EX-99.1 2 lantronix_8k-ex9901.htm PRESS RELEASE Press Release

Exhibit 99.1

Lantronix Reports Third Quarter Fiscal 2007 Results, Device Enablement Revenues
Grow 14% Year-Over-Year


IRVINE, Calif., May 3, 2007 -- Lantronix, Inc. (NasdaqCM:LTRX), a leader in device networking and data center management technologies, today announced financial results for the third fiscal quarter ended March 31, 2007.

Lantronix reported net revenues of $13.3 million for the third fiscal quarter ended March 31, 2007, compared with $13.1 million for the same period last year. The Company reported a net loss for the third fiscal quarter ended March 31, 2007 of $1.1 million or $(0.02) per basic and diluted share, compared with net income of $399,000, or $0.01 per basic and diluted share, for the same period last year. Net income for the third fiscal quarter of 2006 included $1.4 million of income from the recovery of legal settlement expenses.

Device Enablement revenues for the third fiscal quarter ended March 31, 2007 increased 14% to $9.9 million, or 74% of total net revenues, compared to $8.7 million, or 66% of total net revenues, for the same period last year.

Device Management revenues for the third fiscal quarter ended March 31, 2007 decreased 10% to $1.7 million, or 13% of total net revenues, compared to $1.9 million or 15% of total net revenues, for the same period last year.

Non-core revenues for the third fiscal quarter ended March 31, 2007 decreased 32% to $1.7 million, or 13% of total net revenues, compared to $2.5 million, or 19% of total net revenues, for the same period last year.

Gross profit margin increased to 51.8% for the third fiscal quarter ended March 31, 2007, compared with 50.3% for the same period last year.

Total operating expenses were $7.9 million for the third fiscal quarter ended March 31, 2007, compared to $6.2 million for the third fiscal quarter ended March 31, 2006. Operating expenses for the third fiscal quarter ended March 31, 2006 included $1.4 million of income from the recovery of legal settlement expenses. Selling, general and administrative expense in the third fiscal quarter ended March 31, 2007 was $6.0 million compared to $6.0 million for the same period last year. Research and development expense increased to $1.9 million from $1.6 million for the same period last year, in line with the Company’s planned increase in R&D investment to support new product development initiatives.

On March 31, 2007, Lantronix had cash, cash equivalents and marketable securities of $7.6 million.

On January 10, 2007, the settlement of the Company’s securities litigation became final and effective; accordingly, the Company reduced its accrued settlement liability and settlement recovery by $13.9 million in connection with this settlement. As of March 31, 2007, the Company had a remaining accrued settlement liability of $1.1 million. The Company expects to issue warrants to purchase Lantronix common stock with a fair value of $1.1 million to the class plaintiffs as final consideration for the remaining settlement liability.

Marc Nussbaum, President and Chief Executive Officer of Lantronix stated, “In the fiscal third quarter Lantronix delivered its tenth consecutive quarter of year-over-year revenue growth in the combined core business lines of device enablement and device management, which contributed 87% of total third quarter revenues. The typical seasonal slow-down for the period was exaggerated by a steep falloff in non-core sales of 32% and general weakness in the data center equipment management market.

“Revenue growth from our combined core product categories of device enablement and device management continues to trend upward, increasing 13% for the 12-month period ended March 31, 2007 compared to an increase of 11% in the same period a year earlier and 10% in the prior 12-month period. Based on an upturn in orders for device management products in April, we expect sequential and year-over-year increases in this category in fiscal Q4.

“The machine-to-machine (M2M) market has not yet reached the high growth levels forecasted by industry market analysts. Lantronix has responded with aggressive moves to drive market adoption by making device networking easier and more cost effective, while simultaneously adding products to our portfolio to address entirely new applications and industry verticals. We are continuing to invest in bringing innovative products to market, and we anticipate that our new products will contribute to revenues in fiscal 2008.”

Recent New Product Highlights

Significant achievements and new products recently announced include:

 
§
IntelliBox®-I/O 2100 with EventTrak technology, a fully programmable external device server that automates the task of managing remote equipment and associated reporting. With IntelliBox, Lantronix addresses a new class of device applications.

 
§
SecureLinx Spider™, the industry's first IP based "Distributed KVM" (keyboard, video and mouse) remote server management solution small enough to be held in one hand. The SecureLinx Spider delivers next generation non-blocking, remote management for servers in regional branch offices, small-medium businesses, test laboratories and campus environments.

 
§
MatchPort™ b/g, the Company's third generation, full-featured, secure, embedded wireless (802.11 b/g) networking device server module, available for under $60 in volume. MatchPort b/g is suited for a variety of vertical applications including telematics/transportation, security access control, building/industrial automation, medical, retail/POS and power/utilities metering.

 
§
XPort Direct, the industry’s first embedded Ethernet Gateway, capable of establishing a true machine-to-machine connection at the breakthrough price point of less than $20 in volume. This innovation opens device networking to a much broader audience of potential higher volume applications.

 
§
ManageLinx, the first offering in a new hardware and software product line that makes creating scalable and secure end-to-end device networking systems easier than ever. This offering is targeted to the newly emerging application of Remote Product Services (RPS) in a broad variety of vertical product sectors such as industrial automation, medical and energy. The Lantronix developed Device Networking Architecture (DNA) at the heart of ManageLinx bridges remotely located devices to an enterprise management business system. The platform provides a device-centric suite of services for system integrators to build upon and includes advanced device discovery, secure remote subnet access, security, remote configuration and update, monitoring and third party application hosting.

Outlook

Nussbaum continued, “Our fourth fiscal quarter outlook is for year-over-year revenue growth in the range of 15% to 23% for the combined core business of device enablement and device management. For the fourth fiscal quarter of 2007 we expect total revenues in the range of $14.6 million to $15.4 million, which equates to a fiscal 2007 revenue outlook of approximately $55.0 million to $56.0 million. For the fourth fiscal quarter of 2007, we expect earnings to range from break-even to a net loss of $(0.01). Our cash balance may decline by up to $500,000 from the balance as of March 31, 2007 to fund working capital requirements.

“Although industry market analysts expect the M2M market to eventually reach a point of sharp acceleration, we are not waiting. Our internal plan assumes a conservative increase in M2M adoption over the next year. With this growth combined with our product expansion into new wireless applications, industrial applications, distributed KVM, and the remote product services equipment market, we expect substantial progress in fiscal 2008 toward achieving our ultimate goal of sustained annual core revenue growth greater than 20% and solid profitability.”

Conference Call and Webcast

Management will conduct a conference call with simultaneous webcast today at 5:00 p.m. Eastern time. President and Chief Executive Officer Marc Nussbaum and Chief Financial Officer Reagan Sakai will be on the call to discuss third quarter fiscal 2007 results and answer questions.

Interested parties may participate in the conference call by dialing 866-383-8119 (International dial-in 617-597-5344) and entering passcode 24707458. The live webcast of the conference call may be accessed by visiting About Us: Investor Relations: Presentations at the Lantronix web site at http://www.lantronix.com.
 
A telephonic replay of the conference call will be available through May 17, 2007 by dialing 888-286-8010 (international dial-in 617-801-6888) and entering passcode 55181035. The webcast will be archived on the Company’s web site for twelve months.

About Lantronix

Lantronix, Inc. (Nasdaq: LTRX) develops hardware and software solutions to help businesses and government agencies remotely access and manage network infrastructure equipment and rapidly network-enable their physical electronic devices. With nearly two decades of networking experience, the company is a leader in secure, remote device and data center management. With a family of products ranging from embedded device servers, to external box device servers to data center management, Lantronix is a one-stop shop for technologists who design, manage and configure servers, electronic devices and network infrastructure equipment. The company’s worldwide headquarters are located in Irvine, Calif. For more information, visit www.lantronix.com.
 
Lantronix is a registered trademark of Lantronix, Inc. All other trademarks are properties of their respective owners.
 
This news release contains forward-looking statements, including statements concerning our issuance of a warrant in connection with the settlement of class action litigation, the potential growth of the M2M market, our ability to penetrate that market through new products and increase our revenues from the M2M market, the overall revenue of Lantronix in future periods, future cash balances and potential future profitability. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties that could cause actual reported results and outcomes to differ materially from those expressed in the forward-looking statements, including but not limited to: final accounting adjustments and results; quarterly fluctuations in operating results; its ability to identify and profitably develop new products that will be attractive to its target markets, including the M2M market and the timing and success of new product introductions; changing market conditions and competitive landscape; government and industry standards; market acceptance of the Company’s products, by its customers; pricing trends; actions by competitors; future revenues and margins; changes in the cost or availability of critical components; unusual or unexpected expenses; and cash usage including cash used for product development or strategic transactions; and other factors that may affect financial performance. For a more detailed discussion of these and other risks and uncertainties, see the Company's recent SEC filings, including its Form 10-K for the fiscal year ended June 30, 2006, and its subsequent reports on Form 10-Q and Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
 
Contacts:
 
Lantronix, Inc.
Reagan Sakai, CFO
(949) 453-3990
 
The Piacente Group
Investor Relations
Brandi Piacente
(212) 481-2050
brandi@tpg-ir.com
 
 
- Tables to Follow -
 

CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEETS
 
           
   
March 31,
  
June 30,
  
   
2007
  
2006
  
   
 (In thousands)
  
ASSETS
              
Current Assets:
              
Cash and cash equivalents
  
$
7,483
  
$
7,729
  
Marketable securities
    
98
   
88
 
Accounts receivable, net
    
2,755
   
3,087
 
Inventories, net
    
9,834
   
8,113
 
Contract manufacturers' receivable
   
1,354
   
1,049
 
Settlements recovery
    
-
   
15,325
 
Prepaid expenses and other current assets
    
532
   
577
 
Total current assets
    
22,056
   
35,968
 
               
Property and equipment, net
    
1,851
   
1,589
 
Goodwill
    
9,488
   
9,488
 
Purchased intangible assets, net
    
545
   
610
 
Officer loans
    
127
   
122
 
Other assets
    
36
   
38
 
Total assets
  
$
34,103
  
$
47,815
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Current Liabilities:
              
Accounts payable
  
$
10,268
  
$
7,865
  
Accrued payroll and related expenses
    
1,764
   
1,596
 
Warranty reserve
    
445
   
693
 
Accrued settlements
    
1,132
   
16,767
 
Other current liabilities
    
3,145
   
3,675
 
Total current liabilities
    
16,754
   
30,596
 
Long-term liabilities
    
261
   
230
 
Long-term capital lease obligations
    
118
   
211
 
               
Commitments and contingencies
              
               
Stockholders' equity:
              
Common stock
    
6
   
6
 
Additional paid-in capital
    
184,613
   
182,857
 
Accumulated deficit
    
(168,084
)
  
(166,450
)
Accumulated other comprehensive income
    
435
   
365
 
Total stockholders' equity
    
16,970
   
16,778
 
Total liabilities and stockholders' equity
  
$
34,103
  
$
47,815
  
 
 

CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
 
                   
   
 Three Months Ended
  
Nine Months Ended
  
   
 March 31,
  
March 31,
  
   
2007
  
2006
  
2007
  
2006
  
   
  (In thousands, except per share data)
  
Net revenues (1)
  
$
13,253
  
$
13,063
  
$
40,596
  
$
38,258
  
Cost of revenues (2)
    
6,387
   
6,491
   
19,723
   
18,968
 
Gross profit
    
6,866
   
6,572
   
20,873
   
19,290
 
Operating expenses:
                          
Selling, general and administrative
    
6,001
   
6,046
   
17,556
   
18,336
 
Research and development
    
1,898
   
1,572
   
5,498
   
4,285
 
Litigation settlement costs (recovery)
    
-
   
(1,385
)
  
90
   
1,215
 
Amortization of purchased intangible assets
    
18
   
-
   
54
   
2
 
Restructuring recovery
    
-
   
-
   
-
   
(29
)
Total operating expenses
    
7,917
   
6,233
   
23,198
   
23,809
 
(Loss) income from operations
    
(1,051
)
  
339
   
(2,325
)
  
(4,519
)
Interest income (expense), net
    
(11
)
  
16
   
(4
)
  
37
 
Other income (expense), net
    
6
   
57
   
733
   
(2
)
(Loss) income before income taxes
   
(1,056
)
  
412
   
(1,596
)
  
(4,484
)
Provision for income taxes
    
14
   
13
   
38
   
29
 
Net (loss) income
  
$
(1,070
)
$
399
  
$
(1,634
)
$
(4,513
)
                           
Basic - net (loss) income per share
  
$
(0.02
)
$
0.01
  
$
(0.03
)
$
(0.08
)
                           
Diluted - net (loss) income per share
  
$
(0.02
)
$
0.01
  
$
(0.03
)
$
(0.08
)
                           
Basic - weighted average shares
    
59,709
   
58,758
   
59,511
   
58,643
 
                           
Diluted - weighted average shares
    
59,709
   
60,289
   
59,511
   
58,643
 
                           
(1) Includes net revenues from related party
  
$
209
  
$
430
  
$
790
  
$
1,036
  
                           
(2) Includes amortization of purchased intangible assets
  
$
5
  
$
31
  
$
11
  
$
551