DNA X, Inc. Q4 FY2020 earnings call

2020 was a year of transition and transformation. Sonim implemented cost - cutting measures: they struck an agreement with Coforge to transfer the bulk of their software team in India and entered into a cost - advantage agreement, and outsourced manufacturing assembly work to Unicair. The company increased the use of ODM partners for new product development, with UniStrong working on rugged smart scanners and rugged tablets, and FIH working on next - generation rugged feature phones. In Q1, the RS80 smart scanner began shipping. The RS60, a rugged handheld computer and barcode scanner, is expected to ship in Q2. Next - generation feature phones are planned to be released in the third quarter of 2021. Sonim is also continuing its work to transition to 5G, with stabilization in chip choices for 5G and engagement on future generations with 5G capabilities.

In the fourth quarter of 2020, Sonim Technologies' net revenues reached $15.8 million. The sequential increase in net revenues was mainly due to the rise in sales of the XP8 smartphone. Conversely, sales of feature phones decreased by approximately 19% on a unit basis compared to the third quarter. Gross profit for the quarter was $3.7 million, accounting for about 23.5% of net revenues. Margins in the fourth quarter were negatively affected by increasing component prices for certain legacy products nearing the end of their life cycle. However, it was anticipated that margins would stabilize as new products started shipping in 2021.

Sonim will not provide specific guidance today. The company is winding down the sales of its legacy products while next - generation products are just starting to ship. Additionally, Q1 is historically a seasonally low quarter for the business, which could have an impact on short - term top - line growth.

Potential risks include supply chain uncertainties which could affect production and costs. There is also market competition that could pose challenges. Additionally, there is a risk of new products not launching as expected or not gaining sufficient market share.

Q: Can you talk about how the business model works through the channel? Are you recognizing revenue as the new tablets go into the channel and when they're sold through and maybe further, if you could give any commentary on potential expectations of revenue for such product in the back half of this year?

A: Each channel partner has unique agreements. The goal is to recognize revenue upon shipment. Q1 sales of the RS80 have gone well, and they expect to ship the RS60 and RS80 in Q2.

Q: What are some of the proprietary attributes of Sonim Scan? And is there a recurring element revenue element to Sonim Scan?

A: Sonim Scan is tied into the SonimWare suite, offering features like Sonim SOS and centralized deployment. On the XT8, there is a recurring revenue element for Sonim Scan.

Q: Are the new products introduced at disruptive price points a short - term strategy or permanent?

A: It's a permanent strategy for product design and price differentiation.

Q: How does the ODM model provide operating savings and allow addressing new verticals?

A: The ODM model allows for variable production costs. It also leverages ODMs' supply chains to get lower costs. Additionally, it helps in addressing new verticals by using ODMs' expertise and efficiencies.

Q: Can you highlight key milestones for geographic expansion and differentiate against regional competitors?

A: Key milestones include adding regional partners, hiring in Europe, and reporting regional revenues. Sonim believes its products are more rugged and functional than competitors, and will be successful outside of North America.