Data I/O (DAIO) investor relations material

Executive summary

• Q2 2026 revenue reached $5.2 million, up 59% sequentially from Q1, with improved gross margins and bookings of $4.9 million, despite a year-over-year decline and ongoing global trade and tariff uncertainty.

• Operational efficiencies, cost reductions, and strategic realignments in Germany and Redmond lowered the annual run rate below $22 million, with employee-related costs of $345,000 and ongoing reviews for further efficiency.

• Expanded customer base with six new logos in H1, including automotive, robotics, and global communications sectors, supporting future growth and diversification.

• Two acquisitions are in progress, including a transformational deal and intent to acquire IAR's embedded software security IP, expected to nearly double annual revenue run rate and broaden revenue streams.

• Cash balance increased to $10.8 million at quarter-end, supported by a $9 million direct investment and conversion of convertible notes to preferred equity, eliminating company debt.

Financial highlights

• Net sales for Q2 2026 were $5.2 million, up from $3.3 million in Q1 2026 but down from $5.9 million in Q2 2025.

• Gross margin improved to 57% from 49.5% in Q1 and 49.8% in Q2 2025, driven by mix shift, pricing, and efficiencies.

• Operating loss narrowed to $724,000 from $844,000 year-over-year, despite a net loss of $1.63 million ($0.17/share) due to interest expense from convertible debt.

• Adjusted EBITDA was essentially break-even at $39,000, up from -$1.75 million in Q1; adjusted EBITDA excluding equity compensation and one-time expenses was ($488,000).

• Cash at June 30, 2026 was $10.8 million, up from $5.7 million at March 31, 2026, with no debt after July 8th.

Outlook and guidance

• Management expects continued organic revenue growth, recurring/services revenue acceleration, and expansion in programming services, with acquisitions anticipated to nearly double annual revenue and be accretive to earnings.

• Not providing specific Q3 revenue guidance but confident in trajectory and tracking to plan.

• Sufficient liquidity is expected to fund operations and capital requirements for at least the next year.

• Targeting continued operational improvements and cash flow generation.