Lantronix Q2 Earnings Call Highlights

Key Points

• Lantronix reported fiscal Q2 revenue of $29.8 million and non-GAAP EPS of $0.04, with GAAP gross margin of 43.6% (non-GAAP 44.0%); GAAP net loss narrowed to $1.3 million, operating cash flow was nearly $2.2 million, cash totaled $23.0 million, and debt fell to about $9.7 million (net cash ≈ $13.3 million).
• The company raised its fiscal 2026 drone revenue outlook to $8 million to $12 million (from $5–10M), saying drone revenue ramped meaningfully in Q2, it’s working with more than 15 OEMs, and drones could represent roughly 15%–20% of revenue in fiscal 2027.
• For fiscal Q3 management guided revenue of $28.5 million to $32.5 million and non-GAAP EPS of $0.03 to $0.06, expects quarterly operating expenses of about $11.8 million to $12.3 million, and is pushing recurring software/monitoring growth (software/services ≈ 6% of revenue) via a Tier 1 U.S. MNO rollout.

Lantronix NASDAQ: LTRX reported fiscal 2026 second-quarter results that management said reflected continued execution against its long-term Edge AI strategy, with revenue and profitability landing within the company’s guidance range. The company also raised its outlook for drone-related revenue for the fiscal year, citing faster-than-expected scaling and broader customer deployment activity.

Quarterly results and profitability

For the fiscal second quarter, Lantronix delivered revenue of $29.8 million and non-GAAP earnings per share of $0.04. CEO Saleel Awsare said the company achieved double-digit year-over-year growth when excluding its major Smart Grid customer, Gridspertise, and noted profitability benefited from gross margin expansion and operating leverage tied to cost optimization efforts implemented last year.

CFO Brent Stringham said growth drivers, excluding Gridspertise, included strength in embedded compute (including AMD and drone programs), contributions from network infrastructure switch products, and higher SaaS-based annual recurring revenue (ARR) associated with the company’s critical infrastructure monitoring deployment with a Tier 1 U.S. mobile network operator (MNO).

Gross margin performance remained elevated versus the prior year. Lantronix posted GAAP gross margin of 43.6%, compared with 42.6% in the year-ago quarter. On a non-GAAP basis, gross margin was 44.0%, up from 43.2% a year earlier. Stringham noted the prior quarter’s non-GAAP gross margin partially benefited from inventory recoveries and royalty benefits that came in above plan.

On expenses, the company reported GAAP operating expenses of $14.0 million, down nearly 6% sequentially and about 9% year over year. Lantronix’s GAAP net loss improved to $1.3 million, or $0.03 per share, compared with a $2.4 million loss, or $0.06 per share, in the year-ago quarter. On a non-GAAP basis, Lantronix reported net income of $1.6 million, or $0.04 per share.

Balance sheet and cash flow

Lantronix ended the quarter with $23.0 million in cash and cash equivalents, up about $0.8 million from the prior quarter. The company generated positive operating cash flow of nearly $2.2 million during the period.

Net inventories were $27.1 million at December 31, 2025, versus $26.8 million in the prior quarter and $29.1 million a year ago. The company also continued to reduce debt, paying down roughly $1.0 million in the quarter to bring outstanding debt to approximately $9.7 million, down from $14.7 million a year earlier. Stringham said the company’s net cash position was approximately $13.3 million.

Drones and unmanned systems: raised fiscal 2026 revenue outlook

Awsare spent a significant portion of the call discussing growth in drones and unmanned systems, which he described as benefiting from an improving defense funding backdrop and increasing adoption of autonomous platforms. He pointed to the signed fiscal 2026 U.S. defense budget, saying it includes more than $13 billion in enacted funding allocated across unmanned systems, autonomy, ISR, and counter-UAS programs, while noting some funding has yet to be released.

Operationally, Awsare said the company has moved “up the stack” in drones—from general-purpose compute modules to intelligent imaging platforms and integrated workflows combining sensing, processing, and secure connectivity. He said Lantronix currently focuses on Group 1 and 2 short-range reconnaissance drones and is working with more than 15 OEMs.

Management highlighted several customer and partner engagements discussed on the call, including:

• Expanded work with Red Cat and its Teal drones, including higher-volume builds and next-generation platform development.
• Selection by FlightWave (a Red Cat company) to incorporate Lantronix’s Open-Q system-on-module into a new drone.
• Selection by Trillium Engineering in December for gimbaled imaging systems used in ISR, infrastructure inspection, and wildfire operations.
• A first design win with Flock Safety in the “Drone as First Responder” category.
• A collaboration with Safe Pro Group to combine object threat detection models with Lantronix compute modules for on-device detection of landmines and other hazards.

Awsare said drone revenue increased meaningfully from the first quarter to the second quarter and that the company expects growth to continue through the remainder of fiscal 2026 and into fiscal 2027 as programs move from pilots into broader deployments. Reflecting that trajectory, Lantronix raised its expected fiscal 2026 drone revenue range to $8 million to $12 million, up from its prior $5 million to $10 million range.

In the Q&A, Awsare added that, based on current trajectory, the company expects drone revenue to represent approximately 15% to 20% of total revenue in fiscal 2027. He also said the company’s current average selling price (ASP) for its drone offerings is in the $400 to $500 range, and that moving toward more turnkey, integrated solutions could increase ASP by “hundreds of dollars,” while also noting the company plans to pursue FPV drones, which would carry lower ASPs.

Critical infrastructure monitoring and software mix

Lantronix also discussed progress in critical infrastructure monitoring, describing it as a long-term pillar of its industrial IoT strategy. Awsare said the Tier 1 U.S. MNO rollout is progressing as expected and that the company recognized revenue over the last two quarters. He said Lantronix is looking to expand beyond monitoring generators into other tower applications, including backup power banks and rectifiers, and framed the work as foundational to a recurring revenue strategy.

Over the last 12 months, Awsare said software and services accounted for approximately 6% of total revenue, which he characterized as “early innings.” He said the company sees a path to more than doubling that mix over the mid-term by layering software, analytics, and AI pipeline orchestration into existing field deployments.

Stringham also addressed quarterly variability in IoT systems and solutions, noting that the prior quarter (ending in September) is traditionally heavier due to federal customer buying patterns. He added that the Tier 1 MNO program ramped meaningfully over prior quarters and is nearing its rollout endpoint, contributing to a sequential decline in that category in the December quarter.

Outlook and operating expense range

For the fiscal third quarter ending March 31, 2026, Lantronix guided for revenue of $28.5 million to $32.5 million and non-GAAP EPS of $0.03 to $0.06.

In response to an analyst question, management said operating expenses over the next quarter or two are expected to be in a range of approximately $11.8 million to $12.3 million per quarter.

Management also discussed supply conditions, with Awsare acknowledging memory-related pricing and supply pressures in the market. He said Lantronix is working proactively with customers and does not expect a major issue in the short to mid-term, adding that the company has prepared supply for newer areas such as drones.

About Lantronix NASDAQ: LTRX

Lantronix, Inc 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.

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