Q3 2025 Lantronix Inc Earnings Call
Good day and welcome to the land Conics 2025 for Q3 results Conference call.
Operator: Good day and welcome to the Lantronix 2025 Q3 results conference call. All participants will be in a lesson-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
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Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
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Brent: I would now like to turn the conference over to Brent shrink them.
Operator: I would now like to turn the conference over to Brent Stringham, Chief Financial Officer. Please go ahead.
Speaker Change: <unk> Financial Officer. Please go ahead.
Okay.
Brent Stringham: Good afternoon, and thank you for joining our quarterly earnings call. Joining me today is our president and chief executive officer, Saleel Awsare. 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.
Speaker Change: Good afternoon, and thank you for joining our quarterly earnings call. Joining me today is our president and Chief Executive Officer, Sylvia allow us right.
Speaker Change: A live and archived webcast of today's call will be available on the company's website.
Speaker Change: In addition, you can find the collyn details for the phone replay in todays earnings release.
Brent Stringham: 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 in the company's SEC filings, such as its 10-K and 10-Qs. Lantronix undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances.
Speaker Change: 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.
Speaker Change: We encourage you to review the cautionary statements and risk factors contained in the earnings release, which was furnished to the FCC today and is available on our website.
Speaker Change: And in the Companys SEC filings, such as its 10-K and 10-Qs.
Speaker Change: Plantronics undertakes no obligation to revise or update publicly any forward looking statements to reflect future events or circumstances.
Brent Stringham: 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.
Speaker Change: 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.
Saleel Awsare: With that, I will now turn the call over to Saleel. Thanks, Brent, and thank you, everyone, for joining today's call.
Speaker Change: With that I will now turn the call over to soil.
Speaker Change: Thanks, Brent and thank you everyone for joining today's call.
Saleel Awsare: We reported revenue of $28.5 million for the third quarter of fiscal 2025 and our non-GAAP EPS was $0.03. Both metrics were well within our quarterly guidance range.
Speaker Change: We reported revenue of 28, and a half million for the third quarter of fiscal 2025, and our non-GAAP EPS was <unk>.
Speaker Change: Both metrics were well within our quarterly guidance range.
Brent Stringham: Brent Stringham, our CFO, will be providing more details on the third quarter financial results shortly.
Speaker Change: <unk>, our CFO will be providing more details on the third quarter financial results shortly.
Saleel Awsare: On the call today, I would like to cover four topics.
Speaker Change: On the call today, I would like to cover four topics with you.
Speaker Change: First I will speak briefly to the current operating environment and how we've moved quickly without one task force on taught us while remaining focused on executing our business and controlling costs.
Saleel Awsare: First, I will speak briefly to the current operating environment and how we've moved quickly with our own task force on tariffs while remaining focused on executing our business and controlling costs.
Speaker Change: Second I'd like to talk about how we're expanding our distribution network in the European Union in Asia Pacific.
Saleel Awsare: Second, I'd like to talk about how we are expanding our distribution network in the European Union and Asia-Pacific.
Saleel Awsare: Third, I would like to highlight some recent customer wins and mention products we've launched.
Speaker Change: Third I would like to highlight some recent customer wins and mentioned products we've launched.
Saleel Awsare: Lastly, I want to highlight our solid operational execution and strengthening financial position, which Brent will speak to in more detail in his prepared remarks. So first off, we're carefully monitoring the current operating environment and we're working very closely with our customers, suppliers, and contract manufacturers. In anticipation of the tariffs, we established an internal task force to identify our top priorities and devised a 90-day action plan. We are currently implementing this plan and closely managing expenses due to the uncertainty surrounding tariffs and any disruptions to the supply chain. Regarding pricing, we are working on a customer-by-customer basis with goal of minimizing the impact to Lantronix.
Speaker Change: Lastly, I want to highlight our solid operational execution, and strengthening financial position, which Brent will speak to in more detail in his prepared remarks.
Speaker Change: So first off we are carefully monitoring the current operating environment and we're working very closely with our customers suppliers and contract manufacturers.
Speaker Change: And then dissipation of the status, we established an internal task force to identify our top priorities and devised a 90 day action plan.
Speaker Change: We are currently implementing this plan and closely managing expenses due to the uncertainty surrounding tablets and any disruptions to the supply chain.
Speaker Change: Regarding pricing, we're working on a customer by customer basis with golar minimizing the impact of electronics.
Saleel Awsare: And we are in discussion with our largest partners and contract manufacturers to manage and reduce costs. In this operating environment, we will continue to analyze, adjust, and execute our actions.
Speaker Change: And we are in discussion with our largest partners and contract manufacturers to manage and reduce cost.
Speaker Change: In this operating environment, we will continue to analyze adjust and execute our action.
Second regarding our effort to grow our channel distribution, we announced this past quarter that we're expanding our partnership with TD Cynics, our major distributor in North America.
Saleel Awsare: Second, regarding our effort to grow our channel distribution, we announced this past quarter that we are expanding our partnership with TD Cinex, our major distributor in North America. They are now distributing throughout Europe, focused on out-of-band management, network infrastructure, and industrial IoT solutions.
Speaker Change: We're now distributing throughout Europe focused on out of band management network infrastructure, and industrial Iot solutions, bringing expanded support to our customers and partners in the European Union.
Saleel Awsare: bringing expanded support to our customers and partners in the European Union. And we are also leveraging the acquired channel network from NETCOM to expand the distribution in Asia Pacific, Australia, and New Zealand.
Speaker Change: And we're also leveraging the acquired channel network from Netcom to expand the distribution in Asia Pacific, Australia, and New Zealand.
Speaker Change: Overall, the integration of Netcom products into our business has gone very well and I'm pleased with the level of customer engagement and new cross selling opportunities that we're seeing.
Saleel Awsare: Overall, the integration of Netcom products into our business has gone very well and I'm pleased with the level of customer engagement and new cross-selling opportunities that we are Third, regarding new customer wins, we recently announced a new AI-powered camera solution that uses our high-performance system and module paired with thermal infrared camera module from Teledyne FLIR. In this solution, our OpenCUE system and module provides advanced processing for AI-driven situational awareness. Advanced Thermal Imaging, and Real-Time Decision Making. This integration accelerates the next-gen AI camera solutions for drones, surveillance, and robots.
Speaker Change: Third regarding new customer wins, we recently announced a new AI powered camera solution that uses at high performance system on module.
Speaker Change: Ed with thermal infrared camera module from Teledyne Fleur.
Speaker Change: And this solution are open Q system on module provides advanced processing for AI driven situational awareness.
Speaker Change: Advanced thermal imaging and real time decision, making.
Speaker Change: This integration accelerates the nexgen AI camera solutions for drones surveillance and robotics.
Saleel Awsare: I'm also pleased that we announced our latest system and module using Qualcomm's DragonWing 8550 processor that's uniquely designed for higher AI and ML applications, such as video transcoding, camera applications, and edge gateway integration. As I've said previously, we are very focused on edge AI solutions because of the benefits of low latency, better security, and low power requirements at the edge of the network. And we are seeing more customers moving to hybrid architectures that are leveraging both cloud computing for heavy computation processing, as well as edge computing for intelligent, real-time information.
Speaker Change: I'm also pleased that we announced our latest system on module using Qualcomm's Dragon wing 80, 550 processor, that's uniquely designed for Hyatt AI and ml applications such as video transcoding.
Speaker Change: Camera applications and edge gateway integration.
Speaker Change: As I've said previously we are very focused on edge AI solutions because of the benefits of low latency better security and low power requirements at the edge of the network.
Speaker Change: And we are seeing more customers moving to a hybrid architectures that are leveraging both cloud computing for heavy computation processing as well as edge computing for intelligent real time infancy.
Saleel Awsare: And finally, we continue to manage our cost structure tightly, and I'm pleased to report our cash position increased sequentially in fiscal Q3 compared to the prior quarter. We also took the prudent step to pay down some debt, helping us reduce our interest expense.
Speaker Change: And finally, we continue to manage our cost structure tightly and I am pleased to report our cash position increased sequentially in fiscal Q3 compared to the prior quarter. We also took the prudent step to pay down some debt, helping us to reduce our interest expense.
Brent Stringham: Brent will be covering that in more detail in his talk.
Brent: But and we'll be covering that in more detail in the script Brent over to you.
Brent Stringham: Brent, over to you.
Brent Stringham: Thank you, Saleel. I will review the financial results and some business highlights for our third quarter of fiscal year 2025 before commenting on our financial outlook for the fourth quarter of fiscal 2025. For the third quarter of fiscal 2025, or FQ3, we reported revenue of $28.5 million. As we expected, revenue was down both sequentially and on a year-over-year basis with no shipments in the current quarter to our large smart grid customer in Europe as they work through their initial deployment. The revenue impact was partially offset by sequential organic growth in our embedded connectivity and switch products, along with growth in our gateways and routers led by products from the acquisition of Netcom last December.
Brent: Thank you Sunil.
Brent: I will review the financial results and some business highlights for our third quarter of fiscal year 2025, before commenting on our financial outlook for the fourth quarter of fiscal 2025.
Brent: For the third quarter of fiscal 2025 or F. Q3, we reported revenue of $28 5 million.
Brent: As we expected revenue was down both sequentially and on a year over year basis with no shipments in the current quarter to our large smart grid customer in Europe as they work through their initial deployments.
Brent: The revenue impact was partially offset by sequential organic growth in our embedded connectivity and switch products along with growth in our gateways and routers led by products from the acquisition of Netcom last December.
Brent: As expected and discussed on last quarter's call, we saw sequential and year over year increases in our GAAP and non-GAAP gross margins.
Brent Stringham: As expected and discussed on last quarter's call, we saw sequential and year-over-year increases in our GAAP and non-GAAP gross margins. Gap gross margin was 43.5% in FQ3 2025 compared to 42.6% in the prior quarter and 40.1% in the year-ago quarter. our non-GAAP gross margin was 44.1% in FQ3 2025 compared to 43.2% in the prior quarter and 41% in the year-ago quarter. GAAP operating expenses for FQ3 2025 were $16 million compared to $16.6 million in the year-ago quarter and $15.4 million in the prior quarter. We reduced our non-GAAP OPEX for FQ3 2025 by approximately 1.2 million compared to the year ago quarter, and by about 200,000 sequentially.
Brent: GAAP gross margin was 43, 5% in F Q3, 2025, compared to 42, 6% in the prior quarter and 41% in the year ago quarter.
Brent: Our non-GAAP gross margin was 44, 1% in F Q3, 2025, compared to 43, 2% in the prior quarter and 41% in the year ago quarter.
Brent: GAAP operating expenses for F Q3, 2025, or $16 million compared to $16 6 million in the year ago quarter, and $15 4 million in the prior quarter.
Brent: We reduced our non-GAAP opex for F Q3, 2025 by approximately $1 2 million compared to the year ago quarter and by about 200000 sequentially.
Brent Stringham: We continue to realize the impact of the various cost reductions we have spoken to in recent quarters. We know in the March quarter that non-GAAP OPEX, including costs related to NETCOM, was within our previously stated quarterly target range of $11.25 million to $11.75 million.
Brent: We continue to realize the impact of the various cost reductions we have spoken to in recent quarters.
Brent: We know in the March quarter that non-GAAP opex, including costs related to Netcom was within our previously stated quarterly target range of 11.25 million to $11 $75 million, which did not originally contemplated netcom operating costs.
Brent Stringham: which did not originally contemplate NETCOM operating costs. Gap net loss was $3.9 million, or $0.10 per share, during FQ3 2025, compared to gap net loss of $400,000, or $0.01 per share, in the year-ago quarter. The current quarter gap net loss includes a restructuring charge of approximately $1.6 million related to the cost reduction initiatives that we undertook and completed in January. Non-Gap Net Income was $1.1 million, or $0.03 per share, during FQ3 2025, compared to Non-Gap Net Income of $4.2 million, or $0.11 per share, in the year-ago quarter.
Brent: GAAP net loss was $3 9 million or 10 cents per share during F. Q3, 2025, compared to GAAP net loss of 400000 or one cent per share in the year ago quarter.
Brent: The current quarter GAAP net loss includes a restructuring charge of approximately $1 6 million related to the cost reduction initiatives that we undertook and completed in January.
Brent: non-GAAP net income was $1 1 million or <unk> <unk> per share during F. Q3, 2025, compared to non-GAAP net income of $4 2 million or <unk> 11 per share in the year ago quarter.
Brent Stringham: turning to the balance sheet. Cash and cash equivalents at the end of the March quarter totaled $20 million, slightly up from the prior quarter. For the three and nine month periods ended March 31st, 2025, we generated positive operating cash flow of $3.2 million and $6.2 million, respectively. Net inventory has decreased to $28.2 million as of March 31, 2025, as compared to $29.1 million in the prior quarter. Given our recent margin expansion and cost reductions, the positive cash flow from operations allowed us to improve our balance sheet during the current quarter by paying down about $2 million or 15% of our existing term debt.
Brent: Turning to the balance sheet.
Brent: Cash and cash equivalents at the end of the March quarter totaled $20 million slightly up from the prior quarter.
Brent: The three and nine months periods ended March 31, 2025, we generated positive operating cash flow of $3 2 million and $6 2 million respectively.
Brent: Inventories decreased to $28 2 million as of March 31, 2025, as compared to $29 1 million in the prior quarter.
Brent: Given our recent margin expansion and cost reductions the positive cash flow from operations allowed us to improve our balance sheet during the current quarter by paying down about $2 million or 15% of our existing term debt.
Brent Stringham: As Saleel previously mentioned, this will help improve savings on interest costs. As of March 31, 2025, our remaining debt balance approximates $12.5 million, giving us net cash of $7.5 million.
Brent: As <unk> previously mentioned this will help improve savings on interest costs as of March 31, 2025, our remaining debt balance approximates $12 5 million, giving us net cash of $7 5 million.
Brent Stringham: Now for the Outlook. For the fourth quarter of fiscal 2025, we expect revenue to be in the range of $26.5 to $30.5 million. Given the current environment, we are expecting some pressure on gross margins in FQ4 compared to our recent near-record gross margins in FQ3.
Brent: Now for the outlook.
Brent: For the fourth quarter of fiscal 2025, we expect revenue to be in the range of $26 $5 million to $35 million.
Brent: Given the current environment, we are expecting some pressure on gross margins in F Q4, compared to our recent and near record gross margins in F Q3.
Brent Stringham: Accordingly, non-GAAP EPS for FQ4 is expected to be in the range of $0 to $0.02 per share. Thanks, Brent.
Brent: Accordingly, non-GAAP EPS for F Q4 is expected to be in the range of zero to two cents per share.
Brent: Thanks Brent.
Saleel Awsare: As we consider our outlook for the June quarter, we have been cautious given the macro uncertainty. We are executing well in the current operating environment and managing our expenses closely. We are generating positive cash flow. Our balance sheet is strong. Our customer design activity is growing very nicely. In addition to solid business execution, we remain very focused on developing edge intelligence solutions with Compute & Connect for our customers.
Brent: As we considered in our outlook for the June quarter, we have been cautious given the macro uncertainty.
Brent: We are executing well in the current operating environment.
Brent: Managing our expenses closely we are generating positive cash flow our balance sheet is strong.
Brent: Customer design activity is growing very nicely.
Brent: In addition to solid business execution, we remain very focused on developing edge intelligence solutions with computer and connect for our customers.
Operator: With that, I'd like to ask the operator to open the call for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. if you're using a speakerphone. Please pick up the handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Brent: With that I'd like to ask the operator to open the call for Q&A.
Brent: Thank you.
Brent: Thank you.
Brent: We will now begin the question and answer session.
Brent: To ask a question you might best Star then one on your telephone keypad.
Brent: Yeah.
Brent: If you're using a speaker phone.
Brent: Please pick up the handset before pressing the keys.
Brent: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Brent: At this time, we will pause momentarily to assemble our roster.
Operator: At this time, we will pause momentarily to assemble our Austin.
Speaker Change: Our first question comes from Jason Smith from Lake Street. Please go ahead.
Jaeson Schmidt: Our first question comes from Jaeson Schmidt from Lake Street. Please go ahead. Yeah, thanks for taking my questions. Just curious what the Netcom contribution was in the March quarter. And I know you noted that you've been pleased with sort of customer engagement on that. But how should we think about potential growth of that business going forward?
Jason Smith: Hey, guys. Thanks for taking my questions just curious what the Netcom contribution was in the March quarter and I know you noted that you've been pleased what sort of customer engagement on that but how should we think about potential growth of that business going forward.
Jason Smith: Hey, Jason. Thank you for that question as we mentioned when we did the acquisition that we expect the revenue to be $6 million to $7 million on an annualized basis, we are tracking to.
Saleel Awsare: Hey, Jaeson, Saleel here. Thank you for that question. As we mentioned, when we did the acquisition that we expect the revenue to be 6 to 7 million on an annualized basis, we are tracking to exceed that run rate. And if you remember, I'd spoken, we should expect to be, you know, 15 to 20% higher than that run rate. If you think about it on an annualized basis.
Jason Smith: To exceed that run rate and if you remember I've spoken we should expect to be 15.
Jason Smith: 15% to 20% higher than that run rate.
Jason Smith: If you think about it on an annualized basis.
Saleel Awsare: The second part is, how are the customers tracking? The majority, the two big customers are Vodafone and Coca-Cola, I've spoken to them before, and they seem to be very well engaged with us. But what has happened is, some of the other customers that we were working with are also opportunities for some of our other products like Out-of-Band and some of our other industrial IoT products that we have. So in the mid to long term, this is going to be very good as we put it all together with the Lantronix products and the NetGock acquired products.
Jason Smith: The second part is how are the customers tracking are the majority of the two big customers are a waterfall and Coca Cola I've spoken to them before and they seem to be very well engaged with us, but what has happened is.
Jason Smith: Some of the other customers that we were working with are also opportunities for some of our other products like auto band and some of our other industrial Iot products that we have so I.
Jason Smith: In the in the mid to long term. This is going to be very good as we put it altogether with the electronics products and the net golf acquired products and and one key aspect that we really like the business for was it with the <unk> and we got that five G product in itself, it's already sampling.
Jaeson Schmidt: And one key aspect that we really like the business for was the 5G. And we got that 5G product and it's already sampled. Okay, that's really helpful.
Speaker Change: Okay. That's really helpful. And then just given the current macro curious what youre seeing from sort of our quoting activity and order pattern perspective, so far here in Q4.
Jaeson Schmidt: And then just given the current macro, curious what you're seeing from sort of a quoting activity and order pattern perspective so far here in Q4. Great, great question with the macro. And you know, the organization is ready. We've been handling the changes that are ongoing, and we feel really confident where we're at.
Speaker Change: Great Great question, I mean, the macro and you know that the organization is ready.
Speaker Change: <unk> been handling that.
Speaker Change: Changes that are ongoing and we feel really confident very react. So few points, we are not seeing any cancellations push outs or any unnatural behavior from our customers.
Saleel Awsare: So, a few points. We're not seeing any cancellations, pushouts, or any unnatural behavior from our customers. The design activity is continuing to be just fine.
Speaker Change: The design activity is continuing to be just fine.
Brent Stringham: And in the prepared remarks, maybe we talked about how we are managing it, and adding a little bit more color to this.
Speaker Change: And in the prepared remarks, maybe you talked about how we are managing it and adding a little bit more color to this we will be.
Brent Stringham: We will be pretty much out of our China manufacturing by early FQ126.
Speaker Change: Pretty much out of our China manufacturing by early FQ126, maybe you want to add to that a little bit right.
Brent Stringham: Maybe you want to add to that a little bit, Brent. Yeah, we, you know, we, this has been an ongoing process for the last few quarters already before all of these tariffs were announced. So we've, you know, we're seeing the last remnants of some of the Netcom acquired manufacturing playing out over the next quarter or so. And really, from a metric standpoint, you know, we have less than 5% of our products that are manufactured in are destined for the US. And as Saleel said, you know, we're in the process of fully decommitting from China in the next 90 days or so.
Speaker Change: Yeah.
Speaker Change: Yeah. We we this has been an ongoing process for the last few quarters already before all of these tariffs were announced so we you know we're seeing are the last remnants of some of the netcom acquired manufacturing.
Speaker Change: Playing out over the next quarter or so.
Speaker Change: And really.
Speaker Change: From a metric standpoint.
Speaker Change: We have less than 5% of our products that are manufactured in China are destined for the U S and as <unk> said.
Speaker Change: We're in the process of fully fully decommissioned from China in the next 90 days or so.
Speaker Change: Got you and then just a last one from me and I'll jump back into queue. Just following up on some of those comments.
Jaeson Schmidt: Gotcha. And then just the last one from me, and I'll jump back into queue.
Jaeson Schmidt: Just following up on some of those comments, has the macro changed how you're thinking about current expertise in fiscal 26? You know, they continue to do their deployment, we continue to remain engaged with them. There is nothing new for me to add other than the fact that, you know, we are in good conversations with Grisworthies, their deployment is ongoing, and we are engaged, and we are still single source.
Speaker Change: As the macro change how you're thinking about cards per teeth in fiscal 'twenty six.
Speaker Change:
Speaker Change: You know they continue to do their deployment.
Speaker Change: We remain engaged with them that.
Speaker Change: That is nothing new for me to add other than the fact that we have.
Speaker Change: And good conversations with risk with these their deployment is ongoing and we are engaged and we are still single sourced.
Saleel Awsare: That's, you know, the clarity that I have for you on specifically Grits for Teeth.
Speaker Change: Either the clarity that I have for you on specifically grids for DS.
Speaker Change: Okay I appreciate that color guys. Thanks, a lot.
Jaeson Schmidt: Okay, appreciate that call you guys. Thanks a lot. Thanks, Jaeson. Thank you.
Jason Smith: Thanks, Jason.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Scott Searle from Roth Capital. Please go ahead.
Scott Searle: Our next question comes from Scott Searle from Roth Capital, please go ahead. Hey, good afternoon. Thanks for taking my questions.
Scott Searle: Hey, good afternoon, thanks for taking my questions.
Scott Searle: Hey, Saleel, maybe just to jump in on the edge compute side of the equation, a lot going on from a product development standpoint, starting at CS, I think, continuing at Mobile World Congress. I wonder if you could give us some updated thoughts in terms of what that engagement and design activity pipeline looks like, when we should start to see some revenues. How quickly does that ramp up in fiscal 26 and kind of frame in the opportunity?
Speaker Change: Maybe just to jump in on the edge compute side of the equation a lot going on from a product development standpoint, starting at CES I think continuing at mobile World Congress I Wonder if you could give us some updated thoughts in terms of what that engagement design activity pipeline. It looks like when we should start to see some revenues how how quickly does that ramp up in fish.
Scott Searle: 26, and kind of framing the opportunity.
Saleel Awsare: Great question, Scott. And thank you for that question. Our Edge AI initiatives and focus is starting to pay off.
Scott Searle: A great question, Scott and thank you for that question.
Scott Searle: Our edge AI initiatives and focus is starting to pay off.
Saleel Awsare: First one was we announced with Teledyne FLIR, a cooperation where our product is in their new thermal imaging camera. And it's going to go into production shortly, I believe. So we're working with them on that.
Scott Searle: First one was we announced with Teledyne Fleur.
Scott Searle: A cooperation where our product is in their new thermal imaging camera and it's going to go into production. Shortly I believe so we're working with them on that.
Saleel Awsare: Specifically, three areas were where we were focused on. One was drones, robotics, and security and surveillance. I'm very pleased to report our first drone customer, if all the trials complete well, will go into production in the June quarter, small amounts. But as we then go into the fiscal 26, it's going to start to pick up speed. On the surveillance side, we are engaged with two companies where they're looking at our technology to put into their new, I would call it AI-enabled camera, Scott. So in 26, we do see revenue from the AI activities that we are doing specifically around cameras.
Scott Searle: Specifically three areas, where when we were focused on one was drones robotics and security and surveillance and I'm very pleased to report our first joint customer if all the trial is complete well will go into production in the June quarter small amounts, but as we've been going through the fiscal 'twenty.
Scott Searle: Six is going to start to pick up speed on the surveillance side. We are engaged with two companies, where they're looking at our technology to put into their new I would call. It AI enabled camera Scott. So in 'twenty six we do see a revenue from from the AI activities that we're doing specifically.
Scott Searle: Cameras.
Saleel Awsare: From a market size, as you've seen the numbers, Grandview, all of these folks are talking about markets in the billions of dollars longer term. We do believe that we will be able to grow nicely with some of the engagements, and we've really been laser-focused enabling cameras with Edge AI, and that's what we do really well. So I'm happy to report that we have our first design in and hopefully first volume shipments in this quarter. It's a start, but it'll pay off in fiscal 2020. No, great. Thank you. It's good to see some of the traction momentum building on that front.
Scott Searle: From a market size as you've seen the numbers Grand view.
Scott Searle: All of these folks are talking about you know markets in the billions of dollars longer term we.
Scott Searle: We do believe that we would be able to grow nicely with some of the engagements and we've really been laser focused enabling cameras with edge AI and that's what we do really well so.
Scott Searle: I'm happy to report that we have our first.
Scott Searle: Designing in and hopefully first volume shipments in this quarter, it's a stock.
Speaker Change: B it will pay off in fiscal 'twenty six no great. Thank you. It's good to see some of the traction momentum building on that front and in terms of the guidance for the June quarter I'm wondering at this point a couple of things like what visibility do you have to that range at the current time, what are kind of the swing factors on that front to the upside and downside as Greer.
Scott Searle: And in terms of the guidance for the June quarter, I'm wondering at this point, a couple of things, like what visibility do you have to that range at the current time? What are kind of the swing factors on that front to the upside and the downside? Is grid expertise, you know, part of the equation at all in the June quarter?
Scott Searle: For Ts.
Scott Searle: Part of the equation at all in the June quarter, and then I know, it's early but I'm wondering if you could give us your initial thoughts in terms of growth into fiscal 'twenty six it looks like the decks are cleared here with grids for Ts now largely out of the numbers.
Scott Searle: And then I know it's early, but I'm wondering if you give us your initial thoughts in terms of growth into fiscal 26. It looks like the decks are cleared here with grid expertise now largely out of the numbers. You know, what are the early thoughts in terms of how that's starting to shape up? I know it's outside of the near-term tariff window, but I'd love to get your initial thoughts.
Scott Searle: What are the early thoughts in terms of how that is starting to shape up I know, it's a it's outside of the near term tariff window, but I'd love to get your initial thoughts. Thanks, Yeah yeah.
Saleel Awsare: Thanks. Yeah, yeah. Thanks for that.
Scott Searle: Thanks for that and let me try to take one at a time of.
Saleel Awsare: And let me try to take one at a time. For the June quarter, we have no grid expertise revenue, similar to what it was for the March quarter. So as you can see, our base business is starting to grow. I'm very pleased to tell you that. As I think about where we are sitting today, without getting into the details, our bookings were good last quarter, our bookings continue to be good this quarter. So as I said in my prepared remarks, Scott, I was very prudent and cautious with the number that we put out there. So sitting today, we feel fine about the number we put out there for you guys.
Scott Searle: For the June quarter, we have no grids, but these revenue similar to what it was for the March quarter.
Scott Searle: So as you can see our base business is starting to grow I'm very pleased to tell you that.
Scott Searle: As I think about where we are sitting today without getting into the details. Our bookings have were good last quarter. Our bookings continued to be good this quarter. So as I said in my prepared remarks, Scott I was very prudent and cautious with the number that we put out there so.
Scott Searle: Sitting today.
Scott Searle: We feel.
Scott Searle: About the number we put out there for you guys and we were cautious though as we've talked about it. So we did not go over our skus by any means.
Saleel Awsare: And we were cautious as we thought about it. So we did not go over our skis by any means. And as I think about the future for 26, from the run rate business that we are at now from this quarter or last quarter, we should definitely grow double digits. And we have the design momentum and customers that we are working with that will allow us to show that.
Scott Searle: And as I think about the future for 'twenty six.
Scott Searle: No from from the run rate business that we have that now from this quarter or last quarter, we should definitely grow double digits and we have we have the design momentum and customers that we're working with that will allow us to show that.
Speaker Change: It's very helpful and lastly, just on the out of band side of the equation I'm. Just wondering some updated thoughts on that front, it's tended to be a little I think volatile over over several quarter period, but are you starting to get some stability and I'll call. It recurring customers in terms of their buying patterns here. Thank you.
Scott Searle: Okay, very helpful.
Scott Searle: Lastly, just on the out-of-band side of the equation, I'm just wondering some updated thoughts on that front. It's tended to be a little, I think, volatile over several quarter periods, but are you starting to get some stability and I'll call it recurring customers in terms of their buying patterns here? Thank you.
Speaker Change: Yeah, Hey, Scott This is Brent thanks for the question Yeah as you mentioned we've seen.
Brent Stringham: Yeah, hey, Scott, this is Brent. Thanks for the question. Yeah, as you mentioned, you know, we've seen some lumpiness in that in that business. And that's largely because, you know, as we know, it's dependent on, you know, project-based capital spending, and also to a certain amount of federal spending, which, you know, there's some slowdown there. So we're seeing good momentum with the pieces we put in place at the company, resources and the like, and we feel good about the business going forward and kind of expect to get out of the slowdown we've seen over the last quarter or two going forward.
Speaker Change: Some some lumpiness in that in that business and that's largely because it's you know as we know it is dependent on project based capital spending and.
Speaker Change: And also to a certain amount of federal spending which.
Speaker Change: There is there is.
Speaker Change: Some slowdown there so well.
Speaker Change: Where we're seeing good momentum with the pieces, we put in place at the company resources and alike and and.
Speaker Change: And we feel good about our about the business going forward and kind of expect to get out of.
Speaker Change: The slowdown we've seen over the last quarter or two going forward.
Saleel Awsare: And Scott, let me just add, we brought in a new general manager to run that business, and we feel really good about it. He comes out of OpenGear, and I think you know those guys. So I anticipate we will start to see some good momentum, you know, in the probably second half of 26, from where we're at, with some new design connected.
Scott Searle: Scott Let me just add we brought in a new.
Speaker Change: General manager to run that business and we feel really good about it he comes out of open gear.
Speaker Change: You know those guys. So I anticipate we will start to see.
Speaker Change: Some some good momentum.
Speaker Change: Momentum.
Speaker Change: In the second half of 2006 from any of that with some new design win activity.
Scott Searle: Great. Thanks so much. Thanks, Scott. Thank you.
Speaker Change: Great. Thanks, so much.
Scott Searle: Thanks Scott.
Speaker Change: Thank you.
Speaker Change: A reminder to all the participants if you wish to register for a question. Please press Star then one on your telephone keypad.
Operator: A reminder to all the participants, if you wish to register for a question, please press star then 1 on your telephone keypad.
Christian Schwab: Our next question comes from the line of Christian Schwab from Craig Hallam Capital Group. Please go ahead. Thanks for taking my questions.
Speaker Change: Our next question comes from the line of Christian Schwab from Craig Hallum Capital Group. Please go ahead.
Christian Schwab: Thank you for taking my question.
Christian Schwab: I just wanted to follow up on the commentary you just made just a few seconds ago that you're confident you can grow.
Speaker Change: Double digits again in 2026.
Speaker Change: Is that based on you know, obviously netcom rolling in but you.
Saleel Awsare: Scott Searle, Tyler Burmeister, Ryan Koontz, Jeremy Whitaker, George Gianarikas, Saleel Awsare, Brent Stringham, Lantronix, Jeremy Whitaker, George Gianarikas, Saleel Awsare, Brent Stringham, Lantronix, Jeremy Whitaker, Tyler Burmeister, Ryan Koontz, Jeremy Whitaker, Christian, thank you for that question. So as I said, you know, from the base business that we're at today, you know, it's about 28 and a half, approximately, we definitely see a growth of 10%, double digit could be 10% could be 12% from from a couple things design activity. The Qualcomm relationship with new products that we're releasing, new industrial IoT products coming. Also, without a ban, we're releasing a new box that's going to be coming out in probably 90 days.
Speaker Change: You know as you know include grid booties coming back in large you know digestion of previous orders being done.
Speaker Change: Or is that just based on the core business and.
Speaker Change: Expansion of opportunities partnerships with TD, you know set eggs or you know new design wins ramping and you know through your Qualcomm relationship any color there would be great.
Christian Schwab: Christian Thank you for that question.
Christian Schwab: So as I said, you know from the base business that we are at today.
It's about 20, it's gonna have approximately we definitely see a growth of 10%.
Christian Schwab: Double digits could be 10 could be 12%.
Christian Schwab: From from a couple of things design activity.
Christian Schwab: The Qualcomm relationship with new products that we're releasing.
Christian Schwab: New industrial Iot products coming.
Christian Schwab: Also without a band we are releasing some a new box that's going to be coming out in probably 90 days.
Saleel Awsare: So all of that is... in my plan and the company's plan as you think about fiscal 26 from the run rate we're at now.
Christian Schwab: So all of that is in.
Christian Schwab: In my plan and the company's plan as you think about fiscal <unk> fiscal 'twenty six from from the run rate we are at now.
Christian Schwab: Without getting into too much with Grit's expertise, All I'll say is they need to get their deployments done, and I'm working with them closely, but I wouldn't say I'm putting in any big numbers for grid expertise in the number. Does that kind of give you enough clarity? That's great color.
Christian Schwab: Without getting into too much with good expertise.
Christian Schwab: All I'll say is they need to get their deployments done and.
Christian Schwab: I'm working with them closely but I wouldn't say I'm, putting in any big numbers for groups of beef in the number.
Christian Schwab: Does that give you enough clarity.
Speaker Change: That's great color and then my last.
Saleel Awsare: And then my last question is, you know, are you are you still currently the only sole supplier to Grid4T? Should they digest the inventory they have in their rollouts and get back on track? Would you still be the only one they would call? Yes, we are single-sourced with them, and we continue to be single-sourced, and as I've spoken in the past, they're doing a few POCs in the U.S. and things like that. I'm hopeful for the longer term, but, you know, we've helped them, shipped a lot of product. We are still working with them, but, you know, I've tried to de-risk the number as much as I can.
Speaker Change: Question. As you know are you are you still are currently the only.
Speaker Change: So suppliers to grid for Ts should they digest the inventory they have in their rollouts and get back on track, but would you still be the only one they would call.
Speaker Change: Yes, we are single sourced with them.
Speaker Change: And we continue to be single source and as I've spoken in the past they are doing a few poc's in the U S and things like that I am hopeful for the longer term, but you know we've been.
Speaker Change: Help them shipped a lot of product.
Speaker Change: We are still working with them but.
You know.
Speaker Change: <unk> tried to derisk the number as much as I can say is that it makes sense like the fully only the single source with them right now.
Saleel Awsare: So does that make sense? Like, we are fully, only the single source with them right now. and that I've confirmed as of a month ago. Perfect.
Speaker Change: And that I've confirmed as of a month ago.
Speaker Change: Perfect.
Christian Schwab: That's all my questions. Thank you. Thank you so much. Thank you. This concludes our question and answer session.
Speaker Change: That's all my questions. Thank you.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would now like to turn the conference back over to Sally He loves Terry for closing remarks.
Saleel Awsare: I would now like to turn the conference back over to Saleel Awsare for closing remarks. Thank you everyone for joining the call, and we will be in Minnesota at the Craig Holland Conference the week after Memorial Day. Thank you so much.
Speaker Change: Thank you everyone for joining the call and we will be in Minnesota, The Craig Hallum Conference. The week after Memorial day. Thank you so much.
Operator: Bye-bye. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect. and many more. and others. and many more. Thank you.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yeah.
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