LTRX - Earnings call transcript Q1 2018

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Operator

Good afternoon, and welcome to the Lantronix, Inc.

First Quarter Fiscal 2018 Results Conference Call. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Ms. E. E. Wang. ahead. go Please

E. E. Wang

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

on A www.lantronix.com. be live available are today archived webcast Chief Jeremy the the call Lantronix' and Lantronix' us will today's Whitaker, Officer. and and Executive company's Jeff Financial Chief on of President Officer; Joining Benck, call website at

in X X will a available starting entering XXX-XXX-XXXX Eastern, phone by p.m. November through replay and be United for p.m. addition, or today In X Pacific XXX-XXX-XXXX, States international the dialing at callers, XXXXXXXX. passcode

President the to is future Investor section Lantronix publicly management non-GAAP make statements will our release, current and contained I'll to turn of of call, and measures. some now please CEO release, call, the our or obligation differ the reflect this during review presents the forward-looking events We company's company discuss website, Also, to or between which financial During update the results earnings that financial risk which factors use. management's earnings and we Today's describes note today from posted on website any to its may call in the that which circumstances. to as this statements reporting non-GAAP Benck, and expectations. Relations undertakes GAAP Jeff non-GAAP and XX-Q. that such involve furnished differences Lantronix. reconciliations was for measures uncertainties over Jeff? the XX-K risks and cautionary and SEC materially Lantronix' our the encourage and no statements, SEC cause in could available you is revise forward-looking in to filings, the

Jeff Benck

everyone this joining and us E.E., for Thanks, call. welcome afternoon's to

quarter in the came few subsequently achieved first row. expectations, we quarter, in quarter margin the in primarily year-over-year report gross for row during we for to below the in Management of recorded the I'm strong the on a closed and our Net During opportunities that quarter have as sixth the cash quarter. continued these non-GAAP to attributed seventh to profitability in revenue a closing slightly generated our early improvement, October. progress IT pleased not largest business a transactions strengthening make we first

IoT On X% our products perform the well first continue recorded the we family quarter. existing front, growth to on we in year-over-year as

gateway our last progress on for on said gain our fiscal the our launch increasing share continuing pleased and lastly, second, IT I our initiatives our products; with business first, momentum platform. As IoT wireless software MACHXX, with XXXX with Management key design call, number imperatives. establishing of I'm the the are: wins; IoT our IoT these of

wireless about we the are excited being and received family are increasing prior year wins to that this will new XPico design and coming the First, in over growth our how product number our particularly I'm beyond. XXX enable IoT launch. XXX

sizable builds. participating Second, we number data of some a solutions management are new involving IT opportunities, for RFQs including out-of-band Management center new [ph] in

for growth closed in the quarter. already sets in business also significant up well We that some second October ITM us

Finally, to integrators on and Global management quickly connected for ready-to-use MACHXX deploy our cycle suite we Device their application first offering, A OEMs to October IoT launched enable system designed product life X, devices. Manager.

first discuss turn for on call the the quarter. I to our Before business, going results additional to provide color financial some I'm to over our Jeremy

Jeremy Whitaker

my will the release Please of news section you, to details refer Relations financial website for that in financial supplement additional today's and commentary. Thank information Jeff. our the Investors

XXXX decrease $XX.X fiscal year-over-year during XXXX. to on our million The and XXXX. orders Net XXXX first positive quarter lower the first Management revenue of the the sales this out take a large We the quarter. fiscal of was for $XX.X Now of few of I'd like our compared shipped and earlier were to first a the quarter for that IT with had minutes to first million quarter was month. fiscal note, pushed go for a over quarter of results primarily $XX for some million orders of these booked And products. due fourth couple fiscal

of Turning of quarter XX.X% fiscal XXXX. expenses $X.X million for the for the and $X.X of the our fourth with was Net for a for IoT mix the improved well. quarter a fiscal first wired compared the improvement the percentage for administrative quarter fiscal and to quarter first line. XXXX as for revenue quarter products, net products portion of product general The Selling, of of to were continued $X such larger to quarter year ethernet profit export, from our year primarily higher product XXXX net as X% ago of fiscal XX.X% due XXXX. was fiscal by as million million compared of revenue to fiscal the as revenue. quarter margin ago our contributed increased some first the XXXX perform XX.X% and from with quarter our first Gross of XXXX fourth the

the first we were XXXX. $X.X to expenses actions this more Our compared increased research quarter of $X.X to in plan. our and XXXX fiscal with fiscal development million initiated with XXXX of with first the summer expenses $X fiscal due million quarter of closely align earlier our for expectations and million XXXX fourth the resources fiscal Operating for line quarter for

net charge $X.XX Kong in began during net GAAP of share charges to XXXX. from location to quarter a related lower-cost fiscal of severance a of I'm quarter pleased fiscal also actions GAAP fiscal in per GAAP and our loss the report during first in our profitability, fiscal as of XXXX with quarter $XXX,XXX. of high-cost $X.XX and or non-GAAP the quarter the non-GAAP $XXX,XXX for We operations $XXX,XXX to first XXXX, share or income China. compared net net quarter we Hong which closer XXXX non-GAAP a team our $XXX,XXX addition, the of net non-GAAP contract This included of and of of manufacturers of or recorded location fiscal during $XXX,XXX $XXX,XXX quarter of seventh net of achieved fourth the share compares moving portion first income to $XXX,XXX resulted of per during fourth per XXXX a a $XX,XXX income XXXX. fiscal of of of we In loss for loss consecutive quarter of for fiscal $X.XX a first the These first XXXX. quarter the

as Net XX, Cash million as $XX.X of $X.X XX, June Working with June September to sheet. compared were turning million as million and Now cash $X XX, the million XXXX, inventories XXXX, $X.X increased September with compared of $X.X June XXXX. million September balance to XX, equivalents of with compared of as XXXX. XXXX. $XX.X million as of XXXX, XX, capital of XX, was as

expenses quarter. Now gross some second margin and operating I for fiscal the insight into give will

Over the reductions margin year, mix. last improved meaningful combination progress product gross has pricing shown the discipline, in team cost driving a and improvement of through

to to gross forward benefit continue next expect range XX%. quarter, XX% this maintain Looking to we from of to a margins work in and

plans. in we Jeff. at come down meet expenses XXXX to are back I'll operating operating now to to same time, the resources the and turn to expect continuing invest our call sequentially, We

Jeff Benck

Thanks, Jeremy.

additional strategic into me this our provide year. insight Now some for X initiatives let fiscal

IoT Turning business. growing Gateway wireless to our first initiative: our

than design testimony we such is our focused wide as weighing we received easy we is Lantronix' to scales, the products indications xPico have the these range expect first Rest into to embedded into design applications a half gateway wins, interest doubled that the management, getting applications we've XXXX. security, XXX particularly We're as by and anticipated. beyond. will team industrial several early evaluation end number as testing, on and because about the deploy. more. make Further, very smart the we're and and XXXX new of XXX, and of resource XXX of of industrial to assured, offerings, in creates progress continue get early already fruit company these the These solutions are customers We The bear achieving include and of xPico earlier second robots, excited our oversubscribed. that automotive industrial kits newest industrial in production printers and wins reputation fiscal

We into will is to these products, IT to than believe the the enabling a second translate of design as us We pipeline share with faster to in exited Management some we initiative will QX and back drive on continue second grow opportunities. to market. sizeable IT us Our increasing Management put calendar our gains XXXX. growth with return wins an to qualified quarter track and enter

leading unit the we provider office our I started shift of cellular fact, since In SLB to order just branch with the company. a solution largest

management IoT Management IT we this in competition leverage space. innovative as investing our the software can some for also believe are to We product in we family leapfrog offerings

IoT initiative software our business. is Finally, our third to establish

application, devices types We're Device them appreciate machine be the platform. latest and tools Global suite completed is speed be an ecosystem application first IoT Device and to themselves, solution Device performance experience, build connected a the a the development scale IoT trend models. required deliver to being the of to trend applications and ready-to-use OEMs enabling able we time. leveraging IoT skills help like Barcelona. from a MACHXX space feedback X and to model. complete sure first Global An During provide recently scale time that World OEM's in quarter, firmware connected their addresses connected unburden management October excited is in at our integrators and by Global of receive that Manager that Automation time and the our security device management Manager how business We quickly MACHXX this the release connected the maintain has from is MACHXX system launch MACHXX real with for these article no create by the can the may this products. address This us. their World the This to to so Solutions IoT the on to system and up business Congress improve that to real Device initial to a changing making IoT secure enables for web led user of able the of patch talked issue device delivery machines. robust Manager about to Global web from that proactively Manager device OEM in is key integrators important resources one OEMs industrial provide new anything or

vendors we time build out software to consortiums, our expand such, relevant system integrators partners, and are with reach. As more independent spending and solutions

make and the partners we an are join During continued pavilion the Control Kepware this in Look associations, vertical Alliance first as Systems in we became to More partner Congress. to in a consortium's and area industrial at for recently, progress industrial as the quarter, World technology Internet we Association. the joined appropriate, us industry Solutions our add exhibitor strategy. IoT continue to support IoT the Integrators to

wrap Now let me up.

out about the how calendar for like excited made, As we've I we progress the and fiscal I'm closed we're XXXX. year, positioned

new fall this interest. have that gateways generating wireless We significant IoT are launching already

drive are for look remain sheet we on growing our prepared making more strategic with value the our relevance solid, solution, to our growth balance progress software That business, are around we we of business operational our from Management the well journey. on are line, further remarks And among our our MACHXX progress of believe today. marketplace. us engaging deliver first continue We industry-leading in IoT customers industrial We poised the fundamentals updating team we efficiency our you our with for completes in as our higher IoT offerings. positioned to IT We to launch are based our and our initiatives, increased our Bottom on forward the to world. shareholders. customers gaining to the

So session. now the I'll a turn it conduct operator to over to question-and-answer

Operator

[Operator of Jaeson Markets. Lake comes first Capital Instructions] question from Our Street Schmidt

Jaeson Schmidt

call change I that and quickly. Just last kind had to million indicated fiscal start want you expectations? QX, expected through fiscal there $XX the you both been those of to know that revenue any QX level has on

Jeff Benck

thankfully, thousand level. a few specifically but revenue our of we – We this expectations, few quarter, our we Management in saw you some already in for. But of always isn't hundred we as and that deal-driven. deals was talked we this few business fact, in it would compete a kind discussed timing that business, IT would've helped, that we would've short that to was it's a change fell reported predicted, the the from that to a continue closed GAAP closed as attributed October And we've before, No to that – while expectations.

Jaeson Schmidt

you addressable can Okay. off your think is there? And what Management, market opportunity remind IT And your us is is? what going market that – currently you share

Jeff Benck

north that there's triple-digit market, entire but million and believe kind There's don't the is not marketplace good the play $XXX Gartner track of we not number, we that – unfortunately market – in. the a IDC for of

in the lot year. of share and single-digit the in the success I – percent that Management we're recovery growth represent certainly business space. which of that QX, would it's QX, our we've with market about. we share over sort the growth, around didn't like quarter with results not with had of we we're So but Jason, single-digit we – our QX, already seen, represents you the in we've anticipating and high meaningful, gain to we would high talked is nice last a say, that say and maybe some IT something gained may though market is, well, Which a mature share even in why pretty mid- a felt

Jaeson Schmidt

MACHXX, available over just up? response trials now. customers pipeline you even a customer about next What then talk it's moving you the might year? so think know to Can commercial And been little Okay. how commercially how do is many looking far? be bit at Or quantitatively, the has I the shaping

Jeff Benck

various problems in we're the it customers obviously completely a the application, excited the with – how point this Really customer announce getting Device a platform. And at speed with of solution starting versus the good Global have app. on showcase help solve it'll market Management of first excited engagements the various a we at so own. it staging stages. kind the Yes, and developing can MACHXX of number their about to We that power to it's

Some customers management distribution. device of that are resource folks medical the power customers. working doing on some that in in space, example some are we've customers equipment, the We're are got energy

in So of applications a industrial verticals. it's across of a variety number

kind out and being customer can before, that is of of production. that the engagement a an because cycle it's it said, with to kind OEM available the ready good for we've commercially said we're it's say As that actually we release with. is first product OEM But development has

like meaningful to of how that's prospect, as we're know give able the I be – taking really on – more while they're it So be about be able along, and won't what give as or you will more to to and year. get it this color But we that color contributor fiscal customers advantage we excited how be a leveraging further to able it progressing. to

and have we're – launching moving – We we're the that this to seen but And on their disclosed point a because see not eval little them continue with we've obviously customers a – might of grow, it's to it's because talk at the at when we're about that. to we pipeline work this actually be from is early and cycle first they got we've into of with released. on someone development have point dozens beta of kind working customers, number product now continuing

Operator

Our from of George next comes Instructions] MKH Management. Melas question [Operator

George Melas

quick restructuring Jeremy. Or severance mentioned, and as relocation to all the there The question to it? some China? you it related office, charge, elements a of for is other are to the Hong from Maybe first Kong

Jeremy Whitaker

of that it. restructuring we and Yes, the just the Kong it on with was of different operations across one goes number functions company. and a the team, cha component – side, What Hong throughout did

and impacting G&A had we So team sales and as some development also our of that marketing well.

George Melas

you... Okay. Is there way

Jeff Benck

more Just give little to to that. a insight

actually about we of last last we the charge the As be before there earnings quarter, started likely last call, the about we fact talked we would which is talked activity this quarter, end the that where – kind in 'XX the our of resources what meet But that we'll needed opportunity. fiscal and here. had we where we to also with looked that taking we people sure objectives biggest at make needed, be aligned

was a the just specifically. it that talked broader so And operations about we than bit little team

kind about. we Although, we place But there, wanted so opportunities decided we against to we in. talk to of were the that multiple investing a get where across resource did closer functions looked as enough really was meaningful we facility

George Melas

a us very maybe Is sold? cost to between is and Yes, it. yes. break goods $XXX I million SG&A, there even warned about well down Or it R&D to that too granular? guys you think No, way of

Jeff Benck

We of mean, detail. level give that into don't piece typically you of it. of a I it can break out ops maybe sense

Jeremy Whitaker

Yes.

Just the in here on actually, then kind operations. to of Form me file there. of MD&A at our additional from margin – a help to There we as – there. when least $XX,XXX specifically related standpoint was well. you be I've about to was got some to detail that front XX-Q the that tomorrow, there'll And related

related was research to related and development. $XXX,XXX about and So $XXX,XXX about SG&A to

George Melas

understand not Okay, a of yes, great. that beta little little product? love better. help an in like me And a bit context embedded product, really is a a – can of to [ph] mean OE you bit the what It's I'd understand

Jeff Benck

resolved term we any and our might phase, the software before both go qualified test. we've make goes Yes, on we'll we available to for as and used customers uncover – use, customers fully bugs on hardware the to to takes cycle production Typically, time product it is the OEM throw side. we've a defects we or that and validation because tested that and

to if And the want or evaluating deploy they to sometimes integrate are solution decide it. they

their their own with Sometimes solutions they'll OEM products they develop our need to or machine. own do testing as into

that you And it's it's is that testing a phase keep not some to the the to can typically formally with it the that MACHXX they beta say send production-ready and signals to we production-qualified. work have and why means start what is of And provide of sort completed But but to an said, released done that so customer customers phase, not in the we been level that's now now is because that move once means develop go. to of which qualified that intended along far yet we've to it. product and intended it's a it it what fully more and just announced, we now to ready we I kind testing evaluation enough and

So that's typically what that means.

George Melas

that And as feedback of get period, beta customers well? lot do Okay. you from a during

Jeff Benck

done reason mean, we're And own up both up. can open development we Yes, come learn because we we go to I can one in as hardware we to issues might that's we certain features, IoT make the not well. phase that can our that our do. like prioritize and testing, and software alterations, solutions, with we address product since

And so it's part the of as the that to a product as is objectives product to definition. a on sophisticated up able as be process meeting to that we set development embarked the whether we feedback use mechanism

George Melas

just Okay. then sort maybe there. landscape And question of a

are sort customers the many the wrong platform platform, comparable the now that application probably the many Your of but evaluating MACHXX, marketplace? comparable – there the in are word, and how competing is how or

Jeff Benck

or they're search we're you up. all question. do are all not IT in on if just interesting competing people – of more them. not XXX a of the platforms an literally IoT than market. There with a But That's applications But come IoT ton – will applications,

kind put very focused consumer we focused industrial are on that together. people And customers on the us on that kind and like the already dryers. we and We're very of white box are We're space, OEMs. also much are much vertical. addressing targeting know solutions the of washer industrial Some people focused some

only able the capability, really in machines are end because platforms are A their not to connect a really but multiple out makers, platforms end not equipment there Some then their and them is that give solution to for And that lot provide access – platforms. users maker, capability, maker remote to we're of embodied competitive they're the of also really that where end and that users. visibility customer only their machine control, set the to of equipment lot multi-tendency for downstream. manage user and access industrial the works a the talking with our designed and targeting a be IoT it's not user to competitive like not but intended

of that And is some I couple, Now I might not evaluating few they're see you're you guys – that the and will folks. the in they fact unique people play talked to and engagements, have you heard a they're reference that know the we've other back we interface in there a oftentimes, mix. evaluating. Typically yes, about the it's the hundreds the you about. provide, early it's really – years. say, And attributes that that's been guys we there's us, space targeting XX OEM They

Some analyst have And credit to MACHXX don't now. software, and sees hardware both do from – some that us, of products for looking the us connectivity for gateways marketing solutions unique maybe basically engaging we've us know But are as customers think are the us saw as platform collateral folks the brand-new around either certainly and maybe software that because hardware, there well. but hardware I heard we just buying are early not customers community that us are provide then well here or they're looking are as there's a of or the us. as maybe

Operator

This to remarks. [Operator question-and-answer like session. the Mr. closing concludes I would over for to turn any Benck conference Instructions] Jeff back our

Jeff Benck

we today. late for at our forward report our achievements attending point, results Thank in and And ends actions second updating call Thank you, to this January. look when the operator. this on you. a the call. quarter lot progress, We Thanks

Operator

now has conference concluded. presentation. you for Thank The attending today's

your You may disconnect now lines.

Lantronix (LTRX) 27 Oct 172018 Q1 Earnings call transcript