Sonim Technologies Stock

Sonim Technologies, Inc. (Sonim) provides rugged and consumer durable mobile devices including phones and accessories designed to provide extra protection for users that demand more durability in their work and everyday lives.

In 2022, the company introduced a tablet product that has generated a significant portion of its revenue since its introduction. This new product has a large screen that allows customers to easily access and process IoT data. It allows the company to gain experience with data devices and diversifies the company’s portfolio. The company is developing additional data devices to further diversify its portfolio.

The company has device placements in the three largest wireless carriers in the United States - ATT, Verizon and T-Mobile – as well as the three largest wireless carriers in Canada – Bell, Telus and Rogers. While the company primarily sells through the wireless carrier channel, it also sells through distribution channels in North America and Europe. The company’s tablets are sold unbranded, and are imported by its customer to the U.S., for sale in the U.S. The company’s devices and accessories connect users with voice, data, workflow and lifestyle applications that enhance the user experience while providing an extra level of protection.

Task workers in the Enterprise and Government sectors have historically been limited to pen and paper, older radio technology and/or single-purpose electronic devices, such as barcode scanners, location-tracking devices and sensors, to accomplish specific tasks. These single-purpose devices have historically operated on proprietary networks, such as Land Mobile Radio 94 or LMR networks that enable Push-to-Talk or PTT services for voice communications. The company provides communication devices that consolidate and integrate multiple functions, including PTT, into a single ruggedized solution running on commercial wireless networks at a total cost of ownership that is significantly lower than other solutions.

The company’s solutions include ultra-rugged mobile phones that are capable of attaching to both public and private wireless networks, industrial-grade accessories that meet the requirements of specific applications, and software applications and cloud-based tools that provide management and deployment services to its customers. The company tightly integrates PTT capabilities into both the hardware and software of its mobile phones, including a dedicated hard key that can initiate a PTT call even if the phone is in a sleep-state. End customers of the company’s solutions include construction, energy and utility, hospitality, logistics, manufacturing, public sector and transportation entities that primarily purchase its devices and accessories through their wireless carriers. The key attributes of the company’s solutions are specifically tailored for the needs of its end users, including impact resistance, waterproof, chemical resistant, and dustproof construction, extended battery life and extra loud audio, supported by a three-year comprehensive warranty. All of the company’s devices run on the Android operating system, providing a familiar and intuitive user interface, and its smartphones have access to a library of millions of applications available through the Google Play Store. The company has also implemented dozens of application programming interfaces, or APIs, specific to its mobile phones and has partnered with third-party application developers to create a purpose-built experience for its end users using these applications on its mobile phones. This includes working with the leading providers of PTT and mission-critical-PTT, or MCPTT applications to deliver a seamless instant communications experience.

The company has stocked phone and accessory products with the three largest U.S. wireless carriers: AT&T, T-Mobile and Verizon, meaning that these carriers test and certify its mobile phones on their networks and maintain inventory in their warehouses that they then sell through their enterprise and retail sales teams to end customers, often on a subsidized or financed basis. The company’s full product portfolio has also been stocked with the three largest Canadian wireless carriers. In 2022, the company sold approximately 25,000 mobile phones in Canada and 111,000 in the United States.

The company enters into master sales arrangements with carriers (including channel partners contributing over 53% of its total revenues for the year ended December 31, 2022) under which its partners purchase its solutions for distribution on a purchase order basis. Under these arrangements, the company and the channel partners determine sales channel distribution in connection with pricing (including any discounts and price protection) and market positioning of each particular mobile phone product. The company also offers its channel partners channel marketing and other promotional incentives, such as sales volume incentives, in exchange for retail price reductions. The company may also offer Non-Recurring Engineering, or NRE services in the form of third-party design services relating to the design of materials and software licenses used in the manufacturing of its products.

Ruggedized Solution

Durability and reliability: The company’s mobile phones can withstand a variety of harsh environments and are supported by its industry-leading three-year comprehensive manufacturer’s warranty, which includes physical damage. Key features of the company’s rugged devices include:

Puncture, Shock, Pressure and Drop and Impact Resistance: Durable rubber and Gorilla Glass construction to protect against damage from sharp objects, falls, vigorous movements and compression by heavy weights.

Waterproof and Dustproof Construction: Reinforced seals and waterproof mesh membranes to prevent potential damage caused by moisture and debris.

Multi-Shift Battery Life: Replaceable battery designed to provide sufficient power to last through a dual eight-hour shift in most real-world conditions.

Extra-Loud Audio: Produces high sound quality at high volumes and uses noise cancellation technology for loud background noise environments.

Glove-Friendly Design: Screens and buttons responsive to touch through gloves and water.

Operational in and Resistant to Extreme Temperatures: Protective exterior prevents damage to the company’s devices’ hardware from very cold and hot temperatures.

Chemical Resistance: Ability to effectively sterilize and sanitize, regardless of potential contaminants.

Increased Communication and Visibility Through an Enterprise: The company’s solutions are used to track locations, update and manage various tasks and enable communication with and between task workers. For example, location tracking and data analytics enable fleet optimization, help enterprises make asset allocation and deployment decisions and ensure that fleets are at the right place at the right time. In addition, its solutions are specifically designed to capture, store and analyze multiple data types for enterprise needs, enabling them to make decisions. For example, by leveraging this data, task workers such as first responders can more strategically plan their logistics resulting in decreased response times. Finally, by providing a reliable mode of communication between employees, supervisors and command centers, those not in the field have crucial insight into the status and performance of task workers in the field. This can also result in improved safety for employees that work in high-risk environments.

Enhanced Functionality Through Software and Hardware Configurations: The company’s solutions allow end customers and task workers to customize its mobile phones using Android-based applications and vertical- specific accessories to address their varying needs. Enterprises and agencies can leverage the millions of applications available on the Google Play Store, the company’s dozens of device-specific APIs, and its industrial accessories to create a purpose-built solution to meet the specific use cases of their task workers. For example, school bus operators can combine the company’s ruggedized phones, an industrial mounting kit, a PTT application that leverages its APIs and a location-tracking application to ensure that they have a solution that enables constant communication with dispatchers that is compliant with the U.S. Department of Transportation’s hands-free driving regulations and that can also automatically alert parents of route delays. The ability for enterprises and agencies to customize their solutions allows their task workers to use a single device for tasks that would previously require multiple and often more costly devices.

Ease of Use: The company’s devices are designed to look and function similarly to the latest generation of consumer-focused mobile phones with additional features for various enterprise-specific purposes, and also run on the Android operating system which has a familiar and intuitive interface. They provide familiar characteristics to many single-purpose devices, such as dedicated physical buttons for PTT and barcode scanning and offer a simplified user interface which helps minimize the learning curve for task workers who are transitioning from LMR or data capture devices. Furthermore, all of the company’s mobile phones come equipped with its SonimWare software, which helps IT administrators more quickly provision and deploy its devices to task workers.

Consolidation of Devices: A large number of devices can lead to excess bulk carried by task workers and can inhibit their mobility in the field. These specialized devices can also be expensive and typically require full replacement after end-of-life, which can be a cumbersome and costly process. By combining commonly used applications and functionality into one ruggedized device with the option for add-ons, enterprises can reduce the need for multiple, single-purpose devices. Replacing outdated single-purpose devices with a Sonim device can enhance fleets’ mobility and economically streamline equipment updates or replacements.

Strategy

The three pillars of the company’s go-forward strategy are as follows:

Address growing market demand in the consumer market for high quality, attractively designed handsets that include key rugged features such as reinforced housings to prevent screen breakage and higher water ingress ratings to better protect devices from costly damage by leveraging the company’s experience and expertise in rugged phone design.

Approach the data device and connected solutions market with feature-rich devices that are affordably priced and leverage the company’s high-quality approach to product design and procurement.

Maintain the company’s leadership position in rugged enterprise and public sector markets.

The key elements of the company’s strategy reorganize company to achieve growth; invest in sales channel partnerships and brand marketing to drive sales; expand Sonim into the consumer durable market; Sonim value proposition for data devices; provide development and manufacturing services for data devices including a tablet product; position Sonim as the leading solution for the public sector; and position Sonim as a leading solution for industrial workers and logistics.

Target Markets

The company’s ruggedized mobility solutions target three end markets: industrial enterprise, public sector, and consumers that demand a more durable product.

Industrial Enterprise

Transportation and Logistics: Enterprises and fleet workers across supply chain, delivery services and field management rely on mobile devices to operate safely and efficiently in environments that are often susceptible to inclement weather. For enterprises looking to improve supply chain functionality, the company’s mobile resource management applications, such as location tracking, mileage tracking, and job dispatch can help businesses monitor operations more efficiently. A weather-resistant and long-battery ruggedized device, combined with productivity applications and services with the native camera on the company’s XP10 smartphone—provides reliable communication options for transportation and logistics workers. In addition, the company’s solutions reduce the number of devices and tools that these task workers would need to carry in the field by consolidating the functionality of multiple single-purpose devices into one purpose-built mobile device.

Construction: The company offers workers in the construction industry crush-, puncture-, scratch- and impact-resistant devices, which is to be crucial in environments where there is a high risk of such occurrences. Jobsites also value the PTT capabilities that are tightly integrated into Sonim devices. Additionally, the company’s phones and related accessories help promote worker safety and productivity, with support for lone-worker safety applications and with features, such as extended battery life and extra loud-speakers. For business decision-makers, the company offers devices with consolidated functionality, which enables ownership that is significantly lower versus comparable offerings that enable real-time reporting.

Manufacturing: The company’s devices’ PTT functionality and extra-loud speakerphones are designed to keep lines of communication open and functional in fast-changing and loud environments, while its glove-friendly touch screen displays allow for workers to have access to real-time data, thus reducing production down time. Additionally, the company’s devices are designed to survive blunt force and can be sanitized and sterilized for safe use in food or medical processing facilities.

Facilities Management: Service-based operations in large indoor and outdoor facilities require management of mobile teams. The company’s mobile phones consolidate radio, guard tour verification, panic button systems and scanners, which otherwise would require separate and single-purpose equipment. The company’s devices can improve business operations through functionalities, such as automated work order dispatch and job completion verification tools delivered via proprietary third-party applications integrated with its devices.

Energy and Utilities: The safety standards for mobile phones used in the energy and utility industry are more stringent due to the reactive characteristics of the natural resources being procured and serviced, as well as the potentially high-voltage or explosive environments. The company is uniquely positioned to serve these workers because a number of its devices are designed for use in potentially explosive or hazardous environments (rated Non-Incendive or Intrinsically Safe by either the CSA Group, ATEX or IECEx notified bodies), and their resistance to various chemicals and extreme temperatures. Reliable communication devices are often mission- critical for workers to stay safe while performing energy- and utility-related operations.

Public Sector

Public Safety: In the United States, AT&T’s FirstNet network and Verizon’s public safety prioritization provide optimized networks for this sector. Through its partnerships with the major wireless carriers, the company has a strong position to provide mission-critical solutions to the public safety market as public safety networks mature. Through enhanced communication capabilities, the company’s devices can decrease the response time of first responders and help public safety workers stay safe and connected in hazardous, isolated or emergency conditions.

Federal Government: Whether during natural disasters or day-to-day operations, the company’s devices help provide functionality and reliability that is crucial for federal workers to protect and serve their nation. The company’s mobile solutions support purpose-built voice communications and data capture applications that allow federal workers to stay connected and quickly make more informed decisions while in the field.

Consumer Durables

Everyday Consumers and Small Business Users: As consumers grow more reliant upon mobile devices to support all of its daily activities, mobile devices are more than ever being placed into situations and environments that are more prone to physical damage, including screen breakage and water damage.

Data Devices

Mobile hotspots are used by businesses, government employees and consumers. The company will continue to look for opportunities to develop new products to meet customer’s needs.

Products and Technology

Features of Ruggedized Mobile Phones

The company’s mobile phones can withstand a variety of harsh environments and are supported by its industry-leading three-year comprehensive manufacturer’s warranty for its ultra-rugged devices. The company developed its devices to meet industry standards for protection from the ingress of water and/or micro-particles (IEC standard 60529). The company’s devices are rated a minimum of IP-68, allowing them to be submersed in up to six and a half feet of water for up to 30 minutes, and its XP10 smartphone has been further tested and certified to withstand sprays of high-pressure streams (up to 1,450 PSI) of hot (80°C) water (IPx9K). The company has additionally designed and manufactured its devices to withstand repeated drops to concrete across all angles and faces, attaining MIL-STD-810G ratings and, in 2011, earning the Sonim XP3300 the title of World’s Toughest Phone by the Guinness Book of World Records after surviving a fall from 82 feet 11.7 inches to concrete. Engineered with a protective glass lens that is up to three times thicker than that of other cellular devices in the market and a unique blend of plastic and rubber used in the housings, its ultra-rugged mobile phones are designed to be resistant to punctures caused by impacts from external objects up to 2J on the display lens and 4J on the housing. Furthermore, the company understands that the jobs of its end users often take them into extreme environments. As a result, the company has designed its devices to operate from -4°F to +131°F, be usable while wearing work gloves (glove-friendly touch display, large physical buttons), be audible in noisy environments with loud 100+ dB loudspeakers and multiple microphone noise-cancellation technology, and, for its XP5plus and XP10 phones to last throughout an average day based on ordinary use without needing to be recharged with large, extended-life batteries. The company has also designed, manufactured and certified its devices to be safe for use in potentially hazardous or explosive environments.

In addition, its devices provide a wide range of connectivity options for its end customers (including LTE, 3G, 4G, 5G, GSM, WiFi, NFC, location tracking and Bluetooth for certain of its devices), and the company’s phones support a wide range of global frequencies allowing them to be used almost anywhere in the world where there is cellular coverage. The company’s phones are certified to work on multiple mobile network operators and come equipped with LTE Band 14 to support FirstNet (built with AT&T). The company continues to explore how and when to best support the latest technologies, including 5G, and it plans to incorporate them into its product roadmap when its end market segments require such functionality, and the technology has reached a reasonable level of maturity.

Devices

Mobile Phone Products

Sonim XP10: The Sonim XP10 is an Android-based 5G smartphone that is certified as Android Enterprise Recommended by Google. The Sonim XP10 comes equipped with a 5.5 inch durable, glove-friendly display, an ultra-rugged exterior, physical programmable buttons (including a large PTT button), and unique Secure Audio accessory ports that ensures industrial accessories stay connected at all times. The XP10 is built to meet ultra-rugged standards, including MIL-STD-810H and Non-Incendive Class I, II and III Div 2 ratings. It has been tested and can survive drops from six feet directly onto concrete, be submerged in six feet of water for 60 minutes, operate in all weather conditions from -4° F to 131° F. The XP10 comes with an improved photography experience with a dual rear 50MP standard and 8MP wide angle cameras, as well as an 8MP front camera. The device also includes preloaded SonimWare Enterprise Mobility Software to help customers deploy mobile devices faster, as well as manage and support users in the field to increase productivity and improve safety. As of December 31, 2022, XP10 is available at AT&T, Bell Mobility and Telus with additional customers planned to launch in Q1 2023. The company is expecting many of its loyal XP8 customers to upgrade to XP10 as they transition to 5G devices.

Sonim XP5plus: The Sonim XP5plus is a purpose-built 4G feature phone designed for task workers who have a no frills attitude about their communications tool. It comes equipped with a 2.8 inch non-touch display, dual front-facing loudspeakers, a large PTT button, and the Secure Audio connector ports, enabling full access to the company’s complete ecosystem of industrial accessories. The new XP5plus was designed for critical communications and includes many features that enhance the Push-to-Talk (PTT) experience. At the top of its long list of new features is a version with two easy-to-use control knobs – for channel select and volume control. PTT can be accessed without users ever taking their eyes off the mission in front of them. As of December 31, 2022, the XP5plus is available at AT&T, Bell Mobility and Telus. The company also has an unlocked version available to its European and North American customers.

Sonim xp3plus: The Sonim XP3plus is a 4G feature phone in a clamshell form factor that offers the company’s customers a voice and/or PTT solution without distracting end users from doing their jobs with things like an application store or email. Built with an over-sized PTT button, a physical numeric keypad and a loud front-facing speaker, the Sonim XP3plus delivers a reliable voice-centric experience to those who operate in industrial environments. As of December 31st, XP3plus is available at Verizon, T-Mobile, Bell Mobility and Telus with additional customers expected to launch in 2023. There is also an unlocked version for the company North American and European customers. Sonim recently announced the integration of NextNav Pinnacle vertical location, or z-axis capabilities, into XP3plus, making it the first Sonim feature phone available with these capabilities. By leveraging NextNav’s Pinnacle 911 to deliver reliable and consistent z-axis capabilities nationwide, floor-level altitude measurements will greatly enhance the ability of public safety answering points (PSAPs) to accurately identify the indoor location of wireless E911 callers. Dispatchers will be able to more precisely locate where a caller is by adding the vertical dimension alongside their horizontal location of latitude and longitude, and in turn more quickly get callers the help they need. NextNav’s technology has demonstrated floor-level accuracy 94 percent of the time in independent testing conducted in 2018 by the CTIA.

Tablets

In the third quarter of 2022, the company expanded its product line to tablets as an interim strategy to diversify its business and to grow revenue. The company can further enhance and grow its internal competencies as it start to broaden its portfolio. The company expects to offer additional data devices in the future.

Accessories

The company’s portfolio of industrial-grade accessories extends beyond the traditional consumer cellular ecosystem of wall chargers and cases. The company works with a number of accessory manufacturers and design partners to deliver innovative purpose-built accessories that enhance the functionality and usability of its devices. The company’s audio accessories take advantage of its SecureAudio Connector, which allows for accessories, like a Remote Speaker Microphone, or RSM, to be physically secured to the device via a screw mechanism that prevents accidental disconnection. The company’s multi-bay charging accessories allow for enterprises and agencies to charge multiple devices at once via a single unit, ensuring that at the start of a shift, the device is fully charged and ready to go. The company also supports a wide range of in-vehicle solutions that enable hands-free voice communications for those end users who work from the road.

SonimWare Software

In addition to the ecosystem of Android developers and their applications, which are supported on its devices, the company provides a suite of applications and tools that help customers manage, deploy and support their Sonim devices. The capabilities of these software applications differentiate the company from many rugged vendors that only focus on hardware. Capabilities include:

Sonim Setup Wizard allows provisioning teams to rapidly customize and deploy large number of devices with less manual work and fewer errors.

Sonim SafeGuard lets user administrators block usage of selected apps and features, ensuring only those critical to job related functions and cost requirements are used. The company is looking to expand the functionality of SafeGuard to extend to the consumer market for key features, such as parental controls.

Sonim Kiosk Mode lets user administrators configure devices with the minimum required functionality, a critical customer need in hazardous environments or anywhere that user safety is paramount.

Scout App Updater lets administrators control when and where updates are sent to users’ phones.

Sonim SOS provides emergency alert capabilities for users of Sonim devices to help ensure worker and job-site safety. Additionally, given recent events that highlight school safety concerns, it is working on implementing this solution in the company’s consumer handset line, as well as its data solutions products.

Sales and Marketing

As of December 31, 2022, the company’s sales and marketing team consisted of 11 professionals located in the United States, Canada and Europe. The company sells its products directly to wireless carriers, through distributors and resellers and directly to end customers. The company’s marketing efforts consist of product marketing, channel partner/carrier marketing and corporate marketing. Product marketing focuses on ensuring that carrier requirements related to product specifications are in-line with its brand requirements. Channel partner marketing focuses on go-to-market strategy as well as developing supplemental sales tools, carrier and non-carrier marketing campaigns, industry trade show materials and brand awareness. Corporate marketing consists of public relations, social and digital marketing and lead generation operations.

Competition

The company faces competition from manufacturers of non-rugged mobile phones such as Apple Inc. and Samsung Electronics Co. Ltd, or Samsung. to the extent end users decide to purchase traditional devices and add a rugged case for use in environments. The company also faces competition from manufacturers of rugged mobile phones such as Samsung, Bullitt Mobile Ltd. and Kyocera Corporation as well as from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc. and Tait International Limited.

Intellectual Property

As of December 31, 2022, the company held 17 utility and design patents in the United States and 11 outside the United States and have filed 1 utility and design patent applications in the United States. The company also has contractual rights to standard essential patents for 2G, 3G, 4G, and 5G wireless technologies, some of which require significant royalty payments. In addition, as of December 31, 2022, the company held 16 trademarks in the United States and 17 trademarks outside the United States and had filed 9 trademark applications in the United States and 11 outside the United States. The company opportunistically negotiates licenses with other patent holders where appropriate for its technology.

The company’s smartphone devices use the standard Android operating system and its feature phones use an operating system based on the Android Open Source Project. The company additionally integrate third-party licensed software on commercially reasonable terms.

Certain License Agreements

In January 2017, the company entered into an amended and restated global patent license agreement, as amended in December 2018, or the Ericsson Agreement, with Telefonaktiebolaget LM Ericsson (Publ), or Ericsson, pursuant to which Ericsson granted the company a license under certain Ericsson patents to manufacture and sell mobile phones that comply with certain telecommunications standards. The Ericsson Agreement continues until January 1, 2024, unless terminated earlier by the parties.

Research and development

The company’s research and development expenses (R&D) for the year ended December 31, 2022, included $8.0 million.

Regulation

The Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) allocate spectrum for various uses, including commercial wireless services and public safety services, and regulate the use of that spectrum and the devices, such as the company’s products, which operate on that spectrum. The FCC and NTIA also adopt requirements that affect wireless equipment, such as limits on radio emissions and rules requiring that handsets have specified capabilities, such as providing location information to 911 operators. The FCC also regulates the testing and certification for the import and/or sale of certain wireless devices.

History

The company was incorporated in Delaware in 1999. It was formerly known as NaviSpin.com, Inc. and changed its name to Sonim Technologies, Inc. in 2001.