LTRX
$1.38
Lantronix
($.07)
(4.83%)
Earnings Details
4th Quarter June 2016
Tuesday, August 23, 2016 4:15:12 PM
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Summary

Lantronix (LTRX) Recent Earnings

Lantronix (LTRX) reported a 4th Quarter June 2016 loss of $0.02 per share on revenue of $10.5 million. The consensus estimate was a loss of $0.05 per share on revenue of $9.3 million. Revenue grew 2.8% on a year-over-year basis.

Lantronix Inc designs, develops, markets and sells networking and communications products. The Company provides solutions that enable machines, devices and sensors to be securely accessed, managed and controlled.

Results
Reported Earnings
($0.02)
Earnings Whisper
-
Consensus Estimate
($0.05)
Reported Revenue
$10.5 Mil
Revenue Estimate
$9.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Lantronix Reports Fourth Quarter and Fiscal 2016 Financial Results

Lantronix, Inc. (the "Company") (LTRX) a global provider of secure data access and management solutions for Internet of Things (IoT) and information technology (IT) assets, today reported results for its fourth quarter and fiscal year for the period ended June 30, 2016.

Financial Highlights for Fourth Fiscal Quarter

-- Net revenue of $10.5 million

-- Gross profit margin of 47.0%

-- GAAP net loss of $247,000 or $0.02 per share

-- Non-GAAP net income of $121,000 or $0.01 per share

-- Cash and cash equivalents of $6.0 million

Operational and Product Highlights:

During the fourth quarter of fiscal 2016, sales of the company’s SLC 8000 advanced console manager increased by more than 200% over the same period in fiscal 2015, and grew by 22% sequentially from the third quarter of fiscal 2016.

In June, the company announced that Martin Hale Jr., founder and CEO of Hale Capital Partners, was appointed to its board of directors as an independent director. Hale currently serves as a director of FalconStor Software and he has previously served as a director of several other public technology companies.

In July, the company announced the opening of a new IoT software lab in Hyderabad, India.

Most recently, the company announced the launch of the Lantronix SmartAdvantage program, a new marketing program designed to give significant incentives and discounts for approved resellers to market and sell the Lantronix SLC 8000 and related IT management products.

"Our results for the fourth quarter reflect the continued progress we are making in driving operational excellence, establishing a clear product focus, and getting the right team in place to execute our plan," said Jeffrey Benck, Lantronix president and CEO. "As we enter fiscal year 2017, we are focused on one mission: delivering secure data access and management solutions for IoT and IT assets, which we believe will allow us to capture more of the opportunity that the IoT market represents."

Financial Results for Fourth Quarter of Fiscal Year 2016

Net revenue was $10.5 million for the fourth quarter of fiscal 2016, compared with $10.2 million for the fourth quarter of fiscal 2015, and $10.0 million for the third quarter of fiscal 2016.

Gross profit margin was 47.0% for the fourth quarter of fiscal 2016, compared to 47.1% for the fourth quarter of fiscal 2015, and 48.0% for the third quarter of fiscal 2016.

Operating expenses were $5.2 million for the fourth quarter of fiscal 2016, compared with $5.8 million for the fourth quarter of fiscal 2015 and $5.2 million for the third quarter of fiscal 2016.

GAAP net loss for the fourth quarter of fiscal 2016 was $247,000, or $0.02 per share, compared with GAAP net loss of $1.0 million, or $0.07 per share for the fourth quarter of fiscal 2015 and GAAP net loss of $456,000, or $0.03 per share for the third quarter of fiscal 2016.

Non-GAAP net income for the fourth quarter of fiscal 2016 was $121,000, or $0.01 per share, compared with non-GAAP net loss of $575,000, or $0.04 per share for the fourth quarter of fiscal 2015 and non-GAAP net income of $189,000, or $0.01 per share for the third quarter of fiscal 2016. For additional information regarding our non-GAAP results, see "Discussion of Non-GAAP Financial Measures" below.

Financial Results for Fiscal Year 2016

Net revenue was $40.6 million for the fiscal year ended June 30, 2016, compared with $42.9 million for the fiscal year ended June 30, 2015. The 5% decline in total net revenue was primarily due to an 11% decline in Legacy Product sales, which was partially offset by 27% growth in New Product sales.

GAAP net loss was $2.0 million, or $0.13 per share for the fiscal year ended June 30, 2016, compared with GAAP net loss of $2.8 million, or $0.19 per share for the fiscal year ended June 30, 2015.

Non-GAAP net income was $238,000, or $0.02 per share, for the fiscal year ended June 30, 2016, compared with non-GAAP net loss of $767,000, or $0.05 per share, for the fiscal year ended June 30, 2015.

Cash and cash equivalents were $6.0 million as of June 30, 2016 compared with $5.0 million as of June 30, 2015. Increase in cash was primarily related to a $2.0 million equity investment from Hale Capital Partners in June and a $2.9 million reduction in net inventory.

Conference Call and Webcast

Lantronix will host an investor conference call with a simultaneous audio webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its fourth quarter and fiscal 2016 results. To access the live conference call, investors should dial 1-844-802-2442 (US) or 1-412-317-5135 (international) and indicate that they are participating in the Lantronix Fourth Quarter and FY 2016 call. The webcast will be available simultaneously via the investor relations section of the Company’s website at www.lantronix.com.

Investors can access a replay of the conference call starting at approximately 5:00 p.m. Pacific Time today at www.lantronix.com. A telephonic replay will also be available through August 30, 2016 by dialing 1-877-344-7529 (US) or 1-412-317-0088 (international) and entering passcode 10091231.

About Lantronix

Lantronix, Inc. (the "Company," "Lantronix," "we," "our," or "us") is a global provider of secure data access and management solutions for Internet of Things (IoT) and information technology (IT) assets. Our mission is to be the leading supplier of IoT gateways that enable companies to dramatically simplify the creation, deployment, and management of IoT projects while providing secure access to data for applications and people.

With more than two decades of experience in creating robust machine to machine (M2M) technologies, Lantronix is an innovator in enabling our customers to build new business models and realize the possibilities of the Internet of Things. Our connectivity solutions are deployed inside millions of machines serving a wide range of industries, including data center, medical, security, industrial, transportation, retail, financial, environmental and government.

Lantronix is headquartered in Irvine, California, with offices in Europe and Asia. For more information, visit www.lantronix.com.

Learn more at the Lantronix blog, www.lantronix.com/blog, featuring industry discussion and updates. To follow Lantronix on Twitter, please visit www.twitter.com/Lantronix. View our video library on YouTube at www.youtube.com/user/LantronixInc or connect with us on LinkedIn at www.linkedin.com/company/lantronix.

Discussion of Non-GAAP Financial Measures

Lantronix believes that the presentation of non-GAAP financial information, when presented in conjunction with the corresponding GAAP measures, provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations of the non-GAAP financial measures to the financial measures calculated in accordance with GAAP should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that non-GAAP net income (loss) and non-GAAP net income (loss) per share are important measures of the Company’s business. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends to gain an understanding of our comparative operating performance.

Non-GAAP net income (loss) consists of net income (loss) excluding (i) non-GAAP adjustments to operating expenses, (ii) interest income (expense), (iii) other income (expense), (iv) income tax provision (benefit), and (v) severance and restructuring charges.

Non-GAAP net income (loss) per share is calculated by dividing non-GAAP net income (loss) by non-GAAP weighted-average shares outstanding (diluted). For purposes of calculating non-GAAP net income (loss) per share, the calculation of GAAP weighted-average shares outstanding (diluted) is adjusted to exclude share-based compensation, which for GAAP purposes is treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Forward-Looking Statements

This news release contains forward-looking statements, including statements concerning our sales expansion efforts, our relationships with certain customers, and our projected operating and financial performance. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our results or experiences, or future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. Some of the risks and uncertainties that may cause actual results to differ from those expressed or implied in the forward-looking statements are described in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, as well as in our other filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, investors are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the NASDAQ Stock Market, LLC. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.

(C) 2016 Lantronix, Inc. All rights reserved. Lantronix is a registered trademark, and SLC is a trademark, of Lantronix, Inc. All other trademarks and trade names are the property of their respective holders.

LANTRONIX, INC.
Unaudited Consolidated Balance Sheets
(In thousands, except
share and par value data)
June 30,
June 30,
2016
2015
Assets
Current Assets:
Cash and cash equivalents
$
5,962
$
4,989
Accounts receivable (net of allowance for doubtful accounts of
$37 and $45 at June 30, 2016 and 2015, respectively)
3,164
2,658
Inventories, net
6,584
9,503
Contract manufacturers’ receivable
369
369
Prepaid expenses and other current assets
580
400
Total current assets
16,659
17,919
Property and equipment, net
1,569
1,471
Goodwill
9,488
9,488
Other assets
63
93
Total assets
$
27,779
$
28,971
Liabilities and stockholders’ equity
Current Liabilities:
Accounts payable
$
2,721
$
3,633
Line of credit
-
700
Accrued payroll and related expenses
1,817
1,685
Warranty reserve
138
163
Other current liabilities
2,922
3,849
Total current liabilities
7,598
10,030
Long-term capital lease obligations
116
152
Other non-current liabilities
347
80
Total liabilities
8,061
10,262
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized;
none issued and outstanding
-
-
Common stock, $0.0001 par value; 100,000,000 shares authorized;
17,253,799 and 15,089,720 shares issued and outstanding at
June 30, 2016 and 2015, respectively
2
2
Additional paid-in capital
209,297
206,326
Accumulated deficit
(189,952 )
(187,990 )
Accumulated other comprehensive income
371
371
Total stockholders’ equity
19,718
18,709
Total liabilities and stockholders’ equity
$
27,779
$
28,971
LANTRONIX, INC.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
2016
2016
2015
2016
2015
Net revenue (1)
$
10,515
$
9,964
$
10,231
$
40,592
$
42,946
Cost of revenue
5,571
5,186
5,411
21,214
22,648
Gross profit
4,944
4,778
4,820
19,378
20,298
Operating expenses:
Selling, general and administrative
3,388
3,469
4,060
14,396
16,041
Research and development
1,779
1,744
1,778
6,910
6,923
Total operating expenses
5,167
5,213
5,838
21,306
22,964
Loss from operations
(223
)
(435
)
(1,018 )
(1,928 )
(2,666 )
Interest expense, net
(9
)
(8
)
(5
)
(32
)
(17
)
Other income (expense), net
14
-
(5
)
61
(30
)
Loss before income taxes
(218
)
(443
)
(1,028 )
(1,899 )
(2,713 )
Provision for income taxes
29
13
10
63
58
Net loss
$
(247
)
$
(456
)
$
(1,038 )
$
(1,962 )
$
(2,771 )
Net loss per share (basic and diluted)
$
(0.02
)
$
(0.03
)
$
(0.07
)
$
(0.13
)
$
(0.19
)
Weighted average shares (basic and diluted)
15,554
15,225
15,012
15,260
14,904
Net revenue from related parties
$
-
$
-
$
79
$
113
$
298
(1) Includes net revenue from related parties
LANTRONIX, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share data)
Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
2016
2016
2015
2016
2015
GAAP net loss
$
(247
)
$
(456
)
$
(1,038 )
$
(1,962 )
$
(2,771 )
Non-GAAP adjustments:
Cost of revenue:
Share-based compensation
11
14
16
63
69
Depreciation and amortization
84
120
140
477
571
Total adjustment to costs of revenue
95
134
156
540
640
Selling, general and administrative:
Share-based compensation
148
131
187
632
745
Employer portion of withholding taxes on stock grants
-
-
-
4
-
Depreciation and amortization
56
55
37
227
217
Total adjustments to selling, general and administrative
204
186
224
863
962
Research and development:
Share-based compensation
40
41
42
175
201
Employer portion of withholding taxes on stock grants
-
-
-
-
6
Depreciation and amortization
5
16
21
55
90
Total adjustments to research and development
45
57
63
230
297
Severance charges
-
-
-
286
-
Restructuring charges
-
247
-
247
-
Total non-GAAP adjustments to operating expenses
249
490
287
1,626
1,259
Interest expense, net
9
8
5
32
17
Other (income) expense, net
(14
)
-
5
(61
)
30
Provision for income taxes
29
13
10
63
58
Total Non-GAAP adjustments
368
645
463
2,200
2,004
Non-GAAP net income (loss)
$
121
$
189
$
(575
)
$
238
$
(767
)
Non-GAAP net income (loss) per share (diluted)
$
0.01
$
0.01
$
(0.04
)
$
0.02
$
(0.05
)
Denominator for GAAP net income (loss) per share (diluted)
15,554
15,225
15,012
15,260
14,904
Non-GAAP adjustment
336
88
-
157
-
Denominator for non-GAAP net income (loss) per share (diluted)
15,890
15,313
15,012
15,417
14,904
GAAP operating expenses
$
5,167
$
5,213
$
5,838
$
21,306
$
22,964
Non-GAAP adjustments to operating expenses
(249
)
(490
)
(287
)
(1,626 )
(1,259 )
Non-GAAP operating expenses
$
4,918
$
4,723
$
5,551
$
19,680
$
21,705

To more closely align the categorization of our product lines with how we position them in the marketplace, we have reorganized our products and solutions into three product lines: IoT, IT Management and Other. Until this recent change, we had organized our products and solutions into two product lines: IoT Modules and Enterprise Solutions. In addition, we had defined "New Products" as those that had been released since the start of the second quarter of the fiscal year ended June 30, 2012; all other products had been referred to as "Legacy Products."

LANTRONIX, INC.
Unaudited Net Revenues by Product Line and Region
(In thousands)
Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2016
2016
2015
2016
2015
IoT
$
8,029
$
7,572
$
7,649
$
30,568
$
32,067
IT Management
1,585
1,251
1,179
5,279
3,871
Other
901
1,141
1,403
4,745
7,008
$
10,515
$
9,964
$
10,231
$
40,592
$
42,946
Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2016
2016
2015
2016
2015
Americas
$
5,305
$
5,025
$
5,603
$
20,643
$
23,178
EMEA
3,304
3,190
3,012
13,135
12,933
Asia Pacific Japan
1,906
1,749
1,616
6,814
6,835
$
10,515
$
9,964
$
10,231
$
40,592
$
42,946

For comparative purposes, the following tables present our product line categorizations prior to our decision to reorganize how we present this information during the fourth quarter of fiscal 2016. Going forward, we do not plan to disclose our net revenue by these categorizations.

Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2016
2016
2015
2016
2015
IoT Modules
$
5,379
$
5,240
$
5,075
$
20,747
$
21,230
Enterprise Solutions
5,136
4,724
5,156
19,845
21,716
$
10,515
$
9,964
$
10,231
$
40,592
$
42,946
Three Months Ended
Years Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2016
2016
2015
2016
2015
New Products
$
2,771
2,206
$
1,747
$
8,559
$
6,762
Legacy Products
7,744
7,758
8,484
32,033
36,184
$
10,515
$
9,964
$
10,231
$
40,592
$
42,946
Investor Relations Contacts:
Jeremy Whitaker
Chief Financial Officer
949-453-3990
E.E. Wang
Director, Corporate Marketing and Investor Relations
investors@lantronix.com
949-614-5879

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