LANTRONIX INC Q1 FY2025 earnings call

• Acquired NetComm's IoT product line for $6.5 million cash, which strengthens Connect offerings, expands portfolio in Gateway, Routers and Modems including 5G products, adds new enterprise customers, and opens new markets. Expected to generate $6M-$7M in 2024 revenue and be immediately accretive to EPS.
• Progress in collaboration with Qualcomm in Edge AI: Signed development agreement to advance Qualcomm's Graphical Composer Tool, launched SmartLV Edge Compute gateway, and announced five new system in package solutions. Positioning to lead in Edge AI ecosystem.
• Streamlining product portfolio: Not investing in noncore products like WiFi and GNSS modules. Moving from 7 sites to 4 centers of excellence to reduce operating expenses. Expect to reduce fiscal year '25 operating expenses by ~$4.5M relative to '24, fully implemented by end of March 2025.

For the first quarter of fiscal 2025, revenue was $34.4 million, up 4% year-over-year. Embedded IoT Solutions revenue increased by 18% sequentially and year-over-year. IoT System Solutions decreased by 47% sequentially and 1% year-over-year. Software and services were up 8% sequentially and down 13% year-over-year. GAAP gross margin was 42.1%, non-GAAP gross margin was 42.6%. GAAP SG&A expenses were $9.5 million, GAAP R&D expenses were $5 million. GAAP net loss was $2.5 million or $0.07 per share, non-GAAP net income was $2.3 million or $0.06 per share.

• Second quarter of fiscal 2025 revenue expected in the range of $29 million to $33 million. Non-GAAP EPS expected in the range of $0.01 to $0.05 per share.
• Full year 2025 operating expenses expected to be approximately $4.5 million lower than fiscal year 2024, with quarterly non-GAAP OpEx in $11.25 million to $11.75 million range for the balance of the fiscal year.

Q: Push-outs in federal projects in Q1 and headwinds from large auto customer in Q2, any outlook for growth in second half?

A: Saleel mentioned slowdown in automotive customer and enterprise vertical market, but expects sequential improvements in rest of fiscal year.

Q: Update on Smart Grid opportunities?

A: Deployments in Italy ongoing, POC in North America (Massachusetts) starting, traction in Latin America and other European areas, long-term investment with good growth potential.

Q: Monetary connection to Qualcomm development agreements?

A: Saleel said they don't share specific dollar amounts, but collaborative work to improve Qualcomm's AI hub for end customers to develop products faster.

Q: Synergies of acquired NetComm business with Qualcomm partnership and channel relationships?

A: Acquisition adds 5G IoT gateways/routers, complements portfolio, brings new customers and markets, channel relationships, and potential for cross-selling. Revenue expected to grow 20% in 2025 and beyond, small team absorbed with integration to leverage capabilities.

Q: Enterprise slowdown details?

A: Mainly on government side and some insurance/banking customers being cautious with spend.