Lantronix Reports Second Quarter Fiscal 2021 Results - Lantronix (NASDAQ:LTRX)

Second Quarter Net Revenue Was $16.6 Million, Up 25% from the Prior Year
GAAP EPS Improved to ($0.05) per Share vs. ($0.06) in the Prior Year
Non-GAAP EPS Was $0.03 per share
Demand Was Strong, Leading to Record Backlog Entering Q3

IRVINE, Calif., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Lantronix, Inc. LTRX, a global provider of software as a service ("SaaS"), connectivity services, engineering services, and intelligent hardware solutions for the Internet of Things (IoT) and Remote Environment Management (REM), today reported results for the second quarter of fiscal 2021 that ended December 31, 2020.

Net revenue totaled $16.6 million, up 25 percent year over year and down 3 percent sequentially.

GAAP EPS improved to ($0.05), compared to ($0.06) in the prior year, and ($0.01) in the prior quarter.

Non-GAAP EPS was $0.03, compared to $0.03 in the prior year, and $0.05 in the prior quarter.

"While component delays limited revenue in our second quarter, demand strengthened, and we entered Q3 with a record backlog," stated Paul Pickle, president and CEO of Lantronix. "We reacted quickly to increasing lead times to mitigate supply chain disruptions and we look forward to continued growth in our fiscal second half."

Business Outlook

For the full year fiscal 2021, the company expects year over year revenue growth of 15-25 percent, with non-GAAP EPS growth on the order of 75-125 percent.

Conference Call and Webcast
Lantronix will host an investor conference call and audio webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its results for the second quarter of fiscal 2021 that ended Dec. 31, 2020. 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 Q2 FY 2021 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 Feb. 18, 2021, by dialing 1-877-344-7529 (US) or 1-412-317-0088 (international) and entering passcode 10149339.

About Lantronix

Lantronix, Inc. is a global provider of software as a service ("SaaS"), engineering services, and hardware for Edge Computing, the Internet of Things (IoT), and Remote Environment Management (REM). Lantronix enables its customers to provide reliable and secure solutions while accelerating their time to market. Lantronix's products and services dramatically simplify operations through the creation, development, deployment, and management of customer projects at scale while providing quality, reliability and security.

Lantronix's portfolio of services and products address each layer of the IoT Stack including Collect, Connect, Compute, Control and Comprehend, enabling its customers to deploy successful IoT and REM solutions. Lantronix's services and products deliver a holistic approach, addressing its customers' needs by integrating a SaaS management platform with custom application development layered on top of external and embedded hardware enabling intelligent edge computing, secure communications (wired, Wi-Fi, and cellular), location and positional tracking, and environmental sensing and reporting.

With three decades of proven experience in creating robust industry and customer specific solutions, Lantronix is an innovator in enabling its customers to build new business models, leverage greater efficiencies and realize the possibilities of the Internet of Things and Remote Environment Management. Lantronix's solutions are deployed inside millions of machines at data centers, offices, and remote sites serving a wide range of industries, including energy, agriculture, medical, security, manufacturing, distribution, transportation, retail, financial, environmental, infrastructure and government.

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

References in this Report to "fiscal 2021" refer to the fiscal year ended June 30, 2021 and references to "fiscal 2020" refer to the fiscal year ended June 30, 2020.

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. 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. 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.

Non-GAAP net income (loss) consists of net income (loss) excluding (i) share-based compensation and the employer portion of withholding taxes on stock grants, (ii) depreciation and amortization, (iii) interest income (expense), (iv) other income (expense), (v) income tax provision (benefit), (vi) severance and restructuring charges, (vii) acquisition related costs, (viii) impairment of long-lived assets, (ix) amortization of purchased intangibles, and (x) amortization of manufacturing profit in acquired inventory.

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.

Guidance on earnings per share growth is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of certain items that have been excluded from the forward-looking non-GAAP measures, and a reconciliation to the comparable GAAP guidance has not been provided because certain factors that are materially significant to Lantronix's ability to estimate the excluded items are not accessible or estimable on a forward-looking basis without unreasonable effort.

Forward-Looking Statements

This news release contains forward-looking statements, including statements concerning our projected operating and financial performance for fiscal 2021, the short- and long-term impact of COVID-19 on our business, our ability to innovate and to enable new business models, leverage greater efficiencies and realize the possibilities of the Internet of Things and Remote Environment Management as well as the benefits that might be derived from the efforts of our team to transform our business. 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. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: the impact of COVID-19 and the measures to reduce its spread on our employees, supply and distribution chains, the global economy and our financial condition and liquidity; the effects of negative or worsening regional and worldwide economic conditions or market instability on our business, including effects on purchasing decisions by our customers; our ability to continue to generate revenue from products sold into mature markets; our ability to develop, market, and sell new products; our ability to succeed with our new software offerings; fluctuations in our revenue due to the project-based timing of orders from certain customers; unpredictable timing of our revenues due to the lengthy sales cycle for our products and services and potential delays in customer completion of projects; our ability to accurately forecast future demand for our products; delays in qualifying revisions of existing products; constraints or delays in the supply of, or quality control issues with, certain materials or components; difficulties associated with the delivery, quality or cost of our products from our contract manufacturers or suppliers; risks related to the outsourcing of manufacturing and international operations; difficulties associated with our distributors or resellers; intense competition in our industry and resultant downward price pressure; rises in inventory levels and inventory obsolescence; undetected software or hardware errors or defects in our products; cybersecurity risks; our ability to obtain appropriate industry certifications or approvals from governmental regulatory bodies; changes in applicable U.S. and foreign government laws, regulations, and tariffs; our ability to successfully implement our acquisitions strategy or integrate acquired companies; uncertainty as to the future profitability of acquired businesses, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions; acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties; our ability to protect patents and other proprietary rights and avoid infringement of others' proprietary technology rights; the level of our indebtedness, our ability to service our indebtedness and the restrictions in our debt agreements; our ability to attract and retain qualified management; and any additional factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the Securities and Exchange Commission (the "SEC") on September 11, 2020, including in the section entitled "Risk Factors" in Item 1A of Part I of such report, and in our other public 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.

Lantronix Investor Relations Contact:
Jeremy Whitaker
Chief Financial Officer
investors@lantronix.com

LANTRONIX, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	December 31,			June 30,
	2020			2020
Assets
Current assets:
Cash and cash equivalents	$	7,621		$	7,691
Accounts receivable, net		13,298			11,411
Inventories		14,304			13,781
Contract manufacturers' receivables		646			337
Prepaid expenses and other current assets		1,622			1,290
Total current assets		37,491			34,510
Property and equipment, net		1,589			1,587
Goodwill		15,810			15,810
Purchased intangible assets, net		10,688			12,449
Lease right-of-use assets		2,599			3,345
Other assets		244			232
Total assets	$	68,421		$	67,933

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	7,472		$	5,331
Accrued payroll and related expenses		2,317			2,658
Short-term debt, net		1,472			1,472
Other current liabilities		6,808			6,308
Total current liabilities		18,069			15,769
Long-term debt, net		2,946			3,682
Other non-current liabilities		1,293			1,962
Total liabilities		22,308			21,413

Commitments and contingencies

Stockholders' equity:
Common stock		3			3
Additional paid-in capital		247,619			246,265
Accumulated deficit		(201,880	)		(200,119	)
Accumulated other comprehensive income		371			371
Total stockholders' equity		46,113			46,520
Total liabilities and stockholders' equity	$	68,421		$	67,933

LANTRONIX, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Three Months Ended									Six Months Ended
	December 31,			September 30,			December 31,			December 31,
		2020			2020			2019			2020			2019
Net revenue	$	16,585		$	17,146		$	13,228		$	33,731		$	25,969
Cost of revenue		9,589			8,907			6,451			18,496			12,997
Gross profit		6,996			8,239			6,777			15,235			12,972
Operating expenses:
Selling, general and administrative		4,853			4,899			4,871			9,752			9,344
Research and development		2,449			2,572			2,336			5,021			4,957
Restructuring, severance and related charges		137			92			354			229			1,103
Acquisition-related costs		-			-			353			-			996
Amortization of purchased intangible assets		879			882			151			1,761			295
Total operating expenses		8,318			8,445			8,065			16,763			16,695
Loss from operations		(1,322	)		(206	)		(1,288	)		(1,528	)		(3,723	)
Interest income (expense), net		(82	)		(85	)		(16	)		(167	)		40
Other income (expense), net		2			39			(10	)		41			(53	)
Loss before income taxes		(1,402	)		(252	)		(1,314	)		(1,654	)		(3,736	)
Provision for income taxes		57			50			37			107			85
Net loss	$	(1,459	)	$	(302	)	$	(1,351	)	$	(1,761	)	$	(3,821	)
Net loss per share - basic and diluted	$	(0.05	)	$	(0.01	)	$	(0.06	)	$	(0.06	)	$	(0.17	)
Weighted-average common shares - basic and diluted		28,661			28,371			23,145			28,516			23,029

LANTRONIX, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(In thousands, except per share data)

	Three Months Ended									Six Months Ended
	December 31,			September 30,			December 31,			December 31,
		2020			2020			2019			2020			2019

GAAP net loss	$	(1,459	)	$	(302	)	$	(1,351	)	$	(1,761	)	$	(3,821	)
Non-GAAP adjustments:
Cost of revenue:
Share-based compensation		85			58			48			143			72
Employer portion of withholding taxes on stock grants		-			-			-			-			1
Depreciation and amortization		181			177			73			358			140
Total adjustments to cost of revenue		266			235			121			501			213
Selling, general and administrative:
Share-based compensation		671			445			777			1,116			1,236
Employer portion of withholding taxes on stock grants		6			5			1			11			6
Depreciation and amortization		37			55			53			92			107
Total adjustments to selling, general and administrative		714			505			831			1,219			1,349
Research and development:
Share-based compensation		135			100			113			235			208
Employer portion of withholding taxes on stock grants		2			6			1			8			5
Depreciation and amortization		50			33			30			83			56
Total adjustments to research and development		187			139			144			326			269
Restructuring, severance and related charges		137			92			354			229			1,103
Acquisition related costs		-			-			353			-			996
Amortization of purchased intangible assets		879			882			151			1,761			295
Amortization of manufacturing profit in acquired inventory		-			7			-			7			171
Total non-GAAP adjustments to operating expenses		1,917			1,625			1,833			3,542			4,183
Interest (income) expense, net		82			85			16			167			(40	)
Other (income) expense, net		(2	)		(39	)		10			(41	)		53
Provision for income taxes		57			50			37			107			85
Total non-GAAP adjustments		2,320			1,956			2,017			4,276			4,494
Non-GAAP net income	$	861		$	1,654		$	666		$	2,515		$	673

Non-GAAP net income per share - diluted	$	0.03		$	0.05		$	0.03		$	0.08		$	0.03

Denominator for GAAP net income per share - basic		28,661			28,371			23,145			28,516			23,029
Non-GAAP adjustment		1,695			1,833			1,848			1,854			1,791
Denominator for non-GAAP net income per share - diluted		30,356			30,204			24,993			30,370			24,820

GAAP operating expenses	$	8,318		$	8,445		$	8,065		$	16,763		$	16,695
Non-GAAP adjustments to operating expenses		(1,917	)		(1,625	)		(1,833	)		(3,542	)		(4,183	)
Non-GAAP operating expenses	$	6,401		$	6,820		$	6,232		$	13,221		$	12,512

LANTRONIX, INC.
UNAUDITED NET REVENUES BY PRODUCT LINE AND REGION
(In thousands)

	Three Months Ended						Six Months Ended
	December 31, 2020		September 30, 2020		December 31, 2019		December 31, 2020		December 31, 2019
IoT	$	13,402	$	14,620	$	11,180	$	28,022	$	21,401
REM		3,095		2,402		1,832		5,497		4,133
Other		88		124		216		212		435
	$	16,585	$	17,146	$	13,228	$	33,731	$	25,969


	Three Months Ended						Six Months Ended
	December 31, 2020		September 30, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Americas	$	8,023	$	10,929	$	5,840	$	18,952	$	11,604
EMEA		4,740		2,639		4,362		7,379		8,883
Asia Pacific Japan		3,822		3,578		3,026		7,400		5,482
	$	16,585	$	17,146	$	13,228	$	33,731	$	25,969

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