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KiK... I'm not sure what to think. I know Tim Miller has been with them since 2003 and was promoted to V.P. Worldwide Operations/Chief Operating Officer in April 2012. He was supposed to take over the "day-to-day" operations of the company while Kevin Mills (CEO) focused on the bigger things. I do know someone who has interacted with all of the executive team multiple times. He never really had much of an opinion on Tim Miller but he was impressed with Lee Ballif who is taking over part of Miller's duties. I will make inquires and see if I can't find out more. It could also relate to the new V.P. James Lopez who they brought in for worldwide marketing/sales. Perhaps there was enough overlap that he was redundant?
db7...it's part of a Rule 10b5-1 trading plan to sell some of his holdings. I'm sure there will be more as the year goes along. I know the company is also figuring there will be some employee option sales this year. You figure no one has had options in the money for, well, forever. I hope so because it raises cash for them and, when combined with better revenue/profits, may eliminate the need to do a secondary to get the necessary shareholder equity to get back on the NASDAQ. I know the talk from the company concerning a potential secondary has been shelved for the time being for exactly those reasons.
Kevin Mills bought 200K shares at $2 on May 2009. That's a long time to tie up money and I know part of his trading plan is to raise some money back (he gifted 100K of those shares to family over the years).
http://www.gurufocus.com/InsiderBuy.php?position=&insider=MILLS+KEVIN+J
Curlews...Perhaps "peak" isn't the right word. I should of said "accelerates the most". For the most part, the POS industry ramps up the most in the 1/2 half of the year.
ex. In 4th Q 2013, scanners + accessories did $2.5M or so. In 1rst Q 2014, scanners + accessories jumped to $2.9M. The big jump then happened in 2Q when they jumped to $3.73M. This is just the way the industry works. 2nd Q is a big deal. In comparison, 3Q still grew, but only up to $3.9M. It would be nice if 4th Q stayed flat even with Apple and the holidays.
My point in mentioning it all is that 4th Q numbers for 2014 are important at some level, but where 1rst Q jumps to and then 2nd Q on top of that is what's really important and will be the driver of this stock in 2015. It will tell us all where the stock price can go and give us hints about 2016 also. Eventually this industry should leap forward in sales and it will be important to see that showing up in Socket's numbers also.
Hweb2..SCKT... the move up in the stock price is nice, but the more important thing is that the company needs to perform with revenues and growth. I'd like to see 4th Q numbers being decent (even with the Apple iPad issues and holidays), 1rst Q showing solid growth (low $5M range imo) with 2Q starting to break out (upper $5M range) and them breaking the $6.0M number in by 3rd Q. They need day-to-day sales to ramp up, international growth to grow like N.A. levels, the OEM deal to kick in again and be consistent each quarter and some big scanners deals to get signed and start delivering. If they could do that type of growth in 2015, a lot of money will flow to the bottom line and the stock price will take care of itself.
$3 is nice. I'd like to see $10 eventually but that will only come from revenue growth. Can they do it? I think there will be growth without out a doubt and money will be made even on those buying today. Will it be the growth that makes the stock a rocket ship? That one I'm still unsure of. We should know the answer if the industry is exploding in growth (and carrying Socket with it) between now and the 2nd Q cc call in late July. The next 6 months will be the peak point-of-sale time period for the year.
SCKT...Socket scanners + Apple Store's worldwide now
With today's additions (of Canada and the U.S), Socket's 7ci, 8ci, and 7xi scanners are now the exclusive barcode scanners available on the Apple Store in Europe: http://store.apple.com/uk/search/barcode
7qi, 7ci, 7mi in Canada: http://store.apple.com/ca/search/barcode
7qi, 7ci, 7mi in U.S.: http://store.apple.com/us/search/barcode
I'm not sure how many direct sales it will cause, but it should give them a lot of credibility in the marketplace, especially in dealing with large companies on big orders. The CEO said in the last cc call:
"...we're delighted to be working with Apple. And they have driven this project primarily out at their EMEA group. Yes we hope that it was a global initiative driven by the EMEA group, but the information flow from Apple is not very complete in terms of we're focused on doing it in EMEA and we have done it now in EMEA. And we will keep you updated as soon as we know. But we were delighted and we put many months of work into meeting all the requirements, setting up distribution and other facilities with them and it just happened this week. But it's the culmination of many months of work."
The 8qi is the 2d version of their flat scanner that can be attached to the back of a phone. It was supposed to come out in October but was delayed. I heard it was that initial beta testers recommended a change or two and so the made the changes and sent it back out for more testing. The 8ci scanner (the 1d version) went from 0 sales a year ago to now being their 3rd most popular scanner. I know they have high hopes for the 2d version. If it can match the 1d version in sales it'd be a big winner.
The volume since the afternoon of yesterday comes from the Microcap Club imo. One investor on there (who is also heavily followed on iHub) announced he's been a buyer for 2 months now and it's his #2 position. It woke everyone up to SCKT over there. It's resulted in almost 200 views of the message board there in the last 24 hours (where all my research is posted). He'll bring it to iHub soon too I'm sure. I don't want to say the name, but I can guarantee you that you will recognize it. I've spoken with him 2x on the phone already and he was at the LD Micro Conference and met with management in a 1 on 1. After he mentioned it, another large investor (who's well followed) announced that he too was been a buyer.
Hweb2...SCKT
I know he's on a Rule 10b5-1 trading plan that I'm sure is set to sell shares at a given time if the price is over a set limit(??). It was set up Nov 2011. I have no idea where 33 shares comes from it. I heard from a long-time shareholder that he borrowed money against his house many years ago to buy 200K shares at $2. I'm sure his wife doesn't let him shop anywhere else but the $1 Store until the stock is finally higher.
SCKT...Seeking Alpha article out today
http://seekingalpha.com/article/2744905-socket-mobile-is-a-prime-beneficiary-of-the-explosive-growth-in-the-mobile-point-of-sale-market
Well written. His earnings estimate for 2015 is low. I did a full analysis (qtr by qtr breakdown) last night for a private group of investors.
Hweb2..SCKT Did you watch the LD Micro webcast? In it they talked about 55K scanners being sold for 2014. That info doesn't do a lot of good without the first 3 Qs of exact scanners sold. Here you go:
"Our worldwide barcode scanner unit sales in 2014 were as follows:
Q1 10,641
Q2 14,127
Q3 14,767"
I've made a point of emphasizing how conservative they have become in their discussions. I can't imagine that 55K is a number they won't be close to. If so, 4th Q is better than people are thinking.
At the LD Micro conference, a long term shareholder I know (who also gives estimates on the company and is on every cc call) said he watched the company's performance and chatted with them after. He hasn't seen them this confident in years. He also agrees with my assessment his number on 4th Q could be low if they did 55K scanners for the year (and his prediction was for $4.6M to his clients).
If you take 2013 to 2014 growth (19K scanners) and add it to 55K scanners to get 2015 numbers, approx 75K scanners, the numbers are unreal for income for a $2 stock. That should just be minimum growth. Remember, expenses will barely go up. They are serious here about getting the balance sheet cleaned up and a NASDAQ listing lined up for the future and that will only come from cash hitting the bottom line. I've heard they were talking confidently to people in 1 on 1s that they see themselves doing over 100K+ scanners/year in time just based on the current trajectory. They will grow as fast as the partners do and won't know exact numbers until they happen, but you can look at historical growth, the increase in the partners, the aggressiveness of those partners, the impact of their new VP for marketing, etc and make projections.
Also----the 8ci is now listed as a scanner on the European Apple stores. Apple reached out to them and has now put 3 of their units on there (only barcode scanners there). It'd be nice if Apple did it for the U.S.
Also---I know Hudson has started to exercise some more warrants recently. No idea on how many, but they are in the picture somehow. Could have something to do with the current price.
Value1008...SCKT...today's presentation at LD Micro was the first investor conference they have done in years to highlight the company to anyone. I do know that they intend to continue participating in events like this going forward. I wouldn't expect them to put out any meaningless pr's like a lot of OTC companies like to do. They know it gives the wrong impression more often than not. In reality, the best thing they can do, imo, is to put up solid sequential growth throughout 2015 and keep growing net income and continue to work to get themselves back on the NASDAQ. Let that do the heavy talking for them and then continue to present themselves at events like these to those that listen. No huge institution is going to buy in when they are on the OTC market anyways. It'll be more private investor funds doing it. I know of some already involved.
As far as buying in.......94K shares were bought in last Wednesday. Sure, the intra-day price went to $2.70 because someone got crazy in their bidding, but most of it occurred around $2.30. Since 3rd Q numbers of $4.9M and 9 cents/share came out, 575K shares have traded since then (I keep track). 1.05M have traded above $2. You may bid the price up a bit on yourself if you get too aggressive, but it isn't like shares haven't been available. Eventually the cheap shares will dry up and the price will go up, but that's kind of the story to the stock market in general anyways.
Hweb2....SCKT....LD Micro Conf presentation
I checked out the slides and listened in. It sounded good. The CEO was a bit nervous (I heard that the room was packed with 50+ people and standing room only in the rear) so that probably added to it. Some highlights:
----The chart showing revenue increasing, net income increasing and expenses staying completely flat. I like where Kevin, as an after thought, pointed out that expenses will stay low as revenue continues to go up. This is important and I'm glad to see him highlighting it.
----He did a good job of talking about cloud/POS systems for retail, but also highlighting that this is just a portion of what's to come. POS gets the most attention because it's the forerunner now but in time there are other strong areas of growth for their scanners.
He didn't update 4th Q like I thought they were going to. He did say "55K scanners for the year". From what I know about what they sold in exact units/qtr, that puts 4th Q at numbers between 2Q and 3Q for scanner units. It's my assumption right now that they will come in at around $4.4M or $4.5M for the quarter overall (3-4 cents/share) and scanners of 55K/year would be about right for that. The POS industry will start to ramp up in January again (last year it started strong right out of the gate. I tracked approx $400K in scanners in Dec 2013 and Jan 2014 jumped to $620K.
Hopefully the presentation was well received and gets some more eyes tracking this company in 2015 when revenue boosts up again and stays there.
SCKT..webcast/presentation at LD Micro Conference tomorrow
12:30pm (PST) on Tuesday
http://wsw.com/webcast/ldmicro7/register.aspx?conf=ldmicro7&page=sckt&url=http%3A//wsw.com/webcast/ldmicro7/sckt/
I hear they are pretty excited about going. I know that at the end of the presentation they have said that they will update 4th Q numbers.
Hweb2..SCKT, up 16%: if you go 12 months from now, and you only add in the same scanner growth they did in the last 12 months (3Q 2013 to 3Q 2014 = $1.43M in scanner growth), you end up with a company that's returning some serious net income---especially for something that's in the low $2 range. Perhaps someone else did the math too. Their sales this year were from what started 12-18 months ago, so 2015 is only going to add to it as all the developers who created software this year start to market it initially next year and those already out there ramp up their efforts more aggressively. This doesn't have to be a huge company to return great net income if they keep their expenses low and their margins keep going up.
SCKT...reply to myself on link that didn't work
Shareholder Meeting Presentation:
http://www.mkr-group.com/SCKT/presentations.html
Hweb2..SCKT..research list on largest partners
I'm not sure where the industry will go and how far it will take Socket, but it has potential that's for sure. I posted this on another site as part of a long research report I wrote, but I thought I'd share this part here also.
Socket Mobile's Software Application Partners:
At Socket's Shareholder's Meeting, they do a very good presentation to the employees. Here's a link to the one from this year. It's just the slide show, but explains their business better: http://www.mkr-group...g_v9.1.pptx.pdf
I'm going to list a bunch of the major partners that I know. One thing to remember with this list is that all of these companies independently reached out to Socket Mobile to use their scanner products in their software, not Socket selling the idea to them. It's only now with the hiring of James Lopez, Vice-President of Worldwide Marketing, are they going to start to promote their product more. In my research report posted above, I discuss the importance of their Software Development Kit (SDK). This list will start to give you an indication of how it's completely revolutionized the company. From the latest numbers I've heard, they have sold 1000+ SDKs resulting in approx 400 products, approx 125 of which are Point of Sale systems targeted towards small and medium businesses that use the Cloud to store the information. I'm going to focus on biggest names first. Knowing who the partners are and what they are saying and doing to grow is as important to this story as what Socket is doing themselves. Their software capacity is expanding as almost all of them now offer payroll, Quickbooks integration, social networking..... Most of them have only been pushing their systems for 12 months or less and, as they expand in the future, it should flow to Socket Mobile. Come January 2014, they will debut all their updates at the Big Retail show in NY as the 2015 POS "season" starts to ramp up.
NCR:
NCR is a $4.85B company. The product Socket Mobile is used in is NCR Silver. http://www.ncrsilver....com/welcome/ They recently changed their website as they have made a lot of new improvements and it doesn't show a list of hardware anymore (they never listed the Socket Scanner by name, but the pictures showed the unit they offered was definitely a Socket one). About 1/3rd down the new main page you can see a Socket barcode scanner shown in a picture with the tablet stand . On one of their independent resellers http://www.ncrsilver...nt-options.html, the Socket 7ci scanner is shown as the only cordless scanner option. In Sept, 2012, Socket announced this partnership in a press release of their own. This is pretty much the only partnership they have ever announced as they have moved away from that type of publicity. The reasons I've heard for it is that they don't want to promote themselves off the backs of their partners----it doesn't look good, plus, which partners do you announce and which ones don't you?
In May 2012, the CEO of NCR did a major investor relations presentation. It was 4 hours long. The broadcast doesn't exist anymore, but the slide presentation does. http://media.corpora...nalyst_Day.pdf The discussion of NCR Silver begins on Slide 78, which was soon introduced as a product following this presentation in July 2012. Over the next few slides he discusses the target audience of small businesses, of which he states there are 4M in the U.S. and 8M worldwide. It's a shame the audio doesn't exist anymore because he talked about the absolute need for NCR to succeed here as it was important to lock up the small businesses now so NCR will be their choice as the large companies of the future emerge from this crowd. On Slide 94, he talks about expecting 5K customers by the end of 2012 (and the aspiration of having 10K), expect in 2013 = 40K (aspiration of 120K), expect in 2014 = 95K (aspiration of 360K).
In 2013, during a cc call (can't remember which one), the CEO of NCR talked about how they hadn't been as successful with their business approach with NCR Silver as they had hoped. They thought they could use their huge internal sales team to direct sales. The problem is that they have very little experience dealing with small businesses. The CEO commented that they have no intention of failing and were changing their approach completely by using partners instead who already are strongly attached to the small businesses. They started to team up with payment processors Vantiv ($4.4B company in May 2013 http://www.ncr.com/n...vantiv-silver),Elevan (wholly owned subsidiary of US Bank in Jan 2013 http://www.ncr.com/n...ess-customers), Paychex, BNG Holdings, plus more. They have allowed the traditional cash register POS middle men to offer NCR Silver to their customers and receive a monthly residual income from those sales. At the Money 20/20 Las Vegas Conference just last week, they teamed up with Big Commerce (an Australian Company that just raised $75M in funding that provides omni-channel software to small businesses----it's where you link online and brick-n-mortar operations in one. Inventory tracking is essential in this type of system. Big Commerce deals with 55K businesses in 150 countries). This is just part of the news on NCR Silver. It's obvious they are fighting to get their share of the market in the future. The latest numbers I've heard is that 20% of all NCR Silver sales involve a Socket barcode scanner with the system. (A lot of the businesses being targeted by NCR, like cafes, don't need to deal with inventory). Socket is also the cordless option for another one of NCR's POS systems, NCR Counterpoint, but that one is more oriented towards using smartphones as the main device and I've never researched it that much.
VERIFONE
Verifone, $4.8B company, is one of the big boys in the Point of Sale industry. Their tablet based POS system being targeted towards small businesses is currently called Verifone Globalbay Merchant (debuted in Sept 2013). The only barcode scanner that is an option is a Socket Mobile one (again, they don't "name" it, but it is listed on the website: http://www.globalbay...accessories/). Pictures of the scanner are shown in all the literature and slideshows (ex. http://www.slideshar...chant-tablet). If you talk with Socket management, they will verify that it's their scanner that is the option.
What's a little confusing is that Verifone recently sold their Globalbay Merchant "division" to Manhattan Associates in August 2014, but they did NOT sell the tablet POS system for small business as part of it. Verifone has kept that for themselves and will rebrand soon. http://www.pymnts.co...y/#.VGD5_8mj87E
Verifone is selling their system through the Independent Sales Organizations. In April 2014, they had partnered with 100 ISO's, 30 of which were considered part of the largest in the U.S. http://pointofsale.c...Acquirers.html One thing to note is that Verifone is very much a global businesses with over half their sales occurring international.
Shopify
Shopify is a private company that started out by setting up websites for small businesses. They deal with 120K small businesses in 100+ countries (October press release. That's up from them saying 80K at the end of 2013), and raised $20M in 2011/2012 and another $100M in late 2013 (valuing the company at over $1B). The latest venture funding was to tie their strength in e-commerce to the brick-n-mortar part of their small business clients. Again, this is the "omni-central" approach that is becoming more and more prevalent. One of those products that is pushing this for them is Shopify POS, a tablet based cash register. http://www.shopify.com/pos Yet, again, the Socket Mobile barcode scanner is the only choice. Under their "hardware" page, they actually list the 7ci as the option to buy this time.
Shopify just opened a 102,000 square ft headquarters for their 500 employees.
LIGHTSPEED
Lightspeed is another fast growing company out of Canada. They raised $30M in 2012 from Accel Partners (same one that backed Facebook) and another $35M in September 2014 for rapid expansion. http://www.lightspee...ion-in-funding/Their products are all Apple based. They started off with a desktop computer based POS system, but have aggressively switched the focus to a tablet/Cloud system for retail and restaurants. For the retail tablet system, the Socket 7ci scanner is the only choice and is automatically sold with each system. http://www.lightspee...m/pos-hardware/Lightspeed's software is very much inventory oriented and so a barcode is essential. This is the partner that Socket lost (as I mentioned in my research report), but who came back just a few months later.
They too are connected with Big Commerce (as I listed above in the NCR section) plus a bunch of other partners, growing around 100%+ a year, in 20K+ stores in 30+ countries. Their CEO is pretty driven.
SHOPKEEP
http://www.shopkeep.com/ They too only use the Socket Scanner barcodes (though they don't use the cheaper 7ci, but the 7mi's, the 7pi's and the 7xi's http://shop.shopkeep...rcode-scanners They raised $10M in 2013 and another $25M in April 2014 for rapid expansion. They started in NY, but just opened an office in San Francisco and one in Dublin, Ireland. They are in over 10K small businesses. They too have partnered with payment processors, ISOs, and others. The product has won several big awards and is discussed more and more in news about the industry. I may not be posting as much info here as the others (as I'm running out of time to build this list), but don't make that seem like they aren't important. I believe they are. They have a great product and are an example of how this tablet/cloud POS industry is wide open and you don't know who is going to be the ultimate winner in the end (well, other than Socket since they are tied to a lot of products).
VEND
This is a New Zealand company that is starting to expand around the world. http://www.vendhq.com/ Like everyone else, they too are raising money like mad. $8M in 2013, and another $25M in March 2014. http://blog.vendhq.c...re-peg-capital 10K stores, 100 countries and just expanded with their first office into the U.S. this year and Canada.
****Side Note: It's crazy that all these companies are raising millions and Socket Mobile has a market cap of $11M!
For hardware, this is the first example of a company that also allows a USB (plug in) barcode scanner to be used as a choice. However, the Socket Scanners are the only cordless option offered. The nice thing about a Bluetooth barcode scanner is that you can use it more than 40" away (whatever the cord length is) from the register! http://www.vendhq.com/pos-hardware
I don't research this one as much as others because I always forget about it.
SQUARE
Obviously, everyone knows about Square (with Jack Dorsey). I think the latest valuation is $6B. They use the "toggle" for smartphones and such. However, that business model isn't highly profitable. There is a LOT more money in providing software through the Cloud for small businesses that then pays a company a monthly fee + allows you to process payments also if they desire. It's why Square came out the the Square Stand. The barcode that the primarily feature with it is another USB plug-in one. What's crazy is that the stand swivels (so the customer can sign their name with their finger). How does a plug-in scanner deal with that?!? However, if you talk to the company or go into their hardware choices, you will find that the Socket Scanner is, yet again, the only cordless option available for recommendation https://squareup.com...orted-hardware
I won't go into Square more because everyone is familiar with them.
OTHER PARTNERS
I'm starting to run out of time here. I can come back later if people are interested. There is Micros, Epicor, Fujitsu, as some of the bigger names (though the info on those is harder to find and I'm not sure how important those are to Socket in the future). There are a ton of smaller names. This is just the tablet POS players. It doesn't count the other barcode scanner users for field operations, warehouses, sales people..... What everyone needs to remember is what the CEO keeps saying, "sales now are a result of what happened 12 to 24 months ago", namely, that what is happening now is just the start as it takes time for these applications to be written and pushed in to the market place. As more and more of the software partners expand their efforts, Socket is rewarded.
COMPETITORS
I want to highlight the negatives as well as the positives. The biggest product Socket is NOT in Revel Systems (I put them about the size of Lightspeed). http://revelup.com/ They use the Motorola CS3000 scanner or a Honeywell one http://revelup.com/h...arcode-scanners. There are other smaller POS systems that also don't use the Socket scanner.
There are other players, like Groupon's Breadcrumb, that don't use any barcode scanner as inventory tracking is not really a part of their software.
Socket's CEO said in the last cc call that he doesn't think there will be many more "new" players. Most likely the existing ones will battle it out for market share, merge, or go out of business. The only two players I see left of any significance would be if Amazon got involved (as they have hinted at. I'm not sure small business wants their greatest competitor involved in their brick-n-mortar sales though) and Apple. Apple does have a partnership with Verifone already http://www.mobilepay...ne-partnership/
BUSINESS ENTERPRISE
Keep an eye on this. Also, if you talk to Socket yourself, ask them more about the future they see with business enterprise. The partnership of IBM with Apple could open up this whole industry.
http://www.apple.com...e-Mobility.html
https://gigaom.com/2...for-enterprise/
bbotcs..SCKT..on slide 14 of the earnings report given by NCR on October 23rd, 2014, it states that there was an increase rate of adoption for NCR Silver with the customer base up 28% from 3Q from 2Q and it's up 195% year over year.
It shows you that these companies are being aggressive here. 10K systems sold one year will go to 25K sold the next to 70K sold the year after and so forth (these are not actual numbers, just me making a point on growth rate). If you capture the small business now, they are customers as they grow and expand. The last number I heard was that a Socket scanner is sold in approx 20% of each of the NCR Silver systems (the other 80% are for businesses like restaurants and delis. Traditional retail in time will grow in the % of systems). Socket is the first company dedicating their scanners to these systems. It's how they've captured market share when no one else is even paying attention. What will be tough for competitors in the future is to push Socket out of the way. Their barcode software is integrated into the main software already with their SDK.
Hweb2...the wildcard for 4th Q and/or 1rst Q is the van line deal. An associate of mine spoke with them this week. It is not in the revenue projections even though they spoke with the van line company here recently and the "deadline" for drivers/agents is still Dec 31rst or else they face a penalty. The reason it wasn't brought up in the call or in the calculations is because they don't control the timing of it. (This applies to a couple of other "deals"---no details on them other than that). If they tell everyone it's going to happen and then it gets delayed again, shareholders get upset. This is their more conservative approach rather than pumping everyone up like in the past and disappointing them. Listen to the 2nd Q cc call (or transcript on their investor relations page or Seeking Alpha)---what was discussed there concerning the van line deal still holds.
I'll update my inventory tracking for N.A. this weekend at the end of the month. October numbers are not bad at all. The last 8 business days have made a big difference for the month. People must be thinking 4th Q will be a bomb?? I see a little slowdown, but nothing bad. I can guarantee you that they aren't going to their first IR conference in Dec in 3+ years to discuss a negative net income 4th Q.
I try and tell people, but I don't really care anymore if they don't listen. This story is about 2014 (80% scanner growth overall), 2015, 2016, 2017, not whether 4th Q does $4.4M or $4.6M. Scanners are only going to grow as the industry expands. It's not Socket that is the focus, but their partners who are expanding it for them. The real question is "are they going to grow 30% or 50% or 70% a year from now on?" Management is very bullish on where they think this can go in time. It will come out in time. I wrote the CFO this week saying their "conservative" approach in the cc call is appropriate for now, but in 2015 they need to open up more. I encouraged them to bring their new Marketing V.P. into the discussions on how to "market/sell" the stock to investors in conversations and cc calls when the pipeline strengthens and they feel more confident. It's been a rough last 2 years and they don't want to stick their neck out too far right now.
3Q did about 14500 scanners. In 65 business days of selling, that's only 223/day worldwide. Shopify, Verifone, Square, Lightspeed, Fujitsu---plus about a 100 more POS systems (from tiny to large) are going to stay at that level? NCR's CEO in 2013 said they see 4M small business in U.S. and another 4M worldwide for their NCR Silver product. Everyone if fighting for market share. The simple cloud based POS tablet system is being replaced with software that integrates inventory, payroll, accounting programs, everything a small business needs. The whole industry has just started and will push harder in 2015 than 2014. (Same goes for each year that passes until it peaks). When they do 800 scanners/day in 3 years, at $240/scanner, that will be $12.5M per quarter. At 50% margins by then and expenses probably around $2.3M to deal with it (yes, they shouldn't go up much---hire more Mexican ladies in the warehouse to snap scanners together and box them and a couple of key people. No need for more engineers. I've toured their whole company and its simple but efficient), and no taxes yet because of the huge tax loss carry forward, it will cause a lot of money to flow to the bottom line. Now that Hudson Bay did a cashless conversion, absolute full dilution right now is approx 8.5M shares in time. Not bad compared to a lot of microcaps.
When Hudson Bay is done selling (probably around 200K shares now left as of this moment---I heard what they did before is they shorted the stock and then called Socket up and exercised their shares in bulk to convert and cover), there won't be much liquidity left. You won't get it below $2 imo even with this selling. Hudson Bay isn't dumping their shares foolishly.
People may be thinking I'm day dreaming here. I guarantee you that I know more about this one company and the industry they are rolling into and it's future than one investor really should.
Another wildcard.....the Apple iPad Pro now expected in 1rst Q 2015. Apple is going after businesses with it. Steve Jobs ignored business usage, but Cook sees it as an untouched industry. That tablet is MADE for the new cloud POS systems. It will push the whole industry forward even more imo.
KiK..SCKT Info from CFO on warrants & 4th Q
My question to him: I was very surprised when you said Hudson Bay was down to 280K warrants left----it didn't make sense in that there is no way 720K have sold (I'm assuming they aren't holding any shares) and there is no way Socket got 725K x $1.25 in exercise money. I was perplexed until it hit me what may have happened. Is Hudson Bay trading warrants for cash? I know it happens in stock grants very often. Instead of paying the company money, the recipient pays the company by taking fewer shares. Is this what is happening? If so, how many warrants are they trading for the $1.25. My guess would be 1 warrant for each $1.25. No one I know caught this during the cc call, but after I had several people wonder what was up. If this isn't what's happening, then where did the exercise cash go on the balance sheet?
Response: The Hudson Bay warrants have a provision enabling cashless exercise (paying for the shares exercised by giving up others) until remaining shares are fully covered by a registration statement. We have 500,000 shares registered and Hudson Bay has exercised 10,000 of those for cash. The balance have been exercised on a cashless basis which has brought down the overhang quickly to the 280,000 warrant level without incurring as much dilution. Remaining warrants must all be exercised for cash at $1.25 and expire on May 20, 2016. Most of the activity was in October. Our current balance of shares outstanding today is 5.3 million.
As far as 4th Q goes, he said they have a number of "deals" in the works for 4th Q but they don't control the timing on them and, as such, they aren't highlighting them in them their projections. They think the Apple slowdown is primarily over and they expect to give a better outlook on everything during the LD Microcap Conference presentation Dec 2-4.
Side note: This is the first investment conference they will attend in approx 3+ years.
Nelson..SCKT...2015
If they grow 50% year over year for scanners, that would put scanners at $5.55M in 3rd Q next year. The OEM buyer for the Somo should be constant then + regular Somo numbers + misc = $1.1M. Combined it's $6.66M for 3Q next year. Anything less would disappoint me. I expect 1rst Q above $5M and would like to see 2nd Q above $6M.
One thing people forget, their partners (NCR, Verifone, Shopify, Fujitsu, Square, Lightspeed......) are spending $10s of millions going after this industry. 2015 will be bigger than 2014. As such, sales should keep expanding for several years for Socket.
One player to look for in the future to push the whole tablet POS to a new level is Apple. The rumored 12.8" iPad for early 2015 is perfect for business POS. They want retail using it because it then pushes the door for businesses to use Apple Pay in conjunction. Apple also teamed up with IBM recently to go after business enterprise. Steve Jobs ignored businesses, but Tim Cook is planning on going after them just like consumers. The way I see it is as the world changes to mobile POS, enough will trickle to Socket to make it worthwhile for shareholders.
I once said this was the best investment I ever saw. That was when I thought the Somo would stabilize at $2.2M or above. Sadly it slipped and it's been a frustrating couple of years waiting for scanners to finally "outgrow" the Somo decline. 3Q was the first taste of it. 4th Q should be ok imo. The real story is 2015 here (and 2016 and 2017) as the industry really starts to ramp up.
Nelson..SCKT.. every quarter in 2015 will be $5M and above imo. They actually should start to break $6M+ by 2Q. 4th Q will be net income positive but who knows where right now.
KIK..SCKT..4th Q and beyond
A few important things first about 3Q:
1. This Q finally showed everyone that they can carry a lot of money to the bottom line when revenues ramp up. Their expenses are more fixed than people realize. They are very aware of the need to keep overall expenses flat even as revenue rises-----long term shareholders nag them about it constantly! You even heard it on the cc call when someone asked about the new hire, Brian Lopez, and if that was really necessary. (I think it was a very good hire myself. They need someone smarter than the rest of them there and it sounds like this guy is it. I know they are very excited about him).
2. Of the income in 3Q, $300K came from an OEM deal with the Somo. That won't repeat in 4th Q, however, in 2015 when that company gets FDA approval, that level of income should start to become consistent each quarter. No one knows who this company is though. I've tried to get the info but have not been successful. When they get FDA approval I may be able to determine who it is.
3. I don't want to go into the trouble with Hudson Bay---that's a whole story itself. They had 1.0M in warrants available at $1.25. In the cc call it's now down to just 280K. Hudson Bay does not give a darn about Socket at all. They are pure vultures. However, they have not sold 720K shares. That's obvious from daily trading. Also, Socket's balance sheet didn't get 720K shares x $1.25 per warrant received. I need to check with the CFO today, but most likely they are exercising and paying for their warrants with other warrants, i.e. rather than give Socket $1.25 per warrant, they give up a warrant in exchange. As such, they get 500K warrants at $0, but give up the other 500K warrants in return. The negative is no $0 to Socket, the plus is less dilution. If this is true, than the total full dilution (all warrants, all options, all conversion loans combined) puts total diluted shares at 8.4M that will come into play as the stock price goes up and they are all exercised.
I'm almost certain that Hudson Bay will be selling the rest of their 280K in the near future. It'll hold the price down (though they aren't going to take it under $2 most likely).
4th Q:
1. First thing you need to know---they are being conservative on the cc calls from now on. They burned everyone for so many years being optimistic that their motto is under promise and over perform. So don't take 4th Q too negatively though it's obvious there will be reduction in revenue. Without the OEM deal, it would be $4.6M if everything is flat.
2. I'm not going to name him (but you can figure out who he is). The analyst and first caller on the cc call, sends me his letter to his customers on all his updates for the company. He sent one out yesterday afternoon. He's putting 4th Q conservatively at $4.6M and 4 cents/share with the real growth starting again in 2015. He has the best connection to Socket of anyone having owned the stock on/off (himself and his clients) for 15+ years. He also owns part of the loan conversion debt. A wild card in 4th Q is the van line deal with United. It still exists and is supposed to play out in late 2014. The company will acknowledge they talk with the van lines, but they have no control on when it plays out. If it does, it alone will make the Q match 3Q (or better).
3. It's too early for me to make a prediction for 4th Q, but I track inventory and it has showed Oct down slightly from previous months. What's odd was it took off again this week and is catching up to where I expected rather quickly. The cc call makes sense in that it slowed down with the iPad and is now picking up after it's come out. This is actually what I would of expected in Sept from year's past and it's played out more in October. They can make up sales faster than people realize. In the last 2-3 months they have had some monster sales days that I've seen. I'll know more as Oct finishes up and Nov plays out.
4. I'll reach out the the CFO for more info to write a better analysis. I do know this.....2015 is expected to be a year when the whole tablet POS system explodes. I have no worry that they will be $5.5-$6M/qtr in 2015, I just want them to get to $10M/qtr and make this a very nice investment. $5 for this stock is one thing, I want $20+ and they need to grow faster than they are to do that. It's one reason I believe the Brian Lopez hiring was wise even though it will cause expenses to creep up.
I'll post more as I get things verified and get more info.
Guy...SCKT...it will be interesting to hear what they say in the cc call. It'd be nice to see some real volume hit this stock. Hudson Bay is still sitting there with 800K warrants or so to liquidate so it provides liquidity for buyers to get in, but it'd be nice to get past those once and for all.
SCKT: 3Q= $4.9M and 9 cents/share!
http://finance.yahoo.com/news/socket-mobile-reports-third-quarter-200000882.html
bbotcs...you should sell more(!) so the rest of us are rewarded :)
bbotcs..SCKT..$2.73 up 20% today. It seems others are discovering it. Still not a lot of discussion on the internet. One small article on a website and a tweet by a trader. "Sequential" growth in scanners has a lot of appeal if it plays out for the next 2-3 years.
bbotcs...SCKT...it will. I always said that this is a "sexy story" and the following article explains why. If you want to play the iPad POS and possibly the Apple Pay, it's an indirect way that will garner attention in time.
Article today in Motley Fool:
The New iPads Are Key to Apple Pay
By Motley Fool, September 26, 2014, 11:00:08 AM EDT
Apple won't unleash its new payments platform, Apple Pay, until next month. Meanwhile, the company is expected to hold an event on October 21 to announce the new iPads.
I expect the new iPads will complete the Apple Pay ecosystem, which currently consists of the payments platform and the hardware to authorize payments. It's missing the hardware to accept payments, however, and that's where the new iPad fits in.
Retailers are already using iPads
A lot of retailers have already adopted iPads as their point of sale, or POS, terminals. iPads can be extremely cost-effective for small businesses like coffee shops and food trucks, but they can also provide benefits to large retailers as well.
For a new retailer just starting up, the cost of an iPad and all of the software and extra equipment necessary to turn it into a full-fledged POS system is about $1,500. Comparatively, a traditional cash register costs about $4,000. That's why you'll see a lot of newer shops and boutiques open with iPads on the counter instead of a register.
For bigger retailers, ones that have already sunk the cost into registers and a lot of infrastructure behind them, there are still benefits to making the switch. iPads have been shown to speed up transactions, which is key for increasing sales per hour. Additionally, iPads are capable of tracking inventory across multiple terminals, meaning retailers can save time figuring out how much they need to restock.
The speed of transaction and other benefits to retailers improve if Apple supports Apple Pay in the new iPads. For example, not only is Apple Pay quick, it's capable of incorporating coupons and loyalty rewards cards into the transaction. That ought to increase adoption and use for retailers, which gain valuable data from rewards programs.
Now is the time to switch
Although there are several benefits to switching to an iPad checkout system, most retailers aren't going to switch unless there's a big force that overcomes their inertia. We may have seen that force this year. Microsoft dropped its support of Windows XP, which many big retailers still use to run their POS systems. Additionally, we've seen a lot of security breaches from hackers stealing credit card information from large retailers.
Hackers took advantage of Microsoft's old operating system and the fact that credit card data is transferred to retailers' computers during transactions. To be fair, Microsoft strongly encouraged XP users to upgrade to a newer OS, and the security breaches at retailers like Target and Home Depot likely could have been avoided had they upgraded.
The problem also could have been avoided by using chip and pin security on credit cards instead of transferring credit card data using a magnetic stripe. This led card issuers to send some customers new cards supporting the technology, but unless retailers change their terminals, they're essentially no more secure.
Fool contributor Chris Neiger points out that U.S. retailers have until October of next year to support chip and pin credit cards , which may also result in wider adoption of NFC payment terminals necessary for Apple Pay. The iPad is able to support chip and pin payments with an adapter, much to the benefit of small retailers that already use iPads. That also means big retailers might take the opportunity to switch to iPads instead of buying new terminals, especially if they also support NFC payments.
Boosting iPad sales
iPad sales have slumped this year as consumers hold onto their old tablets, and the market is beginning to saturate. A new round of iPads focussing on Apple Pay and benefits to retailers could spur a big upgrade cycle for Apple, which it could certainly use after iPad sales have disappointed for the last couple of quarters.
The iPad has already done a good job replacing a lot of personal computers, now Apple is aiming to go after computers in the business world with its enterprise partnership with IBM . Retail represents one of the biggest PC markets left, and Apple could make inroads with the iPad in an area it's never really participated in before.
What's more, if Apple succeeds in getting more iPads in retail settings, it could boost adoption of Apple Pay. This is the Apple ecosystem at work
Read more: http://www.fool.com/investing/general/2014/09/26/the-new-ipads-are-key-to-apple-pay.aspx#ixzz3EUnsLBbz
bbotcs..SCKT..52 week closing high on 10x+ normal volume
Yeah, it's holding up over $2 nicely. As part of the 90K+ share traded today, 32K occurred at 4:02pm after market at $2.22. Perhaps it was a pre-arranged trade with Hudson Bay? Who knows. It's positive no matter what. Someone is accumulating.
Actually, it's not just a 52 week closing high. It's over a 2 1/2 year closing high!
bbotcs...SCKT...close $2.25. Are you ready to have some fun in the next 12 months? Wait till 3Q earnings hit this low float stock and then people start to realize that they are a serious cash cow at $4.8-$5.0M, what will they be doing at $7M/qtr next year and $10M/qtr in 2016? The cloud based tablet POS system will only grow. It's why having billion dollar partners selling your scanners for you is such a killer business plan.
bbotcs...SCKT...52 week high
Wait till the story actually starts to get known. If you search iHub, I'm the only person who really discusses it. None of the microcap newsletters have picked it up. Wait till sales keep growing and people realize how leveraged this business is and the amount of money that flows to the bottom line. In effect, every major software developer that uses their scanners are a highly motivated sales team they get for free. I may have looked foolish for a long time in believing in this investment, but there are rewards to be had for being an "expert" on everything that there is to know about it.
The only negative left is Hudson Bay and their warrants. However, I heard that Hudson is open to a deal at a price discount to sell them in bulk in time. One almost happened and then Hudson pulled out with the idea they will wait to see what happens first. There is no reason to sell cheap if you don't have to.
SCKT...inventory updating for Sept
On the cc call they talked about the concern that Sept could be a slow month with the new Apple IOS 8 update slowing down the tablet POS sales from Socket's partners (and, thus, affecting scanner sales). From my inventory tracking, Sept started very slow, but has picked up pace. It's actually at the same level as August (which is the best month I ever tracked # wise and estimated $ wise). Bodes well for the future if growth can overcome Apple issues.
For 3Q, I've got 3Q N.A. sales I track at a $150K more than 2Q. From the cc call and subsequent e-mails to the company, international sales are expected to be better in 3Q than 2Q also. Toss in the $300K OEM order for Somo internals that is happening this Q and the net result is it should be more sequential growth. Not sure how much as there is always the issue of straight Somo sales stabilizing vs dropping (my tracking numbers indicate a slight decrease) and what level did "large orders" come in at (I do know the 2 large orders talked about in the cc call are actually parts of ongoing orders that carried into 3Q).
If I had to make a prediction right now, I'm looking at $4.6M to $5.0M for 3Q and 4 cents to 9 cents/share. Not sure where on that scale it will be. If it's the low end, it should push the stock into the low $2s. If it's the high end, than obviously much better especially if they are talking 4th Q growing sequentially and on and on.
Dave
bbotcs...SCKT...hit 52 week intraday high at $1.93
It's nice to see the volume and interest picking up in the stock. I think when it breaks $2 it will start to get more attention from others. The only problem they have anymore are those warrants held by Hudson Bay that can be exercised and sold. The plus is it brings in needed capital, the negative is it has a big seller there and who knows what they want for their shares. If Socket puts in nice sequential growth in the 3Q (reported late October), it should cause volume to go up more and chew through them faster.
Matt...SCKT.... Do I think SCKT is fairly priced for $4.4M and 2 cents/share results of 2Q with their current balance sheet? Yes. Do I think it's priced for the future growth? Not even close.
I think when the full impact of tablet/cloud based POS starts to roll through retailers, the growth at Socket will expand tremendously. With their expanding margins and fixed expenses, every $200K in growth is equal to 1.5 to 2 cents/share net income per quarter. Just wait for 3Q numbers. If they do $4.9M and 6 cents per share then the market will realize that (the most important part of their business) scanners have grown from $2.7M in 1rst Q to around $3.8-9M in 3rd Q, margins went from 42% to 44%, expenses didn't go up at all, and net income grew from (-2) to 6 cents/share. The future of tablet/cloud POS for retailers is just starting. What's going to happen when those 100 POS developers (and 1000 developers overall) who have purchased the software development kit in the last 24 months who now use Socket scanners and have barely even implemented their products really get rolling worldwide? What's net income going to be when 217 scanners/day that Socket sells now goes to 500+/day?!? At $1.55, the stock has absolutely none of that priced in. The current stock price assumes there is no future growth. Talk to the CEO or CFO if that's how they see it? It's why I track inventory numbers.
Not many $7M market cap companies have the software partners and the growth potential that tablet/cloud POS systems presents. It sure beats most of the OTC garbage that has 45M outstanding shares and market caps 5x this stock does and aren't even profitable. Sadly, Socket had enough issues with the Somo to have their shareholder equity drop enough to lose Nasdaq listing a couple of years ago which resulted in them losing all their institutional buyers and no one paying attention to them. The company is determined to get back there (probably won't be until spring 2016 when 2015 numbers can be audited), but they are looking at implementing a new IR campaign in 4th Q to bring attention to their situation. At least, even through the worst of it, they always have done cc calls and will answer questions if you call them up. I've met them all personally and been to the company. It's a small but solid little operation. They just screwed up horribly with the Somo but they are determined to make the scanners a big winner.
Matt...SCKT... to make a long story short, I know that the following website (through a lot of research and making phone calls to distributors and asking dumb questions) is real-time connected only to Ingram Micro's Distributors inventory. That makes it easy to track those numbers. The plus here is that it shows not only what's in stock, but also what's coming into stock.
http://www.shopblt.com/cgi-bin/shop/shop.cgi?action=thispage&thispage=01100U01U0520L.shtml&sitem=BNV7343&order_id=109796882
For Scansource and BlueStar, I use the following link (the Canadian website shows for just these two distributors). If you click on the actual number "in stock", it will break it down to Hebron, KY---which is Bluestar and Southaven, MS ---which is Scansource.
I then combine and double check all of this with a 3rd site that shows all 3 combined (it allows me to check for errors):
http://store.immediasys.com/socket-1/
Ingram is real-time, Scansource updates the end of the day, Bluestart is one day behind, but by the end of the week they all match up. All of this give me # of scanners sold per unit type. I know how much each distributor gets roughly and so I use the $ amount that Socket receives x # of scanners to give me a daily, weekly, monthly total. I've tracked everything for quite awhile now. I also do the Somo pda's too.
All this tracking shows what is coming in/out of the distributors. A true "sale" occurs when the final customer pays for it (the type of accounting Socket uses). As such, 50 scanners could go from Ingram Micro to Amazon and then it takes a week for those to sell out. Other orders could go to the final customer from the distributor. It's why I really say a true quarter is not April 1 to June 30th, but more March 22nd to June 22nd (gives it time to clear the final leg).
The analyst who is a shareholder of Socket (and who is always on the cc call) is someone I correspond with directly and share info. His firm is privately looking at $4.6M to $5.0M and 4 cents to 6 cents/share in 3Q. I know he personally bought a lot of shares under $1 when no one else was believing. Two of his clients are some of the largest shareholders in the company.
I know the OEM buyer for the Somo will be back with a large order in 3Q, that the (2) 1000+ scanner orders discussed in the cc call are actually ongoing orders that carry in to 3Q, that there are other large orders on hand and building in number but no details given on when they will be processed, and that they see international orders picking up (in the cc call they mention 2 large shipments in July and the CFO told me recently that they expect international % of sales will start to expand going forward).
A NY investor who runs an investment partnership is flying out to the west coast mid-Sept to meet for dinner with the CEO. I'll get his summary of what's going on after that.
The risk of this company failing anymore is pretty much diminished. If they didn't go under with their ugly balance sheet before, they sure aren't going to do it as revenue and net income growth and cash flow increase quarterly. The only question is where can it go to in the next 24 months? The answer to that lies more with the partners. Where does Verifone, NCR, Fujitsu, Shopify, Lightspeed, etc plan on going with their tablet software POS systems for small & mid-size businesses in the future?
I used to say it was the best investment I've ever found (that was when I thought the Somo division was going to hold at around $2M+/qtr). If it had, they never would of had the financial difficulties of the past 2 years. It's been frustrating watching the scanners start to grow but be hidden in the results of the diminishing Somo division. On the other hand, the scanner side is finally building. The number of developers keeps growing and growing---that's the key. I'd like to see more exponential growth start to happen rather than just steady sequential growth. The company needs to get to $5M/qtr to be solid and $7M to really get the gas going on this stock. I primarily track "day-to-day" smaller sales in N.A. As those grow, international sales continue to grow, and the larger deals (defined as 1000+ scanners) grow in number also, it should start to add up. Investors haven't seen it yet, but their margins will keep going up as they buy scanners in bulk more from their suppliers (and get their price per unit down) and their operating expenses are more fixed than people realize.
As for the Somo.....I know they are trying to line up more OEM buyers for the internals of it. I've heard hints that there are things happening for the future(along the lines of old customers returning and other OEM buyers), but nothing definite. In the cc call, the CEO said they would like to get it back to $1M/qtr in revenue in 2015. I think that's probably the best that can happen there. It's remnant technology for the most part. The future is the scanners and that's where their emphasis needs to be on.
I know 2 microcap newsletters that are starting to track the company. Nothing has been written up, but it's only a matter of time before the word spreads. If 3Q grows sequentially again as expected then it will start to happen.
Dave
bbotcs...SCKT....August= best inventory month I've tracked
Here's a copy of the post I put on Yahoo.
August inventory tracking----best month I've seen yet + other thoughts
April & May averaged $750K each and 3176 scanners sold that I tracked (there was a solid order right at the end of April that backlogged and was filled in May so rather than decide which month it landed in, I averaged it out for my record keeping).
June was surprisingly weak at $663K and 2941 scanners.
July picked up and was $713K and 3219 scanners.
August went on a tear and was $854K and 3622 scanners!
Conclusion: The trend is showing growth. The key will be September. As you can see, June was a bit weak so it's an easy month to beat. I'm not sure how much the Apple IOS 8 release will be an issue. Orders this week sure weren't affected by it. Yesterday and today did almost 200 scanners/day (darn good before a 3 day holiday weekend). The other plus is that there are a lot of scanners in inventory at distributors and, based on that same fact that occurred in August, that's a positive (as distributors don't order from Socket unless end customers are asking for it).
Important thoughts for those who own this stock: 2Q did 14,137 scanners (from company). With 65 business days in the quarter, that's 217 units/day. That's not a lot & yet they are now net income positive from it. The whole tablet/cloud POS (and business enterprise) software industry has barely even started to ramp up and it will eventually take over retail (and private businesses). Just research it yourself and see what the big software companies have to say about it. In time, Socket should be able to do 500 units, 800 units, and perhaps even 1000 units/day. It's not a matter of "if", just "when" and "how soon". That's the plus to them being the leaders in a new technology vs trying to make money from an old one (Somo division). 500 units/day makes this an incredibly profitable company and the stock price multiples higher than today. It's just a matter of will it occur at a steady pace forward or will they start to get exponential growth happening and it gets there more rapidly.
SCKT...it's eligible for the board again after 2Q numbers
It's one to keep an eye on if 3rd Q scanner numbers grow sequentially again. The company has a track record of disappointing investors, but that could be changing here with the expansion of retail tablet and mobile POS. In all likelihood it's only a matter of time before scanner numbers starts to break $4M/Q and then $5M+ in 2015. Here's a copy/paste of a post I put up on Yahoo last week:
"Important differences between 2Q 2013 and 2Q 2014 = future of Socket
Both quarters came in around $4.4M so on the surface it looks like flat growth. So what's there to be excited about?
Scanners: $3.6M vs $2.6M. The market is finally starting to ramp up with scanner's numbers of $2.4M, $2.75M and $3.6M in the last 3 quarters. It's important that this number keeps growing. The number of developers last year to this year grew from 500 to over 1000 now. That alone points to stronger and stronger growth as they put out their software applications and those applications grow in size and popularity.
Gross Margins: Increased from 40.7% to 43.3%. The margins have been going up as the number of scanners sold go up. It's simple-----the more units you order from the manufacturer, the lower the cost per unit becomes because of bulk pricing. It's a two-fold winner = more scanners sold + more profit per scanner. In time they should be 45% and above.
Expenses: $1.753M in 2013. $1.8M in 2014 (with $60K one time charge for the new interest rate which will lower expenses more). This shows that management is holding the line on expenses. It was good in the cc call that Kevin said they will continue to do this. It means more money will flow to the bottom line in the future as growth increases, margins increase, but expenses stay flattish. It's where the real leverage in the future for net income growth comes from.
What matters most to those reading this.......stock price. It hasn't changed much. However, if they can grow scanners sequentially in 3rd Q (even with Apple issues in Sept) and beyond, then the stock price will take care of itself. Higher revenue, higher margins, fixed expenses, low # of shares (even with full dilution) will put a lot of money to the bottom line. There is no doubt it will happen (1000 developers and growing ensures it plus a POS industry that is taking over the retail industry), the only question is how fast and how much and what time frame?
From company in response to some questions I had with them: The most important change we saw in Q2, as mentioned in our conference call, are adding a few larger deployments to what has been until now primarily a run rate driven business. Based on our general discussions with many of the larger registered software developers, larger deployments are still at a very early stage (those closing in Q2 got started typically over a year ago) and the growing business interest in using Apple and Android Smartphones and tablets in mobile point of sale and commercial services applications as reported from time to time by Venture Development Corporation has the potential to dramatically alter the mobile application landscape over the next several years to Socket’s benefit.
bbotcs....I think the best thing SCKT's management can do is stay the course, increase the number of developers, grow the scanners, try and get some more OEM customers using the Somo, keep expenses bare bones, and bring it all together to pay down debt & get the stock price up (and back on the Nasdaq). As far as I know and hear, that's exactly their plan. Expansion of the Somo with more R&D and upgrades is a risk that they aren't willing to take as you then step into competition with a lot of other (and bigger) companies. They've learned their lessons there. I know when I was at the shareholder meeting last year, the CEO commented on how frustrating it was to hear hospitals say "if you build it, we will buy it" sort of thing and, after they build it, the hospital says "we'll we really aren't sure what we are doing now". I remember hearing the CEO say that they would of done things differently if they knew that was coming.
SCKT...bbotcs
I was a bit disappointed with the $4.4M and 2 cents/share quarter. I was hoping for more just so the company could "break out" a bit and put itself on people's radar to watch. However, once I got past it (more my frustrations acting up and not the actual story), I had to admit that the scanner story is building and I just need to be patient and let it play out. "Sequential quarterly growth" is a pretty nice thing. The scanner revenue may still be clouded a bit by the Somo division's troubles, but it should move beyond it soon (even sooner if the Somo actually rebounded a bit). As those number of developers build, as tablet POS systems start to take over retail in the years to come, Socket should do well.
SCKT: Analysis of 2Q results
I've owned and have researched this company for the last 3 years. It's been frustrating beyond imagination waiting for them to finally execute their business plan---which is a solid business model if they can bring it together. I can finally say, after all this time, they may FINALLY have a business and a future.
Positives for the company:
1. Two years ago they created a software development kit that developers can use to easily integrate into their software applications for tablets and smartphones that allow Socket's barcode scanner to send data to the hardware in various forms, allows for easy changes to that data, and allows tablets to use a barcode scanner and the keyboard option without having to disconnect the scanner (this was unique at the time). In 2 years they have had 1000 developers now purchase the SDK. They now have several hundred applications (part commercial apps & part internal business apps) that can use their scanner. As the CEO said on the cc call "the money they are making now is based on applications that were started 12-18 months ago." As more and more of these applications come to market and mature and grow, Socket just rides their coattails and let's them sell the barcode scanners for them.
Scanner sales: 4th Q 2013: $2.4M
1rst Q 2014: $2.75M (record amount--no big deals)
2nd Q 2014: $3.6M total (record amount---$400K or so from big deals)
Sequential quarterly "day-to-day" sales growth is finally starting to occur. The big deals they have talked about all the way from last summer are starting to occur. In the cc call, the CEO was hesitant to make predictions for 3rd Q due to the fact they've had issues with Apple IOS upgrades affecting software sales. It almost sounded negative. I (and others) communicated with the company after the cc call. It was told to us that they have been burned badly by "over promising and under performing" in the past so they are being conservative in what could happen in 3rd Q. July has started off really strong (they have shipped or have orders just this month from distributors for 50% of what they did last quarter). In my inventory tracking for N.A., I know July has been a very strong month. I also see where a lot of scanners are coming into stock. I also know that distributors don't order scanners unless their end customers are asking for them. The real question is what will Sept do for the month?? The CFO told someone I know that they don't expect as much of a slowdown as years past. Software developers are ready and used to the Apple IOS transition now. However, they want to be cautious. He said if Sept is only a slight downtrend in their pattern of growth, then expect a much more positive cc call in 3rd Q as they start to lay out their future.
2. Somo division: This division is what's killed the company as it's shrank each and every quarter. It's down slide has hidden the growth of the scanners in the revenue numbers. I know that the OEM medical device buyer who purchases $300K of "Somo guts" last year for their European device is coming back in 3rd Q to buy again. I had been under the impression that this company had gotten FDA approval already to sell this product in the U.S, but from the cc call it was made clear that it hasn't happened yet but should start to play out going forward. Other manufacturers have reached out to them for the same purpose. The reality is the Somo isn't getting anyone new writing software for it, but it still is a low priced piece of hardware that could save medical device companies money by switching over to it. Everyone else has pretty much phased out their products. When pushed on the cc call if this could FINALLY put some stability in the down slide of Somo sales, the CEO replied that they actually could cause it to rebound back to $1M/qtr. You could tell he was hesitant to make a statement like that---he's been criticized horribly for those in the past. If there was any rebound in sales in the Somo then that's like free money at this point as their are almost no costs associated with the Somo anymore. In reality, the Somo is and will be meaningless as the scanners grow in volume, but free money is free money, especially when the gross margins on the Somo are over 50%.
3. Profit margins. As the scanners have gone from $2.4M to $3.6M, gross margins have gone from 41.1% to 43.3% this quarter. They will only continue to increase as more scanners are sold each quarter. It's simple purchasing power. They switched to manufacturer's in Mexico for the parts to the scanner and as they buy more, the average price/unit will continue to go lower. It's like buying nuts/bolts----the price/unit goes down as you buy in bulk.
4. Expenses. They aren't going up. They're costs are more fixed than people realize. They should even go down next quarter now that they got part of their debt refinanced. The company is determined to keep an eye on expenses going forward.
5. Large orders: In 2Q, they did two shipments in conjunction with a software partner for around 1200 units each. These orders are from trials that occurred in 2014. The CEO expects some to happen in 3rd Q. It was obvious he was expecting more in 4th Q. They will only grow in number and size going forward. The more you do, the more large companies trust your product. They have trials going on now for deals to close in 2015. This doesn't not include the van line deal----which the CEO talks about in the cc call (which is still a very strong possibility) or the Japanese deal (which is unknown right now). I do know that they have said they can't really publicize these deals as they are more the software partners with the end customer, not Socket as the main lead. These big deals show the power of having your software integrated into the customers---you are the choice the developer recommends to the final customer whether it's a mom-n-pop or a 1000 store chain. The big companies still do demos on the scanners to make sure they are happy with the product. I also know the CEO is trying to get people to focus on the sequential "day-to-day" sales growth that is occurring and then when the big deals happen they will be nicely incremental.
Summary of positives: The company is bringing their business plan together. The balance sheet is a bit of an issue, but they have made it work till now and being cashflow and net income positive from here on out will clear problems up quickly. 43%+ profit margins and fixed expenses makes for serious cash being generated as sales ramp up.
Unless the economy rolls over (always a risk), little Socket Mobile should start to play out nicely. The more developers they get, the more sales they do, the more they are included in big deals, the more the will grow. It just feeds itself as they are accepted as a real player in the industry.
Negatives:
1. I've said many times in the past that I don't trust them----not that they aren't honest, but more a matter of competent. This is passing. It's obvious they have a plan and are executing it wisely. I'm still frustrated with them because I don't like the stock price, but it will take care of itself in time as the scanner business continues to grow sequentially.
2. Low trade volume. I think this is the biggest negative right now. The stock is not well known. It needs publicity and exposure. The CEO said on the cc call that if the 3rd Q plays out well then they will start to make a point of spending money there. They are just being tight right now with expenses. It's a catch-22.....they need to promote the company but they also need to prove 100% to investors that this isn't the same ol' Socket Mobile of promising without performing. 3rd Q will be important to show sequential growth in the scanners yet again. If they do that, even with Apple issues, then it's obvious this business can start to grow for a long time going forward as smartphones and tablets take over the world of retail.
3. The balance sheet needs work. It's not horrible anymore (now that the money is coming in instead of out), but they need to grow the business to pay off debt.
4. They need audited results of $5M shareholder equity to get back on the Nasdaq. They are no where near that----they need 4-5 quarters of net income positive results + warrants and options exercised to raise additional money. The reality is that won't occur until spring 2016. As such, they will be on the OTC market. Even if things start to play out really well, will anyone notice?
OVERALL: In the 3 years I've owned this (and probably the last 10 years total), never have they been in a better position going forward. They have a real business and a plan to make it work. There are still hurdles, but with a market cap of just 1/2 x sales, it could do very well going forward if sequential quarterly scanner sales keep happening. With profit margins growing and fixed expenses, it becomes a cash cow. We will know for sure after 3rd Q. If they can grow sequentially then during their toughest quarter, then this company will be a winner over the next few years. The ol' Socket Mobile will finally be in the rear view mirror.
SCKT: 2 new scanner products being released in 3rd Q
http://finance.yahoo.com/news/socket-mobile-enhances-hands-free-103000228.html
http://finance.yahoo.com/news/socket-mobile-unveils-worlds-smallest-103000540.html
Earnings for 2Q will be released after the market closes on Thursday, July 24th. Everything I've seen in inventory tracking (and rumors I've heard of a large deal) indicate that they should finally surprise everyone to the upside. We'll see. It'd be nice to see some solid revenue growth.
megazoo... I think it's only a matter of time before they break $5M or $6M or even $7M/qtr. I don't know when it will be though. That would be just a pure guess. I do know the tablet and handheld POS system will sweep retail. It's obvious----it allows you to build a database of information on your customers while combining brick-n-mortar with online sales. In all of this, inventory tracking is going to be essential. Does that mean everyone uses a bluetooth scanner with the system? I don't know that for certain. You can use an USB plug-in scanner with a Square Register but then you can't use it in the aisles or warehouse (whereas a bluetooth one can be carried everywhere). The other option is to put a scanner on your smartphone through an attachable case (the phone camera is too slow for multiple scans). Linea Pro did this + a credit card scanner and it all got started for use at Apple stores. People don't know this, but Apple actually approached Socket a few years ago (Socket has some great engineers that are well respected) to create this product for their store employees. Socket turned them down! They couldn't afford the risk (pretty much because the CEO kept too many employees on the payroll for too many years when they cashflow negative and they couldn't risk the money to do it). It's why they came out with the 8ci scanner last summer finally. Sales are growing with that product but it has a ways to go for me to be happy.
For them to get to $5M-$6M quickly, it will involve them getting large deals signed by their software partners. They keep saying they are out there. I honestly thought they would have had the 28K scanner Japanese deal (it's still in play). That alone would add almost $1M/qtr to revenue. With a profit margin of 43% plus and expenses rather fixed other than more warehouse workers, a lot of money would flow to the bottom line. At $7M/qtr, this is a serious cash cow of a little company. It's why I'm so pissed that the company couldn't make the Somo do better.
2013 Shareholder Meeting: Socket allows cumulating of shares (and can't change it until they get back on the Nasdaq again). That means instead of voting 1x for 7 different candidates, I can vote 7x for 1 candidate! I built a coalition of shareholders who held 525K shares who gave me legal permission to vote their shares in person and I put 3.7M shares towards our own candidate, Eric Fidel. No company candidate, through normal voting, had more than 2.1M. Trust me, the company did not like it. In the process on of the founders of the company, Michael Gifford, was kicked off. I later heard he was rather angry and, ironically, they let him go 6 months later. Eric actually worked well with the Board and he pushed them hard on keeping expenses low.
2014: I now communicate with around 1.2M shareholders. 850K or so I know could cumulate without question (this doesn't include you or bbotcs. Just major holders I know as times has gone by). The company knows this and it worried them. They actually liked Eric on the Board, but their plan was instead was to drop him (and replace him with Dave Dunlap their CFO), and, with the two retirements of other Board members (Kevin Jost, the former president of Honeywell's barcode division became a consultant instead) and drop the Board to just 5 people to limit how many I could cumulate against them (i.e. all the shares x just 5). Since we would have to use our shares to put Eric back on the Board, it reduced our ability to add more. They figured we would do it, but only be able to do him alone. Dunlap then would resign and Eric would take his spot. Complicated, eh?!?
Instead, I chose to not do anything. I knew revenues were going to inch up and the focus needed to be on presenting the company in a better light, not on a rogue group of shareholders making a public statement again. There was a bit of disagreement among our group, but Eric instead took a position as an "observer" which means he's at Board meetings but can't vote. As for voting, what we did instead is NOT vote! If you look at the results, no company director got more than 1.1M votes this year. It's the lowest voter participation ever for the company.
2015: Now there is a new worry for them. I can't get everyone to cumulate (some are partners in firms or have different agendas), but if you cumulated 850K shares--the number I'm sure I could get at minimum now (for 4.25M votes while also simultaneously getting others to not vote to keep the total tally down and then you spread that among 3 candidates, you could theoretically take over the Board). This assumes you have solid candidates to put up---not just anyone. Eric F. has a very strong resume. They all wanted me on there instead, but I have no desire.
I don't have a lot of faith in the CEO. I've met him (as have others). Good guy but not driven. Replacing him now isn't fiscally smart as it would cost too much money and their balance sheet isn't strong yet. Though a year from now?!? I'd love to see this a $200M market cap company and I don't know if he has the passion (or ability) to get it there. On the other hand, he has set them up well with the scanner niche they are in. If the partners do all the selling, maybe he's capable of just delivering scanners on time to them??