Group 1 - Lantronix Inc. is considered one of the best AI stocks to buy, with a Buy rating and a price target of $5.00 from Craig-Hallum analyst Christian Schwab following the company's financial results announcement for FQ4 2025 and FY2025 [1][3] - For FQ4 2025, Lantronix reported revenue of $28.8 million, a slight increase from $28.5 million in the previous quarter, while total revenue for FY2025 reached $123 million [1][2] - The company experienced a GAAP net loss of $2.6 million, or $0.07 per share, in Q4 2025, contrasting with a GAAP net income of $400,000 in the same quarter of the previous year [2] Group 2 - Lantronix secured a significant agreement with a US mobile carrier to modernize over 50,000 backup power systems and wireless cell sites [3] - The company also partnered with Red Cat's Steel Drones, providing secure edge compute solutions for the US Army's short-range reconnaissance program [3] - Lantronix develops, markets, and sells industrial and enterprise IoT products and services across various regions including the Americas, Europe, the Middle East, Africa, and the Asia Pacific Japan [4]

Group 1 - Lantronix Inc. reported Q4 revenue of $28.8 million, slightly up from Q3's $28.5 million, but full-year revenue for FY2025 was $123 million, reflecting a 41.23% year-over-year decline [2] - The company achieved a non-GAAP EPS of $0.01 for Q4, which was within guidance, but faced a GAAP net loss of $2.6 million, or $0.07 per share, compared to a GAAP net income of $400K in the same quarter a year ago [2] - Lake Street raised the price target for Lantronix to $5 from $4, maintaining a Buy rating, citing steady growth and strategic wins despite financial pressures [1][3] Group 2 - Lantronix is expected to benefit from a multi-year growth cycle in the unmanned aerial systems market, with over $13 billion allocated for unmanned platforms in 2026 defense funding [3] - A significant contract was secured with Red Cat's Steel Drones to power Black Widow drones for the US Army's short-range reconnaissance program [3] - The company develops, markets, and sells industrial and enterprise IoT products and services across various regions including the Americas, Europe, the Middle East, Africa, and the Asia Pacific Japan [4]

Core Insights - Lantronix Inc. has been recognized with the 2025 IoT Evolution Product of the Year Award for its Open-Q™ System-on-Module (SOM), which is utilized in drone development for defense unmanned aerial vehicles [1][2] Company Overview - Lantronix is a global leader in Edge AI and Industrial IoT solutions, providing intelligent computing, secure connectivity, and remote management for mission-critical applications [4] - The company serves high-growth markets, including smart cities, enterprise IT, and defense unmanned systems, enabling customers to optimize operations and accelerate digital transformation [4] Product Highlights - The Open-Q SOM solution is currently integrated into Teledyne/FLIR thermal cameras for drones and has been selected by Teal Drones for the production of Black Widow™ drones under the U.S. Army's Short-Range Reconnaissance (SRR) Program [3] - This solution is based on the Qualcomm® Dragonwing™ QRB5165 processor, delivering advanced Edge AI processing while ensuring compliance with U.S. security requirements, specifically TAA and NDAA [3] Market Position - By focusing strategically on the drone market, Lantronix has collaborated with 10 manufacturers to develop advanced technology for drone products [2] - The company is positioned in the multi-billion-dollar IoT industry, contributing significantly to the drone sector and the rapidly evolving Industrial IoT (IIoT) business [2]

Core Insights - Lantronix Inc. has been recognized with the 2025 IoT Evolution Product of the Year Award for its Open-Q System-on-Module (SOM), which is utilized in drone development for defense unmanned aerial vehicles [1][2] - The company has strategically focused on the drone market, collaborating with 10 manufacturers to develop advanced technology for drone products [2] - Lantronix's Open-Q SOM solution is compliant with TAA and NDAA, ensuring it meets U.S. security requirements for deployment in sensitive Department of Defense missions [3] Company Overview - Lantronix is a global leader in Edge AI and Industrial IoT solutions, providing intelligent computing, secure connectivity, and remote management for mission-critical applications [5] - The company serves high-growth markets, including smart cities, enterprise IT, and commercial and defense unmanned systems, enabling customers to optimize operations and accelerate digital transformation [5] - Lantronix's solutions are designed to enhance efficiency, security, and competitive advantage in an AI-driven environment [5]

Company Overview - Lantronix, Inc. (NASDAQ: LTRX) is an American company specializing in providing compute and connections for the Internet of Things (IoT) [1] - The company has a long history of secure remote management, which includes out-of-band tools and edge computing solutions [1] Investment Focus - The analysis primarily targets small- to mid-cap companies, which are often overlooked by many investors, while occasionally reviewing large-cap companies to provide a broader market perspective [1]

```markdown PART I [ITEM 1. BUSINESS](index=5&type=section&id=ITEM%201.%20BUSINESS) Lantronix Inc. is a global leader in Edge AI and Industrial IoT solutions, providing intelligent computing, secure connectivity, and remote management for mission-critical applications across smart cities, enterprise IT, and unmanned systems. The company's strategy focuses on continuous innovation and strategic acquisitions to expand its portfolio of hardware, software, and services, aiming to enhance its competitive position and market penetration - Lantronix is a **global leader** in Edge AI and Industrial IoT solutions, focusing on intelligent computing, secure connectivity, and remote management for mission-critical applications[19](index=19&type=chunk) - The company serves high-growth markets including smart cities, enterprise IT, and commercial and defense unmanned systems, enabling customers to optimize operations and accelerate digital transformation[19](index=19&type=chunk) - Lantronix's growth strategy centers on continuous innovation and strategic acquisitions to increase scale, broaden scope, and enhance its value proposition, positioning itself as a strategic partner[24](index=24&type=chunk) Overview - Lantronix Inc. is a **global leader** in Edge AI and Industrial IoT solutions, providing intelligent computing, secure connectivity, and remote management for mission-critical applications[19](index=19&type=chunk) - The company operates globally with sales teams managed across three geographic regions: the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific Japan (APJ)[20](index=20&type=chunk) - Lantronix's portfolio is organized into three product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Engineering Services[20](index=20&type=chunk) Our Strategy - Lantronix focuses on three high-potential vertical markets: smart cities, enterprise, and unmanned aerial systems (UAS/drones), delivering complete solutions including hardware, software, device management, and design services[22](index=22&type=chunk) - In Smart Cities, Lantronix partners with Smart Grid customers, supplying SmartLV compute and connectivity solutions and design services to enhance grid resiliency and flexibility[23](index=23&type=chunk) - For UAS, the company develops Qualcomm Dragonwing–based system-on-modules (SoM) for industrial drone applications, focusing on defense and security, providing high-performance edge compute for flight control, video processing, and AI-enabled situational awareness[23](index=23&type=chunk) Products and Solutions Embedded IoT Solutions - The embedded product portfolio includes Compute SoM and System-in-Package (SiP) solutions, along with wired and wireless connectivity products, offering processing power for advanced AI and machine learning applications at the device level[26](index=26&type=chunk) - Latest SiP devices process multiple media streams using Computer Vision (CV) technology for sophisticated edge analytics, managed remotely via Percepxion™, Lantronix's Cloud IoT Edge Solution software[27](index=27&type=chunk) - Products are pre-certified across multiple regions, reducing regulatory certification costs and expediting time-to-market for OEM customers, and include software tools to accelerate development[28](index=28&type=chunk) IoT System Solutions - The IoT System Solutions portfolio offers standalone systems for routing, switching, gateway functionalities, telematics, and media conversion, providing secure network connectivity and power for IoT end devices via Power over Ethernet (PoE)[30](index=30&type=chunk) - Products incorporate advanced fault management and diagnostics for network troubleshooting and proactive problem-solving, and media converters address bandwidth, security, and distance limitations[32](index=32&type=chunk) - Smart tracking devices provide robust data logging and positional tracking for supply chain and logistics, while Industrial IoT devices offer flexible connectivity options (4G, 5G, LTE) for vehicle, fleet, and asset tracking[33](index=33&type=chunk) Software and Engineering Services - The SaaS platform provides comprehensive single-pane-of-glass management for OOB and IoT deployments, enabling remote deployment, monitoring, management, and automation across global installations[36](index=36&type=chunk) - For OEMs and System Integrators, the platform offers multitenancy functionality and Over the Air (OTA) updates for security patches, firmware upgrades, and configuration changes[37](index=37&type=chunk) - Engineering services leverage deep expertise for turnkey product development or team augmentation in areas like camera tuning, voice control, machine learning, AI, and computer vision, accelerating time-to-market for complex IoT and embedded solutions[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) Net Revenue by Product Line - Net revenue by product line is discussed in 'Management's Discussion and Analysis of Financial Condition and Results of Operations' (Part II, Item 7)[43](index=43&type=chunk) Sales Cycle - Embedded IoT solutions typically have design cycles ranging from nine to 24 months, generating revenue for the entire product lifecycle[44](index=44&type=chunk) - IoT System Solutions generally have design cycles of three to 18 months and are often project-based[45](index=45&type=chunk) Sales Channels - A majority of sales are made through distributors who resell products to various customers including OEMs, ODMs, VARs, system integrators, and online retailers[46](index=46&type=chunk) - Products are also sold by industry-specific system integrators and VARs, as well as direct market resellers like CDW, ProVantage, and Amazon.com[47](index=47&type=chunk) - Direct sales are made to larger OEMs and end users, and the company maintains an e-commerce site for direct sales[48](index=48&type=chunk) Manufacturing - Manufacturing operations are conducted through third-party contract manufacturers primarily located in Thailand, China, and Taiwan, including Hana Microelectronics, Honortone, In-Tech, Tailyn, Info-Tek, and Rubytech[50](index=50&type=chunk) - Contract manufacturers source raw materials, components, and integrated circuits, and perform assembly, testing, and quality control according to Lantronix's specifications[51](index=51&type=chunk) - While many components are available from multiple vendors, Lantronix has several single-sourced supplier relationships[51](index=51&type=chunk) Research and Development - Research and development efforts focus on hardware and software technology to differentiate products and enhance competitive position[52](index=52&type=chunk) - Product R&D is primarily performed in-house, supplemented with outsourced resources[52](index=52&type=chunk) Competition - The industry is highly competitive, characterized by rapid technological advances and evolving industry standards[53](index=53&type=chunk) - Competition is based on product features, software capabilities, company reputation, brand recognition, technical support, partner relationships, quality, reliability, product development capabilities, price, and availability[53](index=53&type=chunk) Intellectual Property Rights - Lantronix protects its intellectual property through patents, copyrights, trademarks, trade secrets, licenses, non-disclosure agreements, and contractual provisions[54](index=54&type=chunk) - The company holds U.S. and international patents covering various aspects of its products, with additional patent applications pending[54](index=54&type=chunk) U.S. and Foreign Government Regulation - Many products require mandatory regulatory approvals in deployment regions, especially wireless products, and must comply with environmental component regulations[55](index=55&type=chunk) - Some products employing security technology are subject to U.S. export restrictions[55](index=55&type=chunk) Employees - As of August **19**, **2025**, Lantronix had **352** total employees, with **351** full-time, none represented by a labor union[56](index=56&type=chunk) - The company reports good relationships with its employees and no labor problems resulting in work stoppages[56](index=56&type=chunk) Customer and Geographic Concentrations - Sales teams are managed by three geographic regions: the Americas; EMEA; and APJ[57](index=57&type=chunk) - Discussion of sales to significant customers and within geographic regions is incorporated by reference from Notes 2 and 11 of the Consolidated Financial Statements[57](index=57&type=chunk) Available Information - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A, and other reports are available free of charge on the company's website (www.lantronix.com) and the SEC's website (www.sec.gov)[58](index=58&type=chunk) Information About Our Executive Officers Executive Officers as of August 29, 2025 | Name | Age | Position | | :--- | :--- | :--- | | Saleel Awsare | 60 | President and Chief Executive Officer | | Brent Stringham | 47 | Chief Financial Officer | | Mathi Gurusamy | 54 | Chief Product and Strategy Officer | | Kurt Hoff | 68 | Chief Revenue Officer | - Saleel Awsare became President and CEO in November **2023**, bringing extensive experience from Synaptics and Conexant Systems[59](index=59&type=chunk) - Brent Stringham was appointed CFO in January **2025**, having served as interim CFO and Chief Accounting Officer since September **2024**, with a long tenure at Lantronix since **2012**[60](index=60&type=chunk) [ITEM 1A. RISK FACTORS](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) Lantronix operates in a dynamic environment with numerous risks, including significant customer concentration, supply chain constraints, and challenges in developing new products. The company faces substantial risks related to cybersecurity, data privacy, and the responsible use of AI, as well as liquidity concerns due to historical losses and reliance on specific financial institutions. International operations are exposed to geopolitical events, currency fluctuations, and trade policies, while regulatory compliance and potential litigation add further complexities - The company depends on a relatively small number of distributor and end-user customers for a large portion of its revenue, making it vulnerable to declines in sales to these major customers[64](index=64&type=chunk) - Lantronix has experienced and may continue to experience constraints in the supply of certain materials and components, including single-sourced integrated circuits, which can affect operating results and lead to lost sales[65](index=65&type=chunk) - Cybersecurity breaches and other disruptions pose a **significant risk** to information systems, data confidentiality, and reputation, potentially leading to legal claims, operational disruptions, and loss of customer confidence[93](index=93&type=chunk)[94](index=94&type=chunk) Risks Related to Our Operations and Industry - Lantronix relies on a small number of distributors and end-user customers for a **significant portion** of net revenue, making it susceptible to material adverse effects from sales declines to these customers[64](index=64&type=chunk) - The company faces supply constraints for certain materials and components, including single-sourced integrated circuits, which can lead to delayed product shipments and loss of sales[65](index=65&type=chunk)[66](index=66&type=chunk) - Substantially all manufacturing is outsourced to contract manufacturers in Asia, exposing the company to risks like reduced control over delivery, quality, and production costs, as well as geopolitical conflicts and regulatory changes[67](index=67&type=chunk)[68](index=68&type=chunk) - The ability to sustain and grow the business depends on developing and successfully marketing new products, as some existing products are in mature markets with declining demand[73](index=73&type=chunk) - Operating results may fluctuate significantly due to project-based large orders and lengthy sales cycles (**3-24 months**), making revenue forecasting difficult[77](index=77&type=chunk)[78](index=78&type=chunk) Risks Related to Technology, Cybersecurity and Intellectual Property - Cybersecurity breaches and disruptions could compromise information, expose the company to liability, and damage its business and reputation, despite existing security measures[93](index=93&type=chunk)[94](index=94&type=chunk) - Failure to comply with evolving data privacy laws and regulations (e.g., GDPR, CCPA) could result in **significant civil and criminal penalties**, legal liability, and reputational harm[98](index=98&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Products with AI capabilities introduce risks related to responsible use, potential misuse, and new regulations, which could lead to reputational, competitive, and financial harm[103](index=103&type=chunk) - The company relies on third-party and open-source software; its unavailability or changes in terms could disrupt business, increase costs, and delay product shipments[104](index=104&type=chunk) - Inability to adequately protect or enforce intellectual property rights could harm competitive position or incur **significant expenses** for enforcement[106](index=106&type=chunk)[107](index=107&type=chunk) Risks Related to Liquidity and Capital Resources - Lantronix maintains cash deposits in excess of federally insured limits, and adverse developments affecting financial institutions (e.g., bank failures like SVB) could impact liquidity[111](index=111&type=chunk) - The company has a history of net losses and there is no assurance of future profitability or positive cash flow, which could lead to a decline in common stock value or a need for additional funding[112](index=112&type=chunk) - Additional capital may be needed for business operations, product development, strategic partnerships, or acquisitions, and may not be available on acceptable terms, potentially diluting existing stockholders[113](index=113&type=chunk)[114](index=114&type=chunk) - Terms of the amended and restated credit facility restrict financial and operational flexibility, requiring maintenance of specified financial ratios and holding **75%** of US cash balances at SVB[115](index=115&type=chunk) Risks Related to International Operations - Rising international tariffs and changes in trade regulations could **materially and adversely affect** business and results of operations, potentially increasing sourcing costs or making foreign sales more difficult[117](index=117&type=chunk)[118](index=118&type=chunk) - International operations are subject to risks including geopolitical events, currency exchange rate fluctuations, import restrictions, unexpected regulatory changes, and longer accounts receivable payment cycles[119](index=119&type=chunk) - Fluctuations in foreign currency exchange rates, particularly the U.S. dollar versus local currencies, could adversely affect revenues and operating results[120](index=120&type=chunk) Risks Related to Regulatory Compliance and Legal Matters - Inability to obtain appropriate industry certifications or governmental regulatory approvals for wireless products could impede revenue growth in those markets[121](index=121&type=chunk) - Failure to comply with U.S. export regulations (e.g., denied parties list) and anti-corruption laws (e.g., FCPA) could lead to sanctions, fines, and adverse effects on revenues and profitability[122](index=122&type=chunk) - Non-compliance with environmental legislation and regulations (e.g., EU directives, potential U.S. programs) could require costly product redesigns or restrict sales in affected jurisdictions[123](index=123&type=chunk) - Current or future litigation, especially regarding intellectual property rights, could be time-consuming, costly, divert management attention, and potentially require monetary damages or product redesigns[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) General Risk Factors - High interest rates may negatively impact results of operations and financing costs by hindering economic growth and increasing debt obligations[128](index=128&type=chunk) - Failure to maintain **effective internal controls** could adversely affect the ability to report financial results accurately and timely, potentially leading to litigation or investigations[129](index=129&type=chunk)[130](index=130&type=chunk) - The company's financial performance depends substantially on attracting, retaining, and motivating key senior management and technical personnel; loss of such personnel could disrupt business[132](index=132&type=chunk) - Quarterly operating results may fluctuate significantly due to variations in net revenue, expenses, and fixed operating costs, making quarter-to-quarter comparisons unreliable for future performance prediction[133](index=133&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=28&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) Lantronix reported no unresolved staff comments as of the fiscal year ended June 30, 2025 - There are **no unresolved staff comments**[136](index=136&type=chunk) [ITEM 1C. Cybersecurity](index=28&type=section&id=ITEM%201C.%20Cybersecurity) Lantronix has established a comprehensive cybersecurity risk management program, leveraging NIST CSF guidance, to assess, identify, and manage material risks. The Board of Directors oversees this program, with day-to-day management handled by the Director of IT, who has over 28 years of experience in IT and cybersecurity - Lantronix has established policies and processes for assessing, identifying, and managing material risks from cybersecurity threats, integrated into its overall risk management systems[137](index=137&type=chunk) - The company leverages guidance from the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) to inform the design and assessment of its cybersecurity risk management program[138](index=138&type=chunk) - The Board of Directors is responsible for the oversight of cybersecurity threats, receiving quarterly updates from senior management on cybersecurity initiatives and incidents[142](index=142&type=chunk) Risk Management and Strategy - The cybersecurity risk management program includes risk assessments, evaluations of incident response readiness, periodic tabletop exercises, and the use of external service providers[140](index=140&type=chunk) - Cybersecurity training is provided to employees, consultants, and users, and a third-party risk management process is in place for service providers and vendors[140](index=140&type=chunk) - As of the report date, known cybersecurity threats or incidents are not believed to have **materially affected** or are reasonably likely to **materially affect** the company's business strategy, results of operations, or financial condition[141](index=141&type=chunk) Governance - The Director of IT, under executive officer oversight, is responsible for day-to-day cybersecurity risk management and the design and implementation of policies and procedures[143](index=143&type=chunk) - The Director of IT has over **28 years** of experience in IT roles, including over **10 years** in cybersecurity management[143](index=143&type=chunk) - Weekly briefings on cybersecurity risks and activities are provided to the Chief Financial Officer, General Counsel, and other incident response team members, with **significant threats** reported to the Board[144](index=144&type=chunk) [ITEM 2. Properties](index=29&type=section&id=ITEM%202.%20Properties) Lantronix operates leased facilities in Irvine, California (corporate headquarters), Plymouth, Minnesota (operations/warehouse), Vancouver, British Columbia, Canada (engineering/operations/marketing), Hyderabad, India (engineering/design), and Taipei City, Taiwan (engineering/sales/marketing). The company believes its current facilities are adequate and suitable additional space will be available if needed Leased Facilities Details | Locations | Primary Use | Approximate Square Footage | | :--- | :--- | :--- | | Irvine, California, U.S.A. | Corporate headquarters; sales and marketing, research and development, operations and administration | 12,000 | | Plymouth, Minnesota, U.S.A. | Operations; warehouse and administration | 66,000 | | Vancouver, British Columbia, Canada | Engineering, operations and marketing | 8,500 | | Hyderabad, India | Engineering and design | 18,000 | | Taipei City, Taiwan | Engineering, sales and marketing | 5,500 | - The company believes its existing facilities are adequate to meet its needs and suitable additional space will be available on commercially reasonable terms if required in the future[145](index=145&type=chunk) [ITEM 3. Legal Proceedings](index=29&type=section&id=ITEM%203.%20Legal%20Proceedings) Lantronix refers to Note 10 of the Notes to Consolidated Financial Statements for a discussion of legal proceedings, indicating that details are incorporated by reference - Discussion of legal proceedings is set forth in Note 10 of Notes to Consolidated Financial Statements, incorporated by reference[146](index=146&type=chunk) [ITEM 4. Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Lantronix reported no mine safety disclosures for the fiscal year ended June 30, 2025 - There are **no mine safety disclosures**[147](index=147&type=chunk) PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Lantronix's common stock is traded on the Nasdaq Capital Market under the symbol "LTRX." As of August 22, 2025, there were approximately 24 holders of record. The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for business expansion. No shares were repurchased during fiscal 2025 - Lantronix's common stock is traded on the Nasdaq Capital Market under the symbol "LTRX."[149](index=149&type=chunk) - As of August **22**, **2025**, there were approximately **24** holders of record of the common stock[149](index=149&type=chunk) - The company has **never declared or paid cash dividends** and does not anticipate paying any in the foreseeable future, intending to retain future earnings for business expansion and general corporate purposes[150](index=150&type=chunk) Common Stock - Common stock is traded on the Nasdaq Capital Market under the symbol "LTRX."[149](index=149&type=chunk) - As of August **22**, **2025**, there were approximately **24** holders of record of the common stock[149](index=149&type=chunk) Dividend Policy - Lantronix has **never declared or paid cash dividends** on its common stock[150](index=150&type=chunk) - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain future earnings for business expansion and general corporate purposes[150](index=150&type=chunk) Issuer Repurchases - Lantronix did not repurchase any shares of its common stock during fiscal **2025**[151](index=151&type=chunk) [ITEM 6. Reserved](index=30&type=section&id=ITEM%206.%20Reserved) This item is reserved and contains no information [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Lantronix experienced a significant decrease in net revenue by 23.3% in fiscal 2025 compared to fiscal 2024, primarily driven by a 34.2% decline in IoT System Solutions. Despite a reduction in operating expenses, the net loss increased from $4.5 million in fiscal 2024 to $11.4 million in fiscal 2025. The company's liquidity is supported by existing cash and credit facilities, but future capital may be needed for growth and strategic initiatives - Fiscal Year 2025 vs. 2024 Financial Summary | Metric | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $122,923 | $160,327 | $(37,404) | (23.3%) | | Net Loss | $(11,373) | $(4,516) | $(6,857) | 151.8% | | Operating Expenses | $62,700 | $67,216 | $(4,516) | (6.7%) | - The **decrease in net revenue** was primarily driven by a **34.2% decrease** in IoT System Solutions, alongside declines in Embedded IoT Solutions (**1.2%**) and Software & Services (**12.5%**)[176](index=176&type=chunk) - The **increase in net loss** was primarily due to the **decrease in revenues**, partially offset by a reduction in operating expenses[176](index=176&type=chunk) Overview - Lantronix Inc. is a **global leader** in Edge AI and Industrial IoT solutions, providing intelligent computing, secure connectivity, and remote management for mission-critical applications[153](index=153&type=chunk) - The company operates globally with sales teams managed across three geographic regions: the Americas; EMEA; and APJ[154](index=154&type=chunk) Products and Solutions - Lantronix organizes its portfolio into Embedded IoT Solutions, IoT Systems Solutions, and Software and Engineering Services[155](index=155&type=chunk) - Further discussion on products and solutions is incorporated by reference from Part I, Item 1 of this Report[155](index=155&type=chunk) Recent Developments Acquisition - In December **2024**, Lantronix acquired Netcomm Wireless Pty Ltd for **$6,458,000** in cash[156](index=156&type=chunk) - The acquisition complements Lantronix's focus on Enterprise and Smart City vertical markets and enhances connectivity solutions in critical infrastructure, asset monitoring, and telecommunications[156](index=156&type=chunk) Recent Accounting Pronouncements - Discussion of recent accounting pronouncements is incorporated by reference from Note 1 of the Notes to Consolidated Financial Statements[158](index=158&type=chunk) Critical Accounting Policies and Estimates Revenue Recognition - Revenue is recognized upon the transfer of control of promised products or services to customers, reflecting the consideration expected[160](index=160&type=chunk) - Significant judgment and estimates are required for product returns and pricing adjustments, which are accounted for as variable consideration[161](index=161&type=chunk) - Engineering and consulting service contracts recognize revenue over time, either based on the right to invoice for Time & Materials (T&M) or input methods (e.g., labor hours) for Fixed Price contracts[162](index=162&type=chunk)[163](index=163&type=chunk) Inventory Valuation - Inventories are valued at the lower of cost (FIFO) or net realizable value, with estimates for excess and obsolete inventories based on future sales demand (**12-24 months**)[166](index=166&type=chunk) - Specific reserve estimates cover risks for end-of-life products, inventory at contract manufacturers, and warranty replacement stock[166](index=166&type=chunk) Valuation of Deferred Income Taxes - A full valuation allowance is recorded against net deferred tax assets, primarily due to historical net operating losses (NOLs) and uncertainty of generating future taxable income[167](index=167&type=chunk) Business Combinations - Purchase consideration for acquisitions is allocated to tangible assets, liabilities, and intangible assets (including IPR&D) based on estimated fair values, with any excess recorded as goodwill[168](index=168&type=chunk) - Valuation of acquired assets and assumed liabilities, especially intangible assets, requires **significant judgment and estimates**, often using income approach techniques like discounted cash flow models[168](index=168&type=chunk) Goodwill Impairment Testing - Goodwill is evaluated for impairment annually (May 31) or more frequently if indicators suggest fair value is below carrying amount[169](index=169&type=chunk) - The impairment test involves a qualitative assessment, followed by a quantitative test comparing the reporting unit's fair value (using income and market approaches) to its carrying value[170](index=170&type=chunk) - As of May **31**, **2025**, the annual goodwill impairment test indicated that the estimated fair value exceeded the carrying amount by approximately **9%**, resulting in **no impairment recognition**[172](index=172&type=chunk) Long-Lived Assets and Intangible Assets - Impairment of long-lived and intangible assets is assessed when events or changes in circumstances indicate that the carrying value may not be recoverable[173](index=173&type=chunk) - If expected future cash flows are less than the carrying amount, an impairment loss is recognized based on the excess of carrying amount over fair value[173](index=173&type=chunk) Results of Operations - Fiscal Years Ended June 30, 2025 and 2024 Summary Fiscal Year 2025 vs. 2024 Financial Summary | Metric | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $122,923 | $160,327 | $(37,404) | (23.3%) | | Net Loss | $(11,373) | $(4,516) | $(6,857) | 151.8% | | Operating Expenses | $62,700 | $67,216 | $(4,516) | (6.7%) | - The **decrease in net revenue** was primarily due to a **34.2% decrease** in IoT System Solutions, and decreases in Embedded IoT Solutions (**1.2%**) and Software & Services (**12.5%**)[176](index=176&type=chunk) Net Revenue Embedded IoT Solutions Net Revenue by Product Line (in thousands) | Product Line | 2025 | % of Net Revenue (2025) | 2024 | % of Net Revenue (2024) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Embedded IoT Solutions | $46,380 | 37.7% | $46,953 | 29.3% | $(573) | (1.2%) | | IoT System Solutions | $68,735 | 55.9% | $104,450 | 65.1% | $(35,715) | (34.2%) | | Software & Services | $7,808 | 6.4% | $8,924 | 5.6% | $(1,116) | (12.5%) | | **Total** | **$122,923** | **100.0%** | **$160,327** | **100.0%** | **$(37,404)** | **(23.3%)** | - Net revenue for Embedded IoT Solutions **decreased by 1.2%** (**$573,000**) in fiscal **2025** compared to fiscal **2024**[177](index=177&type=chunk) - This **decrease was primarily due to lower unit sales** in legacy embedded ethernet connectivity products and network interface cards, partially offset by higher unit sales of embedded compute products driven by a video conferencing customer in APJ[178](index=178&type=chunk) IoT System Solutions Net Revenue by Product Line (in thousands) | Product Line | 2025 | % of Net Revenue (2025) | 2024 | % of Net Revenue (2024) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Embedded IoT Solutions | $46,380 | 37.7% | $46,953 | 29.3% | $(573) | (1.2%) | | IoT System Solutions | $68,735 | 55.9% | $104,450 | 65.1% | $(35,715) | (34.2%) | | Software & Services | $7,808 | 6.4% | $8,924 | 5.6% | $(1,116) | (12.5%) | | **Total** | **$122,923** | **100.0%** | **$160,327** | **100.0%** | **$(37,404)** | **(23.3%)** | - Net revenue for IoT System Solutions **decreased by 34.2%** (**$35,715,000**) in fiscal **2025** compared to fiscal **2024**[177](index=177&type=chunk) - The **decrease was substantially driven by lower revenue** from a European smart energy grid customer (from over **25%** of net revenue in fiscal **2024** to approximately **$11 million** in H1 fiscal **2025**), decreased unit sales of network switches in the Americas, and decreased OOB products across all regions[179](index=179&type=chunk) - These decreases were partially offset by higher unit sales of gateways, routers, and modems (driven by the Netcomm acquisition) and telematic gateways in the Americas[179](index=179&type=chunk) Software & Services Net Revenue by Product Line (in thousands) | Product Line | 2025 | % of Net Revenue (2025) | 2024 | % of Net Revenue (2024) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Embedded IoT Solutions | $46,380 | 37.7% | $46,953 | 29.3% | $(573) | (1.2%) | | IoT System Solutions | $68,735 | 55.9% | $104,450 | 65.1% | $(35,715) | (34.2%) | | Software & Services | $7,808 | 6.4% | $8,924 | 5.6% | $(1,116) | (12.5%) | | **Total** | **$122,923** | **100.0%** | **$160,327** | **100.0%** | **$(37,404)** | **(23.3%)** | - Net revenue for Software & Services **decreased by 12.5%** (**$1,116,000**) in fiscal **2025** compared to fiscal **2024**[177](index=177&type=chunk) - This **decrease was primarily due to lower engineering services revenue** in EMEA as large design services projects transitioned to full production in the prior year, and a moderate decrease in extended warranty services in the Americas related to OOB products[180](index=180&type=chunk) Gross Profit Gross Profit (in thousands) | Metric | 2025 | % of Net Revenue (2025) | 2024 | % of Net Revenue (2024) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross profit | $51,699 | 42.1% | $64,354 | 40.1% | $(12,655) | (19.7%) | - Gross profit **decreased by 19.7%** (**$12,655,000**) in fiscal **2025** compared to fiscal **2024**[182](index=182&type=chunk) - Gross margin **increased from 40.1% to 42.1%**, primarily due to lower overhead costs and changes in product sales mix[182](index=182&type=chunk) Selling, General and Administrative Selling, General and Administrative Expenses (in thousands) | Category | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Personnel-related expenses | $20,387 | $21,316 | $(929) | (4.4%) | | Professional fees and outside services | $4,878 | $5,037 | $(159) | (3.2%) | | Advertising and marketing | $2,239 | $2,346 | $(107) | (4.6%) | | Facilities and insurance | $1,794 | $2,754 | $(960) | (34.9%) | | Share-based compensation | $4,424 | $6,248 | $(1,824) | (29.2%) | | Depreciation | $1,360 | $1,393 | $(33) | (2.4%) | | Other | $1,164 | $1,112 | $52 | 4.7% | | **Total SG&A** | **$36,246** | **$40,206** | **$(3,960)** | **(9.8%)** | - Selling, general and administrative expenses **decreased by 9.8%** (**$3,960,000**) in fiscal **2025**[185](index=185&type=chunk) - The **decrease was primarily due to reduced share-based compensation costs**, lower spending on sales conferences, IT infrastructure, related facilities costs, and lower personnel-related expenses from less variable compensation and restructuring activities[185](index=185&type=chunk) Research and Development Research and Development Expenses (in thousands) | Category | 2025 | % of Net Revenue (2025) | 2024 | % of Net Revenue (2024) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Personnel-related expenses | $12,164 | | $14,022 | | $(1,858) | (13.3%) | | Facilities | $2,597 | | $2,523 | | $74 | 2.9% | | Outside services | $505 | | $636 | | $131 | 25.9% | | Product certifications | $499 | | $462 | | $37 | 8.0% | | Share-based compensation | $1,522 | | $1,852 | | $(330) | (17.8%) | | Other | $1,179 | | $918 | | $261 | 28.4% | | **Total R&D** | **$18,597** | **15.1%** | **$20,282** | **12.7%** | **$(1,685)** | **(8.3%)** | - Research and development expenses **decreased by 8.3%** (**$1,685,000**) in fiscal **2025**[187](index=187&type=chunk) - The **decrease was primarily due to lower personnel-related expenses** from restructuring activities and reduced share-based compensation costs[187](index=187&type=chunk) - These decreases were partially offset by higher facilities-related equipment and software costs, increased third-party contract labor, and increased spending on prototype and materials costs[187](index=187&type=chunk) Restructuring, Severance and Related Charges Restructuring, Severance and Related Charges (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $3,535 | | 2024 | $1,423 | - Charges **increased in fiscal 2025** due to various headcount reduction efforts, most significantly a **12% worldwide reduction** in January **2025**, totaling approximately **$1,400,000** in severance[188](index=188&type=chunk) - Fiscal **2025** also included a charge of approximately **$379,000** related to downsizing the usage of certain sites[189](index=189&type=chunk) Acquisition-Related Costs - In fiscal **2025**, approximately **$371,000** of costs were incurred, primarily for banking, legal, and other professional fees related to the Netcomm acquisition[190](index=190&type=chunk) Amortization of Intangible Assets Amortization of Intangible Assets (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $3,951 | | 2024 | $5,314 | - Amortization charges **decreased in fiscal 2025** compared to fiscal **2024**[191](index=191&type=chunk) Interest Expense, Net Interest Expense, Net (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $(511) | | 2024 | $(916) | - Net interest expense **decreased in fiscal 2025** compared to fiscal **2024**[192](index=192&type=chunk) Other Income (Expense), Net Other Income (Expense), Net (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $(100) | | 2024 | $7 | - Other income (expense), net, primarily consists of foreign currency remeasurement and transaction adjustments related to foreign subsidiaries[193](index=193&type=chunk) Provision for Income Taxes Provision for (Benefit from) Income Taxes (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $(239) | | 2024 | $745 | Effective Tax Rate | Fiscal Year | Effective Tax Rate | | :--- | :--- | | 2025 | 2.1% | | 2024 | (19.8%) | - The effective tax rate in fiscal **2025 was 2.1%**, compared to (**19.8%**) in fiscal **2024**, impacted by domestic losses without tax benefit and foreign earnings taxed at different rates[195](index=195&type=chunk) - In fiscal **2025**, a portion of the liability for uncertain tax positions was reversed due to the dissolution of a foreign subsidiary[195](index=195&type=chunk) Liquidity and Capital Resources Liquidity Working Capital and Cash and Cash Equivalents (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Working capital | $46,971 | $58,794 | $(11,823) | | Cash and cash equivalents | $20,098 | $26,237 | $(6,139) | - Principal sources of cash and liquidity include existing cash, borrowings under bank agreements, and cash generated from operations[197](index=197&type=chunk) - The company believes current cash holdings, operating cash flow, and expected bank borrowing availability will be sufficient for material requirements for at least the next **12 months** and beyond[197](index=197&type=chunk) - Cash and cash equivalents balances are maintained at certain financial institutions in excess of FDIC insured amounts, posing a risk if these institutions fail[199](index=199&type=chunk) Cash Flows Operating Activities Net Cash Provided by Operating Activities (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $7,285 | | 2024 | $18,623 | | Decrease | $(11,338) | - Cash provided by operating activities **decreased by $11,338,000** in fiscal **2025** compared to fiscal **2024**[202](index=202&type=chunk)[203](index=203&type=chunk) - The **decrease was due to payments** against previously accrued variable compensation balances, despite a net loss of **$11,373,000** and **$12,306,000** in non-cash charges[203](index=203&type=chunk) - Accounts receivable **decreased by $6,187,000** (**19.8%**), and accounts payable **increased by $2,912,000** (**28.1%**) due to lower net revenue and timing of payments/receipts[204](index=204&type=chunk) Investing Activities Net Cash Used in Investing Activities (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $(6,963) | | 2024 | $(1,479) | | Decrease | $(5,484) | - Net cash used in investing activities **increased by $5,484,000** in fiscal **2025**, primarily due to the **$6,458,000 cash payment** for the Netcomm acquisition[202](index=202&type=chunk)[206](index=206&type=chunk) - Purchases of property and equipment totaled **$505,000** in fiscal **2025**, mainly for tooling and R&D projects[206](index=206&type=chunk) Financing Activities Net Cash Used in Financing Activities (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2025 | $(6,461) | | 2024 | $(4,359) | | Decrease | $(2,102) | - Net cash used in financing activities **increased by $2,102,000** in fiscal **2025**[202](index=202&type=chunk) - This **was primarily due to principal payments of $4,512,000** on term debt and tax withholdings of **$2,093,000** paid on behalf of employees for restricted shares[207](index=207&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Lantronix, as a "smaller reporting company," is not required to provide quantitative and qualitative disclosures about market risk - Lantronix is **not required to provide** quantitative and qualitative disclosures about market risk as it is a "smaller reporting company."[209](index=209&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=41&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the audited consolidated financial statements and accompanying notes for Lantronix, Inc. for the fiscal years ended June 30, 2025 and 2024. It includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Stockholders' Equity, Cash Flows, and detailed Notes to Consolidated Financial Statements covering significant accounting policies, revenue, acquisitions, supplemental financial information, senior credit facilities, stockholders' equity, retirement plan, income taxes, leases, commitments, and segment reporting - All financial statements required by Item 8, including the report of the independent registered public accounting firm, are included in Part IV, Item 15 of this Report, starting on page F-1, and are incorporated by reference[209](index=209&type=chunk) - The consolidated financial statements include the accounts of Lantronix and its wholly owned subsidiaries, with all significant intercompany transactions and balances eliminated[271](index=271&type=chunk) - The preparation of financial statements requires management to make estimates and assumptions, particularly in areas like revenue recognition, inventory valuation, goodwill, deferred income tax assets, and business combinations[272](index=272&type=chunk) Report of Independent Registered Public Accounting Firm - Baker Tilly US, LLP audited the consolidated financial statements and internal control over financial reporting for Lantronix Inc. for the fiscal years ended June **30**, **2025** and **2024**[244](index=244&type=chunk) - The firm issued an **unqualified opinion**, stating that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[245](index=245&type=chunk) - Baker Tilly US, LLP also opined that the company maintained, in all material respects, **effective internal control** over financial reporting as of June **30**, **2025**[245](index=245&type=chunk) - Critical audit matters included the auditing of management's lower of cost or net realizable value determination for excess or obsolete inventories and the valuation of customer relationships in the Netcomm acquisition[252](index=252&type=chunk)[255](index=255&type=chunk) Consolidated Balance Sheets Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $20,098 | $26,237 | | Accounts receivable, net | $25,092 | $31,279 | | Inventories, net | $26,371 | $27,698 | | Total current assets | $77,393 | $88,950 | | Goodwill | $31,089 | $27,824 | | Total assets | $123,722 | $136,208 | | **Liabilities and Stockholders' Equity** | | | | Accounts payable | $13,259 | $10,347 | | Accrued payroll and related expenses | $3,471 | $5,836 | | Total current liabilities | $30,422 | $30,156 | | Long-term debt, net | $8,684 | $13,219 | | Total liabilities | $49,344 | $54,853 | | Total stockholders' equity | $74,378 | $81,355 | | Total liabilities and stockholders' equity | $123,722 | $136,208 | - Total assets **decreased from $136,208,000** in **2024 to $123,722,000** in **2025**[259](index=259&type=chunk) - Total stockholders' equity **decreased from $81,355,000** in **2024 to $74,378,000** in **2025**[259](index=259&type=chunk) Consolidated Statements of Operations Consolidated Statements of Operations (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net revenue | $122,923 | $160,327 | | Cost of revenue | $71,224 | $95,973 | | Gross profit | $51,699 | $64,354 | | Total operating expenses | $62,700 | $67,216 | | Loss from operations | $(11,001) | $(2,862) | | Net loss and comprehensive loss | $(11,373) | $(4,516) | | Net loss per share - basic and diluted | $(0.29) | $(0.12) | | Weighted-average common shares - basic and diluted | 38,613 | 37,386 | - Net revenue **decreased by 23.3% from $160,327,000** in **2024 to $122,923,000** in **2025**[261](index=261&type=chunk) - Net loss **increased from $(4,516,000)** in **2024 to $(11,373,000)** in **2025**[261](index=261&type=chunk) Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balance at June 30 | $74,378 | $81,355 | | Shares issued pursuant to stock awards, net | 1,230 | 997 | | Tax withholding paid on behalf of employees for restricted shares | $(2,093) | $(1,027) | | Share-based compensation | $6,132 | $8,337 | | Net loss | $(11,373) | $(4,516) | - Total stockholders' equity **decreased from $81,355,000** at June **30**, **2024, to $74,378,000** at June **30**, **2025**[264](index=264&type=chunk) - Share-based compensation expense was **$6,132,000** in fiscal **2025**, down from **$8,337,000** in fiscal **2024**[264](index=264&type=chunk) Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,285 | $18,623 | | Net cash used in investing activities | $(6,963) | $(1,479) | | Net cash used in financing activities | $(6,461) | $(4,359) | | Increase (decrease) in cash and cash equivalents | $(6,139) | $12,785 | | Cash and cash equivalents at end of year | $20,098 | $26,237 | - Net cash provided by operating activities **decreased by $11,338,000** in fiscal **2025** compared to fiscal **2024**[267](index=267&type=chunk) - Net cash used in investing activities **increased significantly** in fiscal **2025** due to the Netcomm acquisition[267](index=267&type=chunk) Notes to Consolidated Financial Statements Note 1. Company and Significant Accounting Policies Company - Lantronix, Inc. is a **global leader** in Edge AI and Industrial IoT solutions, incorporated in California in **1989** and re-incorporated in Delaware in **2000**[269](index=269&type=chunk)[270](index=270&type=chunk) Basis of Presentation - Consolidated financial statements include Lantronix and its wholly owned subsidiaries, with all significant intercompany transactions and balances eliminated[271](index=271&type=chunk) Use of Estimates - Preparation of financial statements requires management to make estimates and assumptions, particularly in areas like revenue recognition, inventory valuation, goodwill, and deferred income tax assets[272](index=272&type=chunk) Revenue Recognition - Refer to Note 2 for a detailed discussion of the significant accounting policy over revenue recognition[273](index=273&type=chunk) Accounts Receivable and Allowance for Credit Losses - Accounts receivable are stated net of an allowance for credit losses, estimated based on historical experience, specific customer circumstances, and economic conditions[274](index=274&type=chunk) Concentration of Credit Risk - Accounts receivable are primarily from customers in North America, Europe, and Asia; credit evaluations are performed, and allowances for potential credit losses are maintained[275](index=275&type=chunk) Fair Value of Financial Instruments - Financial instruments primarily include cash, accounts receivable, accounts payable, and accrued liabilities, with recorded values approximating current fair values due to their nature and short duration[278](index=278&type=chunk) - The company did not have any assets or liabilities measured at fair value on a recurring or non-recurring basis as of June **30**, **2025** and **2024**[278](index=278&type=chunk) Foreign Currency Remeasurement - The functional currency for all foreign subsidiaries is the U.S. dollar; exchange gains and losses from foreign currency transactions and remeasurements are recognized in the consolidated statements of operations[279](index=279&type=chunk) Accumulated Other Comprehensive Income - Accumulated other comprehensive income is composed of accumulated translation adjustments; no other comprehensive income or losses were recorded in fiscal **2025** or **2024**[280](index=280&type=chunk) Cash and Cash Equivalents - Cash and cash equivalents consist of cash and short-term investments with original maturities of **90 days** or less[281](index=281&type=chunk) Inventories - Inventories are stated at the lower of cost (weighted-average cost basis) or net realizable value, with reserves for excess and obsolete inventories based on future demand estimates[282](index=282&type=chunk) Inventory Sale and Purchase Transactions with Contract Manufacturers - Net sales of raw materials to contract manufacturers are recorded as contract manufacturers' receivables and eliminated from net revenue, as the company intends to repurchase them as finished goods[283](index=283&type=chunk) - A

Core Insights - Lantronix, Inc. (LTRX) reported fourth-quarter fiscal 2025 non-GAAP earnings per share (EPS) of 1 cent, matching the Zacks Consensus Estimate, down from 15 cents in the same period last year [1] - Revenues for the quarter totaled $28.8 million, exceeding the consensus mark by 1.2%, but decreased 41.2% year over year; sequentially, revenues increased by $28.5 million from the prior quarter, reflecting a 4% year-over-year growth when excluding Gridspertise [2][10] Financial Performance - IoT System Solutions revenues contributed 57.8% to total revenues, amounting to $16.7 million, a decrease of 53.2% year over year [8] - Embedded IoT Solutions revenues accounted for 35.4% of total revenues, totaling $10.2 million, down 10.1% year over year [11] - Software & Services revenues, which made up 6.8% of total revenues, fell 6.7% year over year to $2 million [11] - Non-GAAP gross margin improved to 40.6%, up from 38.8% in the prior quarter, driven by cost and supply chain initiatives [12] Strategic Developments - The company secured a multi-year contract with a Tier-1 U.S. wireless operator for managing nationwide backup power systems, enhancing network resilience and reducing costs [6] - Recent design wins in drones and commercial Edge AI solutions indicate the company's evolution into a strategic platform partner [4] - Partnerships with Aerora and the launch of the NTC-500 Series industrial-grade 5G routers expanded the company's portfolio [7] Outlook - For the first quarter of fiscal 2026, management projects revenues between $28.5 million and $30.5 million, with non-GAAP EPS expected in the range of 2-4 cents [14]

Financial Data and Key Metrics Changes - For fiscal year 2025, the company reported revenue of $123 million, reflecting a transition from a record fiscal 2024 to a more normalized revenue base, with a significant contribution from Gridspertise in the previous year [15][16] - In Q4 2025, revenue was $28.8 million, a sequential increase from $28.5 million in the prior quarter, and approximately 4% higher than Q4 2024 when excluding Gridspertise [17] - GAAP gross margin for Q4 was 40%, down from 43.5% in the prior quarter, but up from 38.1% in the year-ago period, while non-GAAP gross margin was 40.6% [17][18] - GAAP net loss for fiscal 2025 was $2.6 million, or $0.07 per share, compared to a net income of $400,000, or $0.01 per share in the year-ago quarter [19][20] - The company ended the fiscal year with cash and cash equivalents of $20.1 million, up from the prior quarter, and generated positive operating cash flow of $7.3 million for the year [21][22] Business Line Data and Key Metrics Changes - The core revenue base stabilized in the second half of fiscal 2025, driven by continued momentum in Edge IoT products [16][17] - The company is beginning to see traction in its Edge AI strategy, with visibility in fiscal 2026 improving due to momentum across strategic pillars [14][22] Market Data and Key Metrics Changes - The company sees a multi-year growth cycle for unmanned aerial systems, supported by record defense funding, with over $13 billion earmarked for unmanned platforms in 2026 [6][10] - Recent wins include a multi-year agreement with a major U.S. mobile carrier to modernize over 50,000 backup power systems, which is expected to contribute to high-margin annual recurring revenue [11][12] Company Strategy and Development Direction - The company is transitioning from a traditional hardware supplier to a strategic platform partner, focusing on high-margin business and deepening long-term relationships with customers [12][25] - The integration of the Netcomm IoT acquisition and partnership with Qualcomm is aimed at expanding capabilities in edge IoT and AI-driven innovation [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment for their solutions, highlighting strong early market feedback and expectations for revenue contributions from new partnerships [10][14] - The outlook for fiscal 2026 includes expected revenue in the range of $28.5 million to $30.5 million, with non-GAAP EPS projected between $0.02 and $0.04 per share [22] Other Important Information - The company has made significant progress in reducing costs and improving supply chain efficiency, with a focus on manufacturing products outside of China to minimize tariff exposure [18][19] - The company has streamlined operations and optimized its cost structure, resulting in a leaner operating model [20][25] Q&A Session Summary Question: What is the potential for the drone market? - Management is excited about the drone market, with over 10 different drone makers being worked with, primarily in military or industrial applications, and expects this market to grow significantly into fiscal 2026 [28][29] Question: What are the dynamics driving growth in September? - Management noted broad-based momentum across core business areas, including Edge IoT and networking, contributing to confidence in fiscal 2026 [30] Question: How will gross margins evolve over the next twelve months? - Management anticipates gross margins returning to 44% to 45% for the fiscal year, despite one-off items affecting margins in June [34][35] Question: Can you elaborate on the backup generator opportunity? - Management confirmed a significant mobile carrier win involving 50,000 gateways, with expectations for this to grow substantially over the next few years [41][42] Question: What is the average dollar content per device in the drone market? - The average dollar content per device is approximately $500, which could lead to meaningful revenue as volumes increase [48][49] Question: What is the expected revenue contribution from the drone market in fiscal 2026? - Management indicated that the drone market could contribute millions of dollars in fiscal 2026, with potential for it to become 10% to 15% of total revenue by fiscal 2027 [50][60]

Financial Data and Key Metrics Changes - For fiscal year 2025, the company reported revenue of $123 million, reflecting a transition from a record fiscal 2024 to a more normalized revenue base, with a significant contribution from Gridspertise in the previous year [16] - In Q4 2025, revenue was $28.8 million, a sequential increase from $28.5 million in the prior quarter, and approximately 4% higher than Q4 2024 when excluding Gridspertise [17] - GAAP gross margin for Q4 was 40%, down from 43.5% in the prior quarter, but up from 38.1% in the year-ago period [18] - GAAP net loss for fiscal 2025 was $2.6 million, or $0.07 per share, compared to a net income of $400,000, or $0.01 per share in the year-ago quarter [20] Business Line Data and Key Metrics Changes - The core revenue base stabilized in the second half of fiscal 2025, driven by continued momentum in Edge IoT products [16][17] - The company is transitioning from a traditional hardware supplier to a strategic platform partner, enhancing long-term relationships and embedding solutions in critical operations [13] Market Data and Key Metrics Changes - The company sees a multi-year growth cycle for unmanned aerial systems, supported by record defense funding, with over $13 billion earmarked for unmanned platforms in 2026 [6] - Recent wins include a multi-year agreement with a major U.S. mobile carrier to modernize over 50,000 backup power systems, which is expected to contribute to high-margin annual recurring revenue [12][13] Company Strategy and Development Direction - The company is focused on building a strong foundation for sustainable long-term growth, emphasizing Edge AI and infrastructure modernization [25] - Strategic partnerships, such as with Qualcomm, are aimed at expanding capabilities in Edge IoT and AI-driven innovation [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment for their solutions, highlighting strong traction in the drone market and positive early feedback on new products [11][14] - The outlook for fiscal 2026 includes expected revenue in the range of $28.5 million to $30.5 million, with non-GAAP EPS projected between $0.02 and $0.04 per share [23] Other Important Information - The company has made significant progress in reducing costs and improving supply chain efficiency, with a net cash position of $8.3 million as of June 30, 2025 [22][23] - The company has successfully integrated the Netcomm IoT acquisition and mitigated tariff exposure, which supports improved gross margin performance [25] Q&A Session Summary Question: Drone opportunity and potential - Management is excited about the drone market, currently working with over 10 different drone makers, mainly in military or industrial applications, with expectations for significant growth in fiscal 2026 [29] Question: Bookings and order perspective for September - Management noted broad-based momentum across core business segments, including Edge IoT and networking, indicating confidence for fiscal 2026 [31] Question: Gross margin evolution - Management anticipates gross margins returning to 44% to 45% for the fiscal year, despite one-off items affecting margins in June [35][36] Question: Backup generator opportunity - A significant mobile carrier win involves 50,000 gateways, with expectations for long-term growth and the introduction of annual recurring revenue as devices come online [42][44] Question: Average dollar content per device in drone market - The average dollar content per device is approximately $500, with potential revenue opportunities ranging from $3 million to $5 million per customer annually [48][50] Question: Recurring revenue component from carrier opportunity - The carrier opportunity includes a recurring revenue component, with ongoing RFPs and potential for significant growth in the coming years [68][70]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Management Commentary](index=1&type=section&id=Management%20Commentary) Lantronix underwent strategic transformation in FY2025, streamlining operations and securing design wins for multi-year, high-margin growth in FY2026 - Fiscal 2025 marked a strategic transformation for Lantronix, characterized by disciplined execution, operational streamlining, and targeted investments in high-value markets[2](index=2&type=chunk) - The company strengthened its foundation for sustainable, profitable growth by aligning resources with high-impact opportunities, enhancing supply chain resilience, and advancing platform capabilities[2](index=2&type=chunk) - Recent design wins in drones, commercial Edge AI solutions, and network infrastructure highlight Lantronix's evolution into a strategic platform partner, accelerating intelligence at the edge[2](index=2&type=chunk) - Lantronix enters fiscal 2026 well-positioned to capture multi-year, high-margin opportunities due to expanding customer engagements, growing momentum in Edge IoT and Network Infrastructure, and increasing operating leverage[2](index=2&type=chunk) [Q4 FY2025 Financial Highlights](index=1&type=section&id=Q4%20FY2025%20Financial%20Highlights) Lantronix reported its financial results for the fourth quarter of fiscal year 2025, with net revenue of **$28.8 million** and a GAAP EPS of **($0.07)**, while achieving a non-GAAP EPS of **$0.01** Q4 FY2025 Key Financials | Metric | Value | | :------------ | :------------ | | Net Revenue | $28.8 Million | | GAAP EPS | ($0.07) | | Non-GAAP EPS | $0.01 | [Full Year FY2025 Financial Highlights](index=1&type=section&id=FY2025%20Financial%20Highlights) For the full fiscal year 2025, Lantronix reported net revenue of **$122.9 million**, a GAAP EPS of **($0.29)**, and a non-GAAP EPS of **$0.14** FY2025 Key Financials | Metric | Value | | :------------ | :------------- | | Net Revenue | $122.9 Million | | GAAP EPS | ($0.29) | | Non-GAAP EPS | $0.14 | [Recent Business Highlights](index=1&type=section&id=Q4%20FY2025%20and%20Recent%20Business%20Highlights) Lantronix secured key contracts, partnered for Edge AI, launched new 5G routers, and expanded its leadership team to accelerate growth - Secured a multi-year contract with a Tier-1 U.S. wireless operator to digitally manage nationwide backup power systems using Lantronix Edge gateways and the Percepxion platform, enhancing network resilience and reducing operational costs[5](index=5&type=chunk) - Selected by Red Cat's Teal Drones to power U.S. Army-approved Black Widow™ drones with Lantronix's TAA- and NDAA-compliant System on Module (SoM), initiating June-quarter shipments and positioning for multi-year, high-margin growth in the secure defense drone market[5](index=5&type=chunk) - Partnered with Aerora to deliver Edge AI-enabled solutions for autonomous navigation in drones, robotics, and surveillance, leveraging Open-Q SoMs and Teledyne FLIR imaging to accelerate AI development[5](index=5&type=chunk) - Launched NTC-500 Series industrial-grade 5G routers for private 5G, edge computing, and industrial IoT, offering cost-effective, high-performance wireless connectivity with global certifications[5](index=5&type=chunk) - Expanded leadership team with three strategic hires: Todd Rychecky (head of Out-of-Band Management), Eric Johnson (leader of Compute Ecosystem strategy), and Scott Wallace (head of Project Management Office) to accelerate growth in Edge IoT and Network Infrastructure[13](index=13&type=chunk) [Q1 FY2026 Financial Outlook](index=2&type=section&id=Q1%20FY2026%20Financial%20Outlook) Lantronix provided its financial outlook for the first fiscal quarter of 2026, projecting revenue between **$28.5 million** and **$30.5 million**, and non-GAAP EPS between **$0.02** and **$0.04** Q1 FY2026 Financial Outlook | Metric | Guidance Range | | :------------ | :------------------- | | Revenue | $28.5M to $30.5M | | Non-GAAP EPS | $0.02 to $0.04 | [Company Overview](index=2&type=section&id=Company%20Overview) [About Lantronix](index=2&type=section&id=About%20Lantronix) Lantronix is a global leader in Edge AI and Industrial IoT, providing intelligent computing, secure connectivity, and remote management for mission-critical applications - Lantronix Inc. is a global leader in Edge AI and Industrial IoT solutions[8](index=8&type=chunk) - The company delivers intelligent computing, secure connectivity, and remote management for mission-critical applications[8](index=8&type=chunk) - Lantronix serves high-growth markets including smart cities, enterprise IT, and commercial and defense unmanned systems[8](index=8&type=chunk) - Its comprehensive portfolio of hardware, software, and services powers applications from secure video surveillance to resilient out-of-band network management[8](index=8&type=chunk) [Discussion of Non-GAAP Financial Measures](index=2&type=section&id=Discussion%20of%20Non-GAAP%20Financial%20Measures) Non-GAAP measures offer supplemental insights into Lantronix's financial trends, used by management to evaluate operating results by excluding specific non-recurring items - Non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends[10](index=10&type=chunk) - Management uses non-GAAP measures to monitor and evaluate ongoing operating results and trends for comparative operating performance[10](index=10&type=chunk) - Non-GAAP net loss excludes items such as share-based compensation, depreciation and amortization, interest income/expense, income tax provision/benefit, restructuring charges, acquisition-related costs, impairment of long-lived assets, amortization of purchased intangibles, and fair value remeasurement of earnout consideration[11](index=11&type=chunk) - Non-GAAP EPS is calculated by dividing non-GAAP net income by non-GAAP weighted-average shares outstanding (diluted), adjusted for share-based compensation[12](index=12&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased in FY2025, primarily due to reductions in cash, accounts receivable, and long-term debt Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Cash and cash equivalents | $20,098 | $26,237 | | Accounts receivable, net | $25,092 | $31,279 | | Inventories, net | $26,371 | $27,698 | | Total current assets | $77,393 | $88,950 | | Total assets | $123,722 | $136,208 | | Accounts payable | $13,259 | $10,347 | | Total current liabilities | $30,422 | $30,156 | | Long-term debt, net | $8,684 | $13,219 | | Total liabilities | $49,344 | $54,853 | | Total stockholders' equity | $74,378 | $81,355 | - Total assets decreased by approximately **$12.5 million** from June 30, 2024, to June 30, 2025, primarily due to decreases in cash and cash equivalents and accounts receivable[19](index=19&type=chunk) - Total liabilities decreased by approximately **$5.5 million**, driven by a reduction in long-term debt, net[19](index=19&type=chunk) [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Lantronix reported a significant GAAP net loss increase in FY2025, with net revenue declining year-over-year for both Q4 and the full fiscal year Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :---------------------------- | :----------- | :----------- | :----------- | :----------- | | Net revenue | $28,839 | $49,075 | $122,923 | $160,327 | | Gross profit | $11,537 | $18,722 | $51,699 | $64,354 | | Income (loss) from operations | ($3,134) | $565 | ($11,001) | ($2,862) | | Net income (loss) | ($2,631) | $386 | ($11,373) | ($4,516) | | Net income (loss) per share - basic | ($0.07) | $0.01 | ($0.29) | ($0.12) | - Net revenue decreased significantly year-over-year, from **$49.1 million** in Q4 FY2024 to **$28.8 million** in Q4 FY2025, and from **$160.3 million** in FY2024 to **$122.9 million** in FY2025[21](index=21&type=chunk) - The company reported a GAAP net loss of **($2.6 million)** in Q4 FY2025, compared to a net income of **$0.4 million** in Q4 FY2024. For the full year, GAAP net loss widened to **($11.4 million)** in FY2025 from **($4.5 million)** in FY2024[21](index=21&type=chunk) [Unaudited Reconciliation of Non-GAAP Adjustments](index=6&type=section&id=Unaudited%20Reconciliation%20of%20Non-GAAP%20Adjustments) Non-GAAP adjustments converted GAAP net losses into positive non-GAAP net income for both Q4 and full-year FY2025, with improved gross margins Non-GAAP Reconciliation Highlights (in thousands, except per share data) | Metric | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :---------------------------- | :----------- | :----------- | :----------- | :----------- | | GAAP net income (loss) | ($2,631) | $386 | ($11,373) | ($4,516) | | Total Non-GAAP adjustments | $2,994 | $5,389 | $16,891 | $19,945 | | Non-GAAP net income | $363 | $5,775 | $5,518 | $15,429 | | Non-GAAP net income per share (diluted) | $0.01 | $0.15 | $0.14 | $0.40 | | Non-GAAP gross margin | 40.6% | 38.8% | 42.6% | 41.1% | - Non-GAAP adjustments for Q4 FY2025 totaled **$3.0 million**, leading to a positive non-GAAP net income despite a GAAP net loss[23](index=23&type=chunk) - For the full year FY2025, non-GAAP adjustments of **$16.9 million** converted a GAAP net loss into a non-GAAP net income of **$5.5 million**[23](index=23&type=chunk) - Non-GAAP gross margin improved to **40.6%** in Q4 FY2025 from **38.8%** in Q4 FY2024, and to **42.6%** for FY2025 from **41.1%** in FY2024[23](index=23&type=chunk) [Unaudited Net Revenues by Product Line and Region](index=7&type=section&id=Unaudited%20Net%20Revenues%20by%20Product%20Line%20and%20Region) IoT System Solutions and EMEA revenue saw significant declines in FY2025, while Americas remained the largest regional contributor Net Revenues by Product Line (in thousands) | Product Line | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------- | :-------- | :-------- | :-------- | :-------- | | Embedded IoT Solutions| $10,219 | $11,364 | $46,380 | $46,953 | | IoT System Solutions | $16,654 | $35,603 | $68,735 | $104,450 | | Software & Services | $1,966 | $2,108 | $7,808 | $8,924 | | **Total Net Revenue** | **$28,839** | **$49,075** | **$122,923** | **$160,327** | Net Revenues by Region (in thousands) | Region | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------- | :-------- | :-------- | :-------- | :-------- | | Americas | $19,823 | $17,126 | $70,126 | $78,203 | | EMEA | $5,330 | $26,194 | $30,898 | $64,025 | | APJ | $3,686 | $5,755 | $21,899 | $18,099 | | **Total Net Revenue** | **$28,839** | **$49,075** | **$122,923** | **$160,327** | - IoT System Solutions revenue decreased significantly from **$35.6 million** in Q4 FY2024 to **$16.7 million** in Q4 FY2025, and from **$104.5 million** in FY2024 to **$68.7 million** in FY2025[25](index=25&type=chunk) - EMEA revenue experienced a substantial decline from **$26.2 million** in Q4 FY2024 to **$5.3 million** in Q4 FY2025, and from **$64.0 million** in FY2024 to **$30.9 million** in FY2025[25](index=25&type=chunk) [Additional Information](index=2&type=section&id=Additional%20Information) [Conference Call and Webcast](index=2&type=section&id=Conference%20Call%20and%20Webcast) Lantronix hosted an investor conference call and audio webcast on August 27, 2025, to discuss its fiscal fourth quarter and full year 2025 results - An investor conference call and audio webcast was held on Wednesday, August 27, 2025, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time)[6](index=6&type=chunk) - Live conference call access: 1-844-802-2442 (U.S.) or 1-412-317-5135 (international)[6](index=6&type=chunk) - A conference call replay was available on the Lantronix website and via telephonic replay until September 3, 2025, using passcode 3326088[7](index=7&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This release contains forward-looking statements on future expectations, subject to substantial risks like economic conditions and supply chain disruptions, with no obligation to update - The news release contains forward-looking statements concerning revenue and earnings expectations for Q1 FY2026, positioning for sustainable growth, and benefits from strategic transformation, design wins, and hires[15](index=15&type=chunk) - Forward-looking statements are subject to substantial risks and uncertainties, including negative economic conditions, supply chain disruptions, challenges in implementing acquisition strategy, intense competition, and cybersecurity risks[15](index=15&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, and the company expressly disclaims any obligation to update them after the date of the release, except as required by law[15](index=15&type=chunk) [Investor Contact](index=3&type=section&id=Investor%20Contact) For investor inquiries, Lantronix provides a dedicated email contact - Lantronix Analyst and Investor Contact: investors@lantronix.com[17](index=17&type=chunk)