Lantronix (LTRX) 29 Apr 242024 Q3 Earnings call transcript

Good afternoon, and welcome to the Lantronix Third Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jeremy Whitaker, Chief Financial Officer. Please go ahead.

Good afternoon, everyone, and thank you for joining our quarterly earnings call.

call Awsare. our the Executive and on Saleel Officer, me today President is Chief Joining and webcast live the A archived company's available will website. on be of today's call

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

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

news during non-GAAP financial section that refer and Furthermore, commentary. of Please the use. non-GAAP Today's website and in posted reporting Relations Relations will website, measures for in our our release of the additional details between the the measures. for earnings we company will is differences the the management's section reconciliations the non-GAAP presents Investor that discuss to the call, describes and release, supplement information and our GAAP Investor financial financial which

I'll now Saleel. that, With turn the to call over

quarter. sequential the XX% $XX.X year-over-year to for XXXX on to today. a a increase I'm call XX% million compared joining quarter pleased year the December and record compared period Jeremy, the us everyone, report revenue you, of of of the Thanks, of for thank of and increase to same XXXX, third fiscal

our analysis same Jeremy XX% and grew the Non-GAAP more year, leverage third EPS you financial revenue improves. the year as demonstrating model on shortly. to in period details operating with fiscal last quarter results will provide compared QX in

solutions, the X customers, Lantronix Lantronix EBITDA spent partners and months have and our importantly, key and a most given As sheet. engagement very an the our growing optimistic strategic balance time about of with products with customer completed future improving having our team, and solid I I'm recently lot and strong

compute core play connect solutions. of that's and edge the and our we with exactly We technologies converging and capabilities where the see both at network,

have of and solutions, management device application with services including edge understanding a for We our platform and integration. deep customers requirements software, Percepxion provide compute hardware, IoT complete our design and

X $X.X focus market serve and going infotainment be the annual Our billion, X will years estimate enterprise. is smart XX%. approximately over key forward the we segments, cities, available vertical and expect be rate is to on different We verticals next in the compound company including addressing automotive few the growth

estimate the key approximately cities, of the infrastructure. Let give drive each over me cities $X.X namely and market rate be of have an the approximately In critical over to areas, verticals. serviceable a to addressable the billion we growth and the compound couple in of grid these few years smart We you example smart next smart revenue be vertical XX%. opportunity to annual

with momentum run this initial see customer, from transitioning is lead grid first customer our fiscal we order the smart and our of follow-on to grid as the business. 'XX continued received In half sector, production year design we a where first smart for rate

organization. with at engaged Our levels and we relationship all deepen are customer, continues lead to our the of

address them rollout geographies broader engagement. variants, to and expect mutually we as beyond the current applications with that and I be into with their needs. expand to and the partner this beneficial will long-term its QED device expect to these We continue they market a

managing Percepxion win with X is device FOX power is monitoring SaaS recent great using design generators. of example with telecom customer and sector a our coupled our A Now moving site to critical Tier cell Telematics solution who a for infrastructure. this

We are needs. with makers multiple generator similar design this have replicating win who

other the can construction solution extended Looking further and sites, hospitals applications at be to locations. such same out,

becoming infotainment, the with automotive rate We SAM In valued trend cockpit displays automotive to the part highly XX%. pillar, million about annual infotainment clearly the current a vehicle. approximately is large estimate towards the pillar of be in and $XXX digital a to the to be growth interactive

as Our and Togg, seeing commercial motorcycles Tier trucks, IP manufacturers automotive We and heavy Tier infotainment as we compute machinery. developed X from Turkish-based and are resides automotive in X interest system. the automotive strong the OEMs OEM, well of

also vehicle's is on and solution our They Togg. cockpit. unveiled sedan into vehicle. TXXF add update me an Let the digital designed The compute embedded recently their second

told vehicles shipping Additionally, the us in Germany year start they have in they calendar plan XXXX. to

to their continue expand them innovate with they as business. and collaborate We

the billion, growing at In about of on available enterprise and estimate focused videoconferencing surveillance. serve security next the are $X.X to out-of-band, years. and the our opportunity vertical, enterprise We we annually be vertical market approximately few over X%

Out-of-band important of management. retail out-of-band provide paths not in products, the growing hardware but access the when one is also only resilient We government, sectors, health access networks our software, management sector. networks warranty is routers including me need Let unavailable. on support care to provide for banks, Providing some services. addressing add solutions ongoing many uptime and and and the servers, primary alternative color for

vertical are $X.X markets and serve available market with we billion X of on growing. attractive summary, a focused In growing combined

remain targeting all new Our the growth for and teams ahead major and especially customer portfolio, Lantronix, our I given areas. actively opportunity our design are IP wins base. across the excited verticals great about customer broad geographic business X

building on have In we summary, we a and great company, are strength.

company become have shareholder value. will growth profitable and stronger place, we driving and we technology even forward, in Moving given talent an the

over guidance his quarter. I Officer, our comments the Chief now on and year next With to that, will fiscal QX Jeremy? Financial the for Jeremy, call turn for

Thank you, Saleel.

the XXXX. provide fiscal financial fiscal I our commenting outlook XXXX fourth for quarter financial of business results Now before third on quarter and the some highlights year will of our for

sequential an respectively. The periods, driven & record increase was ramp and smart XX% IoT our sequential shipments and million, grid XX% all-time XX% production XX% $XX.X of the for of lead and Lantronix. revenue from year-ago customer. up was Systems increased reported we primarily by for Solutions year-ago respectively. continued XXXX, FQX the periods, Revenue For revenue by from the and

addition, products. the was impacted our strong increase out-of-band by year-over-year sales from management In

year, contribution remainder IoT we continued of & was the our the up customer. automotive embedded our For from revenue growth fiscal solutions continued lead Sequentially, expect IoT X% Systems with Solutions. from

ago a in period year-on-year FQX design IoT that expected, As decline we a enterprise in solutions included video the large as experienced year ended customer embedded XXXX.

services in into and first production ago margins in by gross X In year-ago down margin margin compared prior FQX XX.X% our was fiscal we half the to product in a and change mix In compared XXXX. product services with quarter during year that the ramp from The period, FQX XX.X% GAAP was quarter the of a range. in was in year XX.X% quarter. the for large the function a in projects gross of prior software function transitioned driven the to design XXXX, XXXX, expect in ago gross Non-GAAP FQX XX% the decline margin customer. percent quarter. for were similar of XX.X% smart XXXX primarily a revenues primarily XXXX the completion XX.X% and gross FQX of grid

were million compared and R&D prior $XX.X are to expenses ago $X.X for million XXXX quarter. FQX as million million GAAP in In expected quarter million quarter. $X.X the $X.X the revenue variable million OpEx increase $X.X GAAP earnings XXXX. expect with quarter ago XXXX SG&A in we year FQX for quarter, improve $X.X and sequential in were and year the the expenses with in compared compensation in prior a to upcoming FQX in related the

million GAAP $XXX,XXX income year cost in income quarter, per operating net $X.X to quarter. share ago $X.XX or share XXXX of share Non-GAAP in the from GAAP control. in share million ago FQX $X.XX the doubled non-GAAP leverage in quarter. ago Non-GAAP $X.XX net $X.X compared model year million year loss our demonstrating to of per or per $X.X or compared loss per income net during net XXXX was the FQX and or $X.XX was net

quarter. ended million prior XXXX quarter. cash million, at inventories increase a FQX the $XX.X Net the We an FQX of million increase end of cash equivalents the sheet. million million, prior prior of balance with quarter. from $X.X capital $XX.X XXXX, the of to the were Working and $X.X turning an decrease $X.X from from million Now $XX.X was of

Now our to turning outlook.

$X.XX For $XX.X of per quarter revenue we to of expect million share. to XXXX, non-GAAP EPS range the and fourth in fiscal range to $X.XX of the million in a $XX.X be

and outlook, the revenue February fiscal EPS for our earnings XXXX summary, At revenue a annual FQX and as during year with provided the of our fiscal to are earnings compared XXXX our we maintaining XXXX we guidance in XX% organic we growth expect results. XX% that fiscal increase XXXX midpoint In call. deliver non-GAAP non-GAAP XXXX for to

I complete turn now to Q&A we our for that, With our prepared over today, the session. will conduct operator to so remarks it

Instructions] [Operator from Jaeson Schmidt with question Street. first Lake is The

to opportunity additional we sole we this follow-on should help thinking order? still or want here? how be sourced just Gridspertise. this relatedly, the start if I size Curious you us with assume about could should And you're

much very Saleel. it's Jaeson, the question. for you Thank

on. take me let So it

year. our million fourth in the to and grid in QX smart the remarks, of a QX $XX our expected prepared during ramp with product with of discussed customer have around As we fiscal fiscal product fiscal ship steep quarter

opportunity remain for We growth. them a expect important further the customer and to very

While demonstrate time will expect and are the they some to we $XX we take be currently them it the don't to million immediate for quarter rate, the units in we expect success. shipping their run deploy

to grow expect continue over the time. will We business

delivered million more that gone in follow-on a commitment around the of rate pleased and business. beginning just the shows of first customer's they first and the rollout. to they've very as received I'm half be they $XX for as even put initial a supply said, are is sort deployment, to the the in order also It successful run program That at though we our the order to

us, we expect forward conclude, rollout. is told To success we we their shipped their what much than look 'XX, they and overall really larger what fiscal continued in enabling in have opportunity the to is

the question? is second of What your half

assume sole Just if you're should sourced. we still

To Yes. we knowledge, sourced. my sole are

Perfect. if a you're channel a follow-up, inventory of from you customer just And what or inventory us curious update as sort seeing then could standpoint. on

Yes.

a poised the broad-based our if question, based forecast, several channel over great business. and it's So is business, right? it that is channel current And We've Jaeson, and broad-based the completed on normalizing our areas. got quarters. think we growth appears quarter in I business for just about X So that our next

it's addition, In down at the at the quarter and inventory its is historical from looked running come average. and we prior

the on side. So that's channel

to were couple done they're ramp in now said compute. that fiscal embedded our the compute, track in and going delays specific great in we've the On supposed the start And were to opportunity of they working embedded fiscal One 'XX, of in designs some of but that 'XX, ramp past I they're Jaeson, were there 'XX. the to 'XX. visiting that ramping on CEO in large had companies the with, in of one we're

we'll as successful be So with they're them. successful,

with from Walkley The is Mike Canaccord next question Genuity.

on just your sense Saleel, make guess, a of portfolio. lot targeted I product segments the given X that

As 'XX you fiscal the through a areas went pruning basis? are impact rate maybe some there that portfolio, run the growth you're on that could

Yes.

So we really product of. got we products, for I with that pretty today. portfolio where also but I'm at report, our happy the spoke our the products X review I did We've whole are verticals deep really a sitting broad, technology. a like -- to

are going of As to out-of-band I'm are of some a the one be going them. compute growth, future, outsized more we lot embedded us them, being products to one looking provide really that on in focus being putting

but we'll Some of ones really, growth into, out some outsized of the other won't get there. go I

on that the Also, management Percepxion for pull we software are application and integration. our IoT products focusing device in

not I about areas, in but that our just hardware, X of in some consists So our company, point products, summary, our the cloud-based a design solution even transitioning think verticals, and as software, selling services.

customers. to So putting bringing really it together, a our holistic solution all

rate you're the period. a guidance, from digestion strong for areas, for some how they share for at shipments? have but different think of color Gridspertise time fiscal Q&A Okay. a I as you Thanks should maybe likely on the about 'XX giving know the And Gridspertise to quarter a only we go follow-up decline through SAMs given a like as initial baseline run in the Maybe X modeling is question. targeted a the just a

Yes.

our here. are fiscal We're can in than really fiscal we growth quarterly QX in As providing for very we companies over call customer tremendous mentioned And to got most term, faster be at as SAM. really at in the said call, me an last to opposed our long-term QX having an August big the our and with transitioning grow $X.X let looking clear. to guidance. annual portfolio our that, providing And longer a like billion 'XX. forward expect base, you a outlook a I'm are product growing XX%, growing SAM. the We've market. I The or prospects But we

next with is Searle question The from ROTH Scott MKM.

And and then the as and I'm Saleel, the to wondering March some a in Gridspertise growth the of maybe time the or nice looks well as set associated that opportunity within job help have to be kind to they're follow-ups. the starting up if the markets. into Nice could expand line might the continued on June. quarter us couple pan-European outlook. on size of both I and create U.S. there it? follow It like you rapidly other understand with opportunities, opportunity see

Yes.

let's start us with largest opportunity that that customer, they the have units. in thousands is told what is size, hundreds been their of of to We've Enel. specific So told which the

getting be they're in now companies Scott, mainly United the in States there. that extent. power to to at to and be show we're big and putting in started, They going a it's started. going So They were in team DISTRIBUTECH, public to are are get the San Diego, just

looking So early we are to. that's days get them started are areas, area on another with engaged them to many the U.S., it's but that really and we for in forward

early the we they understand, they them U.S. for look States it's for be as So them the in we'll future, at as But with opportunity, the working now. days Enel right United deploy. the

pipeline, now. there's a seems of And that design Great. Mike's it maybe into right couple looking that the to lot like going on question, opportunity at within

than about about different with the talked the and that. that you I blended X faster CAGR XX% think was beyond verticals growing

about normalization again, in if as tell should near-term growth growth I'll that rate, you it, of, pipeline long-term a shipment any be could how XX% then wondering rate. we is sort looking thinking I'm us design up. And call plus the excluding Gridspertise

Yes.

So the We opportunity it. reviewed reviewed relatively really is healthy. often. pipeline it We've

it's healthy. happy I'm So report, to very

and with compute connect. continue customer to large target deals We our

at So the that term. will give visibility us look longer as business we

We an are X XX%. focused on it's that billion Scott, I talked about. growing the $X.X verticals, And SAM,

better we said, longer that be the to at term. expect So growing as in or I

could. if I And Great. one last one,

edge of That discussion certainly You have together equals AI. compute connect. expertise lot of in and around a terms

it of customers opportunity, positioned I'm start mean conversation when how we shaping I'll from I impact and how more of filtering So is kind that's software that? types it, cloud? a wondering terms the those both opportunities? into call do for with specifically larger defined a up? Is and that see, And how in of to driving hardware, you're

and question, That's a great Scott. bringing that you thank for up,

and simplify you allows on about build, start with And and It's deploy accelerate. rapid edge compute got Compute I this which know, our as Lantronix software to as for edge to AI applications SOM, development. So think our integrating is really as IoT we've streamline NPU that. devices it Percepxion with the going

it streamlines So and that robust you -- optimization. gives a tool

in scalable results solution that production, the efficiency product this reliability. prototype powerful, accelerates boosting transition So from to and significantly a

We at an look show the in gave Nuremberg. early this embedded at

the really feel partner that but As and we on It's as a future. working. areas one look it matter the fact, out was actually focusing good we we it showed early And it. our I days, called into of are about of

The Craig-Hallum. [Operator is Christian from Instructions] next Schwab question with

then one bit maybe in you're areas doing? markets, But first, of to do kind the on I a revenue you for math some I highlighted Christian. and like, the understand of could you but areas what maybe understand kind doing? Tyler the revenue key much of smart frame you Gridspertise. have looks outlined we think how guess is size those little you you X This currently city are the X much can -- I how

solutions, and So report now our right software on so and and revenue want I IoT now, to the -- change as report We we call embedded systems. the our right it not today. way reporting

So that's to about it how Jeremy that's we I'm and and how talk it specifically. today, report going

I now side. verticals. out we right the of into vertical. a Going verticals, report revenue the cities embedded because into go like the smart specific They don't go our products and different the into some in enterprise go compute to that break the couple of into automotive the want They even vertical

different kind it into verticals. So of goes

those about for specifically the We now, is way it largest. enterprise right it don't X for talking I we have we're I give verticals. But our that probably what look it have our there. So specifically at out

Our largest one, for put third the is automotive of to smart kind and you. it cities just is our second perspective in

year appreciate to pointed, give little Gridspertise next bit And order That's not to next I completely be your some guess, going trying guess still maybe I so, total line grow with fair. be is I for the I that I if understand can -- like think line makes but a with And sounds you rank top first -- color. but which digestion top where year? guidance to order, sense, year, offset? this on down comparatively, your next

Yes.

said, going right, just what again, quarterly through So we've a guidance. gone to back we

forward of systems forward. you lot that, let's order give into that, had I about and as but 'XX. time deploying better with Having us a clear, into fiscal to said a guys a ramp spending big really do as much a they're they follow-on with we to be with them, you excited the we get I'm give So August QX looking view you call

so first future. the this them half is are follow-on rate as goes the to for of run our with the year, fiscal working So order we only for and

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

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