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LANTRONIX INC (LTRX)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue was $28.8M, up slightly sequentially and above Wall Street consensus; GAAP EPS was ($0.07) while non-GAAP EPS was $0.01, with non-GAAP gross margin at 40.6% vs 44.1% in Q3 and 38.8% YoY . Revenue modestly beat consensus ($28.84M vs $28.48M), EPS was roughly in line/slightly below ($0.01 vs $0.0125)* (Values retrieved from S&P Global).
  • Management highlighted strategic wins in defense drones (Teal Black Widow for U.S. Army SRR) and a multi‑year Tier‑1 U.S. carrier contract modernizing >50,000 backup power systems, reinforcing the Edge AI and infrastructure modernization narrative .
  • Q1 FY2026 outlook guides revenue to $28.5–$30.5M and non‑GAAP EPS to $0.02–$0.04, citing improving visibility and momentum across Edge IoT and Network Infrastructure .
  • Sequential gross margin pressure was driven by aged inventory charges and higher duties/tariffs; management expects margins to recover to H1 FY2025 levels as tariff mitigation and supply-chain actions take hold .

What Went Well and What Went Wrong

  • What Went Well

    • “Return to growth” in core revenue base excluding Gridspertise; Q4 revenue $28.8M and non‑GAAP EPS $0.01 came within guidance, with non‑GAAP gross margin above prior year .
    • Strategic wins: U.S. Army-approved Teal Black Widow drones using Lantronix NDAA/TAA‑compliant SoM; shipments began in the June quarter, strengthening FY2026 visibility .
    • Multi‑year Tier‑1 U.S. mobile carrier agreement to modernize >50,000 backup power systems using Lantronix Edge gateways and Percepxion; volume shipments already commenced .

  • What Went Wrong

    • Sequential gross margin compression (GAAP 40.0% vs 43.5% in Q3; non‑GAAP 40.6% vs 44.1%) due to aged inventory charges and higher duties/tariffs .
    • GAAP net loss of $2.6M in Q4 versus GAAP net income of $0.4M in Q4 FY2024, reflecting restructuring charges and the absence of prior-year Gridspertise contribution .
    • EBITDA materially below S&P consensus (actual approximately negative vs positive estimate)*, indicating persistent operating pressure despite cost reductions (Values retrieved from S&P Global).

Financial Results

Headline metrics vs prior periods and estimates

MetricQ4 FY2024Q3 FY2025Q4 FY2025Q4 FY2025 Consensus
Revenue ($USD Millions)$49.1 $28.5 $28.8 $28.48*
GAAP EPS ($)$0.01 ($0.10) ($0.07) n/a
Non-GAAP EPS ($)n/a$0.03 $0.01 $0.0125*
GAAP Gross Margin (%)38.1 43.5 40.0 n/a
Non-GAAP Gross Margin (%)38.8 44.1 40.6 n/a

Note: Asterisks denote values retrieved from S&P Global.

Segment revenue breakdown

Segment ($USD Millions)Q4 FY2024Q3 FY2025Q4 FY2025
Embedded IoT Solutions$11.4 $12.0 $10.2
IoT System Solutions$35.6 $14.7 $16.7
Software & Services$2.1 $1.8 $2.0
Total$49.1 $28.5 $28.8

Regional revenue breakdown

Region ($USD Millions)Q4 FY2024Q3 FY2025Q4 FY2025
Americas$17.1 $16.5 $19.8
EMEA$26.2 $6.0 $5.3
APJ$5.8 $6.0 $3.7
Total$49.1 $28.5 $28.8

Operating profile and KPIs

KPI ($USD Millions unless noted)Q3 FY2025Q4 FY2025
GAAP Operating Expenses$16.0 $14.7
Non-GAAP Gross Margin (%)44.1 40.6
Cash & Cash Equivalents$20.0 $20.1
Net Inventories$28.2 $26.4
Debt (Remaining)~$12.5 ~$11.8
Operating Cash Flow (FY2025)n/a$7.3

Estimate comparison (S&P Global)

MetricQ3 FY2025 EstimateQ3 FY2025 ActualQ4 FY2025 EstimateQ4 FY2025 Actual
Revenue ($USD)$29.12M*$28.50M $28.48M*$28.84M
Primary EPS ($)$0.03*$0.03 $0.0125*$0.01
EBITDA ($USD)$2.20M*approx. negative (operating loss) $0.50M*approx. negative (operating loss)

Note: Asterisks denote values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)Q4 FY2025$26.5M–$30.5M Actual $28.8M In‑range (maintained)
Non-GAAP EPS ($)Q4 FY2025$0.00–$0.02 Actual $0.01 In‑range (maintained)
Revenue ($USD)Q1 FY2026—$28.5M–$30.5M New
Non-GAAP EPS ($)Q1 FY2026—$0.02–$0.04 New
Gross Margin (%)Q4 FY2025“Pressure vs Q3” Actual GAAP 40.0%, non‑GAAP 40.6% In line with caution

Earnings Call Themes & Trends

TopicQ2 FY2025 (Prev-2)Q3 FY2025 (Prev-1)Q4 FY2025 (Current)Trend
Edge AI/Compute initiativesHighlighted Open‑Q™ SoMs, Qualcomm collaboration, CES customer engagements Continued investment; design wins in AI cameras; Open‑Q™ 8550CS launch Defense/commercial drones traction (Teal Black Widow, Aerora); Edge AI momentum into FY2026 Improving
Supply chain/tariffs90‑day task force, cost control, site consolidation (4 Centers of Excellence) Ongoing tariff mitigation; margin improvement; cautious outlook Majority of U.S.-bound products manufactured outside China; expect GM recovery Improving
Network infrastructure/OOBExpanded distribution (TD SYNNEX EU), OOB management deployments Customer wins in OOB for AI datacenter Top‑of‑Rack Tier‑1 U.S. carrier win modernizing backup power (FOX gateways + Percepxion) Improving
Regional trendsAmericas stable; EMEA/APJ mixed Americas 16.5; EMEA 6.0; APJ 6.0 Americas 19.8; EMEA 5.3; APJ 3.7 Mixed (Americas up; EMEA/APJ down)
Cost structure/OpExTarget quarterly non‑GAAP OpEx $11.25–$11.75M; $4.5M FY OpEx reduction plan Non‑GAAP OpEx down YoY and sequentially ~$4M costs removed vs FY2024; GAAP OpEx down to $14.7M Improving
Balance sheet/liquidityPaid $6.5M for NetComm; OCF $3.0M H1 OCF positive; paid down ~$2M debt FY OCF $7.3M; refinanced term debt to ABL, maturity Aug 2028; net cash ~$8.3M Improving

Management Commentary

  • CEO tone on transformation: “Fiscal 2025 was a year of strategic transformation… We strengthened our foundation for sustainable, profitable growth… design wins in drones, commercial Edge AI solutions and network infrastructure highlight our evolution into a strategic platform partner” .
  • Defense drone positioning: “Our TAA‑ and NDAA‑compliant solution now powers Teal’s Black Widow drones… We began shipments in the June quarter, generating initial revenue and strengthening visibility into fiscal 2026” .
  • Carrier win strategic value: “We recently signed a multi‑year agreement with a major U.S. mobile carrier… modernize over 50,000 backup power systems… booked nearly all the initial units and have begun shipping in the June quarter” .
  • Platform shift: “This transition from a traditional hardware supplier to a strategic platform partner… creates a stickier, higher‑margin business over time” .
  • Margin and supply chain: “The sequential decline [in GM] primarily reflects inventory charges… and higher duties and tariffs… the vast majority of U.S.-bound products are now manufactured outside of China” .

Q&A Highlights

  • The provided SEC exhibits include prepared remarks; a full Q&A transcript was not available in the document set. Management’s commentary clarified: sequential GM pressure due to aged inventory and tariffs, with expected recovery to H1 FY2025 levels, and highlighted supply-chain relocation outside China to mitigate tariffs . Liquidity improved via FY operating cash flow ($7.3M), debt paydown to ~$11.8M, and refinancing to an ABL maturing Aug 2028, supporting lower interest expense and greater flexibility . Strategic design wins (Teal drones; Tier‑1 carrier) underpin FY2026 visibility and ARR growth via Percepxion .

Estimates Context

  • Q4 FY2025 results vs S&P Global consensus: Revenue beat modestly ($28.84M actual vs $28.48M estimate; ~+1.3%), while EPS was roughly in line to slightly below ($0.01 actual vs $0.0125 estimate); EBITDA underperformed materially versus positive estimates, consistent with gross margin pressure and restructuring effects*.
  • Estimate calibration: Given new Q1 FY2026 guidance and visible design wins, consensus may need to adjust mix assumptions (Americas strength; EMEA/APJ softness), gross margin recovery trajectory post tariff mitigation, and ARR contributions from Percepxion tied to the carrier deployment*.
    Note: Asterisks denote values retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term: Revenue is stabilizing and slightly ahead of consensus, but margins are the swing factor; tariff mitigation and inventory normalization are catalysts for GM recovery back toward H1 FY2025 levels .
  • Strategic wins de‑risk FY2026: U.S. Army SRR drone shipments and Tier‑1 carrier rollout provide backlog visibility and support higher‑margin software‑enabled ARR via Percepxion .
  • Balance sheet and cash: FY2025 OCF of $7.3M, debt paydown, and refinancing to an ABL maturing 2028 reduce interest expense and improve flexibility; net cash of ~$8.3M supports execution .
  • Mix and geography: Americas growth offset EMEA/APJ declines; watch for distribution expansion (TD SYNNEX EU, NetComm APAC channels) to stabilize international revenue .
  • Product cycle: NTC‑500 industrial 5G router and Open‑Q™ 8550CS broaden Edge IoT capabilities; adoption across private 5G and industrial automation could accelerate in CY2026 .
  • Estimates: Expect upward revisions to revenue where carrier/drones visibility is incorporated, but margin forecasts may remain conservative until tariff impacts fully abate*.
  • Trading lens: Stock likely reacts to confirmation of margin recovery and incremental orders under the carrier/drone programs; monitor Q1 FY2026 delivery vs guidance for narrative progression .