LTRX - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Lantronix 2019 Q3 Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Marketing. President, Vice Mehraban, Shahram Please go ahead.

Shahram Mehraban

Good Thank for and you everyone, the you, Lantronix call. operator. joining conference third thank XXXX afternoon, quarter fiscal

President be Officer. A the Paul and archived and on today today’s live our Whitaker, and call company’s of Lantronix’ will Jeremy Financial us Officer; on Chief Chief Joining Lantronix’ webcast Executive available call Pickle, are website.

in X:XX XX a starting callers, entering at Eastern XXX-XXX-XXXX and available by international replay May X:XX through be P.M. or will phone today XXX-XXX-XXXX In passcode addition, Pacific for XXXXXXXX. U.S., dialing P.M. and

Whitaker, During in publicly call, which factors and will which and you reconciliations not wins now and a With revise SEC call, cause website Chief will encourage we discuss the this uncertainties There the website, note Financial update in are or XX-Qs. which release, is measures design our this financial and contained Relations which statements circumstances. is for risk production. management’s section Jeremy measures. that non-GAAP the or Officer. events Please during customer discuss call, defined to our management a Lantronix’s company turn call products undertakes also company the risks these or verbal could by their We such into financial risk use. our XX-K may or expectations. presents from to make on non-GAAP no Lantronix on the obligation to the reporting SEC the our earnings may between to release, implementation. Investor designer to some the reflect review from company forward-looking I’ll Today’s earnings wins, GAAP that today some Furthermore, differences any furnished materially over that, and describes as is – posted its design to current that future involve commitment was statements, of the company’s written as the a in results use the company’s available cautionary the forward-looking publicly differ to and the enter and statements filings, that non-GAAP during of

Jeremy Whitaker

We afternoon’s to it joining the Thank you, us for and financial few additional over remarks. business website this Paul results, Investor release today’s and to Please refer with provide to our I’m as some a top the going welcome as delivered line everyone continued growth to for the commentary. before will highlights quarter quarter, fiscal the our news call. section hand details financial for in I well Shahram, of and a solid that my information supplement of profitability. Relations third increased for

XXXX, reported for a compared the XXXX XXXX. third of $XX.X million we ended fiscal of fiscal and was be of customers. continues the X%. for March ended product new sequentially our core stable product revenue In product our product at from For quarter Year-to-date, quarter $XX.X March grew predicated months IoT general, net quarter increase revenue accelerated revenue to down line for line XX% the million IoT XX, nine Net X%, for OEM $XX.X upon by an and rollouts by million net revenue, to XX, second in the the remained our XXXX. growth this

our included ramping out-of-band the American for The XX% As IT than slower ago record driven deployment XX% growth use solution, in SLC Net for Express by up quarter call, from centers. OEM which large a a their enterprise management Management was rollouts quarter a sequentially. discussed by data our last was are product on year product line these and anticipated. from revenue XXXX

XX.X% received profit that remote IT XX.X% which the the fiscal one products. sequential management SLC XX% XXXX. sales a to continued of Furthermore, second to an quarter distribution Gross quarter due pleased Chase rollout highest-margin our was with products. a our our as to of order our primarily growth, we branch product SLB report The partners for quarter solution mix, cloud-based remote the Management for I’m for of the quarter fiscal to centralized in and In management application as solution. software of was XXXX compared XXXX, third of JPMorgan third of for contributed is addition, fiscal had for of revenue of percentage margin as for our our improvement office as record newest XXXX, our one net

our million expenses mitigate for with general XXXX moving third contract Additionally, compensation the to and decline quarter tariff the fiscal manufacturing expenses, of from with $X.X second was The fiscal for lower to of the the we which of compared quarter million efforts CEO. XXXX Asia. to were $X.X costs previous China of million, connection departure for third XXXX. sequential quarter in $X.X our related our from includes Southeast Selling, benefited ongoing administrative and fiscal

per as net $XXX,XXX, third and of or GAAP non-GAAP net the invest to improved quarter third million $X.XX of fiscal per of continue $XXX,XXX, or share $XX.X to were quarter were quarter income $X share compares net expenses for per the XXth fiscal Working new cash fiscal income compared This The quarter $XXX,XXX, of profitability, XXXX. XXXX. was fiscal third report September for quarter an XX, in of compared of as and million of cash as during net XXXX, second or public million the million We or or primarily as million, the per of achieved XXXX, net million XXXX non-GAAP quarter and second working XXXX. $X.XX quarter of of GAAP per of for XX, of relates per XXXX with XXXX. income share the of XXXX third our third income Research XXXX, compared GAAP third for of fiscal compared for offering. $X.XX XXXX. $X.X non-GAAP quarter capital to to share during fiscal million second $X.X products. the $XXX,XXX, the and $X.XX share $XX.X net the fiscal March as pleased income our fiscal million, I’m $X.X as we the consecutive increases to income of XXXX, during March development $X.X for of and as increase in of of fiscal XX, or non-GAAP XX, $XX.X of to and million, to June share $X.XX $XX.X XXXX, $X.XX June quarter with $XXX,XXX, equivalents of Cash capital XXXX. quarter

XX, as million current XXXX, to XX, inventories and net $X.X of compared of March expect inventory at XXXX, we increased June as expected, to levels. remain As $X.X with million

moving As contract executing of call, to manufacturing portion plan to products a large on on facilities reduce of we last discussed our exposure manufacturing to in Asia. have by our China our been Southeast the a

our during our $XX,XXX, as third tariff-related to fiscal forecast $XXX,XXX. manufacturing initial our a of approximately representing first products execution substantially quarter Through costs of similar in tariff fiscal we the level our experienced fourth well an below fiscal in the quarter expect quarter. third costs team, all of Southeast by good the to amount XXXX. operations able during we quarter of limit during our anticipate We Asia We were

from expect provide for $XX.X and in will Considering to a fourth XXXX. net million range on of million. revenue $XX.X guidance quarter outlook, earnings deliver the our fiscal revenue to Now we I current

share diluted earnings per in $X.XX. We $X.XX share expect range from non-GAAP GAAP of and to a diluted to per $X.XX $X.XX earnings

and of Now after most us I President recently would as served new having like Microsemi Pickle. CEO, COO introduce Paul our to Paul joins Corporation.

few As you Paul on aware, this actively he the the acquainted to been team the company. may on last and speed of Monday And be getting days, over started getting with up has week.

Paul. introduction, call over turn to quick that with now So the I’ll

Paul Pickle

time, over I quarters. it’s here to June XX-year marks the to and dive and expanded during products IoT eventful few into the Management. for already enabled to Thank I have the that look of applications Jeremy. has say, customers next been industrial couple worldwide. offering IT of And networking mission-critical you, Lantronix’s provided an has continuing recent to that at This have anniversary. target In Lantronix, and forward been product thousands years, growth markets days Lantronix operation reliable grade

including a transportation technologies the end to segments also retail verticals, center growing adoption transform is and as and vision. IoT transformation adopting Management edge and challenges our across the businesses. with the edge Lantronix we and software-defined data their being beyond at more all rapidly traditional with computing them that growth medical, data As these are current incredible of the the class their customers accelerate cloud connected of can growing navel know, devices. energy, we IoT to in as as is projected networking customers number whom to deployed enterprise solutions, industrial, IT royal to computing of we base has address products center an digital and are expand engagements more applications comes

by Our on development. a talented team. financial while substantially and premium performance, recent In executing has its solutions times, the highly improved supported product company are delivered and technical

they that in expect, of solutions the growth. and opportunity a our our ability cash and in inorganic. requirements grateful these respond price a in I’m lead is chapters the at are both responsible organization Given to want leadership delivering executing great next on position, strategy, every strong market of team. hallmark possible company customers combined the quickly all terms organic way dynamics efficient to with most the for the table The cards and of to an determined

point, at back this turn I’ll it So Q&A. for over

Operator

Thank you.

the now Lake begin comes first Jaeson go [Operator Your Schmidt from session. with Street. will Please We question-and-answer Instructions] question ahead.

Jaeson Schmidt

the the Do thanks to relatedly, some you on with in for the what’s Hey, taking want here in remind reason to just I expect ramp commentary you of your And business. just quarter? June my questions. behind IoT that the start ramps? of sort us can the slower slower persist continued guys,

Paul Pickle

turn I’ve largely look I’ll have quarters. it some sales continue rolled to of going appears Would couple products I dependent on to implementations that chance for I’ll to probably and you customers team say together. some it that customers. tibiae some their CapEx at put cycles the at days out have Jeremy. those dependency for for of and that the few part, on – had In calls getting had most the had, down of probably Yes. a is [ph] their say, that a It’s the this over that? in I

Jeremy Whitaker

anticipated. we’re discussed wins And what We that’s their yes, much with had we our that market Paul have that products we’re higher customers. the call seeing as design expectations this had I necessarily driven designs that’s seeing last we’re not is, and IoT their a with rate a our of while in that out enter by would say, happening at that in seeing for we quarter on is our is Yes. growth being that bit little what mentioned, business general the than we’re there. OEMs customers seeing go to what away, what ability slower we at customers

Paul Pickle

Yes.

of haven’t requirements in any seen come new from back customers changes. We terms the

It’s a So the are they ramp up. matter there. of when designs just

Jaeson Schmidt

helpful. quarter? new over the growth that’s customers? there. if by at ITM how some you looking Any And is if has the customers, pipeline customer tracked being Okay, a growth it guys segment, engagement on color additional nice or is the the driven really of showed this couple past And addition

Jeremy Whitaker

more a units to that It’s more team getting getting we into couple entails ultimately really quarters customers we product And them and demo and both. proof-of-concepts last line. has drive drives of as of combination more driving this that their on and what opportunities in proof-of-concepts, really believe over The that with product. them sales focused try the is

customers a rollouts business there’s So as of – rate been also it’s of and also that’s larger we – both, that happening believe run doing a well. some it’s combination more

Jaeson Schmidt

and jump me, OpEx should How into queue. Okay. And for this the I’ll we for about one back year? think last calendar

Jeremy Whitaker

Yes.

invest current in are outlook to spending light we a R&D. SG&A revenue, of are to the bit, we in So, the moderate but looking on continuing

general, quarter. I going OpEx look that ahead relatively we think as to would remain in So, to is next flat

Jaeson Schmidt

Okay. lot, Thanks guys. a

Operator

Thank you.

ahead. Your next question comes from Please go Co. Needham Rich & Valera with

Roger Boyd

is couple of Roger Boyd guys, on A Rich. this questions. for Hi,

the Just dig deeper to products. on want IoT

for you’re wins I shipping on XX that the ramp? wonder little maybe you expecting an update quarter. I update then kind to product mentioned, sort around number cadence the if for call you of edge, on give that And think over a been you’ve xPico you and on last how could of an export a of had series. had

if see to on being wanted Just qualitative received? is feedback have product that any how you

Jeremy Whitaker

wireless wins that the design progress. XX on xPico, Okay. Starting the wins in the had with to the we’ve designs increase – throughout this so six quarter, for we’re new on quarter, up an about design

product. that some win activity see in to continuing good we’re design with So traction

Roger Boyd

Wired wireless actually as wired been going, pushed been IoT the well? just going has even has been revenue not out has up, designing, but though

Jeremy Whitaker

correct. Yes,

business, with side that the bit the performing of the has So or we some export in Ethernet have been on a products and little other with expectation wired even seen wired better. the particular, at

new relates the entered recently it some been export – on market. As to edge, recent designs of the into a that’s the

time take related meaningful So longer from that wins. that any before seeing we will product design to the revenue start

Paul Pickle

push In security through that medical, primarily, audits. a as we the segment the unexpected. design that not if think look out they past you’ll additional some pass have continue ramps from my There to at hip go quite market of I frequently And see they it’s production with Yes. it’s of certification. kind and you interaction totally is have compliance with, – experience, of

longer can out medical industrial and bit in cycle, well medical So as industrial security. did little notorious push a can is –

Roger Boyd

then Makes win the ConsoleFlow you quarter. had with nice sense. for sounds Thanks in color. a it the like And

you anymore is Just wanted at color on going? the to see if had software how go-to-market

Jeremy Whitaker

Yes.

our seeing are a proof-of-concepts we nice our for the order SLB SLC sales incrementally we There’s call, think on we to team one did revenue our that more stickiness provide – as a as basis about XXXX mentioned be partners believe that allow I the of And to of hardware office subscription branch So that And our ConsoleFlow. customers first the well. some will received are We manager. on will would dozen also to ongoing. traction this the on that proof-of-concepts ConsoleFlow. add buying with

Paul Pickle

It’s but ConsoleFlow a early specifically. of innings, lot around interest there’s

Roger Boyd

Thanks. Good me. to for That’s hear. it

Operator

This you. Pickle concludes the Paul turn our I like question-and-answer to Thank session. remarks. to over any back would Mr. conference closing for

Paul Pickle

to forward – day. and you our look nice I in you, with thank I’ll our that, And fiscal QX next updating fiscal on a Lexie. you, August. guys have Thank say results on

Operator

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

now may You disconnect.

Lantronix (LTRX) 25 Apr 192019 Q3 Earnings call transcript