LTRX - Earnings call 2 2024

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Operator

Good afternoon, and welcome to the Lantronix Second Quarter 2024 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Adams. Please go ahead.

Robert Adams

Good afternoon, everyone, and thank you for joining the second quarter fiscal 2024 conference call.

call Whitaker, Saleel Chief the Officer; Chief on Jeremy and Financial us today Awsare, are Executive Joining Officer. website. A today's live company's call of will be and available on archived webcast the

and addition, details today's In release. find can the earnings for phone replay you the in call

this management's forward-looking furnished which current filings the in encourage to available its to contained risk and may expectations. its involve results the to cautionary make and cause review and that which was XX-K We could SEC earnings is our the management factors on in statements differ release, today call, risks During statements, the uncertainties such materially and from and website our company's XX-Q. SEC you as

publicly events release Investor reflect will any forward-looking call, discuss no some commentary. for undertakes in non-GAAP financial our Lantronix statements company website Furthermore, or will during the details news Please additional measures. update future refer and to the section of financial the information that obligation to Relations or the management's circumstances. to supplement the revise

Relations Today's Investor posted we reconciliations and the reporting presents which of our differences is our in GAAP and the describes use. non-GAAP measures financial earnings that non-GAAP for between website, release, the section

With Saleel and CEO. call that, over now the Awsare, I'll turn to Lantronix's President

Saleel Awsare

the to Rob, thank for at first November. you of speaking I'm the for joined you, to joining everyone, happy us since Thanks, be and end today. on the call time I

of compared revenue same over quarter, I'm of XXXX technology, $XX well in XXXX. in ], Lantronix an and [ we of it million the discuss report I and the short as of of to in optimistic an some QX fiscal the pleased results of product our of I'm I be ] XX% growing to expect and revenues and of period that joined engagement. FY with as the [ would why total to the term. given some record driving my leadership record strong background thought pipeline last XXXX of customer XX% second initiatives for the FY wide array helpful about future Lantronix increase for FY provide quarter also increase I'm

high-tech years, and hardware, IoT across XX services. largest was I've at Most I than successes General the mobile navigated to Vice the ran President the Synaptics, the more enterprise company's landscape, business recently, driving I that, For the software Manager, of division. Prior and and division. Senior

and led I changes, centricity prioritizing gross significant at margin made implementing to significant operations, streamlining profitability customer methodologies go-to-market and While improvements. that Synaptics, robust

unique with of on are its [ wireless capitalize accelerating to secure IoT solutions positioned have the including Lantronix multiple compute Conexant, routers, record secure business. opportunity potential rapidly solution growing portfolio this and be range From edge and telematics, custom auto-band to Across of and me of a business Winbond improvement Lantronix metrics. Synaptics trends macro The unlocked. companies, of is was it When quickly programmable to apparent presented, perfectly a ] modules established performance compute that management, there was connect a and is momentum. much track across

depth coverage. and have and of differentiated unparalleled to We breadth and IoT global solutions, the invested be providing reach trusted supplier the

shareholder capital, new steward the CEO, myself President that a see responsibility and As as I I of seriously. and take

my strengths many focus our in direct, employees, immersing customers, met first building growing find and XX on a opportunities. You'll partners oriented profitable with days, and results In me I and business. myself

review, a However, into strategic areas remains multiple like launched operations delving portfolio initiatives focus including on We've engineering, enhancing my and deeply various performance. marketing.

Europe, rate have to to line of be include happy gate tracking commencement of SmartGrid in the in say long-term I'm the strong business and in noteworthy In our device In expect generators this the with existing towers. lead deepened, to and a a telecom communication XXXX, device times. orders way and this customer, applications. backlog the to in receiving Initial and shipments made met win first highlights Having customer the a business Other of place engagement. volume FY purchase remainder just FY shipment year. run that critical has cell be ramp collection, volume our with will design carrier, major I we our power we expect supplying the FOXX our data a QX, to drive enables against we to transition relationship for diagnostics to deployments

standards. large adoption enterprise well reporting And backup state purchases. systems customers finally, is mandates products and driven power to out-of-band resuming in our energy continue perform This by our with

and in Before been impressed with by our over our financials I hand QX board, about conclude I'm like the Jeremy ahead Since I'd on at more the to to to and customers. I've the Lantronix. I've technology IP review saying opportunity portfolio really great detail, been of the broad excited call team,

us to an generate sustainable work but have of the we lot as growth. company to a on become built we blocks Lantronix have ahead transformation, drive stronger franchises building profitable on confident place We of that in even I'm the continue and differentiated

turn now Chief the Whitaker, to I'll Officer. over Lantronix's call Financial Jeremy

Jeremy Whitaker

Thank you, Saleel.

on for our commenting fiscal Now remainder the XXXX of quarter financial year and will the year. for business provide financial second I some results our targets the fiscal of before highlights

for to we up the was from driven of year-ago record XXXX, and XX% an grid Lantronix, periods, provider. million, smart all-time $XX a reported Revenue sequential and FQX production XX% For initial solutions respectively. by revenue shipments

for initial primarily increased previously XX% and production driven system periods, noted. increase shipments IoT by solutions customer, the sequential year-ago smart from as and XX% grid respectively. our lead by The was

strong impacted by year-over-year addition, In from increase sales out-of-band was the deployments.

from IoT of year, continued contribution meaningful IoT solutions system lead the X%, carrier. telematics expect our continuing growth and telecom by customer production fiscal solutions customer, our design out-of-band solutions remainder EV from the we a in For strength up asset Tier SmartGrid of to Sequentially, ramp tracking driven the X were with our embedded [indiscernible].

year service revenues of embedded the a were enterprise into in transitioned projects as FQX design a X ended that customer included large of down and As software services sequentially, in In year-on-year ago win have XXXX. we a expected, the large primarily function video FQX XXXX design period that experienced production. IoT completion solutions decline

GAAP in The of the the increased XX.X% quarter compared XX% in FQX ago in change prior the function prior decline year a from gross XXXX the quarter and to margin was and XX.X% to margin primarily margin ago was the for XX.X% prior product XX.X% gross was in XX.X% and a XXXX mix in for Non-GAAP compared year in quarter quarter. quarter. FQX costs. logistics gross

margins a range. in similar For FQX gross XXXX, we expect

year FQX SG&A expenses $X.X $XX.X ago to sequential compared were related million primarily $X.X million to and XXXX $X.X the share-based offset cost-cutting to costs $X.X GAAP the compared The with prior million in in efforts. quarter GAAP compensation, the partially SG&A XXXX related prior the by in for were year cost-cutting variable increase million due for was primarily The GAAP in quarter. decline quarter. million expenses with quarter and and activities. FQX ago R&D was

headcount reduced XXXX. approximately we Company-wide, FQX during by X%

or ago $X.X net $X.X was or more the to XXXX $X.XX was our our in as ago income several acquisitions, approximately the in during the FQX per million to or million from compared GAAP efficiently quarter. Non-GAAP XX% non-GAAP net the headcount $X.X share loss business $X.XX improve net of compared and million of per quarter. income share cost efforts net $X.X capture million margins. by Over have share to reduced per or loss previous operating quarters, year synergies share $X.XX ongoing XXXX during GAAP part $X.XX run of last year we per FQX

turning $XX.X to sheet. million, of capital the Now from from ended an quarter. million We balance $XX.X and FQX prior million quarter. the of an increase increase of was prior cash XXXX with the cash equivalents Working million, $X.X $X.X

Net quarter. as FQX $X.X XXXX, million inventories were from prior million $XX.X a of decrease of the

turning our outlook. Now to

XXXX, we per a For the quarter of to million in share. range EPS revenue $XX to a and $X.XX of of third $X.XX $XX in million range non-GAAP expect fiscal

in updating EPS range in per to to we million and XXXX, $X.XX annual a to fiscal million of non-GAAP share. For range guidance of our $XXX $XXX are revenue a $X.XX

The and A an the of business, embedded in second growth a for business XXXX. that fiscal XXXX half growth revenue change of are their and in with our was channel deliver through broad-based guidance organic sales annual as top our revenue and lines to video that expected a for win design slated factors. XX% in solutions XX% the to earnings. bottom pushed into on embedded work on result primarily compute non-GAAP inventories the and over in fiscal remain our both slowdown track due optimistic customers lower record to year general applications XX% on as X is IoT in We

for remarks today. prepared that, complete With our we

So it for conduct Q&A I our will now operator turn the over to session.

Operator

Instructions] [Operator

of come Ross Searle MKM. will question first Our from Scott

Scott Searle

there little congratulations sounds clarity Maybe of and a in embedded dive just to got the aboard. below how color and wonder outlook, the Saleel, a a more a welcome I if expectations. win push the terms quickly current talking like And front that larger with slippage level at customer of embedded risk any on looks opportunity about thinking And the inventory you're slip? going, is them. is you're ramp II time? you on design It like a provide what could about front. of little in how channel the Phase the other like Enel you've on to

Saleel Awsare

question. for thanks Scott, the

then I'll other to Let pass start the the of that me and Jeremy it asked. question Enel ramp, some you with for

And going deployed customer in are prepared precisely. in orders this ramp the backlog the So year. who of the is the more our getting as will we customer, of transition end run said rate kind Europe remarks, for we've a I second good put in well. And the as fiscal if half field, be year. of the purchase getting as I of I in is said, a are of and June in showstoppers. my Systems now And till we for business, meeting it no that you into we was got business Enel --

the forward. get as and ramp to with I we'll them move expect for of second the half year, orders purchase we

especially big second start mean, deployments, calendar the buildup QX. fiscal down of will our there half Now a is just bit slow year. the and we into a calendar QX they I go it our Jeremy? the as in QX, little as

Jeremy Whitaker

Yes, question you distributor regarding Scott, inventories. a had

Scott Searle

on the elevated some you're that channel about you inventory down And kind and could ramp of embedded or inventory front, Yes. help in give Jeremy, and the to, an to in us levels. on just slipped fact, like sounds September idea out, December. otherwise the that us if that, it weeks wonder design then visibility comfort I that, going to win working calibrate. the is

Jeremy Whitaker

Yes.

solutions customer broad-based So hearing of of to and a that team that working And was in that in A as it industrial back team macro what base, heard channel back connectivity a is it lot sales are starting and with down our a is the lot customers. slowdown also from embedded inventories impacting IoT area. in customers. what we're that sales -- that going inventories general business relates and and end are to that we there is customers our from

And embedded brought fiscal for for second that we the forecast our year. for of solutions our down half reason, the

and are interaction As customer go applications, say talking on with I production of the is compute or customer relates team pushout and the understand it with that ramp. -- fiscal from we more have far a into to 'XX they to more in their would sales as of as one embedded track our video the

this buying point, ramp 'XX. are at the some us their already of slipped product They're into but has from production actual

Saleel Awsare

add things stuff. bit might I what you like certifications, you conferencing little now. like Scott. system, they're through more to right bit they a is anticipate, with This that's, through and longer and video think, Usually, go a color, let it, be going need this a Just takes familiar teams some me and than

Scott Searle

follow-up. And one helpful. if you. Very Got I could,

growth insight get of I it's I'm a about as early, the is bit still business so unfair. how or the this a could wondering 'XX, to give necessarily that customer is we you've kind comfortable of give a this perhaps know business and interactions us are growth portfolio mid-teens if you the fiscal into But given So some think double-digit but the you product into had? guidance, you that not

bigger profile industry. margin seen gross about the the some offerings, you if and that give as in on now product blended point if compute us I from business is you've insight that that, of discussion well, part a thinking front. And as edge throw you're that could bigger the becoming And within

the that marketplace You guys evolving wondering several your in lot and to of front see have a have on position there. a that over business the led that you years. how components I'm past

Saleel Awsare

Yes.

So is I percentages have think move this in said, numbers. from But for fiscal things into all the as company, it's it I bit forward to it to of 'XX, the compute a business and 'XX compute grew little me to just to connect. right we quite fiscal grow. a get clear from are early and I 'XX too be as specifics projecting XX% we And to growing our fiscal almost is -- that

that expect look into as I be future. growth I driver So to a the

you're areas. specifically do some edge going compute, early 'XX see right, momentum days, do technology and to the for but we Now great products. into I have specific those It's some fiscal

through doing, deep the program into strategic also is done strength, line, engineering And review. -- This going area. in look called the and dive teams a go business portfolio that the our every the with in past. are weakness trying teams really ROI spend starting our growth a we in week product and that a have of And Scott, I'm part I at probably our to something and to understand better the product March the

be better I'll able So in the this or to so. May give view about call a

Operator

The from Mike Walkley of comes next Canaccord question Genuity.

T. Michael Walkley

a than you. with here. look briefer welcome multipart to little Saleel, try aboard. to keep working I'll I And just forward them

mentioned your channels background, or industry in any But midst of terms the fruit portfolio you a unique given go-to-market can expand distribution do low-hanging you're of help in like see with think tenure you reach? and strategic Lantronix Lantronix at You away that review. right your short

Saleel Awsare

and QBR look earlier, go I I've low-hanging weeks with the worked future. really quarter a with and I'll about areas in and that team understand to very customers you at past think the fruit. that mean But go get it portfolio I with are. through what, And into fruits future. just details review few the the wouldn't I really first go as there might You we I have to said if that's connect the teeth I as we are know back. can I look it as I there can done my as my go is what, low-hanging more think when the that I going in I I'm have compute that because good in through get into the any,

done more? do kind really gravitated, [indiscernible] fruit? stuff which people the that, But pods leader. this I've go understand NVIDIA which And And I'll this Not in we can out a is just the a digress out-of-band roll Where is It's great [ question. AI, out-of-band space a there, it's little What here, of we one data and That in I as do low-hanging out-of-band. think more? lot not this past. about are exercised of have as in all for area, piece can port new differentiated Lantronix can and like they being yet. that for ] these be folks centers a I

here go after. there that but are things again, -- little Maybe can think we but bit me time, more give a I really

T. Michael Walkley

Jeremy. And Great. for follow-up maybe and/or helpful. just you a That's

customers in to -- of and As opportunity kind large look in longer-term with the the you a at Lantronix shared of long meet as has past, number pipeline. the you the start deals

I think time XX ] million. Any maybe opportunity? around that on was the and pipeline [ it last deals update $XXX

Saleel Awsare

Yes.

great a So funnel at spent time let and of was the really want Synaptics. The is a you I thing is this about lot understand. funnel, when to I've me something talk that

the very through to and size our before I familiar sales funnel. numbers, and few out back, just report the very there. said, I'm I back went surprised with number on I at and specific So I'm a weeks there's pleasantly But as team the a marketing team QBR of

that. much and to understand just more a funnel in it do schedules go of see dive, with we I'm deeper respect where a of like are the going and the programs each to the with stuff

So just of time, the with I'm but -- what saw far, give me I little a with so happy funnel. bit

T. Michael Walkley

getting And terms on. issues customers can rank just 'XX other issues? order the of just between some Jeremy, maybe I'll the Great. the those Last and any me the were main help really guidance? just were pass Or your in reduced impacts fiscal project at question pushed? inventory the to and you there of for different X guidance,

Jeremy Whitaker

would forecast say our out QBR reviewed the several of main sales wired mentioned application which team, I weeks we our that those the compute the business, -- came products, business, out mostly little business that. between with connectivity I ago broad-based kind after customer Those that evenly would from are X coming primarily And expected embedded of things the video a is the bit both impacted relatively, of I of split previously. not connectivity wireless, and a then the decline as but by say, embedded

So the to fiscal half numbers for drivers those second bring year. were down the the the reason primary of for our

Operator

The next Needham & from question of Ryan comes Koontz Co.

Ryan Koontz

this years, thinking outlook on It business change. from where your about like headwind core sounds business, that the that's the of couple core the Just back dating think last of on here the a big the as I angle embedded. is what different second here half

looking it? -- that's is is fiscal how we it's second think going down so into should that your stepping to rate in that its half? like materially And about run Jeremy,

Jeremy Whitaker

high-growth these of expectation Yes. market for what anticipated. that the have are general down products would I'm in have it's say in would been sure a do not legacy not it's they're if we And products taking I have but even a we major in originally time. than step many lower period of the a forecast.

these the companies, other of including a -- did resurgence, of this that of these lot think COVID. I side in of saw kind bit I of some products. products And COVID during legacy us resurgence of a is that on have a a they many did have of a So think just bit

Saleel Awsare

little add me more color, right, here. bit a just Saleel Ryan, let

So Jeremy there about broad I market. this, broad market. it's as clearly kind industrial IoT of think might pointed be out, as areas And more still really

few they macro slowdowns ago. X originally planned as months a So opposed what to when maybe it was X,

it. that's would I about think So how

It's hugely So dimension. just it's nothing from material. that

Ryan Koontz

Kind you you then of can color the duplicative terms Okay. side, these us OpEx of any be through share of Helpful. RIF business? functions? And sort walk these the the adjustments on resources? on areas Are redeployment Are made helpful. in what what of would that of

Jeremy Whitaker

Yes.

and Uplogix ago. nearly did was it acquisition, network. then duplicative an of Some year transition that -- prior a to we

as integrated and of able some And we've together, identify we've systems business. offices were able synergies to some cost so of these take get additional the been positioned been to out to

So identifying I and wrapping it's bit just duplicity. the we're a of the areas at had up think more where we that phase integration in

Ryan Koontz

And different focused? is of folks pretty that in Is R&D, the ops and of or broad-based terms into components it flow SG&A more COGS? cost that

Jeremy Whitaker

would I was done ago. quarters couple it pretty sales broad-based. say a in had We something of

more R&D, bit probably And little a marketing ops, so and was this G&A. of

Operator

The Capital Schwab next Christian Craig-Hallum Group. of question comes from

Christian Schwab

I something. just want Jeremy, to, confirm

the So the roughly $XX [ expectations to XXX around ] million miss ]. XXX from midpoint Street [ at

that customer of large came million levels excess up. push other from came the channel and the correct? $XX half from the distribution inventory So Is that

Jeremy Whitaker

little broad-based Yes. to I distribution the probably kind a say business. of to would tail long heavily weighted it's the more channel,

Christian Schwab

Okay.

XX-XX, not maybe it's X/X, it's So X/X?

Jeremy Whitaker

ballpark. the in probably That's

Christian Schwab

Okay.

Gridspertise ship revenue Gridspertise, And much do then 'XX, roughly. Okay. shipping in you expect fiscal to to how to

Jeremy Whitaker

as year, a was nearly tad the contributor to track it's current below around million, fiscal $XX And had on we expected. this and slightly right that significant that. Yes, deliver it we're quarter maybe a to

Christian Schwab

Yes.

Okay.

of are Gridspertise is well, seeing And many business in disruptions that -- planned. the as some going then of seeing. the we're of peers your So kind

right. -- So

what I sustainable I large big over, the assumptions portfolio figured are the a beyond look year, is? company? the think we the of company, we company? a of inventory Are of running we line range XX% have about fiscal top we as So XX% a running rate we multiyear deals, we mean out being correction pipeline, a over thinking What time should XX% growth mean, be frame?

Saleel Awsare

I'm look I Christian. numbers going through still here, the as Saleel is all at This it. Yes.

different not sure. company It's would I because That XX% one. substantially think clear is this for be a that's about we growing a that grower.

And think that compute low working platforms is single anticipate, pushed on double-digit high of grower. better got like be could them I these clear, we one said, digits, than of kind Jeremy some out. this do of we're just

I of are think would a these But high-protein businesses. as kind about

So if hits, it's number. one big a

to kind sure and now, right but moving got internally. I'm platforms ready have connect But -- about guidance fiscal it. more we've give this for we're I 'XX. because So as near-term of you kind see I as get right that growing into compute of not these to with stuff we guys forward, a some of think the going And company

Christian Schwab

Yes.

quarter to on not the go-forward share as we're expect large we going -- we'll a year. be We're year go be of fiscal time I guidance but at Did So we you and we companies. should guys again. future, the then and hear this probably you act to like one going basis, like speak exit the should to public a about start portion esoterically anticipating something correctly? That's give this you at

Saleel Awsare

from -- where which my right I we came came where head where That's head the very is to have transparent open past. with at my that. adapting, I a you, But in did place Yes. I'm done That's at. I be now. I'll from is

about my right it, think but head now. where is at we'll So that's

Operator

The session. question-and-answer may now Thank also attending has for now you concluded. disconnect. you our concludes presentation, This conference and today's

Lantronix (LTRX) 8 Feb 242024 Q2 Earnings call transcript