Lantronix, Inc.

Good day and welcome to the Lantronics fourth quarter 2024 results conference call. All participants will be in 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 questions, 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 Jeremy Whitaker, Chief Financial Officer. Please go ahead.

Good afternoon, everyone, and thank you for joining our quarterly earnings call. Joining me on the call today is our President and Chief Executive Officer, Celia Osari. 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 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. 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 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 now turn the call over to Salil.

Thanks, Jeremy, and thank you, everyone, for joining us on the call today. I'm pleased to report record revenue of $49.1 million for the fourth quarter of fiscal year 2024, a year-over-year increase of 41% compared to the same period of 2023, and a sequential increase of 19% compared to the March quarter. Non-GAAP EPS at fiscal year Q4 grew 150% compared to the same period last year, demonstrating the leverage in our operating model as revenue grows. Jeremy will provide you with more details and analysis on fiscal year 2024 and the fourth quarter financial results shortly. At Lantronics, we enable edge intelligence with our compute and connect solutions, allowing our customers to improve both their operational efficiency and real-time decision-making. We understand the complexity of edge compute requirements, and we provide our customers with complete solutions, including hardware, software, device management, and design services. Because our offerings are differentiated, sticky, and help our customers solve problems, we are able to achieve a relatively higher value for the solutions in the marketplace. We remain focused on three key vertical markets, smart cities, automotive, and enterprise, that have double-digit growth rates, favorable secular trends, and combined serviceable addressable market, of approximately 8.5 billion, representing a tremendous opportunity for electronics. Today, let me start with the enterprise vertical market. Our out-of-band management solutions business is performing very well and grew more than 70% from fiscal year 2023 to fiscal year 2024. Our out-of-band management product portfolio makes it easier to securely manage distributed enterprise networks and devices by providing access, resiliency, and tools for daily management tasks and when a disruption occurs. For example, during the global CrowdStrike outage that occurred last month, our out-of-band management products with remote access were likely used to reduce network downtime. Our solutions minimize mean time to recovery, allowing network administrators to restore the affected window devices and get businesses back up and running again. In addition to providing resiliency and recovery during an emergency, our out-of-hand management solutions make daily operational tasks easier, more efficient, and highly secure. In fact, our LM series products are a leader in the industry with patented automation, that can greatly reduce time to recovery during network outage events, malicious or accidental. Our out-of-band management solutions have higher than our average corporate gross margins and are often combined with other Lantronics products such as IoT gateways, media converters, and recurring services. Also in the enterprise vertical, we began shipping to our largest video conferencing customer that recently announced their next generation product. In the automotive vertical, our relationship with TOG continues to progress. The Turkish automotive OEM is looking at new software features that will require higher performance compute modules, and we are engaged with them on that. TOG is also continuing to focus on its goal of introducing its new vehicles to Germany next calendar year. With these developments, we expect continued growth with this customer into the future. Additionally, we recently secured a design services purchase order with a large German OEM that is developing a new infotainment platform for long and short haul trucks. We are pleased to have entered into this new relationship. and it shows great progress in our longer-term goal of winning new compute designs in our emerging automotive infotainment business. In the smart cities vertical, we continue to work closely with our lead smart grid customer. During the June quarter, we shipped over $21 million in product to them, as we expected, and while it will take them some time to digest and deploy this product with their customer, We believe that this can be an ongoing business for several years. In the current quarter, fiscal Q1 2025, we expect to deliver approximately $5 million in product to them. We believe that as the initial inventory is consumed, this business is transitioning into a run rate business. We are also very pleased to be partnering with them on expanding into the North American market. They are currently working with a large U.S. energy company on a similar smart grid solution and will be supplying demo units for a proof of concept. Many electrical grids are having to be upgraded significantly given the rise in energy demands, and these networks are requiring real-time decision-making at the edge, which this device provides. While it is still early days, We are pleased to be assisting our customer as they enter the large U.S. market. Lastly, we are very excited to be working on new projects with our key partner, Qualcomm, related to edge AI computing. In late June, we demonstrated our perception edge AI solution fully integrated with Qualcomm's AI Hub at Qualcomm's Industry Analyst Day. This platform enables deployment of edge AI solutions for vertical markets such as smart city and enterprise. Qualcomm's AI Hub, when combined with our perception platform, reduces the complexity of edge AI applications and simplifies the deployment of AI models. Building on our platform, we are closely collaborating with our compute partner, who we expect to deploy our software tools at scale to help their developers build leading-edge AI edge solutions. While it's still early days for us, the opportunity in edge AI for Lantronics lies in providing integrated solutions using our compute modules and edge AI gateways for customers looking to deploy solutions with compute power needed to drive AI models at the edge of the network. In support of this, we are pleased to see our perception platform win the 2024 Product of the Year Award from the IoT Evolution World earlier this month. To conclude, I'm very optimistic about Lantronic's future, given our strong balance sheet, the momentum in our enterprise verticals, specifically in video conferencing and out-of-band solutions, new engagements in automotive infotainment, diversifying into additional geographic regions with our smart grid customer, and our deepening relationship with Qualcomm, enabling us to participate in the new megatrend of Edge AI. We are also mindful of inorganic, accretive growth opportunities, and we will pursue those that fit within our portfolio and make economic sense. Our goal is to increase shareholder value through both organic and inorganic growth. With that, I will now hand the call back over to Jeremy.