Lantronix Reports Fourth Quarter and Fiscal 2013 Financial Results
Irvine, Calif., August 29, 2013 – Lantronix, Inc. (the “Company”) (NASDAQ: LTRX), a global provider of smart networking and communications solutions for machine-to-machine (M2M) applications, today reported results for its fourth quarter and fiscal year ended June 30, 2013.
- Net revenue of $46.7 million, a 3% increase
- Gross profit as a percentage of net revenue of 47.4%
- GAAP net loss of $(2.8) million, or ($0.19) per share
- Non-GAAP net loss of $(935,000), or ($0.06) per share
Fiscal Fourth Quarter:
- Net revenue of $11.1 million
- Gross profit as a percentage of net revenue of 44.7%
- GAAP net loss of $(1.1) million, or ($0.08) per share
- Non-GAAP net loss of $(665,000), or ($0.05) per share
- Expanded worldwide sales and distribution channels during fiscal 2013 with new agreements and partnerships with Ingram Micro Europe, Arrow Electronics, and Mouser Electronics.
- Expanded presence in Asia with the opening of a new office in Shanghai, China, announced in August 2013.
- Launched into production seven new products during fiscal 2013: xPrintServer Home and Office editions, xDirect, vSLM, xSenso and xSenso Controller, and Lantronix SLB. During fiscal 2012, the Company launched five new products.
- In August 2013, the Company announced global availability of xPico Wi-Fi, the latest addition to its new xPico product family. announced at the February 2013 Embedded World conference, the xPico Wi-Fi measures just under 4 cm2 and is designed for a wide range of M2M applications from small battery powered devices to large industrial installations. The xPico Wi-Fi’s simultaneous access point and client mode functionality allows for secure, direct access to a machine from a smart handheld device such as a tablet, smartphone or other mobile device, making xPico Wi-Fi ideally suited for customers seeking to leverage the convergence of mobility with M2M deployments.
- In August 2013, the Company announced that its award-winning xPrintServer product family is available on JD.com, one of China’s largest B2C ecommerce companies.
“During fiscal 2013, we continued to make progress on our strategic plan by further expanding our worldwide distribution and sales channels, executing on our disciplined product development strategy, and increasing awareness of our solutions in the marketplace through enhanced marketing efforts,” said CEO Kurt Busch. “New product revenue contribution continued to grow, outpacing the decline in contribution from our mature products, which ultimately reversed the 8% revenue decline we experienced in fiscal 2012 and resulted in a 3% revenue increase for fiscal 2013.”
Busch continued: “While we would have preferred a stronger finish in the last quarter of fiscal 2013, we believe that the underlying trends we see developing with our new products will position the Company for future revenue growth. During fiscal 2014, our primary focus continues to be on investing our resources to accelerate revenue growth, while maintaining financial discipline.”
Financial Results for the Fiscal Year Ended June 30, 2013
Net revenue was $46.7 million for the fiscal year ended June 30, 2013, an increase of $1.3 million or 3 percent, compared to $45.4 million for the fiscal year ended June 30, 2012.
Gross profit as a percentage of net revenue (“gross margin”) was 47.4% for the fiscal year ended June 30, 2013, compared to 48.8% for the fiscal year ended June 30, 2012. The decline in gross margin was primarily due to an increase in expedited freight costs and an increase in new product sales, which have lower gross margins that typically improve when they reach production volumes.
Operating expenses were $24.7 million for the fiscal year ended June 30, 2013 compared to $24.9 million for the fiscal year ended June 30, 2012.
GAAP net loss for the fiscal year ended June 30, 2013 was ($2.8) million, or ($0.19) per share, compared to a GAAP net loss of ($3.0) million, or ($0.27) per share for the fiscal year ended June 30, 2012.
Non-GAAP net loss for the fiscal year ended June 30, 2013 was ($935,000), or ($0.06) per share compared to non-GAAP net loss of $(504,000) or $(0.04) per share for the fiscal year ended June 30, 2012. For additional information regarding our Non-GAAP results, see “Discussion of Non-GAAP Financial Measures” below.
Cash and cash equivalents as of June 30, 2013 were $5.2 million, a decrease of $6.2 million, compared to $11.4 million as of June 30, 2012. A significant use of cash was related to a $2.8 million increase in inventories to support new product releases and forecasted changes in customer demand. In addition, cash was used as follows: (i) $866,000 for investments in capital assets to support product development and manufacturing; (ii) $814,000 related to cash losses from operations; (iii) $693,000 related to a decrease in accounts payable; and (iv) $667,000 for scheduled payments on the Company’s term loan, which is expected to be completely paid off in September of 2013.
Financial Results for the Fourth Quarter of Fiscal 2013
Net revenue was $11.1 million for the fourth quarter of fiscal 2013, a decrease of $485,000 compared to $11.6 million for the fourth quarter of fiscal 2012 and a decrease of $1.1 million, compared to $12.2 million for the third quarter of fiscal 2013. The year-over-year decline in net revenue was primarily due to decreases in unit sales for some of the Company’s mature products, which was partially offset by growth in new product sales. The sequential decrease in net revenue was primarily due to the fact that the Company’s revenue in the third quarter of fiscal 2013 benefited from three significant transactions that did not recur during the fourth quarter of fiscal 2013. To a lesser extent, the Company experienced a decrease in xPrintServer revenue as the third quarter of fiscal 2013 benefited from sales and marketing momentum related to the release of the xPrintServer Office Edition.
Gross margin was 44.7% for the fourth quarter of fiscal 2013, compared to 50.7% for the fourth quarter of fiscal 2012 and 46.2% for the third quarter of fiscal 2013. The decrease in gross margin was primarily the result of an increase in manufacturing overhead expenses related to the amount of overhead costs applied to inventories.
Operating expenses for the fourth quarter of fiscal 2013 were $6.1 million, an increase of $89,000, compared to $6.0 million for the fourth quarter of fiscal 2012 and a decrease of $327,000, compared to $6.4 million for the third quarter of fiscal 2013. Operating expenses for the fourth quarter of fiscal 2013 included severance charges of $208,000 related to actions the Company took to lower its operating expenses and non-GAAP breakeven point.
GAAP net loss for the fourth quarter of fiscal 2013 was $(1.1) million, or ($0.08) per share, compared to a GAAP net loss of $(178,000), or ($0.01) per share, for the fourth quarter of fiscal 2012 and a GAAP net loss of $(801,000), or ($0.05) per share, for the third quarter of fiscal 2013.
Non-GAAP net loss for the fourth quarter of fiscal 2013 was $(665,000), or $(0.05) per share compared to non-GAAP net income of $351,000 or $0.03 per share for the fourth quarter of fiscal 2012 and a non-GAAP net loss of $(388,000), or $(0.03) per share, for the third quarter of fiscal 2013. For additional information regarding our Non-GAAP results, see “Discussion of Non-GAAP Financial Measures” below.
Discussion of Company Target Model
The Company is in a transitionary period during which it is pursuing a strategy of increasing revenue by expanding sales channels and regularly releasing new products with the expectation that, in the long-term, new product revenue will significantly outpace the decline in mature product revenue. The Company believes that this strategy will ultimately result in the improvement of gross margin, GAAP net income and non-GAAP net income.
The Company is updating the target model that it previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2012. The purpose of the following model is to demonstrate the operating leverage that the Company believes it may achieve if its current business strategy is successful.
|Financial Metrics (as a percentage of net revenue):||3-Year Target Model|
|Gross margin||49 – 51%|
|GAAP net income||5 – 7%|
|Non-GAAP net income||8 – 10%|
The model is based on estimates that the Company believes are reasonable given its assessment of historical trends and other information available as of the date of this press release. However, these assumptions and estimates are necessarily speculative in nature and actual results may vary materially from those expressed or implied by the information contained in the model. See “Forward-Looking Statements” below. The Company does not intend to update the foregoing model at any particular interval.
Conference Call and Webcast
Lantronix will host a conference call and webcast today at 2:00 p.m. Pacific Daylight Time (5:00 p.m. Eastern Daylight Time) to discuss its fourth quarter and fiscal 2013 financial results. Those wishing to participate in the live call should dial800-706-7749 (international dial-in 617-614-3474) using the passcode 31972568. A telephone replay of the call will be available through September 5, 2013 by dialing (888) 286-8010 (international dial-in 617-801-6888) and entering passcode 24563513.
Lantronix, Inc. (NASDAQ: LTRX) is a global provider of smart networking and communications solutions for machine-to-machine (M2M) applications. Lantronix OEM Modules and Enterprise Solutions enable machines, devices and sensors to be securely accessed, managed, monitored and controlled. Easy to integrate and deploy, Lantronix solutions enable customers to capitalize on the convergence of mobility with M2M systems and to participate in the Internet of Things (IoT). Lantronix solutions have applications across many industries including, security, industrial and building automation, transportation, energy, retail, financial, government, consumer electronics, medical and information technology. Founded in 1989, Lantronix is headquartered in Irvine, California. For more information, visit www.lantronix.com or follow us atwww.twitter.com/Lantronix.
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 of the non-GAAP financial measures to the financial measures calculated in accordance with GAAP should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. 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.
This news release contains forward-looking statements, including statements concerning our business plans, our financial and operating results, our product development strategies, and our target financial model. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our results or experiences, or future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. Some of the risks and uncertainties that may cause actual results to differ from those expressed or implied in the forward-looking statements are described in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, as well as in our other filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, investors are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the Nasdaq Stock Market, LLC. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.
© 2013 Lantronix, Inc. Lantronix, xPico and xPrintServer are registered trademarks, and xDirect™, vSLM™, xSenso™ 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.
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Investor Relations Contacts:
Chief Financial Officer
E.E. Wang Lukowski