Lantronix (LTRX) 7 Sep 232023 Q4 Earnings call transcript

Hello, and welcome to the Lantronix 2023 Q4 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Adams. Please go ahead.

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

on call Jacques us archived on and President Joining the the Marketing. webcast Chief Interim Whitaker, of will Financial CEO of our company's today's Officer; be live website. and A Issa, call Vice today our and are available Jeremy

details replay in phone addition, can In the you find for the earnings call release. and today's

to differences of I Lantronix' that, Whitaker, use. With results available revise GAAP reflect future reporting that the to our to will financial forward-looking make which and any additional materially the statements, news XX-Qs. for XX-K Relations the Officer. involve Today's Relations to of and our could may cause Chief will expectations. non-GAAP management Jeremy uncertainties our measures Investor to our statements and and section information and website the company's or forward-looking current to now commentary. Furthermore, the some undertakes statements the call, this circumstances. as release, or the in management's in the section website, the risk in During you factors was we is over in obligation which no that review and website differ furnished update release, cautionary its company discuss call risks non-GAAP non-GAAP SEC financial supplement from which Lantronix encourage contained today earnings and describes call, that publicly and our during to is will We details on earnings refer Please the SEC and between posted events the filings, the such Interim the presents management's financial Financial reconciliations measures. turn CEO Investor for release

fiscal welcome update our our results and year us for Rob, and joining highlights fourth of well to provide for financial CEO as for as afternoon's I fiscal financial provide the call. on the an search. our going business and quarter I'm everyone targets to XXXX you, before some this Thank XXXX

XXXX, we a year-ago an growth embedded period. up $XX.X quarter approximately million, largely function led solutions $X.X in-flight of sequentially for to of X% an FQX sequential For of products, of our embedded compute and reported X% from a down strong revenue infotainment customer. was the The X% sale million by

revenue continued from Togg. System contribution We production QED solutions and electric customers quarter-over-quarter pilot of weaker quarter delivery We experienced exhibit customer, out-of-band a to our flat units spending also products in as to larger were saw vehicle from our included in $X.X patterns. financial relatively the million Gridspertise. cautious continue

XXXX, out-of-band revenues FQX the design the services expect revenue. to and improve margins. In season, should a upcoming and in boost the a adding of were fed to sales of gross September backdrop sequentially, down and We here quarters, December against buying services function increase software lower

However, XX.X% an ebb XXXX we XX.X% prior in these of function a during mix, XXXX. sales variances out-of-band FQX higher compute a primarily was being product expect in going design was FQX GAAP as embedded margin revenue the quarter projects, gross lower the there of the forward. in margin compared for decline sales The percentage to gross with improvement quarter. year-ago was XX.X% biggest to and and flow and and

$X.XX XXXX lower primarily were the quarter For R&D due in million $X.X GAAP were and in and to expenses $X.XX SG&A the in on or during was GAAP mid-XXs. GAAP quarter. sales or per mix Non-GAAP from $X.XX and year-ago with share XXXX, The for in the million or quarter. million, XXXX a the or net in and $X.X per $X.X margins focus expense in million quarter net net $X.X the $X expenses with quarter. lower share GAAP compensation to sales during $X.X million prior cost $X.X gross share-based prior million compared million $X.XX the income decline to $X.X FQX FQX share year-ago containment. loss per FQX FQX of income expect compute million income XXXX GAAP down FQX we with normalize year-ago was flat the non-GAAP compared year-ago net for to quarter. our $X.X million per SG&A to of share closer XXXX compared was

$XX.X and sheet. quarter. of million prior Working the capital to lead remained from increase FQX of We decrease the with $XXX,XXX the of long $XX prior $XX.X inventory cash and of time ended the with of balance million was steady a million of FQX components as inventories FQX turning Now XXXX $X prior XXXX million, cash equivalents prepaid quarter. an of were were nearly quarter. The balance from a by that XXXX, customer. Net $XX.X million includes as

these during to agreement. consume fiscal XXXX on components We deliver expect the as we customer

Now turning first XXXX. quarter year and to the fiscal

environment into previous guidance a earnings but XXXX with record call. We we cautious compute provided Compute new backlog, quarter production. XXXX demand will contribute steady relatively FQX sequentially we our designs down the as function the this entered in the first fiscal ahead and the fiscal was that a the during fiscal growth of moving year are at the confident growth level upcoming led revenue to in beyond, shipment us and remain much don't in upon solutions, in largely a both a the deployments, of XXXX fiscal expected significant at of deploying XXXX quarter. to revenue system about intelligent and customer vehicles video. to similar that We infotainment in-flight be drive expect enterprise and smart level, systems. expect deliver expect to We customer grid the by embedded That said, and

the that we substantial Gridspertise XXXX. us electric is have real-time QED, revenue call, in discussed, progress to in of into for QED fiscal lead production, realize will smart current grid control $XX edge we've platform the than we backlog which an with more getting million with automated resources. Since made Gridspertise customer the As on our last during and previously insights allow distributed operators have our providing energy all-in-one computing grid

we XXXX to substantially and the FQX quarter. units production QED December gate Specifically, would fiscal ready contract that start component all of in deliveries resolved. during shipment been the mass of XXXX upcoming production are ended in All under completed pilot the have shortages the

increased expect customer far. due fiscal under deposit we for initial million a XXXX. total production Furthermore, are XXXX deposits that side, thus On that that confident recently by and upon production FQX program and a purchase of received Gridspertise XXXX, their over approximately these continued half order order, and FQX. our the amount in forecast of double $X would drive the the XXXX. a revenue FQX million the the in ramp would follow-on was volume balance to result QX fiscal we of negotiating would in first factors, fiscal in production that production demand deliver $X.XX from currently full growth begin us which current million grand contribution the our in in to ability paid second during Based We we and are QED XXXX. this to to contract indicates $XX meaningful which we the production in More leading quarter in specifically, in would the deliver final

also progressing is EV well. lead customer, Our Togg,

XXXX. run was than FQX double had current During and significant greater rate Togg received for XXXX, from we previously that we their what fiscal a order anticipated

to with traction services design engage to we continue arrangements. We're that handful to potential meaningful opportunities other also other compute of EV addition, transition the designs. a with have In supply seeing

computing had and industrial with we design announcement increased recent boxes. applications the with AI have of high-volume robots, Edge customers processing collaboration Wi-Fi drones that in example, QCSXXXX compute-intensive for Qualcomm ramp engagements a autonomous video multiple XXXX. their For have enterprise interested and X AI for using solution we FQX as to in expected Furthermore, connectivity, such various mobile with Edge

Now for our I'd XXXX specifics like to guidance. provide fiscal the

new for revenue to $XXX With the $X.XX relatively growth solutions of a of and target anticipate of into our compute in of are steady fiscal system we to XX% environment non-GAAP range $X.XX production, a in demand cautious the range delivering $XXX per and a designs share. EPS reiterating over record going million million but during XXXX annual our backdrop and backlog,

engaged along process search. Now a a provide CEO search. the update the brief performing conduct our and third-party have interviews. begun well to candidate In Board a XXXX, in-person I'll We're in June on firm

expect prepared remarks our difficult the is timing, pinpoint it a completes exact today. to identify we'll qualified year-end. That do that I While for the calendar before candidate

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

comes Instructions] from question Searle [Operator first Today's MKM. ROTH Scott with

I other Nice reinforced It to of continue in products. in just given want a 'XX. mix in maybe for the recovery back out-of-band to some around that's some and dive of that gross and June the quarters you're and margins. where -- recent color correct? to expecting quickly get to recovery purely the kind sounds quarter in fiscal to Is we've been like the the Jeremy, outlook see

strong was margin and and quarter, Yes, of that of the would our the the the sequentially, be our correct. We scale. a really compute on actually end out-of-band out-of-band being higher scale end lower compute on the down had

would gross kind much lower more likely And to out-of-band we're that returning margins we're see FQX, and the to contribution expecting be of that to For where mid-XXs. to flip, of from the closer result contribution going compute. from

looking then September bit. I the little thought down I top just Great. at And sequentially a line, heard

up. ramp-up in you see Gridspertise Just But the to that. from clarify then want start to ramping contribution the

in said because color wondering the you of of ramp-up provide contract, to in year? continue of things that it. quarter. you back see top in Gross that in the December think million impact other magnitude, big that how really million March and I'm the is that size timing on then terms I half wondering, that contribution to fiscal going want could the follow-on And what right, and the course guys related that? clarify the of year on it margin X to around to profile, $XX the you the implies, I'm going front. I that you to $X over

Yes.

we expect I think to play the characterizing how you're out. year

mid- what 'XX. margins we similar As margin, to to are to fiscal it the saw in to expecting low-XXs we maintain relates in

average. As been and -- do it to some supply PPVs. have but will tailwinds lower Grid rolls slightly, chain we costs down our relates bring in, close we've it's lower to corporate as said, pretty margins it That experiencing

margin lower the we a so get would see I offset gross benefit that combined those will would roll in, on costs as from Gridspertise. of basis lower which some that, would expect some And from we

if And different I opportunities But heard cetera. a some Togg, about of the opportunity talked sure the I if like not verticals, pipeline. et I'm terms could, guys Great. of other in in lastly, you number

talked it. wondering you if about quarter, there's $XXX in put million number would a that last plus think you opportunities. I on I'm

applications in has the the cities, greater is opportunities seen past. and number of EV, to as such large number as lot smart smart what surveillance. well That a still as in than automotive pursuing grid, has continued of Yes. security A grow. We're company that

The next question comes Genuity. from Mike Canaccord with Walkley

ramping. my yes, on closer the to And congrats Gridspertise reiterating Great. guidance

you're If year? you think could Just early 'XX, have $XX as on the in for would could versus off year well million? it goes Gridspertise, least fiscal that as out negotiation follow-on another at talked Or to of production contract. we about be that maybe look ramping you the another that it grow you full throughout

Yes.

the year-on-year we high about. on Gridspertise that we're and with the have think they upon I units based currently grow the would talking pricing that end,

good, with to year-on-year. And have really continue so it think, yes, the I business we grow to opportunity a and Gridspertise do

to ramps Jeremy, I about Great. Gridspertise back at as That's that full you're good look throughout bounce QX puts out is and any the to or is on call you year, way to pipeline? the gross mix year year? margins? saying Or on we know helpful. margin should think takes, kind your as then the think for anything gross throughout your that there how should there a mid-XX-ish. of Is based about And

Yes.

half bit the I we upon see forecast, purchase greater fiscal are With price of do absorption benefit should increases logistics that as year quite some fiscal margin get full mentioned for and the start costs. variances, 'XX. gross fiscal profile from and QX of we and And put what had a looks from also, of I pretty the we second said, seeing previously, into based we we year. models in the relief together to as fixed our as which in showing both in some close themselves the our like And current revenue

the addition business. in on operating bit the that, think in of a margin, there's quite also I leverage to just

And so OpEx an top similar the line, as don't mid-teens. we to allow do us grow margin which we a level, add at EBITDA to the the would year expect in exit with

grows for a you business question ramp the about think guess, just strong Is is in talked think systems down me, quarter $X I do you the million from most model. and to from as there? in growth And shipment, XXXX? Or helpful That's the sequentially. it of you IoT it due on that Great. last very embedded, builds coming about this year-over-year? that

Yes.

the bit little the be So next soft embedded compute couple on a side, quarters will of there.

the We or in growth. an new processor. opportunity Gridspertise continue embedded is of wins it, us ramp design itself have compute -- although a through design a general, business, But it's new the which are that to would the call part in business. was the business to Qualcomm that I would brought services the, QX, grow number not that our product, on of couple of beginning driving to is and compute

Craig-Hallum Capital with question next The Schwab from comes Group. Christian

can million next goal? still that to wanted you Togg. do just years production I few you Is with $XX believe that guys the still over the So verify

anything, gotten We was this greater anticipated. which had if a better. just order received follow-on from it's And than Yes. initially Togg, we much quarter

track, So than not, on indicated previously. they're if doing what we've better

like about $XXX projects XX million And first highlighted those that Fantastic. of fiscal of you next my question, expectations is before year? your follow-up final could then Are the Scott. annual that I from of revenue. to in contribute projects think, any There's kind for question

in fiscal to couple be say I 'XX 'XX. could then are help in 'XX. them majority projects contributing There would that the likely that fiscal be vast a and of winning we'd revenue most fiscal would

fiscal although about with the contributing closing some that current as high and it's them of a have pipeline, future the of more well. likelihood year think in I

with The Ryan Koontz from next question comes Needham.

Yes.

pipeline Just do kind like the there of of out on of how softness the terms with It would in near-term helpful. dealing industrial was general near you that and with in drilling down Qualcomm Can current inventory, and of your commentary are versus you some kind you sounds term. dynamics? state promising kind That of kind still IoT. a distribution contrast there the the about business contrast be pipeline of

channel with several inventories. in with Starting the our at saw declining Yes. least channel our inventory We distributors. quarters with

would we I it a it is This bit, within, did say, up but historical little quarter, see our bump norms.

elevated seeing inventory distributors. our So we're not at

We but inventory I heard couple burn distributor have it's not a have where necessarily systematic, they customers they feel in like to think, from through, that of channel. our they need

we weakness for programs 'XX in of be of shortages calls -- the it. We companies most situation companies supply won was did and did more mention really a that putting on business. That COVID, where coming it's Gridspertise we think driven large I we've on several Togg, everybody hand on particular, and growth like by parts in a because of our inventory drive said, fiscal certain were and to some lot out of with hand that post-COVID, orders getting are of difficulty previously drivers see where in have our able that growth. to

we opportunity nice In the from have call. of seeing connectivity. particular, generated our that we quarter, also on growth with some will addition, mentioned are we some a product progress newer releases previous our with that being last nice year. in and help next In the made That's new some AT&T over demand

is that this hear. and with Or much I've the of other new pretty at landscape? seeing and entrants about of competitive coming competitive follow-up That's changes? industrial stable few areas impact? a and heard a great kind on you spots. of And in out front. type it Are to a kind Europe an products of quick you Any hard play

Yes.

With think necessarily got with we've our of this not there. any a product our product, out-of-band at we acquisition point. I new Uplogix, market-leading we're recent think seeing entrants

we services, not areas with seeing great a those so Qualcomm On anything ability necessarily to ourselves there think the the side design I differentiate today. have and in new

Thank session. you. has you question-and-answer This for today's The concluded. attending our Thank presentation. concludes now conference

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