Lantronix, Inc.

Good day, ladies and gentlemen, and welcome to the Lantronics Inc. 2023 Q2 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, sir.

Thank you. Good afternoon, everyone. Thank you for joining the second quarter fiscal 2023 conference call. Joining us on the call today are Paul Pickle, President, 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, 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 it is also in the company's SEC filings, such as its 10-K and its 10-Qs, Landtronics 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, Lantronics 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 2023, before I hand it over to Paul for his commentary. For the second quarter of fiscal 2023, we reported revenue of $31.5 million compared to $33.7 million for the second quarter of fiscal 2022. Sequentially, revenue was down 1%. GAAP gross margin was 44% for the second quarter of fiscal 2023, which is consistent with the prior quarter and about a 900 basis point improvement from the year-ago quarter. Selling, general, and administrative expenses for the second quarter of fiscal 2023 were $9.8 million compared with $8.9 million for the second quarter of fiscal 2022 and $9.2 million for the first quarter of fiscal 2023. Research and development expenses for the second quarter of fiscal 2023 were $5.1 million compared with $4.3 million for the second quarter of fiscal 2022 and $4.5 million for the first quarter of fiscal 2023. The year-on-year increases in SG&A and R&D were largely driven by headcount we assumed in the September 2022 acquisition of Uplogix. Gap net loss was $2.6 million, or $0.07 per share, during the second quarter of fiscal 2023 compared to a GAAP net loss of $2.4 million, or $0.08 per share, during the second quarter of fiscal 2022. Non-GAAP net income was $1.4 million, or $0.04 per share, during the second quarter of fiscal 2023, compared to non-GAAP net income of $3.3 million, or $0.10 per share, during the second quarter of fiscal 2022. Now turning to the balance sheet. We ended the December 2022 quarter with cash and cash equivalents of $6.8 million as compared to $13.1 million in the prior quarter. With our recently announced contract, we expect to receive aggregate prepayments of $20 million during the next six months. Working capital was $50.6 million as of December 31, 2022, as compared with $54.5 million as of June 30, 2022. Net inventories were $49.2 million as of December 31, 2022, compared with $37.7 million as of June 30, 2022. The increase was primarily due to the purchase of components to support the recently announced contract, which is expected to ramp during fiscal 2024. Now turning to our annual outlook. For fiscal 2023, we are targeting revenue of $135 to $145 million, and non-GAAP EPS in a range of $0.27 to $0.33 per share. I'll now turn the call over to Paul.