Prepress

Lantronix Reports Fourth Quarter and Fiscal Year 2012 Financial Results

Thursday 30. August 2012 - Company Reports Second Consecutive Quarter of Non-GAAP Net Income; Reports GAAP Net Loss of $(0.01) Per Share

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.