創力 (LTRX) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2010 Lantronix, Inc. earnings conference call. My name is Noellia and I will be your coordinator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Reagan Sakai, CFO. Please proceed.

Good afternoon, everyone, and welcome to today's conference call. Before we begin, I would like to highlight that an archived webcast of this call will be available on the Company's website at www.lantronix.com. An audio playback will be available through December 5, 2009. The number to call for the replay is 888-286-8010 or 617-801-6888 for international callers with pass code 39319140. Please be reminded that during the course of this conference call, management will be making forward-looking statements in their prepared remarks and in response to your questions concerning, among other matters, our plans for future product introductions, upcoming planned product releases, the implementation of new corporate marketing messages and marketing techniques, and statements regarding future financial metrics including non-GAAP profitability and cash flow.

These forward-looking statements are based on Lantronix's current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially as a result of several factors. For a more detailed discussion of these and other risks and uncertainties, see the Company's recent SEC filings including its form 10-K filed for the fiscal year ended June 30, 2009. 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. I would now like to introduce Jerry Chase, President and CEO of Lantronix. Please go ahead, Jerry.

Thank you, Reagan. Good afternoon, everyone, and thank you for joining us. For the September ended quarter, our fiscal Q1, Lantronix was profitable for the fifth quarter in a row, generating $411,000 to non-GAAP income. Gross margins remain strong and our balance sheet remains solid with stable cash. We introduced to the market a number of exciting customer driven products including SpiderDuo and XPort Pro, the world's smallest Linux computer. Customer reaction to our new XPort Pro has been remarkably strong and positive.

More new products like ManageLinx 2.0, which is being released on Monday of next week, are on the way. During the quarter the economy continued to exert downward pressure on our revenue number. However, we also saw a pickup in designing activity and an improvement in customer demand. We remain optimistic about our future. We'll discuss these items and more during today's call. Reagan?

In addition to GAAP results, we report adjusted net income and adjusted operating expenses referred to as non-GAAP net income or loss and non-GAAP operating expenses, respectively, and non-GAAP net income or loss per share. Please refer to our earnings release posted in the investor relations section of our website where we have provided the definition for these non-GAAP financial measures.

We believe that the presentation of non-GAAP financial measures provide 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 Lantronix 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 to those financial statements should be carefully evaluated.

The non-GAAP financial measures used by Lantronix may be calculated differently from and therefore may not be comparable to similarly titled measures used by other companies. In our investor relations section of our website we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

My upcoming comments relate to the three months ended September 30, 2009, compared to the three months ended September 30, 2008 which represents our first fiscal quarter. Net revenue was $11 million for the first fiscal quarter of 2010, a decrease of $3.3 million or 23% compared to $14.2 million. Device networking net revenue was $10.7 million for the first fiscal quarter of 2010, a decrease of $2.8 million or 21% compared to $13.5 million. Device networking enablement, or DeviceLinx net revenue was $8.7 million for the first fiscal quarter of 2010, a decrease of $2.8 million or 24% compared to $11.6 million.

Device networking management net revenue remained flat at $2 million for the first fiscal quarter of 2010 and 2009. Noncore net revenue was $211,000 for the first fiscal quarter of 2010, a decrease of $470,000 or 69% compared to $681,000.

Gross profit margin was 52.2% for the first fiscal quarter of 2010 compared to 52.9%. The decrease in gross profit margin percent was mainly due to the product mix in the quarter. Selling, general and administrative expense was $4.6 million for the first fiscal quarter of 2010, a decrease of $588,000 or 11% compared to $5.2 million. Research and development expense remained flat at $1.5 million for the first fiscal quarter of 2010 and 2009. As stated before, operating results were positively impacted by the company's previous restructuring efforts, stringent control on discretionary spending, and a company-wide furlough program that was taken in response to the economic down turn.

GAAP operating expenses were $6.1 million for the first fiscal quarter of 2010, a decrease of $1.2 million or 16% compared to $7.3 million. Non-GAAP operating expenses were $5.4 million for the first fiscal quarter of 2010, a decrease of $880,000 or 14% compared to $6.3 million. GAAP net loss was $499,000 or $0.01 per share for the first fiscal quarter of 2010 compared to GAAP net income of $184,000 or $0.00 per share. Non-GAAP net income was $411,000 or $0.01 per share for the first fiscal quarter of 2010 compared to non-GAAP net income of $1.3 million or $0.02 per share.

In addition to being our fifth consecutive quarter of non-GAAP profitability, this marked our seventh quarter of non-GAAP profitability out of the last eight quarters. My upcoming comments on the balance sheet relate to the fiscal quarter ended September 30, 2009 compared to June 30, 2009. Cash and cash equivalents remained flat at $9.1 million as of September 30, 2009 and June 30, 2009. Total receivables, which includes accounts receivable and contract manufacturers receivables, were $2.3 million as of September 30, 2009, a decrease of $158,000 compared to $2.5 million.

Net inventories were $6.1 million as of September 30, 2009, a decrease of $376,000 compared to $6.5 million. Accounts payable were $5.8 million as of September 30, 2009, a decrease of $171,000 compared to $5.6 million. Working capital was $7.1 million as of September 30, 2009, a decrease of $285,000 compared to $7.4 million.

This concludes my prepared remarks regarding the fiscal quarter ended September 30, 2009 financial performance. Looking forward as we drive top line growth, we expect our non-GAAP overhead cost structure to remain relatively stable and would expect a significant portion of incremental revenue going towards profitability. I would now like to turn the call back to Jerry.

Thank you, Reagan. As I mentioned at the beginning of the call, this is our fifth consecutive quarter of non-GAAP profitability and our seventh out of the last eight. Our financial house remains in order and we are seeing the benefits of key additions to our management team in sales and marketing.

We continue to invest in new technology, and our customers are telling us they like the new products we've been launching and the ones we'll be launching soon. A little bit more about our new products. SpiderDuo, which we launched in early September, is a palm sized device that provides users secure real time control of remote computers and equipment as if the computers or equipment were right in front of them while simultaneously allowing local access. SpiderDuo with ManageLinx VIP access has been of particular customer interest, allowing unmatched secure access and control of mission critical equipment behind firewalls. In the next few months, we will be adding a secure web browser interface and we are researching mobile connectivity to make SpiderDuo even more versatile.

The XPort Pro, the world's smallest Linux computer, was released in mid October to enthusiastic customer response. You may recall the XPort Pro supports ManageLinx VIP access, has five times the raw performance and 32 times the memory in the identical form factor as our flagship XPort. The launch of XPort Pro has generated an unprecedented level of customer interest in design activity. ManageLinx software 2.0 is released and on track for a market launch date of November 9th, Monday of next week. This newest version supports ManageLinx VIP access on an increasing number of our DeviceLinx products including XPort Pro and all of our Spider products.

We are also exploring other platforms where ManageLinx VIP access makes business sense such as cable modems and microprocessors. Version 2.0 is an enterprise class release which represents the integration of features and operational inputs from the demanding requirements of key market applications.

Our popular EDS DeviceServer family is being enhanced with increased processing and security features along with ManageLinx VIP access. Due in March of 2010, the EDS1100 and 2100 will address the growing demand in the medical, security, and retail markets for advanced connectivity applications for networking and devices. We look forward to providing you additional updates as these products come online and begin to impact our business model.

We continue to concentrate much of our marketing effort on web and interactive marketing. For example, we have recently augmented our popular website video series with two new videos to support the launch of XPort Pro and SpiderDuo. Our ongoing marketing programs this quarter are focused on our two major product launches which have driven tremendous traffic to our website. Our first campaign promotes XPort Pro in its Linux capabilities. This campaign has generated strong interest both in terms of press coverage and in customer requests for information. Our second major campaign targets SpiderDuo and its unique capabilities.

Turning to plans for the March ending quarter, we will continue to build on the success of the XPort Pro campaign and launch new campaigns for ManageLinx Version 2.0 and the EDS 1100 and 2100. Our website has become a fine window into Lantronix and we are seeing an excellent customer response to our marketing and messaging.

Thanks for visiting with us online and if you haven't already, please check out the new videos, new case studies and some special new product promo offers at www.lantronix.com. Continuous focused investments in our product pipeline and sales and marketing have positioned Lantronix well for sustainable growth in the future. This concludes our prepared remarks and Noellia, we'd like to now open the call to questions.

(Operator Instructions) David Kanen, First Midwest.

Congratulations, gentlemen, on another profitable quarter. First question is in regards to the small sequential decline. In the past I recall that seasonally there's a fairly meaningful drop sequentially from Q2 to Q3 whereas this year the drop was only about 3.5% approximately. Should I take that as an indication that end demand is starting to firm and then going forward we would expect revenues to grow sequentially?

Yes, so you are correct, the September ended quarter is seasonally one of our softer quarters. And over the last four or five years it's typically been down sequentially 2% to 6% with on average around 3% or 4%. So what we saw, which was a 3% sequential decline, is the correct statement. We have seen a firming up of orders for this quarter and as you know, as you follow the Company, our December ended quarter is typically one of our better seasonal quarters. So October orders were pretty strong but we're still on top of a pretty shaky economy, so certainly don't want to extrapolate one month into the quarter. But as I mentioned, historically our FQ2 is a pretty good quarter. One would hope that as the economy comes back around, we can plow through this seasonality that we usually expect in the March ended quarter. But it's still too early to determine what the March ended quarter will look like.

Okay, and as far as the pickup that you're seeing in design and demand and orders for October, how much of the growth of this seeming pickup do you think is driven by new products versus a general economic improvement if you had to attribute percentages to each? And I know that's a very subjective and nebulous question, but nonetheless if you could attempt to answer it.

So good question and so the first thing I would say is that the XPort Pro, as we mentioned, has driven an unprecedented level of activity with measured -- anyway we choose to measure it in terms of websites hits, in terms of requests for information, evaluation kits, it's really been remarkable and we've been very encouraged. So those -- it's very analogous though to semiconductor designing wins. In other words, that level of interest, we hope it continues, we expect that it will continue, but it won't start generating revenue for us until middle of 2010 which is sort of a normal designing cycle for us. So the majority of the activity that we're seeing now is on existing products which are being still well received and as Reagan mentioned, we see an increase in some encouraging signs in the economy and in our customers across the geographies and across verticals.

And could you touch on SpiderDuo and the activity that you've seen there?

SpiderDuo has been very well received. In fact, SpiderDuo with ManageLinx access on it has been very encouraging. And so what we're seeing is some of our customers have been waiting for SpiderDuo to be launched and they're going to have ManageLinx on top of it so they can access equipment behind firewalls around the world whether it's in an industrial setting or an airport security setting or whatever the case may be. They're using Spider to not only see that equipment, but to control it as if it were right in front of them and securely through firewalls with ManageLinx VIP access. So the combination of SpiderDuo and ManageLinx VIP access has been a very nice combination for us indeed.

Do you think -- I won't hold you to this, Jerry, but given the activity you're seeing and the economic improvement although it is slight, do you think that the growth sequentially this year from September to the December quarter could be more profound than past years on average?

Still too early to say.

As Reagan said, we've had a good October, but still too early to say. I don't want to go too far out on a limb because the economic situation is so volatile. So we're encouraged. We've got all of our ducks in a row in terms of the balance sheet and the income statement, the products are performing very well, the new products are being well received. But there's some macro factors out there that could affect us and I don't want to make a prediction. But we're encouraged, we're optimistic, and we'll continue to run the business and we expect good things to be happening for us.

Okay, guys, thank you and good luck.

(Operator Instructions). At this moment you have no questions.

Okay. Thank you very much, Noellia. I'd like to thank everyone for their participation in our call today and we look forward to speaking with everyone next quarter. Thank you.

Thank you for your participation in today's conference. This concludes your presentation and you may now disconnect. Have a great day.