Socket Mobile (SCKT) Q3 2026 Earnings Call Transcript

DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Chief Financial Officer - Lynn Zhao
• President and Chief Executive Officer - David Holmes

TAKEAWAYS

• Revenue -- $3.4 million, representing a 9% increase versus the prior year quarter and a 12% sequential increase driven by stabilizing performance in an uncertain market.
• Gross Margin -- 48.6%, reflecting a year-over-year increase from 47.7% due to inventory reduction and cost management initiatives.
• Operating Expenses -- $2.3 million, representing a 10% decrease from the third quarter of 2025 as management prioritized operational efficiency and financial discipline.
• Operating Loss -- $643,000, narrowing from a loss of $1.1 million in the prior year quarter due to higher revenue and reduced expenses.
• Net Loss -- $789,000, which improved from a net loss of $1.2 million in the third quarter of 2025.
• Loss Per Share -- $0.09, representing an improvement compared to $0.15 in the prior year quarter and $0.16 in the preceding quarter.
• Adjusted EBITDA Loss -- $262,000, an improvement from a loss of $540,000 a year ago and $745,000 in the second quarter of 2026.
• Cash Balance -- $1.4 million as of Sept. 30, 2026, down from $2 million as of Dec. 31, 2025.
• Inventory -- $3.4 million, decreasing from $4.2 million at the end of 2025 as the company worked to align stock levels with current demand.
• Bridge Financing -- $425,000, secured from Board Chairman Charlie Bass at an interest rate of 10% to provide working capital.
• Debt Repayment -- $575,000, representing the amount of convertible notes repaid during the third quarter.
• Convertible Note Conversion -- $50,000, representing debt converted into equity during the period.
• Research and Development Expenses -- $930,000, down from $1 million in the prior year quarter.
• Sales and Marketing Expenses -- $600,000, representing a decrease from $935,000 in the third quarter of 2025.
• General and Administrative Expenses -- $761,000, increasing from $577,000 a year ago.
• Total Liabilities -- $9.9 million as of Sept. 30, 2026, compared to $10.2 million at the end of 2025.
• Total Stockholders' Equity -- $1.8 million, falling below the minimum $2.5 million requirement for continued NASDAQ listing.
• Accounts Receivable -- $1.3 million, down from $1.7 million as of Dec. 31, 2025.

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RISKS

• Holmes stated, "the results have been a little bit lumpy, which is why you've seen some inconsistencies with the revenue," referring to the timing of industrial customer wins.
• Zhao noted that the company received a notification from NASDAQ indicating "stockholders' equity was below the minimum $2.5 million requirement," necessitating a transition to the OTCID market.

SUMMARY

Socket Mobile, Inc. (NASDAQ:SCKT) reported improved financial performance for the third quarter with sequential and year-over-year revenue growth alongside narrowed losses. Management stated that the company is executing inventory reduction and cost management initiatives to align its structure with uncertain market conditions. The company is voluntarily transitioning its stock listing from the NASDAQ Capital Market to the OTCID market to reduce administrative and regulatory costs. Management indicated that this transition is intended to redirect capital toward core product development and long-term growth opportunities while maintaining SEC reporting compliance.

• CEO Holmes stated, "We've had some wins in a diverse customer group," including a major construction equipment manufacturer and engagements in the automotive and flooring industries.
• Management expects the common stock to begin quoting on the OTCID market under the ticker symbol SCKT on or about Nov. 19, 2026.
• The company expanded its vertical market reach through partnerships with 3Eye Technologies for industrial mobility and Orda for enterprise workplace dining solutions.
• CFO Zhao indicated that the transition to the OTCID market will redirect capital toward core product development and operational execution.
• Management confirmed that industrial customer opportunities are expected to be fulfilled through the remainder of 2026 and into the first half of 2027.
• The company intends to continue filing periodic reports, including Forms 10-K, 10-Q, and 8-K, following its listing transition.

INDUSTRY GLOSSARY

• CaptureSDK: A software developer kit that allows application providers to modify captured data and control barcode or RFID data placement.
• NFC (Near Field Communication): A set of communication protocols that enables two electronic devices to communicate over a short distance.
• OTCID: A market tier operated by OTC Markets Group for companies that are current in their reporting to a U.S. regulator.
• RFID (Radio Frequency Identification): A technology that uses electromagnetic fields to automatically identify and track tags attached to objects.

Full Conference Call Transcript

Lynn Zhao: Welcome, everyone, to Socket Mobile, Inc. Q3 2026 Earnings Call. My name is Lynn Zhao, CFO at Socket Mobile. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements include, but are not limited to statements regarding mobile data collection and related products, including their development, timing, distribution and market acceptance as well as anticipated trends, sales, market conditions and opportunities in the markets in which Socket Mobile sells its products.

Such statements involve risks and uncertainties, and actual results could differ materially from those anticipated due to a number of factors, including delays in the manufacturing or product launches resulting from technological market or financial factors, the availability of product components and necessary working capital, the possibility that market acceptance and sales opportunities may not develop as anticipated; the risk that Socket's application partners and existing distribution channels may choose not to distribute its products or may be unsuccessful in doing so, and the risk that the Socket's products may not achieve the anticipated acceptance in vertical application markets. Other risks are described in Socket's most recent Forms 10-K and 10-Q filed with the Securities and Exchange Commission.

Socket undertakes no obligation to update any forward-looking statements. On the call with me today is Dave Holmes, President and Chief Executive Officer. I will now turn the call over to Dave. Dave, you may begin.

David Holmes: Thanks, Lynn. Good afternoon, everyone, and thank you for joining us today to discuss our results for the third quarter of 2026. This quarter, we grew revenue, improved gross margin and narrowed our operating loss compared to both last year and last quarter. Revenue for the third quarter was $3.4 million, up 9% from the third quarter of 2025 and up 12% from the second quarter of 2026. Gross margin improved to 48.6% compared to 47.7% a year ago and 46.4% in Q2. Operating expenses were $2.3 million, down from $2.5 million a year ago and $2.6 million last quarter.

As a result, our operating loss was $644,000 compared to $1.06 million in the prior year quarter and $1.2 million last quarter. We ended the quarter with approximately $1.4 million in cash. Our third quarter results reflect progress in stabilizing revenue while executing our inventory reduction and cost management initiatives. While not satisfied with the revenue outcome, we did show improvement in a market that remains uncertain. At the same time, we continue to align our cost structure with business conditions. Our reduction in operating expenses reflects our ongoing focus on operational efficiency and financial discipline while maintaining our ability to support customers and pursue future growth opportunities. This quarter, we also expanded our commercial reach through strategic partnerships.

3i Technologies supports industrial mobility solutions for Apple-based frontline workflows and Orda provides integrated mobile ordering and self-checkout for enterprise workplace dining. Both of these partnerships extend our data capture solutions into new markets. Looking ahead, we expect to continue our cost management initiatives through the rest of the year while pursuing opportunities to expand our data capture solutions across key markets. Our priorities are disciplined expense management, stabilizing revenue and expanding enterprise opportunities. We believe these will position the company for continued operational improvement on our march toward profitability. With that, I'll turn the call back to Lynn for more details on our financial results. Lynn?

Lynn Zhao: Thank you, Dave. Our Q3 adjusted EBITDA loss was $262,000, an improvement from a loss of $745,000 in Q2 2026 and $540,000 in the prior year quarter. Loss per share was $0.09 compared with $0.16 in Q2 2026 and $0.15 in Q3 2025. Turning to the balance sheet. Cash totaled $1.4 million as of September 30, 2026, compared with $2 million at December 31, 2025. Inventory, net of reserves was $3.4 million as of September 30, 2026, compared with $4.2 million at December 31, 2026, reflecting our continued efforts to align inventory levels with current demand. In Q3, the company repaid $575,000 of convertible notes and converted an additional $50,000 into equity.

In August, the company received $425,000 in secured subordinated bridge financing from Charlie Bass, the company's Board Chairman and an existing note holder. The loan bears interest at 10% and was used for working capital. Upon closing the convertible note financing, the loan principal will convert into subordinated convertible promissory note on the same terms as the other notes issued in the financing. Next, I'd like to address our recent announcement regarding the voluntary transition of our common stock listing from the NASDAQ Capital Market to the OTCID market operated by OTC Markets Group. As previously disclosed, the company received a notification from NASDAQ in August, indicating that our stockholders' equity was below the minimum $2.5 million requirement.

After evaluating our strategic alternatives, market capitalization and operational costs, our Board of Directors determined that continuing to incur substantial legal, accounting, compliance and listing fees required to maintain a NASDAQ listing is no longer an optimal use of corporate capital relative to the benefits provided. By voluntarily transitioning to the OTCID market, we expect to significantly reduce administrative and regulatory costs, free up management resources and redirect capital towards core product development, operational execution and long-term growth. We have received a recent confirmation from OTC Markets Group that we have satisfied the onboarding qualification for quotation on the OTCID market.

And we expect our common stock to begin quoting under our existing ticker symbol SCKT on or about November 19, 2026, following the filing of effectiveness of Form 25. Importantly, the transition will have no impact on our day-to-day business operations, customer commitments or product delivery schedules. Furthermore, we intend to continue filing periodic reports, including Forms 10-K, 10-Q and 8-K with the SEC in full accordance with the Exchange Act. This concludes our prepared remarks. We will now open the call for questions.

Lynn Zhao: [Operator Instructions] Yes, we can hear you now.

Steve Swanson: This is Steve Swanson, a private investor. David, can you speak to any industrial customers we might have signed any contracts with over the last quarter or that we're getting close with going forward?

David Holmes: Yes. Thanks, Steve. So we've had some initial success here this year, but the results have been a little bit lumpy, which is why you've seen some inconsistencies with the revenue. I can't name anyone specifically by name. But what I can say is it's -- we've had some wins in a diverse customer group. So we have a major construction equipment manufacturer that we've won. We've had -- we have a flooring company, which is on the horizon that we're in good talks with. There's a whole -- there's kind of a nice cross-section of different industries that we're engaged with. Automotive is another one that we're fairly heavily engaged with.

So although I can't name anybody specifically, we've tried to get some public testimonies from some of the customers that we're engaged with, but haven't been able to secure those yet. But we're still engaged across the board with several big players. And so we're still pretty bullish about the opportunities in front of us. We just wish it would have happened a little sooner and been a little more consistent to this point.

Lynn Zhao: Steve? Sorry. Yes, I was there.

Steve Swanson: I was asking, David, are those industrial customers going to be 2026 opportunities? Or are they more 2027? And if so, the first half or the second half?

David Holmes: Yes. The short answer is all of the above. So we do have a few opportunities that will be fulfilled still this year. We have others that we've engaged with, which we are expecting to happen this year that slipped into first half of 2027. And we have new opportunities that are sort of new in the last couple of months that are in first half and also second half. And there's -- and there's some nice sized opportunities that we're chasing. So I think the revenue will get more consistent over time as we start stacking up more and more wins.

But in this initial stage, we were sort of expecting it to be a little lumpy, and that's exactly how it's played out.

Steve Swanson: With everyone being reticent to be the first man in on a new product or a new area that the company is going into, are there -- is there much more reticence to go with Socket as a result of our financial issues over the last 90 to 120 days?

David Holmes: Thus far, there's been no issues on that front, at least none that have been communicated to us. A couple of the players that we go up against are some small guys, small companies. So especially on the iOS front. Obviously, when we're competing on the Android side, we're with some heavy weights. But so far, no one's brought that up, no.

Steve Swanson: Lynn, about the convertible debt that was -- that you guys called that was called in and you replaced, did you just basically swap out the Chairman who -- did the Chairman just basically swap out the debt that the mills person put back or wanted to get paid off?

Lynn Zhao: Yes, that's correct.

Steve Swanson: And then I also know that you mentioned you'd be doing future earnings releases and 10-Qs and 10-Ks. Are you going to be having earnings calls going forward? Or are those going to fall off and we'll just get the earnings releases for the next 9 to 12 months?

Lynn Zhao: No, we'll do everything as usual. [Operator Instructions] Dave, I don't see any other questions.

David Holmes: No, I don't either.

Lynn Zhao: Okay. All right. Thank you, everyone. This concludes today's conference call. Thank you for attending.

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