LTRX - Earnings call transcript Q4 2021

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Operator

Good day and welcome to the Lantronix 2021 Fourth Quarter Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Rob Adams. Please go ahead, sir.

Rob Adams

Chuck. Thanks, thank the and XXXX quarter for call. conference you afternoon fourth joining fiscal Good

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

International by Eastern, Pacific Time for tonight In addition, be XXX-XXX-XXXX will States p.m. replay callers in available starting United September the X:XX XXXXXXXX. X dialing entering a phone at XXX-XXX-XXXX the X:XX pass p.m. and through or code

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

Jeremy Whitaker

ended supplement am that hand to website for the section some release the additional for over results the details the refer and this provide before today’s year information quarter Rob welcome commentary. highlights XXXX commentary. Please joining as you, to well afternoon’s call. financial fourth business for fiscal us Relations I of my for to and our will going and to Paul Thank as it in I news our of Investor financial everyone

As or of the do closed August comprises of NetXEdge, revenue Systems, and any X, segment business our Inc., results for and Transition costs which which a Networks fiscal XXXX on software acquisition Communication reminder, the XXXX. include not electronics operating

share For compared the fiscal XX.X% we mix of XXXX said, quarter the we Research $X.X license fiscal of of the over XXXX the third quarter million, were fiscal for million for us The share quarter of a accrued fiscal million XXXX XXXX loss fourth a was fiscal during the non-GAAP of improvement of and fourth net of XXXX. R&D impacted during quarter fourth the $X fiscal XXXX. XX.X% quarter price fourth $X.X Non-GAAP product expect and fourth fiscal in expenses with third We software and to and for fiscal million, as XX.X% to of quarter. improved $X.X supply fiscal quarter to affecting quarter for fourth million $X.XX in it can or compared fiscal XX% SG&A $X.X per with improve XXXX. don’t revenue of revenue. record XXXX Gross for the increase through XXXX, sequential million net the of or fiscal fourth fiscal million well fourth XXXX. attributed to at as compared general of during quarter to loss combination costs to quarter of to variable as the of anticipated the by revenue $X.XX increase when third $X.X gross quarter reported backlog million ‘XX cost million situation record million This XXXX net And $X.X or fourth a quarter compared compared quarter of of the fiscal $X of we income was fiscal Lantronix compensation the $XX.X product net fourth for demand fourth $X.X the the as per fourth be in by GAAP costs quarter continue the see net That XXXX. $XX.X moment, of in we million and or for for part third fourth driven for while share changes face offerings. fiscal administrative supply the headwinds XXXX $X.XX the and share of the chain of change environment in compared increase margin. for reported was expenses XXXX. up of XXXX. material $X.XX $X.X quarter per Selling, GAAP and The a per of the were XXXX from XXXX. during net fiscal increased profit improved quarter quarter million with of income to and $XX.X fiscal XX% quarter was $X the fiscal development fourth million with sequential million for customer revenue in of Sequentially, an constraints. exited the percent as compared chain

$XX.X for fiscal was with fiscal margin with XXXX mix. fiscal for XX.X% primarily product XX% a for in million an net $XX.X $XX.X all-time as million, Now the The was improvement increase and compared XXXX for revenue profit compared operating to year XXXX. XXXX. due compared to fiscal percentage fiscal turning gross of of net for an XX.X% results, in Gross million revenue $XX.X were as XXXX when XXXX. to GAAP was record full expenses million

for of fiscal XXXX to XX% operating compared improved As expenses XXXX a revenue, XX% revenue revenue. percentage of to of non-GAAP at fiscal

Non-GAAP million XXXX. compared net up we $X.X from from per in fiscal $XX.X GAAP by million per totaled GAAP share XXXX, income compared million million $X.X per per a in increased quarter. XXXX share loss to $XXX,XXX operations $X.XX in or For $X.XX in net or QX for XXXX. loss sequentially million as to share net year a up $X reported the flow share XX% $X.XX $X.XX XX% and to XXX% Cash fiscal of fiscal or QX for of or ago $X.X from $X.X million fiscal and

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

NetXEdge. turning XX Now of contribution from months outlook, our which our annual to acquisitions Networks includes and recent Transition approximately of

we Paul. call For turn fiscal XX% to growth over growth expect XX% XXX%. non-GAAP year of EPS the and of to XX% XXXX, revenue will now I to

Paul Pickle

for carry Jeremy. watershed revenues we significant quarter fiscal here and am you, our into a year. QX Lantronix was well Thank I as million. In to momentum results pleased the us of record delivered extremely the at quarter, next $XX.X we these as report fourth

we our We record record revenues were continued full strength, new saw a are year and entering offerings, results $XX.X million. at software XXXX a fiscal XXXX, backlog. the strong from booking with also For

to the detailed year. look next outlook in Jeremy we and our fiscal much Given results just this for you, robust forward have to

quarters the chain ongoing. million $X our from caused pandemic the million delays the versus or peers experienced In supply in caused have future manner component you some probably disruptions As out revenue fourth shortages into $X by us million of to $X QX. heard QX quarter, and push yourself, in in and are approximately

continue first when of were talk key secure disruptions not a to a are moved to clearly components. that X despite growing the the position recall ago, year However, quickly you problem, about over noted And first while supply may in are the challenge. immune Lantronix We supply we issue. of companies to the we we to

to our solid started million XX% products growth strong revenue WiFi to modules the IoT group a XX% year-over-year sequentially in and and catch Turning to with posted demand, product pace double-digit comeback with Ethernet categories quarter we QX, mitigated somewhat opportunity as and continue for up future continue funnel we delivered in The internal revenue, up set we to sequentially. our year-over-year. our the to Compute expand after and third continue quarter. which very In robust, telematics to by revenue meet demand. growth. moderated resources table $XX.X strong IoT is gateway Edge a solutions,

shipments. we XXXX. year XXXX, record backlog in IoT revenues move from our million, and circling the at momentum another revenues ultimately are kits services customer and several opportunities, for design volume we in, anticipate As development which, All strong $XX.X shipments, look fiscal from product in design year to up dollar XXXX, forward to to multimillion XX% we fiscal of could result each place volume a accelerating with customers, in totaled

sequentially, Revenues year Turning X% to million from up but QX ago. a XX% Management totaled $X Environment Remote in REM. or down

totaled XXXX. customer of up million, For the the XX% out-of-band growth, our our REM continuing fiscal revenues year $XX.X solutions. from by Demand SaaS drove adoption products augmented this for XXXX,

solutions While this management an business post-COVID. remote quarter-to-quarter, enduring the is demand seeing volatile for uptick can be

to we revenues. Our by strong licensing QX visibility year-over-year expect continue software to is increasing, double-digit gains. results and bolstered deliver were

and in XXXX. toward progress our services other and to recurring continue exceeded internal We expectations goals SaaS make revenue for our

within to on X and our recurring are adoption still the reach innings, that we well every accelerating, have are growing, While in X to of for conviction years. we total is XX% is early revenue revenues the pipeline we way

a and Finally, several number acquired to report current bring reasons. calendar The highly in we product in business complementary finalized about flows This months as together, customers over while offering, a September. half applications. fiscal for revenues brings XXXX, This ending quarter our city IoT NetXEdge expect it this Lantronix didn’t CSI go-to-market our size. efficiency million we fiscal QX, to are well of as an million first a month, similar. smart lines of $XXX we and from earlier the $XX.X of exciting for deliver And year carve-out almost our real X and networks to and acquired number transition in manufacturing The federal year for revenue acquisition financial close us expect of scale sticky exposure and municipal business guided, is growing revenue to product in just XXXX. Jeremy our totaled

our hard meeting we work customers, which already to synergy expect opportunities, we capture. several new are and revenue at We see

switches the number transportation of that to powered router sells supplied cloud Network deployment The applications. a Transition by then Ethernet competitors. uploaded of via example, our camera captured for is departments government and is data of currently its security cellular one For to

rate. growth point. we We the synergies to deliver a have product compelling just accelerating of we at our deliver to offerings, higher can of customers is revenue in-house capability same over price type a new and expect thus see with one our the the time, This performance very solution example and

the we substantial the due the products, nature and next our over $X synergies, to be months. XX of we is A which realized ability this Finally, expected X, day course complementary immediately piece on to of of confident to realize deliver expense the million that expect in million and of $X was acquisition operating are over accretive. manufacturing to

put to we’re pleased expecting double to to these our at perspective, Just to out the into midpoint fiscal earnings of we laid at versus of the of the more this Jeremy than XXXX summary, are EPS fiscal call, in power beginning In non-GAAP guidance guidance results XXXX. shareholders. accretion deliver the the

continue very executed to organically through a at fiscal XXXX in double-digit ‘XX. a challenging rate team growing exited has year well environment. fiscal and that expect We our trend Our

strategic to on forward prepared remarks to continue the acquiring as progress today. cash synergies execute them We the our strategy. shareholders assets, to look flow. for We in we our to and are completes That months improving reporting as integrating so drive coming realizing

So now to Q&A I conduct it Chuck will to our turn over session.

Operator

Thank question Please from Instructions] go ROTH And will with [Operator first the Scott Searle come ahead. you. Capital.

Scott Searle

nice questions. Thanks of Very Nice well see growth line top the as the to software good coming with as my the Hi, through afternoon. taking for margins guys. some gross contribution. quarter,

expecting you’re Just growth choppy. gross was bit I looks as sure a Networks looking quarter, catch-ups Transition the OpEx and of we the I Jeremy, But grow to right correctly. rates quarter Networks software the OpEx audio forward lot clarify a trend little months sequentially? well fourth of OpEx for as know was How And the of Paul, offset variable cost got expecting a want should of some you now be we’re on on to the there. things, Transition like up, X some couple to the margins board got heard moving of by with of And impact. double-digit then the in parts comp going I gross reduction you’ve also front into the forward? as plans impact being margins the quarter want Organically, ongoing? make September to

So September and margins how into should gross go we quarter? think as OpEx about we

Paul Pickle

the those on long on had continues quarter. order. this We’ve rate I’ll those organic able rate backlog We been Alright. those backlogs building, past a growth those take some of shipments about piece backlog. talking definitely strong The deliver lead got first. We to that time to grow. components in-house. on having growth were

quarter new I is These last well our And over That’s the that been think customers at averages. organic that are I we point, Xx. orders programs for. we’re over new historical placing said business. this have were Xx all production Part well programs. of

that trend mention as and on well. on we’re of quite got business it and we’ve lots are Management a strength. then for nice a I’ll of so real bit visibility seeing Jeremy. as over an that. number seeing whole, OpEx a to we on POCs the macro of But Remote And products comment the to Not I’ll new And quick Environment the trend, overall turn

the of percentage a revenue. look important we’re thing think at I driving as what to

of that And projects comment you that needed a on down. always continue driving look even we down. to on last down that board as OpEx to a want X.X see drive depending you on up the X to years, But if be do of to drive. So overall, Jeremy, come should certifications it’s been that we’ve you and R&D basis, percentage years, going we further? a the quarter-on-quarter at OpEx percentage us as have and revenue revenue

Jeremy Whitaker

Yes.

contribution revenue going kind came that software lumpy. was to the it’s quarter, margins, off be expected meaningful we from future, and helped to strong is relates it As really a but some licensing in that by of pretty

to down I couple then product kind And targeting would down hundred would in EBITDA, low to of are we income gross a points double we back digits. margins our I – come just of so as normal margins basis And come expect to get non-GAAP our mix. the

expect particular, as so another I are And because out we that will of we different business, with revenue, as that synergies a planned. roll would while that would total we Paul that, OpEx the adding go to percentage in expect as up mentioned, have I decline,

Scott Searle

bit little well color anything you Could in just availability issues all or something of quarter Got a the going on from an product end it. into market next on business perspective going fared to particular? Helpful. bit Remote – seems it except or some kind little the more is of over mode that categories there there? and Are couple a in And for like Paul, back the growth lumpy Management. quarters? pretty component this Is of provide expect it’s get a there

Paul Pickle

Yes.

cycle. kind definitely a to is business. of This REM tied – is customer So more CapEx lumpy it’s

and the purchase then placed. that we and So when have things really design look we end going opportunity to track POCs orders kind visibility and watch up we funnel of those we to even for going getting ends large design those the are though get are to happen, purchase ends, orders

this But So in they doesn’t make pretty two-quarter strong of REM. see forward, quarter basis. to decent It happen going a just I continued quarter. a trend. growth measured fashion. on lumpy The average, going do prior of coming even trend best expect, was of quarter business if a look a kind QX A quarterly at you’re for forward. pretty a was going would you is off

Scott Searle

wide to $XX variance for in fiscal if it’s into low-double some But of back providing of kind the And kind think of margin XX%. it. digit, up million year. $XX of And for to is course a with, the that terms million, I it’s low over dive the in pretty I for out could ‘XX, longer-term the of begin Transition I of digit the if the growth rate organic end kind Got Networks, assumptions just lastly, to high-single thanks guidance perspective. a

it’s terms am in the range could factors it in So, you the sounds out plays that. ‘XX? Certainly, that address a swing of wondering course I availability like we wide look fiscal part of there. as range if over big Thanks. component But a

Paul Pickle

bit a of It’s Yes. range. a broader

XXX% that, case And more this people but do expect, does wait in. for as couple We I localities months of grow. correct. from and down. a again, Again, have we we look the COVID quite into to drop we But that for built if to shutdown feel caution pause of not it’s Lantronix be is at variant, indicative I to the in business new live QX, to will a times think great You of up really are kind to tendency that we – norm get think proper aside – rates really things have a Delta business different strongly we we position exited have that cause bring as we maybe that just the in guidance. the

product We the what turning years, we see starting for working X last think to on I from I probably – on where tackling as of offerings And August new working and around expect that just obviously, some as better. bit happened closed continue. been we Definitely little the blocking things are a revenue, newly are results our of to growth that X. a QX. and it indicative have acquired certain in standpoint not we this would

seeing definitely them close were January, the were they we of them a the component pretty the seeing ship. the at if $XX.X are And linear If analyzing is December time. of at of kind you way were million calendar look that as terms we in of growth were But there business. in asking they we year, course, in prior – they component shortages, that

quarter time. that the at weren’t revenue. the seeing they shortages are already component placing orders necessary But We future for

was I a were up. March they think seeing And the of as it result, a has backlog quarter definitely because bit a that perhaps gone in close. hindsight little then

think orders got I with to our do operationally we as to to things purchase we get we suppliers, The have bit larger leverage stronger we being start in. will at that is there. that do of And that deliver. will can in I they So, is be able say what that optimistic are shape a little I think strong the their pull moment. than to demand demand able to quite about – much

we are cautious So, But little deliver that’s positive. being to it. their a ability just on bit a

revenue business judge on don’t have But So, years we yet. for at double-digits I a that is really quite been at definitely X certainly, working growing double-digit rate. the the that past

Scott Searle

Great. Thank you.

Operator

The Ryan Koontz ahead. next go Please from Company. question will Needham with come &

Ryan Koontz

for balance wonder of over where year calendar can saw color and where about over is verticals in think question. Thanks the if strength terms in market Hi. maybe And – the COVID that us you those of here? a your QX, you still any the I give on you the balance how headwind? verticals

Paul Pickle

Ryan. you, Thank Yes, great question.

today verticals industrial normally – in we Industrial enterprise market is as well. that an put an would largely have bucket. our municipalities, really component industrial. do So, We so

back every device some type bit patient color purchases. about coming what really rush to just device half of COVID, of But XXXX. provide where catch-up. needs during that we are Due monitoring it seeing XXXX the cities We during will strong connectivity And some to there on management. in is the playing and was was on was have new moderated a That later programs then a really terms industry of the opportunities. of piece as medical smart

strong seeing the are it’s across nice definitely in we strength particular. is doing – Industrial board. pretty So, medical, in some

a As is base the vertical, have lift. would macroeconomic industrial and a nice of vast characterize rooted at as in that we it majority uplift. look I it, our business seen I really

But as then as And kind delivery municipal strength We energy some a result well more them classify opportunities as those these of sector, still in applications. new that new sector, in North are kind seeing the seeing energy you of smart as are America, even but security sector, city Europe industrial, applications. of APAC.

for just have well. instance, the We been applications year, And then new of have video orders in camera launches some placed real and that last applications. component of there. we these program Flock are new in that There security that’s terms rather strength lastly, has going Safety, talked conferencing seen price likes some about from

a well customers SAM that’s given opportunities for well. lot to Our as as volume new supporting more opened them Microsoft there up whole transition Teams a and us

not that the COVID across of from see a just So, standpoint, know ordering board. strength are in strength the general little bit right by I a sector I hampered but board. across that’s particular don’t they an now,

Ryan Koontz

Sure.

the from impact terms sector challenges in on not mean kind of supply there? thinking the on of I I an maybe was headwinds, you side auto seeing are with industrial use some Okay. seeing chain,

Paul Pickle

application and fairly automotive, is automotive us, some development have platform launches. for do it’s in Well, new. We new programs but mostly

in nicely in the would Our Germany quite doing electric ramping Both well. tomorrow, sorry, so just us. for us have things are XX,XXX do problem going to cargo so I again, we to up we with they that customer units bit as of lead arrival that of UK little an in am rather, because – and the a ban that But are Turkey time a product. TOGG once production based those deliver have wanted of if

Ryan Koontz

etcetera, real the your are seeing more characters your it. have shifts last concerns, you Thanks. the that on other types analog chain, chips, or chips, you? becoming problem of few are supply the it for for seen shifts a any of similar of long into Yes, And quarters, terms helpful. that in Got we Is poles. different

Paul Pickle

XX type bit devices. a But of came problem it’s substrates. a real materials in little Substrates now. real specialty Things problem chips TSMC, the us. bit of launch. right for it are better specialty a on small versus mixed terms are now. ran processes little Raw the we the the a lithography year analog are got devices the to because at down last a problem fab. then into of end of that the It’s And of high-volume right signal the iPhone not dependent to easier more some silicon, getting

back some have online. back – has oscillators, We come of our seen come

with we But of That’s across – is capacity those And so in board. seems components. a business is it comes general, tight, raw up. the why I materials the kind really issue, of see WiFi substrates think be there starting of little are down to to easing to overall, picked and bit and big some it our

So, point single we I issues this talked we One couldn’t to freight as a are a costs, have and point. at chain of with associated were supply those and back percentage pre-COVID. about culprit moderated, we today, are logistics increased below we positive, revenue, at least where

are we there. okay doing So,

Ryan Koontz

all helpful. Super for Great. That’s have. that Thanks Paul. color I

Paul Pickle

Thank you, Ryan.

Operator

This remarks. I concludes back like for Paul the Please to closing session. would question-and-answer sir. turn any our to go ahead, conference Pickle over

Paul Pickle

you thank and Chuck, have evening. a joining for you, us, great and Thank all

Operator

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

now disconnect. You may

Lantronix (LTRX) 27 Aug 212021 Q4 Earnings call transcript