Lantronix, Inc.

Good afternoon everyone and welcome to the Landtronics first quarter 2023 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 and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. And at this time, I would like to turn the floor over to Rob Adams. Sir, please go ahead.

Thank you, and good afternoon, and thanks for joining us for our first quarter of fiscal 2023 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, 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, as well as the company's SEC filings, such as 10-Ks and 10-Qs. Lentronics undertakes 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 will now 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 first quarter of fiscal 2023 before I hand it over to Paul for his commentary. In September of 2022, we closed the acquisition of Uplogix for $8 million in cash consideration and an additional cash earn out of up to $4 million if certain revenue targets are met. We funded the acquisition with an increase of $5 million to our existing term loan and available cash. As a result, our first quarter of fiscal 2023 includes approximately two weeks of operating activity related to the Uplogix acquisition. Although not significant to our first quarter results, the acquisition was accretive to non-GAAP earnings and is expected to be accretive on a go-forward basis. For the first quarter of fiscal 2023, we reported revenue of $31.8 million, an increase of 15% when compared to $27.7 million for the first quarter of fiscal 2022. As expected, revenue was down sequentially as compared to $35.9 million reported in the fourth quarter of fiscal 2022. Our most recent acquisition contributed approximately $400,000 of revenue in the current quarter. GAAP gross margin was 44.1% for the first quarter of fiscal 2023 as compared with 41.9% in the prior quarter. The sequential improvement was related to lower supply chain costs in addition to improved product mix. Selling general and administrative expenses for the first quarter of fiscal 2023 were $9.2 million compared with $7.9 million for the first quarter of fiscal 2022 and $9.4 million for the fourth quarter of fiscal 2022. Research and development expenses for the first quarter of fiscal 2023 were $4.5 million, compared with $4 million for the first quarter of fiscal 2022 and $4.9 million for the fourth 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 fiscal 2022. However, as a percentage of revenue, expenses were down from the year-ago period. Gap net loss was $1.7 million or $0.05 per share during the first quarter of fiscal 2023 compared to a gap net loss of $2.3 million or $0.08 per share during the first quarter of fiscal 2022. Non-gap net income was $2.7 million or $0.07 per share during the first quarter of fiscal 2023 compared to non-gap net income of $2.5 million or $0.08 per share during the first quarter of fiscal 2022. Now turning to the balance sheets. We ended the September 2022 quarter with cash and cash equivalents of $13.1 million, as compared to $17.2 million in the prior quarter. Working capital was $50.3 million as of September 30, 2022, as compared with $54.5 million as of June 30, 2022. Net inventories were $45.3 million as of September 30, 2022, compared with $37.7 million as of June 30, 2022. The sequential increase was primarily due to the assumption of inventories in the Uplogix acquisition and the purchase of components to support the Enel project, which is expected to ramp during the second half of the fiscal year. Now turning to our revised annual outlook. After adjusting for a recent acquisition of Uplogix, For fiscal 2023, we are increasing our target as follows. Revenue of 155 to 165 million and non-GAAP EPS in a range of 41 to 46 cents per share. We expect the revenue and earnings growth to be more heavily weighted in the second half of the fiscal year as our two largest design wins are expected to ramp into full production during the second half. I'll now turn the call over to Paul.