Lantronix, Inc.

Good day and welcome to the Landtronic 2021 fourth quarter results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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. And 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 Mr. Rob Adams. Please go ahead, sir.

Thanks, Chuck. Good afternoon, and thank you for joining the fourth quarter fiscal 2021 conference call. Joining us on the call today are Paul Pickle, our president and chief executive officer, and Jeremy Whitaker, our chief financial officer. 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 time tonight. through September 2nd by dialing 877-344-7529 in the United States, or for international callers, 412-317-0088 and entering the passcode 10159500. 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 or 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, 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 turn the call over to Jeremy Whitaker, Landtronic's 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 fourth quarter and fiscal year ended 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. As a reminder, our fiscal 2021 results do not include any revenue or operating costs for the acquisition of transition networks and net-to-edge. which comprises the electronics and software business segment of Communication Systems, Inc., which closed on August 2nd, 2021. For the fourth quarter of fiscal 2021, we reported record revenue of $20.6 million, an increase of 19% when compared to $17.4 million for the fourth quarter of fiscal 2020. Sequentially, net revenue was up 21% compared to $17.1 million reported in the third quarter of fiscal 2021. We exited the fourth quarter of fiscal 2021 with record backlog from a combination of increased customer demand and supply chain constraints. Gross profit as a percentage of net revenue improved to 48.8% for the fourth quarter of fiscal 2021, as compared with 37.7% for the fourth quarter of fiscal 2020 and 45.1% for the third quarter of fiscal 2021. The sequential improvement can be attributed to improved product mix driven in part by software license revenue. That said, we continue to face headwinds in supply chain costs affecting gross margin. This cost us over $2 million in fiscal 2021, and while we don't see a material change in this situation at the moment, we expect it to improve as the environment changes. as well as through anticipated price increase for Lantronics product offerings. Selling general administrative expenses for the fourth quarter of fiscal 2021 were $6.1 million compared with $4.7 million for the fourth quarter of fiscal 2020 and $5 million for the third quarter of fiscal 2021. Research and development expenses for the fourth quarter of fiscal 2021 were $3.6 million compared with $2 million for the fourth quarter of fiscal 2020 and $2.5 million for the third quarter of fiscal 2021. The sequential increase in SG&A and R&D was impacted by variable compensation costs accrued in the fourth quarter. Gap net loss was $1.1 million, or $0.04 per share, during the fourth quarter of fiscal 2021 compared to a gap net loss of $1.7 million, or $0.06 per share, during the fourth quarter of fiscal 2020. Non-gap net income was $1.7 million, or $0.06 per share, during the fourth quarter of fiscal 2021, compared to non-gap net income of $1.2 million, or $0.04 per share, during the fourth quarter of fiscal 2020. Now turning to the full year results. Net revenue for fiscal 2021 was $71.5 million, an all-time record and an increase of 19% when compared to $59.9 million in fiscal 2020. Gross profit as a percentage of net revenue for fiscal 2021 was 46.2% as compared with 44.9% for fiscal 2020. The improvement in gross margin was primarily due to product mix. GAAP operating expenses for 2021 were $36.4 million, compared with $37.4 million for fiscal 2020. As a percentage of revenue, non-GAAP operating expenses for fiscal 2021 improved to 39% of revenue, compared to fiscal 2020 at 42% of revenue. For fiscal 2021, we reported the GAAP net loss of $4 million, or 14 cents per share, compared to a gap net loss of $10.7 million, or 42 cents per share, for fiscal 2020. Non-gap net income increased by 132% to $5.8 million, or 19 cents per share, for fiscal 2021, as compared to $2.5 million, or 9 cents per share, in fiscal 2020. Cash flow from operations totaled $1.7 million in Q4. up 14% sequentially from $1.5 million in Q3, and up 86% from $914,000 in the year-ago quarter. Now, turning to the balance sheet. We ended the June 2021 quarter with cash and cash equivalents of $9.7 million, an increase of $2 million from the prior fiscal year. Working capital improved to $20.3 million as of June 30, 2021, as compared with $18.7 million as of June 30, 2020. Net inventories were $15.1 million as of June 30, 2021, compared with $13.8 million as of June 30, 2020. Now, turning to our annual outlook, which includes approximately 11 months of contribution from our recent acquisitions of transition networks and net-to-edge. For fiscal year 2022, we expect revenue growth of 45% to 75%, and non-GAAP EPS growth of 85 to 135%. I'll now turn the call over to Paul.