Lantronix (LTRX) 12 Feb 202020 Q2 Earnings call transcript

Good afternoon, and welcome to the Lantronix Q2 2020 Results conference Call. [Operator Instructions]. Please note, today's event is being recorded.

I would now like to turn the conference over to Amber Tinz. Please go ahead, ma'am.

thank Conference joining Call. and Quarter Lantronix everyone, XXXX Fiscal afternoon, you the for Second Good

Whitaker, Officer; Joining Paul of and Jeremy Pickle, on Strategy Lantronix Chief us the President Chief call and Marketing. Executive Vice Jonathan Shipman, and today are Lantronix President Financial Officer;

A archived today's webcast call on be available live company's website. and the of will

in for through In Eastern, X p.m. callers, starting at March by entering XXXXXXXX. addition, XX X:XX pass a or phone replay will the dialing and XXX-XXX-XXXX XXX-XXX-XXXX Pacific international available today U.S. be code p.m.

today to to call, forward-looking contained to its During to such filings, and management's available you company's involve our on in Lantronix or the as obligation which any events revise in current that may furnished results this and update cause and factors encourage the statements We review undertakes management is earnings our which the release, the reflect make forward-looking website was could future no from or expectations. SEC risks cautionary circumstances. statements, to statements XX-Q. XX-K materially differ and risk SEC uncertainties and publicly

Relations which will posted Furthermore, earnings that use. and reporting during the Today's financial non-GAAP in for describes non-GAAP release, differences our of company measures financial we non-GAAP the the measures. some discuss and GAAP website, call, the Investor the section our is between presents reconciliations

Financial Lantronix that, call With Whitaker, to Chief Officer. the I'll now turn Jeremy over

our financial commentary. section refer of call. Investor Paul of news as for XXXX, some hand Amber, financial and second going our details you, well supplement Thank for welcome today's I the for joining to additional Relations fiscal business website this information my will release in to and that over his commentary. the results to quarter highlights before Please the the of I'm for everyone to provide us afternoon's as it

we end fiscal quarter For range of to net million million XXXX. the second million $XX.X in net upper revenue and the quarter first compared was revenue as the our of reported XXXX, second XXXX a fiscal guidance $XX.X at the for fiscal of quarter $XX.X for of

percentage the with of of the fiscal due quarter mix quarter for XX.X% and fiscal of for first margin compared XX% The XXXX gross result our for of XXXX XXXX a net primarily Maestro. fiscal revenue as product second was as second of acquisition decline the year-over-year profit Gross was of XXXX. as a to in July quarter XX.X%

acquisition expenses second $X.X second fiscal million fiscal recent development XXXX were first of with XXXX, of comp. million of administrative and of of compared fiscal quarter general and in fiscal down and XXXX. SG&A compared additional million $X.X increase Research to the with $X.X an XXXX, second for head quarter the $X.X to million count for and quarter in the due first and related the the was increase The fiscal million the for in expenses quarter share-based for XXXX quarter from second year-on-year quarter fiscal Selling, $X.X $X.X XXXX. primarily of million were the for

fiscal of the GAAP loss compares guidance loss a $XXX,XXX midpoint XXXX of second below acquisition fiscal up of to of share the share or This of Included million $XXX,XXX share fiscal the was of of $X.X for or Non-GAAP and XXXX as reported quarter loss GAAP of and quarter non-GAAP costs. XXXX. our quarter and or fiscal XXXX, non-GAAP $X.XX net net range, $X $XXX,XXX income non-GAAP $X.XX we compared XXXX. sequentially per for of a income per and net quarter and second the or $X,XXX second per quarter income net fiscal fiscal during per the of $X.XX first net per GAAP of the during the per of the GAAP $X.X severance-related income $X.XX share or during $X.XX was share or second were net million XXXX. in quarter first net $XXX,XXX for to share

cash million of acquisition as compared December of as cash of Intrinsyc. Cash million Working June capital June to compared with restricted XX, used equivalents December of XX, XXXX, million were as December $XX.X XXXX. of XXXX, XX, million inventories as compared were cash XX, million $XX.X XX, of In as with $XX.X was fund $XX and of $XX.X as million January to of XXXX. and Net $XX $XX.X XXXX, million as approximately XXXX, as we June balance XX, the this XXXX.

Now on closed recent turning XXXX. XX, which our to January acquisition of Intrinsyc,

give me Intrinsyc that brings. contribution of perspective Let some the potential

full XXXX, December XX, brings entity. operations. quarter non-GAAP For expect million, our the EPS ended combined to scale earnings months the be first standpoint, to additional an was which combined quarter, which we transaction From revenue approximately will fiscal $XX of in XX be to the accretive fourth the

the slower million quarter This business over strong has integrate costs targeting $X first December stronger year million XX, in typically a as little XXXX. half. we And efficiencies. seasonality. chains, Longer a sales company $X expect a ended we for we realize second supply ahead, seasonal public the Intrinsyc annual are with look typical operating redundant as other half finished calendar in eliminate synergies term, we cost and

not that noted will the should January XX it quarter. our for addition, XXXX the of be included in be results first March days In financial

guidance quarter on Now of for XXXX. earnings fiscal and provide the revenue third will I

$XX minus non-GAAP million, We expect net and of revenue income XX%, $X.XX of plus per share net $X.XX. or to

to over turn now I'll call the Paul.

as progress, of our quarter's our forecast. quarters into top with results Three Lantronix, compared we Thank you, line this to including are pleased transformation the Jeremy.

we million, shown and than the were has range, of improvement since our end guided drive of not able sequentially report, high EPS While last macroeconomic significant $X.XX the the towards our within X% environment was however, $XX.X guidance. to revenues our midpoint. up lower

our on are than came While initial higher were down expectations. remain integration and our expenses in on We non-GAAP schedule. otherwise operating focused they plans sequentially,

to the necessary to add to talent next the take Lantronix continue We level.

processes. Holliday, may recently seen of our we in to drive a You the Roger hired Business veteran of have that go-to-market Roger the Sales VP is new a Development, news and industry, recent confident integrate we've and in am last lead future sales we to also and from our XX teams the his ability for side-by-side years. acquisitions. worked while technology efforts I

customer We the saw newer during driven growth continue products ramps. this past quarter to and our products modules gain due good by in our our that quarter, IoT Ethernet momentum primarily to production second WiFi

product tracker modem revenues. a initial products fourth sequential by strong asset and from tracker Looking our partially we offset and lower at newly acquired launched generation had growth lines, saw newly router solutions ramp,

our have are with products, the past flat an While continue older at to appropriate the success below good norms newer for see and Distributor Revenues weeks. X level of flat were and results sit they about sequentially and same not QX. acquired products few Lantronix quarters. sequentially, historical been were seeing in also here did we the inventories

For significantly. the and accordingly, would we optimistic ago. economy outlook revenue products return a To quarters, prior as broader have three last at until to yet date, have compared year Lantronix adjusted we to more been levels seen it cautiously improves the our least not legacy have

revised our our incorporates model. a expectations our upside see improvement the we guidance it consumption for would to legacy an relative fiscal more modest products. expectations, drive and for such, of in mix our Should quarter As XXXX March newly revenue to

in Turning the customers we now continues the second customers We nine. the grow. paying that to added the customers. am stage, quarter. prior X should add And more to from pipeline total XX report three have pleased up to software. bringing In I to were I quarter, those POC the

developing new software rollout with our integrated refined platform, micro We've further are additional front the end software also the into back product we have services Lantronix's we SaaS in, road planned acquired importantly, consolidated for DXSphere quarters. next newly More few map. over the and a

In sum, for see to continue opportunities growth Lantronix. good we

our disputes trade towards is and extension demand potential a the growth Currently, manufacturers our greater effect for the XXXX China XX% is chain, to of delayed base, of range have chain supply our virus of the U.S. supply COVID-XX unknown. forecast and the is While XX%. end target on has for positive new and progress said, catch exceeded, our revenue been the our That XX% quarter. the expectations to New our as Year growth fiscal of full by on Lunar up between although the holiday market resolution than year-over-year yet the customer the end of contract

more from fiscal near-term up products, However, flat given Lantronix higher now our XXXX muted to year-over-year be EPS expectations the year margin for older, XX% XXXX. fiscal expect will we

customers, we profitable the end stack. IoT On will technologies to engagement products continue make more valuable markets. deeper, focus our to within bringing and value-added additional front, a the capturing us on This more with our M&A

high-end, complete exciting embedded artificial middle compelling capabilities intelligent, solution capabilities. Intrinsyc the already to embedded of the we as report business. strategic learning begun our complementary our Together, edge will that of software this We integration product and acquisition. standpoint, computing design and complementary, will rapid Intrinsyc are of IoT engineering, portfolios a technologies, expand intelligence From and planned, a that prototyping acquisition portfolio, hardware is our machine in enable software closed this more capability. our and have January brings pleased

at Intrinsyc the impressive It customer compound XX% a our industry-leading track revenue annual our accelerate strong rate sense engagement. and performance. has term, product expands allow also combination having consistently Lantronix. XXXX, while ROI. This IoT since our of deal teams longer financial also increasing while record, makes diversifies the margin and design to our EBITDA us grown good delivering our Over for an offering solutions growth base will

growth with scale improved combined into solutions entity. double-digit a the their leverage the we global As but of platform, see profitability capability, of we continued as our increased result

larger, quarters grasp a We a supplier small Lantronix, the the from transformation into value-added faster-growing of technologies connectivity-only with transformation the IoT X are within strong to solutions a of IoT a now stack. supplier

soon. and We continue peers. we outgrow our out-profit progress expect forward to execute, our to on again As reporting to we look

That remarks for completes prepared today. our

will to I it the to operator conduct now turn Q&A So our session. over

Lake [Operator question first from Instructions]. Schmidt Jaeson comes of Today's Street.

particular IoT you start seeing or if others? there's strength markets to just been Curious in I comment from strength that business. have stronger with you're the could want certain if on than if the any markets

a of we in tracker uptick kind our nice Well, saw business. about talked We that.

cat we've had just recently a a product and initial fourth-generation one. was nice our we think That that LTE had released ramp. product, utilizing in I

fairly that doing gateways. our do steady the to well. of we'll most is of more we're So development. not trackers, necessarily contribution be part, bit heritage Modems business, from coming a a a lot Pretty little continuing for something

And a lower. was so it's that not surprising it little bit

Ethernet was really modules quite Our strong.

nice came nicely, uptick. that quite had little back So

for the what of terms numbers. we was so it, of a at the growth we most balance with to color And offsetting that's kind saw of other in of what little part, look if bit the

of some Is Okay. softness saw then business. typical that And shifting IT gears order to the just lumpiness? December that just you management in

appreciably not below what down typical this is it's Yes, in cycle.

So last for quarter was us. an upcycle

which or was downcycle This within of bounces the forth. us. quarter and for the range it back of kind a It's norm

product was the So bit pretty I out look call rolling are fell I would most did as typical. lower our had that normal. product. just some the up well a SLB was off of - a as - little the We of a it little bit more. Spider But slice I of that norms, little it, little for more product, bit at our think, if category kind a part, Those bit. some if Spider products you have KVM We

moving are million last we forma in I'll going think on just Okay. me, of there think here. know in I for But OpEx? rate about forma parts into jump $X.X what level basis December, run queue. of should and one And a sort forward? pro pro number back OpEx a I

Yes.

consideration through synergies into cost business, add business, into the taking to least from Maestro going on work we're continuing to the Lantronix picture. for classic because, we're bringing the acquisition. the So the Intrinsyc at But before obviously, acquisition, costs Lantronix the

general, - synergies the next to as quarters, expect in continue So couple from we we see over that to of integration.

business top least slightly, then, layer So of from of on the Intrinsyc historical OpEx. on that that, should business part you But top the to on begin at in to have decline of it. the

X to And Yes. improvement think kind months. about on it a as of basis, you of want think probably about revenue percentage go-forward just next over if steady a the

or have time the in associated some the costs I through frame say. latest months, transition X will us that with there We June should take out acquisition

integration X out of think next complete you improvements over costs make we'll of we months, as start if pull the the kind associated kind so Maestro. steady we'll beyond Then some of Intrinsyc. And for of that, with to some plan continually the

so. or So months X steady improvement next over the

Company. & Rich [Operator comes next Instructions]. Valera, Today from question Needham

Nate is Rich. for on This

two So as from any WiFi impact IoT you wondering quarter was - impacted at into results there if would the first, wins the wanted to all, if look last - Or wins be particularly quarter, went expected? the at the - looking could production performing I that design helpful. that if color were that there's large

the Yes. that say WiFi We particular, in to called business those. They some prepared production definitely in are on The we're out of historical filling remarks, definitely in newer to off. in fall kind that of one, up. just the ramp older continue products

that's So And quarter one for was well. IoT. strong going that of we pretty that this contributors came that rather in the saw

just Great. gross at then looking And margins.

of Or better wondering result think, that I So And if rebounded product quarter. gross And is there the just think, color outperformance? potentially was as I slightly there nicely the a any margins, the was I mix? in if than expected. regarding

product Mostly mix.

refining improvements we operations. ahead plans, the But making our our acquisition, if to while acquisition. I to justify slightly point model that are and we're Maestro of We the the use

with of was anticipated push on going there track. a track was out are conservative terms but are most model. of because just integration in But pretty Really, are of things them some rather pulling some activity, X-month all that - the costs well those in delay X, of driving out. some of a built efficiencies. slight had So We've we small the and on

see improvement. further we'll improvement, think, So I

that's in margin. Now XX obviously, we're folding not points doing a of business

on point driving XXs combined then this efficiency expect to some make improvement in end we'll there. So steady business some and the quarter, up at

Great.

question for me. last Just

front. quarter. also of So I cross-sell is sales this significant you the know on prior regarding added about discussed opportunity personnel know the thinking making the on I time the then call, you mention Intrinsyc. acquisition, improvements And there of

new cross-sell And the dynamics both as of and so as balancing well kind sales in at I was play initiatives, the wondering personnel Intrinsyc.

a give in question, year. fiscal our kind us, the the see talk great particular. for over what time. The if period and in first and though, happening Yes. I all, I'll complex a we short not a see of of answer That's of It's entity model, a can good combined they're you we financial in synergies, about when revenue one

but fraction this of So a much selling expect than SoCs I The we're there's have world's not necessarily in Certainly, overall. on say, planning the consumed and less revenue Intrinsyc's of over it's synergies, team is fraction, that sales resources those a but SoMs, of product. Europe, year, think it that of in have XX% to forward are revenue didn't to small and let's opportunity. lots XX% really terms change next EMEA, we the there. a looking team in

team. addition opportunity Europe we really sales as several does since as us it well to the considerably expand services in have pretty So the engineering there in sites support for

revamped. I sales Lantronix that to has be products And that from had need on of past. products. in products repeat were good We one-to-many that across news those bought recurring our revenue front. reliant, go buy to sales of kind trust too where customers product. board. a bit continue is the We've orders of the from a the or customers that's They a lot got kind that of The the processes are kind think,

- that that's a to off particular, the we And the I of forward. some order wanted he So was Roger in blocking a process of have kind move brought and job to Holliday to implement much and is in ball base to organizational to and But address Happy place we in think initiatives great can that. have better tackling. do of. build in

get new while I'll see opportunities. already in anecdote. organized, will little take I one give team additional starting we're - one but of So a it think terms little you to to that forward, going

larger with last just we sales that QBR funnel The in really and at good to had, increase, Maestro pleased So have front presentation. all presence particularly see see giving to a the the of I that in I'm a customers. testament of opportunities. if grow you happen is can product was and to starting the what opportunity force product, that's EMEA the filling it's

well. in our we to then North as And intelligent happening business, America same the business. expect happen see So edge the Intrinsyc with solutions thing that's

Roger few overall, be have around, able the and in high So confidence on hopes. over to I I reporting to quarters. that that progress have we'll high turn be next

question-and-answer I'd concludes back This Instructions]. [Operator for remarks. the session. the to like Pickle conference turn to Paul any over closing

attending day. you, Thank guys, very for and great have you a hope much today,

all and thank Today's attending concluded, sir. now you today's you, Thank presentation. we conference has for

You now your day. may disconnect have wonderful and lines, a