SOURCE: Lantronix, Inc.

September 02, 2010 16:05 ET

Lantronix Reports Fiscal 2010 Fourth Quarter and Full Year Financial Results

Eighth Consecutive Quarter of Non-GAAP Profitability; Cash Increases $762,000 to $10.1 Million During the Fourth Quarter

IRVINE, CA--(Marketwire - September 2, 2010) - Lantronix, Inc. (NASDAQ: LTRX), a leading provider of secure, remote management, device networking and data center management technologies, today reported financial results for its fiscal 2010 fourth quarter and full year ended June 30, 2010.

Financial Highlights for the Fourth Fiscal Quarter


--  Net revenue of $11.8 million, an increase of 4% year-over-year.
--  GAAP net loss of $509,000, or ($0.05) per share.
--  Non-GAAP net income of $169,000, or $0.02 per share.
--  Eighth consecutive quarter of non-GAAP net income.
--  Cash and cash equivalents increased to $10.1 million at June 30, 2010.

Jerry Chase, president and CEO, said, "We made substantial progress in fiscal 2010 and are pleased with our positive results and momentum. Shipments in the fourth quarter came in at their highest levels in six quarters, contributing to the substantial improvement in our cash balance at quarter end. We saw continued positive sales momentum across many of our products and geographies during the quarter and are excited with the increasing market traction we are generating with our new products and services."

"During fiscal 2010, we invested in new products and marketing capabilities to maximize our opportunities in the growing medical device connectivity market. We believe our value-added solutions uniquely position us to benefit from growth in this exciting vertical."

Recent Non-Financial Highlights


--  Announced the launch of AccessMyDevice.com, a new Internet-based,
    enterprise-grade subscription service enabling secure remote access
    behind firewalls to virtually any device from a web browser.

--  Announced new investments and initiatives to drive increased sales
    within the growing medical device connectivity market, including the
    appointment of a new vice president of marketing, the addition of sales
    professionals in the U.S. and Europe, a comprehensive global rebranding
    effort, and a new solutions-focused website.

--  United Oil, a large fueling station services company serving Shell,
    Exxon, Mobil, ConocoPhillips and United Oil-branded stations throughout
    the U.S., selected Lantronix' ManageLinx® solution using VIP Access
    enabled EDS1100s to remotely access gasoline storage tanks for data
    collection and analysis, initially for 70 Shell stations in Southern
    California.

--  Perinata, a newly-launched IT services company, selected ManageLinx®
    to provide secure access to firewall-protected devices via the
    Internet, enabling its new business model to provide robust IT services
    from remote locations.

--  Launched MatchPort® NR, the newest addition to the Company's
    MatchPort family of device servers that enables customers to easily
    configure their products for wired or wireless connectivity with the
    swap of a module, significantly shortening development time.

--  XLHost and netdirekt, data center and server hosting companies,
    selected Spider to provide secure keyboard, video, mouse (KVM) server
    management over the internet.

--  STARA Technologies selected WiPort® for its cutting edge Mosquito
    automated guidance unit. Mosquito is a precision-guided aerial delivery
    system that precisely delivers blood plasma, batteries, ammunition,
    ground-based sensors and MREs (meals ready to eat) to Special
    Operations Forces and other troops on the battlefield.

Financial Results for the Fiscal Fourth Quarter Ended June 30, 2010

Net revenue was $11.8 million, an increase of 4%, compared to $11.4 million for the fourth fiscal quarter of 2009.

Gross profit margin increased to 50.8%, compared to 49.4% for the fiscal fourth quarter of 2009. The increase in gross profit margin percent primarily reflects a decrease in inventory and warranty reserve expenses, offset by an increase in freight costs due to expedite charges relating to component and product shortages.

GAAP operating expenses were $6.5 million, an increase of $331,000, compared to $6.1 million for the fourth fiscal quarter of 2009. Approximately $400,000 of the increase was attributable to the Company discontinuing its corporate-wide furlough program for the fourth fiscal quarter of 2010.


--  Selling, general and administrative expense was $4.8 million, an
    increase of $208,000, compared to $4.5 million for the fourth fiscal
    quarter of 2009. The increase was primarily due to the Company
    discontinuing its corporate-wide furlough program for the fourth
    fiscal quarter of 2010 and severance related charges.

--  Research and development expense was $1.7 million, an increase of
    $231,000, compared to $1.5 million for the fourth fiscal quarter of
    2009. The increase was primarily due to the Company discontinuing its
    corporate-wide furlough program for the fourth fiscal quarter of 2010.

Non-GAAP operating expenses were $5.9 million, compared to $5.4 million for the fourth fiscal quarter of 2009.

GAAP net loss was $509,000, or ($0.05) per share, compared to GAAP net loss of $553,000, or ($0.05) per share, for the fourth fiscal quarter of 2009.

Non-GAAP net income was $169,000, or $0.02 per share, compared to non-GAAP net income of $326,000, or $0.03 per share, for the fourth fiscal quarter of 2009.

Financial Results for the Fiscal Year Ended June 30, 2010

Net revenue was $46.4 million for fiscal 2010, a decrease of 5.6%, compared to $49.1 million for fiscal 2009.

Gross profit margin was 52.0%, compared to 52.2% for fiscal 2009. The decrease in gross profit margin percent reflects product mix and increased freight costs due to expedite charges relating to component and product shortages.

GAAP operating expenses were $25.4 million, a decrease of $838,000, compared to $26.3 million for fiscal 2009.


--  Selling, general and administrative expense was $19.0 million, a
    decrease of $482,000, compared to $19.5 million for fiscal 2009. The
    decrease was due to personnel-related and facilities-related expenses,
    marketing expenses, professional fees and outside services due to cost
    cutting efforts.

--  Research and development expense was $6.3 million, an increase of
    $450,000, compared to $5.9 million for fiscal 2009. The increase was
    due to personnel-related expenses, facilities-related expenses, and
    outside services for engineering projects.

Non-GAAP operating expenses were $22.8 million, a decrease of $167,000, compared to $23.0 million for fiscal 2009.

GAAP net loss was $1.5 million, or ($0.15) per share, compared to GAAP net loss of $780,000, or ($0.08) per share, for fiscal 2009.

Non-GAAP net income was $1.6 million, or $0.15 per share, compared to non-GAAP net income of $2.9 million, or $0.28 per share, for fiscal 2009.

Balance Sheet Summary

Cash and cash equivalents were $10.1 million as of June 30, 2010, an increase of $938,000, compared to $9.1 million as of June 30, 2009.

Total receivables, which include accounts receivable, net, and contract manufacturers' receivable, were $2.4 million as of June 30, 2010, compared to $2.5 million as of June 30, 2009.

Net Inventory was $6.9 million as of June 30, 2010, compared to $6.5 million as of June 30, 2009.

Accounts payable were $6.5 million as of June 30, 2010, compared to $5.6 million as of June 30, 2009. The increase was due to the timing of inventory receipts during the quarter as inventory is the primary driver of accounts payable.

Working capital was $7.6 million as of June 30, 2010, compared to $8.1 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
Lantronix will host a conference call and webcast today at 2:00 p.m. Pacific Time (5:00 p.m. ET) to discuss its fiscal 2010 fourth quarter and year-end financial results. Those wishing to participate in the live call should dial 800-599-9829 (International dial-in 617-847-8703) using the passcode 14137881. A telephone replay of the call will be available for one week beginning approximately one hour after the call's conclusion by dialing (888) 286-8010 and entering 24165699 followed by the "#" key when prompted for a code. To access the live webcast of the call, go to the Investor Relations section of Lantronix's website at www.lantronix.com. 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 quarters ended March 31, 2010, December 31, 2009 and 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 Consolidated Balance Sheets
             (In thousands, except  share and per share data)

                                               June 30,        June 30,
                                                 2010            2009
                                            --------------  --------------
Assets
Current Assets:
 Cash and cash equivalents                  $       10,075  $        9,137
 Accounts receivable (net of allowance for
  doubtful accounts of $93 and $130 at June
  30, 2010 and 2009, respectively)                   1,342           1,851
 Inventories, net                                    6,873           6,479
 Contract manufacturers' receivable                  1,015             655
 Prepaid expenses and other current assets             515             529
 Deferred tax asset                                    567             675
                                            --------------  --------------
  Total current assets                              20,387          19,326

 Property and equipment, net                         2,392           2,230
 Goodwill                                            9,488           9,488
 Purchased intangible assets, net                      155             265
 Other assets                                          135             122
                                            --------------  --------------
  Total assets                              $       32,557  $       31,431
                                            ==============  ==============
Liabilities and stockholders' equity
Current Liabilities:
 Accounts payable                           $        6,545  $        5,626
 Accrued payroll and related expenses                1,568           1,414
 Warranty reserve                                      183             224
 Restructuring reserve                                   -              76
 Short-term debt                                       667             667
 Other current liabilities                           3,776           3,221
                                            --------------  --------------
  Total current liabilities                         12,739          11,228
Non-Current Liabilities:
 Long-term liabilities                                 646             117
 Long-term capital lease obligations                   153             309
 Long-term debt                                        111             778
 Deferred tax liability                                567             675
                                            --------------  --------------
  Total non-current liabilities                      1,477           1,879
                                            --------------  --------------
   Total liabilities                                14,216          13,107
                                            --------------  --------------
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;
  200,000,000 shares authorized;
  10,322,597 and 10,090,087 shares issued
   and outstanding at                                    -               -
  June 30, 2010 and 2009, respectively                   1               1
 Additional paid-in capital                        191,147         189,584
 Accumulated deficit                              (173,206)       (171,687)
 Accumulated other comprehensive income                399             426
                                            --------------  --------------
  Total stockholders' equity                        18,341          18,324
                                            --------------  --------------
  Total liabilities and stockholders'
   equity                                   $       32,557  $       31,431
                                            ==============  ==============




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

                                Three Months Ended        Years Ended
                                     June 30,               June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

Net revenue (1)                 $  11,819  $  11,395  $  46,375  $  49,147
Cost of revenue                     5,819      5,762     22,257     23,478
                                ---------  ---------  ---------  ---------
Gross profit                        6,000      5,633     24,118     25,669
                                ---------  ---------  ---------  ---------
Operating expenses:
 Selling, general and
  administrative                    4,756      4,548     19,035     19,517
 Research and development           1,700      1,469      6,338      5,888
 Restructuring charges                  -        108          -        806
 Amortization of purchased
  intangible assets                    18         18         72         72
                                ---------  ---------  ---------  ---------
Total operating expenses            6,474      6,143     25,445     26,283
                                ---------  ---------  ---------  ---------
Loss from operations                 (474)      (510)    (1,327)      (614)
Interest expense, net                 (31)       (52)      (149)      (186)
Other income (expense), net           (11)       (24)       (19)        19
                                ---------  ---------  ---------  ---------
Loss before income taxes             (516)      (586)    (1,495)      (781)
Provision (benefit) for income
 taxes                                 (7)       (33)        24         (1)
                                ---------  ---------  ---------  ---------
Net loss                        $    (509) $    (553) $  (1,519) $    (780)
                                =========  =========  =========  =========

Net loss per share (basic and
 diluted)                       $   (0.05) $   (0.05) $   (0.15) $   (0.08)
                                =========  =========  =========  =========

Weighted average shares (basic
 and diluted)                      10,321     10,090     10,276     10,081
                                =========  =========  =========  =========

(1)  Includes net revenue from
 related parties                $     161  $     158  $     642  $     962
                                =========  =========  =========  =========




                             LANTRONIX, INC.
             Unaudited Reconciliation of Non-GAAP Adjustments
                              (In thousands)

                                 Three Months Ended       Years Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

GAAP net loss                   $    (509) $    (553) $  (1,519) $    (780)
 Non-GAAP adjustments:
   Cost of revenues:
    Share-based compensation           13         14         43         63
    Employer portion of
     withholding taxes on stock
     grants                             -          -          3          -
    Depreciation and
     amortization                      76         45        264        171
                                ---------  ---------  ---------  ---------
   Total adjustments to cost of
    revenues                           89         59        310        234
                                ---------  ---------  ---------  ---------
   Selling, general and
    administrative:
    Share-based compensation          272        359      1,380      1,315
    Employer portion of
     withholding taxes on stock
     grants                             -          -         13          -
    Depreciation and
     amortization                     164        142        625        565
                                ---------  ---------  ---------  ---------
   Total adjustments to
    selling, general and
    administrative                    436        501      2,018      1,880
                                ---------  ---------  ---------  ---------
   Research and development:
    Share-based compensation           89        134        478        488
    Employer portion of
     withholding taxes on stock
     grants                             -          -         21          -
    Depreciation and
     amortization                      11         16         56         70
                                ---------  ---------  ---------  ---------
   Total adjustments to
    research and development          100        150        555        558
                                ---------  ---------  ---------  ---------
   Restructuring charge                 -        108          -        806
   Amortization of purchased
    intangible assets                  18         18         72         72
                                ---------  ---------  ---------  ---------
  Total non-GAAP adjustments to
   operating expenses                 554        777      2,645      3,316
                                ---------  ---------  ---------  ---------
 Interest expense, net                 31         52        149        186
 Other (income) expense, net           11         24         19        (19)
 Provision (benefit) for income
  taxes                                (7)       (33)        24         (1)
                                ---------  ---------  ---------  ---------
 Total non-GAAP adjustments           678        879      3,147      3,716
                                ---------  ---------  ---------  ---------
 Non-GAAP net income (loss)     $     169  $     326  $   1,628  $   2,936
                                =========  =========  =========  =========

Non-GAAP net income per share
 (basic and diluted)            $    0.02  $    0.03  $    0.15  $    0.28
                                =========  =========  =========  =========


Denominator for GAAP net income
 per share (basic and diluted)     10,321     10,090     10,276     10,081
Non-GAAP adjustment                   666        476        549        353
                                ---------  ---------  ---------  ---------
Denominator for non-GAAP net
 income per share (basic and
 diluted)                          10,987     10,566     10,825     10,434
                                =========  =========  =========  =========


GAAP operating expenses         $   6,474  $   6,143  $  25,445  $  26,283
Non-GAAP adjustments to
 operating expenses                  (554)      (777)    (2,645)    (3,316)
                                ---------  ---------  ---------  ---------
Non-GAAP operating expenses     $   5,920  $   5,366  $  22,800  $  22,967
                                =========  =========  =========  =========




                              LANTRONIX, INC.
            Unaudited Consolidated Net Revenue by Product Line
                              (In thousands)

                         Years Ended June 30,
                --------------------------------------        Change
                          % of Net            % of Net  -----------------
                  2010    Revenue     2009    Revenue       $        %
                --------- --------  --------- --------  --------  -------
                          (In thousands, except percentages)
Device
 enablement     $  37,096     80.0% $  39,945     81.2% $ (2,849)    (7.1%)
Device
 management         8,384     18.1%     7,397     15.1%      987     13.3%
                --------- --------  --------- --------  --------  -------
Device
 networking        45,480     98.1%    47,342     96.3%   (1,862)    (3.9%)
Non-core              895      1.9%     1,805      3.7%     (910)   (50.4%)
                --------- --------  --------- --------  --------  -------
Net revenue     $  46,375    100.0% $  49,147    100.0% $ (2,772)    (5.6%)
                ========= ========  ========= ========  ========  =======




                       Quarters Ended June 30,
                --------------------------------------        Change
                          % of Net            % of Net  -----------------
                  2010     Revenue    2009     Revenue      $         %
                ---------  -------   --------  -------  -------   -------
                           (In thousands, except percentages)
Device
 enablement     $   9,557     80.9%  $  9,540     83.7% $    17       0.2%
Device
 management         2,103     17.8%     1,569     13.8%     534      34.0%
                ---------  -------   --------  -------  -------   -------
Device
 networking        11,660     98.7%    11,109     97.5%     551       5.0%
Non-core              159      1.3%       286      2.5%    (127)    (44.4%)
                ---------  -------   --------  -------  -------   -------
Net revenue     $  11,819    100.0%  $ 11,395    100.0% $   424       3.7%
                =========  =======   ========  =======  =======   =======

Contact Information

  • Investor Relations Contacts:
    Todd Kehrli / Jim Byers
    MKR Group, Inc.
    323-468-2300
    Email Contact

    Lantronix, Inc.
    Reagan Y. Sakai
    Chief Financial Officer
    (949) 453-3990