Data I/O (US:DAIO)2021-05-13 16:00Financial Performance - In 2020, the company incurred operating losses due to a cyclical downturn and COVID-19 related order declines, despite significant investments in the security deployment business[60]. - Net sales for the first quarter of 2021 were $6.0 million, a 25.7% increase from $4.8 million in the same period last year[83]. - International sales accounted for 95.3% of total net sales in Q1 2021, up from 94.3% in Q1 2020[84]. - Gross margin for Q1 2021 was $3.3 million, representing 55.5% of net sales, down from 58.2% in Q1 2020[87]. - Adjusted EBITDA for Q1 2021 was $173,000, compared to a loss of $110,000 in Q1 2020[100]. Market Impact - The company reported that 93% of its 2020 sales were generated from international markets, significantly impacted by the COVID-19 pandemic[65]. - The automotive electronics business saw a bottoming out in the second quarter of 2020, with expectations for recovery in 2021[61]. - The company anticipates that chip shortages and automotive plant shutdowns will continue to adversely impact its business, although these issues are expected to be temporary[64]. - The company expects widespread vaccinations to help restore business interactions, but anticipates continued impacts from customer site restrictions and travel limitations[65]. Research and Development - The company is focusing on research and development in strategic growth markets, including automotive electronics and IoT programming technologies[62]. - Research and development expenses were $1.6 million, accounting for 26.7% of net sales, compared to 33.1% in the prior year[88]. Cost Management - The company is managing costs carefully and executing strategies for cash preservation amid the ongoing pandemic[61]. - Selling, general and administrative expenses increased to $2.1 million, or 34.3% of net sales, from 37.8% in Q1 2020[89]. - The company plans to manage capital expenditures carefully to support business growth and product development[96]. Revenue Recognition and Tax Valuation - Revenue recognition is based on the transfer of control of products or services to customers, with specific criteria for installation and service components[69]. - The company maintains tax valuation allowances due to uncertainties related to its loss history and the ongoing economic outlook[79]. Backlog and Working Capital - Backlog at March 31, 2021 was $3.0 million, down from $3.9 million at year-end but up from $2.3 million a year ago[85]. - Working capital at March 31, 2021 was $18.1 million, showing a slight increase from $18.059 million at year-end[94]. Future Expectations - The company expects gross margin percentages in Q2 2021 to be in the mid to upper 50s[87]. - Updated SentriX hardware and tools were released in late 2020, aimed at simplifying customer acquisition and reducing dependency on third-party suppliers[62].