LTRX - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the Lantronix 2022 Second Quarter results conference call. All participants will be in a listen-only mode. Should you need assistance please signal conference specialist by [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions, to ask a question, [Operator Instructions] to withdraw your question [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Adams, Investor Relations, please go ahead.

Rob Adams

Betsy. Thanks and call. joining everyone, fiscal second you conference XXXX thank afternoon, the for quarter Good

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

international will today callers, X:XX P.M. XXX-XXX-XXXX, PM Pacific through In XXXXXXX. XXth at or and addition, Eastern, XXX-XXX-XXX, starting for a enter passcode be available phone dialing February replay by X:XX

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

Jeremy Whitaker

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

during and $X.X quarter. decline mix. as GAAP XXXX, product compared of quarter made net million fiscal prior XXXX recent increase XX% of XXXX. our for first due to costs first quarter or an revenue up second or The fiscal a $X.X the Sequentially, costs $X.XX GAAP the million of of operating when of the reported to gross during for were $X.X were to as second due Fiscal XXXX. net headcount $XX.X XXXX, $X.X we of was million million, the second $X.X compared driven to of compared fiscal our year-on-year and second in quarter. of non-GAAP to as progress the quarter fiscal compared to quarter related expenses XXXX, from gross increase of R&D quarter loss XXXX to increase fiscal XXXX. or Fiscal XX% of the The of revenue to of quarter for of XXXX. growth primarily $XX.X of for for net of a reported Selling $X.X in second GAAP administrative loss was net general And was in growth, $X.XX the percentage during per the share a For contribution organic The the XXX% XXXX. by GAAP $XXX recent second second fiscal share sequential XXXX, million related XX%. million GAAP our million was was quarter year-ago result, operating sequentially Research in quarter XXXX, to the thousand, million second $X.X quarter million of non-GAAP first compared second million implementing fiscal acquisition quarter record the of quarter net quarter in expenses plan. acquisition. for And synergy loss and second primarily increased XX.X% of development of and revenue was Fiscal with margin quarter per impacted net was share, non-GAAP $X.XX for from expenses fiscal margin compared the a recent the compared of and $X declined with acquisition. million $X.X and the the or per XXXX. the during Fiscal with by the SG&A and in per fiscal Fiscal We've was quarter $XX.X million income XXXX, $X.XX income share second good

balance Now quarter increase equivalents ended December the an from of turning of million $XX $XX.X cash we sheet, cash million, quarter. the with XX the prior to and

as of of compared share. million $XX.X XXXX, second-lien pay to Net In term January per November $XX.X partial loan December inventories million of facility compared down million interest as as our December $XX.X Working with improved September of XXXX, and XX, XXXX. million as high with During of a as we in XX, for the as used of an recent we acquisition. of to were price a $XX that $XX.X million used the million $X.X consideration XX, capital offering quarter. XXXX, proceeds $XX.X prior raised million we at shares common of $X.XX sale XXXX, of

from outlook, December backlog. annual of months recent our strong our demand which exited with includes quarter to contribution and approximately We XX acquisition. customer turning the Now,

the stronger fourth and we -- see expect deliver believe chain a EPS to result, supply we upon continue annual to quarter, much of without that guidance. guided end revenue non-GAAP our supply current the high are increasing revenue could chain see improvements Based our we above a and as constraints, and range. our outlook, annual We forecasted in

raising target million to to For fiscal growth our XX%. range the we $XXX.X a of in year are XXXX, of range $XXX.X million, to revenue representing annual XX%

EPS representing in expect the range of we I addition, will of $X.XX share, over XXX%. and take target now turn Paul. to to to $X.XX our adjusting range capital XX% non-GAAP In in are recent a our the call growth to account raise earnings annual into per

Paul Pickle

to shareholders here to our today. Thank am record Jeremy. report you, I especially results pleased

we During we one, year-over-year. $XX.X made revenues progress XXX% million, and the quarter, several up fronts. of on Number reported XX% record sequentially, second

successfully Excluding Number recent to acquisition, well the Number currently we grew that growth production upside three, we equity impressive organic our fiscal $XX offering, XX% rate next projects volume and fantastic navigating did a team projects experienced next multiple down backlog an revenue and interest drive fund high million pipeline, the finally, high our a raising that constraints job year. and growth, in our acquisition. potential we quarter. And year-over-year completed we to four, secondary will were and continued almost potentially the and supply XX% sequentially. fund to chain move most the of into we Compute our meet through demand Edge some debt, able expect pay September on

let's out on With way, get some the quarter outlook. the into our second of results in headlines detail

As and in growth second I've a pointed XX% record. more most revenues doubled grow QX, an in a our and quarter, service out, equation, basis were revenues device QX cellular strength revenues Edge than Intelligent acquired our upside and Solutions recent saw notable our business included from the where continues in benefited was demand remote bolstered very levels. quarter from product from products, exciting month solutions. healthy. our Compute than management new Intelligent newly million acquisitions came our The to contribution from Edge of with relationship sequential more Benefiting the in contributors of XX% environment products, year-over-year, we the Qualcomm tracking, funnel removing recent broad our a from is QX full on and organic these $XX.X from largest incremental by execution one Wi-Fi, strong opportunity for

that we process to this few meet and this we we of QX on and dollars focusing front a not programs pleased potential. to million. supply capacity expanding over progress To about this in the revenue chain navigate to and our thousand some potential influx offer ongoing to customer we're draw growth that must down $X with We million surplus also capture in report products made to on. are constraints selectively continue we're requested the After hundred strongest QX. those deliver however We $X.X that managed could on sequentially exiting

is do it relatively for ability upside components repeatedly. we small, continue chain a the bring we Each year the this whenever possible. we to time product given upside to first environment, more temper a upside been deliver and own to outlook, the this is than have in does decrease securing its to able set and prudent circumstances to And but in related that not an the supply that potential situation our translate of it in While feel will navigate quarter its number and down. necessarily has

we beginning will supply built shortages the older semiconductor that that cautiously are on especially the optimistic to processes, ease. is high-reliability to belief current are constraints for Our but continue products linger, chain

rise in We quarter. we I'm a as rates. our thus balance We place another successfully will session. results Betsy Finally, summary, environment $XX completes of That company's time, navigated of increased to million pay earlier, shipments growth. growth, rate time to remarks working us difficult revenues. a enable it funds record that source balance as that will We dry-powder crucial pleased capital coupon potentially to double-digit at track a of serve to lead leg sheet QX so quarter by capital the our Since Jeremy over cash $XX.X the remainder be have with supply able today, an and In was eliminating able an turn improved Q&A to which components allowing poised our long to our our now impressive down and complete second-lien procure an interest organically. us million. the second we to positions. equity continues next fund detailed leaving conduct in The used offering to our to deliver and were put we're with these to that grew expenses prepared the I loan for of in for

Operator

Thank you.

Instructions] Answer will Question At pause We [Operator to time, will assemble begin and momentarily this our we now the session. roster.

Roth go ahead. from The Scott Searle first question with comes Please Capital.

Scott Searle

quarter, for Nice Thanks job on the my guys. afternoon. Good taking questions.

Paul Pickle

Thank you.

Scott Searle

gross mix the to expedites, I could just start quickly incremental supply was component you of a quantify the terms costs. on the bit wondering Maybe impact quarter. I in there's margins; if front, in chain issue know little on a financial

little costs a that component got terms follow-ups. flush versus out of a could couple If maybe I've of bit mix, you and in

Jeremy Whitaker

record of sequential mix. decline Scott, doubled yeah, a from is previous They Intelligent We had by than the was Edge this so driven Yes the more Jeremy, quarter products. with our most probably group products various our lower from year-ago quarter. product the quarter. even more than is of standpoint. look from margin In this end on at you the scale And that the solution as

costs, other a and consistent still that said, are those change the from this it mix necessarily than costs component feeling have of shortages PPBs it quarter several we been was was quarters. because pressure but more So last relatively costs, the and a over in matter

Scott Searle

could to And Jeremy, was follow up if OpEx on I sequentially. front, the up it

full You of quarter a from had Transition impact Networks.

impact the fiscal only think else? there versus that prior I Is base in X forward should So this the the about there? of that the going level Is quarter. extrapolating we half be 'XX? months in Is into thinking second anything

Jeremy Whitaker

Yes. than Because of revenue also amount expected had the a quarter, this costs. variable higher we higher of

was costs come accordingly see well. so we variable then -- So as tempers as the that revenue could down

Paul Pickle

basis cost have -- base dollar bit, looking programs some that but are a when a on in revenue, definitely we're growth we good to you Yeah, of and wouldn't we say that percentage mode, a prove source that little level, but fund. is this just I that a maybe as a

dollar up grows, efficiency. to expect but a would spending go think a percentage basis to revenue over time I the we'd some additional So continue of as revenue, as drive I on

Scott Searle

good Got related I to in maybe areas pretty to talked supply doing more you from what in guys provide larger quarter but a stretched lead you. think on some problematic still you the end-market like an then And And Intelligent standpoint. standpoint, could meters. opportunities terms it been that on sounds just of job about last color bit front, time have you are Paul little maybe as jump chain, from a a

of If some or where quarters to couple next things move you of up for are flush Thanks. bigger and the opportunities you down. levers out over the

Paul Pickle

Okay.

tent. the reflect made long I some last comments said So yeah, on of the not I if I Qualcomm -- would be that I quarter quarter, the on believe last pulling the back

necessarily the secure at does mean in Qualcomm doing it upside, So quarter, I lot additional to in components this point, additional that not reflected, but get to timeframe. some March to around a of processors. managed we as the shipments shipments were other quarter will And able additional the the we've translate

at are some potential, got dive particular some try So on I I on in those to have visibility point, into and last But the and look QX exotic deliveries in it's to and Qualcomm upside upside good get chips try processors additional buys. the though some market When spot say for to this possibly in we've the it, scrambling pop-memory relatively particular, find us. able substrates, even to mostly did then Rolodex it, go demand. we're mentioned before, and the and flash. supply source to quarter or out components good as we are in tough but

getting So shortage say little to is some Ethernet here switches will processors, up navigate, is more we're then to definitely then bit I flash, WiFi that able difficult. and memory, and a as chipsets, a starting creep but

to related certain more it's think suppliers. I

space, smart we've of end it's as core of that projects couple able we we the go some camera did AR industrial That terms in but but compute secured other of be to HAR, will but gave on still optionality. platforms automotive type say strong, are point, processing, more safety One I'll kind competency get strategy remains the, as on electronics additional shift which of of if Then markets applications, to processing, us quarters. future were additional we a qualify terms more in of consumer suppliers, this in in planned more forward in those. past look still quarter, visual will So opportunities, same that utility. production those course, not a say I vendors outside definitely

that projects additional new late. up were security just a the picking Smart we related of up to Some in contract picked ARR then a And cities is cameras. new one,

Scott Searle

Thank you. Nice quarter.

Paul Pickle

Thank you, sir.

Operator

Group. The question from next go ahead. with Craig-Hallum comes Christian Please Schwab Capital

Christian Schwab

guys. quarter great Hey,

another backlog it, So record miss or leave or record backlog did did a number do I you that? but a backlog, you have

Paul Pickle

We It's of Yes. such million million from was the a gave we went tripling jump. essentially backlog. it a because several million it out then customers by and big rates $XX excluding requests acquired order backlog $XX of -- last pull-in to quarter a $X had and

it not fixate worth was quarter. necessarily said of why to It's thought We we that's So gave will today. we it's Having really of in relevant. something that, it on. as say last I want $XX

some did despite revenue able being in the significant in grow see it upside So quarter. to

grow, I we does want something to -- that think on continue fixate it's but does not it go-forward something So it's but a to also that basis, grow. it continue to

Christian Schwab

do any track 'XX new energy was then update ahead And that when kicking any you and supposed material of grid have everything track, the revenue half on in kind more there? timeframe second the custom drive smart start growth Fiscal in update to Great. on of maybe is

Paul Pickle

customers into schedules. to on schedules. expectations it's come of some board They're driving to say I'd those still track our some the driving consigned aggressive platform. There's

say. Some components the come platform, consigned should I that into

those Our components. customers had procuring difficulty some

more ensure million to we confident to the workshop to comparing been finished December just and $XX million terms in end probably to the continues fiscal just in say million able from Happy about we're stepped that say Then, a December last that secure three-day quarter. in talked year, a program we a million like. quarter. bit what we've So of Well, the talking the additional upper quarter, starting looks to range. move for $XX color, to about I'd the commentary forward. them $XX the contribution next-generation impact of $XX in to

things are going far nicely. so And pretty

Christian Schwab

we growth here, a that bunch talked been of while, done I of be I business as organic good that's like Paul, rate the new what programs and question, got being you've our -- about the you're million, my And on material, guess, that of the organic in see there minus time. you kind is and of That's acquisitions later this seeing, I then I'll Great. mean, backlog could over do quite a $XX north growth news. mean, Okay. typical last true

Paul Pickle

where of XX+%. terms drive little This I'd a position, of we continue more take to conservative that think can bit probably but I a in is

that that. caveat I'll I don't of and on the the business. entirety Now, think is

that really that business continue due to phase I we have think so roadmaps worked we around. in XX+%'s Xnd, what we've need well could factoring with I'm on through demand But year. turn We acquired in far, August very next we look done extraordinary at just an we're not probably the so if closed that the that growth we conservative. that

so potential a meter growth drive would that a environment, in some smart look is that or manage think that's more not it's smart not backlog, normalized add in can to I at I number you program, XX+% of considerable performance. that obviously If I even should program currently say that good level utility think we

Christian Schwab

No Great, Thank other fantastic. you. questions.

Operator

Ryan comes from Koontz ahead. with question go next Needham. The Please

Ryan Koontz

for how Thanks the and business you're acquired the progress Thanks. if your on it relates What is across your market and X, verticals really question. strength seeing business the the strategies? taking Transition contrast along coming different as to cross-selling you Networks core your organic

Paul Pickle

thought are The will lines a lot an Networks that from couple that to more of that's from one and that that. product We of is of customer was don't still the that now. staggering with bit about just say Compute cross-selling so organic of that would portion say up say, well, of They we're we that but picking natural performing but that I on potential a rate, first. These a pleasantly it acquisition. at the the there's programs, will of team pretty phenomenal about kept key assets. are a I'll Proper, emphasis growing. opportunities. came quite I Lantronix The business I job. the happy there, put have guys we expect talk know rate the beginning a We little is muted pull-through to that team business good doing I But really though, strategy. Transition sales -- It right growth rest in continue. the with the terms say surprised.

contrast but compute would steady newly get addressing XX+%, more newer, we expectation. that, drive now we say have. I we'll probably So XX% business, that a can if even where that approaching acquired I with XX% is to a the confidently point solutions reasonable XX+% on oriented right Maybe

Ryan Koontz

and verticals businesses different base Okay. the similar. how two the How about touch or different they on are across

Paul Pickle

Yeah.

won't newly there's So say boards. and two the in -- different that I

different teams sell really sales portfolio. two of have can We entirety that the the

not we've business. So the separated

makes to I just think product We responsibility acquired sense that it sales a two selling motions combine and portion the went of have the portfolio. well. distinct account as team to there's

-- does just two there send a it to Smart bit So little little sales quarter sales business have bit through but towards having year a -- as at want and stronger that does government are is slower on organizations, I Fed move in different motion more There's a different cyclicality well. of it's verticals, December margin fiscal industrial. for it that don't the look that to go and we pullback some bit two that a pace, That march one there's spending. come motions particular at message and end a about. certainly timeframe, June one, cities September a if with then a the

but that sale again, is moving it's standpoint little are then look definitely bit a once stickier. if within a cities, it So we from bit Smart slower cycles one that DOT one at longer, could a

several is municipal extreme So contrast vertical. where and one security be enterprise those. the we really next from growth come I of from certainly, in it's of that if If today, SMART coming would and the applications some to expect where we into some Utility the move with quarters, growth

Ryan Koontz

much. Bravo Thank you Paul. very

Paul Pickle

you. Thank

Operator

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

Paul Pickle

for Thank today, and Thank you, great you joining Betsy. have a us evening.

Operator

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

now disconnect. may You

Lantronix (LTRX) 11 Feb 222022 Q2 Earnings call transcript