Lantronix Q4 2025 Earnings Report

Lantronix EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.01
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Lantronix Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $28.48 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Lantronix Announcement Details

• Quarter: Q4 2025
• Date: 8/27/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 27, 2025
• Conference Call Time: 5:00PM ET

Lantronix (NASDAQ:LTRX) is a provider of secure data access and management solutions designed to simplify the deployment, monitoring and control of devices and equipment across a wide range of industries. Headquartered in Irvine, California, the company develops hardware and software products that enable connectivity for smart devices, industrial machinery, IT infrastructure and other systems in the Internet of Things (IoT) ecosystem.

Founded in 1989, Lantronix was among the early innovators in serial-to-Ethernet device networking and has since expanded its portfolio to include secure console servers, device servers, gateways and embedded modules. Its offerings are designed to help businesses convert legacy devices to networked assets, while providing robust encryption, authentication and compliance features for critical applications.

The company’s flagship software platform, Mach10, delivers centralized device management and remote access capabilities via the cloud, allowing users to monitor device health, perform firmware updates, and troubleshoot equipment without the need for on-site intervention. Lantronix also supplies embedded modules and system-on-modules (SoMs) that integrate networking and security functions into OEM products, accelerating time-to-market for original equipment manufacturers.

Lantronix serves customers globally through a network of channel partners and direct sales, with a presence in North America, Europe, and the Asia-Pacific region. Its solutions are employed in sectors such as healthcare, manufacturing, energy, transportation and telecommunications, where reliable and secure device connectivity is essential for operational efficiency and remote management.

Lantronix Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The company reported $28.8 million in Q4 revenue and a non-GAAP EPS of $0.01, both within guidance and marking a return to core revenue growth excluding Gridspertise.
• Positive Sentiment: Lantronix secured a design win with Redcat’s Teal drones for the U.S. Army’s short-range reconnaissance program, began shipments in June, and gained early visibility into fiscal 2026 revenue.
• Positive Sentiment: A multi-year agreement with a major U.S. mobile carrier to modernize 50,000 backup power systems is underway, with initial shipments and future ARR from the company’s perception platform expected to drive long-term growth.
• Neutral Sentiment: Fourth-quarter gross margin dipped to around 40% due to inventory write-downs and higher tariffs, but management expects margins to recover to the mid-40% range in fiscal 2026 through supply chain and cost initiatives.
• Neutral Sentiment: The company set Q1 fiscal 2026 guidance at $28.5 million–$30.5 million in revenue and $0.02–$0.04 in non-GAAP EPS, reflecting continued momentum from recent design wins and a more diversified core business.

Presentation

[Operator]

Good day, and welcome to the Lantronix Fourth Quarter and Full Year twenty twenty five Results Conference Call. All participants will be in a listen only mode. Please note that this event is being recorded. I would now like to turn the conference over to Brent Stringham, Chief Financial Officer. Please go ahead.

[Brent Stringham, CFO at Lantronix]

Good afternoon, and thank you for joining our fiscal fourth quarter and full year twenty twenty five earnings call. Joining me today is our President and Chief Executive Officer, Saleo Alsare. A live 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. 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.

[Brent Stringham, CFO at Lantronix]

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 ks and 10 Qs. Lantronix undertakes no obligation to revise or update publicly any forward looking statements to reflect future events or circumstances. 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.

[Brent Stringham, CFO at Lantronix]

With that, I will now turn the call over to Saleel.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thanks, Brent, and thank you, everyone, for joining today's call. Fiscal twenty twenty five marked a turning point for Lantronix, a year of disciplined execution, meaningful transformation and building the foundation for sustainable long term growth. The progress was evident in our fourth quarter results with revenue of $28,800,000 and a non GAAP EPS of zero one dollars both well within our quarterly guidance range. These results reflect a return to growth in our core revenue base, excluding the impact of Gridspertise, our EMEA smart grid customer. As we enter the new fiscal year, we see powerful industry dynamics creating significant opportunities for Lantronix.

[Saleel Awsare, President, CEO & Director at Lantronix]

We believe we are entering a multi year growth cycle for unmanned aerial systems supported by record defense funding and favorable regulatory momentum. According to the U. S. Department of Defense more than $13,000,000,000 is earmarked for unmanned platforms in 2026 that increased focus on secure U. S.

[Saleel Awsare, President, CEO & Director at Lantronix]

Made technologies. We believe the demand environment for our solutions has never been stronger. Against this backdrop of growing demand, we are beginning to see meaningful traction in the market, highlighted by our most recent win with Redcat's Teal drones, which we formally announced last week. We've been collaborating with their team for some time and our TAA and NDA compliant solution now powers TEAL's Black Widow drones for the U. S.

[Saleel Awsare, President, CEO & Director at Lantronix]

Army's short range reconnaissance program. As a blue UAS approved platform, this program highlights both the rigor of qualification process and the mission critical role of our technology. We began shipments in the June, generating initial revenue and strengthening visibility into fiscal twenty twenty six. We believe our competitive edge lies in our deep camera expertise, military and other high performance drone requirements include advanced camera tuning, sensor fusion and complex software integration, capabilities we have refined over many years. Equally important being North America based and fully compliant with NDAA and TAA regulations further positions us as a trusted supplier to OEMs and defense contractors engaged in U.

[Saleel Awsare, President, CEO & Director at Lantronix]

S. Government programs. RedCap's steel drones exemplifies our secure edge compute solutions, drive long term growth opportunities in the drone market. Beyond defense, our partnership with Aurora highlights our ability to deliver high performance HII solutions for commercial drone applications. By combining our compute module with Teledyne FLIR's thermal camera and Prism AI software, we enable more intelligent real time decision making for applications like autonomous flight, surveillance and industrial inspection.

[Saleel Awsare, President, CEO & Director at Lantronix]

Early market feedback has been very positive and we expect revenue contribution from these solutions to begin in fiscal twenty twenty six. Looking ahead, we see broader industry trends, including government investment and rising demand for U. S.-based suppliers creating a strong runway for both defense and commercial growth. Moving to our next win, we recently signed a multi year agreement with a major U. S.

[Saleel Awsare, President, CEO & Director at Lantronix]

Mobile carrier to provide devices and services as they modernize over 50,000 backup power systems at wireless cell sites nationwide. This win is a strong validation of our edge infrastructure strategy, enabling resilient network uptime, improved lifecycle management and real time operational visibility across thousands of distributed locations. So far, we booked nearly all the initial units and have begun shipping in the June. With additional orders expected as the rollout continues, we believe this is a long term opportunity with this customer and expect additional volume beyond this initial deployment reflecting the depth of our relationship and the strategic nature of the program. In addition to the sizable hardware deployment, this design win also incorporates our perception platform enabling remote monitoring and ongoing management of connected assets.

[Saleel Awsare, President, CEO & Director at Lantronix]

As these devices are brought online, we expect they will contribute our growing base of high margin annual recurring revenue. This win also opens the door to broader collaboration with the carrier over time, including additional software enabled services and potential expansion across their larger network footprint. These types of win highlight our transition from a traditional hardware supplier to a strategic platform partner helping customers accelerate intelligence at the edge. This evolution positions us to capture a larger share of customer wallet, deepen long term relationships and embed our solution more directly in their critical operations. By moving up the value chain, we are not only expanding revenue opportunities, but also creating stickier high margin business over time.

[Saleel Awsare, President, CEO & Director at Lantronix]

Turning to our growth outlook. As we turn the corner into a new fiscal year, we are seeing growing momentum fueled by recent design wins that are expanding our customer base and enhancing the predictability of our business. This diversification marks an important step forward as as we move past the impact of Grizzpertise and underscores the underlying strength of our core platform. Q1 is off to a strong start with healthy engagement from both new and existing customers across multiple verticals. Our core business has stabilized and is now positioned to deliver growth over the longer term.

[Saleel Awsare, President, CEO & Director at Lantronix]

At the same time, we are beginning to see encouraging traction in our Edge AI strategy. Looking ahead, our visibility in fiscal twenty twenty six has improved supported by momentum across these two strategic pillars of our platform. Edge IoT spanning compute and connectivity and network infrastructure encompassing out of band management and networking solution. The momentum is driven by recent design wins in edge IoT and out of band, continued investment in product innovation and expanding relationships across our distribution and technology partner ecosystems. Together, these initiatives reinforce our ability to scale profitably and capture long term opportunities at the intelligent edge. With that, I'll turn the call over to Brent to provide more detail on our financial performance. Brent?

[Brent Stringham, CFO at Lantronix]

Thanks, Saleel.

[Brent Stringham, CFO at Lantronix]

Building on that strategic context, I will now walk through our fourth quarter and fiscal twenty twenty five financial results, highlight the key drivers behind our performance and provide our outlook for the 2026. Looking back on fiscal twenty twenty five, we delivered revenue of $123,000,000 reflecting the transition from a record fiscal twenty twenty four to a more normalized revenue base. As we have noted before, fiscal twenty twenty four included a significant contribution from Gridsfertise, which accounted for roughly 25% of revenue that year. In fiscal twenty twenty five, we recognized just over $11,000,000 from Gridsfertise in the first half, with minimal revenue contribution in the second half of the year as the customer continued to work through its prior deployments. Excluding this customer, our core revenue base stabilized in the second half of the year and the operational discipline we've driven over the last twelve months positions us for more sustainable and diversified growth in fiscal twenty twenty six.

[Brent Stringham, CFO at Lantronix]

In the 2025, we delivered revenue of $28,800,000 a sequential increase from $28,500,000 in the prior quarter and approximately 4% higher than fiscal Q4 twenty twenty four when excluding the impact of GridSportees. This growth, driven by continued momentum in our Edge IoT products, underscores the strength of our core platform and the benefits of a more diversified revenue base. Turning to margins. In the fourth quarter, GAAP gross margin was 40% compared to 43.5% in the prior quarter and 38.1% in the year ago period. On a non GAAP basis, gross margin was 40.6% versus 44.1% last quarter and 38.8 in the year ago quarter.

[Brent Stringham, CFO at Lantronix]

The sequential decline primarily reflects inventory charges for aged inventory and higher duties and tariffs incurred in the quarter. Despite these temporary impacts, margins remain above the year ago period, reflecting benefits from our ongoing cost and supply chain initiatives as well as a favorable product mix. As we continue to carefully manage our inventories and the impact of tariffs, we expect gross margins to recover to the levels we achieved in the 2025. We have made strong progress on our ninety day plan to further improve our cost structure and supply chain efficiency. As of today, the vast majority of U.

[Brent Stringham, CFO at Lantronix]

S.-bound products are now manufactured outside of China, reducing costs and minimizing potential tariff exposure going forward. Turning to expenses and profitability. GAAP operating expenses in the 2025 were $14,700,000 down from $16,000,000 in the prior quarter and $18,200,000 in the year ago period. GAAP net loss for the 2025 was $2,600,000 or $07 per share compared to GAAP net income of $400,000 or $01 per share in the year ago quarter. GAAP results for both the fiscal fourth quarter and full year include restructuring charges of $900,000 and $3,500,000 respectively, related to the cost reduction initiatives we executed during the year.

[Brent Stringham, CFO at Lantronix]

On a non GAAP basis, we reported net income of just under $400,000 or $01 per share compared to non GAAP net income of $1,100,000 or $03 per share in the prior quarter. Cost reductions that we have discussed in recent quarters continue to benefit our P and L with non GAAP operating expenses down by just under $200,000 from the prior quarter and approximately $1,900,000 compared to the year ago quarter. Importantly, the proactive steps we took have reduced just over $4,000,000 of costs relative to fiscal twenty twenty four, and the implemented efficiency measures have created a leaner operating structure and meaningful leverage in our model. We streamlined our operations, optimized our supply chain and reduced operating expenses while continuing to invest into strategic growth initiatives. These actions allowed us to maintain profitability on a non GAAP basis despite the year over year revenue decline.

[Brent Stringham, CFO at Lantronix]

Turning to the balance sheet. Net inventories decreased to $26,400,000 as of 06/30/2025, compared to $28,200,000 in the prior quarter and $27,700,000 at the end of fiscal twenty twenty four. We ended the June with cash and cash equivalents of $20,100,000 up from the prior quarter. For the quarter, we generated positive operating cash flow, bringing our full year fiscal twenty twenty five operating cash flow to $7,300,000 During the year, we paid down approximately $4,500,000 of term debt or 28% of our outstanding balance. As of 06/30/2025, our remaining debt was approximately $11,800,000 resulting in a net cash position of $8,300,000 providing us with a stronger balance sheet entering fiscal twenty twenty six.

[Brent Stringham, CFO at Lantronix]

We also recently refinanced this term debt into an asset backed line of credit with the same lending partner. This refinancing reduces interest expense, provides greater flexibility on principal repayments and extends the maturity to August 2028. Together with our debt reduction efforts, these actions strengthen liquidity and improve the efficiency of our capital structure. Now turning to our outlook for the 2026, which ends 09/30/2025. We expect revenue to be in the range of $28,500,000 to $30,500,000 Non GAAP EPS is expected to be in the range of $02 to $04 per share.

[Brent Stringham, CFO at Lantronix]

With that, I'll turn the call back to Saleel for closing remarks.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thanks, Brent. To close, fiscal twenty twenty five was a year of transformation for Lantronix, one in which we built a strong foundation for profitable growth and positioned the company to capitalize on high value opportunities and edge AI and infrastructure modernization. We reshaped our global operations, established four centers of excellence, streamlined our cost structure and strengthened our balance sheet. We successfully integrated the Netcomm IoT acquisition and deepened our strategic partnership with Qualcomm, expanding our capabilities in edge IoT and AI driven innovation. On top of this, we proactively mitigated tariff exposure and realigned our supply chain, actions that reduce risk and support improved gross margin performance going forward.

[Saleel Awsare, President, CEO & Director at Lantronix]

Collectively, these initiatives have focused our resources on the highest impact opportunities, embedded meaningful operating leverage into our model and strategically reposition Nantronix to scale with sustained profitability as we enter fiscal twenty twenty six. With that, we now open the call for your questions.

[Operator]

Thank you. We will now begin the question and answer session. Question will

[Operator]

And your first question today will come from Jason Schmidt with Lake Street. Please go ahead.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Hey, guys. Thanks for taking my questions. Just want to start with the drone opportunity. Obviously, a massive market and you guys are seeing some really nice traction here out of the gate. How should we think about the potential for you guys here in the near term, both with Redcat and what you potentially have in the pipeline?

[Saleel Awsare, President, CEO & Director at Lantronix]

Jason, Saleel, thank you for that question. We are extremely excited about the drone market and the drone opportunity. Just to give you a frame reference, we announced Red CAT about a week ago, but as of this quarter, we have over 10 different drone makers that we're working on, mainly military or industrial applications. We see this market growing really nicely into fiscal twenty twenty six, representing a meaningful portion of our business longer term. And again, it's fueled by programs like the SRR with Redcat and as more funding comes, we are well suited there.

[Saleel Awsare, President, CEO & Director at Lantronix]

And I think the key is our competitive edge is our expertise in cameras. We've been working around cameras for a long time and that's really what a road requires. The camera tuning, the fusion, the software integration and then us being North American based NDA and TA certified really allows us to win these contracts. So we have shipped as I said last quarter, I mean in the June, we have visibility into fiscal twenty twenty six with a few of the 10 drone makers and as we get into early twenty twenty six calendar, we'll be seeing more of these companies going into production. So we are feeling really good as I sit here today.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Okay, that's really helpful. And then just as a follow-up, if you could comment on sort of what you're seeing from a bookings or order perspective so far here in September. If I look back at the past few years, usually September is sequentially down, but obviously the midpoint of your guidance for September here is for growth sequentially. Just curious if you could provide some additional color around the dynamics driving that growth?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes, Jason, another great question. You're right, in the past maybe last year or the year before we might have, we were down sequentially. We are seeing momentum in our business. We are seeing new customers that we've acquired and the momentum is really broad based throughout our core business, including our Edge IoT, which is some of it is new and then even our networking business and out of band also is growing nicely into this quarter. So, build a lot of confidence as you think about fiscal twenty twenty six.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Perfect. Thanks a lot guys.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thank you, Jason.

[Operator]

And your next question today will come from Ryan Koontz with Needham and Company. Please go ahead.

[Ryan Koontz, MD - Research Analyst at Needham & Company]

Great. Thanks. You had some real interesting comments there on gross margin. I just want to make sure I'm not losing the forest through the trees here, so to speak. Can you maybe unpack that, Saleel, in terms of how you think about gross margins evolving over the next twelve months?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes, Ryan, great question. I think, not I think, I know in the June, we had some one off gross margin related items like tariffs and some inventory. But moving forward, it's going to be closer to 44%, 45% for the fiscal year. But I'll pass the mic to Brent to add a little bit more color to that.

[Brent Stringham, CFO at Lantronix]

Yes, think Ryan as we talked about in the prepared remarks, we're seeing gross margins for the upcoming quarters here in fiscal 'twenty six returning to what we saw a year ago in the Silvio mentioned 44%. We're trending in that direction going forward.

[Ryan Koontz, MD - Research Analyst at Needham & Company]

Great. Super. Thanks for that clarification. And then maybe all these opportunities in the drone market around defense and unmanned vehicles. Can you talk a little bit about how is that a new channel for you?

[Ryan Koontz, MD - Research Analyst at Needham & Company]

Are you working direct? Are you working through integrators? I mean, maybe walk through some of the commercial side of these drone opportunities. Are they very similar to your business of the past or is it or somewhat new kind of market motion? Thanks.

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes, Ryan, another great question. And you and I have spoken before, we kind of started on this journey of unmanned UAS or drones in calendar twenty four and into that we've kind of worked with Teledyne FLIR which was a very important announcement that we did. They are the leader in thermal imaging cameras, is this market is all about. They gave us, hey, we are a great partner for them. So that helped us and we worked with them on major designs.

[Saleel Awsare, President, CEO & Director at Lantronix]

And then just having this camera expertise working with some of the integrators that are out there and we've increased our understanding of the market, what we can do for the market and that's how we've really gotten to winning somebody like Redcat on one of their big programs. And this one we pretty much got done in eight months from beginning to end. So it was really all systems go, all hands on deck to get them ready. So we are very proud of what we've done there.

[Ryan Koontz, MD - Research Analyst at Needham & Company]

That's great. So Teledyne sounds like somebody they're pulling you into some of these deals in a kind of a partner ecosystem?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes. Teledyne first is pulling us into quite a few and they're a big company with a lot of access. So it's been very helpful.

[Ryan Koontz, MD - Research Analyst at Needham & Company]

Yes. That's great. Maybe one last one, if I can squeeze it in. You talked about this backup generator for sell side opportunities, great to finally get that deal closed. Any more you can tell us about that?

[Ryan Koontz, MD - Research Analyst at Needham & Company]

And are there other opportunities similar to that in the pipeline that you can address? Thank you.

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes. Thanks, Ryan. Another great question, right. We announced a big Tier one mobile win with about 50,000 of our gateways, our FOX gateways in that and we anticipate longer term this should be at least three times what it is, as we progress over the next couple of years. So the good news is we booked most of the order.

[Saleel Awsare, President, CEO & Director at Lantronix]

We started to ship in the June, which we did and we'll continue to ship throughout this fiscal year. I do want to make one point of clarification Ryan, which is I think very important. Not only are we selling a hardware, but we are also incorporating our perception platform, enabling remote monitoring and device management. And as these devices come online, we are starting to get our first real ARR or annual recurring revenue. So that's another great thing.

[Saleel Awsare, President, CEO & Director at Lantronix]

So that's going to start at this is not starting at a big number, but as they move more and more devices come online, it's going to do that. So it shows the investments that we were making in the last eighteen months in these areas where giving a platform, giving a solution has enabled us to be successful. So I'm optimistic just with this vendor, it could get bigger and there are more that we're working on.

[Ryan Koontz, MD - Research Analyst at Needham & Company]

Great. That's all I've got. Thanks so much, Lou.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thank you, Ryan.

[Operator]

And your next question today will come from Christian Schwab with Craig Hallum Capital Group. Please go ahead.

[Christian Schwab, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Great. Thanks for taking my question. Just as it relates to the drone opportunity, can you give us an idea of what your average dollar content would be per device, not specifically to Redcat itself, but the entire 10 customers you're dealing with just kind of to give us either an idea of what your dollar content is, please?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes, great question, Christian. It's approximately around $500 So it's pretty very good from an ASP perspective. So as the volumes get into the many thousands or tens of thousands, this is meaningful revenue for the company as you think about moving forward.

[Christian Schwab, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Great. And then in your prepared comments, you talked about a meaningful revenue opportunity. I assume some customers, of course, have different volumes that they would be planning on shipping over a multiyear time frame. When you think of that market, could you give us a broad range of revenue? Is this a $5,000,000 business in two years?

[Christian Schwab, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Is this a $20,000,000 business that some guidepost for us to be thinking about?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes, great question again, Christian. I would say the opportunity per customer, and again, some are going to be bigger, some are going to be smaller. The customer size could be four million to five million dollars annualized each customer. Again, as I said, the ones that we're working with today, if they are a bit smaller ones, could be smaller. But again, they're going to come online and as they win their sockets.

[Saleel Awsare, President, CEO & Director at Lantronix]

So could this be a 10% to 15% of Lantronix revenue in fiscal twenty twenty seven? There's a probability it could get there. But we're working through all that and working through all the customers. But the opportunity size on some of the early ones are 3,000,000 to $5,000,000 each.

[Christian Schwab, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Great. No other questions. Thank you, guys. Good quarter.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thank you.

[Operator]

Your next question today will come from Scott Searle with ROTH Capital. Please go ahead.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hey, good afternoon. Thanks for taking my questions. Looks like I'll back clean up. Maybe just a quick clarification, Brent, on the inventory write down. I'm wondering if you could quantify that.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

I'm not sure if I missed that. And then a couple of the segments there. I just want to clarify, what are you seeing in terms of out of band management in terms of in the June and as we're going into the back half of the calendar year here? And I just want to clarify in terms of the September guidance that there's no grid expertise in those numbers. And then I had a couple of follow ups.

[Brent Stringham, CFO at Lantronix]

Yes. Thanks, Scott. On the inventory, one way to maybe look at it is based on the margins that we disclosed here in the quarter, we said that tariffs were a part of that. Probably made tariffs probably made up about 100 basis points of the decline in margin quarter over quarter with a large part of difference being some of the inventory charges that we took in the quarter. Could you repeat the second part of your question?

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Out of band management contribution in the quarter, what kind of growth were you seeing in June? What are you guys seeing in terms of the book and the build of business as we're looking into the second half?

[Brent Stringham, CFO at Lantronix]

Yes. Out of band, quarter over quarter, obviously, we don't break out the details at that level, but out of band is was up quarter over quarter from our third quarter and we're seeing pretty solid momentum in that business with some of the resources and other things we have going on in that product line. And then you had asked about was the Yes, third part of your

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

just in terms

[Brent Stringham, CFO at Lantronix]

Yes, we don't currently have any grid expertise estimates in our guidance.

[Saleel Awsare, President, CEO & Director at Lantronix]

Scott, just to put it right, we've had no grids for tees since January 1, right. So we've taken it out. As I said, the core business is growing nicely.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Great. Now just wanted to clarify. Now, Talil, the drone opportunity really starting to perk up for you. It seems like there's an incredible backlog of opportunities. Is there a number that you're comfortable with in fiscal 'twenty six?

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

You talked about fiscal twenty twenty seven maybe being 10% to 15% of revenues. Kind of what is that what do you think that looks like in fiscal twenty twenty six? And when does it start to become meaningful in terms of contribution on a quarterly basis in fiscal twenty twenty six?

[Saleel Awsare, President, CEO & Director at Lantronix]

We don't specifically call out the details, but it's definitely going to be meaningful in this year and it's in the millions of dollars for the fiscal year, Brian. It's not tens of millions this year, but since in the millions of dollars. And as I said, these guys are just starting to launch and our ASP is pretty good at around $400 it's $500 approximately give or take. So we're feeling good about that. Does that kind of give you a goalpost for this Absolutely

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

does. Just trying to calibrate where we are in the ramp and maybe Saleel to follow-up on that front. I want to make sure I understand in terms of your software content versus what Slur brings to the equation. And then as you look at the characteristics of why you're being adopted in drones being at low power, right, I think you're leveraging off of Qualcomm processors as well as your computer vision and AI capabilities. There are other markets related to security, surveillance, etcetera, that fit into that as well.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

So I'm wondering if there are, I'll call them, tethered opportunities as opposed to drones and UAV that are starting to perk up in your backlog or opportunity pipeline?

[Saleel Awsare, President, CEO & Director at Lantronix]

Yes. So a bunch of questions there, right. So FLIR is a partner, but it's not for everyone. I want to be clear about that, right. FLIR is with some of the customers that we're working with.

[Saleel Awsare, President, CEO & Director at Lantronix]

The recent announced win we did does not use Flur. So we had to provide some camera tuning, some of the software that we had and they also had some software. So it was kind of a combination of both teams. Remember, we did some services work for them. So it was kind of getting together on this.

[Saleel Awsare, President, CEO & Director at Lantronix]

So FLIR is great. It's doing well for us, but we also are doing independent programs, Scott, on that. The other area that this is going to go into is robotics as you think about it, because robotics needs cameras. Those are very on the early days. I think you'll see opportunities percolating probably calendar Q1, calendar Q2 that we are looking at.

[Saleel Awsare, President, CEO & Director at Lantronix]

But right now, we are laser focused on the drone area. As you know, the U. S. Government is making a big push. The Secretary of Defense, HEXA talked about two drones per platoon, the smaller ones.

[Saleel Awsare, President, CEO & Director at Lantronix]

And you hit the key point. We have worked with our customer to make sure that they have enough range. And there's a whole and you and I can talk offline of what the range means and how that needs to be. So right now, it's all hands on deck to get these guys, multiple guys over the hub.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Got you. And lastly, if I could, I'll just slip one in on the carrier opportunity. There's a nice recurring revenue component that goes along with it. I'm not sure if you quantify that. I'd love to get your thoughts.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

And then just in terms of RFP pipeline, it sounds like you think that could be three exercise of where it is today. I'm just kind of wondering if you're actually those opportunities are currently percolating or with a formal RFP or if you guys are just continuing to knock on other doors? Thanks.

[Saleel Awsare, President, CEO & Director at Lantronix]

So two questions. We do call out software and services, so the ARR will be a part of that. But we also have service portion of that. So it's going to be shown in that line as you think about the future. As for the carrier one, there is one RFP that we are bidding on and we believe we were at a good high probability of getting that.

[Saleel Awsare, President, CEO & Director at Lantronix]

But this carrier company has now sent us to the Generacs and these other guys who make these backup power generators and they've kind of told us we are the approved vendor for So that also is in motion as you think about it. So therefore, we believe in the next few years, next couple of years, this should be a larger portion. As I said, could be as high as three times of what we announced already.

[Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Perfect. Thanks so much.

[Saleel Awsare, President, CEO & Director at Lantronix]

Thank you, Scott.

[Operator]

This will conclude our question and answer session. I would like to turn the conference back over to Saleel Assaray for any closing remarks.

[Saleel Awsare, President, CEO & Director at Lantronix]

I want to thank everyone for you joining us. I know it's Labor Day coming up. So please enjoy the weekend and Lantronix will be at the Gateway Conference next week in San Francisco. Please hopefully you can join us there. Thank you so much.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Brent Stringham, CFO
• Saleel Awsare, President, CEO & Director

Analysts

• Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital
• Ryan Koontz, MD - Research Analyst at Needham & Company
• Christian Schwab, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Scott Searle, MD & Senior Research Analyst at Roth Capital Partners, LLC