SOURCE: Lantronix, Inc.

Lantronix, Inc.

August 29, 2012 16:05 ET

Lantronix Reports Fourth Quarter and Fiscal Year 2012 Financial Results

Company Reports Second Consecutive Quarter of Non-GAAP Net Income; Reports GAAP Net Loss of $(0.01) Per Share

IRVINE, CA--(Marketwire - Aug 29, 2012) -  Lantronix, Inc. (the "company") (NASDAQ: LTRX), a leading global provider of smart M2M connectivity solutions, today reported results for its fourth quarter and fiscal year ended June 30, 2012.

Financial Highlights

  • Net revenue of $11.6 million.
  • Gross profit as a percentage of net revenue was 50.7%, the fourth sequential quarter of gross margin improvement.
  • GAAP net loss of $(178,000), or ($0.01) per share.
  • Non-GAAP net income of $351,000, or $0.03 per share, the second consecutive quarter of non-GAAP net income.
  • Net inventories of $6.0 million, a reduction of 35% from the fiscal year ended June 30, 2011.
  • Raised $9.5 million in net proceeds from the sale of common stock which increased cash from $1.8 million as of March 31, 2012 to $11.4 million as of June 30, 2012.

Operational Highlights

  • In April 2012, the company began shipping xPico™, the world's smallest embedded device server measuring less than 4 cm2.
  • In June 2012, Emulex chairman and former CEO Paul Folino, joined the company's board of directors.
  • In June 2012, the company began shipping its first cellular product, the PremierWave XC, Secure Cellular Device and Application Server for Remote and Mobile M2M Applications
  • In June 2012, the company announced the xPrintServer™ - Home Edition, designed specifically for home use by consumers wishing to print from their iPad®, iPhone® or iPod® Touch to a USB or network printer. The product began shipping in the first quarter of FY 2013.
  • In July 2012, the company began shipping samples of the xSenso, the first of a family of analog device servers that enables remote monitoring, real-time charting and event notification of virtually any analog sensor. xSenso is the seventh new product launched by the company since December 2011.

"In eight months Lantronix launched an unprecedented seven new products into production, improved gross margins from 46.1% for the fourth fiscal quarter of 2011 to 50.7% for the fourth fiscal quarter of 2012, and achieved two consecutive quarters of non-GAAP net income" said CEO Kurt Busch. "We achieved these goals while bringing expenses in line with revenues and improving the company's balance sheet."

"While we are proud of the accomplishments the company has achieved during fiscal 2012, our focus remains on continuing to execute on our product development strategy and to push forward toward achieving long-term growth and profitability for our shareholders."

Financial Results for the Fourth Quarter of Fiscal 2012 Ended June 30, 2012

Net revenue was $11.6 million for the fourth quarter of fiscal 2012, a decrease of $416,000 or 4%, compared to $12.0 million for the fourth quarter of fiscal 2011 and a decrease of $522,000 or 4%, compared to $12.1 million for the third quarter of fiscal 2012. The year-over-year decrease in net revenue was primarily due to decreases in the company's device enablement product lines which were partially offset by a net increase in sales of device management products. The sequential decrease in net revenue was primarily due to lower sales of our device enablement products in Europe. 

Gross profit as a percentage of net revenue ("gross margin") was 50.7% for the fourth quarter of fiscal 2012, compared to 46.1% for the fourth quarter of fiscal 2011 and 48.8% for the third quarter of fiscal 2012. The year-over-year increase in gross margin was primarily the result of a reduction in charges related to inventory reserves and manufacturing overhead.

GAAP operating expenses for the fourth quarter of fiscal 2012 were $6.0 million, a decrease of $3.1 million or 34%, compared to $9.1 million for the fourth quarter of fiscal 2011 and an increase of $89,000 or 2%, compared to $5.9 million for the third quarter of fiscal 2012.

  • Selling, general and administrative expenses were $4.2 million for the fourth quarter of fiscal 2012, a decrease of $3.1 million or 43%, compared to $7.3 million for the fourth quarter of fiscal 2011 and an increase of $105,000 or 3%, compared to $4.1 million for the third quarter of fiscal 2012. The year-over-year decrease was primarily due to costs of $2.5 million associated with an independent investigation and severance for former named executive officers during the fourth quarter of fiscal 2011. There were no similar costs during the fourth fiscal quarter of 2012. In large part, the remaining balance of the decrease in selling, general and administrative expenses of approximately $0.6 million can be attributed to the cost containment activities that management began to implement during the second fiscal quarter of 2012.
  • Research and development expenses were $1.8 million for the fourth quarter of fiscal 2012, flat with $1.8 million for both the fourth quarter of fiscal 2011 and the third quarter of fiscal 2012. 

Non-GAAP operating expenses for the fourth quarter of fiscal 2012 were $5.7 million, a decrease of $445,000 or 7%, compared with $6.1 million for the fourth quarter of fiscal 2011, and an increase of $98,000 or 2%, compared to $5.6 million for the third quarter of fiscal 2012.

GAAP net loss for the fourth quarter of fiscal 2012 was $(178,000), or ($0.01) per share, compared to a GAAP net loss of $(3.6 million), or ($0.34) per share, for the fourth quarter of fiscal 2011 and a GAAP net loss of $(41,000), or ($0.00) per share, for the third quarter of fiscal 2012. 

Non-GAAP net income for the fourth quarter of fiscal 2012 was $351,000, or $0.03 per share compared to non-GAAP net loss of $(433,000) or $(0.04) per share for the fourth quarter of fiscal 2011 and a non-GAAP net income of $471,000, or $0.04 per share, for the third quarter of fiscal 2012.

Financial Results for the Fiscal Year ended June 30, 2012

Net revenue was $45.4 million for the fiscal year ended June 30, 2012, compared to $49.3 million for the fiscal year ended June 30, 2011.

Gross profit as a percentage of net revenue was 48.8% for the twelve months ended June 30, 2012, compared with 49.5% for the twelve months ended June 30, 2011.

GAAP operating expenses for the fiscal year ended June 30, 2012 were $24.9 million, compared to $29.5 million for the fiscal year ended June 30, 2011.

  • Selling, general and administrative expenses for the twelve months ended June 30, 2012 were $17.7 million, compared to $22.4 million for the twelve months ended June 30, 2011.
  • Research and development expenses for the twelve months ended June 30, 2012 were $6.9 million, compared to $7.0 million for the twelve months ended June 30, 2011.
  • Restructuring charges for the fiscal year ended June 30, 2012 were $286,000.

Non-GAAP operating expenses for the twelve months ended June 30, 2012 were $23.1 million, compared to $23.6 million for the twelve months ended June 30, 2011.

GAAP net loss for the fiscal year ended June 30, 2012 was $(3.0) million, or ($0.27) per share, compared to $(5.3) million, or ($0.51) per share, for the fiscal year ended June 30, 2011.

Non-GAAP net loss for the twelve months ended June 30, 2012 was $(504,000) or ($0.04) per share, compared to non-GAAP net income of $1.3 million, or $0.12 per share, for the twelve months ended June 30, 2011.

Balance Sheet Summary

Cash and cash equivalents were $11.4 million as of June 30, 2012, compared to $5.8 million as of June 30, 2011. In April and May of 2012, the company closed two transactions involving the sale of its common stock that generated aggregate net proceeds of approximately $9.5 million.

Accounts receivable were $2.7 million as of June 30, 2012, compared to $2.9 million as of June 30, 2011.

Net inventories were $6.0 million as of June 30, 2012, compared to $9.2 million as of June 30, 2011.

Accounts payable were $3.6 million as of June 30, 2012, compared to $8.4 million as of June 30, 2011.

Working capital was $11.9 million as of June 30, 2012, compared to $5.2 million as of June 30, 2011.

Annual Discussion of Company Target Model

The company reaffirmed the target financial model previously disclosed in its Form 8-K filed with the Securities and Exchange Commission on April 25, 2012.

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 and to gain an understanding of our comparative operating performance. In addition, certain stockholders have expressed an interest in seeing financial performance measures, which exclude the impact of certain matters such as decisions relating to the restructuring, which while important, are not central to the core operations of the Company's business.

Non-GAAP operating expenses consist of operating expenses excluding share-based compensation and related payroll taxes, depreciation and amortization, restructuring charges, costs associated with the contested proxy, costs associated with the 2011 independent investigation of certain allegations by a director of Lantronix, and consulting fees for former named executive officers. 

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.

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 fourth quarter and fiscal year 2012 financial results. Those wishing to participate in the live call should dial 866-383-8119 (international dial-in 617-597-5344) using the passcode 26633893. A telephone replay of the call will be available through September 5, 2012 by dialing (888) 286-8010 (international dial-in 617-801-6888) and entering passcode 65476087.

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 serves some of the largest medical, security, industrial and building automation, 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. The Lantronix blog, http://www.lantronix.com/blog, features industry discussion and updates.

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: our ability to raise additional capital when and to the extent necessary; 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; our ability to implement the planned cost reduction program; 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 Annual Report on Form 10-K for the year ended June 30, 2011 and our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2011, December 31, 2011, and March 31, 2012. 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.

   
LANTRONIX, INC.  
Unaudited Consolidated Balance Sheets  
(In thousands, except share and per share data)  
   
    June 30,     June 30,  
    2012     2011  
                 
Assets                
Current Assets:                
  Cash and cash equivalents   $ 11,374     $ 5,836  
  Accounts receivable (net of allowance for doubtful accounts of $108 and $102 at June 30, 2012 and 2011, respectively)     2,674       2,908  
  Inventories, net     5,955       9,160  
  Contract manufacturers' receivable     622       636  
  Prepaid expenses and other current assets     549       605  
  Deferred tax assets     657       569  
    Total current assets     21,831       19,714  
                 
  Property and equipment, net     1,605       1,761  
  Goodwill     9,488       9,488  
  Purchased intangible assets, net     -       54  
  Other assets     87       175  
    Total assets   $ 33,011     $ 31,192  
                 
Liabilities and stockholders' equity                
Current Liabilities:                
  Accounts payable   $ 3,563     $ 8,358  
  Accrued payroll and related expenses     2,100       2,000  
  Warranty reserve     232       268  
  Short-term debt     667       667  
  Other current liabilities     3,342       3,199  
    Total current liabilities     9,904       14,492  
Non-Current Liabilities:                
  Long-term liabilities     303       550  
  Long-term capital lease obligations     48       45  
  Long-term debt     167       833  
  Deferred tax liabilities     657       569  
    Total non-current liabilities     1,175       1,997  
      Total liabilities     11,079       16,489  
                 
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; 14,549,072 and 10,549,852 shares issued and outstanding at June 30, 2012 and 2011, respectively    
1
     
1
 
  Additional paid-in capital     203,049       192,780  
  Accumulated deficit     (181,517 )     (178,477 )
  Accumulated other comprehensive income     399       399  
    Total stockholders' equity     21,932       14,703  
    Total liabilities and stockholders' equity   $ 33,011     $ 31,192  
   
   
LANTRONIX, INC.  
Unaudited Consolidated Statements of Operations  
(In thousands, except per share data)  
   
    Three Months Ended     Years Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
Net revenue (1)   $ 11,612     $ 12,028     $ 45,382     $ 49,321  
Cost of revenue     5,728       6,478       23,236       24,907  
Gross profit     5,884       5,550       22,146       24,414  
Operating expenses:                                
  Selling, general and administrative     4,192       7,290       17,684       22,373  
  Research and development     1,794       1,761       6,910       7,033  
  Restructuring charges     -       -       286       -  
  Amortization of purchased intangible assets     -       18       54       72  
Total operating expenses     5,986       9,069       24,934       29,478  
Loss from operations     (102 )     (3,519 )     (2,788 )     (5,064 )
Interest expense, net     (21 )     (36 )     (97 )     (123 )
Other income (expense), net     (32 )     (45 )     (82 )     (28 )
Loss before income taxes     (155 )     (3,600 )     (2,967 )     (5,215 )
Provision for income taxes     23       15       73       56  
Net loss   $ (178 )   $ (3,615 )   $ (3,040 )   $ (5,271 )
                                 
Net loss per share (basic and diluted)   $ (0.01 )   $ (0.34 )   $ (0.27 )   $ (0.51 )
                                 
Weighted average shares (basic and diluted)     13,307       10,495       11,253       10,434  
                                 
(1) Includes net revenue from related parties   $ 216     $ 295     $ 865     $ 942  
                                 
   
   
LANTRONIX, INC.  
Unaudited Reconciliation of Non-GAAP Adjustments  
(In thousands)  
   
    Three Months Ended     Years Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
GAAP net loss   $ (178 )   $ (3,615 )   $ (3,040 )   $ (5,271 )
  Non-GAAP adjustments:                                
    Cost of revenues:                                
      Share-based compensation     9       17       37       63  
      Employer portion of withholding taxes on stock grants     -       -       -       4  
      Depreciation and amortization     124       109       431       362  
    Total adjustments to cost of revenues     133       126       468       429  
    Selling, general and adminstrative:                                
      Costs associated with the investigation     -       1,672       108       2,124  
      Separation costs related to the former CEO and CFO     -       862       -       862  
      Costs associated with the contested proxy     -       -       -       561  
      Consulting fees for former CEO and CFO     -       -       153       -  
      Share-based compensation     132       123       449       1,114  
      Employer portion of withholding taxes on stock grants     -       -       2       18  
      Depreciation and amortization     122       165       475       665  
    Total adjustments to selling, general and administrative     254       2,822       1,187       5,344  
    Research and development:                                
      Share-based compensation     61       109       259       426  
      Employer portion of withholding taxes on stock grants     -       -       3       23  
      Depreciation and amortization     5       10       27       43  
    Total adjustments to research and development     66       119       289       492  
    Restructuring     -       -       286       -  
    Amortization of purchased intangible assets     -       18       54       72  
  Total non-GAAP adjustments to operating expenses     320       2,959       1,816       5,908  
  Interest expense, net     21       36       97       123  
  Other (income) expense, net     32       46       82       28  
  Provision for income taxes     23       15       73       56  
  Total non-GAAP adjustments     529       3,182       2,536       6,544  
  Non-GAAP net income (loss)   $ 351     $ (433 )   $ (504 )   $ 1,273  
                                 
Non-GAAP net income (loss) per share ( basic and diluted)   $ 0.03     $ (0.04 )   $ (0.04 )   $ 0.12  
                                 
                                 
Denominator for GAAP net income (loss) per share (basic and diluted)     13,307       10,495       11,253       10,434  
Non-GAAP adjustment     216       -       210       421  
Denominator for non-GAAP net income (loss) per share (basic and diluted)     13,523       10,495       11,463       10,855  
                                 
                                 
GAAP operating expenses   $ 5,986     $ 9,069     $ 24,934     $ 29,478  
Non-GAAP adjustments to operating expenses     (320 )     (2,959 )     (1,816 )     (5,908 )
Non-GAAP operating expenses   $ 5,666     $ 6,110     $ 23,118     $ 23,570  
                                 
 
LANTRONIX, INC.
Unaudited Consolidated Net Revenue by Product Line
(In thousands)
 
  Quarters Ended June 30,              
      % of Net         % of Net     Change  
  2012   Revenue     2011   Revenue     $     %  
  (In thousands, except percentages)        
                     
Device enablement $ 9,257   79.7 %   $ 9,705   80.7 %   $ (448 )   (4.6 %)
Device management   2,355   20.3 %     2,323   19.3 %     32     1.4 %
Net revenue $ 11,612   100.0 %   $ 12,028   100.0 %   $ (416 )   (3.5 %)
                                     
                                     
    Years Ended June 30,                
        % of Net           % of Net       Change  
    2012   Revenue       2011   Revenue       $      %   
    (In thousands, except percentages)         
                     
Device enablement $ 35,831   79.0 %   $ 39,608   80.3 %   $ (3,777 )   (9.5 %)
Device management   9,551   21.0 %     9,713   19.7 %     (162 )   (1.7 %)
Net revenue $ 45,382   100.0 %   $ 49,321   100.0 %   $ (3,939 )   (8.0 %)
                                     

Contact Information

  • Investor Relations Contacts:

    Lantronix, Inc.
    Jeremy Whitaker
    Chief Financial Officer
    (949) 453-3990

    E.E. Wang Lukowski
    investors@lantronix.com
    949-614-5879