LANTRONIX INC Q2 FY2025 earnings call

• Pleased with NetComm acquisition, which expands Connect business with 4G and 5G gateways, integration going well. - Highlighted Edge AI market growth with Gartner report projecting 79% of data captured at edge by 2025. - Strengthening collaboration with Qualcomm, integrating Qualcomm's AI framework into edge AI systems. - Progress on cost reduction initiatives, consolidating locations into four centers of excellence.

For the second quarter of fiscal 2025, Lantronix reported revenue of $31.2 million. GAAP gross margin was 42.6% compared to 42.1% in the prior quarter and 40.6% in the year ago quarter. Non-GAAP gross margin was 43.2% in FQ2 2025 compared to 42.6% in the prior quarter and 41.6% in the year ago quarter. Revenue did not include NetComm acquisition revenue as the transaction closed at the end of the quarter.

• For Q3 2025, expect revenue in range of $27 million to $31 million. - Anticipate sequentially lower revenue in Q3 due to slow smart grid rollout, partially offset by organic growth in gateways, routers, etc. - Expect non-GAAP EPS in range of $0.01 to $0.05 per share in Q3. - Expect next quarter's non-GAAP gross margin to be slightly higher than FQ2.

• Potential impacts of tariff environment on supply chain, with initiatives in place to transition manufacturing out of China.

Q: Thoughts on follow-on orders from smart grid customer later in calendar year?

A: Thoughts haven't changed, continuing to work closely with Gridspertise, sole sourced, with pilots in Carolinas and Northeast.

Q: Update on out-of-band business?

A: Got design win for AI edge data center, weakness previously with government-related entity.

Q: Progress on Togg and automotive opportunities?

A: Relationship with Togg good, shipping new product for upcoming car, working on services business, and with truck manufacturer in Europe.

Q: Smart grid market opportunities and competitive field?

A: Focus on SmartLV box using Qualcomm sum for low voltage substations, POC in Europe, different competitors and channels being developed.

Q: Growth rate for out-of-band and Edge AI?

A: Edge AI expected to start showing growth in fiscal 2026, out-of-band management expected to grow around 10-12%.

Q: Supply chain and tariffs?

A: Initiatives in place to address tariffs, transitioning majority of manufacturing out of China with no material impact on business.

Q: Multiyear growth expectations and gross margins?

A: Anticipate 12% growth rate, near term gross margins expected slightly higher in Q3, longer term margins expected to improve closer to 45%.