Business Overview
Lantronix, Inc. (LTRX) is a global leader in compute and connectivity solutions, enabling the shift towards Artificial Intelligence (AI) and Edge Intelligence. With a strong focus on high-growth markets such as Smart Cities, Automotive, and Enterprise, Lantronix is at the forefront of powering the next generation of IoT applications.
Lantronix has a rich history dating back to 1989 when it was founded in Irvine, California. Initially focused on developing hardware and software for network connectivity, the company started by providing out-of-band management solutions for enterprise data centers and network equipment. Over the years, Lantronix has evolved to become a diversified provider of advanced compute, connectivity, and software solutions.
Throughout its journey, Lantronix has faced various challenges, including navigating the competitive and rapidly evolving IoT market. The company has had to continually innovate and adapt its products and solutions to stay ahead of the competition and meet the changing needs of its customers. This has required significant investments in research and development, as well as a focus on maintaining strong relationships with key partners and customers.
Another challenge Lantronix has encountered is managing its supply chain and manufacturing operations. As a global company, Lantronix has had to navigate various geopolitical and economic factors that have impacted the availability and cost of components and materials. The company has demonstrated agility in its sourcing and production strategies to mitigate these challenges.
Despite these obstacles, Lantronix has achieved several milestones over the years. The company has established a strong presence in the IoT market, with a diverse customer base that includes enterprise, industrial, and government customers. Lantronix has also received recognition for its innovative products and solutions, including awards and accolades from industry organizations and publications.
Lantronix's portfolio is organized into three key product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Services.
The Embedded IoT Solutions product line offers a comprehensive range of System-on-Module (SoM) and System-in-Package (SiP) solutions, providing customers with powerful compute capabilities and seamless wired and wireless network connectivity. These modules are designed to enable data collection, analysis, and interpretation using specialized AI and machine learning algorithms.
The IoT Systems Solutions portfolio includes a wide array of standalone systems that offer routing, switching, and gateway functionalities, as well as telematics and media conversion capabilities. These solutions enhance the value and utility of modern electronic systems and equipment by providing secure network connectivity, Power over Ethernet (PoE) support, application hosting, protocol conversion, and secure access for distributed IoT deployments.
Lantronix's Software and Services segment includes its software-as-a-service (SaaS) platform, which provides customers with a single-pane-of-glass management solution for out-of-band (OOB) and IoT deployments. The platform enables customers to easily deploy, monitor, manage, and automate their global IoT deployments from a single platform login. The company also leverages its engineering expertise to deliver high-quality, innovative products and offer turnkey product development or team augmentation services to customers facing complex product development challenges.
Financial Performance
Lantronix has demonstrated steady revenue growth over the past few years, with annual net revenue increasing from $71.01 million in fiscal year 2020 to $160.33 million in fiscal year 2024. This represents a compound annual growth rate (CAGR) of approximately 23.5% during this period. However, the company has struggled to achieve consistent profitability, reporting net losses in each of the past four fiscal years.
In the most recent fiscal year 2024, Lantronix generated net revenue of $160.33 million, a 22.3% increase compared to the prior year. Gross profit margin improved to 40.2% from 39.2% in the previous year. The company's net loss narrowed to $4.52 million, or $0.12 per diluted share, compared to a net loss of $8.98 million, or $0.25 per diluted share, in fiscal year 2023. Lantronix reported annual operating cash flow of $18.62 million and annual free cash flow of $17.14 million for fiscal year 2024.
For the second quarter of fiscal year 2025, Lantronix reported net revenue of $31.16 million, a decrease of 15.9% compared to the same quarter in the prior year. This decrease was driven by lower sales across all three product segments, with the IoT System Solutions segment experiencing the largest decline of 19.2%. Gross profit for the quarter was $13.28 million, with a gross margin of 42.6%, up from 40.6% in the prior year period. Operating expenses decreased by 8.0% to $15.44 million, primarily due to lower selling, general, and administrative costs. The company reported a net loss of $2.37 million for the quarter, an improvement from the $2.59 million net loss in the prior year quarter.
For the six months ended December 31, 2024, Lantronix reported net revenue of $65.58 million, a decrease of 6.4% compared to the prior year period. This decline was mainly attributable to an 11.2% decrease in IoT System Solutions revenue and a 16.7% decrease in Software and Services revenue, partially offset by a 4.5% increase in Embedded IoT Solutions revenue. Gross profit for the six-month period was $27.76 million, with a gross margin of 42.3%, up from 41.6% in the prior year period. Operating expenses decreased by 1.3% to $32.05 million, driven by lower selling, general, and administrative costs. The company reported a net loss of $4.87 million for the six-month period.
Lantronix's performance during the reported periods was impacted by a challenging macroeconomic environment, supply chain constraints, and project-based customer demand. The company continues to focus on developing innovative products, expanding its software and services offerings, and enhancing its operational efficiency to drive long-term growth and profitability.
In terms of geographic performance, Lantronix sells its products globally, with the majority of revenue coming from the Americas (51.5% in Q2 2025), followed by EMEA (29.8%) and Asia Pacific (18.7%).
Liquidity
Lantronix's financial position remains solid, with a healthy balance sheet. As of December 31, 2024, the company had $19.21 million in cash and cash equivalents. Lantronix maintains a $20 million revolving credit facility and a $15 million term loan, both with Silicon Valley Bank. The company's debt-to-equity ratio stood at 0.0392, indicating a low level of leverage.
The company's current ratio, a measure of liquidity, stood at 2.56, while the quick ratio was 1.69 as of December 31, 2024. These ratios indicate a strong ability to meet short-term obligations and maintain financial flexibility.
Key Developments and Acquisitions
Lantronix has been actively expanding its capabilities through strategic acquisitions. In December 2024, the company acquired the enterprise IoT business assets of Netcomm Wireless Pty Ltd for $6.46 million. This acquisition complemented Lantronix's focus on the Enterprise and Smart City verticals and added products to enhance its connectivity solutions in areas such as critical infrastructure, asset monitoring, and telecommunications. The acquisition expanded Lantronix's Connect business with 4G and 5G gateways.
Prior to the Netcomm acquisition, Lantronix had acquired several other businesses, including Maestro, Intrinsyc, the Transition Networks and Net2Edge businesses of Communication Systems, Inc., and Uplogix, Inc. These acquisitions have strengthened Lantronix's product portfolio and technological capabilities, positioning the company as a comprehensive provider of compute and connectivity solutions for the IoT market.
In addition to its acquisition strategy, Lantronix has made significant investments in developing its edge computing and AI capabilities. The company has collaborated extensively with Qualcomm, integrating the latter's advanced AI framework into its Lantronix edge AI systems to enhance modeling and real-time analytics. Lantronix's SmartLV, an AI-enabled IoT Edge Compute Cellular Gateway, is a prime example of the company's innovation in this space, designed for low-voltage substations and distribution automation applications in the smart grid, utilities, and industrial sectors.
Market Opportunities and Challenges
The global IoT market is experiencing rapid growth, driven by the increasing adoption of connected devices, the rise of edge computing, and the proliferation of AI applications. According to a recent Gartner report, 79% of data is expected to be captured at the edge of the network by 2025, up from 25% in 2018. Moreover, more than 50% of enterprise-generated data will be processed outside of traditional data centers by 2028, compared to only 25% in 2018.
The edge computing market is expected to grow at a CAGR of 12% from 2025 to 2031, reaching $76 billion in value by 2031, according to the same Gartner report. This shift towards edge computing and the growing demand for AI-enabled solutions present a substantial market opportunity for Lantronix. The company is strategically positioning itself to capitalize on this trend by focusing on its core competencies in compute and connectivity, as well as its expanding software and AI capabilities.
However, Lantronix faces several challenges in its pursuit of growth. The company operates in a highly competitive industry, with larger, well-established players such as Cisco, Juniper Networks, and Arista Networks, among others. Lantronix must continue to innovate and differentiate its offerings to maintain its competitive edge.
Additionally, Lantronix has historically relied on a small number of large customers for a significant portion of its revenue, making it vulnerable to fluctuations in customer demand and project-based sales cycles. The company has been working to diversify its customer base and revenue streams to mitigate this risk.
Outlook and Guidance
Lantronix's focus on the growing edge computing and AI markets, coupled with its strategic acquisitions and collaborations, position the company well for future growth. The company's recent acquisition of Netcomm's enterprise IoT business and its partnership with Qualcomm to integrate advanced AI capabilities into its edge solutions are notable developments that should contribute to its long-term success.
For the third quarter of fiscal year 2025, Lantronix expects revenue to be in the range of $27 million to $31 million. The company anticipates non-GAAP earnings per share in the range of $0.01 to $0.05 for the same period. The sequential lower revenue guidance for Q3 is primarily due to a slower-than-anticipated rollout by their large smart grid customer in Europe, which is expected to be offset by organic growth in gateways, routers, and out-of-band management.
Lantronix expects their non-GAAP gross margin in Q3 FY2025 to be slightly higher than the 43.2% reported in Q2 FY2025. The company's cost reduction initiatives are substantially complete, and they are on track to deliver the targeted $4.5 million reduction in FY2025 operating expenses compared to FY2024.
Conclusion
Lantronix must continue to navigate the competitive landscape, manage its customer concentration risk, and execute on its strategic initiatives to achieve sustainable profitability. The company's ability to diversify its revenue streams, expand its customer base, and capitalize on the rising demand for edge computing and AI-powered IoT solutions will be critical to its future performance.
Overall, Lantronix's position as a global leader in compute and connectivity solutions for the IoT market, coupled with its focus on the high-growth edge intelligence segment, makes it an interesting player to watch in the rapidly evolving technology landscape. While the company faces near-term challenges, its strategic initiatives and market positioning suggest potential for long-term growth and value creation.