Results of Operations

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) : April 30, 2020 Data I/O Corporation (Exact name of registrant as specified in its charter) Washington 0-10394 91-0864123 (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.) 6645 185th Ave. N.E., Suite 100, Redmond, WA 98052 (Address of principal executive offices, including zip code) (425) 881-6444 (Registrant’s telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: □ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) □ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) □ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) □ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock DAIO NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company □ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act □ Items reported in this filing: Item 2.02 Results of Operation and Financial Condition Item 9.01 Financial Statements and Exhibits Item 2.02 Results of Operation and Financial Condition A press release announcing first quarter 2020 results was made April 30, 2020 and a copy of the release is being furnished as Exhibit 99.0 in this current report. Item 9.01 Financial Statements and Exhibits. (d)   Exhibits Exhibit No. Description 99.0 Press Release: Data I/O Reports First Quarter 2020 Results SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Data I/O Corporation April 30, 2020 By: /s/ Joel S. Hatlen Joel S. Hatlen Vice President Chief Operating and Financial Officer EXHIBIT INDEX Exhibit No. Description 99.0 Press Release: Data I/O Reports First Quarter 2020 Results Joel Hatlen Darrow Associates, Inc. Chief Operating and Financial Officer Jordan Darrow Data I/O Corporation 6645 185 th Ave. NE, Suite 100 (512) 551-9296 jdarrow@darrowir.com Redmond, WA 98052 (425) 881-6444 Data I/O Reports First Quarter 2020 Results Redmond, WA -- April 30, 2020 -- Data I/O Corporation (NASDAQ: DAIO), the leading global provider of advanced data and security deployment solutions for flash, flash-memory based intelligent devices and microcontrollers, today announced financial results for the first quarter ended March 31, 2020. First Quarter 2020 Highlights · Net sales of $4.8 million; bookings of $4.3 million · Gross margin as a percentage of sales of 58.2% · Net loss of ($554,000) or ($0.07) per share · Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)*, excluding equity compensation, of ($110,000) · Cash & Equivalents of $13.8 million; no debt · Automotive electronics, advanced programming and secure provisioning leadership o Automotive Electronics represented 55% of first quarter 2020 bookings o New distribution partnership with NOA Leading Co., Ltd. in Japan o Three new automotive wins in the quarter in Asia, Americas and Europe o Growth in SentriX® devices provisioned, device types supported, and design wins o COVID-19 Positioning and Response · Globally diversified manufacturing/service operations complying with local regulations · As an “essential” business, manufacturing facilities remain open with core personnel onsite to service, build and ship products · Prioritizing COVID-19 related device supports, equipment orders and service · Cash conservation and expense management initiatives, including reductions in executive and Board level compensation *EBITDA and Adjusted EBITDA are non-GAAP financial measures.  A reconciliation is provided in the tables of this press release. Management Comments Commenting on the first quarter ended March 31, 2020, Anthony Ambrose, President and CEO of Data I/O Corporation, said, “The first quarter delivered unprecedented worldwide conditions with the onset of the COVID-19 pandemic just as our business seemed to be emerging from the cyclical downtrend that commenced nearly two years ago.  Our thoughts and prayers go out to all the communities, businesses and individuals who have been hard hit by the virus.  This has been a crisis affecting global businesses and humanity alike, and we at Data I/O are doing our part to contribute toward the comprehensive steps for safety and recovery.  “We are an essential supplier to the medical and aerospace industries, and therefore need to stay open while keeping our employees and our facilities safe. We have required most of our workforce to operate remotely, while maintaining a core group to staff our manufacturing, service and support operations. O ur global teams follow recommended best practices in accordance with local government mandates. I would like to personally recognize the efforts of our entire global workforce who have risen to the occasion and kept our workplaces, their communities and families safe while supporting customers. “While we entered the crisis in a position of strength, the unprecedented nature of the pandemic creates significant downside risk under certain scenarios, so we are taking precautionary measures.  These include reductions and deferrals in compensation for corporate executives and members of our Board of Directors, and reduced work weeks for certain locations and functions as outlined in our previous SEC filing.   We also will evaluate on a case by case basis all government programs worldwide that help preserve our workforce and cash flow at the same time. “Globally, the automotive manufacturing arena has been materially impacted by plant closures.  While China factories have reopened, the US, Mexico and Europe remain largely shut-down through April.  Guidance from leading customers indicates they will be reopening soon and ramping European and American output later in the second quarter, with expectation of normal production by the fourth quarter of 2020. “Data I/O has consistently been at the forefront of the industry.  The first quarter was no different as we continued to invest in our leading data programming and secure provisioning platforms.  Our innovations in ultra-fast performance and reliability were recognized in the quarter, and we are honored to have received the coveted Service Excellence Award for Device Programming Support for the second year in a row as determined by customer voting.  “These qualities must be resonating with our target customers from around the world.  During the first quarter, our global sales channels and world class products enabled us to win system orders at new automotive customers in Asia, Americas and Europe as well as being selected by a global ventilator manufacturer to ramp its production.  We were particularly excited to rapidly support the ventilator electronics customer with our most advanced Lumen®X programming technology.  Locations and markets may change, but the reasons we are selected by customers remain the same: outstanding products, great customer support, financial stability and global capability. “For our other key target market in IoT, the rapid adoption of work-at-home policies amid COVID-19 underscore the importance of security at all ends of the connected electronics ecosystem.  O ur SentriX Platform, a highly robust and flexible cost-effective security provisioning and data programming deployment system for authentication devices, secure elements and secure microcontrollers, has experienced steady interest despite the recent stress on the overall economy.  The low investment SentriX model is becoming even more attractive to companies that require solutions on tight budgets. “In these very uncertain times, it is our intent to remain agile, improve our processes, follow our product roadmap, protect our superior financial condition, and grow relative to the competitive landscape until the eventual recovery in electronics manufacturing.” Financial Results Net sales in the first quarter of 2020 were $4.8 million, as compared with $6.1 million in the first quarter of 2019.  The year-over-year decline in sales reflects the cyclical downtrend in the industry, reduced demand resulting from international trade and geopolitical issues and the onset of the COVID-19 pandemic which negatively impacted automotive and industrial market production.  For the 2020 first quarter, gross margin as a percentage of sales was 58.2%, as compared to 60.8% in the first quarter of 2019.  The 2020 first quarter gross margin was primarily impacted by fixed costs being spread over lower revenue, as well as increased tariffs. Total operating expenses in the first quarter of 2020 were $3.4 million, down from $3.7 million in the 2019 period.  Data I/O continues to invest in research and development and SentriX, while emphasizing ongoing expense management practices. An operating loss of ($609,000) for the first quarter of 2020 compares to operating income of $29,000 for the first quarter of 2019.  Net loss in the first quarter of 2020 was ($554,000), or ($0.07) per share, compared with net income of $26,000, or $0.00 per diluted share, for the first quarter of 2019.  Included in net income are foreign currency transaction gains of $52,000 for the 2020 period and losses of ($104,000) for the first quarter of 2019. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was ($359,000) in the first quarter of 2020, compared to EBITDA of $189,000 in the first quarter of 2019.  Adjusted EBITDA, excluding equity compensation, was ($110,000) in the first quarter of 2020, compared to adjusted EBITDA of $476,000 in the first quarter of 2019. Bookings in the first quarter of 2020 were $4.3 million, compared to $6.2 million in the first quarter of 2019 and $6.9 million in the fourth quarter of 2019.  Backlog at March 31, 2020 was $2.3 million, as compared with $2.9 million at December 31, 2019.     Data I/O’s financial condition remains strong with cash of $13.8 million at March 31, 2020, as compared with $13.9 million at December 31, 2019.  The Company had net working capital of $18.4 million at March 31, 2020, a slight reduction from $18.5 million at December 31, 2019. The Company continues to have no debt. Conference Call Information A conference call discussing financial results for the first quarter ended March 31, 2020 will follow this release today at 2 p.m. Pacific Time/5 p.m. Eastern Time.  To listen to the conference call, please dial 412-902-6510.  A replay will be made available approximately one hour after the conclusion of the call.  To access the replay, please dial 412-317-0088, access code 10142430.  The conference call will also be simultaneously webcast over the Internet; visit the News and Events section of the Data I/O Corporation website at www.dataio.com to access the call from the site. This webcast will be recorded and available for replay on the Data I/O Corporation website approximately one hour after the conclusion of the conference call. About Data I/O Corporation Since 1972 Data I/O has developed innovative solutions to enable the design and manufacture of electronic products for automotive, Internet-of-Things, medical, wireless, consumer electronics, industrial controls and other electronic devices. Today, our customers use Data I/O security deployment and programming solutions to reliably, securely, and cost-effectively bring innovative new products to life. These solutions are backed by a global network of Data I/O support and service professionals, ensuring success for our customers. Learn more at dataio.com Forward Looking Statement and Non-GAAP financial measures Statements in this news release concerning economic outlook, coronavirus impact, expected reopening and recovery, expected revenue, expected margins, expected savings, expected results, orders, deliveries, backlog and financial positions, as well as any other statement that may be construed as a prediction of future performance or events are forward-looking statements which involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements.  These factors include uncertainties as to the ability to record revenues based upon the timing of product deliveries, installations and acceptance, accrual of expenses, coronavirus related business interruptions, changes in economic conditions and other risks including those described in the Company's filings on Forms 10K and 10Q with the Securities and Exchange Commission (SEC), press releases and other communications. Non-GAAP financial measures, such as EBITDA and Adjusted EBITDA excluding equity compensation, should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.  We believe that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s results and facilitate the comparison of results. - tables follow     - DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (UNAUDITED) Three Months Ended March 31, 2020 2019 Net Sales $4,785 $6,058 Cost of goods sold 2,001 2,373 Gross margin 2,784 3,685 Operating expenses: Research and development 1,582 1,681 Selling, general and administrative 1,811 1,975 Total operating expenses 3,393 3,656 Operating income(loss) (609) 29 Non-operating income: Interest income 8 12 Gain on sale of assets - 60 Foreign currency transaction gain (loss) 52 (104) Total non-operating income 60 (32) Income(loss) before income taxes (549) (3) Income tax (expense) benefit (5) 29 Net income(loss) ($554) $26 Basic earnings(loss) per share ($0.07) $0.00 Diluted earnings(loss) per share ($0.07) $0.00 Weighted-average basic shares 8,219 8,303 Weighted-average diluted shares 8,219 8,417 DATA I/O CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (UNAUDITED) March 31, 2020 December 31, 2019 ASSETS CURRENT ASSETS: Cash and cash equivalents $13,814 $13,936 Trade accounts receivable, net of allowance for          doubtful accounts of $79 and $80, respectively 3,107 4,099 Inventories 4,804 5,020 Other current assets 1,709 924 TOTAL CURRENT ASSETS 23,434 23,979 Property, plant and equipment – net 1,813 1,668 Income tax receivable - 640 Other assets 1,850 1,994 TOTAL ASSETS $27,097 $28,281 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $1,072 $1,151 Accrued compensation 1,214 1,541 Deferred revenue 1,421 1,387 Other accrued liabilities 1,286 1,372 Income taxes payable 28 31 TOTAL CURRENT LIABILITIES 5,021 5,482 Operating lease liabilities 1,045 1,178 Long-term other payables 67 91 COMMITMENTS - - STOCKHOLDERS’ EQUITY Preferred stock - Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none - - Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 8,221,447 shares as of March 31, 2020 and 8,212,748 shares as of December 31, 2019 19,001 18,748 Accumulated earnings 1,954 2,508 Accumulated other comprehensive income 9 274 TOTAL STOCKHOLDERS’ EQUITY 20,964 21,530 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $27,097 $28,281 DATA I/O CORPORATION NON-GAAP FINANCIAL MEASURE RECONCILIATION Three Months Ended March 31, 2020 2019  (in thousands) Net Income(loss) ($554) $26    Interest (income) (8) (12)    Taxes 5 (29)    Depreciation and amortization 198 204 EBITDA earnings(loss) ($359) $189    Equity compensation 249 287 Adjusted EBITDA earnings(loss),    excluding equity compensation ($110) $476