Lantronix, Inc.

Good day and welcome to the Landtronics 2022 Second Quarter 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, you may press star, then one on a touch-tone phone. 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, Investor Relations. Please go ahead.

Thanks, Betsy. Good afternoon, everyone, and thank you for joining the second quarter fiscal 2022 conference call. Joining us on the call today are Paul Pickle, President and Chief Executive Officer, Jeremy Whitaker, Chief Financial Officer, and Jacques Issa, Vice President of Marketing. 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 17th by dialing 877-344-7529 or for international callers, 412-317-0088 and enter passcode 3413427. 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. Lentronics 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 report and presents reconciliations for the non-GAAP financial measures that we use. With that, I'll now turn the call over to Jeremy Whitaker, Lentronics 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 second 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. For the second quarter of fiscal 2022, we reported record revenue of $33.7 million, an increase of 103% when compared to $16.6 million for the second quarter of fiscal 2021. The year-on-year growth was driven by contribution from our recent acquisition and organic growth of 47%. Sequentially, net revenue was up 22% compared to $27.7 million reported in the first quarter of fiscal 2022. Gap gross margin was 42.9% for the second quarter of fiscal 2022 as compared with 45% in the prior quarter. The sequential decline in gap gross margin was primarily due to product mix. Selling, general, and administrative expenses for the second quarter of fiscal 2022 were $8.9 million compared with $4.9 million for the second quarter of fiscal 2021. and $7.9 million for the first quarter of fiscal 2022. Research and development expenses for the second quarter of fiscal 2022 were $4.3 million, compared with $2.4 million the second quarter of fiscal 2021 and $4 million for the first quarter of fiscal 2022. The increase in SG&A and R&D was impacted by increased headcount and operating costs related to the recent acquisition. We've made good progress in implementing our synergy plan, and as a result, non-GAAP operating expenses as a percentage of revenue declined sequentially and from the year-ago quarter. GAAP net loss was $2.4 million, or $0.08 per share, during the second quarter of fiscal 2022, compared to a GAAP net loss of $1.5 million, or $0.05 per share, during the second quarter of fiscal 2021. The increase in GAAP net loss was primarily due to costs related to our recent acquisition. Non-GAAP net income was $3.3 million, or $0.10 per share, during the second quarter of fiscal 2022, compared to non-GAAP net income of $861,000, or $0.03 per share, during the second quarter of fiscal 2021. Now turning to the balance sheet. We ended the December 21 quarter with cash and cash equivalents of $36.4 million, an increase of $26 million from the prior quarter. During November of 2021, we raised $32.6 million in an offering and sale of 4.7 million common shares at a price of $750 per share. In January of 2022, we used $12 million of the proceeds to pay down a high-interest second-lane term loan facility that we used as partial consideration for our recent acquisition. Working capital improved to $64.2 million as of December 31, 2021, as compared with $32.2 million as of the prior quarter. Net inventories were $29.4 million as of December 31, 2021, compared with $26.6 million as of September 30, 2021. Now turning to our annual outlook. which includes approximately 11 months of contribution from our recent acquisition. We exited the December quarter with strong customer demand and backlog. We continue to believe that without supply chain constraints, we could deliver annual revenue and non-GAAP EPS above the high end of our guided range. Based upon forecasted improvements in the supply chain and our current outlook, we expect to see a much stronger fourth quarter, And as a result, we are increasing our annual revenue guidance. For fiscal year 2022, we are raising our annual revenue target to a range of $112.5 million to $127.5 million, representing growth in the range of 57% to 78%. In addition, we are adjusting our annual earnings target to take into account our recent capital raise and expect non-GAAP EPS in a range of 32 to 40 cents per share, representing growth in a range of 68 to 111%. I'll now turn the call over to Paul.