創力 (LTRX) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Lantronix Incorporated Earnings Conference Call. My name is Angela, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of today's conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. And now, I'd like to turn the presentation over to your host for today's event, Reagan Sakai, Chief Financial Officer. Please proceed.

Good afternoon, everyone, and welcome to today's conference call. Before we begin, I'd 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 May 29. The number to call for the replay is 888-286-8010 or 617-801-6888 for international callers with the pass code 8503-8731.

Please be reminded that during the course of this conference call, management will be making forward-looking statements in their prepared remarks and 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-Qs filed for the fiscal quarters ended December 31, 2009 and 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'd now like to introduce Jerry Chase, President and Chief Executive Officer of Lantronix.

Thank you, Reagan. Good afternoon, everyone, and thank you for joining us. Our March ended quarter is typically the softest of our fiscal year. However, for our third fiscal quarter of 2010, we are pleased to report improvements in our key financial metrics. This includes sequential and year-over-year revenue growth, a decrease in GAAP loss, a doubling of our non-GAAP profitability compared to the year-ago quarter, positive cash flows from operations and stable balance sheet. We continue to work closely with our market-leading customers and partners to deliver value-added solutions. Lantronix is well positioned to contribute to and benefit from growing markets such as medical device connectivity. We'll discuss these items in 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.

My upcoming comments relate to the three months ended March 31, 2010 compared to the three months ended March 31, 2009, which represents our third fiscal quarter.

Net revenue was $12.1 million, an increase of $1.4 million, or 14%, compared to $10.7 million. Sequentially, this was an increase of $646,000, or 6%, compared to $11.5 million for the second fiscal quarter of 2010. Gross profit margin was 52.4%, compared to 52.3%. The increase in gross profit margin percent was due to lower inventory reserve costs offset by an increase in freight costs.

GAAP operating expenses were $6.5 million, an increase of $657,000, or 11%, compared to $5.8 million. Selling, general and administrative expense was $4.8 million, an increase of $358,000, or 8%, compared to $4.4 million. The increase was due to an increase in state franchise tax fees as a result of the reverse stock split, recruiting fees related to the hiring of sales managers in our Japan and Hong Kong sales offices, severance-related charges and sales commissions due to higher net revenue.

Research and development expense was $1.6 million, an increase of $276,000, or 20%, compared to $1.4 million. The increase was due to personnel-related expenses as a result of a reduction in the use of a company-wide furlough program and increased spending related to new product introductions.

Non-GAAP operating expenses were $5.9 million, an increase of $532,000, or 10%, compared to $5.3 million. GAAP net loss was $136,000, or $0.01 per share, compared to $263,000, or $0.03 per share. Non-GAAP net income was $552,000, or $0.05 per share, compared to $265,000, or $0.03 per share.

My upcoming comments on the balance sheet relate to the fiscal quarter ended March 31, 2010 compared to June 30, 2009. Cash and cash equivalents were $9.3 million, an increase of $176,000, compared to $9.1 million. Total receivables, which includes account receivable and contract manufacturers' receivables, were $3.6 million, an increase of $1.1 million, compared to $2.5 million. Net inventories were $6.4 million, a decrease of $30,000, compared to $6.5 million.

Accounts payable were $7.2 million, an increase of $1.6 million compared to $5.6 million. The increase was primarily due to the receipt of a significant portion of our inventory in the latter half of the quarter. Inventory purchases are the primary driver of our accounts payable balance. As compared to last quarter, accounts payable were down $353,000.

Working capital remained consistent at $7.4 million. As compared to last quarter, working capital increased $243,000. I'd now like to provide some insight into what we're seeing early in our fourth fiscal quarter as well as our thoughts on the business going forward.

As I mentioned in our last conference call on February 4, 2010, our bookings have stabilized and increased, and we have seen increased sales activity. These trends continued into our fourth fiscal quarter, with gross orders booked in April for shipment within the quarter exceeding any of the months in the prior fiscal quarter. Additionally, we entered our fourth fiscal quarter with the strongest backlog over the past few quarters.

Project and bid activity levels continue on their upper trajectory and we're seeing good traction from our newly released products such as XPort Pro and SpiderDuo. You may have noticed that just yesterday, our XPort Pro with Linux was named the winner of EDN's 20th Annual Innovation Award for embedded systems technologies.

We have stabilized our balance sheet, we have achieved sustained non-GAAP profitability and we believe that our efforts over the past few quarters will generate revenue growth. We remain committed to increasing non-GAAP profitability but realize the needs of a growing business. That said, we fully expect revenue growth, gross margins in the 51% to 53% range and expansion of our non-GAAP profitability due to fixed-cost absorption and prudent oversight of our operating expenses.

I'd now like to turn the call back to Jerry.

Thank you, Reagan, and again thank you, everyone for joining us. As Reagan described, for the March ended quarter, we experienced improvements in substantially all our key financial measurements, including a 14% growth in revenue and a more than doubling of our non-GAAP income from a year ago. We continue to see positive momentum extend into this quarter. Through hard work, the Lantronix team now has the platform, the structure and the discipline to grow our business. A number of factors contributed to the results and growth momentum we saw last quarter and that we continue to see into this quarter.

Underlying last quarter's activity, we saw an improvement in the business climate. This resulted in more predictability in the sales order cycle and a stable and growing order pipeline. The Lantronix team has worked diligently to get our business in shape and our cost structure in order. In the process, we developed the individual and organizational discipline to closely manage our cost structure while we focus on growing the business.

We saw and continue to see sales strength across all of our core product lines and geographies. We serve and will continue to serve and grow in a number of very important vertical markets such as security, industrial, automation and gaming. We've been particularly encouraged with the growing market demand for medical device connectivity, both at the OEM and hospital level. Around 10% of our revenue is currently related to the medical market.

Medical device connectivity represents a unique opportunity for Lantronix to sharpen our focus and provide more value-added solutions that connect medical devices to healthcare information systems. Our solutions will help improve the timeliness and accuracy of electronic medical records. Going forward, we believe Lantronix is well positioned to contribute to and benefit from growth in this exciting vertical.

Finally, our newly launched products are off to good start with successful initial customer acceptance. As I mentioned earlier, the Lantronix team has the platform, the structure, the discipline and now with a focus on medical device connectivity, the direction to grow our business.

This concludes our prepared remarks, but before wrapping up, I'd like to take the opportunity to thank my Lantronix colleagues, our investors, our partners and especially our customers for your ongoing support of Lantronix. Angela, we'd like to open the call to questions.

Thank you, sir. (Operator Instructions). Gentlemen, your first question will come from the line of [David Cannon] with [First Midwest]. Please proceed.

Good afternoon, gentlemen. Congratulations on the first quarter growth in quite some time.

Hi, Dave, thank you.

Thank you.

My first question is in regards to new products, specifically XPort Pro, can you give me a sense as to what percentage of revenue was in the quarter, if there were -- if there was any at all? And going forward, what kind of a ramp or contribution incrementally should we expect from XPort Pro and other new products?

So, as it relates to XPort Pro, as you know, we recognize our revenue on sell-through. So, shipments in I believe were below a six-figure range from a dollar perspective, but certainly less than that on a revenue perspective. We're seeing good backlog for that, good orders. The demand for development kits continues to climb. But we're scrambling to keep up with that demand. And we're hopeful that it will be on the same trajectory that we saw -- the XPort line that we experienced four or five years ago.

Okay. And then in the prepared remarks, you made a comment about orders for the month of April. Could you just repeat that? I didn't get the whole thing, I was a little late on the call.

Yes. So the orders -- the gross orders that we received in the month of April for shipment within this quarter, so the month of April exceeded January's total, exceeded February's total, exceeded March's total, not in -- not our total FQ2, but each of those individual months, April is the highest of those four months.

Okay. Excellent. Thank you. Good luck.

Thank you.

All right. Thanks, Dave.

(Operator Instructions). Gentlemen, at this time, I have no further questions within the queue.

Thank you, Angela. I'd like to thank everyone for their participation on our call today and we look forward to speaking with you next quarter.

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