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LANTRONIX INC (LTRX)·Q1 2026 Earnings Summary
Executive Summary
- Q1 FY26 revenue $29.8M and non-GAAP EPS $0.04, both at the high end of guidance; non-GAAP gross margin expanded to 45.3%, the company’s highest in recent years, aided by mix, lower inventory charges and royalty benefits .
- Versus S&P Global consensus, LTRX modestly beat on revenue ($29.79M vs $29.55M*) and EPS ($0.04 vs $0.03*); prior quarter was a small EPS miss while Q3 FY25 met EPS but missed revenue* .
- Q2 FY26 guide: revenue $28–$32M and non-GAAP EPS $0.02–$0.04, implying sequential growth at the midpoint; management expects gross margins to remain healthy and generally consistent with 1H FY25 levels .
- Strategic momentum in Edge AI/drones (17 OEM engagements exiting Q1) and asset monitoring (Kompress.ai with Vodafone IoT) alongside steady out-of-band/networking demand underpin improving operating leverage and ARR mix .
Values retrieved from S&P Global for estimate comparisons are marked with an asterisk (*).
What Went Well and What Went Wrong
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What Went Well
- Non-GAAP gross margin reached 45.3% (vs 40.6% in Q4), reflecting favorable mix, lower inventory charges, and royalty benefits; management called it the highest in recent years .
- Drone pipeline accelerated: OEM engagements rose from 10 to 17 in Q1; new integrations with Gremsy and Teledyne FLIR and a Sightline Intelligence partnership broaden capability and reach in defense/commercial UAS .
- Balance sheet/liquidity improved: cash $22.2M; operating cash flow ≈$3.6M; paid down $1M debt and ended with ≈$11.5M net cash position .
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What Went Wrong
- Year-over-year revenue down against tough comp ($29.79M vs $34.42M in Q1 FY25) due to lapping Gridspertise; management focused on core/platform growth to offset .
- EBITDA tracked below S&P consensus as reported (estimate $1.15M* vs actual -$0.35M*), highlighting differences between GAAP/non-GAAP views despite EPS beat* .
- Tariff/trade environment remains a watch item; while actions reduced exposure (manufacturing shift), management continues to monitor evolving cross-border requirements .
Financial Results
Values retrieved from S&P Global are marked with an asterisk (*).
Segment revenue breakdown
Geographic revenue breakdown
Selected KPIs
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “Fiscal 2026 is off to a strong start, with revenue and earnings per share both at the high end of our guidance ranges,” highlighting “margin expansion, disciplined cost management and growing contributions from our high-growth platforms” .
- “At the end of Q1, our OEM engagements grew from 10 last quarter to 17 today… Together, these advancements underscore our ability to deliver secure, AI-enabled flight systems, at scale” .
- “On a non-GAAP basis, gross margin was 45.3%… The increase reflects a more favorable product mix, lower inventory charges, and benefits from certain royalties” .
- “We ended the quarter with cash and cash equivalents of $22.2 million… generated positive operating cash flow of approximately $3.6 million… remaining [debt] balance of approximately $10.7 million… net cash position of $11.5 million” .
- “We recently introduced EdgeFabric.ai… enabling customers to design and deploy AI applications in minutes instead of months… creating a foundation for recurring software and services revenue over time” .
Q&A Highlights
- Drone adoption and scale: management is working with 17 OEMs, expects accelerating demand through FY26, and views drones as a potential 10–15% revenue contributor by FY27 .
- Tier-1 MNO asset monitoring: recognized revenue in September quarter; expect revenue again in December; quarterly orders and run-rate shipments against 50k-unit POs; follow-on orders likely in calendar 2026 beyond diesel generators .
- ARR outlook: software/services currently ~5–7% of revenue; targeting 7–9% and toward 10% over time with Percepxion and Kompress.ai .
- Gross margin modeling: near-term modeling around 43–44% consistent with 1H FY25 levels; achieved 45.3% non-GAAP GM in Q1 .
- OOB management: sequential growth with new product launch planned late this year; government shutdown risk minimal for defense/UAS given multi-year funding .
Estimates Context
- Q1 FY26 results vs S&P Global consensus: Revenue $29.79M vs $29.55M* (beat); Primary EPS $0.04 vs $0.03* (beat). Prior quarter: rev beat, slight EPS under; Q3 FY25: rev miss, EPS in-line* .
Values retrieved from S&P Global are marked with an asterisk (*).
Key Takeaways for Investors
- Execution improved: high-end guide delivery, record non-GAAP gross margin, stronger liquidity and net cash provide flexibility into FY26 .
- Multiple growth vectors: drones (17 OEMs, defense/commercial integrations) and asset monitoring (Kompress.ai with Vodafone IoT; Tier-1 MNO rollout) broaden TAM and support ARR expansion .
- Near-term guide solid: Q2 FY26 revenue $28–$32M and EPS $0.02–$0.04, with gross margins expected to remain healthy and consistent with 1H FY25; monitor mix and tariff dynamics .
- Estimate revisions likely upward on EPS and revenue given beats and midpoint Q2 guide implying sequential growth; watch EBITDA methodology differences vs non-GAAP profitability* .
- Tactical: narrative favoring defense UAS, OOB networking, and ARR catalysts should be stock-supportive on pullbacks; catalysts include new OOB product launch and additional drone/MNO customer disclosures .
Additional Relevant Press Releases (Q1 FY26 timeframe)
- Gremsy/Teledyne FLIR integrations in Lantronix’s NDAA/TAA-compliant Edge AI drone solution—supports longer flight endurance and real-time edge processing; in production with multiple customers .
- CEO to participate in Craig-Hallum, ROTH, Headgate investor events in Nov–Dec 2025 .
Values retrieved from S&P Global are marked with an asterisk (*).