Lantronix, Inc.

Good afternoon and welcome to the Lantronics 2021 Third Quarter Results Conference Call. All participants will be in a listening 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 telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded I would now like to turn the conference over to Rob Adams, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good afternoon. Thanks, everyone, for joining the Landtronics Third Quarter Fiscal 2021 Conference Call. Joining us on the call today are Paul Pickle, President and Chief Executive Officer, Jeremy Whitaker, Chief Financial Officer, and Jonathan Shipman, Vice President of Strategy. Thank you. A live and archived webcast of today's call will be available on the company's website. 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 its 10-Qs. Landtronics undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Furthermore, during the call today, 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. Finally, please refer to today's news releases and financial information in the investor relations section of our website for additional details to supplement today's commentary. With that, I'll turn the call over to Jeremy Whitaker, Chief Financial Officer.

Thank you, Rob, 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 third quarter of fiscal 2021 before I hand it over to Paul for his commentary. For the third quarter of fiscal 2021, we reported $17.1 million in net revenue, an increase of 4% when compared to $16.5 million for the third quarter of fiscal 2020. Sequentially, net revenue is up 3% compared to the $16.6 million reported in the second quarter of fiscal 2021. For the nine months ended March 31st, 2021, revenues were up 20% when compared to the nine months ended March 31st, 2020. Once again, we exited the third quarter of fiscal 2021 with a record level of total backlog as a result of increased customer demand and partially due to supply constraints. Gross profit as a percentage of net revenue was 45.1% for the third quarter of fiscal 2021, as compared with 44.7% for the third quarter of fiscal 2020, and 42.2% for the second quarter of fiscal 2021. The sequential improvement can be attributed to improved product mix from the prior quarter. That said, we continue to face headwinds in our gross margin as a result of component shortages and elevated logistics costs. As the component shortages and logistics costs subside, we expect to see gross margins improve from 200 to 400 basis points from the current levels. Selling, general, and administrative expenses for the third quarter of fiscal 2021 remain consistent at $5 million. Research and development expenses for the third quarter of fiscal 2021 were $2.5 million compared with $2.7 million for the third quarter of fiscal 2020 and $2.4 million for the second quarter of fiscal 2021. Non-GAAP operating expenses as a percentage of net revenue decreased from 42% in the third quarter of fiscal 2020 to 38% in the third quarter of fiscal 2021, demonstrating our synergy capture and leverage in the operating model. Gap net loss was $1.2 million or $0.04 per share during the third quarter of fiscal 2021 compared to a gap net loss of $5.2 million or $0.19 per share during the third quarter of fiscal 2020. Non-gap net income was $1.5 million or $0.05 per share during the third quarter of fiscal 2021 compared to non-gap net income of $611,000 or $0.02 per share during the third quarter of fiscal 2020. Now turning to the balance sheet. We ended the March 2021 quarter with cash and cash equivalents of 8.3 million, an increase of 656,000 from the prior quarter. Working capital improved to 19.9 million as of March 31st, 2021, as compared with 18.7 million as of June 30th, 2020. Net inventories were 15.1 million as of March 31st, 21, compared with 13.8 million as of June 30th, 2020. Now turning to our outlook, we are now targeting 2021 revenue growth of 15% to 25% and non-GAAP EPS growth of 100% to 175%. As a reminder, this does not include any contribution from the acquisition that we announced this morning. I'll now turn the call over to Paul.