DNA X, Inc. Q3 FY2020 earnings call

• Sonim is in a period of transformation, having reduced operating expenses by 20% year-over-year and improved gross margin. - Feature phones XP3 and XP5 are top sellers; next-generation feature phones with expanded carrier bands are planned for mid-2021 launch, with major carrier design wins in Q3 2020. - Smart scanner handheld computer and tablet device to launch in Q1 2021, targeting a $2 billion market. - XP8 smartphone upgraded to Android 10. - Focus on OpEx efficiency and product development for cost and cash efficiency. - SonimWare software for device management and Sonim Care service commitment emphasized. - Working on z-axis technology and seeking opportunities in industrial/enterprise markets.

Net revenues for the third quarter of 2020 decreased to $14.4 million. Gross profit for the third quarter of 2020 was $4.4 million, or approximately 30.6% of net revenues, which is up from 23.9% in the year-ago third quarter. Total operating expenses for the third quarter were $10.5 million, a $2.6 million improvement from the year-ago quarter. Net loss for the third quarter of 2020 was $6.5 million, a sequential and year-over-year decline. Sonim anticipates margins will benefit from increased scale and future cost of goods sold improvements, particularly with the launch of higher gross margin scanner products in Q1 2021.

• Sonim has sufficient capital to execute 2021 plans. - In Q4, undertook additional changes to cut $2 million of annual run rate operating expenses. - No specific quarterly guidance provided, but anticipates continued progress on strategic goals and shift to long-term growth initiatives.

• Rugged business is lumpy, with carrier order timing affecting revenue. - Inventory management at carriers poses risks. - Uncertainties related to 5G deployment and its impact on product relevance.

Q: Jaeson Schmidt asked about visibility into carrier inventory levels for Q4.

A: Tom Wilkinson said they have significant visibility, and carriers aim to end the year with minimal inventory and start piling up after that.

Q: Jaeson Schmidt inquired about smart scanner products, if requested by customers and recurring revenue.

A: Tom Wilkinson stated it's an identified market need and natural extension of Sonim's experience, with SonimWare and Sonim Care applicable, but currently focused on hardware launch.

Q: Zack Silver asked about distribution channels and SmartScanner distribution.

A: Tom Wilkinson said right products for right channels, carriers in NA for phones, distributors in other geographies, and SmartScanners not typically sold through NA carriers.

Q: Zack Silver asked about cash burn and liquidity.

A: Bob Tirva said they've modeled sunset of existing products, extended XT8 life with Android 10 upgrade, ramping new products, and adjusted burn rate through cost savings and lean operations to bridge with existing cash.