Lantronix, Inc.

Good day and welcome to Landtronic's first quarter 2022 results conference call. All participants will be in a 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, please press star, then one. 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. Please go ahead.

Thank you and good afternoon and thank you to all of those joining us for our first quarter fiscal 2022 conference call. Joining us on the call today are Paul Pickle, President and CEO, Jeremy Whitaker, 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 PM Eastern and Pacific today through November 18th by dialing 877-344-7529 in the United States or for international callers, 412-317-0088 and enter passcode 10161701. 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 yesterday 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 will now 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 first quarter of fiscal 2022 before I hand it over to Paul for his commentary. Please refer to the 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 first quarter of fiscal 2022 includes two months of operations related to the acquisition of Transition Networks and Net2Edge which comprised the electronics and software business segment of Communication Systems, Inc., which closed on August 2nd, 2021. For the first quarter of fiscal 2022, we reported record revenue of $27.7 million, an increase of 62% when compared to $17.1 million for the first quarter of fiscal 2021. The year-on-year growth was driven by contribution from the recent acquisition and double-digit organic growth. Sequentially, net revenue was up 34% compared to $20.6 million reported in the fourth quarter of fiscal 2021. GAAP gross margin was 45% for the first quarter of fiscal 2022, as compared with 48.8% for the fourth quarter of fiscal 2021 and 48.1% for the first quarter of fiscal 2021. The sequential decline in GAAP gross margin was expected as we recognized a large amount of software license revenue in the prior quarter. As discussed on previous calls, we continue to see higher than normal supply chain costs. That said, we recently rolled out price increases, which we expect will offset a large portion of the product cost increases we are experiencing. Selling general and administrative expenses for the first quarter of fiscal 2022 were $7.9 million compared with $4.9 million for the first quarter of fiscal 2021 and $6.1 million for the fourth quarter of fiscal 2021. Research and development expenses for the first quarter of fiscal 2022 were $4 million compared with $2.6 million the first quarter of fiscal 2021 and $3.6 million for the fourth quarter of fiscal 2021. The increase in SG&A and R&D was impacted by increased headcount and operating costs related to the recent acquisition. That said, we have moved quickly on implementing our Synergy plan, and as a result, non-GAAP operating expenses as a percent of revenue actually declined sequentially and from the year-ago quarter. GAAP net loss was $2.3 million, or $0.08 per share, during the first quarter of fiscal 2022 compared to a gap net loss of $302,000 or one cent per share during the first quarter of fiscal 2021. The increase in gap net loss is primarily due to costs related to our most recent acquisition. Non-gap net income was $2.5 million or eight cents per share during the first quarter of fiscal 2022 compared to non-gap net income of $1.7 million or $0.05 per share during the first quarter of fiscal 2021. Now turning to the balance sheet. We ended the September 2021 quarter with cash and cash equivalents of $10.3 million, an increase of half a million from the prior quarter. Working capital improved to $32.2 million as of September 30, 2021, as compared with $20.3 million as of June 30, 2021. Net inventories were $26.6 million as of September 30th, 2021, compared with $15.1 million as of June 30th, 2021. The increase is primarily related to inventories assumed in our most recent acquisition. Now turning to our annual outlook, which includes approximately 11 months of contribution from the most recent acquisition. Once again, we exited the current quarter with increased demand driven by record backlog. We believe that without supply chain constraints, we could deliver annual growth and non-GAAP EPS above the high end of our guided range. However, we feel it prudent to take a more conservative approach, and as such, we are raising the low end of our guidance range while keeping the high end unchanged. For fiscal 2022, we expect revenue growth of 54% to 75% and non-GAAP EPS growth of 95% to 135%. I'll now turn the call over to Paul. Thank you, Jeremy.