Lantronix Reports Second Quarter Fiscal Year 2013 Financial Results

Company Reports Fourth Consecutive Quarter of Non-GAAP Income; Company Reports GAAP Net Loss of $(0.03) per Share and Non-GAAP Breakeven EPS


IRVINE, CA -- (Marketwire) -- 01/31/13 -- Lantronix, Inc. (the "company") (NASDAQ: LTRX), a leading global provider of smart M2M connectivity solutions, today reported results for its second fiscal quarter ended December 31, 2012.

Financial Highlights

  • Net revenue of $12.2 million
  • Gross profit as a percentage of net revenue of 49.6%
  • GAAP net loss of $(412,000), or ($0.03) per share
  • Non-GAAP net income of $70,000, or breakeven per share

Operational Highlights

  • In October 2012, the company entered into an agreement with Ingram Micro Europe, a division of Ingram Micro Inc. (NYSE: IM), the largest global wholesale provider of technology products and supply chain management services, under which Ingram Micro Europe will provide advanced logistics, product delivery and distribution services for Lantronix throughout Europe.
  • In November 2012, the company announced a sales and marketing partnership agreement with DataVision, New York's largest independent computer and video retailer, under which DataVision agreed to market and sell the Lantronix award-winning xPrintServer™ family of mobile printing solutions both online and through DataVision's flagship store.
  • In November 2012, OKI Data Americas, a leading provider of print management solutions, expanded its relationship with Lantronix to become the first printer manufacturer to resell the Lantronix xPrintServer mobile printing solution.
  • In January 2013, the company entered into an agreement with Arrow Electronics, Inc. (NYSE: ARW), to extend Arrow's product sales programs, product delivery and distribution services for Lantronix throughout the Asia-Pacific (APAC) region.

Product Highlights

  • In October 2012, the company began shipping the xDirect™ device server -- a compact serial-to-Ethernet device server that provides quick and easy connectivity to virtually any device or machine with a serial interface. In November 2012, the company announced the launch and worldwide availability of its new vSLM™ -- the Virtual Secure Lantronix Management Appliance -- a software solution designed to enable IT (information technology) managers to seamlessly integrate and manage multiple pieces of IT equipment anywhere in the enterprise.
  • In November 2012, the company launched and began shipping the xPrintServer -- Office Edition, an enterprise version of its award-winning mobile printing solution.

"Our operational and financial results for the quarter ended December 31, 2012 reflect the continued progress we achieved in executing on our strategic plan and marked the fourth consecutive quarter of non-GAAP profitability," said Lantronix CEO Kurt Busch. "During the quarter, we continued to expand our distribution and sales relationships worldwide, launched three new products, and enhanced Lantronix' visibility in the marketplace through increased marketing efforts."

Financial Results for the Second Quarter of Fiscal 2013 Ended December 31, 2012

Net revenue was $12.2 million for the second quarter of fiscal 2013, an increase of $1.7 million or 16%, compared to $10.5 million for the second quarter of fiscal 2012 and an increase of $1.0 million or 9%, compared to $11.2 million for the first quarter of fiscal 2013. In large part, the sequential and year-over-year revenue growth was due to increased unit sales of our xPrintServer and SLC console server product families.

Gross profit as a percentage of net revenue was 49.6% for the second quarter of fiscal 2013, compared to 48.2% for the second quarter of fiscal 2012 and 48.8% for the first quarter of fiscal 2013.

Operating expenses were $6.4 million for the second quarter of fiscal 2013 compared to $6.4 million for the second quarter of fiscal 2012 and increased by $0.5 million or 9%, compared to $5.9 million for the first quarter of fiscal 2013. The sequential change in operating expenses was primarily due to an increase in selling, general and administrative expenses related to a marketing plan we initiated in November 2012 to drive sales growth and brand awareness for the xPrintServer product family.

GAAP net loss for the second quarter of fiscal 2013 was $(412,000), or ($0.03) per share, compared to a GAAP net loss of $(1.4 million), or ($0.13) per share, for the second quarter of fiscal 2012 and a GAAP net loss of $(430,000), or ($0.03) per share, for the first quarter of fiscal 2013.

Non-GAAP net income for the second quarter of fiscal 2013 was $70,000, or $0.00 per share compared to non-GAAP net loss of $(629,000) or $(0.06) per share for the second quarter of fiscal 2012 and non-GAAP net income of $48,000, or $0.00 per share, for the first quarter of fiscal 2013.

Cash and cash equivalents as of December 31, 2012 were $8.5 million, compared to $11.4 million as of June 30, 2012. The decrease in cash was primarily due to an increase in inventory from $6.0 million as of June 30, 2012 to $9.7 million as of December 31, 2012 to support buffer stock and anticipated customer demand.

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 second quarter fiscal year 2013 financial results. Those wishing to participate in the live call should dial 866-700-7477 (international dial-in 617-213-8840) using the passcode 31619690. A telephone replay of the call will be available through February 7, 2013 by dialing (888) 286-8010 (international dial-in 617-801-6888) and entering passcode 72135803.

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, California.

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

Discussion of Non-GAAP Financial Measures

Lantronix believes that the presentation of non-GAAP financial information, when presented in conjunction with the corresponding GAAP measures, provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP net income (loss) per share are important measures of the company's business. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends to gain an understanding of our comparative operating performance.

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

Non-GAAP net income (loss) consists of net income (loss) excluding (i) non-GAAP adjustments to operating expenses, (ii) interest income (expense), (iii) other income (expense), and (iv) income tax provision (benefit).

Non-GAAP net income (loss) per share is calculated by dividing non-GAAP net income (loss) by non-GAAP weighted-average shares outstanding (diluted). For purposes of calculating non-GAAP net income (loss) per share, the calculation of GAAP weighted-average shares outstanding (diluted) is adjusted to exclude share-based compensation, which for GAAP purposes is treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Forward-Looking Statements

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

© 2013 Lantronix, Inc. Lantronix is a registered trademark, and vSLM, xDirect and xPrintServer are trademarks of Lantronix, Inc.

All other trademarks and trade names are the property of their respective holders. Specifications subject to change without notice. All rights reserved.


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


                                                                 Change
                                 December 31,    June 30,    --------------
                                     2012          2012         $       %
                                 ------------  ------------  -------  -----
Assets
Current assets:
  Cash and cash equivalents      $      8,452  $     11,374  $(2,922)   -26%
  Accounts receivable, net              2,348         2,674     (326)   -12%
  Contract manufacturers'
   receivable                             704           622       82     13%
  Inventories, net                      9,694         5,955    3,739     63%
  Prepaid expenses and other
   current assets                         598           549       49      9%
  Deferred tax assets                     657           657        -
                                 ------------  ------------  -------
    Total current assets               22,453        21,831      622      3%

  Property and equipment, net           1,426         1,605     (179)   -11%
  Goodwill                              9,488         9,488        -      0%
  Other assets                             79            87       (8)    -9%
                                 ------------  ------------  -------
    Total assets                 $     33,446  $     33,011  $   435      1%
                                 ============  ============  =======

Liabilities and stockholders'
 equity
Current liabilities:
  Accounts payable               $      5,126  $      3,563  $ 1,563     44%
  Accrued payroll and related
   expenses                             1,466         2,100     (634)   -30%
  Warranty reserve                        222           232      (10)    -4%
  Short-term debt                         500           667     (167)   -25%
  Other current liabilities             3,615         3,342      273      8%
                                 ------------  ------------  -------
    Total current liabilities          10,929         9,904    1,025     10%
                                 ------------  ------------  -------
Non-current liabilities:
  Long-term liabilities                   281           303      (22)    -7%
  Long-term capital lease
   obligations                             78            48       30     63%
  Long-term debt                            -           167
  Deferred tax liabilities                657           657        -      0%
                                 ------------  ------------  -------
    Total non-current
     liabilities                        1,016         1,175     (159)   -14%
                                 ------------  ------------  -------
      Total liabilities                11,945        11,079      866      8%
                                 ------------  ------------  -------

Commitments and contingencies

Stockholders' equity:
  Common stock                              1             1        -      0%
  Additional paid-in capital          203,460       203,049      411      0%
  Accumulated deficit                (182,359)     (181,517)    (842)     0%
  Accumulated other
   comprehensive income                   399           399        -      0%
                                 ------------  ------------  -------
    Total stockholders' equity         21,501        21,932     (431)    -2%
                                 ------------  ------------  -------
      Total liabilities and
       stockholders' equity      $     33,446  $     33,011  $   435      1%
                                 ============  ============  =======



Check figure                                -             -

Total receivables                       3,052         3,296     (244)    -7%
Working capital                        11,524        11,927     (403)    -3%



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


                              Three Months Ended           Six Months Ended
                    -------------------------------------  ----------------
                      December    September     December
                        31,          30,          31,        December 31,
                    -----------  -----------  -----------  ----------------
                        2012         2012         2011       2012     2011
                    -----------  -----------  -----------  -------  -------
Net revenue (1)     $    12,162  $    11,202  $    10,452  $23,364  $21,636
Cost of revenue           6,130        5,730        5,411   11,860   11,293
                    -----------  -----------  -----------  -------  -------
Gross profit              6,032        5,472        5,041   11,504   10,343
                    -----------  -----------  -----------  -------  -------
Operating expenses:
  Selling, general
   and
   administrative         4,719        4,268        4,441    8,987    9,405
  Research and
   development            1,665        1,609        1,646    3,274    3,341
  Restructuring
   charges                    -                       269        -      269
  Amortization of
   purchased
   intangible
   assets                     -            -           18        -       36
                    -----------  -----------  -----------  -------  -------
Total operating
 expenses                 6,384        5,877        6,374   12,261   13,051
                    -----------  -----------  -----------  -------  -------
Loss from
 operations                (352)        (405)      (1,333)    (757)  (2,708)
Interest expense,
 net                        (16)         (15)         (23)     (31)     (50)
Other expense, net          (23)           5           (8)     (18)     (37)
                    -----------  -----------  -----------  -------  -------
Loss before income
 taxes                     (391)        (415)      (1,364)    (806)  (2,795)
Provision for
 income taxes                21           15           13       36       26
                    -----------  -----------  -----------  -------  -------
Net loss and
 comprehensive loss $      (412) $      (430) $    (1,377) $  (842) $(2,821)
                    ===========  ===========  ===========  =======  =======

Net loss per share
 (basic and
 diluted)           $     (0.03) $     (0.03) $     (0.13) $ (0.06) $ (0.27)
                    ===========  ===========  ===========  =======  =======

Weighted-average
 common shares
 (basic and
 diluted)                14,578       14,558       10,581   14,568   10,571
                    ===========  ===========  ===========  =======  =======

Net revenue from
 related parties    $       381  $       292  $       174  $   673  $   411
                    ===========  ===========  ===========  =======  =======

(1) Includes net revenue from related parties



                          LANTRONIX, INC.
         Unaudited Reconciliation of Non-GAAP Adjustments
               (In thousands, except per share data)
                                                                     Three
                                                                     Months
                         Three Months Ended       Six Months Ended 30-Sep-12
                   -----------------------------  ----------------  -------
                   December  September  December
                      31,       30,        31,      December 31,
                   --------  ---------  --------  ----------------  -------
                     2012       2012      2011      2012     2011      $
                   --------  ---------  --------  -------  -------  -------

GAAP net loss      $   (412) $    (430) $ (1,377) $  (842) $(2,821) $  (430)
                   --------  ---------  --------  -------  -------
 Non-GAAP
  adjustments:
  Cost of revenue:
   Share-based
    compensation         10         11         9       21       22       11
   Depreciation
    and
    amortization        103         99        99      202      194       99
                   --------  ---------  --------  -------  -------  -------
  Total
   adjustments to
   cost of revenue      113        110       108      223      216      110
                   --------  ---------  --------  -------  -------  -------
  Selling, general
   and
   adminstrative:
   Costs
    associated
    with the
    investigation         -          -         -        -      108        -
   Consulting fees
    for former CEO
    and CFO               -          -         -        -      153        -
   Share-based
    compensation        141        146       113      287      194      146
   Employer
    portion of
    withholding
    taxes on stock
    grants                -          1         -        1        2        1
   Depreciation
    and
    amortization        110        116       118      226      248      116
                   --------  ---------  --------  -------  -------  -------
  Total
   adjustments to
   selling,
   general and
   administrative       251        263       231      514      705      263
                   --------  ---------  --------  -------  -------  -------
  Research and
   development:
   Share-based
    compensation         55         74        71      129      137       74
   Employer
    portion of
    withholding
    taxes on stock
    grants                -          2         -        2        3        2
   Depreciation
    and
    amortization          3          4         7        7       16        4
                   --------  ---------  --------  -------  -------  -------
  Total
   adjustments to
   research and
   development           58         80        78      138      156       80
                   --------  ---------  --------  -------  -------  -------
  Restructuring
   charges                -          -       269        -      269        -
  Amortization of
   purchased
   intangible
   assets                 -          -        18        -       36        -
                   --------  ---------  --------  -------  -------  -------
 Total non-GAAP
  adjustments to
  operating
  expenses              309        343       596      652    1,166      343
                   --------  ---------  --------  -------  -------  -------
 Interest expense,
  net                    16         15        23       31       50       15
 Other expense,
  net                    23         (5)        8       18       37       (5)
 Provision for
  income taxes           21         15        13       36       26       15
                   --------  ---------  --------  -------  -------  -------
Total non-GAAP
 adjustments            482        478       748      960    1,495      478
                   --------  ---------  --------  -------  -------  -------
Non-GAAP net
 income (loss)     $     70  $      48  $   (629) $   118  $(1,326) $    48
                   ========  =========  ========  =======  =======  =======

Non-GAAP net
 income (loss) per
 share (diluted)   $   0.00  $    0.00  $  (0.06) $  0.01  $ (0.13) $  0.00
                   ========  =========  ========  =======  =======  =======

Denominator for
 GAAP net income
 (loss) per share
 (diluted)           14,578     14,558    10,581   14,568   10,571   14,558
Non-GAAP
 adjustment              50         92         -       92        -       92
                   --------  ---------  --------  -------  -------  -------
Denominator for
 non-GAAP net
 income (loss) per
 share (diluted)     14,628     14,650    10,581   14,660   10,571   14,650
                   ========  =========  ========  =======  =======  =======

GAAP operating
 expenses          $  6,384  $   5,877  $  6,374  $12,261  $13,051  $ 5,877
Non-GAAP
 adjustments to
 operating
 expenses              (309)      (343)     (596)    (652)  (1,166)    (343)
                   --------  ---------  --------  -------  -------  -------
Non-GAAP operating
 expenses          $  6,075  $   5,534  $  5,778  $11,609  $11,885  $ 5,534
                   ========  =========  ========  =======  =======  =======



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



                             Three Months Ended December 31,
                           ----------------------------------
                                                                  Change
                                   % of Net          % of Net  ------------
                             2012   Revenue    2011   Revenue     $     %
                           ------- --------  ------- --------  ------ -----

Embedded device enablement $ 5,546     45.6% $ 4,994     47.8% $  552  11.1%
External device enablement   3,480     28.6%   3,349     32.0%    131   3.9%
Device management            3,136     25.8%   2,109     20.2%  1,027  48.7%
                           ------- --------  ------- --------  ------
  Net revenue              $12,162    100.0% $10,452    100.0% $1,710  16.4%
                           ======= ========  ======= ========  ======



                              Six Months Ended December 31,
                           ----------------------------------
                                                                  Change
                                   % of Net          % of Net  ------------
                             2012   Revenue    2011   Revenue     $     %
                           ------- --------  ------- --------  ------ -----

Embedded enablement        $11,334     48.5% $10,471     48.4% $  863   8.2%
External enablement          6,755     28.9%   6,635     30.7%    120   1.8%
Device management            5,275     22.6%   4,530     20.9%    745  16.4%
                           ------- --------  ------- --------  ------
  Net revenue              $23,364    100.0% $21,636    100.0% $1,728   8.0%
                           ======= ========  ======= ========  ======



                             Three Months Ended December 31,
                           ----------------------------------
                                                                  Change
                                   % of Net          % of Net  ------------
                             2012   Revenue    2011   Revenue     $     %
                           ------- --------  ------- --------  ------ -----

Americas                   $ 6,852     56.3% $ 5,847     55.9% $1,005  17.2%
EMEA                         3,575     29.4%   2,933     28.1%    642  21.9%
Asia Pacific                 1,735     14.3%   1,672     16.0%     63   3.8%
                           ------- --------  ------- --------  ------
  Net revenue              $12,162    100.0% $10,452    100.0% $1,710  16.4%
                           ======= ========  ======= ========  ======



                              Six Months Ended December 31,
                           ----------------------------------
                                                                  Change
                                   % of Net          % of Net  ------------
                             2012   Revenue    2011   Revenue     $     %
                           ------- --------  ------- --------  ------ -----
Americas                   $12,808     54.8% $11,524     53.3% $1,284  11.1%
EMEA                         6,652     28.5%   6,448     29.8%    204   3.2%
Asia Pacific                 3,904     16.7%   3,664     16.9%    240   6.6%
                           ------- --------  ------- --------  ------
  Net revenue              $23,364    100.0% $21,636    100.0% $1,728   8.0%
                           ======= ========  ======= ========  ======



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Investor Relations Contacts:
Lantronix, Inc.
Jeremy Whitaker
Chief Financial Officer
(949) 453-3990

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