DNA X, Inc. Q1 FY2021 earnings call

• Sonim entered the rugged handhelds and tablet market with products like RS80 and RS60, expecting to release RS80 tablet end of Q2 and next gen feature phones in Q3.
• Expanded distribution network, including agreements with SYNNEX and Energy Electronics, and partnership with Syndico in UK.
• Prioritizing R&D spending on products to enable future revenue growth, with next gen devices expected to improve margins.
• Feature phones are high volume products, and next gen feature phones will have new processors, expanded network support, and customer-driven features.

Net revenues for the first quarter of 2021 were $12.2 million compared with $12.7 million in the first quarter of 2020. Gross profit for the first quarter of 2021 increased 14% to $2.5 million or 20.1% of net revenues from $2.2 million or 17.0% of net revenues in the first quarter of 2020. Operating expenses for the first quarter were $11.5 million compared with $11.2 million in the first quarter of 2020. Net loss for the first quarter of 2021 totaled $9.3 million or $0.14 per basic and diluted share compared to a net loss of $10 million in the first quarter of 2020 or $0.48 per basic and diluted share.

• Will not provide specific guidance today.
• Look forward to successful launches of next gen products in 2021, with initial $10 million preorder indicating carrier enthusiasm.

• Legal expenses related to ongoing SEC investigation, with elevated legal spending likely to continue until resolved.
• Component prices for legacy products negatively impacted margins as they approach end-of-life.
• Uncertainty around legal costs and balance sheet, leading to exploration of equity or debt capital markets.

Q: Good feedback on tablet products, does it change long-term road map and life cycle of rugged tablets?

A: Good feedback reinforces existing plans, and rugged products are expected to be used 2 to 3 years before recycling.

Q: On coming feature phones, more preorders and rationales?

A: Every carrier works differently, motivation is to ensure supply for new products, and preorders are for Q3 and Q4.

Q: Level of capital desired for ODM transition?

A: Focus is on strengthening balance sheet to cover legal costs, with D&O insurance deductible at $7.5 million and incurred amounts towards that.

Q: Channel distribution strategy, revenue recognition?

A: Recognize revenue based on shipping to distributor, with reserve for returns, and just started with $1 million plus shipped.

Q: Supply constraints or chain challenges?

A: Challenges with legacy products' end-of-life components becoming more expensive, but COVID-related issues not an issue now.

Q: Inventory levels on legacy products?

A: Still some inventory on smartphones with AT&T, but carrier partners don't carry large amounts of inventory otherwise.

Q: $10 million order for feature phones, multiple skews?

A: It's two skews, camera and non-camera, for one carrier