創力 (LTRX) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Lantronix, Inc.'s Earnings Conference Call. My name is Crystal Lynn, and I will be your operator for today. (Operator instructions). As a reminder, today's conference is being recorded.

I would like to turn the conference over to your host for today, Reagan Sakai, Chief Financial Officer. Please proceed.

Thank you. 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, and an audio playback will be available through March 4. The number to call for the replay is 888-286-8010, or 617-801-6888 for international callers, with pass code 11259142.

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-Q filed for the fiscal quarter ended September 30, 2009 and 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 Chief Executive Officer of Lantronix. Please go ahead, Jerry.

Thank you, Reagan. Good afternoon, everyone, and thank you for joining us.

While our top line performance continued to be impacted by the current economy, we are pleased to report sequential revenue growth of 5%, our sixth consecutive quarter of non-GAAP profitability, fifth consecutive quarter of positive cash flow from operations and a robust product portfolio and pipeline. With a solid executive team in place and recently launched products such as XPort Pro and SpiderDuo beginning to ship, we are optimistic about our momentum and growth potential in 2010.

In addition, our product pipeline remains full, with updates to our SLC platform due for release in this, our third, fiscal quarter, completely new high-performance EDS 1100 and 2100 device servers with VIP access for release in our fiscal fourth quarter and a ManageLinx version 3.0 due for release this summer. We will discuss these items and more during today's call.

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 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 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.

Upcoming comments relate to the three months ended December 31, 2009 compared to the three months ended December 31, 2008, which represents our second fiscal quarter.

Net revenue was $11.5 million for the second fiscal quarter of 2010, a decrease of $1.4 million, or 11%, compared to $12.9 million. On a sequential basis, this was an increase of $524,000, or 5%, compared to $11 million for the first fiscal quarter of 2010.

Device networking net revenue was $11.2 million for the second fiscal quarter of 2010, a decrease of $1.2 million, or 10%, compared to $12.4 million. Device enablement, or DeviceLinx, net revenue was $9.3 million for the second fiscal quarter of 2010, a decrease of $860,000, or 9%, compared to $10.1 million. Device management net revenue was $1.9 million for the second fiscal quarter of 2010, a decrease of $342,000, or 15%, compared to $2.2 million. Non-core net revenue was $324,000 for the second fiscal quarter of 2010, a decrease of $205,000, or 39%, compared to $529,000.

Gross profit margin was 52.7% for the second fiscal quarter of 2010, compared to 53.9%. The decrease in gross profit margin percent was primarily due to product mix, increased freight costs, and employee severance.

Selling, general, and administrative expense was $4.9 million for the second fiscal quarter of 2010, a decrease of $460,000, or 9%, compared to $5.3 million.

Research and development expense was $1.5 million for the second fiscal quarter of 2010, a decrease of $39,000, or 3%, compared to $1.6 million.

GAAP operating expenses were $6.4 million for the second fiscal quarter of 2010, a decrease of $627,000, or 9%, compared to $7 million. Non-GAAP operating expenses were $5.6 million for the second fiscal quarter of 2010, a decrease of $373,000, or 6%, compared to $6 million.

GAAP net loss was $375,000, or $0.04 per share, for the second fiscal quarter of 2010, compared to $148,000, or $0.01 per share. Non-GAAP net income was $496,000, or $0.05 per share, for the second fiscal quarter of 2010, compared to non-GAAP net income of $1 million, or $0.10 per share. In addition to being our sixth consecutive quarter of non-GAAP profitability, this marked our eighth quarter of non-GAAP profitability out of the last nine quarters.

Now, turning to the six months ended December 31, 2009 compared to the six months ended December 31, 2008.

Net revenue was $22.4 million for the six months ended December 31, 2009, a decrease of $4.7 million, or 17%, compared to $27.1 million.

Device networking net revenue was $21.9 million for the six months ended December 31, 2009, a decrease of $4 million, or 15%, compared to $25.9 million. Device enablement, or DeviceLinx, net revenue was $18 million for the six months ended December 31, 2009, a decrease of $3.7, or 17%, compared to $21.7 million. Device management net revenue was $3.9 million for the six months ended December 31, 2009, a decrease of $317,000, or 8%, compared to $4.2 million. Non-core net revenue was $535,000 for the six months ended December 31, 2009, a decrease of $675,000, or 56%, compared to $1.2 million.

Gross profit margin was 52.5% for the six months ended December 31, 2009, compared to 53.4%. The decrease in gross profit margin percent was primarily due to product mix, increased freight costs, and employee severance.

Selling, general, and administrative expense was $9.5 million for the six months ended December 31, 2009, a decrease of $1 million, or 10%, compared to $10.5 million.

Research and development expense was $3 million for the six months ended December 31, 2009, a decrease of $57,000, or 2%, compared to $3.1 million.

GAAP operating expenses were $12.5 million for the six months ended December 31, 2009, a decrease of $1.8 million, or 13%, compared to $14.3 million. Non-GAAP operating expenses were $11 million for the six months ended December 31, 2009, a decrease of $1.3 million, or 10%, compared to $12.3 million.

GAAP net loss was $874,000, or $0.09 per share, for the six months ended December 31, 2009, compared to GAAP net income of $36,000, or $0.00 per share. Non-GAAP net income was $907,000, or $0.08 per share, for the six months ended December 31, 2009, compared to non-GAAP net income of $2.3 million, or $0.23 per share.

I'd now like to provide further insight into our 5% sequential growth for our second fiscal quarter.

What we saw in our second fiscal quarter was a stabilization and modest uptick in gross orders, as well as increased design-in activity for our embedded products and an increase in project-related proposals for our SecureLinx products. Consequently, we started the quarter with healthy backlog, and we continued to see these trends in January and early February.

My upcoming comments on the balance sheet relate to the fiscal quarter ended December 31, 2009, compared to June 30, 2009.

Cash and cash equivalents were $9.4 million as of December 31, 2009, an increase of $242,000 compared to $9.1 million. Total receivables, which includes accounts receivables and contract-manufactured receivables, were $2.8 million as of December 31, 2009, an increase of $282,000 compared to $2.5 million. Net inventories were $6.6 million as of December 31, 2009, an increase of $127,000 compared to $6.5 million. Accounts payable were $7.6 million as of December 31, 2009, an increase of $2 million compared to $5.6 million. The increase in accounts payable was due to the timing of incoming inventory, a significant portion of which arrived in December 2009. Working capital was $7.2 million as of December 31, 2009, a decrease of $289,000 compared to $7.4 million.

This concludes my prepared remarks regarding the fiscal quarter ended December 31, 2009 financial performance.

On December 18, 2009, the Company completed a successful reverse stock split, enabling the per-share trading price of the Company's common stock to satisfy the minimum bid price requirement for continued listing on NASDAQ. On January 6, 2010, the Company received a letter from NASDAQ notifying the Company that it had regained compliance, and the Company securities would remain listed on the NASDAQ stock market.

I would now like to turn the call back to Jerry.

Thank you, Reagan. We're beginning to see the positive benefits of key additions to our management team in sales and marketing. Consequently, we're engaging customers at a higher level with solutions that are more important to their business models. Recently launched products such as XPort Pro and SpiderDuo continue to receive strong interest. In addition, and as I mentioned in my opening remarks, our product pipeline remains full with new customer-driven products scheduled for release this quarter and throughout the remainder of calendar 2010.

Here is some updated information about our new products. You may recall that we launched XPort Pro, the world's smallest Linux computer, in mid-October to enthusiastic market response with the identical form factor as our popular XPort device server. But, with five times the processing power, 32 times the memory, and VIP access support, XPort Pro offers a lot to be excited about. Support of the popular Linux operating system, in particular, has driven a great deal of the unprecedented interest around XPort Pro.

To fully explore and give voice to all the creative device networking ideas we know are out there, we will launch an XPort Pro design competition focused on XPort Pro's Linux capability. With Linux on board, developers can bring a product to market quickly, without having to learn a new operating system and development environment. Please look for the formal launch of the contest on February 9, next Tuesday. We look forward to seeing the ideas of Linux enthusiasts from around the world.

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 a particular customer interest, allowing unmatched, secure access and control of mission-critical equipment behind firewalls.

In order to help get the word out on this exciting product, we have provided over 30 SpiderDuos very recently to various tech writers around the world for evaluation. We look forward to sharing the results of their evaluations with you.

We recently launched ManageLinx software version 2.0. Version 2.0 will support ManageLinx VIP access across all of our DeviceLinx products going forward. Look for us to launch ManageLinx version 3.0 during the June-ended quarter. Version 3.0 will be an enterprise-grade release with full redundancy and hot, standby capability. The user interface will be enhanced with additional features, like [TreeView] and generally made more user-friendly. Increased throughput, enhanced security, enhanced logging, and greatly increased reporting capability are just a few of the benefits that ManageLinx version 3.0 will bring to our customers.

Targeting the medical, security, and retail markets for networking and devices, our popular EDS device server family is being augmented with the EDS 1100 and 2100, utilizing simple yet full-featured industry-standard management tools such as Web, CLI, XML, SNMP, along with robust SSH or SSL enterprise-level security. And, supporting ManageLinx VIP access, the EDS 1100 and 2100 will be powerful, new offerings for our customers. Look for the EDS 1100 and 2100 to launch in March of this year.

We continue to strengthen our intellectual property portfolio with two new patents awarded, which cover the management of equipment and the secure transport of data. We anticipate additional patents in the very near future in our core technologies. 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, interactive, and social marketing. With over 65,000 contacts in our customer database, we will begin sending out a regular e-newsletter on interesting news, product updates, and other items of interest. For example, our first e-newsletter will include a medical white paper to be published next week.

In addition, you may have noticed that we recently launched the Company's blog. The blog is accessible at www.Lantronix.com/blog. Hosted by Daryl Miller, our Vice President of Engineering, it encourages open and candid exchanges with customers, partners, and the greater Lantronix community on a variety of interesting and relevant topics.

In addition, we look forward to displaying our products at the Embedded World show 2010 in March in Nuremburg, Germany, the International Security Conference West show in March in Las Vegas, and the Embedded Systems Conference in San Jose in April. These shows are an excellent way to connect firsthand with our customers and partners, discuss current implementations and trends, and receive suggestions for new products and features. We look forward to hopefully seeing you there.

As always, thank you for visiting with us online. And, if you haven't already, please check out our new blog, the new videos, new case studies, and some special new product promo offers at www.Lantronix.com.

This concludes our prepared remarks. And, Crystal Lynn, we'd like to open the call to questions.

(Operator instructions). [David Kanan], First Midwest.

Congratulations. Excellent quarter on executing on the things you have control over, like expenses. The first question is in regards to your comment about the sequential increase and the trends that you've seen in January and the first part of February in terms of order momentum. Is this a function more of new products? Are some of the newer products a meaningful part of this growth? Or is it that you're just seeing a general tick up in your core business, if you will?

And, then, the second part of my question is - As we move through the year and hopefully grow sequentially on the top line, do you guys see operating expenses holding at these modest levels, so you can capture the operating leverage to the upside?

Okay. So, on the bookings and backlog, what we saw in the December-ended quarter is, for XPort Pro, we actually started to ship product into the channel at a surprisingly high rate, given where we are in the new product introduction cycle. Anecdotally, I would say that we saw an acceleration of the process by somewhere around five or six months over what would normally be expected. That-- Those shipments, of course, because we recognize revenue on sell-through-- in other words, we don't recognize revenue until our distributors sell it-- we'll start recognizing the revenue for that this quarter. So we didn't recognize it last quarter. But unusually positive acceptance of the product led to some surprisingly good shipments in the December-ended quarter.

SpiderDuo, strangely enough, doesn't get as much attention as XPort Pro because XPort Pro has been such a hit, but SpiderDuo actually is the second-most-popular product that we've ever launched. And getting a lot of good leads there. And I don't know if we actually recognized any revenue on Duo in December. But we've actually started shipping and recognizing revenue on that this quarter already; so, in January.

So OpEx going forward-- Reagan, you want to take OpEx?

Yes. So, on the operating expenses, the non-GAAP operating expenses for this last quarter were about $5.5 million or $5.6 million. We would expect going forward that number to stay in the mid to upper $5 million-- So, I would say between $5.6 million and $5.9 million. So you will see the advantage of incremental revenue-- or the margin from incremental revenue falling to the bottom line.

Additionally, to get some color on Jerry's comments, when we said stabilization of gross orders, what we meant is on a day-by-day or week-by-week basis we're not seeing the severe ups and downs that we did in prior quarters. So every week tends to be pretty steady, and we saw that throughout the December-ended quarter and then through January and the first part of February.

Great. Excellent. Thank you, guys. And good luck for the year.

(Operator instructions). As there are no further questions, I would like to turn the call back to Jerry Chase, Chief Executive Officer, for closing comments.

Thank you, Crystal Lynn. I'd like to thank everyone for your participation on our call today. We look forward to speaking with you next quarter. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.