Lantronix Reports Third Quarter Fiscal Year 2013 Financial

IRVINE, CA--(Marketwired - May 2, 2013) -  Lantronix, Inc. (the "Company") (NASDAQ: LTRX), a leading global provider of smart M2M (machine-to-machine) connectivity solutions, today reported results for its third fiscal quarter ended March 31, 2013.

Financial Highlights

• Net revenue of $12.2 million
• Gross profit as a percentage of net revenue of 46.2%
• GAAP net loss of $(801,000), or ($0.05) per share
• Non-GAAP net loss of $(388,000), or ($0.03) per share

Operational Highlights

• In January 2013, the Company entered into an agreement with Arrow Electronics, Inc. (NYSE: ARW), to extend Arrow's product sales programs, product delivery and distribution services.
• In February 2013, the Company announced a distribution agreement with Berkshire Hathaway-owned Mouser Electronics to expand availability of Lantronix external and embedded device enablement solutions from the Americas to worldwide.

Product Highlights

• In January 2013, the Company's award-winning Lantronix xPrintServer® was showcased at Digital Experience in Las Vegas and MacWorld in San Francisco.
• In February 2013, Lantronix announced that for the second year in a row, an xPrintServer® product received the MacObserver Editors' Choice Award.
• In February 2013, at the Embedded World conference in Nuremberg, Germany, the Company announced the introduction of the xPico™ Wi-Fi, a new wireless embedded connectivity solution. With a footprint of just under 4 cm², the small module features a full IP stack, both client and access point functionality, advanced security features, and can operate in industrial environments. The Embedded World conference is the world's largest global embedded technology conference.
• In March 2013, Lantronix launched and began shipping the newest addition to its external analog sensor networking product family, the xSenso™ Controller. Designed specifically for use in rugged and harsh environments, the xSenso Controller's analog and relay outputs provide the ability to take action by controlling industrial processes and equipment based on sensor readings and predefined thresholds to solve real-time problems.

"During the third quarter of fiscal 2013, Lantronix continued to make progress on its strategic plan by further expanding the Company's worldwide distribution and sales channels, introducing new products, and increasing awareness of our solutions in the marketplace through our enhanced marketing efforts," said Lantronix CEO Kurt Busch. "These actions resulted in Lantronix achieving continued growth in new product revenues."

Financial Results for the Third Quarter of Fiscal 2013 Ended March 31, 2013

Net revenue was $12.2 million for the third quarter of fiscal 2013, an increase of $30,000, compared to $12.1 million for the third quarter of fiscal 2012 and flat with the second quarter of fiscal 2013.

Gross profit as a percentage of net revenue was 46.2% for the third quarter of fiscal 2013, compared to 48.8% for the third quarter of fiscal 2012 and 49.6% for the second quarter of fiscal 2013. The decline in gross profit as a percentage of net revenue was primarily due to increased manufacturing costs.

Operating expenses were $6.4 million for the third quarter of fiscal 2013 compared to $5.9 million for the third quarter of fiscal 2012 and $6.4 million for the second quarter of fiscal 2013. The year-over-year change in operating expenses was primarily due to an increase in planned marketing activities to drive new product sales growth and brand awareness.

GAAP net loss for the third quarter of fiscal 2013 was ($801,000), or ($0.05) per share, compared to a GAAP net loss of ($41,000), or ($0.00) per share, for the third quarter of fiscal 2012 and a GAAP net loss of ($412,000), or ($0.03) per share, for the second quarter of fiscal 2013. 

Non-GAAP net loss for the third quarter of fiscal 2013 was ($388,000), or ($0.03) per share compared to non-GAAP net income of $471,000 or $0.04 per share for the third quarter of fiscal 2012 and non-GAAP net income of $70,000, or $0.00 per share, for the second quarter of fiscal 2013.

Cash and cash equivalents as of March 31, 2013 were $7.2 million, compared to $11.4 million as of June 30, 2012. The decrease in cash was primarily due to an increase in inventory from $6.0 million as of June 30, 2012 to $9.2 million as of March 31, 2013 to support buffer stock and new product launches. In addition, cash was used to make scheduled payments on our existing term loan and invest in capital assets to support product development and manufacturing.

Conference Call and Webcast

Lantronix will host a conference call and webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its third quarter fiscal year 2013 financial results. Those wishing to participate in the live call should dial 866-318-8620 (international dial-in 617-399-5139) using the passcode 11408138. A telephone replay of the call will be available through May 9, 2013 by dialing (888) 286-8010 (international dial-in 617-801-6888) and entering passcode 39420444.

About Lantronix

Lantronix, Inc. (NASDAQ: LTRX) is a global leader of secure communication technologies that simplify access and communication with and between virtually any electronic device. Our smart connectivity solutions enable sharing data between devices and applications to empower businesses to make better decisions based on real-time information, and gain a competitive advantage by generating new revenue streams, improving productivity and increasing efficiency and profitability. Easy to integrate and deploy, Lantronix products remotely and securely connect electronic equipment via networks and the Internet. Founded in 1989, Lantronix' products have applications in every industry, including medical, security, industrial and building automation, transportation, retail/POS, financial, government, consumer electronics/appliances, IT/data center and pro-AV/signage. The Company's headquarters are located in Irvine, California.

For more information, visit www.lantronix.com. The Lantronix blog, http://www.lantronix.com/blog, features industry discussion and updates.

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 to those financial statements 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 operating expenses, 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 operating expenses consist of operating expenses excluding (i) share-based compensation and related payroll taxes (ii) depreciation and amortization, and (iii) restructuring charges.

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), and (iv) income tax provision (benefit).

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 future business plans, future financial position, future results of operations and future product development strategies and schedules. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties that could cause actual reported results and outcomes to differ materially from those expressed in the forward-looking statements. Factors that could cause our expectations and reported results to vary, include, but are not limited to: final accounting adjustments and results; quarterly fluctuations in operating results; our ability to identify and profitably develop new products that will be attractive to our target markets, including products in our device networking business and the timing and success of new product introductions; changing market conditions and competitive landscape; market acceptance of our products by our customers; pricing trends; actions by competitors; future revenues and margins; changes in the cost or availability of critical components; unusual or unexpected expenses; and cash usage including cash used for product development or strategic transactions; and other factors that may affect financial performance. For a more detailed discussion of these and other risks and uncertainties, see our Annual Report on Form 10-K for the year ended June 30, 2012 and subsequent Reports on Forms 10-Q and 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances. If the Company does update or correct one or more of these forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections.

© 2013 Lantronix, Inc. Lantronix and xPrintServer are registered trademarks, and xPico and xSenso are trademarks of Lantronix, Inc. All other trademarks and trade names are the property of their respective holders. Specifications subject to change without notice. All rights reserved.

LANTRONIX, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
					March 31,				June 30,
					2013				2012
Assets
Current assets:
	Cash and cash equivalents				$	7,154			$	11,374
	Accounts receivable, net					2,808				2,674
	Contract manufacturers' receivable					529				622
	Inventories, net					9,177				5,955
	Prepaid expenses and other current assets					437				549
	Deferred tax assets					657				657
		Total current assets				20,762				21,831
	Property and equipment, net					1,751				1,605
	Goodwill					9,488				9,488
	Other assets					81				87
		Total assets			$	32,082			$	33,011
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable				$	4,355			$	3,563
	Accrued payroll and related expenses					1,580				2,100
	Warranty reserve					226				232
	Short-term debt					333				667
	Other current liabilities					3,720				3,342
		Total current liabilities				10,214				9,904
Non-current liabilities:
	Long-term liabilities					270				303
	Long-term capital lease obligations					66				48
	Long-term debt					-				167
	Deferred tax liabilities					657				657
		Total non-current liabilities				993				1,175
			Total liabilities			11,207				11,079
Commitments and contingencies
Stockholders' equity:
	Common stock					1				1
	Additional paid-in capital					203,663				203,049
	Accumulated deficit					(183,160	)			(181,517	)
	Accumulated other comprehensive income					371				399
		Total stockholders' equity				20,875				21,932
			Total liabilities and stockholders' equity		$	32,082			$	33,011

 

LANTRONIX, INC.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
			Three Months Ended												Nine Months Ended
			March 31,				December 31,				March 31,				March 31,
			2013				2012				2012				2013				2012
Net revenue (1)			$	12,164			$	12,162			$	12,134			$	35,528			$	33,770
Cost of revenue				6,547				6,130				6,215				18,407				17,508
Gross profit				5,617				6,032				5,919				17,121				16,262
Operating expenses:
	Selling, general and administrative			4,685				4,719				4,087				13,672				13,492
	Research and development			1,717				1,665				1,775				4,991				5,116
	Restructuring charges			-				-				17				-				286
	Amortization of purchased intangible assets			-				-				18				-				54
Total operating expenses				6,402				6,384				5,897				18,663				18,948
Income (loss) from operations				(785	)			(352	)			22				(1,542	)			(2,686	)
Interest expense, net				(14	)			(16	)			(26	)			(45	)			(76	)
Other income (expense), net				10				(23	)			(13	)			(8	)			(50	)
Loss before income taxes				(789	)			(391	)			(17	)			(1,595	)			(2,812	)
Provision for income taxes				12				21				24				48				50
Net loss			$	(801	)		$	(412	)		$	(41	)		$	(1,643	)		$	(2,862	)
Net loss per share (basic and diluted)			$	(0.05	)		$	(0.03	)		$	(0.00	)		$	(0.11	)		$	(0.27	)
Weighted-average common shares (basic and diluted)				14,580				14,578				10,585				14,572				10,576
Net revenue from related parties			$	221			$	381			$	238			$	894			$	649
(1) Includes net revenue from related parties

 

LANTRONIX, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share data)
					Three Months Ended												Nine Months Ended
					March 31,				December 31,				March 31,				March 31,
					2013				2012				2012				2013				2012
GAAP net loss					$	(801	)		$	(412	)		$	(41	)		$	(1,643	)		$	(2,862	)
	Non-GAAP adjustments:
		Cost of revenue:
			Share-based compensation			12				10				6				33				28
			Depreciation and amortization			91				103				113				293				307
		Total adjustments to cost of revenue				103				113				119				326				335
		Selling, general and adminstrative:
			Costs associated with the investigation			-				-				-				-				108
			Consulting fees for former CEO and CFO			-				-				-				-				153
			Share-based compensation			138				141				123				425				317
			Employer portion of withholding taxes on stock grants			-				-				-				1				2
			Depreciation and amortization			100				110				105				326				353
		Total adjustments to selling, general and administrative				238				251				228				752				933
		Research and development:
			Share-based compensation			53				55				61				182				198
			Employer portion of withholding taxes on stock grants			-				-				-				2				3
			Depreciation and amortization			3				3				6				10				22
		Total adjustments to research and development				56				58				67				194				223
		Restructuring charges				-				-				17				-				286
		Amortization of purchased intangible assets				-				-				18				-				54
	Total non-GAAP adjustments to operating expenses					294				309				330				946				1,496
	Interest expense, net					14				16				26				45				76
	Other income (expense), net					(10	)			23				13				8				50
	Provision for income taxes					12				21				24				48				50
Total non-GAAP adjustments						413				482				512				1,373				2,007
Non-GAAP net income (loss)					$	(388	)		$	70			$	471			$	(270	)		$	(855	)
Non-GAAP net income (loss) per share (diluted)					$	(0.03	)		$	0.00			$	0.04			$	(0.02	)		$	(0.08	)
Denominator for GAAP net income (loss) per share (diluted)						14,580				14,578				10,585				14,572				10,576
Non-GAAP adjustment						-				50				361				-				-
Denominator for non-GAAP net income (loss) per share (diluted)						14,580				14,628				10,946				14,572				10,576
GAAP operating expenses					$	6,402			$	6,384			$	5,897			$	18,663			$	18,948
Non-GAAP adjustments to operating expenses						(294	)			(309	)			(330	)			(946	)			(1,496	)
Non-GAAP operating expenses					$	6,108			$	6,075			$	5,567			$	17,717			$	17,452

LANTRONIX, INC.
Unaudited Net Revenues by Product Line and Region
(In thousands, except percentages)
				Three Months Ended March 31,
							% of Net						% of Net			Change
				2013			Revenue			2012			Revenue			$				%
Embedded device enablement				$	6,321		52.0	%		$	6,267		51.6	%		$	54			0.9	%
External device enablement					2,805		23.0	%			3,201		26.4	%			(396	)		(12.4	%)
Device management					3,038		25.0	%			2,666		22.0	%			372			14.0	%
		Net revenue		$	12,164		100.0	%		$	12,134		100.0	%		$	30			0.2	%

				Nine Months Ended March 31,
							% of Net						% of Net			Change
				2013			Revenue			2012			Revenue			$				%
Embedded enablement				$	17,655		49.7	%		$	16,738		49.6	%		$	917			5.5	%
External enablement					9,560		26.9	%			9,836		29.1	%			(276	)		(2.8	%)
Device management					8,313		23.4	%			7,196		21.3	%			1,117			15.5	%
		Net revenue		$	35,528		100.0	%		$	33,770		100.0	%		$	1,758			5.2	%

				Three Months Ended March 31,
							% of Net						% of Net			Change
				2013			Revenue			2012			Revenue			$				%
Americas				$	6,501		53.4	%		$	6,391		52.7	%		$	110			1.7	%
EMEA					3,606		29.6	%			3,945		32.5	%			(339	)		(8.6	%)
Asia Pacific					2,057		17.0	%			1,798		14.8	%			259			14.4	%
		Net revenue		$	12,164		100.0	%		$	12,134		100.0	%		$	30			0.2	%

				Nine Months Ended March 31,
							% of Net						% of Net			Change
				2013			Revenue			2012			Revenue			$				%
Americas				$	19,309		54.3	%		$	17,915		53.1	%		$	1,394			7.8	%
EMEA					10,258		28.9	%			10,393		30.8	%			(135	)		(1.3	%)
Asia Pacific					5,961		16.8	%			5,462		16.1	%			499			9.1	%
		Net revenue		$	35,528		100.0	%		$	33,770		100.0	%		$	1,758			5.2	%