Lantronix (LTRX) 5 Sep 242024 Q4 Earnings call transcript

Good day, and welcome to the Lantronix Fourth Quarter 2024 Results Conference Call. [Operator Instructions]. Please note, this is being recorded.

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

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

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

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

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

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

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

year-over-year compared grows. same of XXXX Non-GAAP fiscal and year period a to of Thanks, the quarter million year, record XXXX, revenue sequential $XX.X quarter us the EPS the compared operating will financial of the the results a revenue more details on QX for compared the and on to fiscal call today. fiscal Jeremy, provide you, XXXX report shortly. same analysis period increase I'm to pleased everyone, XXX% and model XX% with demonstrating thank leverage last as and joining XX% for our fourth increase the Jeremy of year you in March year in grew quarter. to of fourth

we and complexity complete and At and customers with including help efficiency we We compute Edge connect hardware, understand real-time operational and to the intelligence solutions, problems, Edge differentiated, design our for we solutions our decision-making. in are solutions both provide are sticky improve our value compute software, requirements, solve Because achieve to management the customers the marketplace. device Lantronix, allowing able customers relatively of our offerings higher these and enable a services. with

key remain combined automotive favorable double-digit addressable trends a focused vertical tremendous rates, and and have serviceable enterprise We X on Lantronix. approximately $X.X secular billion, cities, representing of markets: opportunity for market growth smart that

Today, market. let the vertical enterprise me with start

well from performing solutions business Our more year XXXX. to fiscal year than fiscal very is XX% out-of-band management XXXX grew and

Our tasks out-of-band resiliency networks distributed disruption enterprise a and securely occurs. devices when management management daily and access, product portfolio makes providing tools manage for it and easier by to

to reduce CrowdStrike with month, used downtime. access that network out-of-band our global last the management during were products example, For remote outage likely occurred

affected Our allowing time get administrators window up mean restore back solutions to and running minimize the businesses again. network and to recovery, devices

easier, during emergency, our more management to make recovery an resiliency operational daily and In out-of-band providing solutions addition and secure. tasks highly efficient

recovery malicious events, that leader [ products to with in during our outage network or the a are automation ] time can greatly series accidental. reduce fact, In industry LM patented

that video their products combined to media our and higher solutions recently gross IoT Our we than recurring other next-generation services. are and announced converters Gateways, shipping enterprise Lantronix as out-of-band customer conferencing such vertical, Also in with management margins average largest corporate have the product. often began

require looking its relationship is its year. vertical, In at focus that. performance vehicles higher automotive on modules, is continuing The compute on of progress. also new with are them that OEM Togg continues calendar will engaged Germany to our Turkish next goal we to introducing and features Togg with automotive new the software to

with expect the With customer future. continued these this growth into developments, we

design a purchase Additionally, recently OEM German a a order platform with trucks. secured infotainment and is that new haul large services we short long developing

designs pleased entered infotainment relationship, to emerging goal have are new winning it into shows new automotive progress longer-term of in business. We this great and our our compute in

In closely cities with smart customer. the work we continue our to vertical, smart lead grid

we to expect can several customer, over product as fiscal QX take to this $XX their will ongoing we $X expected. the them. shipped In we that XXXX, million deliver with the years. while some and June During million an them approximately to time in this product be it deploy And them quarter, current for product believe digest we in to business quarter,

We believe business initial rate the this consumed, is a that transitioning into as inventory business. is run

large to partnering be very North working We solution, a pleased into with them American grid demo U.S. of for be smart similar on company and a are energy currently concept. also a with on units market. They're we'll supplying expanding the proof

significantly requiring the are rise this device which Edge, demands decision-making be and in provides. real-time energy given Many these at upgraded grids to electrical having the networks are

it While large assisting we market. are is to early our the as pleased U.S. customers they days, still be enter

of applications platform AI models. for of vertical and Edge edge platform, markets when AI Day. new with Analyst be hub, Qualcomm's cities June, AI related solutions solution Industry Edge In demonstrated simplifies Qualcomm's AI with are as such AI to working of the Qualcomm's key integrated Percepxion and to deployment hub we we Qualcomm, enterprise. AI late projects Percepxion our deployment our smart Lastly, our at computing. combined the Edge very This fully enables AI excited partner, reduces on with complexity

collaborating with compute Building edge our scale solutions. build our deploy developers platform, leading-edge we who tools are their closely our to help we to on expect partner, at software AI

of AI it's gateways in the power the solutions Edge from we in at to and of platform for AI this, Edge providing IoT us, network. deploy opportunity integrated XXXX the compute Lantronix Percepxion Evolution support In needed World edge pleased compute looking Award days drive AI early the this for our using see to Year month. customers earlier still to While are Product our modules win the for models solutions the of with lies

conclude, sheet, strong in our diversifying the infotainment, AI. To grid and with the momentum given participate very of our videoconferencing new future automotive engagements optimistic enabling to our balance us additional megatrend verticals, in regions out-of-band geographic I'm with customer, new in deepening about Edge specifically Qualcomm enterprise our smart Lantronix' and solutions, relationship into

those we sense. are We also of pursue will that within our portfolio mindful growth opportunities make and economic fit accretive inorganic and

through organic and shareholder growth. value Our inorganic goal increase both is to

I back to call that, the now Jeremy. will hand With over

Thank you, Saleel.

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

from record I We million, growth will brief start of representing fiscal our with XX% reported revenue prior a $XXX.X XXXX. recap year. the of

non-GAAP year. In reported of addition, representing we million, $XX.X from record the earnings prior XX% growth

EPS liquidity reported commitment the earnings, while did per also significant the growth earnings we XX% for year. discipline delivering record our We only or our prior leverage model The from and from year. $X.XX share the and deliver and year. prior balance Not growth sheet maintain revenue non-GAAP team operating also record revenue in financial to improved the of non-GAAP our fiscal demonstrates record the in still

capital prior by $XX.X working We $XX.X XX%. of in from of flow inventories prior up we year million, increased from to generating XX% year million, an prior the million ended year. Furthermore, the with million We the our from a cash in reduced to of from $XX.X cash $XX.X increase million, the year operations. reduction XX% $XX

In addition, extended short-term this maturity the week, year, term of X improving our loan our $XX.X we million by further liquidity.

our positioned growth remain plan. capital improvements, these drive With and strategic sheet to balance working we well

to turning the F results. Now QX XXXX

QX an Revenue midpoint respectively. lead by by our of The revenue was sequential the slightly For and continued primarily our system from of $XX.X increase shipments from we solutions up the was XXXX, year-ago for periods, IoT XX% and above Lantronix. million, smart driven the respectively. all-time sequential grid F increased production XX% year-ago and XX% record ramp reported customer. periods, guide and of and the XXX% for

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

X%, IoT solutions with down our contribution from Sequentially, automotive lead continued customer. were embedded

GAAP the of experienced XXXX, function software that of QX the production year-on-year year in XX.X% of that XX.X% ago ago quarter. decline prior included services IoT for were designs embedded In was as year services the in transitioned large compared and XXXX. a the X solutions, from expected, F projects margin customer during completion gross first primarily QX to and X period the a we into ended F XX.X% XXXX period, the XXXX. QX As fiscal in quarter down large in half F year-ago design

The the charges related was XXXX QX F and for XX.X% margin decline in in was percent gross inventory prior taken in the to margin excess quarter. quarter to XX.X% related the gross Non-GAAP costs. of compared buildup XX% year-ago to primarily

We F QX in with the SG&A were $X.X prior don't expect compared low QX. margin in for GAAP percent ago and product year mix as quarter. and similar improve million in XXXX million quarter gross we the expect to mid-XXs the improvement to an to $X in expenses F charges $XX million

and million in R&D year the record variable XXXX higher R&D for quarter. share-based The and variable for non-GAAP to during cost as the sequential $X.X quarter million fiscal expect revenue the in related to expenses fiscal decrease in GAAP driven and a compared and prior were compared and with continued lower a SG&A $X.X $X.X in F upcoming compensation earnings, year resulted QX in XXXX. expenses ago million were we by quarter, which XXXX In containment compensation. operating increases

guide share during net in share was per strong year the compared $X.X per GAAP million midpoint income cost $X.XX our for the $X.X and the share share to the non-GAAP in Non-GAAP net in and or XXXX income a income leverage our $X.XX $X.X million year model or net came $X.XX compared quarter. of operating at or increased QX million $XXX,XXX by loss net of from XXX% control. per year net QX quarter, $X.XX demonstrating or per income XXXX, Non-GAAP GAAP ago ago to in quarter. of F ago F was

outlook. Now our turning to

decline For of earnings a sequential due $XX million 'XX, was QX grid discussed for our the first previous and to on share. we range $XX customer in to The smart as quarter $X.XX to F to anticipated XXXX, EPS our ramp expect million the calls. fiscal per in QX $X.XX of the be revenue range of non-GAAP of F steep in

During F we record this to customer. delivered a QX XXXX, million $XX.X

grow from addition, expected of sequentially from shipment by In customer our additional received in to to a QX XXXX, products. balance the million follow-on deliver exclude QX $X we XX%. F them and have this revenue expect approximately of this approximately order we we F is If our expected guidance,

we As on look leverage we by forward, business. financial improvement the continued performance of the focused enhancing operational are of

complete that, for our prepared With we remarks today.

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

[Operator Instructions].

with first ROTH comes from The Capital. Scott question Searle

quick A Jeremy. clarification,

You mentioned solutions sounds that It was like margins go the charges margin gross impacting September quarter. should the the come of favorable go the back bit. them gross you Could a there? detail little we a quarter. mix the little into given as magnitude from bit, impact the what they management away fourth And in out-of-band

inventories And the some the Yes. pandemic. those accumulated to points, by obsolete costs inventory basis related books. some were that, come off with it came as or inventory. and to the addition It for growth was also during XXX was excess costs And of charges hundred down basis several significantly, points XXX that have primarily and in

little -- Okay. business. on give that in very or us it's front, growth terms Saleel, we of a that bit now? as Could in growth you hear business where 'XX pipeline exciting Very management shaping what going is that's expected into helpful. size out-of-band be how the the fiscal right a how up? that and the that it look on And outlook range is big to would how and maybe And

Sure thing, Scott.

as fiscal mentioned, as We it's gross We year we the wouldn't grew the get average growth XX% it's got are And same very margins I management XX% Y-o-Y. above expect And but into growth. our it pleased growth, business. out-of-band with 'XX. for double-digit

the $XXX So that approximately sized the in our is market shows way as in with sizing. been to all so all data the market $XXX area, million vendors million has around

subsegments, business out Now exciting really I won't we into don't, by break that, revenue Scott, but for us. go so

the our clarification, for upper on end the margins of as gross well. And are scale

product. margin high nice a it's So

funnel opportunity help front? organic with what obviously some you. seeing I there of better to funnel, The Got questions, very could. on design has And and And some X the if these equation coupling days. us more, been favorable. Edge there growth. way relationship understand is pushing you're more the then And seeing that wondering, into more AI the I'm that out we're Qualcomm

Gridspertise. talked XX% over should the normalized You numbers Gridspertise about is about -- the growth the should September we June to taking we of growth out several thinking quarters? where from we What x next sequential of organic be be out number looking for the out

So take at And would exciting Edge headquarters. the We compute I at the Edge this right? June AI Edge full And what let And a as in offer the me Analyst Day one first. it, and Industry Lantronix SoMs box AI about really we is will AI think offer? demoed box. Qualcomm

but to a we it's very for As give Qualcomm for this. that, with early are sizing, me aligned from number a closely you revenue on

working our remarks, in on software enable into tools developers who we're my and their partner, the deploy tool our we're with to build deploy to platform, caught solutions. you chain Additionally, if rapidly to building expect we prepared

make So little they're we be in what more unique us that bit would a the doing and can differentiated to market.

specific that's Qualcomm. So to

So early center data already for you days, it's as happened. has Edge AI know,

So that's early on days. the

we're quarterly Sequentially, plus. us you we guidance. headroom, so are On giving that we we are [ grew percent doing ] billion addressing $X.X mentioned, The are Jeremy gives of XX%. the market, -- lot a -- as

say XX%. As that rate is or to we've better growing And growth expect I'll growth we I've area. the in at that said than that we the again, said in about past, mentioned the rate be

Scott. that So we in term, longer growing be better than expect the to

Schmidt question Jaeson Street. comes with next from Lake The

Just want to P&L? the some contributing I How up grid know opportunity to you North smart opportunity. mentioned the potential think we units. your on on of comments American this the demoing follow should about timing

Yes.

North know, -- It's to started deployed grids But similar system there. just we demoing the that. Italy. large our a proof-of-concept you the that's American point revenue key in a As work early pretty got very with system is utility, they partner with on And give have you what going the is ramps days to in there.

a it's like not it's brand-new So system.

there, POCs we through I you it's months to going as XX lots it's on it speak. see a doing. but And it's it's of already big out is Now but that, are a like of does. I out before they've ramp the it with expect what XX proof testing concept started

know then, I margin excess to And Jeremy, continued clarification that charges, Okay. a include on low Does That's helpful. gross though? inventory any September. just mid-XX%. in you mentioned

we buildup point of should price also pandemic, variances drive purchase much our it a the We We the nice No, year and that from nearly revenue currently going ago amortized don't capitalized charges having and at down rate XX% doesn't. the anticipate in during pretty forward. the part significant improvement. run related historical all like that meaningful time, costs, off do But there to with the in overhead have forecast of tailwinds some the period of decline as modeling. coming kind help

to as expect our improvement grid with also to from see well. a addition that, smart from fiscal in 'XX, customer anticipated mix we'll In lower contribution

Next Canaccord question with Genuity. comes George Gianarikas from

can So maybe on sort this there? detail you on engagement auto a have profile that side? little of on give the selling Any you to start, average us price just and margins the more

So things there. let bit doing a on that more you we're little specific me the give

They and automotive in We services. for a new but customer So business. and short our are with it on adds software is for really know customers, German we've the OEM a automotive signed this order infotainment infotainment truck purchase platform to emerging cycle focused long trucks. diversification a developing long haul

have the the margins in automotive should past. -- I what gross in expect done we be the

is that to a go is I this our story start shows the we expect it or the specific We more, area. couple customers it by that George, to around adapted. technology the really getting beyond of be way, that And this a customer Part number haven't really here. there, What's and is our point many of And greenfield. out key have of into that. exciting, is but given it's one the

I'd to fit. on around story. look the little when you to inorganic the at your accretion just of bit about the understand accretion, a obviously, new, side, maybe And sort and earnings strategic love I'm philosophy M&A side, acquisitions a

Yes.

So that synergy go-forward look type side, done are things time the very focused get in past on at on financial line the basis straight to gate through capture. the we've and a of least doing becoming accretive, the a we of on short or at out very there having

for that focus the how things. deals have And Saleel basis. point, significant met pretty also this side on at I'll we're a a go-forward been let say deals strategic of comment on that X last in past that's done that's all the criteria. and of us we've So evaluating And I'd the

Yes.

So in looking and now like cities, enterprise George, to pipeline like we right? great compute, question, we a And those look are X seeing acquisitions. be so verticals are like: where starting at in smart automotive coming, really infotainment. have we we're We to going we stuff. We And that connect. spaces

add And my from in being my is important, experience really with for I'll accretive sure. X just to on focused that previous acquisitions be own company, and we're day personal going

Needham comes Koontz question Co. from next with The Ryan &

autonomous truck. might that clarification into move all be you Quick able Did your at when to mention time revenue? first thought frame you your on

revenue revenue a first them deal did We right got not little is services. for to going bit. out the first and we mention on software now. hardware said with What working is closely be timing of we our The

service future and schedule hardware. for to not cycles, you yet. said so RPO the which then the did we we But a did the revenue you longer, As leads Ryan, give hardware know are get software we in for on automotive

mostly smart things large your down looked inventory quick housekeeping other to to your Jeremy, shipments it was high Q-over-Q. Is are still? -- grid like the write-off substantially And Or that driving or that inventory great. a impact customer? was it related That's there on

the then were smart ours. to of been after brought focus down write-downs grid probably customer. our the down Then impact a the biggest The inventory And areas. inventory was Yes. impact quarter. we That's for bringing smallest also the shipments of levels in some that, the the other to

Got it.

more I'm can your you manageable So components of key about are much -- you're sure Anything times times share components? strategic lead lead now. seeing for kind there

for the I manageable. And progress. we rightsized. The times, quarters, the No. said sitting X uber-focused point, of very there are lead Jeremy Ryan, think this what on been us made tremendous And to inventory getting now. past now. lead times to are some we're okay have We've your And X the

exciting. sort a Great. really you to terms Are of AI of there the Edge back And can share architecture it of these sounds do? would Anything of circling they part topic, what more devices in the or kind this the and larger involved cloud architecture inferencing there of you the core AI on the AI anything can kind from that cloud is in of front? about the share edge you're

Ryan. question, Great Yes.

going So obviously, in. like And is give differentiate let is Edge this the we win examples. and to are what X me you inferencing

do, really some we where And with In videoconferencing, used You it conferencing see are to video right? audio. customers. fits got and great can being video what AI now both enhance tools we've

the are to to chain. ability I them. the to right? already our models. future, like making actually them. our it Right to going created will So talking gesture we SoMs, partners in run We now, interesting recognition, what be going the that. in won't And have embed things but about will be tools, they tracking, models able autoframing, as we've have shipping tool mentioned, But to the their The with be I'm they future, we're are have,

example. that's So one

large medium In voltage allow of the to both inferencing are substations the variables. of set low grid, going and smart voltage

the kind going to in from energy the So the and loads. of will companies. of grid loading be future the understand are But to the in variables energy data our products steer come and anticipation able

chips bit, -- early focus know who to working really and they quite days but and Edge you Qualcomm, days a and the on nice low-power So partner, edge, it's and them we're that's we've some a have early they for great is really because with AI also. key a are, them it's indexed

on alignment our good So side.

the This Thank call. conference and concludes question-and-answer for session today's today's you presentation. attending

disconnect. now may You