Lantronix Q3 Earnings Call Highlights

Key Points

• Unmanned systems drove growth—embedded IoT sales rose 22% year‑over‑year, Lantronix raised fiscal 2026 drone revenue guidance to $10–$14M and expects unmanned systems to represent 15–20% of revenue in fiscal 2027.
• Q3 results were in line with guidance: revenue of $30.2 million and non‑GAAP EPS of $0.04; the company finished the quarter with $23.5M in cash (net cash ≈ $14.8M) and guided Q4 revenue $29–$33M and non‑GAAP EPS $0.03–$0.05 while forecasting double‑digit revenue growth in fiscal 2027.
• Lantronix expanded its multi‑silicon strategy by adding MediaTek alongside Qualcomm to broaden addressable and price‑sensitive markets, and is growing its software and services mix (now 8–9%) to support margin expansion toward ~45%.

Lantronix NASDAQ: LTRX reported fiscal third-quarter results that were in line with management’s outlook, as the company pointed to continued momentum in embedded compute—particularly its unmanned systems initiatives—and an increasing contribution from software and services.

Revenue for the quarter was $30.2 million, and non-GAAP earnings were $0.04 per share, both within the company’s guidance range, according to President and CEO Saleel Awsare. Chief Financial Officer Brent Stringham said results reflected “sequential and year-over-year growth driven by strength in embedded compute products, including our NDAA and drone programs, and continuing momentum in software and services revenues.”

Embedded IoT growth led by unmanned systems

Awsare said the company’s embedded IoT solutions portfolio grew 22% year-over-year, which he described as the main driver behind overall sequential and year-over-year revenue growth. He characterized Lantronix as “a critical onboard edge compute platform for unmanned systems,” and said demand for unmanned systems and drones remains strong, supported by industry and military tailwinds.

Awsare also cited regulatory dynamics as beneficial to domestic and “trusted supplier platforms,” pointing to an FCC action in December 2025 that bars DJI and other foreign drone makers on a covered list from obtaining approval for new drone models in the U.S. He said Lantronix’s positioning as a U.S. partner that is NDAA- and TAA-compliant strengthens its competitive position for Group 1 and 2 drone ecosystems.

Management described a push to move “up the tech stack” in unmanned systems. Awsare said the company is evolving “from supporting the camera to enabling full intelligent drone and counter-drone systems,” with increasing interest in swarming and coordinated autonomy driving demand for larger fleets and more advanced Edge AI and machine-learning compute solutions.

New wins and expanding engagements across drones and counter-UAS

Awsare said Lantronix expanded the number of OEMs it engages with and has “shipped product to over 12 of these partners.” He highlighted a conversion of one engagement into a design win tied to “another drone as a first responder program with one of the largest U.S.-based body camera makers,” which he said added a new DFR customer.

He also said the company secured a new customer win involving “a payload that identifies hostile drone operators,” which he described as an expansion into counter-drone applications. In Q&A, Awsare said counter-UAS is “becoming a very important piece for the future,” particularly in GPS-denied environments where autonomy and onboard compute become critical.

Internationally, Awsare said the “huge majority” of current drone revenue remains domestic, but the company has begun expanding its unmanned OEM base abroad. He cited a first shipment to Evolve Dynamics, a U.K.-based unmanned aerial systems developer, and said Lantronix is supporting Red Cat’s expansion into NATO and Asia-Pacific. He also noted new engagements with multiple Ukraine drone makers, describing Ukraine as a fast-evolving market where supply chains are pivoting away from China toward NDAA- and TAA-certified solutions.

Awsare said Lantronix raised its fiscal 2026 drone revenue outlook again, to $10 million to $14 million, and reiterated an expectation that unmanned systems could represent 15% to 20% of overall revenue in fiscal 2027. In Q&A, he said the expectation for fiscal 2027 drone growth—roughly doubling from current levels—was based on visibility with existing customers and programs, while acknowledging the market remains dynamic and could provide upside.

Multi-silicon strategy adds MediaTek alongside Qualcomm

During the quarter, the company announced an expansion of its multi-silicon strategy with MediaTek’s Genio family of system-on-chip platforms. Awsare said MediaTek provides AI performance comparable to Qualcomm platforms while being “highly optimized for industrial and commercial use cases,” adding that the combination allows Lantronix to serve a broader set of customers with architectures tuned to specific requirements.

In response to analyst questions, Awsare said he expects MediaTek “design-ins and design wins coming up this calendar year.” He and the company also pointed to geographic advantages and greater flexibility for price-sensitive markets. “Geographically, very much so,” Awsare said, adding that MediaTek should help Lantronix be stronger in Asia-Pacific and Europe, while also expanding price-performance options.

Software, services, and margins

Gross margin remained around the low-43% range. Awsare said gross margin “remains strong at about 43%,” supported by “a richer mix of higher margin products and recurring revenue across the portfolio.” Stringham reported GAAP gross margin of 43.1% and non-GAAP gross margin of 43.6%.

Management emphasized that increasing software and services should support margin over time. Awsare said software and services mix has increased over the last two quarters from 5%–6% of revenue to 8%–9%, with a “clear path” to reaching double digits over the midterm. He attributed the opportunity to layering device management, analytics, and AI orchestration on an expanding installed base, which he said should improve revenue visibility and lifetime value per deployment.

In Q&A, Awsare said further gross margin expansion toward 45% could be supported by:

• Continuing growth in software and services mix toward 10%–12% of revenue
• Adding more software, AI models, and frameworks around the drone business
• Moving beyond camera integration into broader platform and system-level capabilities

Federal spending softness in enterprise and networking; outlook provided

Both executives noted slower federal spending and extended procurement cycles affecting enterprise and networking products, including media converters and out-of-band management. Awsare said federal customers are moving cautiously amid “continued government shutdowns” that have slowed ordering, but he framed the situation as “timing dynamics, not demand issues.” Stringham similarly said the company should benefit “once this market normalizes.”

On expenses and profitability, Stringham reported GAAP operating expenses of $14.1 million, nearly flat sequentially and down about 12% from the year-ago period. GAAP net loss improved to $1.2 million, or $0.03 per share, compared with a loss of $3.9 million, or $0.10 per share, a year earlier. On a non-GAAP basis, net income was $1.5 million, or $0.04 per share.

Lantronix ended the quarter with $23.5 million in cash and cash equivalents. Stringham said operating cash flow was nearly $2.2 million for the quarter and $7.9 million year-to-date. Debt stood at $8.7 million after about $1 million of paydown during the quarter, and the company reported a net cash position of about $14.8 million as of March 31, 2026.

For the fiscal fourth quarter ending June 30, 2026, Stringham guided revenue to a range of $29 million to $33 million and non-GAAP EPS of $0.03 to $0.05 per share. Awsare said the outlook “points to a strong finish to fiscal 2026,” and added that the company expects to deliver double-digit revenue growth in fiscal 2027.

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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