LANTRONIX INC
For the period ended Dec 31, 2024. Filed Feb 7, 2025.
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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.
Dec 31, 2024 · Filed Feb 7, 2025
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 2024-09-30; filed 2024-11-08.
0001683168-24-007780
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-07.
0001683168-25-000793
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 73 previous paragraphs and 101 current paragraphs.
50 unchanged; 21 reworded; 24 added; 2 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 8 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 (24)
Current report
Recent Developments
Current report
Acquisition
Current report
On December 23, 2024, we finalized the acquisition of Netcomm Wireless Pty Ltd (“Netcomm”), a subsidiary of DZS Inc., for all of its enterprise IoT business assets for $6,458,000 in cash. The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance our connectivity solutions in areas such as critical infrastructure, asset monitoring and telecommunications.
Current report
Refer toNote 3 of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report, which are incorporated herein by reference, for additional discussions regarding the acquisition.
Current report
Net revenue decreased primarily due to lower unit sales of (i) certain legacy products in our embedded ethernet connectivity product family in the Americas and APJ regions and (ii) our wireless communications products in the Americas and APJ regions. These decreases were partially offset by higher unit sales of our network interface cards in the Americas and EMEA regions and higher unit sales of our embedded compute products in the Americas and APJ regions.
Current report
Net revenue decreased primarily due to (i) decreased unit sales of our network switches and OOB products across all regions and (ii) decreased unit sales of our converters and device servers in the Americas region.
Current report
Net revenue decreased primarily due to a decrease in our engineering services revenue in the Americas and EMEA regions as well as lower revenues from our extended warranty services in the Americas region.
Current report
Selling, general and administrative expenses decreased primarily due to (i) lower sales conference and facilities-related costs, (ii) reduced share-based compensation costs based on the value of new and outstanding awards, and (iii) lower variable compensation costs in our personnel-related expenses.
Current report
Results of Operations – Six Months Ended December 31, 2024 Compared to the Six Months Ended December 31, 2023
Current report
Summary
Current report
Net Revenue
Current report
Embedded IoT Solutions
Current report
IoT System Solutions
Current report
Software & Services
Current report
Gross Profit
Current report
Selling, General and Administrative
Current report
Selling, general and administrative expenses decreased primarily due to (i) lower sales conference and facilities-related costs and (ii) reduced share-based compensation costs based on the value of new and outstanding awards.
Current report
Research and Development
Current report
Research and development expenses increased primarily due to (i) slightly higher facilities-related equipment and software costs and (ii) certain prototype and materials costs, which are included in the “Other” category in the table above.
Current report
In January 2025, we undertook a reduction in our labor force to better align staffing needs with our business objectives. We expect the severance and related charges in connection with this action to approximate $1,300,000 to $1,500,000, which will be recorded in the three months ending March 31, 2025.
Current report
Acquisition-Related Costs
Current report
During the three months ended December 31, 2024, we incurred approximately $208,000 of costs primarily in connection with the acquisition of Netcomm. These costs were mainly comprised of banking, legal and other professional fees.
Current report
Accounts receivable decreased by $807,000, or 2.6% from June 30, 2024 to December 31, 2024. The decrease was primarily due to the higher volume of shipments that took place during the fourth quarter of our fiscal 2024 as well as the timing of payments from certain customers in the current year period. The reduction was partially offset by $904,000 of accounts receivable acquired in the Netcomm acquisition.
Current report
Inventories, net increased by $1,372,000, or 5.0% from June 30, 2024 to December 31, 2024. The increase was primarily the result of $972,000 of net inventories acquired in the Netcomm acquisition.
Removed paragraphs (2)
Previous report
Selling, general and administrative expenses increased primarily due to an increase in personnel-related costs resulting from year-over-year compensation increases and changes in headcount. The increase was partially offset by (i) reduced share-based compensation costs mostly from reversals of certain forfeited awards and (ii) lower facilities and related costs from previous restructurings of certain non-essential operations.
Previous report
Our net inventories increased by $1,835,000, or 6.6%, from June 30, 2024 to September 30, 2024. The increase resulted primarily due to the timing of various material receipts during the current quarter as compared to our shipments to customers.
Reworded paragraphs (21)
Previous wording
Lantronix, Inc. is a global leader in compute and connectivity solutions, targeting high-growth industries such as Smart Cities, Automotive, and Enterprise markets. Our products and services empower companies to capitalize on the expanding internet of things (“IoT”) market by delivering customizable solutions that address each layer of the IoT stack.
Current wording
Lantronix, Inc. is a global leader of compute and connectivity solutions, targeting high-growth markets such as Smart Cities, Automotive, and Enterprise markets. Our products and services empower companies to succeed in the growing internet of things (“IoT”) market by delivering customizable solutions that enable artificial intelligence (“AI”) edge intelligence.
Previous wording
Our SaaS platform offers comprehensive single-pane-of-glass management for out-of-band (“OOB”) and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device. Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale deployments.
Current wording
Our software-as-a-service (“SaaS”) platform offers comprehensive single-pane-of-glass management for out-of-band (“OOB”) and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device. Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale deployments.
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, 2024 and filed with the Securities and Exchange Commission (the “SEC”) on September 9, 2024 (the “Form 10-K”) and have not changed significantly during the three months ended September 30, 2024 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, and stock-based compensation. These policies are described in further detail in our Annual Report on Form 10-K for the year ended June 30, 2024 and filed with the Securities and Exchange Commission (the “SEC”) on September 9, 2024 (the “Form 10-K”) and have not changed significantly during the six months ended December 31, 2024 as compared to what was previously disclosed in the Form 10-K.
Previous wording
Gross profit as a percent of revenue (referred to as “gross margin”) decreased slightly due primarily to our product sales mix as embedded compute products contribute to a larger portion of revenues in the current period.
Current wording
Gross profit as a percent of revenue (referred to as “gross margin”) increased due to our product sales mix in the current quarter, along with slightly lower freight and overhead costs.
Previous wording
Research and development expenses decreased primarily due to lower 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 higher product certification expenses resulting from the timing of costs incurred related to various development projects.
Previous wording
In the three months ended September 30, 2024, our net revenue increased by $1,392,000 or 4.2%, compared to the three months ended September 30, 2023. The increase in net revenue was driven by a 17.7% increase in net revenue in our Embedded IoT Solutions product line, partially offset by a 13.2% decrease in net revenue in our Software & Services product line and a 1.5% decrease in our IoT System Solutions product line. We had a net loss of $2,502,000 for the three months ended September 30, 2024 compared to a net loss of $1,886,000 for the three months ended September 30, 2023. The increase in net loss was primarily driven by an increase in operating expenses of $932,000 for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, which mostly related to an increase in restructuring and severance charges. These changes were partially offset by the increase in revenue.
Current wording
In the six months ended December 31, 2024, our net revenue decreased by $4,485,000 or 6.4%, compared to the six months ended December 31, 2023. The decrease in net revenue was driven by an 11.2% decrease in net revenue in our IoT System Solutions product line as well as a 16.7% decrease in our Software and Services production line. These decreases were partially offset by a 4.5% increase in net revenue in our Embedded IoT Solutions product line. We had a net loss of $4,874,000 for the six months ended December 31, 2024 compared to a net loss of $4,479,000 for the six months ended December 31, 2023. The increase in net loss was primarily driven by the decrease in revenues partially offset by a reduction in operating expenses of $413,000 for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, mostly due to lower selling, general and administrative costs in the current year period.
Previous wording
Net revenue increased primarily due to higher unit sales of our embedded compute product line in the APJ and Americas regions. This was partially offset by lower unit sales of our embedded ethernet connectivity products and network interface cards across all regions.
Current wording
Net revenue increased primarily due to higher unit sales of our embedded compute product line driven by a video conferencing customer in the APJ region. This was partially offset by lower unit sales in some of our legacy embedded ethernet connectivity products across all regions and (ii) in our wireless communications products in the Americas region.
Previous wording
Net revenue decreased primarily due to (i) decreased unit sales of our OOB products in the Americas and EMEA regions and (ii) decreased unit sales of our network switches in the Americas and APJ regions. These reductions were mostly offset by sales of our custom solutions to a European smart energy grid provider that we ramped production for in the second half of the prior fiscal year.
Current wording
Net revenue decreased primarily due to (i) decreased unit sales of our OOB products primarily in the Americas and (ii) decreased unit sales of our network switches in all regions. These reductions were partially offset by current year growth in unit sales of our custom solutions to a European smart energy grid provider that we ramped production for in the second half of the prior fiscal year.
Previous wording
Net revenue decreased primarily due to a decrease in our engineering services revenue in the EMEA region as two of our large design services projects transitioned in the prior year from the design phase to full production.
Current wording
Net revenue decreased primarily due to lower engineering services revenue in the EMEA region as two of our large design services projects transitioned in the prior year from the design phase to full production.
Previous wording
During the three months ended September 30, 2024, we incurred charges of $900,000 related to headcount reductions. During the three months ended September 30, 2023, we incurred $20,000 of restructuring, severance and related charges.
Current wording
During the three and six months ended December 31, 2024, we incurred charges of $193,000 and $1,093,000, respectively, related to headcount reductions. During the three and six months ended December 31, 2023, we incurred $530,000 and $550,000, respectively, of restructuring, severance and related charges.
Previous wording
For the three months ended September 30, 2024 and September 30, 2023, 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 six months ended December 31, 2024 and December 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
Refer toNote 7of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, which is incorporated herein by reference, for a discussion regarding our provision for income taxes.
Current wording
Refer toNote 8of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, which is incorporated herein by reference, for a discussion regarding our provision for income taxes.
Previous wording
Our principal sources of cash and liquidity include our existing cash and cash equivalents, borrowings and amounts available under our existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), and cash generated from operations. We are subject to a variable amount of interest on the principal balance of our Senior Credit Facilities and could be adversely impacted by rising interest rates in the future. We believe that our current cash holdings and net cash flows from operations are sufficient to satisfy our current obligations for the foreseeable future, and, assuming continued access to the undrawn amounts available under our Senior Credit Facilities, these combined sources will be sufficient to fund our material requirements for working capital, capital expenditures and other financial commitments for at least the next 12 months and beyond. We continue to monitor our existing banking relationships and the availability of potential alternate sources of credit based on market conditions and our ongoing capital requirements. There can be no guarantee that we would be able to obtain any needed alternate financing on acceptable terms, or at all, or that such a financing would not result in a default under the Loan Agreement (as defined inNote 5 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report). We anticipate that the primary factors affecting our cash and liquidity are net revenue, working capital requirements and capital expenditures.
Current wording
Our principal sources of cash and liquidity include our existing cash and cash equivalents, borrowings and amounts available under our existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), and cash generated from operations. We are subject to a variable amount of interest on the principal balance of our Senior Credit Facilities and could be adversely impacted by rising interest rates in the future. We believe that our current cash holdings and net cash flows from operations are sufficient to satisfy our current obligations for the foreseeable future, and, assuming continued access to the undrawn amounts available under our Senior Credit Facilities, these combined sources will be sufficient to fund our material requirements for working capital, capital expenditures and other financial commitments for at least the next 12 months and beyond. We continue to monitor our existing banking relationships and the availability of potential alternate sources of credit based on market conditions and our ongoing capital requirements. There can be no guarantee that we would be able to obtain any needed alternate financing on acceptable terms, or at all, or that such a financing would not result in a default under the Loan Agreement (as defined inNote 6 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report). We anticipate that the primary factors affecting our cash and liquidity are net revenue, working capital requirements and capital expenditures.
Previous wording
From time to time, we may seek additional capital from public or private offerings of our capital stock, borrowings under our existing or future credit lines or other sources in order to (i) develop or enhance our products, (ii) take advantage of strategic opportunities, (iii) respond to competition or (iv) continue to operate our business. We currently have a Form S-3 shelf registration statement on file with the SEC. If we issue equity securities to raise additional funds, our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of our existing stockholders. If we issue debt securities to raise additional funds, we may incur debt service obligations, become subject to additional restrictions that limit or restrict our ability to operate our business, or be required to further encumber our assets. There can be no assurance that we will be able to raise any such capital on terms acceptable to us, if at all.
Current wording
From time to time, we may seek additional capital from public or private offerings of our capital stock, borrowings under our existing or future credit lines or other sources in order to (i) develop or enhance our products, (ii) take advantage of strategic opportunities, (iii) respond to competition or (iv) continue to operate our business. If we issue equity securities to raise additional funds, our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of our existing stockholders. If we issue debt securities to raise additional funds, we may incur debt service obligations, become subject to additional restrictions that limit or restrict our ability to operate our business, or be required to further encumber our assets. There can be no assurance that we will be able to raise any such capital on terms acceptable to us, if at all.
Previous wording
Refer toNote 5of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, which is incorporated herein by reference, for a discussion of our loan agreements.
Current wording
Refer toNote 6of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, which is incorporated herein by reference, for a discussion of our loan agreements.
Previous wording
Cash provided by operating activities during the three months ended September 30, 2024 decreased compared to the prior year period. Cash from operations increased in the prior year period due to our reduction of inventories and receipt of customer deposits relating to the delivery to our European smart grid provider customer. In the current year period, inventories increased slightly, and we also made payments against previously accrued variable compensation balances, as discussed further below. For the three months ended September 30, 2024, our net loss included $3,418,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $1,747,000.
Current wording
Cash provided by operating activities during the six months ended December 31, 2024 decreased compared to the prior year period. Cash from operations was positively impacted in the prior year period due to our reduction of inventories and receipt of deposits relating to deliveries to our European smart grid provider customer. In the current year period, inventories increased slightly, and we also made payments against previously accrued variable compensation balances, as discussed further below. For the six months ended December 31, 2024, our net loss included $6,749,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $1,128,000.
Previous wording
Accounts payable increased by $6,802,000, or 65.7%, from June 30, 2024 to September 30, 2024. The increase is primarily due to the timing of inventory receipts near the end of the current quarter, as well as payments made to our vendors.
Current wording
Accounts payable increased by $5,628,000, or 54.4%, from June 30, 2024 to December 31, 2024 primarily due to the timing of inventory receipts and payments made to our vendors.
Previous wording
Contract manufacturers’ receivables increased by $1,321,000, or 94.3%, from June 30, 2024 to September 30, 2024. The increase is primarily due to timing of shipments of components to contract manufacturers during the current quarter.
Current wording
Contract manufacturers’ receivables increased by $2,072,000, or 147.9%, from June 30, 2024 to December 31, 2024. The increase is primarily due to timing of shipments of components to contract manufacturers during the current period.
Previous wording
Accrued payroll and related expenses decreased by $2,396,000 or 41.1% from June 30, 2024 to September 30, 2024. The decrease is primarily due to accrued variable compensation paid out during the current quarter.
Current wording
Accrued payroll and related expenses decreased by $2,868,000 or 49.1% from June 30, 2024 to December 31, 2024. The decrease is primarily due to accrued variable compensation paid out during the current year period.
Previous wording
Net cash used in investing activities for the three months ended September 30, 2024 consisted of purchases of equipment totaling $157,000, primarily for tooling at our contract manufacturers and certain research and development projects. Cash used during the three months ended September 30, 2023 consisted of purchases of plant and equipment of $486,000 primarily for research and development and certain business analysis tools.
Current wording
Net cash used in investing activities for the six months ended December 31, 2024 includes the acquisition of Netcomm, which used cash of $6,458,000. We also purchased equipment totaling $241,000, primarily for tooling at our contract manufacturers and certain research and development projects. Cash used during the six months ended December 31, 2023 consisted of purchases of plant and equipment of $1,189,000 primarily for research and development and certain business analysis tools.
Previous wording
Net cash used in financing activities during the three months ended September 30, 2024 and the three months ended September 30, 2023 resulted primarily from tax withholdings paid on behalf of employees for restricted shares as well as principal payments on the Senior Credit Facilities.
Current wording
Net cash used in financing activities during the six months ended December 31, 2024 and the six months ended December 31, 2023 resulted primarily from tax withholdings paid on behalf of employees for restricted shares as well as principal payments on the Senior Credit Facilities. During the six months ended December 31, 2023 we also used cash to pay the contingent consideration related to the acquisition of Uplogix.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
In the three months ended December 31, 2024, our net revenue decreased by $5,877,000 or 15.9%, compared to the three months ended December 31, 2023. The decrease in net revenue was driven by a 19.2% decrease in net revenue in our IoT System Solutions product line, as well as decreases in net revenue in our Embedded IoT Solutions product line of 8.3% and our Software and Services product line of 20.7%. We had a net loss of $2,372,000 for the three months ended December 31, 2024 compared to a net loss of $2,593,000 for the three months ended December 31, 2023. The decrease in net loss was primarily the result of a decrease in operating expenses of $1,345,000 offset by a decrease in gross margin of $1,747,000.
Current report — wording carried from elsewhere
The following tables present our net revenue by product line and by geographic region:
Current report — wording carried from elsewhere
The following table presents our gross profit:
Current report — wording carried from elsewhere
Gross profit as a percent of revenue (referred to as “gross margin”) increased slightly due primarily to lower overhead costs in the current year period.
Current report — wording carried from elsewhere
The following table presents our selling, general and administrative expenses:
Current report — wording carried from elsewhere
The following table presents our research and development expenses: