LANTRONIX INC

Previous wording

Lantronix Inc. is a global leader in Edge AI and Industrial IoT solutions, delivering intelligent computing, secure connectivity, and remote management for mission-critical applications. Serving high-growth markets, including smart cities, enterprise IT, and commercial and defense unmanned systems, we enable customers to optimize operations and accelerate digital transformation. Our comprehensive portfolio of hardware, software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive edge in today’s AI-driven world.

Current wording

Lantronix Inc. is a global leader in Edge AI and Industrial IoT solutions, delivering intelligent computing, secure connectivity, and remote management for mission-critical applications. Serving high-growth markets, including smart cities, enterprise IT, and commercial and defense unmanned systems (including drones), we enable customers to optimize operations and accelerate digital transformation. Our comprehensive portfolio of hardware, software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive edge in today’s AI-driven world.

Previous wording

The accounting policies that have the greatest impact on our financial condition and results of operations and that require the most judgments are those relating to revenue recognition, sales returns and allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets. These policies are described in further detail in our Annual Report on Form 10-K for the year ended June 30, 2025 and filed with the “SEC” on August 29, 2025 (the “Form 10-K”) and have not changed significantly during the three months ended September 30, 2025 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 judgments are those relating to revenue recognition, sales returns and allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets. These policies are described in further detail in our Annual Report on Form 10-K for the ficsal year ended June 30, 2025 and filed with the SEC on August 29, 2025 (the “Form 10-K”) and have not changed significantly during the six months ended December 31, 2025 as compared to what was previously disclosed in the Form 10-K.

Previous wording

In the three months ended September 30, 2025, our net revenue decreased by $4,629,000 or 13.4%, compared to the three months ended September 30, 2024. The decrease in net revenue was driven by a 12.3% 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 14.3% and our Software and Services product line of 18.0%. We had a net loss of $1,401,000 for the three months ended September 30, 2025 compared to a net loss of $2,502,000 for the three months ended September 30, 2024. The improvement in net loss was primarily driven by a decrease in operating expenses of $1,730,000 for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Current wording

In the three months ended December 31, 2025, our net revenue decreased by $1,387,000 or 4.5%, compared to the three months ended December 31, 2024. The decrease in net revenue was driven by a 28.6% decrease in net revenue in our IoT System Solutions product line, partially offset by increases in net revenue in our Embedded IoT Solutions product line of 28.6% and our Software and Services product line of 47.2%. We had a net loss of $1,330,000 for the three months ended December 31, 2025 compared to a net loss of $2,372,000 for the three months ended December 31, 2024. The improvement in net loss was primarily driven by a decrease in operating expenses of $1,403,000 for the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

Previous wording

Net revenue decreased primarily due to lower unit sales of our embedded compute products in the APJ region and lower volume sales of our network interface cards in the Americas and EMEA regions. These decreases were partially offset by higher unit sales of our embedded ethernet connectivity products in the Americas and EMEA regions.

Current wording

Net revenue increased primarily due to (i) higher unit sales of our embedded compute products, which includes our drone and aerospace and defense programs, in the Americas and EMEA regions and (ii) higher unit sales of our embedded ethernet connectivity and wireless communication products in the Americas and APJ regions.

Previous wording

Net revenue decreased primarily due to reduced sales to Gridspertise. We did not have any shipments to this customer in the current quarter, as compared to over $5 million the prior year quarter. The year-over-year decrease in revenue from this customer was partially offset by (i) increased unit sales of our network switches in the Americas and APJ regions and (ii) increased unit sales of our telematic gateways in the Americas and EMEA regions.

Current wording

Net revenue decreased primarily due to reduced sales to Gridspertise. We did not have any shipments to this customer in the current quarter, as compared to approximately $5.8 million the prior year quarter. The year-over-year decrease in revenue from this customer was partially offset by (i) increased unit sales of our network switches in the Americas and APJ regions and (ii) increased unit sales of our routers and modems products across all regions.

Previous wording

Gross profit as a percentage of revenue (referred to as “gross margin”) increased primarily as a result of our product sales mix as well as reduced logistics and tariff-related costs.

Current wording

Gross profit as a percentage of revenue (referred to as “gross margin”) increased primarily as a result of our product sales mix. This was primarily driven by the absence of revenue from Gridspertise in the current period, and a slightly higher percentage of our current period revenue derived from software and services.

Previous wording

Selling, general and administrative expenses increased slightly due to an increase in share-based compensation costs driven by higher-valued stock award grants in the current quarter. This was mostly offset by lower legal fees and certain other professional and outside services costs.

Current wording

Selling, general and administrative expenses decreased slightly due to lower legal fees and various professional and outside services costs. We recovered certain previously written-off receivables, the benefit of which is included in the “other” category in the table above. This was partially offset by (i) increased share-based compensation costs driven by new stock awards granted during the current fiscal year, and (ii) slightly higher personal-related expenses.

Previous wording

Research and development expenses decreased due to (i) lower personnel-related expenses in our engineering groups driven by headcount reductions from restructuring activities during the previous fiscal year, (ii) lower facilities-related equipment and software costs, (iii) decreased costs for third party contract labor, which are included in the “outside services” category in the table above, and (iv) reduced share-based compensation costs based on the value of new and outstanding awards. These decreases were partially offset by increased spending on certain prototype and materials costs, which are included in the “other” category in the table above.

Current wording

Research and development expenses decreased due to (i) lower personnel-related expenses in our engineering groups driven by restructuring activities during the previous fiscal year, (ii) lower facilities-related equipment and software costs, (iii) reduced share-based compensation costs based on the value of new and outstanding awards. These decreases were partially offset by increased spending on outsourced product development, which is included in the “outside services” category in the table above.

Previous wording

Net revenue decreased primarily due to lower engineering services revenue in the Americas region and a decrease in our extended warranty revenues across all regions. These decreases were partially offset by an increase in our SaaS product revenue in the Americas and EMEA regions.

Current wording

Net revenue increased primarily due to higher SaaS solutions in the Americas and EMEA regions. This increase was partially offset by a decrease in our extended warranty services in the Americas region.

Previous wording

During the three months ended September 30, 2025, we incurred charges of $93,000 related to headcount reductions. During the three months ended September 30, 2024, we incurred $900,000 of restructuring, severance and related charges.

Current wording

During the three and six months ended December 31, 2025, we incurred charges of $43,000 and $136,000, respectively, related to headcount reductions. During the three and six months ended December 31, 2024, we incurred $193,000 and $1,093,000, respectively, of restructuring, severance and related charges.

Previous wording

For the three months ended September 30, 2025 and September 30, 2024, 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, 2025 and December 31, 2024, we incurred net interest expense due to borrowings on our credit facilities. We also earn interest income on our domestic cash balance.

Previous wording

Our other income (expense), net, is comprised primarily of foreign currency remeasurement and transaction adjustments related to our foreign subsidiaries whose functional currency is the U.S. dollar.

Current wording

Our other income (expense), net, is comprised primarily of foreign currency remeasurement and transaction adjustments related to our foreign subsidiaries whose functional currencies are the U.S. dollar.

Previous wording

Our principal sources of cash and liquidity include our existing cash and cash equivalents, borrowings and amounts available under our existing bank borrowing agreement, and cash generated from operations. We are subject to a variable amount of interest on the principal balance of our borrowings and could be adversely impacted by rising interest rates in the future. We believe that our current cash holdings, net cash provided by operating activities, and expected availability under our bank borrowing agreement 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 Loan Agreement (as defined inNote 5 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report), and cash generated from operations. We are subject to a variable amount of interest on the principal balance of our borrowings and could be adversely impacted by rising interest rates in the future. We believe that our current cash holdings, net cash provided by operating activities, and expected availability under our Loan Agreement 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. We anticipate that the primary factors affecting our cash and liquidity are net revenue, working capital requirements and capital expenditures.

Previous wording

As of the date of this report, we have full access to and control of our cash and cash equivalents balance at Silicon Valley Bank and our other banking institutions. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds. As of September 30, 2025, we are in compliance with all covenants of the Loan Agreement.

Current wording

As of the date of this report, we have full access to and control of our cash and cash equivalents balance at Silicon Valley Bank and our other banking institutions. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds.

Previous wording

Cash provided by operating activities during the three months ended September 30, 2025 increased compared to the prior year period as a result of strong collections on accounts receivable and a reduction in net loss in the current period. For the three months ended September 30, 2025, 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, 2025, our net loss included $2,848,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $2,158,000.

Current wording

Cash provided by operating activities during the six months ended December 31, 2025 increased compared to the prior year period primarily as a result of strong collections on accounts receivable, and a reduction in net loss in the current period. For the six months ended December 31, 2025, our net loss included $5,448,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $3,066,000.

Previous wording

Accounts receivable decreased by $3,167,000, or 12.6%, from June 30, 2025 to September 30, 2025. The decrease was primarily due to the timing of payments from certain customers.

Current wording

Accounts receivable decreased by $1,831,000, or 7.3%, from June 30, 2025 to December 31, 2025. The decrease was primarily due to the timing of payments from certain customers.

Previous wording

Contract manufacturers’ receivables decreased by $2,619,000, or 85.3%, from June 30, 2025 to September 30, 2025. The decrease is primarily due to timing of shipments of components to contract manufacturers during the current quarter.

Current wording

Contract manufacturers’ receivables decreased by $1,957,000, or 63.7%, from June 30, 2025 to December 31, 2025. The decrease is primarily due to timing of shipments of components to contract manufacturers during the fiscal period.

Previous wording

Net cash used in investing activities for the three months ended September 30, 2025 and 2024 consisted of purchases of equipment totaling $74,000 and $157,000, respectively, primarily for computer hardware and tooling at our contract manufacturers and certain research and development projects.

Current wording

Net cash used in investing activities for the six months ended December 31, 2025 and 2024 consisted of purchases of equipment totaling $166,000 and $241,000, respectively, primarily for computer hardware and tooling at our contract manufacturers and certain research and development projects. Net cash used in investing activities for the six months ended December 31, 2024 also includes the acquisition of Netcomm, which used cash of $6,458,000.

Previous wording

Net cash used in financing activities during the three months ended September 30, 2025 resulted primarily from principal payments on our outstanding debt. Net cash used in financing activities during the three months ended September 30, 2024 resulted primarily from tax withholdings paid on behalf of employees for restricted shares as well as principal payments on the borrowings outstanding under the Loan Agreement.

Current wording

Net cash used in financing activities during the six months ended December 31, 2025 resulted primarily from net principal payments and borrowings on our Loan Agreement, as well as from tax withholdings paid on behalf of employees for restricted shares. Net cash used in financing activities during the six months ended December 31, 2024 resulted primarily from tax withholdings paid on behalf of employees for restricted shares as well as principal payments on our previous term loan borrowings.