Lantronix, Inc.

Good afternoon and welcome to the Landtronics Third Quarter 2022 Earnings 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 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, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone, and thanks for joining the third quarter fiscal 2022 conference call. Joining us on the call today are Michael, 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, you can find the call-in details for the phone replay in today's earnings release. 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 the 10-K and 10-Q. Landtronic Center takes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Please refer to the news release and the financial information in the investor relations section of our website for additional details that will supplement management's commentary. 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, our Chief Financial Officer. Jeremy?

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 2022 before I hand it over to Paul for his commentary. For the third quarter of fiscal 2022, we reported revenue of $32.3 million, an increase of 89% when compared to $17.1 million for the third quarter of fiscal 2021, and down 4% sequentially as compared to $33.7 million reported in the second quarter of fiscal 2022. The year-on-year increase was driven by organic growth of 32%, in addition to contribution from our recent acquisition of the TN companies. GAAP gross margin was 42.1% for the third quarter of fiscal 2022, as compared with 42.9% in the prior quarter. The sequential decline in gross margin was primarily due to increased supply chain costs in addition to product mix. While logistics and supply chain costs were higher than our initial expectations due to significant disruptions in the Asia-Pacific region experienced during the quarter, we navigated these issues delivered revenue above our initial expectations, and largely met customer needs. Selling, general, and administrative expenses for the third quarter of fiscal 2022 were $8.3 million compared with $5 million for the third quarter of fiscal 2021 and $8.9 million for the second quarter of fiscal 2022. Research and development expenses for the third quarter of fiscal 2022 were $4.5 million compared with 2.5 million the third quarter of fiscal 2021, and 4.3 million for the second quarter of fiscal 2022. The year-on-year increases in SG&A and R&D were largely driven by the acquisition of the TN companies at the beginning of this fiscal year. Gap net loss was 3.2 million, or nine cents per share, during the third quarter of fiscal 2022, compared to a gap net loss of 1.2 million, or $0.04 per share during the third quarter of fiscal 2021. The increase in GAAP net loss was primarily due to earn-out consideration and non-cash charges related to our most recent acquisition. Non-GAAP net income was $2.8 million or $0.08 per share during the third quarter of fiscal 2022 compared to non-GAAP net income of $1.5 million or $0.05 per share during the third quarter of fiscal 2021. After adjusting for our recent capital raise, which impacted non-GAAP EPS by approximately 2 cents per share, this quarter we are meeting our post-acquisition quarterly target of 10 cents per share. Now turning to the balance sheet. We ended the March 2022 quarter with cash and cash equivalents of $22.8 million, a decrease of $13.6 million from the prior quarter. Working capital decreased to $51.8 million as of March 31, 2022. as compared with $62 million in the prior quarter. The decrease in cash and working capital was primarily due to the use of cash to pay down a high-interest loan in January 2022. Net inventories were $33.2 million as of March 31, 2022, compared with $29.4 million as of December 31, 2021. Now turning to our annual outlook, which includes approximately 11 months of contribution from our most recent acquisition. Once again, we exited the quarter with record backlog and strong customer demand. Based upon our current outlook, we expect to see a much stronger fourth quarter, and as a result, we are narrowing the range and increasing our annual revenue guidance. For the full fiscal year 2022, we are now targeting annual revenue of $125 to $129 million, representing growth in the range of 75% to 80%. In addition, we are adjusting our annual earnings target, which includes the full share impact of our recent capital raise, and expect non-GAAP EPS in a range of 31 to 37 cents per share, representing growth of 64 to 95%. We continue to believe that without supply chain constraints, we could deliver annual revenue and non-GAAP EPS above the high end of our updated guidance. I'll now turn the call over to Paul.