Company: SONM
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001641172-25-009749
Chunk: 47

Company: SONIM TECHNOLOGIES INC
Filing Date: 2025-05-12
Form: 10-Q
Item: Item 2
Chunk 47
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3 million related to the expiration of customer allowance agreements as three of our legacy phones
approach end-of-life. The three months ended March 31, 2024, included $7.7 million in revenue from white label products sold to a
related party. We discontinued our white label program during the first quarter of 2024. Sales of our feature phones increased $1.5
million period over period and hotspot sales from products that were launched after the first quarter of 2024 were $0.7 million in
2025. Excluding the impact of the expiration of customer allowance agreements mentioned above, we expect revenue to increase
significantly in the second quarter of 2025 due to increasing sales of our hotspots in the U.S. and our phones in EMEA.

Cost
of Revenues

Cost
of revenues for the three months ended March 31, 2025, decreased by $5.5 million as compared to 2024. The first quarter of 2024 included
white label phones with cost of revenues of $7.2 million. The decrease resulting from the loss of this revenue was partially offset by
higher cost of revenues in the first quarter 2025 because of higher revenue from feature phones and hotspots.

Gross
Profit and Margin

Gross
profit for the three months ended March 31, 2025, increased by $5.5 million compared to 2024 because of the $5.3 million adjustment
to revenue from the expiration of customer allowance agreements in the first quarter of 2025. Gross margin for the three months
ended March 31, 2025, was 50%, which reflects the positive impact from the expiration of customer allowance agreements that has no
related cost of sales, compared to 17% in the first quarter of 2024, which reflects the negative impact of white label products that
had a gross margin of approximately 6%.

20

Research
and Development

R&D
expenses for the three months ended March 31, 2025, increased by $1.2 million compared to 2024, primarily due to there being limited
R&D projects during the first half of 2024. In 2025 R&D expenses were primarily from internal work on the development of new
variants of our XP Pro, including a version with a thermal camera, the HPUE hotspot, the XP400 phone for Europe, and the updated 5G version
of our XP3plus. In the