Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| I'm pleased to report record results for the second quarter of FY 2024 with total revenues of $37 million in FY Q2, an increase of 18% compared to the same period of FY 2023, and an increase of 12% over the last quarter and we expect record revenue for fiscal 2024 |
| We remain optimistic on the business and are on track to deliver a record year on both the top and bottom lines with 18% to 26% organic revenue growth and over 50% growth in non-GAAP earnings |
| We have a lot of work ahead of us as we continue down the transformation, but I'm confident we have the building blocks in place to drive Lantronix to become an even stronger company built on differentiated and sustainable franchises that generate profitable growth |
| While at Synaptics, I made significant changes streamlining operations, prioritizing customer centricity, and implementing robust go-to-market methodologies that led to significant gross margin and profitability improvements |
| Across multiple companies, including Conexant, Winbond and Synaptics, I've established a track record of business performance improvement across a range of metrics |
| Since I've been on board, I've been impressed with our team, the broad portfolio of technology and IP, and our great customers |
| The macro trends of IoT are accelerating and Lantronix, with its unique portfolio of secure, compute and connect solutions is perfectly positioned to capitalize on this momentum |
| From wireless routers, programmable telematics, out-of-band management, edge compute modules and a rapidly growing secure custom solution business, we have the breadth and depth to be the differentiated and trusted vested supplier of IoT solutions, providing unparalleled global reach and coverage |
| And so, some of these were positions that as we've been able to get systems integrated and offices together, we've been able to identify some additional cost synergies to take out of the business |
| But as I said earlier, I think the Compute and Connect portfolio that we have is really very good as I think about it in the future |
| For the remainder of the fiscal year, we expect continuing growth from our IoT system solutions, driven by the production ramp of our smart grid customer, continued strength in out-of-band, and telematics' asset tracking solutions to a Tier 1 telecom carrier |
| I'm optimistic about the future of Lantronix, given our wide array of leadership in technology, strong product pipeline, and growing customer engagement |
| This adoption is driven by mandates in power backup systems and state energy reporting standards and finally, our out-of-band products continue to perform well with our large enterprise customers resuming purchases |
| Sequentially, embedded IoT solutions were up 3%, with meaningful contribution from our lead EV customer design-in |
| Before I hand over the call to Jeremy to review the Q2 financials in more detail, I'd like to conclude by saying I'm really excited about the opportunity ahead at Lantronix |
| And be clear, some of these compute platforms that we're working on could do better than we anticipate |
| Over the last several quarters, we have reduced headcount by approximately 10%, as part of our ongoing efforts to capture cost synergies from our previous acquisitions, run the business more efficiently, and improve operating margins |
| In FY Q2, we made our first volume shipment to our smart grid customer, and we have the backlog in place to drive a strong ramp for the remainder of the year |
| Revenue was up 12% and 18% from the sequential and year-ago periods, respectively |
| For FQ2 2024, we reported revenue of $37 million, an all-time record for Lantronix, driven by initial production shipments to a smart grid solutions provider |
| Having just met with a customer in Europe, I'm happy to say that the relationship has deepened, and I expect this to be a long-term engagement |
| For more than 25 years, I've navigated the high-tech landscape, driving successes across hardware, software and services |
| IoT system solutions increased by 21% and 54% from the sequential and year-ago periods, respectively |
| Systems are now getting deployed in the field, and we have no showstoppers and as I said in my prepared remarks, we've got good backlog until the end of June for the fiscal year and as we transition this business into more of a run rate kind of business, we will be getting in purchase orders for the second half of the year |
| So I expect that to be a growth driver as I look into the future |
| In my first 60 days, I met with many customers, partners and employees, immersing myself in our strengths and opportunities |
| In addition, the year-over-year increase was impacted by strong sales from out-of-band deployments |
| So, yeah, it's nearly $40 million, right around, maybe slightly a tad below that and we're on track to deliver that this fiscal year and it was a significant contributor to the current quarter, as we'd expected |
| We do have some great technology and products |
| Almost it grew 60% from fiscal '23 to fiscal '24, just to be clear, as that we are projecting it to grow |
| Statement |
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| A general slowdown in our broad-based channel business as customers work through their inventories, and an embedded compute design win in video applications that was slated for revenue in the second half of fiscal 2024 that pushed into fiscal 2025 |
| In FQ2 2024, software and service revenues were down sequentially, primarily a function of the completion of two large design services projects that have transitioned into production |
| The decline in gross margin was primarily a function of a change in product mix from the prior quarter and increased logistics costs |
| The change in our annual guidance is primarily due to lower expected sales for our embedded IoT solutions as a result of two factors |
| And for that reason, we brought down our forecast for our embedded solutions for the second half of the fiscal year |
| So, the roughly $20 million miss at the midpoint from street expectations around $180 million to $160 million |
| As expected, we experienced a year-on-year decline in embedded IoT solutions, as the year-ago period included a large enterprise video customer design win that ended in FQ4 2023 |
| Maybe just to dive in quickly on the outlook, a little below expectations, it sounds like you've got a design win on the embedded push front |
| So those were the primary drivers for the reason to bring down our numbers for the second half of the fiscal year |
| So, Gridspertise is going as planned, and then we're kind of seeing some of the disruptions in the business that, well, many of your peers are seeing |
| So, half of that came from the distribution channel, excess inventory levels, and the other $10 million came from the large customer push-out |
| Jeremy, just in terms of the reduced fiscal '24 guidance, can you just help maybe rank order, the different issues between inventory at some of your customers and this project getting pushed, and were there any other impacts to the guidance, or were those really just the two main issues? Jeremy Whitaker I would say those are the two main things that came out of our QBR several weeks ago after we reviewed the forecast with the sales team, both primarily coming out of the embedded business, relatively, I would say, evenly split between kind of a broad-based expected decline from our connectivity business, embedded connectivity business, which is mostly wired products, a little bit of wireless, but not as impacted by that, and then the compute customer and the video application that I mentioned previously |
| So, a few macro slowdowns as opposed to what was originally when they planned it maybe six, nine months ago |
| Jeremy Whitaker Yes, so starting with channel inventories and what we're hearing back from our sales team as it relates to end customers, a lot of that business is going to a broad-based, customer-base, a lot of it in industrial IoT connectivity and embedded solutions in that area and what we heard back from our sales team is that there are customers that are working down inventories, and that was -- and also a general slowdown in the macro that is impacting customers |
| The decline was primarily related to cost-cutting efforts |
| GAAP net loss was $2.6 million, or $0.07 per share, during FQ2 2024, compared to GAAP net loss of $2.6 million, or $0.07 per share, in the year-ago quarter |
| It'll slow down just a little bit as we go into the second half of the calendar |
| So as I said, I went through the QBR with our sales team and marketing team just a few weeks back, and I'm very pleasantly surprised at the size of the funnel |
| Just thinking about this from a different angle here on the second half outlook change, sounds like the core business, what I think of as the core business, dating back the last couple years, that that's where the big headwind here is on your embedded, and so that's looking like it's going to -- is that stepping down in its run rate materially into your fiscal second half? Jeremy, is that how you think about it? Jeremy Whitaker Yeah, I would say it's lower than what we would have originally anticipated |
| So, they did have a bit of a -- many of these products did have a bit of a resurgence during COVID |
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