Data I/O Corporation — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the quarter ended September 30, 2026, were $4.9 million, down from $5.4 million in the prior year period and $5.2 million in the second quarter 2026.
• Gross margin was 58.0% of sales, compared to 57.0% in Q2 2026 and 50.7% in Q3 2025.
• Operating loss was $2.0 million, compared to a loss of $1.4 million in Q3 2025.
• Net loss was $2.7 million ($0.27 per share), compared to a net loss of $1.4 million ($0.15 per share) in Q3 2025.
• Adjusted EBITDA (excluding equity compensation and one-time expenses) was ($71,000), an improvement from ($563,000) in Q3 2025.
• Cash on hand was $9.4 million as of September 30, 2026, down from $10.8 million on June 30, 2026.
• Net working capital increased to $14.7 million on September 30, 2026, from $10.8 million on June 30, 2026.
• The company had no debt on September 30, 2026, following the conversion of $6.2 million of convertible debt into preferred shares.
• Deferred revenue was $0.9 million on September 30, 2026, down from $1.1 million on June 30, 2026.
• Bookings were $5.0 million for the quarter, compared to $4.9 million in Q2 2026.
• Backlog was $1.5 million on September 30, 2026, down from $2.1 million on June 30, 2026.

Guidance and Future Outlook:

• The V-TEK acquisition is anticipated to double revenues and be accretive to earnings.
• Management expects to shift the revenue mix towards software and services to diversify streams and reduce exposure to the capital equipment cycle.
• The company plans to apply AI to the integration of V-TEK and ongoing operations.
• Management intends to continue optimizing the business, realigning costs to the new go-to-market strategy, and reviewing expense reductions to improve profitability.
• The company aims to scale, enter new markets, increase operating leverage, and generate cash through the consolidation of V-TEK.

Business Segments and Product Lines:

• Consumable adapters and services represented 48% of total revenue in Q3 2026, compared to 55% in Q2 2026 and 81% in Q1 2026.
• Platform sales represented 52% of total revenue in Q3 2026, up from 45% in Q2 2026 and 19% in Q1 2026.
• The company expanded into high-growth end markets including data centers, AI, photonics, industrial automation, and robotics.
• The acquisition of V-TEK (V-TEK, Inc. and A&J Programming, Inc.) adds Programming-as-a-Service capabilities and expands the product portfolio.
• Demand for platform equipment appears to have inflected following a prolonged downward cycle in automotive technology spending.

Market and Competitive Landscape:

• The company is significantly reducing its reliance on the automotive market, which had experienced a cyclical downturn.
• The combined entity now serves multibillion-dollar markets including data centers, AI, photonics, industrial automation, robotics, medical, military, aerospace, and defense.
• Bookings in the first six months of 2026 indicated accelerating demand in end markets not traditionally targeted by the company, such as edge AI and robotics.
• Automotive electronics platform sales were favorable in Q2, though consumable adapter sales were softer.

Risks and Challenges:

• The company faces risks related to the integration of recent acquisitions and the realization of anticipated synergies.
• Market acceptance of existing and new products/services remains a factor.
• Potential impacts from geopolitical conditions, international trade restrictions, and supply chain constraints are noted.
• Risks include uncertainties regarding revenue timing based on product delivery, shipping availability, and installation acceptance.
• The company previously faced a cybersecurity incident in the prior year, with ongoing risks regarding containment and remediation efforts.

Management Commentary and Tone:

• CEO William Wentworth described the V-TEK acquisition as the most important measure of recent performance and future prospects.
• Management expressed conviction in the transaction, noting it was the first acquisition in decades and involved a total consideration of $23 million ($3 million in common stock).
• The tone emphasized a "NEW Data I/O" reality, focusing on best people and best practices.
• Management highlighted the use of AI to optimize the business over the last two years and plans to apply it to the V-TEK integration.
• The CEO noted the company is investing in its core programming platform while shifting focus to software and services.

Other Key Points:

• Data I/O closed on the transformational acquisition of V-TEK, Inc. and A&J Programming, Inc. in October 2026.
• Total consideration for the V-TEK acquisition was $23 million, with $3 million paid in Data I/O common stock.
• In October 2026, the company secured a $13.25 million direct investment and a $7.5 million bank line of credit.
• Operating expenses for Q3 2026 were $4.9 million, including approximately $1.5 million in one-time expenses related to debt, financing, IT/ERP transition, and inventory reserves.
• The company converted $6.2 million of convertible debt into preferred shares following a June 2026 private placement.
• The company serves customers in automotive, industrial automation, data center, AI, photonics, medical, military, aerospace, defense, IoT, and consumer electronics markets.