Lantronix, Inc.

Good day and welcome to the Lantronics Inc. 2021 Q2 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the conference over to Amber Tins. Please go ahead.

Good afternoon, everyone, and thank you for joining the Landtronic Second Quarter Fiscal 2021 Conference Call. Joining us on the call today are Paul Pitreault, Landtronic's President and Chief Executive Officer, Jeremy Whitaker, Landtronic's Chief Financial Officer, and Jonathan Shipman, Vice President of Strategy. A live and archived webcast of today's call will be available on the company's website. In addition, a phone replay will be available starting at 8 p.m. Eastern, 5 p.m. Pacific today through February 18th by dialing 877-344-7529 in the U.S. or for international callers, 412-317-0088 and entering passcode 101-51719. During this call, management may make forward-looking statements which involve risks and uncertainties that could cause our results to differ materially from management's current expectations. We encourage you to review the cautionary statements and risk factors contained in the earnings release, which was furnished to the SEC today and is available on our website and in the company's SEC filings, such as its 10-K and 10-Qs. Lantronics undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Furthermore, during the call, the company will discuss some non-GAAP financial measures. Today's earnings release, which is posted in the investor relations section of our website, describes the differences between our non-GAAP and GAAP reporting and presents reconciliations for the non-GAAP financial measures that we use. With that, I'll now turn the call over to Jeremy Whitaker, Landtronic's Chief Financial Officer.

Thank you, Amber. And welcome to everyone joining us for this afternoon's call. I'm going to provide the financial results as well as some of the business highlights for our second quarter of fiscal 2021 before I hand it over to Paul for his commentary. Please refer to today's news release and the financial information in the investor relations section of our website for additional details that will supplement my commentary. For the second quarter of fiscal 2021, we reported $16.6 million in net revenue, an increase of 25% when compared to $13.2 million for the second quarter of fiscal 2020. Sequentially, net revenue was down 3% compared to the $17.1 million reported in the first quarter of fiscal 2021. We exited the second quarter of fiscal 2021 with record backlog, As a result of supply chain constraints driven by component shortages, which affected our ability to ship against current customer demand and meet our quarterly revenue target. Gross profit as a percentage of net revenue was 42.2% for the second quarter of fiscal 2021 as compared with 51.2% for the second quarter of fiscal 2020 and 48.1% for the first quarter of fiscal 2021. Approximately 500 basis points of the year-on-year decline in gross margin percentage can be attributed to increased manufacturing costs as a result of component shortages and elevated logistics costs. As the component shortages and logistics costs subside, we expect a large portion of these costs to return to normal levels. Selling, general, and administrative expenses for the second quarter of fiscal 2021 remained consistent at $4.9 million. Research and development expenses for the second quarter of fiscal 2021 were $2.4 million compared with $2.3 million for the second quarter of fiscal 2020 and $2.6 million for the first quarter of fiscal 2021. Non-GAAP operating expenses as a percent of net revenue decreased from 47% in the second quarter of fiscal 2020 to 39% in the second quarter of fiscal 2021, demonstrating our synergy capture and leverage in the operating model. Gap net loss was $1.5 million, or $0.05 per share, during the second quarter of fiscal 2021, compared to a gap net loss of $1.4 million, or $0.06 per share, during the second quarter of fiscal 2020. Non-GAAP net income was 861,000 or 3 cents per share during the second quarter of fiscal 2021 compared to a non-GAAP net income of 666,000 or 3 cents per share during the second quarter of fiscal 2020. Now turning to the balance sheet. We ended the December 2020 quarter with cash and cash equivalents of 7.6 million, which is consistent with the prior quarter. Working capital improved to $19.4 million as of December 31, 2020, as compared with $18.7 million as of June 30, 2020. Net inventories were $14.3 million as of December 31, 2020, compared with $13.8 million as of June 30, 2020. Now turning to our annual outlook. We are now targeting fiscal 2021 revenue growth of 15% to 25%. and non-GAAP EPS growth of 75% to 125%. I'll now turn the call over to Paul. Thank you, Jeremy.