News Column

Lantronix Reports Fourth Quarter and Fiscal 2014 Financial Results

August 21, 2014

IRVINE, CA -- (Marketwired) -- 08/21/14 -- Lantronix, Inc. (the "Company") (NASDAQ: LTRX) a leading global provider of smart IoT (Internet of Things) solutions, today reported results for its fourth quarter and fiscal year ended June 30, 2014.

Financial Highlights for Fiscal Year 2014:

•Net revenue of $44.5 million•Gross profit margin of 50.0% •GAAP net loss of $933,000, or $0.06 per share •Non-GAAP net income of $948,000, or $0.06 per share •Cash and cash equivalents of $6.3 million as of the end of the fiscal year •Cash flow positive from operations for the fiscal year

Financial Highlights for the Fourth Quarter of Fiscal 2014:

•Net revenue of $11.1 million•Gross profit margin of 50.1% •GAAP net loss of $213,000, or $0.01 per share •Non-GAAP net income of $206,000 or $0.01 per share (representing the fourth consecutive quarter of non-GAAP net income)

Operational and Product Highlights for the Fourth Quarter of Fiscal 2014:

•The Company finalized the formation of a technology and marketing alliance with Server Technology, a leading producer of high-quality rack mount power distribution units and power monitoring solutions, which was announced in July 2014.



•In June 2014, the Company launched its next-generation branch office manager, the SLB™ 8824 (220V). Designed specifically for the power requirements of international customers, the SLB enables IT administrators to securely manage remote servers and IT infrastructure equipment quickly and easily over the Internet.

"We were pleased to achieve non-GAAP profitability and positive cash flow from operations for fiscal 2014. In addition, our ongoing sales expansion efforts contributed to an 11% increase in Enterprise Solutions sales internationally," said Kurt Busch, Lantronix president and CEO. "During the fourth quarter, we continued to see new product revenues grow both sequentially and year-over-year, a direct result of the growth initiatives we started in fiscal 2013 and successful sales efforts with several Tier One customers."

Busch continued: "As we move forward into fiscal 2015 we believe our pipeline of qualified opportunities and focused engagements with Tier One accounts, position us well to achieve long-term revenue growth and profitability."

Financial Results for Fiscal Year 2014

Net revenue was $44.5 million for fiscal 2014, a decrease of $2.1 million, compared to $46.7 million for fiscal 2013.

Gross profit margin was 50.0% for fiscal 2014, compared to 47.4% for fiscal 2013.

Operating expenses were $23.1 million for fiscal 2014, a decrease of $1.6 million, compared to $24.7 million for fiscal 2013.

GAAP net loss for fiscal 2014 was $933,000, or $0.06 per share, compared to a GAAP net loss of $2.8 million, or $0.19 per share for fiscal 2013.

Non-GAAP net income for fiscal 2014 was $948,000, or $0.06 per share compared to non-GAAP net loss of $935,000 or $0.06 per share for fiscal 2013. For additional information regarding our non-GAAP results, see "Discussion of Non-GAAP Financial Measures" below.

Cash and cash equivalents were $6.3 million as of June 30, 2014, an increase of $1.0 million, compared with $5.2 million as of June 30, 2013.

Financial Results for the Fourth Quarter of Fiscal 2014

Net revenue was $11.1 million for the fourth quarter of fiscal 2014, compared to $11.1 million for the fourth quarter of fiscal 2013 and $11.6 million for the third quarter of fiscal 2014.

Gross profit margin was 50.1% for the fourth quarter of fiscal 2014, compared to 44.7% for the fourth quarter of fiscal 2013 and 50.9% for the third quarter of fiscal 2014.

Operating expenses were $5.8 million for the fourth quarter of fiscal 2014, a decrease of $313,000, compared to $6.1 million for the fourth quarter of fiscal 2013 and a decrease of $243,000, compared to $6.0 million for the third quarter of fiscal 2014.

GAAP net loss for the fourth quarter of fiscal 2014 was $213,000, or $0.01 per share, compared to a GAAP net loss of $1.1 million, or $0.08 per share, for the fourth quarter of fiscal 2013 and a GAAP net loss of $130,000 or $0.01 per share, for the third quarter of fiscal 2014.

Non-GAAP net income for the fourth quarter of fiscal 2014 was $206,000, or $0.01 per share compared to non-GAAP net loss of $665,000 or $0.05 per share for the fourth quarter of fiscal 2013 and non-GAAP net income of $331,000, or $0.02 per share, for the third quarter of fiscal 2014. For additional information regarding our non-GAAP results, see "Discussion of Non-GAAP Financial Measures" below.

Conference Call and Webcast

Lantronix will host an investor conference call with a simultaneous audio webcast today at 2:00 p.m. Pacific Daylight Time (5:00 p.m. Eastern Daylight Time) to discuss its fourth quarter and fiscal 2014 results. Those wishing to participate in the live conference call should dial 866-825-3209 (US) or 617-213-8061 (international) using passcode 64637156. A webcast will be available simultaneously via the investor relations section of the Company's website at www.lantronix.com.

A telephone replay will be available through August 28, 2014 by dialing 888-286-8010 (US) or 617-801-6888 (international) and entering passcode 16447251.

About Lantronix

Lantronix, Inc. (NASDAQ: LTRX) is a global leader of secure communication technologies that simplify access and communication with and between virtually any electronic device. Our smart connectivity solutions enable sharing data between devices and applications to empower businesses to make better decisions based on real-time information, and gain a competitive advantage by generating new revenue streams, improving productivity and increasing efficiency and profitability. Easy to integrate and deploy, Lantronix products remotely and securely connect electronic equipment via networks and the Internet. Founded in 1989, Lantronix products have applications in every industry, including medical, security, industrial and building automation, transportation, retail, POS, financial, government, consumer electronics, and IT/data center. The Company's headquarters are located in Irvine, California. For more information, visit www.lantronix.com. The Lantronix blog, http://www.lantronix.com/blog, features industry discussion and updates. To follow Lantronix on Twitter, please visit http://www.twitter.com/Lantronix.

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 of the non-GAAP financial measures to the financial measures calculated in accordance with GAAP 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 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 to gain an understanding of our comparative operating performance.

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.

Forward-Looking Statements

This news release contains forward-looking statements, including statements concerning our sales expansion efforts, our relationships with certain customers, and our projected operating and financial performance. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our results or experiences, or future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. Some of the risks and uncertainties that may cause actual results to differ from those expressed or implied in the forward-looking statements are described in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, as well as in our other filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, investors are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the NASDAQ Stock Market, LLC. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.

© 2014 Lantronix, Inc. All rights reserved. Lantronix and xPico are registered trademarks of Lantronix, Inc. SLB is a trademark of Lantronix, Inc. All other trademarks and trade names are the property of their respective holders.


LANTRONIX, INC. Unaudited Consolidated Balance Sheets (In thousands, except share and par value data) June 30, June 30, 2014 2013 ------------ ------------ Assets Current Assets: Cash and cash equivalents $ 6,264$ 5,243 Accounts receivable (net of allowance for doubtful accounts of $34 and $107 at June 30, 2014 and 2013, respectively) 3,631 2,599 Inventories, net 8,404 8,741 Contract manufacturers' receivable 359 607 Prepaid expenses and other current assets 524 431 ------------ ------------ Total current assets 19,182 17,621 Property and equipment, net 1,487 1,687 Goodwill 9,488 9,488 Deferred tax assets 400 476 Other assets 125 87 ------------ ------------ Total assets $ 30,682$ 29,359 ============ ============ Liabilities and stockholders' equity Current Liabilities: Accounts payable $ 4,547$ 2,870 Accrued payroll and related expenses 1,863 1,516 Warranty reserve 150 193 Short-term debt - 167 Deferred tax liabilities 400 476 Other current liabilities 3,418 3,877 ------------ ------------ Total current liabilities 10,378 9,099 Long-term capital lease obligations 7 54 Other non-current liabilities 131 249 ------------ ------------ Total liabilities 10,516 9,402 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding - - Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,787,158 and 14,579,764 shares issued and outstanding at June 30, 2014 and 2013, respectively 1 1 Additional paid-in capital 205,013 203,871 Accumulated deficit (185,219) (184,286) Accumulated other comprehensive income 371 371 ------------ ------------ Total stockholders' equity 20,166 19,957 ------------ ------------ Total liabilities and stockholders' equity $ 30,682$ 29,359 ============ ============ LANTRONIX, INC. Unaudited Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended Years Ended June 30, March 31, June 30, June 30, -------- --------- -------- ------------------ 2014 2014 2013 2014 2013 -------- --------- -------- -------- -------- Net revenue (1) $ 11,102$ 11,593$ 11,127$ 44,546$ 46,655 Cost of revenue 5,543 5,694 6,148 22,261 24,555 -------- --------- -------- -------- -------- Gross profit 5,559 5,899 4,979 22,285 22,100 -------- --------- -------- -------- -------- Operating expenses: Selling, general and administrative 4,097 4,248 4,318 16,355 17,990 Research and development 1,665 1,757 1,757 6,746 6,748 -------- --------- -------- -------- -------- Total operating expenses 5,762 6,005 6,075 23,101 24,738 -------- --------- -------- -------- -------- Loss from operations (203) (106) (1,096) (816) (2,638) Interest expense, net (6) (6) (14) (28) (59) Other income (expense), net 2 (2) (10) (28) (18) -------- --------- -------- -------- -------- Loss before income taxes (207) (114) (1,120) (872) (2,715) Provision for income taxes 6 16 6 61 54 -------- --------- -------- -------- -------- Net loss $ (213)$ (130)$ (1,126)$ (933)$ (2,769) ======== ========= ======== ======== ======== Net loss per share (basic and diluted) $ (0.01)$ (0.01)$ (0.08)$ (0.06)$ (0.19) ======== ========= ======== ======== ======== Weighted average shares (basic and diluted) 14,707 14,686 14,580 14,657 14,574 ======== ========= ======== ======== ======== Net revenue from related parties $ 72$ 79$ 164$ 524$ 1,058 ======== ========= ======== ======== ======== (1) Includes net revenue from related parties LANTRONIX, INC. Unaudited Reconciliation of Non-GAAP Adjustments (In thousands, except per share data) Three Months Ended Years Ended ----------------------------- ------------------ June 30, March 31, June 30, June 30, -------- --------- -------- ------------------ 2014 2014 2013 2014 2013 -------- --------- -------- -------- -------- GAAP net loss $ (213)$ (130)$ (1,126)$ (933)$ (2,769) Non-GAAP adjustments: Cost of revenue: Share-based compensation 10 11 11 45 44 Depreciation and amortization 109 122 107 472 400 -------- --------- -------- -------- -------- Total adjustment to costs of revenue 119 133 118 517 444 -------- --------- -------- -------- -------- Selling, general and administrative: Share-based compensation and related witholding taxes 145 144 137 606 563 Depreciation and amortization 69 83 113 355 439 -------- --------- -------- -------- -------- Total adjustments to selling, general and administrative 214 227 250 961 1,002 -------- --------- -------- -------- -------- Research and development: Share-based compensation and related witholding taxes 52 54 59 218 243 Depreciation and amortization 24 23 4 68 14 -------- --------- -------- -------- -------- Total adjustments to research and development 76 77 63 286 257 -------- --------- -------- -------- -------- Total non-GAAP adjustments to operating expenses 290 304 313 1,247 1,259 -------- --------- -------- -------- -------- Interest expense, net 6 6 14 28 59 Other (income) expense, net (2) 2 10 28 18 Provision for income taxes 6 16 6 61 54 -------- --------- -------- -------- -------- Total Non-GAAP adjustments 419 461 461 1,881 1,834 -------- --------- -------- -------- -------- Non-GAAP net income (loss) $ 206$ 331$ (665)$ 948$ (935) -------- --------- -------- -------- -------- Non-GAAP net income (loss) per share (diluted) $ 0.01$ 0.02$ (0.05)$ 0.06$ (0.06) -------- --------- -------- -------- -------- Denominator for GAAP net income (loss) per share (diluted) 14,707 14,686 14,580 14,657 14,574 Non-GAAP adjustment 413 662 - 253 - -------- --------- -------- -------- -------- Denominator for non-GAAP net income (loss) per share (diluted) 15,120 15,348 14,580 14,910 14,574 -------- --------- -------- -------- -------- GAAP operating expenses $ 5,762$ 6,005$ 6,075$ 23,101$ 24,738 Non-GAAP adjustments to operating expenses (290) (304) (313) (1,247) (1,259) -------- --------- -------- -------- -------- Non-GAAP operating expenses $ 5,472$ 5,701$ 5,762$ 21,854$ 23,479 ======== ========= ======== ======== ======== LANTRONIX, INC. Unaudited Net Revenues by Product Line and Region (In thousands) Three Months Ended Years Ended ---------------------------- ------------------ June 30, ------------------ June 30, March 31, June 30, 2014 2014 2013 2014 2013 -------- ---------- -------- ------- ---------- OEM Modules $ 5,429$ 6,091$ 5,914$21,434$ 23,569 Enterprise Solutions 5,673 5,502 5,213 23,112 23,086 -------- ---------- -------- ------- ---------- Net revenue $ 11,102$ 11,593$ 11,127$44,546$ 46,655 ======== ========== ======== ======= ========== Three Months Ended June 30, -------------------------------------------------------- 2014 2013 ---------------------------- --------------------------- OEM Enterprise OEM Enterprise Modules Solutions Total Modules Solutions Total -------- ---------- -------- ------- ---------- -------- Americas $ 2,186$ 4,160$ 6,346$ 2,193$ 3,683$ 5,876 EMEA 2,150 1,019 3,169 2,475 960 3,435 Asia Pacific 488 257 745 627 355 982 Japan 605 237 842 619 215 834 -------- ---------- -------- ------- ---------- -------- $ 5,429$ 5,673$ 11,102$ 5,914$ 5,213$ 11,127 ======== ========== ======== ======= ========== ======== Years Ended June 30, -------------------------------------------------------- 2014 2013 ---------------------------- --------------------------- OEM Enterprise OEM Enterprise Modules Solutions Total Modules Solutions Total -------- ---------- -------- ------- ---------- -------- Americas $ 8,191$ 15,625$ 23,816$ 8,845$ 16,340$ 25,185 EMEA 8,334 4,874 13,208 9,143 4,550 13,693 Asia Pacific 2,412 1,408 3,820 2,471 1,349 3,820 Japan 2,497 1,205 3,702 3,110 847 3,957 -------- ---------- -------- ------- ---------- -------- $ 21,434$ 23,112$ 44,546$23,569$ 23,086$ 46,655 ======== ========== ======== ======= ========== ========



Investor Relations Contacts: Lantronix, Inc.Jeremy Whitaker Chief Financial Officer (949) 453-3990 E.E. Wanginvestors@lantronix.com (949) 614-5879



Source: Lantronix, Inc.


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