LANTRONIX INC
For the period ended Mar 31, 2024. Filed May 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
LTRX$5.17+3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0001683168-24-000785
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001683168-24-002895
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 96 current paragraphs.
70 unchanged; 22 reworded; 3 added; 2 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
Selling, general and administrative expenses decreased primarily due to a lower professional and outside services expenses related to (i) audit and accounting compliance costs that were higher in the prior year as we implemented Section 404(b) of the Sarbanes-Oxley Act, (ii) new facility costs for our California and Minnesota facilities incurred in the prior year period, and (iii) reduced current year costs for outsourced sales and marketing resources. The decrease in professional and outside services expenses was partially offset by an increase in personnel-related expenses for certain variable compensation costs.
Current report
Results of Operations – Nine Months Ended March 31, 2024 Compared to the Nine Months Ended March 31, 2023
Current report
Accrued payroll and related expenses increased by $2,108,000 or 86.7% from June 30, 2023 to March 31, 2024. The increase is primarily due to variable compensation costs incurred during the current year.
Removed paragraphs (2)
Previous report
Selling, general and administrative expenses increased primarily due to an increase in personnel-related expenses arising from certain variable compensation costs. We also saw increases in (i) share-based compensation related to the hiring of our new chief executive officer and (ii) insurance premiums and certain facility-related costs. These increases were partially offset by reductions in certain professional fees and outside services related to both our financial audit compliance activities, and our enterprise resource planning (“ERP”) implementation from the prior year.
Previous report
Results of Operations – Six Months Ended December 31, 2023 Compared to the Six Months Ended December 31, 2022
Reworded paragraphs (22)
Previous wording
The accounting policies that have the greatest impact on our financial condition and results of operations and that require the most judgment are those relating to revenue recognition, sales returns and allowances, inventory valuation, restructuring charges, valuation of deferred income taxes, business combinations, valuation of goodwill and long-lived and intangible assets, stock-based compensation, litigation and other contingencies. These policies are described in further detail in our Annual Report on Form 10-K for the year ended June 30, 2023 and filed with the Securities and Exchange Commission (the “SEC”) on September 12, 2023 (the “Form 10-K”) and have not changed significantly during the six months ended December 31, 2023 as compared to what was previously disclosed in the Form 10-K.
Current wording
The accounting policies that have the greatest impact on our financial condition and results of operations and that require the most judgment are those relating to revenue recognition, sales returns and allowances, inventory valuation, restructuring charges, valuation of deferred income taxes, business combinations, valuation of goodwill and long-lived and intangible assets, stock-based compensation, litigation and other contingencies. These policies are described in further detail in our Annual Report on Form 10-K for the year ended June 30, 2023 and filed with the Securities and Exchange Commission (the “SEC”) on September 12, 2023 (the “Form 10-K”) and have not changed significantly during the nine months ended March 31, 2024 as compared to what was previously disclosed in the Form 10-K.
Previous wording
In the three months ended December 31, 2023, our net revenue increased by $5,532,000 or 17.6%, compared to the three months ended December 31, 2022. The increase in net revenue was driven by a 54.4% increase in net revenue in our IoT System Solutions product line, partially offset by a 13.9% decrease in net revenue in our Embedded IoT Solutions product line and a 23.0% decrease in our Software & Services product line. We had a net loss of $2,593,000 for the three months ended December 31, 2023 compared to a net loss of $2,609,000 for the three months ended December 31, 2022. The decrease in net loss was primarily driven by the increase in revenues for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, partially offset by an increase in operating expenses of $884,000 and a reduction in gross margin percentage.
Current wording
In the three months ended March 31, 2024, our net revenue increased by $8,219,000 or 24.9%, compared to the three months ended March 31, 2023. The increase in net revenue was driven by a 90.9% increase in net revenue in our IoT System Solutions product line, partially offset by a 22.4% decrease in net revenue in our Embedded IoT Solutions product line and a 32.5% decrease in our Software & Services product line. We had a net loss of $423,000 for the three months ended March 31, 2024 compared to a net loss of $3,065,000 for the three months ended March 31, 2023. The decrease in net loss was primarily driven by the increase in revenues for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, combined with a decrease in operating expenses of $468,000 related to a decreases in (i) restructuring and severance charges, (ii) amortization, and (iii) charges related to earnout fair value remeasurement. These changes were partially offset by a reduction in gross margin percentage.
Previous wording
Net revenue decreased primarily due to lower unit sales of our network interface cards and our GPS modules across all regions. These decreases were partially offset by an increase in revenue in our embedded ethernet connectivity products in the APJ region, as well as our wireless communication products in the Americas and APJ regions.
Current wording
Net revenue decreased primarily due to (i) lower unit sales of our embedded compute product line in the Americas and APJ regions and (ii) lower unit sales of our network interface cards and our wireless communication products across all regions.
Previous wording
Net revenue increased primarily due to increased unit sales in our EMEA region related to our custom solutions, as we ramped volume production for a European smart energy grid provider, as well as an increase in unit sales of our out-of-band products in the Americas and EMEA regions. These increases were partially offset by decreases in sales of our network switches products in the Americas region.
Current wording
Net revenue increased primarily due to increased unit sales related to our custom solutions in our EMEA region, as we continued to ramp volume production for a European smart energy grid provider, as well as an increase in unit sales of our out-of-band products across all regions. These increases were partially offset by decreases in sales of certain network switches products across all regions.
Previous wording
Gross profit as a percent of revenue (referred to as “gross margin”) decreased due primarily to our (i) product sales mix and (ii) higher international freight and related costs in the current quarter.
Current wording
Gross profit as a percent of revenue (referred to as “gross margin”) decreased due primarily to (i) our product sales mix, (ii) higher various overhead charges, and (iii) higher freight and logistics costs in the current quarter.
Previous wording
Research and development expenses decreased primarily due to (i) lower product certification expenses resulting from the timing of costs incurred on various ongoing development projects and (ii) slightly lower costs for outsourced resources.
Current wording
Research and development expenses increased primarily due to an increase in personnel-related expenses for certain variable compensation costs, partially offset by (i) lower costs for outsourced resources and (ii) lower product certification expenses resulting from the timing of costs incurred on various ongoing development projects.
Previous wording
In the six months ended December 31, 2023, our net revenue increased by $6,768,000 or 10.7%, compared to the six months ended December 31, 2022. The increase in net revenue was driven by a 42.4% increase in net revenue in our IoT System Solutions product line, partially offset by a 19.6% decrease in net revenue in our Embedded IoT Solutions product line as well as a 2.6% decrease in revenue in our Software & Services product line. We had a net loss of $4,479,000 for the six months ended December 31, 2023 compared to a net loss of $4,262,000 for the six months ended December 31, 2022. The increase in net loss was primarily driven by an increase in operating expenses of $1,148,000 coupled with a reduction in gross margin percentage, which offset the increase in revenues for the six months ended December 31, 2023 compared to the six months ended December 31, 2022.
Current wording
In the nine months ended March 31, 2024, our net revenue increased by $14,987,000 or 15.6%, compared to the nine months ended March 31, 2023. The increase in net revenue was driven by a 58.0% increase in net revenue in our IoT System Solutions product line, partially offset by a 20.6% decrease in net revenue in our Embedded IoT Solutions product line as well as a 13.5% decrease in revenue in our Software & Services product line. We had a net loss of $4,902,000 for the nine months ended March 31, 2024 compared to a net loss of $7,327,000 for the nine months ended March 31, 2023. The decrease in net loss was primarily driven by the increase in revenues, partially offset by an increase in operating expenses of $680,000 coupled with a reduction in gross margin percentage for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023.
Previous wording
Net revenue decreased primarily due to lower units sales of (i) our embedded ethernet connectivity products in the Americas and EMEA regions, (ii) our embedded compute product line in the Americas and APJ regions, and (iii) our network interface cards in the Americas and EMEA regions. These decreases were partially offset by an increase in revenue in our wireless communication products in the Americas and APJ regions.
Current wording
Net revenue decreased primarily due to lower units sales of (i) our embedded compute product line in the Americas and APJ regions, (ii) our network interface cards across all regions, and (iii) our embedded ethernet connectivity products in the Americas and EMEA regions.
Previous wording
Net revenue increased primarily due to increases in units sales of (i) our custom solutions, as we ramped volume production for a European smart energy grid provider in the current period, (ii) our out-of-band products in the Americas and EMEA regions, and (iii) our converters and radio nodes products in the Americas region. These increases were partially offset by decreases in sales of our network switches in the Americas region.
Current wording
Net revenue increased primarily due to increases in units sales of (i) our custom solutions, as we continued to ramp volume production for a European smart energy grid provider in the current period, (ii) our out-of-band products in the Americas and EMEA regions, and (iii) our converters and radio nodes products in the Americas region. These increases were partially offset by decreases in sales of our network switches in the Americas region.
Previous wording
Gross profit as a percent of revenue (referred to as “gross margin”) decreased due primarily to our (i) product sales mix and (ii) higher international freight and related costs in the current year period.
Current wording
Gross profit as a percent of revenue (referred to as “gross margin”) decreased due primarily to our (i) product sales mix and (ii) higher freight and logistics costs in the current year period.
Previous wording
Selling, general and administrative expenses increased primarily due to (i) an increase in personnel related expenses arising from certain variable compensation costs, (ii) an increase in depreciation expense related to new equipment and certain business analysis tools that we added in the current year, and (iii) increases in insurance premiums and various facility-related costs. These increases were partially offset by reductions in professional fees and outside services related to both our financial audit compliance activities and our ERP implementation from the prior year.
Current wording
Selling, general and administrative expenses increased primarily due to (i) an increase in personnel-related expenses arising from certain variable compensation costs, (ii) an increase in depreciation expense related to new equipment and certain business analysis tools that we added in the current year, and (iii) increases in insurance premiums and various facility-related costs. These increases were partially offset by reductions in professional fees and outside services related to (i) audit and accounting compliance costs that were higher in the prior year as we implemented Section 404(b) of the Sarbanes-Oxley Act, (ii) new facility costs for our California and Minnesota facilities incurred in the prior year period, and (iii) reduced current year costs for outsourced sales and marketing resources.
Previous wording
Research and development expenses increased primarily due to an increase in personnel-related costs related to variable compensation expenses and increased share-based compensation costs for various equity award grants made in the current fiscal year. These increases were partially offset by a reduction in product certification expenses resulting from the timing of costs incurred on various ongoing development projects.
Current wording
Research and development expenses increased primarily due to an increase in personnel-related costs related to variable compensation expenses and increased share-based compensation costs for various equity award grants made in the current fiscal year. These increases were partially offset by a reduction in product certification expenses resulting from the timing of costs incurred on various ongoing development projects and lower costs for outsourced resources.
Previous wording
During the three and six months ended December 31, 2023, we incurred charges of approximately $530,000 and $550,000, respectively, related to headcount reductions and restructuring of certain non-essential operations. During the three and six months ended December 31, 2022, we incurred $82,000 and $174,000, respectively, of restructuring, severance and related charges.
Current wording
During the three and nine months ended March 31, 2024, we incurred charges of approximately $350,000 and $900,000, respectively, related to headcount reductions and restructuring of certain non-essential operations. During the three and nine months ended March 31, 2023, we incurred $490,000 and $664,000, respectively, of restructuring, severance and related charges.
Previous wording
During the three and six months ended December 31, 2023, we did not incur any acquisition-related costs. During the six months ended December 31, 2022, we incurred approximately $315,000 of costs related to the acquisition of Uplogix. These costs were mainly comprised of banking, legal and other professional fees.
Current wording
During the three and nine months ended March 31, 2024 and during the three months ended March 31, 2023, we did not incur any acquisition-related costs. During the nine months ended March 31, 2023, we incurred approximately $315,000 of costs related to the acquisition of Uplogix. These costs were mainly comprised of banking, legal and other professional fees.
Previous wording
For the three and six months ended December 31, 2023 and December 31, 2022, we incurred net interest expense due to borrowings on our credit facilities. We also earn interest income on our domestic cash balance.
Current wording
For the three and nine months ended March 31, 2024 and March 31, 2023, we incurred net interest expense due to borrowings on our credit facilities. We also earn interest income on our domestic cash balance.
Previous wording
Cash provided by operating activities during the six months ended December 31, 2023 increased compared to the prior year period. We used cash from operations in the prior year due to the build-up of our inventories and decreases in our accounts payable and accrued liabilities. For the six months ended December 31, 2023, our net loss included $8,191,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $7,778,000.
Current wording
Cash provided by operating activities during the nine months ended March 31, 2024 increased compared to the prior year period. We used cash from operations in the prior year due to the build-up of our inventories and decreases in our accounts payable and accrued liabilities. For the nine months ended March 31, 2024, our net loss included $12,163,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $9,087,000.
Previous wording
Our net inventories decreased by $6,962,000, or 14.0%, from June 30, 2023 to December 31, 2023. The decrease resulted primarily from increased shipments on certain existing large customer contracts for which we had been building up our stock levels in recent periods.
Current wording
Our net inventories decreased by $9,184,000, or 18.5%, from June 30, 2023 to March 31, 2024. The decrease resulted primarily from increased shipments on certain existing large customer contracts for which we had been building up our stock levels in recent periods.
Previous wording
Accounts payable decreased by $2,806,000, or 22.6%, from June 30, 2023 to December 31, 2023. The reduction is primarily due to the decrease in our inventories and the timing of payments to our vendors.
Current wording
Accounts payable decreased by $1,444,000, or 11.6%, from June 30, 2023 to March 31, 2024. The reduction is primarily due to the decrease in our inventories and the timing of payments to our vendors.
Previous wording
Accounts receivable increased by $2,699,000, or 9.8%, from June 30, 2023. The increase is primarily due to the increased sales during the current quarter coupled with timing of payments received from our customers.
Current wording
Accounts receivable increased by $860,000, or 3.1%, from June 30, 2023 to March 31, 2024. The increase is primarily due to the increased sales during the current quarter coupled with timing of payments received from our customers.
Previous wording
Other current liabilities increased by $3,276,000, or 11.4%, from June 30, 2023 to December 31, 2023. This was mostly driven by an increase in deposits related to expected future shipments under a customer contract.
Current wording
Other current liabilities decreased by $6,625,000, or 23.0%, from June 30, 2023 to March 31, 2024. This was mostly driven by a reduction in deposits previously received related to shipments under a customer contract.
Previous wording
Net cash used in investing activities for the six months ended December 31, 2023 consisted of purchases of equipment amounting to $1,189,000, primarily for research and development and certain business analysis tools. Cash used during the six months ended December 31, 2022 included the acquisition of Uplogix, which used net cash of $4,650,000, as well as purchases of plant and equipment of $1,994,000 primarily related to building out and furnishing our new lease facilities in California and Minnesota.
Current wording
Net cash used in investing activities for the nine months ended March 31, 2024 consisted of purchases of equipment amounting to $1,325,000, primarily for research and development and certain business analysis tools. Cash used during the nine months ended March 31, 2023 included the acquisition of Uplogix, which used net cash of $4,650,000, as well as purchases of plant and equipment of $2,325,000 primarily related to building out and furnishing our new lease facilities in California and Minnesota.
Previous wording
Net cash used in financing activities during the six months ended December 31, 2023 resulted primarily from principal payments on the Senior Credit Facilities as well as tax withholdings paid on behalf of employees for restricted shares. Net cash provided by financing activities during the six months ended December 31, 2022 resulted primarily from $7,000,000 in gross proceeds received from our Senior Credit Facilities with SVB partially offset by payments on the term loan as well as tax withholdings paid on behalf of employees for restricted shares.
Current wording
Net cash used in financing activities during the nine months ended March 31, 2024 resulted primarily from principal payments on the Senior Credit Facilities as well as tax withholdings paid on behalf of employees for restricted shares. Additionally, we used cash of $1,262,000 to pay the contingent consideration earned related to the Uplogix acquisition. Net cash provided by financing activities during the nine months ended March 31, 2023 resulted primarily from $7,000,000 in gross proceeds received from our Senior Credit Facilities with SVB partially offset by payments on the term loan as well as tax withholdings paid on behalf of employees for restricted shares.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Net revenue decreased primarily due to a year over year decline in our engineering services in the EMEA region as two of our large design services projects recently transitioned from the design phase to full production, partially offset by growth in our extended warranty services across all regions.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net revenue remained mostly flat due to a year over year decline in our engineering services, mostly offset by growth in our extended warranty services.