Lantronix, Inc. (NASDAQ: LTRX) a global provider of secure data access and management solutions for Internet of Things (IoT) and information technology (IT) assets, today reported results for the third quarter of its fiscal year 2017 ended March 31, 2017.

Financial Highlights for Third Fiscal Quarter

  • Net revenue of $11.5 million
  • Gross profit margin of 55.5%
  • GAAP net loss of $162,000 or $0.01 per share
  • Non-GAAP net income of $484,000
  • Generated $627,000 in cash from operating activities
  • Cash and cash equivalents  grew to $7.4 million

Operational and Product Highlights:                                                                                               

  • Net revenue for the third quarter of fiscal 2017 increased 16% from the same period in fiscal 2016 and 3% from the second quarter of fiscal 2017. 
  • Sales of the company’s IoT products grew by 14% during the third quarter of fiscal 2017 compared with the same period in fiscal 2016. 
  • Sales of the company’s IT Management products grew by 93% during the third quarter of fiscal 2017 compared with the same period in fiscal 2016. 
  • In January, the company introduced a technology preview of its MACH10™ software platform. MACH10™ is a multi-dimensional management software platform designed specifically to enable IoT OEMs (original equipment manufacturers) to quickly and profitably deliver web-scale IoT applications and services.   
  • In February, Intel IoT veteran Shahram Mehraban joined the company as vice president of marketing. Prior to joining Lantronix, Mehraban served as marketing director and chief of staff of the industrial and energy solutions division of Intel’s IoT Group, where he played a key role in expanding the company’s industry visibility in key IoT verticals, and served as part of the IoT executive team that delivered innovative end-to-end solutions for the industrial IoT market. 
  • In March, the company previewed the xPico 200 product family of embedded IoT gateways at Embedded World 2017 in Nürnberg, Germany. xPico 200 series will feature advanced enterprise security, networking intelligence, and pre-integration with Lantronix’s MACH10 management software platform in a compact 17mm by 25 mm footprint.

“I’m pleased to report that we delivered 16% year-over-year topline growth, as well as our fifth consecutive quarter of non-GAAP net income,” said Jeffrey Benck, Lantronix president and CEO.  “During the third quarter, we continued to gain market share in the management console business, as we more than doubled the revenue of our SLC 8000 product family over the third quarter of FY 2016. With the unveiling of our MACH10 IoT management platform strategy, we continued to demonstrate our commitment to delivering complete solutions for the IoT market and making progress against our strategic plan.”

Financial Results for the Third Quarter of Fiscal Year 2017

Net revenue was $11.5 million for the third quarter of fiscal 2017, compared with $10.0 million for the third quarter of fiscal 2016, and $11.2 million for the second quarter of fiscal 2017.

Gross profit margin was 55.5% for the third quarter of fiscal 2017, compared to 48.0% for the third quarter of fiscal 2016, and 51.8% for the second quarter of fiscal 2017.

Operating expenses were $6.5 million for the third quarter of fiscal 2017, compared with $5.2 million for the third quarter of fiscal 2016, and $5.7 million for the second quarter of fiscal 2017. Increase in operating expenses was due in part to higher variable compensation expenses driven by strong year-over-year revenue growth and charges related to the restructuring of the European sales organization.

GAAP net loss for the third quarter of fiscal 2017 was $162,000 or $0.01 per share, compared with GAAP net loss of $456,000, or $0.03 per share, for the third quarter of fiscal 2016, and GAAP net income of $41,000, or $0.00 per share, for the second quarter of fiscal 2017.

Non-GAAP net income for the third quarter of fiscal 2017 was $484,000, compared with non-GAAP net income of $189,000 for the third quarter of fiscal 2016, and non-GAAP net income of $444,000 for the second quarter of fiscal 2017. For additional information regarding the company’s non-GAAP results, see “Discussion of Non-GAAP Financial Measures” below.

Conference Call and Webcast

Lantronix will host an investor conference call with a simultaneous audio webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its fiscal 2017 third quarter results. To access the live conference call, investors should dial 1-844-802-2442 (US) or 1-412-317-5135 (international) and indicate that they are participating in the Lantronix Fiscal Year 2017 Third Quarter call. The webcast will be available simultaneously via the investor relations section of the company’s website at www.lantronix.com.

Investors can access a replay of the conference call starting at approximately 5:00 p.m. Pacific Time today at www.lantronix.com. A telephonic replay will also be available through May 4, 2017 by dialing 1-877-344-7529 (US) or 1-412-317-0088 (international) and entering passcode 10105368.

About Lantronix Lantronix, Inc. is a global provider of secure data access and management solutions for Internet of Things (IoT) and information technology (IT) assets. Our mission is to be the leading supplier of IoT gateways that enable companies to dramatically simplify the creation, deployment, and management of IoT projects while providing secure access to data for applications and people.

With more than two decades of experience in creating robust machine to machine (M2M) technologies, Lantronix is an innovator in enabling our customers to build new business models and realize the possibilities of the Internet of Things. Our connectivity solutions are deployed inside millions of machines serving a wide range of industries, including data center, medical, security, industrial, transportation, retail, financial, environmental and government.

For more information, visit www.lantronix.com.

Learn more at the Lantronix blog, www.lantronix.com/blog, featuring industry discussion and updates. To follow Lantronix on Twitter, please visit www.twitter.com/Lantronix. View our video library on YouTube at www.youtube.com/user/LantronixInc or connect with us on LinkedIn at www.linkedin.com/company/lantronix.

Discussion of Non-GAAP Financial Measures

Lantronix believes that the presentation of non-GAAP financial information, when presented in conjunction with the corresponding GAAP measures, provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends to gain an understanding of our comparative operating performance. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations of the non-GAAP financial measures to the financial measures calculated in accordance with GAAP should be carefully evaluated. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Non-GAAP net income (loss) consists of net income (loss) excluding (i) non-GAAP adjustments to operating expenses, (ii) interest income (expense), (iii) other income (expense), (iv) income tax provision (benefit), and (v) severance and restructuring charges.

Forward-Looking Statements

This news release contains forward-looking statements, including statements concerning our sales expansion efforts, our product development efforts, and our projected operating and financial performance. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our results or experiences, or future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. Some of the risks and uncertainties that may cause actual results to differ from those expressed or implied in the forward-looking statements are described in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, as well as in our other filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, investors are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the NASDAQ Stock Market, LLC. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.

© 2017 Lantronix, Inc. All rights reserved. Lantronix and xPico are registered trademarks, and MACH10 is a trademark, of Lantronix, Inc. All other trademarks and trade names are the property of their respective holders. 

 
LANTRONIX, INC. 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands) 
 
        March 31,     June 30,
          2017         2016  
Assets              
Current assets:              
Cash and cash equivalents       $ 7,389       $ 5,962  
Accounts receivable, net         2,827         3,164  
Inventories, net         7,664         6,584  
Contract manufacturers' receivable         314         369  
Prepaid expenses and other current assets         536         580  
Total current assets         18,730         16,659  
Property and equipment, net         1,278         1,569  
Goodwill         9,488         9,488  
Other assets         49         63  
Total assets       $ 29,545       $ 27,779  
               
Liabilities and stockholders' equity              
Current liabilities:              
Accounts payable       $ 2,719       $ 2,721  
Accrued payroll and related expenses         2,623         1,817  
Warranty reserve         116         138  
Other current liabilities         3,344         2,922  
Total current liabilities         8,802         7,598  
Long-term capital lease obligations         71         116  
Other non-current liabilities         378         347  
Total liabilities         9,251         8,061  
               
Commitments and contingencies              
               
Stockholders' equity:              
Common stock         2         2  
Additional paid-in capital         210,104         209,297  
Accumulated deficit         (190,183 )       (189,952 )
Accumulated other comprehensive income         371         371  
Total stockholders' equity         20,294         19,718  
Total liabilities and stockholders' equity       $ 29,545       $ 27,779  
               

 

LANTRONIX, INC.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
                                       
                                       
     Three Months Ended                Nine Months Ended    
     March 31,      December 31,      March 31,                March 31,    
      2017         2016         2016                 2017         2016    
Net revenue (1)   $ 11,524       $ 11,222       $ 9,964               $ 33,686       $ 30,077    
Cost of revenue     5,126         5,410         5,186                 15,776         15,643    
Gross profit     6,398         5,812         4,778                 17,910         14,434    
Operating expenses:                                      
Selling, general and administrative     4,414         3,873         3,469                 12,129         11,008    
Research and development     2,126         1,873         1,744                 5,944         5,131    
Total operating expenses     6,540         5,746         5,213                 18,073         16,139    
Income (loss) from operations     (142 )       66         (435 )               (163 )       (1,705 )  
Interest expense, net     (5 )       (6 )       (8 )               (18 )       (23 )  
Other income (expense), net     2         4         -                 3         47    
Income (loss) before income taxes     (145 )       64         (443 )               (178 )       (1,681 )  
Provision for income taxes     17         23         13                 47         34    
Net income (loss)   $ (162 )     $ 41       $ (456 )             $ (225 )     $ (1,715 )  
                                                           
Net income (loss) per share (basic)   $ (0.01 )     $ 0.00       $ (0.03 )             $ (0.01 )     $ (0.11 )  
Net income (loss) per share (diluted)   $ (0.01 )     $ 0.00       $ (0.03 )             $ (0.01 )     $ (0.11 )  
                                                           
Weighted-average common shares (basic)     17,522         17,347         15,225                 17,374         15,163    
Weighted-average common shares (diluted)     17,522         17,703         15,225                 17,374         15,163    
                                                           
Net revenue from related parties   $ -       $ -       $ -               $ -       $ 113    
                                       
(1)  Includes net revenue from related parties                                      
                                       
LANTRONIX, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(In thousands)
                           
     Three Months Ended           Nine Months Ended 
     March 31,    December 31,   March 31,           March 31,  
      2017       2016       2016             2017       2016  
                           
GAAP net income (loss)   $ (162 )   $ 41     $ (456 )         $ (225 )   $ (1,715 )
Non-GAAP adjustments:                          
Cost of revenue:                          
Share-based compensation     12       13       14             36       52  
Depreciation and amortization     87       84       120             260       393  
Total adjustments to cost of revenue     99       97       134             296       445  
Selling, general and administrative:                          
Share-based compensation     169       162       131             480       484  
Employer portion of withholding taxes on stock grants     4       5       -             9       4  
Depreciation and amortization     56       56       55             166       171  
Total adjustments to selling, general and administrative     229       223       186             655       659  
Research and development:                          
Share-based compensation     43       45       41             129       135  
Employer portion of withholding taxes on stock grants     1       -       -             1       -  
Depreciation and amortization     8       13       16             29       50  
Total adjustments to research and development     52       58       57             159       185  
Severance charges     -       -       -             -       286  
Restructuring charges     246       -       247             246       247  
Total non-GAAP adjustments to operating expenses     527       281       490             1,060       1,377  
Interest expense, net     5       6       8             18       23  
Other income (expense), net     (2 )     (4 )     -             (3 )     (47 )
Provision for income taxes     17       23       13             47       34  
Total non-GAAP adjustments     646       403       645             1,418       1,832  
Non-GAAP net income   $ 484     $ 444     $ 189           $ 1,193     $ 117  

 

LANTRONIX, INC.  
UNAUDITED NET REVENUES BY PRODUCT LINE AND REGION  
(In thousands)  
                                   
       Three Months Ended           Nine Months Ended   
      March 31, 2017     December 31, 2016     March 31, 2016         March 31, 2017   March 31, 2016  
IoT     $ 8,644     $ 8,304     $ 7,573         $ 24,817   $ 22,542  
IT Management       2,569       2,265       1,331           7,271     3,997  
Other       311       653       1,060           1,598     3,538  
      $ 11,524     $ 11,222     $ 9,964         $ 33,686   $ 30,077  
                                   
                                   
       Three Months Ended           Nine Months Ended   
      March 31, 2017     December 31, 2016     March 31, 2016         March 31, 2017   March 31, 2016  
Americas     $ 6,625     $ 6,453     $ 5,027         $ 19,244   $ 15,339  
EMEA       3,392       3,122       3,190           9,615     9,831  
Asia Pacific Japan       1,507       1,647       1,747           4,827     4,907  
      $ 11,524     $ 11,222     $ 9,964         $ 33,686   $ 30,077  
                                   
Investor Relations Contacts:

Jeremy Whitaker
Chief Financial Officer
949-453-3990

E.E. Wang
Director, Corporate Marketing and Investor Relations
investors@lantronix.com 
949-614-5879
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