• Revenue: $31.2 million for Q2 fiscal 2025.
• Non-GAAP EPS: $0.06 for Q2 fiscal 2025.
• GAAP Gross Margin: 42.6% for Q2 fiscal 2025.
• Non-GAAP Gross Margin: 43.2% for Q2 fiscal 2025.
• GAAP Operating Expenses: $15.4 million for Q2 fiscal 2025.
• Non-GAAP Operating Expenses: Reduced by approximately $700,000 year-over-year.
• GAAP Net Loss: $2.4 million or $0.06 per share for Q2 fiscal 2025.
• Non-GAAP Net Income: $1.8 million or $0.04 per share for Q2 fiscal 2025.
• Cash and Cash Equivalents: $19.2 million at the end of Q2 fiscal 2025.
• Operating Cash Flow: Positive $3 million for the six-month period ended December 31, 2024.
• Net Inventories: Decreased to $29.1 million as of Q2 fiscal 2025.
• NetComm Acquisition Cost: $6.5 million.
• Q3 Fiscal 2025 Revenue Outlook: Expected to be in the range of $27 million to $31 million.
• Q3 Fiscal 2025 Non-GAAP EPS Outlook: Expected to be in the range of $0.01 to $0.05 per share.

• Warning! GuruFocus has detected 4 Warning Signs with LTRX.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lantronix Inc (NASDAQ:LTRX) reported revenue of $31.2 million for the second quarter of fiscal 2025, within the guidance range.
• The strategic acquisition of NetComm for $6.5 million is expected to expand Lantronix's Connect business with 4G and 5G gateways.
• Lantronix is strengthening its relationship with Qualcomm, integrating advanced AI frameworks into its edge AI systems.
• The company is strategically positioning itself to capitalize on the edge computing trend, which is projected to be a $76 billion market by 2031.
• Cost-reduction initiatives are on track, with operating expenses reduced significantly, contributing to improved financial performance.

Negative Points

• Revenue in the second quarter was down approximately $5.9 million or 16% year-over-year, due to lower activity in some product lines.
• The company reported a GAAP net loss of $2.4 million or $0.06 per share during the second quarter.
• Sequentially lower revenue is expected in the third quarter, primarily due to a slower rollout by a large SmartEdge customer in Europe.
• The acquisition of NetComm IoT products is expected to add $300,000 to $400,000 in quarterly operating expenses.
• The company faces challenges with customer concentration, impacting its financial performance and growth prospects.

Q & A Highlights

Q: Have your thoughts changed about potential follow-on orders from your SmartEdge customer later this calendar year? A: Our thoughts haven't changed. We are sole-source and continue to work closely with them. I will be visiting them in Europe soon. They have committed to us for the long term, and it's a matter of getting the rollout done.

Q: Any update on the opportunity in North America for SmartEdge? A: They have two pilots ongoing, one in the Carolinas and one in the Northeast.

Q: How should we think about gross margin trending for the remaining fiscal '25? A: Margins are heavily dependent on product mix. We expect the next quarter's non-GAAP gross margin to be slightly higher than what we saw in FQ2.

Q: Can you talk about what's happening in your out-of-band business and expectations for the March quarter? A: We got a design win and are shipping to an AI edge data center. We expect growth from Q2 fiscal to Q3 fiscal. The weakness in December was primarily with a government-related entity.

Q: Could you provide more color on the edge AI opportunity and how it will ramp up in fiscal '26? A: We had good momentum out of CES with three customer programs in banking, manufacturing, and farming. We expect to see revenue in fiscal '26. The industry is talking about a 12% growth rate, and we expect to be in that area.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.