Nasdaq: DAIO. Joel Hatlen. Chief Operating & Financial Officer. Data I/O Corporation September 2017 Investor Presentation

Transcription

1 Nasdaq: DAIO Joel Hatlen Chief Operating & Financial Officer Data I/O Corporation September 2017 Investor Presentation

2 Safe Harbor The matters that we discuss today will include forward-looking statements that involve risks factors that could cause Data I/O Corporation s results to differ materially from management s current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release as well as our most recent SEC filings for a complete description. Additionally, those forward-looking statements are made as of today, and we take no obligation to update them. Data I/O, LumenX, SentriX, ConneX, FLASHCore are trademarks of Data I/O Corporation. All rights Reserved 2

3 Who We Are Data I/O enables the secure digital world by designing, manufacturing, and selling programming systems to global electronic device manufacturers. 3

4 Supporting the Secure Digital World Data I/O s programming systems are used by the world s leading manufacturers, programming centers, and contract manufacturers, to securely program integrated circuits and bring their devices to life. Circuits Need To Be Programmed Options for Programming (DAIO customers) Data I/O On-Line or Off-Line Programming Final Assembly End User OEMs Contract Manufacturers Programming Centers 4

5 Company Snapshot Recent Achievements and Trends 4 consecutive years of revenue growth 3 consecutive years of profitability Strong Momentum in Automotive and IoT devices 8 of top 9 Auto electronics companies are customers Significant win in automotive, awarded 5-year global supply agreement with Bosch Served Available Market expansion of 2x: Puget Sound Business Journal s Fastest Growing Public Technology Companies list 3 Consecutive Years LumenX & PSV5000 wins Global Technology Award for Programming; 150 PSV systems sold in under 4 years Introduction and demonstration of SentriX Managed and Secure Programming Technology Committed to Growing Shareholder Value Focusing programmable core competencies on higher growth, higher margin vertical markets Differentiated market position through technology leadership, and global support NASDAQ: Headquarters: DAIO Established: 1972 Stock Price: $8.39 Market Cap: Redmond, WA $70.5M Diluted Shares: 8.4M 3 Month Avg. Volume: 77,000 shares Sales (TTM): $29.4M Diluted EPS (TTM): $0.43 Adj. EBITDA (TTM): Cash & Sec. (6/30/17): Company Snapshot (1)(2) $4.9M Debt (6/30/17): $0.0 14% of stock held by insiders so that management and Board are aligned with shareholders (1) Stock price, market cap and volume as of 9/12/17 (2) Financials for the TTM period ended 6/30/17 or as noted $12.0M ($1.43/share) 5

6 Data I/O: Turnaround in Review Reinvigoration of the core business through new product development, cost control and global sales 4 consecutive years of revenue growth 3 consecutive years of profitability Success of new products, with focus on automated preprogramming Automotive growth: approximately half of new orders, largest end market, double digit increases 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % System Revenue from New Products Full Year Bookings by Segment Automotive 25% 20% Programming Centers 8% 47% Wireless IoT/Industrial/Consumer 25,000 20,000 15,000 10,000 5,000 4,000 2, (2,000) (4,000) (6,000) 56.0% 55.0% 54.0% 53.0% 52.0% 51.0% 50.0% 49.0% 48.0% 17,085 18,717 Revenue 21,924 22,017 23, (8,000) Operating Income(Loss) Net Income(Loss) EBITDA EBITDAS 50.6% 50.8% Profitability Metrics GM% 53.9% 52.4% 55.0%

7 Strategic Objectives Long Term Growth Focus Growth strategy focused on Automotive Electronics and expansion into Managed and Secure Programming for the Internet of Things (IoT). Revenue growth to support market share gains Expansion of addressable markets Technology leadership through continued investment in intellectual property portfolio Developing new partnerships for Managed and Secure Programming Deploying excess capital and other resources for opportunistic growth 7

8 Servicing Customers Globally in Growing Markets Data I/O delivers cutting edge products and technology to hundreds of customers around the globe Global footprint with headquarters in Redmond, Washington and offices located in Shanghai, China and Munich, Germany 55% growth in Automotive electronics orders in 2016 with eight of the top nine automotive electronics companies buying from Data I/O Automotive Wireless Sample Customers 32% 39% 15% 14% IoT/ Industrial/Consumer Programming Centers and EMS 8

9 How Data I/O Markets Grow Market Forces Programming Impact 1. More products will require device programming as they get connected Unit Growth 2. Products will increase their code size as customers want more features Bit Growth 3. Products will be more secure, creating new opportunities Added Complexity + Security Requirements Programming Demand = Units x Bits x Security 9

10 Financial Overview

11 Operational Performance Consistent Performance Improvements through Innovation and Operational Excellence Adjusted EBITDA ($M) Revenue and Net Income Revenue Net Income H17 EBITDA adjusted for restructuring charges and stock based compensation H /2018 Growth Drivers Semi-cap equip. cycle Automotive Internet-of-Things Recurring revenues from installed base 14

12 Balance Sheet and Capital Structure Overview 30% 20% 10% 0% Management Effectiveness 2012* Q17** ROE ROA *2012 ROE and ROA were -43.5% and -34.0%, respectively, but shown as 0% for illustrative purposes **2Q17 data includes annualized net income; shareholders equity and assets as of June 30, 2017 Enterprise Value ($K) Market Cap (1) $ 70,542 Plus Total Debt (2) 0 Less Total Cash (2) $ 12,033 Enterprise Value $ 58,510 Diluted Shares Outstanding (2) 8,408 Balance Sheet Strategy Important to maintain strong balance sheet Financial flexibility allows the company to: o Withstand downturns in semiconductor cycle o Invest in organic and acquisitive growth opportunities Over $6 million returned to shareholders in form of 2012, 2016 share repurchase programs At June 30, 2017: $12.0 million in cash and cash equivalents No debt $16.9 million of working capital Total stockholders equity of $18.4 million, or $2.19 per diluted share outstanding EV/Sales at 2.0x; EV/Adjusted EBITDA at 11.9x (3) NOLs of approximately $17.0 million (1) At 9/12/17 (2) Weighted average at 6/30/17 (3) Sales and Adjusted EBITDA based on TTM through 6/30/17 financial results 15

13 Market Outlook

14 Growth of Electronic Systems in Automobiles According to The Clemson University Vehicular Electronics Laboratory, a typical automobile on the road today has over 50 computer controlled electronic systems. 17

15 IoT Market Drivers - Multi-year Secular Growth The IoT is forecast to be bigger than the mobile internet and desktop markets We believe nearly every single industry will eventually migrate to an IoT model yielding 50 billion connected devices by Needham & Company, November 27, 2015.But Security Issues are top of mind and must be addressed 19

16 Managed & Secure Programming Addresses IoT Device Security Needs Security Must Become Ubiquitous Secure Update Services Secure Firmware Development Secure Manufacturing New Secure Elements, and Secure MicroControllers 20

17 New Partnerships for Growth Data I/O, the global leader in firmware provisioning, is partnering with the leading suppliers of secure elements and secure microcontrollers and industry security experts to develop high volume, cost effective security provisioning solutions: Renesas and Data I/O partnership on Synergy Family MicroController Programming EBV/Infineon and Data I/O partnership on Authentication IC Programming Data I/O and SecureThingz partnership for security Plan: Development Costs: 2016/2017 increased R&D expense; engineers added; partnering for new expertise First Products: additional investment for equipment; units in field during 2H17/2018 Revenue Recognition: scaling begins in mid- to late

18 SentriX Secure Programming System US and International Patents Pending 22

19 The Opportunity: 4B Units of Security Devices in 2021 Standalone Secure Elements (eg: AICs, ESEs, TPMs) 2021 MCU Market Secure MCUs with Embedded Secure Elements 2021 Security TAM: 4.0 Bu Traditional MCUs 2021 Total TAM: Smart Card MCUs 24.7 Bu 23

20 Investment Merits: Positioned for Long-Term Growth Market Expansion in Automotive and Internet of Things Strong Brand with Leading Products Strong Balance Sheet and Operating Leverage Stable Financially & Positioned For Growth NASDAQ: DAIO Seasoned Management Growth in Managed and Secure Programming 4 Consecutive Years of Revenue Growth Global Sales and Infrastructure 24

21 Appendix 25

22 Adjusted EBITDA Reconciliation 2Q17 NON-GAAP FINANCIAL MEASURE RECONCILIATION (in thousands) Three Months Ended June 30, Six Months Ended June 30, Net Income $1,206 $444 $2,185 $276 Interest (income) (6) (11) (13) (23) Taxes Depreciation and amortization EBITDA earnings $1,451 $584 $2,599 $533 Equity compensation Adjusted EBITDA earnings, excluding equity compensation $1,721 $789 $2,966 $833 26

23 Income Statement 2Q17 CONSOLDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, Net Sales $9,135 $5,801 $16,359 $10,414 Cost of goods sold 3,933 2,713 6,990 4,798 Gross margin 5,202 3,088 9,369 5,616 Operating expenses: Research and development 1,771 1,172 3,316 2,297 Selling, general and administrative 2,163 1,525 3,981 3,103 Total operating expenses 3,934 2,697 7,297 5,400 Operating income 1, , Non-operating income (expense): Interest income Gain on sale of assets Foreign currency transaction gain (loss) (62) 49 (92) 45 Total non-operating income Income before income taxes 1, , Income tax (expense) (86) (7) (99) (8) Net income $1,206 $444 $2,185 $276 Basic earnings per share $0.15 $0.06 $0.27 $0.03 Diluted earnings per share $0.14 $0.06 $0.26 $0.03 Weighted-average basic shares 8,104 7,942 8,067 7,944 Weighted-average diluted shares 8,408 8,039 8,367 8,033 27

24 Balance Sheet 2Q17 CONSOLDATED BALANCE SHEETS (in thousands, except per share data) (UNAUDITED) June 30, 2017 December 31, 2016 ASSETS CURRENT ASSETS: Cash and cash equivalents $12,033 $11,571 Trade accounts receivable, net of allowance for doubtful accounts of $133 and $96, respectively 7,233 4,725 Inventories 4,855 4,059 Other current assets TOTAL CURRENT ASSETS 24,742 20,838 Property, plant and equipment net 1,990 1,875 Other assets TOTAL ASSETS $26,776 $22,776 LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES: Accounts payable $1,676 $1,428 Accrued compensation 2,502 2,208 Deferred revenue 2,791 1,926 Other accrued liabilities Income taxes payable TOTAL CURRENT LIABILITIES 7,880 6,265 Long-term other payables COMMITMENTS - - STOCKHOLDERS EQUITY Preferred stock - Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none - - Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 8,172,491 shares as of June 30, 2017 and 8,015,746 shares as of December 31, ,065 19,204 Accumulated (deficit) (1,175) (3,360) Accumulated other comprehensive income TOTAL STOCKHOLDERS EQUITY 18,432 16,032 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $26,776 $22,776 28