SOURCE: Lantronix

Lantronix

February 04, 2010 16:26 ET

Lantronix Reports Results for the Second Fiscal Quarter Ended December 31, 2009

5th Consecutive Quarter of Positive Cash Flow From Operations

IRVINE, CA--(Marketwire - February 4, 2010) - Lantronix, Inc. (NASDAQ: LTRX), global provider of secure, network-enabling technologies, today announced financial results for the second fiscal quarter ended December 31, 2009.

Financial Highlights for the Second Fiscal Quarter of 2010

-- Fifth consecutive quarter of positive cash flow from operations;
-- Sequential quarterly revenue growth of 5%;
-- GAAP net loss of $375,000 and positive non-GAAP income of $496,000; and
-- Sixth consecutive quarter of non-GAAP net income.

"While our revenue performance continued to be impacted by the current economy, we are pleased to report sequential revenue growth of 5%, our 6th consecutive quarter of non-GAAP profitability, 5th consecutive quarter of positive cash flow from operations, and a solid product portfolio and pipeline," said Jerry Chase President and CEO. "With a solid executive team in place and new products such as XPortPro and SpiderDuo coming on-line, we are optimistic about our momentum and growth potential in 2010."

Non-Financial Highlights

-- Reverse stock split enabling the per share trading price of the
   Company's common stock to satisfy the minimum bid price requirement for
   our continued listing on Nasdaq.
-- Released ManageLinx 2.0, the latest version of the Company's secure,
   remote access solution. ManageLinx provides access to firewall-protected
   devices via the Internet.
-- Relocated corporate headquarters to a new facility in Irvine, California
   that will reduce facilities costs.
-- On February 9, we will announce the specifics of a design contest based
   on our recently launched XPort® Pro™, the newest addition to
   Lantronix' popular XPort® family of embedded Ethernet networking and
   compute modules used in millions of devices worldwide.

Financial Results for the Second Fiscal Quarter ended December 31, 2009

Net revenue was $11.5 million for the second fiscal quarter of 2010, a decrease of $1.4 million or 11%, compared to $12.9 million for the second fiscal quarter of 2009. On a sequential basis, this was an increase of $524,000 or 5%, compared to $11.0 million for the first fiscal quarter of 2010.

Gross profit margin was 52.7% for the second fiscal quarter of 2010, compared to 53.9% for the second fiscal quarter of 2009. The decrease in gross profit margin percent was primarily attributable to product mix, increased freight costs, and employee severance.

GAAP operating expenses were $6.4 million for the second fiscal quarter of 2010, a decrease of $627,000 or 9%, compared to $7.0 million for the second fiscal quarter of 2009. Selling, general and administrative expense was $4.9 million for the second fiscal quarter of 2010, a decrease of $460,000 or 9%, compared to $5.3 million for the second fiscal quarter of 2009. Research and development expense was $1.5 million for the second fiscal quarter of 2010, a decrease of $39,000 or 3%, compared to $1.5 million for the second fiscal quarter of 2009. Restructuring charges were $128,000 for the second fiscal quarter of 2009.

Non-GAAP operating expenses were $5.6 million for the second fiscal quarter of 2010, a decrease of $373,000 or 6%, compared to $6.0 million for the second fiscal quarter of 2009.

GAAP net loss was $375,000, or ($0.04) per share, for the second fiscal quarter of 2010, compared to GAAP net loss of $148,000, or ($0.01) per share, for the second fiscal quarter of 2009.

Non-GAAP net income was $496,000, or $0.05 per share, for the second fiscal quarter of 2010, compared to non-GAAP net income of $1.0 million, or $0.10 per share, for the second fiscal quarter of 2009.

Financial Results for the Six Months ended December 31, 2009

Net revenue was $22.4 million for the six months ended December 31, 2009, a decrease of $4.7 million or 17%, compared to $27.1 million for the six months ended December 31, 2008.

Gross profit margin was 52.5% for the six months ended December 31, 2009, compared to 53.4% for the six months ended December 31, 2008. The decrease in gross profit margin percent was primarily attributable to product mix, increased freight costs, and employee severance.

GAAP operating expenses were $12.5 million for the six months ended December 31, 2009, a decrease of $1.8 million or 13%, compared to $14.3 million for the six months ended December 31, 2008. Selling, general and administrative expense was $9.5 million for the six months ended December 31, 2009, a decrease of $1.0 million or 10%, compared to $10.5 million for the six months ended December 31, 2008. Research and development expense was $3.0 million for the six months ended December 31, 2009, a decrease of $57,000 or 2%, compared to $3.1 million for the six months ended December 31, 2008. Restructuring charges were $721,000 for the six months ended December 31, 2008.

Non-GAAP operating expenses were $11.0 million for the six months ended December 31, 2009, a decrease of $1.3 million or 10%, compared to $12.3 million for the six months ended December 31, 2008.

GAAP net loss was $874,000, or ($0.09) per share, for the six months ended December 31, 2009, compared to GAAP net income of $36,000, or $0.00 per share, for the six months ended December 31, 2008.

Non-GAAP net income was $907,000, or $0.08 per share, for the six months ended December 31, 2009, compared to non-GAAP net income of $2.3 million, or $0.23 per share, for the six months ended December 31, 2008.

Balance Sheet Summary

Cash and cash equivalents were $9.4 million as of December 31, 2009, an increase of $242,000, compared to $9.1 million as of June 30, 2009.

Total receivables, which include accounts receivable, net, and contract manufacturers' receivable, were $2.8 million as of December 31, 2009, an increase of $282,000, compared to $2.5 million as of June 30, 2009.

Inventories, net, were $6.6 million as of December 31, 2009, an increase of $127,000, compared to $6.5 million as of June 30, 2009.

Accounts payable were $7.6 million as of December 31, 2009, an increase of $2.0 million, compared to $5.6 million as of June 30, 2009. The increase in accounts payable was due to the timing of incoming inventory, a significant portion of which arrived during December 2009.

Working capital was $7.1 million as of December 31, 2009, a decrease of $289,000, compared to $7.4 million as of June 30, 2009.

Discussion of Non-GAAP Financial Measures

Lantronix believes that the presentation of non-GAAP financial information 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.

Non-GAAP operating expenses consist of operating expenses excluding share-based compensation and related payroll taxes, depreciation and amortization, litigation settlement, and restructuring charges, as well as charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the company's core operating performance.

Non-GAAP net income (loss) consists of net income (loss) excluding share-based compensation and related payroll taxes, depreciation and amortization, litigation settlement, restructuring charges, interest income (expense), other income (expense), income tax provision (benefit), as well as charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the Company's core operating performance.

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 is treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Conference Call and Webcast

The Company will report financial results for the second fiscal quarter ended December 31, 2009, after the market close on Thursday, February 4, 2010. Following the press release, management will conduct a conference call with simultaneous audio webcast at 5:00 p.m. EDT. President and Chief Executive Officer Jerry Chase and Chief Financial Officer Reagan Sakai will discuss the second fiscal quarter's results and answer questions.

Interested parties may participate in the live conference call by dialing 866-578-5784 (international dial-in 617-213-8056) and entering passcode 7959-6105, prior to the initiation of the call. The live webcast of the conference call may be accessed by visiting: About Us > Investor Relations > Presentations from the Lantronix web site at http://www.lantronix.com.

A telephonic replay of the conference call will be available through March 4, 2010 by dialing 888-286-8010 (international dial-in 617-801-6888) and entering passcode 1125-9142. The webcast will be archived on the Company's web site for twelve months.

About Lantronix

Lantronix, Inc. (NASDAQ: LTRX) is a global leader of secure communication technologies that simplify remote access, management and control of any electronic device. Its solutions 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 connect and control electronic equipment via the Internet; provide secure remote access to firewall-protected equipment; and enable remote management of IT equipment over the Internet. Founded in 1989, Lantronix serves some of the largest security, industrial and building automation, medical, transportation, retail/POS, financial, government, consumer electronics/appliances, IT/data center and pro-AV/signage entities in the world. The company's headquarters are located in Irvine, Calif. For more information, visit www.lantronix.com

This news release contains forward-looking statements, including statements concerning our future business plans. 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; government and industry standards; 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 SEC filings, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and our Annual Report on Form 10-K for the year ended June 30, 2009. 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.


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

                                                December 31,    June 30,
                                                    2009          2009
                                                ------------  ------------
Assets
Current assets:
 Cash and cash equivalents                      $      9,379  $      9,137
 Accounts receivable, net                              1,762         1,851
 Contract manufacturers' receivable                    1,026           655
 Inventories, net                                      6,606         6,479
 Prepaid expenses and other current assets               847           529
                                                ------------  ------------
  Total current assets                                19,620        18,651

 Property and equipment, net                           2,660         2,230
 Goodwill                                              9,488         9,488
 Purchased intangible assets, net                        203           265
 Other assets                                            128           122
                                                ------------  ------------
  Total assets                                  $     32,099  $     30,756
                                                ============  ============

Liabilities and stockholders' equity
Current liabilities:
 Accounts payable                               $      7,583  $      5,626
 Accrued payroll and related expenses                    950         1,414
 Warranty reserve                                        224           224
 Restructuring reserve                                     -            76
 Short-term debt                                         667           667
 Other current liabilities                             3,062         3,221
                                                ------------  ------------
  Total current liabilities                           12,486        11,228
                                                ------------  ------------
Non-current liabilities:
 Long-term liabilities                                   662           117
 Long-term capital lease obligations                     222           309
 Long-term debt                                          444           778
                                                ------------  ------------
  Total non-current liabilities                        1,328         1,204
                                                ------------  ------------
   Total liabilities                                  13,814        12,432
                                                ------------  ------------

Commitments and contingencies

Stockholders' equity:
 Common stock                                              1             1
 Additional paid-in capital                          190,397       189,584
 Accumulated deficit                                (172,561)     (171,687)
 Accumulated other comprehensive income                  448           426
                                                ------------  ------------
  Total stockholders' equity                          18,285        18,324
                                                ------------  ------------
  Total liabilities and stockholders' equity    $     32,099  $     30,756
                                                ============  ============


                              LANTRONIX, INC.
              Unaudited Consolidated Statements of Operations
                  (In thousands, except per share data)


                                    Three Months Ended   Six Months Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
Net revenue (1)                     $ 11,478  $ 12,885  $ 22,432  $ 27,097
Cost of revenue                        5,429     5,942    10,666    12,630
                                    --------  --------  --------  --------
Gross profit                           6,049     6,943    11,766    14,467
                                    --------  --------  --------  --------
Operating expenses:
 Selling, general and
  administrative                       4,855     5,315     9,475    10,523
 Research and development              1,510     1,549     2,995     3,052
 Restructuring charges                     -       128         -       721
 Amortization of purchased
  intangible assets                       18        18        36        36
                                    --------  --------  --------  --------
Total operating expenses               6,383     7,010    12,506    14,332
                                    --------  --------  --------  --------
Income (loss) from operations           (334)      (67)     (740)      135
Interest expense, net                    (42)      (57)      (89)      (83)
Other income (expense), net               11       (16)      (25)        6
                                    --------  --------  --------  --------
Income (loss) before income taxes       (365)     (140)     (854)       58
Provision for income taxes                10         8        20        22
                                    --------  --------  --------  --------
Net income (loss)                   $   (375) $   (148) $   (874) $     36
                                    ========  ========  ========  ========
Net income (loss) per share (basic) $  (0.04) $  (0.01) $  (0.09) $   0.00
                                    ========  ========  ========  ========
Net income (loss) per share
 (diluted)                          $  (0.04) $  (0.01) $  (0.09) $   0.00
                                    ========  ========  ========  ========
Weighted-average shares (basic)       10,301    10,084    10,234    10,073
                                    ========  ========  ========  ========
Weighted-average shares (diluted)     10,301    10,084    10,234    10,107
                                    ========  ========  ========  ========
(1) Includes net revenue from
     related party                  $    142  $    306  $    267  $    560
                                    ========  ========  ========  ========



                              LANTRONIX, INC.
             Unaudited Reconciliation of Non-GAAP Adjustments
                  (In thousands, except per share data)

                                    Three Months Ended   Six Months Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
GAAP net income (loss)              $   (375) $   (148) $   (874) $     36
 Non-GAAP adjustments:
   Cost of revenues:
    Share-based compensation              10        35        19        47
    Employer portion of withholding
     taxes on stock grants                 -         -         3         -
    Depreciation and amortization         64        41       118        83
                                    --------  --------  --------  --------
   Total adjustments to cost of
    revenues                              74        76       140       130
                                    --------  --------  --------  --------
   Selling, general and
    adminstrative:
    Share-based compensation             428       485       851       714
    Employer portion of withholding
     taxes on stock grants                 -         -        13         -
    Depreciation and amortization        148       140       281       270
                                    --------  --------  --------  --------
   Total adjustments to selling,
    general and administrative           576       625     1,145       984
                                    --------  --------  --------  --------
   Research and development:
    Share-based compensation             146       221       273       303
    Employer portion of withholding
     taxes on stock grants                 -         -        21         -
    Depreciation and amortization         16        18        32        36
                                    --------  --------  --------  --------
   Total adjustments to research
    and development                      162       239       326       339
                                    --------  --------  --------  --------
   Restructuring charge                    -       128         -       721
   Amortization of purchased
    intangible assets                     18        18        36        36
                                    --------  --------  --------  --------
  Total non-GAAP adjustments to
   operating expenses                    756     1,010     1,507     2,080
                                    --------  --------  --------  --------
  Interest expense, net                   42        57        89        83
  Other income (expense), net            (11)       16        25        (6)
  Provision for income taxes              10         8        20        22
                                    --------  --------  --------  --------
Total non-GAAP adjustments               871     1,167     1,781     2,309
                                    --------  --------  --------  --------
Non-GAAP net income                 $    496  $  1,019  $    907  $  2,345
                                    ========  ========  ========  ========
Non-GAAP net income per share
 (diluted)                          $   0.05  $   0.10  $   0.08  $   0.23
                                    ========  ========  ========  ========

Denominator for GAAP net income per
 share (diluted)                      10,301    10,084    10,234    10,107
Non-GAAP adjustment                      554       448       529       217
                                    --------  --------  --------  --------
Denominator for non-GAAP net income
 per share (diluted)                  10,855    10,531    10,763    10,324
                                    ========  ========  ========  ========

GAAP operating expenses             $  6,383  $  7,010  $ 12,506  $ 14,332
Non-GAAP adjustments to operating
 expenses                               (756)   (1,010)   (1,507)   (2,080)
                                    --------  --------  --------  --------
Non-GAAP operating expenses         $  5,627  $  6,000  $ 10,999  $ 12,252
                                    ========  ========  ========  ========




                              LANTRONIX, INC.
                  Unaudited Net Revenues by Product Line
                    (In thousands, except percentages)


                      Three Months Ended December 31,
                      ----------------------------------
                                 % of              % of       Change
                                  Net               Net   ----------------
                        2009    Revenue   2008    Revenue     $       %
                      --------- ------  --------- ------  -------- -------
Device enablement     $   9,255   80.6% $  10,115   78.5% $   (860)  (8.5%)
Device management         1,899   16.5%     2,241   17.4%     (342) (15.3%)
                      --------- ------  --------- ------  --------
 Device networking       11,154   97.1%    12,356   95.9%   (1,202)  (9.7%)
 Non-core                   324    2.9%       529    4.1%     (205) (38.8%)
                      --------- ------  --------- ------  --------
  Net revenue         $  11,478  100.0% $  12,885  100.0% $ (1,407) (10.9%)
                      ========= ======  ========= ======  ========




                        Six Months Ended December 31,
                      ----------------------------------
                                 % of              % of       Change
                                  Net               Net   ----------------
                        2009    Revenue   2008    Revenue     $       %
                      --------- ------  --------- ------  -------- -------
Device enablement     $  17,995   80.2% $  21,668   80.0% $ (3,673) (17.0%)
Device management         3,902   17.4%     4,219   15.6%     (317)  (7.5%)
                      --------- ------  --------- ------  --------
 Device networking       21,897   97.6%    25,887   95.6%   (3,990) (15.4%)
 Non-core                   535    2.4%     1,210    4.4%     (675) (55.8%)
                      --------- ------  --------- ------  --------
  Net revenue         $  22,432  100.0% $  27,097  100.0% $ (4,665) (17.2%)
                      ========= ======  ========= ======  ========

Contact Information

  • Investor Relations Contact:
    Lantronix, Inc.
    Reagan Y. Sakai, Chief Financial Officer
    (949) 453-3990