LTRX - Earnings call transcript Q3 2021

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Operator

Good afternoon and welcome to the Lantronix 2021 Third Quarter Results Conference Call. All participants will be in a listen-only mode [Operator Instructions] After today's presentation there will be opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Adams, Head of Corporate Development and Investor Relations. Please go ahead.

Rob Adams

you. Thank afternoon. Good joining call. for third fiscal quarter Thanks the conference XXXX everyone Lantronix

Joining Paul on and today Chief call call live us the on of webcast are website. President Strategy. Jeremy today's Chief and archived Vice be Executive Whitaker, Pickle, company's Financial Shipman, Officer; available Jonathan will of A the Officer; and President

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

of relations the Whitaker, With to Jeremy refer website commentary. call Officer. section investor please today's additional Finally, our Financial to the details financial news Chief over and turn supplement in for releases I'll that, today's to information

Jeremy Whitaker

Paul provide some our XXXX his quarter the commentary. afternoon's welcome for and business highlights as to hand well fiscal for to as us Rob of this Thank results call. of I over to I'm going financial joining it the before for third you, everyone

the XXXX. an Sequentially, third net the X% million fiscal of was up X% XXXX. for quarter increase net XX.X the million the we XX.X quarter quarter revenue, fiscal reported to For in reported of of compared third to second compared fiscal in of XXXX, XX.X revenue when million

be For the XX.X% third revenues total March with nine constraints. XXXX, as XX, of of the again, the level a increased partially exited fiscal up demand result and compared ended fiscal to for when continue record supply with XX, XXXX of and backlog as we profit nine for months to the quarter XXXX. we ended second the third of third prior quarter. components quarter quarter the XX% compared as as percentage of XXXX XXXX. a due result for was a to from costs. Once logistics elevated March months revenue Gross improve margin of were a customer and net XXXX sequential XX.X% of The headwinds in improvement said fiscal of our XX.X% gross quarter That product fiscal shortages can mix face the to to attributed

As subside. a component shortages and costs logistics

share quarter million. operating from administrative million, quarter see XX% for of We to from Research X.X million of the from XX% the X.X of third second to the net $X.XX XXXX expect and million our X fiscal consistent for and with or demonstrating synergy XXXX remain during current fiscal XXXX a quarter third the or income percentage quarter XXXX XXXX points net X.X margins per of third the to per XXXX. and the loss $X.XX fiscal model. fiscal to quarter gross GAAP fiscal net of capture for quarter leverage revenue of $X.XX levels. of decreased third were third GAAP compared operating XXX per during expenses XXXX net fiscal $X.XX of non-GAAP share basis quarter in the million during net of loss was third quarter X.X fiscal fiscal was XXXX. of the of to and fiscal Selling or in million X.X third the compared per income share Non-GAAP Non-GAAP quarter as XXX,XXX, general million in third of expenses XXX XXXX. share of fiscal third the the at or a development quarter during for XXXX compared improve X.X expenses the

as million 'XX, prior to as XX, the X.X million quarter XX.X XXXX June to million cash XX.X million, Net the as with of Now June an were March from turning capital ended increase of March to of compared equivalents of as XXX,XXX XX.X XX.X as improved cash XX, million compared balance inventories March the XXXX, of XX, XXXX. XXXX. and XX, sheet, quarter. with Working of we

to turning of our XXXX XXX%. targeting non-GAP outlook, revenue Now of now XXX% are growth and XX% to EPS we to XX%, growth

any As a morning. this over not announced turn we I'll call reminder, acquisition this that from to Paul. does include contribution the the now

Paul Pickle

our current inventory the distribution. record total you of that norms compared customer we quarter to Bookings results to above fundamentals levels third with as with on are the more quarter strong our ended in solidly a I'm fiscal third shipments quarter continue demand. today our outpacing today the Jeremy. In of revenues once you, to times Lantronix - four up Thank one, channel as the considerably trend with build year quarter, consumption our as into historical to far to backlog a than a And with our again, of report the improve. were resumed new XXXX. excited growth book

about to ship we've the quarter. The experienced to due margins been component addition, limited revenue our not gate of in to upside customer our talking In improved we quarters a favorable mix, last to ability continued product and gross demand, three everything's for the shortages perfect course.

$X quarters requested As previous of of of in the end $X the million product to into component the quarter. to future customer million late QX, approximately shipments versus shortage pushed due

are no for substitutes. weighted there products However, portfolio which designed our product towards is been in have heavily that and

third awaiting delivery in in beyond. anxiously are and products quarter, our fourth ship product million quarter of we could $X of While not the our they that to customers the

to industry logistics recover. of vaccines front, the beginning commercial On the with and rollout is air

to we have our improve. to obligations calendar couple expect costs much level, remains our towards and we next component supplier capacity logistics to of does, us Yet will end year. suppliers ship over the needed the procured components it quarters to the of improvement As crucial our believe see of contractual we lead the tight. with At discussions the

supply As constraints logistics and ease.

the as to We we demand. revenues let's With our upside delivery into on capability and to delve the expect margins substantial specifics match some quarter. more increased that, both

X% products million sequentially, categories, flat our product XX.X IoT roughly delivered Turning year-over-year. to our and QX in up

year-over-year telematics somewhat Wi-Fi had been EMEA, and XX% by group, strong revenue which year-over-year. in saw where grew picking mitigated up calendar solutions as rebound our growth or Ethernet grew our design services We last nice which most as through well cellular things devices tracking Our a from in of sequentially year. impressive

we for because As coinciding in also but the Lantronix. only volume next was Qualcomm's important generation design capacity processor releases. maxed into recent for have provide, are ultimately discussed meet services we services the These prior margins out opportunities demand strong and they increasing with shipment turn they quarter, to been the not

contracts well detailed distributor and For quarter vehicle of you TOGG, we as world's manufacturer. a example, electricity as remember Enel electric largest with gas last may the Turkish manufacturing

create vision, design. with company Module to Additionally, deliver using Safety, a our high Safety their and learning will next growth XXX Flock machine engagement recently technology in QX, on computer on law Lantronix' generation objective for we leads extended automated evidence and announced flagship enforcement. and continuing Open-Q Flock utilize unbiased System

development these outsized mitigate to technology growth to their be partner enforcement city as technologies projects, privacy reform to a bias use likely debating continue AI. and In human potential. the through safety have which of such aim world We on protect are crime, smart law eliminate

booked, robust. projects design these production look to we our the Along move Lantronix from will capture these opportunity next over the to production have being to volume services opportunity funnel is opportunities forward revenue As our year. design And revenues. converting with to sizable completely

million REM, morning the this ago. environment and XX% and segment to of definitive our would that, solutions. by announcement briefly business like products Incorporated. growth remote a customer With to of almost for our Communication X% year out-of-band drove Systems revenues electronics management of agreement totaled recap sequentially, this continuing regarding our X.X up SaaS augmented Demand acquire from up software adoption a I Turning or to signing

This For have it. yet those a morning, the investors announced acquisition. conference seen opened. We held we market may who not before the call

replay the in investor find can website. You our section of the relations

efficiently of forma sticky and $XXX about because it scale We have pro combination revenue federal brings with the synergies an The simply of occurring expect complementary of over of excess number one. of several applications. to exposure product the And this to $X annual due the offering, - addresses nature are highly reap IoT excited much a a Lantronix million smart which million. customers day efficiency. number city quite and It next complementary in one, on the substantial of growing municipal we opportunity XX months, will to course that of products

July run non-GAAP year conditions, non-GAAP be first the deal upon should accretive full in model doubling This along customary subject with it in to close we upside this immediately shareholder EPS is is expectation adding acquisition and current approval, our to a will rate. EPS Our closing and roughly significant our expect June on its to CSI board other timeframe.

of a about it busy momentum supply coming is our the and substantial shareholders of quarter can addition the over Lantronix. turn excited As we quarter disruption, the of the to with With over resumed I'll the targeting growth that, a months. just to Lantronix tell pipeline we Coupled I'm difficulties chain fourth opportunities. forward growing its high announced the improving backlog you prospects. course, our to was for progress for sure now operator are acquisition, volume record And has continuing our with Q&A. reporting it enters profitability, is and Despite look

Operator

Thank you.

from [Operator the the first Please begin will ahead. Scott Capital. with now will Searle We ROTH question go question-and-answer be Instructions] session. And

Scott Searle

my taking for Thanks Good to questions, afternoon. you good again. Hey, to talk guys.

Paul Pickle

Absolutely.

Scott Searle

just cleanup So to in of expect wanted off heard normalizing maybe and basis the gross current make saw point just of what I we XXX margin with improvement just quick XXX the to commentary supply that chain sure a couple you questions quarter. correctly

Jeremy Whitaker

That's correct.

picture work then of the really Okay. has quarters probably coming a And some mean, to its way begin nobody next, time three through. clarification, which clear right, over it's would to say take to I back But to normal, two today. to I for subject that things improve. would probably

Paul Pickle

Yes.

evenly to you points to XXX logistics need improve, and if split XXX if you that basis between component increases So costs.

as more We flights will expect we obviously on components going. those get international, of shortages. The ease portion logistics the come commercial, as bit more the to quickly we especially get international component

Scott Searle

component up then cumulatively now I that and following you over think shortage with three Paul, the you past million X comment, said Got quarters.

commentary that you outstanding slippages have want your from that and still that X is like have shipped, none of correct? sounds that So can customers is still orders those when it product So you correct? ship, previous is actually million it available, of

Paul Pickle

that's So correct. not

So in almost we've been the previous to very the the quarters, all take outstanding month. of completely and in ship next it able actually

a were we about - month it's So delayed.

think of month. out kind commitment can times pushed being in You terms of a it of

into of a not will even bleed place. has And this next. be now unprecedented notably. it, quarter, put So able business, lot This both sharp to that that referencing seeing we've 'XX getting it look quarter taken kind we're what seeing seeing because I on it's first legacy four volume at the programs has in a yields classic historical been. quarter continuing ballooned also normal five if levels, demand it uptick been so average being of in little think we is kind of what we're this And an than macroeconomic think point clear million backlog and be you coming to I then doing this trend But business partly five And a online. $X but times we because mostly an the But we're those partly saw some uptick we're would existing the it I'm of of in more entire at kind new quarters, hard production, backlog - we're times in time levels. demand of is place. what quarter observing opportunities will going because our of call FY bit this this work substantial past

customer seeing The So pull delivery are associated lot pretty dates, request a consistent. dates we're staying that. not of with in

this times, in little So a a just ramp double we demand it uptick see don't lot rate. seeing in ordering keep of and we the can't up with pattern. component But just this with nice lead

Scott Searle

incremental those, demand able recent the you most so - is clarify have just there is to the satisfy been you that quarter? X not Paul, what you, Got million to in that

Paul Pickle

million so were if next were recent the about it most the flush we able month. million, previous that quarter, very we the $X to ship we referenced $X quarter, In level,

late And another so accumulate we've $X seen million for this to total balloons the quarter, for. CRD

not be we'll the anticipate able quarter. or don't entire to will to million flush the flush we We this be entire $X million $X able

Scott Searle

Got just reported million. March normalize was to the versus XX you, of quarter but demand terms million XX the for in over

Paul Pickle

That's correct.

Scott Searle

back you comment just Okay, related got seeing, you're this to in that morning, clarify want and made doubling comment. and you terms the what to the EPS that go acquisition I of

some quite is a what transaction in to accretion in is base the expected point September about kind time of chunk to think out that doubling it on I that one, just flesh So time? and start sure make of synergies we them a of what day there at to little comment bit Also bit the quarter? when a pull there's From you close of because like the the out that want big more. sound but start

Paul Pickle

strong first going we'd close. to get it's because our But Yeah, that took if so next synergies months. we target target say current taking year. full the $X.XX in we I'd - $X.XX just when from in or fiscal captured estimates, XX don't entirely in our the quarters, anticipating a say first know that's we It's another from And would from accretion Lantronix. at the least basically target

ballpark that a a right it. look pretty conservative way that's that's at But think good a And we so now, outlook. - it's to

Scott Searle

Okay, seeing for very the you not continuing obviously to just on persist lastly, the front, out for it's And just availability industry in helpful. but there, Where component you, are general. insulated, continues out-of-band It year well. REM like this last well solutions sounds as continue seems does been or this relatively have management that the year. though shortages? and like It that

on growth remains curve? an that unrestricted so And

Paul Pickle

we revenue Well, an of critical those components, in uptick support those where in large we're volumes demand. not heavily in that's where areas dependent on actually can

play. REM take for you state. bit older, Certainly, products that's So of for that we a pretty been in that's have quite steady have instance, true of our whip mature some

to we taking anticipated It's to have what able than that we deeper is So so in that's and where in an production have we anticipated. ability for orders into ramps the talking extended after all The way we to customers uptick period, lead an really been new are demand. June place, having quarters, some our production respond going put about back volume news the place time this good have three last we were to quarter. and

to meet And in new couple anticipate a to so process. of is able next going we'll we be over the that while But uptick quarters. to take demand little the the demand

Jeremy Whitaker

of we're to from box, little relatively I a easily pay standpoint, out was where seeing component. for a those little that more go units because products it's we're That's it. say, higher cost that source on can XXXX doing bit going We'll a to lower flavor got little on volume a were that maybe and able those the expense, materials. source we

having for So supply components expedite of to paying the you some sure customer. a little some we more costs can those related to make we're bit

Paul Pickle

buys Yeah, up. the really do spot add

Scott Searle

wondering, of Got lastly, I but you model it's platform, et that any front? the recurring terms interest, terms so I'm of Nice I and just customer just on recurring in if quarter. could days, that know out development, SaaS still Thanks on platform early much. building in cetera, front, updates

Paul Pickle

milestone us. call We're it's had you for it on an for exceed Yeah, that recruiting number. a But forecast our year very much. it's fiscal innings. we the going still important Yeah, small for thank we front, this to early

new some features is we've next - So rolling and think I Touch to of do four one And the Really, I've it have signups number over annualized about software a months. the Zero XXXk. really of recurring. to because some flip between an talking We're of QX at licensing just late more - going validation we here. great significant those $XXX,XXX seen features. was being expected of for off been that out close Provisioning about us, with we a of

really So factor convenience well. this just anticipating experience. of those, going box eagerly of and Ease they're is the a out customers so it's use, for really

certainly next be a on some report and to it hopefully indicators we I to lot think year, there. put color anticipate able more better

Operator

next [Operator Instructions] Koontz The Please Needham go question will with from be & Ryan Company. ahead.

Ryan Koontz

landscape some kind for the are they now, are players, you maybe the at bigger question. the thanks Great, Cisco's, kind of the all the competitive in shifts opportunities as you. to many your in of Thank more available active you. their with recent of Erickson's or leave One, in acquisition, space smaller seeing

Paul Pickle

Yeah, it. appreciate

play heads certified management, especially it's of we best like either we boutique more a out-of-band with ours. on external internal bump solution would an or applications Cisco suggested guess those So Homeland an on or but remote solution, and to often lot, be don't in a like have Department a I an Security, console box management guys niche router, practice,

And so a products, those pulled along somebody we long those. find center, building time, using lines Cisco that of data we along a with get

bit us with Meraki project competitive the cut come as with transition line. products product Masa a out the name, I more product So a some time like, up round key complimentary, we areas. It's us. infrastructure especially we biking that competitive for portfolio the that's late, say product definitely think not opportunities, would and I landscape off And that gives good that for for. It's with networks, museum, be adjacent will the But the and attention look us. something they're a are I build very something in focusing that their couple necessarily think outs of a or

Ryan Koontz

XX, you do the catalysts what here? sort important as of And opportunities - kind is Obviously far at of much macro XX is most helpful. look impact an your on Okay, see kind one, months, cities you build the of as that there? XG have smart next are that's out over

Paul Pickle

Yeah, do doubt, what of we're with hand-in-hand. XG those seeing a is kind go without cities, smart

are than just lot being where see city to connection that's brings of higher infrastructure in populated densities what possible the smart out. of XG we densely magnitude a So And areas. especially built orders urban today,

side on interested we've a seen area lot services object that activity and a is particular deadline are like we the classification So of with in.

work type time only distributions, real a yellow available advanced is very categorize once, make object, allows an that it classification, you video for that Our you identify with in metadata classify familiar team object to stream, analytics. but and

So those XG obviously, liked And place, connectivity then the go hand-in-hand the with really connectivity. very space. is complimentary, and so we

Ryan Koontz

the Great, appreciate for questions. that. Thanks

Paul Pickle

Ryan. you, Thank

Operator

Ladies for session. like remarks. our any Pickle this and I conference gentlemen, turn to over the would Paul concludes question-and-answer back to closing

Paul Pickle

you. thank us of once great a your again, for and Thank you And joining have rest day.

Operator

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

You may disconnect. now

Lantronix (LTRX) 3 May 212021 Q3 Earnings call transcript