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DATE
Thursday, July 24, 2025 at 9:00 p.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Bill Wentworth
Interim Chief Financial Officer — Todd Hennie
Investor Relations — Jordan Darrow
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RISKS
Backlog declined by $200,000 to $2.8 million at June 30, 2025 (Q2 2025), as sequential bookings have not yet increased reported backlog.
Gross margin narrowed to 49.8% in Q2 2025 from 51.6% in Q1 2025 and 54.5% in Q2 2024, with management stating this resulted from "a lower margin product mix and configuration of automated systems driven by a large customer order."
Operating loss deepened to $844,000 for Q2 2025, mainly due to $480,000 in one-time spending, compared to a reported operating loss of $566,000 in Q2 2024.
Automotive electronics segment represented 66% of bookings for Q2 2025, making results increasingly concentrated in a domain management described as "not the direction I want to go in" due to capital spending delays elsewhere.
TAKEAWAYS
Net Sales-- Net sales were $5.5 million in Q2 2025, down from $6.2 million in Q1 2025 and up from $5.1 million in Q2 2024. Sales in Q1 2025 were elevated by a large one-time order.
Bookings-- $5.8 million in bookings for Q2 2025, up from $4.6 million in Q1 2025 and $5.6 million in Q2 2024; June saw a large order announcement, with ongoing activity into Q3 2025.
Backlog-- Backlog was $2.8 million as of June 30, 2025, $200,000 lower than at March 31, 2025; new orders have yet to fully impact backlog.
Gross Margin-- 49.8% in Q2 2025, compared with 51.6% in Q1 2025 and 54.5% in Q2 2024; mix shift and system configuration for a large order were cited as margin pressures.
Recurring Revenue-- Consumable adapters and services accounted for 50% of total revenue in Q2 2025, providing a stable base.
Operating Expenses-- $3.8 million, up from $3.6 million in Q1 2025 and $3.3 million in Q2 2024, including approximately $480,000 of one-time items tied to platform investment and leadership transition.
Adjusted EBITDA-- Adjusted EBITDA loss of $437,000 reported for Q2 2025, but would have been a positive $43,000 adjusted EBITDA excluding one-time expenses (compared to $3,000 positive in Q2 2024).
Cash Position-- $10 million at quarter end (Q2 2025); would have been $10.5 million as of June 30, 2025, absent one-time spending, compared to $10.3 million as of December 31, 2024.
Working Capital-- Over $15.6 million in net working capital as of June 30, 2025, slightly below $16.1 million at December 31, 2024 (year-end 2024), primarily reflecting first-half one-time spending.
Debt-- No outstanding borrowings; Balance sheet remains debt-free as of June 30, 2025.
Automotive Electronics Bookings Concentration-- Increased to 66% of total bookings for Q2 2025, compared with 59% for all of 2024, with Asia (notably China) leading due to EV demand.
Tariff and Trade Uncertainties-- "Europe and the Americas continue to be pressured by pent-up capital equipment spending due to tariff and trade uncertainties."
One-Time Investments-- $480,000 relating to platform upgrades, sales/marketing strategy, business line expansion, HR, and CFO transition; further double-spending expected during CFO transition into Q3 2025 and possibly Q4 2025.
Product Roadmap Events-- Six major product launches planned for September–November at shows worldwide, expected to increase lead generation.
Yield Improvements-- New investments in the core platform target yields of 99.8%-99.9% for UFS flash devices, with 100% yield currently achieved on test samples of new contact technology (based on a small sample size as of Q2 2025).
Strategic Focus-- New universal programming platform rollout planned by late 2025, with consolidation of product lines onto a single platform by 2026–2027.
SUMMARY
Management described Sequential bookings growth and activity improvement in June 2025, with bookings of $5.8 million, up from $4.6 million in Q1 2025 and $5.6 million in Q2 2024, attributing this to a major system order and anticipated product launches. The company emphasized a major ongoing push to solve UFS flash yield issues, stating this is where literally, like, significant amount of our engineering time is being spent. Strategic investments totaling $480,000 were presented as essential for both technology advancement and management transition, with additional spending expected in the CFO handover process. Data I/O continues to rely on the automotive electronics segment for the majority of bookings, signaling concentration risk acknowledged by leadership as a business challenge. Tariff and trade concerns persisted, affecting equipment spending in Europe and the Americas, while recurring revenue from adapters and services offset volatility in new systems business.
Management stated, "Everything from a milestone perspective is on track," for product launches and investments, though timelines were described as "a little tight."
Direct material costs were reported as steady, with only minor price pressures identified in aluminum-containing system parts.
One-time IT infrastructure upgrades are expected to result in annualized cost reductions of about $512,000, with roughly half implemented and the remainder targeted by year-end.
Asia-Pacific growth, especially from China’s EV sector, was cited as a key booking driver, including a $1.4 million order from an existing Chinese EV customer expanding on its prior installed base of 20 systems.
The company is pursuing vertical integration into socketing technology to improve device contact yields and address a $7 billion market opportunity.
Cloud migration and new CRM systems were highlighted as key to future sales and service efficiency, with Service Cloud deployment expected within approximately twelve weeks.
INDUSTRY GLOSSARY
UFS (Universal Flash Storage): High-speed flash memory standard with complex data transfer protocols, increasingly used in automotive and consumer electronics applications.
NVMe (Non-Volatile Memory Express): Interface protocol enabling fast data access for flash memory, cited as a targeted area for expanding product offerings.
PSV Handlers: Offline automated programming systems for integrated circuits, forming part of the company’s established product line.
LumenX: Data I/O’s proprietary programming platform, currently under redesign to address yield and complexity challenges with new memory standards.
Socketing: The mechanical and electrical interface technology for programming devices, which is critical for achieving high programming yields.
Full Conference Call Transcript
Operator: Good afternoon, everyone, and welcome to the Data I/O Corporation Second Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. At this time, I'd like to turn the call over to Mr. Jordan Darrow, Investor Relations. Please go ahead, sir.
Jordan Darrow: Thank you, operator, and welcome to the Data I/O Corporation second quarter 2025 financial results conference call. With me today are the company's President and CEO, Bill Wentworth, and Interim Chief Financial Officer, Todd Hennie.
Before we begin, I'd like to remind you that statements made in this conference call concerning future events, results from operations, financial positions, markets, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry participants, and any other statements 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 also include uncertainties as the impact of global and geopolitical events, international tariff and trade regulations, order levels for the company, and the activity level of the automotive and semiconductor industry overall, ability to record revenues based on the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, part shortages, pricing, other activities by competitors, and other risks including those described from time to time in the company's filings on forms 10-K and 10-Q with the Securities and Exchange Commission in our press releases and other communications.
The company may also reference GAAP and non-GAAP financial performance measures including one-time items, which are intended to provide listeners with a means to better understand the company's performance. The accuracy and completeness of all discussions on this call, including forward-looking statements, should not be unduly relied upon. Data I/O is under no duty to update any forward-looking statements. And now, I'd like to turn the call over to Bill Wentworth, President and CEO of Data I/O.
Bill Wentworth: Thank you, Jordan, for that introduction. I also want to thank the people that have made the call and took out the time to listen to what we're going to talk about today. As you can see, anybody who's seen the report, bookings were up sequentially from Q4 '21, Q2 '24, and Q2 '25, respectively. It still hasn't settled in the backlog number. I see that in the second half and I'll talk a little bit more about that and why. The large system order reflects our commitment to our core programming platform, the new universal platform we'll be rolling out between now and the end of the year.
And the reason for this investment is the complexity of programming technology, especially in memory, has gotten a lot more difficult. And so commitment to that is we need to have a platform that can actually handle these new technologies and the complexity that come with them and the changing standard that really almost change almost annually at this point, at least every two years. So this complexity has driven the need to obviously invest in our core platform, which we are doing in that order reflected that commitment because one of those technologies was UFS flash memory.
And both UFS and NVMe, which are two technologies we are focused on, not the only ones, but certainly two of the core because they have the most complexity, have annual CAGRs between now and 2030 of 14%. That is twice the semiconductor market. So obviously, there's a very good reason to be focusing in on these technologies, but also advance our platform in general. For the wide range of products that we have to serve and eventually end up on one platform 2026, beginning of 2027, time technical debt the company has been carrying for the past. Second half, I can tell you the product mix looks better. We'll get into the margin discussion.
I'm sure there'll be some very big questions around margin, which I totally understand and we're well aware of it. We have six major events between September and November. This is all around our new product roadmap, but the products are actually going to be introduced at these shows. These are six of the largest shows in the territory. From China to Germany, which is Productronica. India now has Productronica because their market has grown significantly. So actually this is the first time we'll be showing at that event with our new products. China has their show in October and there's a spattering of other events also in Mexico, Guatemala, they have their largest event in September as well.
So this should really pick up significantly increase the lead generation that we'll be doing. So these are big announcements that really drive a lot of value and understanding about where Data I/O is going with this technology and its roadmap overall. And these are roadmaps that were not just done in a vacuum. I mean, they were done with sharing data with our semiconductor partners, which we established better more significant partnerships in the first quarter of this year. Which really helps us really look out ten to fifteen years of where we need to be. Because the technology is not going to slow down.
So we have to be able to accept and be able to have room in our fabric of our platform to be able to absorb these new technologies, which we will have. Everything from a milestone perspective is on track, which is great. It's a little tight. That always happens. But we look really good for these launches for the second half. What else would I like to say? Now it's the Let's see. I think that's it for right now. I will now turn over to Todd Hennie for our financial section. But really look forward to the Q&A. We have plenty to talk about. I'm excited to talk about it. So look forward to your questions.
All right, Todd?
Todd Hennie: Thank you, Bill, and good day to everyone. It's a pleasure to speak with all of you today. My remarks, I will address our recent financial performance in more detail. My comments today will focus on key points of interest for the second quarter of 2025, recent trends, our outlook for the second half of the year. Net sales in the second quarter of 2025 were $5.5 million, down from $6.2 million in the first quarter of 2025 and up from $5.1 million in the second quarter of 2024. First quarter 2025 revenues were elevated due to completion of a large order received in the first quarter of 2024.
We were also awarded a large order toward the end of the second quarter of 2025, which is expected to be shipped and recognized as revenue in the second half of the year. Automotive Electronics as a primary business segment represented 66% of second quarter 2025 bookings compared to 59% for all of 2024. Asia led by China has been relatively strong particularly within the EV sector of automotive electronics. Europe and the Americas continue to be pressured by pent-up capital equipment spending due to tariff and trade uncertainties. Despite this headwind, consumable adapters and services provide a stable base of recurring revenue, which represents 50% of total revenue in the second quarter.
Moving on to new bookings, the first two months of the second quarter carried forward similar activity from the first quarter order activity, which were impacted by the aforementioned tariff uncertainties. Conditions improved in June as evidenced by the large order we announced and have continued to remain active in the third quarter to date even though certain of the international trade negotiations remain an issue. Second quarter 2025 bookings were $5.8 million, up from $4.6 million in the first quarter of 2025 and $5.6 million in the second quarter of 2024. Backlog as of June 30, 2025, was $2.8 million, down $200,000 from March 31, 2025.
Gross margin as a percentage of sales was 49.8% in the second quarter of 2025 as compared to 51.6% in the first quarter of 2025 and 54.5% in the prior year period. A lower margin product mix and configuration of automated systems driven by a large customer order led to reduced margins. Direct material costs remained steady and consistent with prior periods. Ongoing supply chain planning and other actions have been mitigating the impact of new tariffs, trade, and inflationary pressures, including shifting material sourcing product manufacturing. Our top-line performance was affected by tariff and trade negotiation pressures.
We really have not been meaningfully impacted on the manufacturing side due to earlier mitigation and workaround strategies possible given our diversified supply chain and manufacturing operations in the U.S. and China. More recently, we are seeing some smaller items creeping in like for example aluminum. We are not an aluminum buyer directly, but there is a small percentage of that metal in some of our system parts we purchase. We are taking steps to avoid this increase in price and note that as currently in very small and limited amount within our overall cost of goods sold.
Operating expenses for the second quarter of 2025 were $3.8 million, up from $3.6 million in the first quarter of 2025 and $3.3 million in the prior year period. Second quarter 2025 spending included approximately $480,000 in one-time expenses, which are part of the company's investments in the core programming platform and information systems as well as for leadership and other human resources transition requirements. While savings from prior improvements in operations and more recent investments are expected to continue to positively influence financial performance, the one-time spending items are being brought to light to provide transparency in what we are doing and where we believe would be under normal conditions.
For comparison purposes, first quarter operating expenses including annual spending on public company costs pertaining to audits, regulatory fees, and NASDAQ fees of approximately $300,000. The additional one-time spending in the second quarter of 2025 put us into a loss on operating income, net income, and adjusted EBITDA basis. That said and looking into cash flow and the balance sheet, we used a very small amount of cash in the quarter primarily from investments as we've touched upon during the call and for the other one-time spending purposes. I'd like to provide additional color and perspective on these one-time items.
We're making investments as well as critical enhancements to our technology platform and putting in place a roadmap for the future. These investments are one-time in nature, which amounted to approximately $165,000 in the second quarter of 2025. We also made the important decision to invest in the establishment of two other key functional areas, One, our new sales and marketing strategies and two, the framework for ongoing growth and future business line expansion. Additional one-time expenses included costs related to HR and the CFO transition for which we spent about $145,000 in the second quarter of 2025.
We expect to make an announcement of a permanent CFO in the third quarter of 2025 but I remain on board for a brief period of time to ensure a smooth transition. Therefore, we expect some double spending in the third quarter of 2025 and possibly the fourth quarter of 2025 on the CFO transition. One-time expense in the second quarter of 2025 for technology and IT related growth initiatives amounted to $170,000. Total one-time investments and expenses in second quarter 2025 were approximately $480,000 which reduced our profits, adjusted EBITDA, and cash in the period.
Backing out one-time expenses in the second quarter of 2025 would have left us with an operating loss of $364,000 versus the reported second quarter operating loss of $844,000 and the second quarter 2024 operating loss of $566,000. Again, backing out one-time expenses, adjusted EBITDA would have been $43,000 versus reported adjusted EBITDA loss of $437,000 and positive adjusted EBITDA of $3,000 in the prior year period. Working within this framework, it would seem that our cash balance, absent the one-time expenses, have been approximately $480,000 higher or nearly $10.5 million as of June 30, 2025, versus the reported amount of $10 million at the end of June 2025 and $10.3 million as of December 31, 2024.
Based on this analysis, we can see that our financial performance and cash management reflect an improved cost structure and effective handling of our inventory and other short-term assets all while we invested for more productive operations and future growth and scaling of the business. Data I/O's networking capital of over $15.6 million as of June 30, 2025, was slightly lower than $16.1 million at the end of last year, largely reflecting one-time spending for the first half of the year, which also included public company and other annual costs paid in the first quarter of 2025. Finally, the company continues to have no debt. This concludes my remarks for the second quarter of 2025.
Operator, you please start the Q&A portion of the call?
Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. If you'd like to ask a question, please press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from David Marsh from Singular Research. Please go ahead with your question.
David Marsh: Hey, thanks guys for taking the questions. Just want to start out if I could, quick housekeeping. Question. With regards to the $480,000, Todd, you tell me you know, how that hits the P&L, you know, in terms of SG&A, R&D, how it might hit the P&L, and how we could think about that going forward in particular around you know, around the kind of double counting you were saying for CFO services and then back half of the year?
Todd Hennie: Yes. It really, David, it hits multiple areas. I mean, the primarily the area it's going to hit is going to be the G&A category because that's where the IT spending goes. That's where the finance spending goes. That's where HR goes. So a majority of that is going to be on the G&A line. Some of the consulting is in there as well. And also the executive, there's some consulting in there, our executive group and that's also in the same line item. And that I would expect to kind of run out by the end of the year.
So with the savings that we're seeing across, we did a lot of IT discovery in our infrastructure and there was a lot of discovery begun there. And so we identified all the spend. One of my consultants I brought in is going through each vendor. We've already seen what we've already identified about $512,000 worth of spend reductions in our IT annually. And so we're probably about halfway that number. I'd already implemented, expect the rest of that to be done by definitely before year-end for sure. I can't tell you exactly when some of it's got a lot of complexity to it.
And we're trying to move as much as we can to the cloud, get more stuff off-prem, which then enhances our security. So there's a lot of you know, we'll end up with far better infrastructure, far secure, infrastructure, and half the price. So I think it's been a great exercise for sure. And then I would expect the consultants that do run up to about annualized, if I use the numbers, some might have increased because of the that they're doing specifically in IT. So that's going to more than pay for itself. Probably about an annualized spend around $0.5 million maybe a little bit more. There's a couple of people that we've extended that were supposed to retire.
I convinced to stay on board because of their thirty years of knowledge, and they've been super helpful in defining our new programming platform. And looking at being more vertically integrated, which is one of our new growth strategies that we've now identified in Q2 and will be moving forward. In the second half. And that's also expanding into services, which I've talked to some of the shareholders about. Sorry for that long-winded answer, but I just want to get all that out there.
David Marsh: No. No. That's really helpful. I appreciate that. Appreciate that color and detail. Yeah. Hey. So Bill, I guess, you know, I kinda wanna dial in here a little bit on you know, UFS flash. A lot of commentary, obviously, in the press release about it. And Yeah. You know, obviously, you know, great news on the, you know, on you know, on these new orders. Yep. But, you know, this is this is a this is a part of the business that's been kinda challenged, you know, with, you know, kind of lower yield rates historically.
Could you just talk about, you know, what you know, what Data I/O can do differently that might, you know, produce some better yield rates and know, just talk about a little bit more about the about the map. Thing for the
Bill Wentworth: Thanks for the layup. I appreciate that. So, yeah. So UFS when Luminex was first introduced, it was really introduced as a product. Not a platform. And so, you know, through my discovery process, and this actually goes back to Q4, identified some of the technology gaps that were in the platform itself and they were not small. And so I came back and started the with the vengeance and just challenged the entire engineering team to say, look, we just need to reset here completely on Luminex. And so that's what we've done. And we brought in some outside consultants that there were some one-time charges in Q1, too, that we didn't get a chance to talk about.
I wish we did and we'd give some reasons and more color for those numbers. But the investment here Dave, is going to do exactly that. Is get our yields. We need to be at 99.8% or 99.9%. That's the typical yield for memory devices. That's been ever since Flash came out. UFS, you get a picture, it almost like a hard drive. It's got multiple layers just like a hard drive platters. And is also a small part of what's inside the memory that directs to each one of those slivers of wafer. Or memory section. To basically land the data. And so it's like a mini hard drive in a way.
But it just does it through flash cells and a small instruction code. That's why they have these what they call protocols. These handshake protocols have only been present in UFS. Not even in eMMC. eMMC is just a large piece of memory. That's it. UFS is a completely different animal. And so much more difficult. And if you don't preplan in your architecture, for this technology, there's no way you get there. We need to invest in some bench equipment to help us actually drive the ability to for the engineers to identify why they why it was not working, why we were not getting those yields. I mean, in fact, there.
And it was because driven by UFS, it yield the log files, yields were all over the place. It would bounce each site would bounce around from failure rates nobody knew why. And so when I came back from that trip, and then I dove into the platform to find out why it was evident as to why that happened. And so we've been working since January when John W. Took over our hardware department in January. I said, John, welcome to welcome to Data I/O and you need to design a new platform. So it was a pretty big introduction. He's done a phenomenal job of getting me in engineers rallied around this.
And I will tell you testing on a certain contact that we're trying It's an older contact technology, socket technology. But we've honed in some of the parameters of it. We're seeing a 100% yield right now at test. Now it's a small sample size, so we're not ready to say we've won the war because we haven't. It's still ways to go. There's still some intimate issues that are happening. But we have line of sight. And so we also are trying other socketing technology that I believe will actually offer better contact and capability. Because the next most important thing to our platform is the ability to contact the device.
If you can't make that 100% perfect, it's very difficult to drive good yields. It just is. So it's one of the reasons why we're looking at being more vertically integrated around socketing and getting into that market. And it's not a bad market. It's $7 billion. So it wouldn't be bad for DataRent to enter that market to get a little sliver. And it's a larger market. So it can increase our overall revenue over time and the margins are pretty solid. So anyway, sorry for that long-winded answer, but that is our primary focus is yields.
David Marsh: Got it. And then if I could just one you know, sneak one last one in here before I yield. Just, you know, gross margin, this is kind of a low watermark for the last couple of years that we've seen for a company. He just kinda you know, obviously, you know, Todd, I caught your comments on mix. Maybe you could just give a little bit more color on that and kind of just what the expectations are, you know, maybe for the back half of the year if you have any of that. Available.
Bill Wentworth: I do. Actually, another way of thanking you. So that order came in June and we're actually able to ship few systems out before the end of the quarter, probably six of them. That came from one of our larger customers, And the IOs are the options, I would say, they don't put a lot of them in. They do load up on the program. That was one of the reasons why we had to conquer this 4.0 because it was part of that order because they were putting Luminex heads in the system. It's not as much as we would like, but enough.
But if they were the smaller systems, less IOs, and you've got six of them in the mix with a 7,000 couple of 3,500, it's going to end up putting a lot of pressure on that because the mix was just so pointed in one direction. So that's definitely going to drive down. The second half we have a broad we have a very broad mix of products in the system side. 3,000, 5,000, 7,000 all look very similar, equal weighted in Q3 and Q4. Certainly with the manual launches, we should certainly get a lot more conversations around systems as we drive more value into the product line.
We also don't have any revenue in the second half for any of the manual system launches. And I will tell you from the early demos and conversations we've had with customers, they're literally waiting for that product to come out to buy. Like, I think we've already got like fifteen manual systems. Not a ton of money, but that will start to really build out. And we have a lot of low hanging fruit with our system customers over the 500 to that have been delivered over the last ten years. Every one of those customers could at least buy two of these manual systems.
So we really expect that to drive a lot more conversation with customers, but also get us more exposure into what they're thinking and where their businesses are going also. For 2026. So that's the reason for the press margin. We also had some additional costs and cost materials with prototyping for V1, reskinning V0. So that had a little impact on the margin as well because those costs were not connected to any specific revenue, just added cost to the supply side. So I hope that answers your question.
David Marsh: Yes, very helpful. Hey, thanks guys. I want to yield before.
Operator: Our next question comes from Casey Ryan from West Park Capital. Please go ahead with your question.
Casey Ryan: Good afternoon, everybody. Thanks for the up Real quickly, I think we've talked in the past about wanting to expand beyond automotive that I know that it takes time. Would you be happy to give us sort of a qualitative view of how it's going sort of, you know, expanding and getting into new customers. Right? And talking to people who maybe knew you but hadn't chose me in the past.
Bill Wentworth: Long term. Right. Right. Now it's a good question. And, you know, unfortunately, unfortunately, right now, I would say the new conversations are really going to be driven by the lead generation from the six shows we have coming up in the second half. Right now, I wouldn't say that we're not out there selling, but certainly we have new product launches coming up and that we know is going to drive more value to customers than new customers. So we're kind of in that in-between moment. But certainly on the customer side, yes, automotive continues to be a big because it's been very large. And when you have these trail headwinds.
As an example, Korea our Korea rep, South Korea rep, was one of our largest revenue-producing reps. And at this point last year, they had acquired and when they forecasted the 2025, certainly tariffs wasn't in the discussion at that time in December forecasting. But they were earmarked for $3.5 million of revenue. They've done zero. And it's a lot has been tariff driven because in Korea, the customers we have there are tariff affected. Their volumes slow down. And they just put CapEx on hold. And so that's been a direct impact to our revenue for the first half. We would have a far better first half if that had not occurred. March, April, and May were scary months.
That's I could say. June, was outstanding. So we unlocked some of that kind of CapEx spend that was out there. But again, it ended up being mostly automotive. So we went from 59% or 58% to 66%. That's not the direction I want to go in. We definitely want to be more diverse in our domains that we serve because that obviously makes the revenue more stable and not as impactful if you have an event like we have had in automotive. Really started to affect the numbers early last year. So absolutely, it's a continued focus Monty and the sales team are all over that. We are changing almost monthly kind of our strategy.
It's getting better and better as we fine-tune it. We're definitely being far more consultative. We came up with additional sales strategies that are going to help that. But on top of it, with the investment in IT infrastructure, mostly on the application side, we're adopting Salesforce Service Cloud. It's a great application that ties directly into CRM. But it also will allow us to get the field service team to also be revenue-generating. That group should generate revenue.
Through doing milk front, health checks, going in and talking to the operators, offering training, but also identifying things that they may not know about our product line where they get more throughput, better productivity, other programs software that can help them identify issues if they have any like really drive a lot more value. And so and we're going to initiate that even before the implementation of Service Cloud. Which should be about twelve weeks. I wanna get at least the last two months fully under Salesforce service cloud. We're gonna start those milk runs this quarter. Probably September. It's after the summer season, everybody's back into full work form. So after Labor Day, we'll probably start those.
So we're identifying exactly the regions. We've got the team to go out. We're arming them with iPads so they can document all the data and enter it directly in the Salesforce. So then what surface Salesforce Service Cloud comes online, that data will auto already be in there. Is not a whole lot of data we'll be able to pull from the old system because the way it was configured but we'll be pulling over the meaningful data. So, yeah, there's a total focus around enhancing our existing customer relationships, a lot of this comes from contract manufacturers. I mean contract manufacturers have as a service provider, have diversity built into their customer base already.
We had a couple of machines go out to JV end of last quarter, one going out this quarter. So when they use these machines and some of the plants that are somewhat universal in the markets they serve, Some will be dedicated to automotive. That was where one of these systems went. Because of the reason that one, it's a platform they designed into their build plan. So once you set that automotive, you can't make changes. So you're in. But one is more of a one of facilities that does a broad range of products. So we are even managing that to that level within the EMS world.
Because you have to set up by domain based on compliance programs, regulation, things like that. So no, it's very much a focus. I do not like being focused. I mean, look, I learned a very hard lesson back in 2001 of being too focused on a domain, which was networking and telco back in early 2001. And it was devastating to the entire industry. So it's one of the things even as a board member identified this is something that has to be changed.
Casey Ryan: Right. Okay. Good. Well, that's actually a very helpful overview. So We just can't get out of automotive's way. They like us.
Bill Wentworth: You're you're just too popular. Understand. I guess so.
Casey Ryan: So the bookings growth was really good right 26% I mean, which is a big number or small numbers, so I understand that. But you know, do you feel like we could continue to see bookings at this level or is it reasonable to think that bookings could actually keep rising as we move through the year?
Bill Wentworth: Oh, yeah. No. They should and they will. I mean, we're rolling out new products. Those good thing about the booking numbers and so systems are a little more challenging like depending on the system type, the fact that we they were 5,000 actually was a good thing because we could build them faster. They're easier machines to make. China, it's I mean, the order was in China. The Shanghai facility built them. And delivered them. So that was a unique situation. Super.
That's why we would focus so hard on getting over this UFS, not only just to complement or be able to show that we can actually do this and be able to get high yields on UFS technology because there are multiple protocols out there. The sweet spot right now for UFS is 3.1 and about 128 gigabytes. But there's already 256s out there, there's 512s coming one terabytes coming in 2027. So the unique thing about this is we were able to book and ship within the quarter a decent amount of those systems to help the quarter. So yes, that's that was the big help there.
Casey Ryan: Okay. Alright. Terrific. And then you know, sort of getting to the gross margins, I guess, I'm a little less concerned about it, but you know quarter to quarter. But tell me about the spread of the spread of the margins across your product. You know, how wide is the spread do we have to think about in terms of mix? I mean, are some seventy and some at thirty or is everyone kind of in this forty five? No. Well, that's no. Like, you know, that's a good question, actually.
Bill Wentworth: The Board asked that question yesterday. We need to do a little bit more homework on that, so we can identify. One of the things that manufacturing implemented at the beginning of the year is that we didn't do a good job of true cost accounting at the labor level. Right? To really understand what our margins are product to product, So I had Dwayne Jones as our VP of Manufacturing. Awesome. What he does, he's been here for thirty years. And he's been crying for this opportunity to be able to track the data as we build. And so they've been doing that and then we'll start to be able to do true we are doing true activity-based accounting.
On manufacturing. I understand the exact margins of those products. And look, manual systems are going to have a much light sockets, very similar margin to sockets, maybe even more. Because as we build leverage on the platform, we can also increase our pricing. And that increase of pricing. And as I looked at how we price things, we tend to mark up the things we don't make pretty high. And I don't think we mark up our core platform and where we invest our capital high enough. So we're going to start breaking some of this stuff out just especially internally.
So that, you know, where we're spending the money accurately shows the generation of revenue and the gross margin contribution to the company. And so then when I talk about investing in the core, people will get excited. Right, because they'll see the real value that we drive by making those investments in what we do, which is building programmers. Not analysts. We do the PSV line is kind of aged at this point. It's been over ten years, around ten years since the first PSV was announced. We are looking at new automation designs now. And we'll start hopefully a project plan by Q1. But we're going to simplify the systems.
And by simplification, it acts which So we'll have increased margins but we're also looking at the market a little differently than putting everything in one platform and one machine. We'll still make probably the 7,000. We'll do some advances on it. Change the smack head. So we'll increase speed and UPH. But when you have a large system that moves in multiple directions, they just will tend to break down. More. And we try to give customers the right information on what to maintain, but they don't always do it. So by going to a single gantry and very high-speed pick head, we can get probably a lot 50% increase in throughput.
In a machine that's far less to build and far simpler to manage. And so and it has a smaller footprint. So again, these are just design thoughts but definitely doable. And what it does is it should increase uptime for our customers, but also lower maintenance costs, and higher throughput. I mean, pretty large value that they get there. And then the second part of that will be breaking off some of the IOs and put that in a separate system, media marketing and tape and reel. Tape and reel will still be able to go tape to tape or tray to tape in the programmer. Platform. Automation platform.
But there's a real need for a system that just does those services. Complementary to programming, but also individually in their supply chain. I think we can put a package of two systems that marry up to each other. That provide customers a wider variability to manage their supply chain, like if they had parts that came in and some of them went bad in the reels, they could run vision inspection on that machine. And not do permanent. So I think it expands there. Our market as well in automation in general.
I mean, the whole purpose is on the programming side, but why not have a machine that's universal that's got a good price point that you can do other services on it? The programming houses will love it. The contract manufacturers will love it. Because they can build that into their supply chain.
Operator: Next question comes from George Marema from Perito Ventures. Please go ahead with your question.
George Marema: Thank you. Good afternoon, Bill.
Bill Wentworth: Hey, George. How are you?
George Marema: I'm well. I'm first, I just wanna say I'm absolutely thrilled with the team's energy. And the big positive cultural shift going on there. It's it's like an entrepreneurial startup, and I'm just thrilled about this.
Bill Wentworth: It is it is I will tell you. I changed the work from home policy a few weeks ago. Not everybody loved it. But I will tell you in the last four weeks, it's a main the amount of collaboration we have now. Got the software team in here altogether. They're here on fixed days. You can see the collaboration growing, which is it will just extend into the value that will be driving in the second half. I mean, some of the software team came out and fixed the old product. When we get this thing out there, it is the amount of value that it's going to give our customers amazing. I was just blown away.
They did the demo last week. I mean, it's pretty special what's going on in the building right now.
George Marema: That's great to hear. A couple of questions. One is on this $1.4 million EV order, from China.
Bill Wentworth: Yes.
George Marema: What kind of penetration does this represent into this company? And does it meet all their needs, and what does this replace that they were using?
Bill Wentworth: It didn't replace. It's, you know, obviously, the Chinese EV market is doing well, very well inside of China and also outside of China where they don't have massive tariffs put on their cars and you can actually sell them. So that is it's they were an existing customer, already had twenty systems. So this was adding to their demand. So an existing customer and that's why the configuration was what we expected from them and price point we kind of knew. And look, it was a great order to overcome BFS technology, something that they already use.
It's also so that was 4.0 because they were going to make a new investment and those systems are on a product that's going to adopt the 4.0 protocols. Like I said earlier, the 3.1 is the sweet spot today. They use that and our assistance for that as well. And have been dealing with the yield issue. It's why we were they were like, look, we're not gonna place an order unless you can show us you can you can conquer this. And we did. And we got the order. I mean, we work the engineers work literally 24/7 for eight weeks. I mean, it was it was hardcore. And so and they accomplished a phenomenal goal.
Which also gave them all the hope that we know we can we can conquer the 3.1 and all our competitors are having the same problems. Once we've solved this yield issue, I believe this pent-up demand is in the sweet spot right now. So I can't say that confirmatory with 100% confidence. It's just a feeling. But I think customers have also held back in general offline programming until this problem can be resolved. And they're just managing through. They can get enough yield to build the products, but if I was them, I wouldn't be happy either. But we're giving them a lot of hope that we not hope, just we've shown them that we can fix this.
And so we're pretty close on three to I would say we're probably four to six weeks. Again, that's just the range and it may be eight. But we will get 3.1 solved by the end of this quarter.
George Marema: So let me go with that. So if you get to you get that solved and then the 4.0, like, can you sort of describe, best you can, sort of the what kind of dollar market opportunity does that represent? For you guys if you solve these problems? And also, does the profile of this solution have the same type of recurring adapter revenue, or is it less or more or about same?
Bill Wentworth: Oh, no. It was same adapter revenue. And all that. Yeah. None of that changes. If anything, it probably would increase, obviously, as they move into more of using UFS across their entire platform. But I tell you, it's not just Asia, it's Korea, it's Europe, There's not much UFS believe it or not. Not a ton in Mexico, but it's coming. So as more and more adoption of the UFS and NVMe too, which is something we haven't talked about before, but it is a technology that also is growing at 14% CAGR. We actually run the bench equipment was already here start working on it. It was just never implemented.
So it's hard for me to put in dollars because again, like, if I look at the Korea customers, they bought 7,000s. Didn't buy 5,000. So they would load up because they're using a ton, especially in consumer, some in automotive. But on the consumer side, you're driving large, large volumes of UFS. So in Korea, they would configure those systems with pretty much all Luminex. No flash core. So it's hard for me to give you a very direct answer because it's literally region by region. And it's also market by market.
George Marema: That makes sense?
Bill Wentworth: Yeah.
George Marema: Suffice to say, it's a large opportunity though.
Bill Wentworth: Yeah. So Yeah. Oh, well, of course. And it's like I said, 14% is twice the overall semiconductor TAM. So it would be crazy not to conquer this. I mean, it's where literally, like, significant amount of our engineering time is being spent right now. We've really I dumped a lot of programs that were in the business in Q4. Pretty much all of them, because one, it wasn't in the core and it wasn't solving the problem. What I found was as a Board member, just became recently aware of the UFS. But until you get under the coverage you don't really know what's going on.
I mean, they could flash up a bunch of reports that says we've solved this, we've solved that. In reality, a lot of it was not solved. So it's not because they would kind of guess a as to where they should focus to solve. And I will tell you from my experience, of being intimately involved in this right now, is that it's literally four or five areas of our technology and our automation in Sauconic. Right? So contacting the device. And also the Lumenex platform is eight sites. Eight sites was okay with eMMC, not okay with UFS.
And so by the new platform goes down to four sites which gives us much more power to every pin on the device. Which you need to access multiple of these pins because you're dealing with such complexity in the device itself. So we can solve it with what we refer to as M8. But M4 will definitely be which gets launched in November. But we've been able to do some pretty special things even on the existing platform like 4.0, which has fairly complex communication handshake needs. But I will say from 3.1 to 4.0, the suppliers themselves have gotten better. Because even some of them implement these protocols in variable different ways. That's the other complexity.
It's not the same across all the silicon providers. Some are really good at it like Micron, and I won't call out the ones that don't do a great. But there are some that it's a bigger area of gray. So you have to have the right bench equipment to do that. And to identify that and understand it. So the team is learning a lot. And I think through these challenges, we're going to up our ante in these in these consortiums. We're actually going to be a real member of these different committees, and we'll have representation at those large committee meetings when they start talking about the protocols and stuff. So we're ahead of this.
All the time in the future.
Operator: And ladies and gentlemen, at this time, we've reached the end of the question and answer session. I'd like to turn the floor back over to management for any closing remarks.
Bill Wentworth: Well, I just want to thank everybody taking the time to listen to our spiel. We're very, very excited about where we're going. The team is as energetic as ever. I think it seems to be increased retired and I put them on contract because of their knowledge and now they're thinking I don't know if I wanna retire. I'm like, sorry. No. I'm kidding. I mean, love to keep them around. These are people with twenty, twenty-five, thirty years of experience. That's one of the other things that we're really going to start to drive in our customer presentations is why do you choose Data I/O? I can tell you Dwayne Jones has been here for thirty years.
That's ten years longer than Dennyfrogg, one of our competitors even been alive. So to not promote that educate the knowledge base that's in this building, It just needed to be unlocked and that's what we're doing. And I think it's obviously helping us solve these complex problems and get to where we need to go. It's also driven a lot of excitement. And the collaboration, like I said, we've got some interns in here now that are learning and that they're loving doing the business. They're learning stuff. What they're learning, they love. And some of our best hardware engineers were those very interns five years ago.
So yes, I just think as we build more and more knowledge, we need to be viewed as DXP in this space and that's what we're doing. So I want to thank everybody. You know, it was it was definitely a hard quarter. This was not easy. The first two months were ugly, and we had a great close to the quarter. My goal was to get through the first half a little unscathed I guess, and not too many scars because I know the second half is going to be better.
Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation with you. Thank you for joining. You may now disconnect your lines.