管理層發言
Welcome to the Lantronix Q3 2026 Earnings Call. The operator provided instructions. Please note this event is being recorded. I'd like to turn the conference over now to Mr. Brent Stringham, Chief Financial Officer. Thank you, and over to you.
Good afternoon, everyone, and thank you for joining our fiscal third quarter 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. During this call, we may make forward-looking statements, which involve risks and uncertainties that could cause our results to differ materially from current expectations. We encourage you to review the cautionary statements and risk factors contained in today's earnings release, which was furnished to the SEC and is available on our website and other SEC filings such as our 10-K and 10-Qs. Lantronix undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Additionally, during the call, we 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. With that, I will now turn the call over to Saleel.
Thanks, Brent, and thank you, everyone, for joining today's call. We delivered revenue of $30.2 million and non-GAAP EPS of $0.04, both within our guidance range. Our Embedded IoT Solutions portfolio delivered extremely robust growth of 22% year-over-year, driving overall sequential and year-over-year revenue growth for the company. This performance reinforces our position as a critical onboard edge compute platform for unmanned systems, an increasingly important contributor to our business. Gross margin also remained strong at above 43%, supported by a richer mix of higher margin products and recurring revenue across the portfolio. Overall, these results reflect disciplined execution and continued momentum across the business. Turning to our results. We continue to see strong demand for unmanned systems or drones, supported by favorable industry and military tailwinds that position Lantronix for sustained growth.
Our customer list in unmanned systems continues to expand, reflecting both the effectiveness of our drone strategy and the increasing need for reliable, real-time computing solutions. Drones are physical AI in action, and we deliver that capability to our customers by enabling autonomy, edge compute and real-time decision-making, further increasing the value of our technology. The FCC's December 2025 action, which bars DJI and other foreign drone makers on the covered list from obtaining approval for new drone models in the U.S., has meaningfully improved the outlook for domestic and trusted supplier platforms. This environment strengthens our competitive moat as a U.S. partner that is both NDAA and TAA compliant, providing trusted and secured AI-enabled edge compute platform solutions for the Group 1 and 2 drone ecosystems. Further, we are expanding both our capabilities and the number of active engagements.
Our SoMs or System on Modules provide the onboard edge compute foundation for greater autonomy, which is becoming increasingly critical as mission complexity rises and the market pushes beyond what human operators alone can support. In aerospace and defense, scale will require more intelligence, more autonomy and Lantronix is helping enable that shift. As a result, we are moving up the tech stack, evolving from supporting the camera to enabling full intelligent drone and counter drone systems. In parallel, growing interest in swarming and coordinated autonomy is driving demand for larger fleets requiring more advanced Edge AI and machine learning-based compute solutions to support increasingly complex missions. Beyond the drone itself, we are expanding our role into counter UAS and spectrum dominance applications. These markets require high-performance, low-power compute to process sensor data and enable real-time decision-making in contested environments.
As systems become more intelligent, connected and electronically aware, we expect our SoMs and broader technology to play an increasingly central role across more of the mission stack. Given the growth opportunity ahead, we are investing to scale. We are expanding our technical R&D talent to deepen our capabilities and capture more opportunities across the drone ecosystem, while also expanding our dedicated drone sales effort. As the unmanned aerial systems market continues to heat up, new entrants will emerge. However, our first-mover advantage positions us to become the go-to provider for unmanned systems compute, and these investments are designed to strengthen the moat around our business as a critical platform partner to the unmanned ecosystem. In parallel with those investments, we are also advancing the product and technology initiatives that will support our next phase of growth.
During the quarter, we announced the advancement of our multi-silicon strategy with MediaTek's Genio family of system-on-chip or SoC platforms, strengthening our ability to serve a wide range of Edge AI and industrial IoT applications. MediaTek's SoCs delivered strong AI performance with processing power comparable to our Qualcomm platforms, while offering a feature set highly optimized for industrial and commercial use cases. By adding MediaTek, we are filling important use case coverage in our portfolio. Both MediaTek and Qualcomm are highly capable Edge AI compute solutions and together allow Lantronix to serve a broader set of customers and end markets with architectures tuned to their specific requirements. Diving deeper, we continue to build momentum during the quarter. We significantly expanded the number of OEMs we engaged with and now have shipped product to over a dozen of these partners.
Importantly, we recently converted one of these engagements into a design win, another drone-as-a-first-responder program with one of the largest U.S.-based body camera makers. This adds a new drone-as-a-first-responder customer and further validates our position as a leading compute and connectivity provider across the UAS ecosystem. We also secured a new customer win with a payload that identifies hostile drone operators, marking our expansion into counter drones. This new win reinforces our role as a trusted partner in mission-critical applications, underscoring our expanding relevance into counter unmanned systems, where FPV drones are used to detect, track, identify and mitigate hostile systems in contested environments. More broadly, it demonstrates our Edge AI drone solutions support the full UAS ecosystem, including counter drone use cases. In addition to expanding capabilities and applications, we have been growing beyond the U.S. market into international markets, as we are now supporting global expansion with Red Cat as they enter NATO and across the Asia Pacific.
We also made our first shipment to Evolve Dynamics, a U.K.-based developer of unmanned aerial systems serving the defense, emergency response and critical infrastructure markets. Expanding our unmanned OEM customer base internationally is an important part of our growth strategy, and this shipment marks another step in expanding our reach across the global autonomous system ecosystem. Additionally, we recently engaged with multiple Ukraine drone makers. Ukraine is becoming one of the most leading-edge and fastest-evolving markets for unmanned systems globally, and its domestic drone companies have demonstrated remarkable real-world performance. As the United States Department of Defense continues to increase its investments in unmanned systems, collaborating with leading Ukrainian innovators provides us with critical insights and validation opportunities for our technology in highly demanding real-world environments.
We are seeing a broader shift towards trusted platforms with customers increasingly moving away from Chinese components towards NDAA-compliant solutions. This transition is creating meaningful opportunities for Lantronix, particularly as customers evaluate our products such as our Drone Reference Platform, which helps shorten development cycles and accelerates evaluation to deployment. Further, in March, we formed a strategic collaboration with Unusual Machines to support the next generation of unmanned platforms. This partnership combines Lantronix's edge compute and integrated connectivity solution with UMAX flight components to help accelerate deployment timelines, enhance ISR and autonomous capabilities across aerial systems. Together, this enables both companies to pursue emerging opportunities tied to the Department of Defense's drone dominance program, and we believe we are well positioned to capitalize on this near-term growth opportunity.
We are encouraged by the early progress made during the collaboration so far, and we'll release additional updates as appropriate. We are making a concerted effort to strengthen our position in the unmanned ecosystem by scaling the platform and introducing new capabilities that support faster, easier and more effective deployments. As we expand the platform, we are building an ecosystem around it, one that enables customers and partners to adapt, integrate and scale solutions more seamlessly. We are encouraged by the momentum we've built in unmanned systems since entering the market just over a year ago. And we are once again increasing our fiscal 2026 drone outlook now to a range of $10 million to $14 million. Our team is executing with urgency, and we continue to see a clear path for unmanned systems to represent 15% to 20% of overall revenue in fiscal 2027. Moving to software and services.
We remain excited about the expanding ARR we are seeing. Over the last two quarters, we have expanded our software and services mix from 5% to 6% to 8% to 9% of total revenue, and we see a clear path of sustainably reaching double-digits over the midterm. This confidence is driven by our ability to layer high-value software and services onto a growing installed base of hardware already in the field. As we integrate capabilities such as device management, analytics, AI orchestration, we are not only expanding recurring revenue streams, but are also improving overall mix and increasing the lifetime value of each deployment. Over time, we believe this will drive greater revenue visibility, stronger margins and a higher quality business model overall. On IoT system solutions, we continue to experience slower federal spending and extended procurement cycles, particularly with our core enterprise and networking products, which includes media converters and out-of-band management.
Federal customers are moving more cautiously and continued government shutdowns have resulted in slower ordering patterns and a more measured pace of conversion. That said, these are timing dynamics, not demand issues. Importantly, enterprise and networking continue to deliver margins well above our corporate average and provide strong cash generation, giving us the ability to reallocate resources into higher-growth opportunities such as unmanned aerial systems and critical infrastructure monitoring. In summary, I'm encouraged by our third quarter performance and the discipline of our execution as we continue to deliver strong margins and profitability. We are hyper-focused on growing the business, and we are putting the right team and capabilities in place to capture the growing opportunities we are seeing. Before passing the call over to Brent, I want to highlight a couple of important developments, starting with a key leadership addition for our next phase of growth.
In March, we appointed Sano Marsiano as our new Vice President of Operations, bringing years of leadership experience across global operations, manufacturing and quality. Also in March, we participated in ISC West 2026, where we showcased SmartSwitch.ai, SmartEDGE Gateway and our Edge AI solutions for autonomous systems. We saw strong interest in both our Drone Reference Platform and SmartSwitch, particularly from security and surveillance customers evaluating next-generation perimeter monitoring and agentic edge network configuration monitoring and proactive maintenance. A consistent theme was a growing shift towards drone-based surveillance for large compounds, complementing or in some cases reducing reliance on fixed perimeter camera infrastructure, an area where we are uniquely positioned. We offer an integrated full stack solution that spans switches and drones, offering customers a single differentiated partner for autonomous perimeter security. Nobody else in the market can deliver the breadth we provide. With that, I'll turn the call back to Brent to cover financial results.
Thank you, Saleel. I'll first start with our fiscal third quarter financial results and some of the key drivers behind our performance, after which I'll provide our outlook for the fourth quarter ending June 30, 2026. As previously discussed, our current quarter revenue was $30.2 million. We saw sequential and year-over-year growth driven by strength in embedded compute products, including our A&D and drone programs and continuing momentum in software and services revenues. Federal customers are moving cautiously, resulting in slower ordering patterns for our core enterprise and networking products. However, like Saleel mentioned, we believe these are primarily timing dynamics, not demand issues, and we should benefit once this market normalizes. Turning to our gross margins. In the third quarter, GAAP gross margin was 43.1%, roughly flat compared to a year ago. On a non-GAAP basis, gross margin was 43.6%, slightly down compared to a year ago.
Our current quarter margins reflect the revenue mix we have spoken to with embedded IoT solutions, particularly our compute products, driving our growth. We continue to remain focused on disciplined cost management that has driven our execution over the last year, which we expect to contribute to sustaining our gross margins near current levels. Looking at expenses and profitability. GAAP operating expenses in the third quarter of fiscal 2026 were $14.1 million, nearly flat with the prior quarter and down approximately 12% from $16 million in the year-ago period. We continue to observe the leverage in our OpEx model based on the actions we took last year and the ongoing cost discipline that we are executing on. GAAP net loss for the third quarter of fiscal 2026 improved to $1.2 million or $0.03 per share compared to GAAP net loss of $3.9 million or $0.10 per share in the year-ago quarter.
On a non-GAAP basis, net income of $1.5 million or $0.04 per share was consistent with the prior quarter and an improvement from the $0.03 per share in the year-ago quarter. Moving to the balance sheet. We ended the quarter with cash and cash equivalents of $23.5 million, an increase of approximately $500,000 from the prior quarter and $3.5 million from the year-ago period. During the current quarter and fiscal year-to-date periods, we generated positive operating cash flow of nearly $2.2 million and $7.9 million, respectively. Net inventories were $26.4 million as of March 31, 2026 compared to $27.1 million last quarter and $28.2 million in the year-ago quarter. Our current debt balance is $8.7 million after having paid down about another $1 million during the current quarter. In the last 12 months, we have lowered our debt balance by nearly $4 million. Our net cash position on March 31, 2026 was approximately $14.8 million.
Lastly, our outlook for the fourth quarter of fiscal 2026 ending June 30, 2026, is as follows: we expect revenue to be in the range of $29 million to $33 million. Non-GAAP EPS is expected to be in the range of $0.03 to $0.05 per share. Now back to Saleel for some closing remarks.
Thanks, Brent. Before turning to Q&A, I want to leave you with a few key takeaways as we approach the end of fiscal 2026. We remain highly confident in the opportunity ahead in unmanned systems. This market is scaling rapidly, supported by strong customer engagement, favorable regulatory dynamics and an expanding base of OEMs and end market relationships. We continue to broaden our customer roster, win new programs and deepen our role with existing partners. At the same time, we are moving up the technology stack beyond cameras, adding more intelligence, secure connectivity and system-level capabilities, further positioning Lantronix as a more strategic and valuable partner over time. At the midpoint of our raised drone outlook, we are targeting $12 million in revenue this fiscal year. We recently had one of the largest funding catalysts yet with the fiscal 2027 Department of Defense budget release and a record $75 billion proposed for unmanned and autonomous systems through the Defense Autonomous Warfare Group or DAWG, reinforcing our view that the super cycle is accelerating across the ecosystem.
Looking ahead, we continue to expect drone revenue to roughly double in fiscal 2027 and represent approximately 15% to 20% of the total revenue. Just over 9 months ago, drones contributed minimal revenue. Today, they are becoming a meaningful growth driver and helping propel our next phase of growth. As Brent mentioned, our Q4 outlook points to a strong finish to fiscal 2026. We believe we are operating from a position of strength and have greater confidence in our growth trajectory today than at any point since beginning the transformation. In Embedded IoT, revenue grew by over 20% year-over-year, driven by strong traction in unmanned systems. We have raised our drone expectations once again, supported by a growing number of shipments, new customer engagements, expanding use cases across drone and counter drone applications. We are also broadening our geographic reach with new international customers, further validating Lantronix's role as a trusted Edge AI compute partner for the unmanned systems ecosystem.
In critical infrastructure monitoring, we completed deployment of our Tier 1 MNO customer and are adding ARR to the business, which we expect will support higher margins and greater revenue visibility over time. We also see additional land and expand opportunities in adjacent high-value cell tower applications, including power banks and rectifiers, while Kompress.ai continues to gain traction in the industrial compressor market. The progress we made repositioning Lantronix towards a higher growth vertical is becoming increasingly evident in our results. And we believe the momentum we built will carry into next year. Based on what we are seeing today, we expect to deliver double-digit revenue growth in fiscal 2027, marking an important next step in Lantronix's evolution towards a more focused, faster-growing, higher quality and more profitable business. With that, operator, we will now open the call for questions.
分析師問答
The operator provided instructions. We have the first question from the line of Scott Searle from ROTH Capital.
Saleel, maybe just to jump in on the drone front, it's a big range of $10 million to $14 million, which implies a wide variance in the June quarter. I'm wondering if you could just give us an idea of why you're seeing such a wide range in the existing June quarter? And then as we're looking out to fiscal '27, it looks like you're expecting the business to nearly double, somewhere in the ballpark of $20 million to $30 million. I'm wondering if you could talk a little bit about some of the levers in either direction there, be it, is dollar content increasing for you? Do you have to acquire some additional technologies to continue to drive the presence there? Or is it just unit growth and more customers that you're engaged with going into commercial production?
Scott, thank you for the question. You're right. We put the range because we've always done a $2 million range. We are confident about our midpoint of $12 million. Remember, the midpoint last quarter was $10 million. And a few quarters back, we had said around a $5 million to $7 million range. So we are confident about the $12 million midpoint. On the growth, we are seeing expansion across the whole spectrum of the drone business or unmanned systems. It's going beyond drones now into counter drones with spectrum dominance and related investments, and we are seeing growth. We're also seeing early traction in unmanned on the ground and at sea. So across those areas we expect growth. To your point, we expect to double the business into fiscal '27, given where we are with the list of customers we are working with and the programs we have aligned. And it's now, as I've mentioned, beyond just aerospace and defense. We're getting drone-as-a-first-responder opportunities and entering commercial areas. So it's a very positive picture as I look forward to the next 12 months.
Great. Very helpful. And if I could just follow up then. The MediaTek relationship is interesting in terms of diversifying your silicon base, but they also have a pre-existing strong channel into areas such as robotics. I wonder if you could just give us some updated thoughts on that and when we might expect a first design win on that front? And then for Brent, real quickly, just can you help calibrate us in terms of the IoT system solutions business, the mix of federal business on that front?
Yes. So let me do the MediaTek part quickly, and then I'll pass it to Brent. MediaTek, to your point, we announced it at Embedded World mainly because anything with vision, they're strong in the robotics space. Robotics are strong in Asia. They are a big partner for us. Additionally, it's going to go into Europe and Asia, which is the focus now. They felt the capabilities Lantronix brings with what we have done in our edge compute and Edge AI solutions, and they thought it was a good partnership. So I expect design-ins and design wins coming up this calendar year. Brent, go ahead.
Yes. And then, Scott, I think you're asking about the mix of federal in our IoT systems business. It does fluctuate from quarter-to-quarter, but right around 15% to 20% is kind of where we've traditionally seen that mix of federal business as a percentage of that segment that we disclosed.
We have the next question from the line of Austin Bohlig from Needham.
Congrats on the great unmanned system results. Just wanted to piggyback off the 2027 question. Now that you guys are expanding internationally nicely, what can we assume of this kind of double guide for 2027 as what's U.S. versus international?
Thanks for the question, Austin. Right now, a huge majority of our revenue is domestic. Our first international design win— we shipped to Evolve Dynamics out of the U.K., they won a U.K. defense contract. So we are involved with that. I'm particularly excited about what's happening in Ukraine. As you know, Ukrainian supply chains are pivoting away from China to NDAA and TAA certified solutions, and we are now seeing early engagements there. I'll be at XPONENTIAL next week, which is a big drone show, and I have a bunch of meetings with senior executives from companies in Ukraine. The capabilities they're bringing will be phenomenal. Autonomy is key and edge compute is key, and we enable both. I don't have a specific number for how much international will be in fiscal '27, but it's definitely a significant growth vector for us.
Got you. And then I guess kind of a follow-up based on that. So with the wins that you currently have in this doubled guide, is this just baking in what you have with your customer wins today, meaning any kind of new wins could be potential upside to this number?
Yes. As I said in my prepared remarks, the number doubling from where we are today is based on the visibility we have with the customers we are working with. It's a dynamic market and changing quickly, so as we go through the year we'll update you. There is definitely potential upside from new wins.
Okay. And then I guess just one last one. The counter UAS market, super exciting. How should we be thinking about the split between counter and traditional UAS business?
Counter UAS is becoming a very important piece for the future. I met with a few customers in the last two weeks, and we've got our first design win there and shipments in that area, as I mentioned, for spectrum dominance and operations in GPS-denied environments. That makes the need for edge compute especially important because you need autonomy and the ability to run AI models locally to perform counter UAS functionality when GPS is unavailable. Our solution to run models and AI locally is working well, and while it's an early start, it's another big vector of growth for us.
We have the next question from the line of Austin Moeller from Canaccord.
First, could we discuss some of the involvement with the Drone Dominance vendors? And how might the IBAS Defense Industrial Base investments benefit your capacity as some of these programs ramp into production?
Yes. So 12 vendors got picked in the first tranche of the Drone Dominance Program. We know who they are and are working with some of them. I believe the second tranche is expected around September, and we are engaged with a number of customers in that space, all requiring edge compute and autonomy. Our device and module are well suited for that. As for the IBAS program, we are preparing our Blue UAS solution, which will be ready this quarter. That's another plus for us. We're getting more integrated with the Department of Defense and its suppliers as they move forward.
Great. And if we look at the fiscal year '27 budget request, how does the $54.6 billion front-end funding request for the Defense Autonomous Warfare Group, how should we think about backlog expansion for Lantronix over the next 12 to 24 months if that is passed by Congress over the summer?
Austin, the funding request is very large and could be a game-changing amount of dollars into autonomy and unmanned systems. We are positioned as a compute solution and have invested in this space. Many solutions will need a compute platform, and we are right there. We already have inbound interest from customers wanting to qualify us, get dev kits and do POCs. The team is working with urgency. I don't want to put a specific number out, but it's an extremely exciting and potentially transformative opportunity for the market. Historically, our ASPs are between $400 and $700, so you can back into the math from there, but the potential is very significant.
We have the next question from the line of Christian Schwab from Craig-Hallum Capital Group.
I just have one quick question. Of the recent Drone Dominance vendors that you referred to, how many of the top 12 do you think are current customers or prospective customers?
I don't want to go into specific numbers because some are covered by NDAs and I can't name them. But we are well aligned with a number of those vendors in the first 12, and we also know who is going for the second tranche. I feel good about where we are with the Drone Dominance Program. By the way, the Department of Defense has increased the ASP on that program, which gives room for additional AI, machine learning and compute in these products, and we are well situated.
We have the next question from the line of Kevin Cassidy from Rosenblatt Securities.
Congratulations on the great progress. I was just along the lines of what are the key factors that you need to expand your gross margins? Is it increasing the technology stack? Is it the volume? What are the key factors or is there a factor to expand gross margin?
Let's put it in perspective. For Q4 of fiscal '24, our gross margins were in the high 30s. We have now been in the 43% to 45% range for the last few quarters. We want to move above 45%. One driver is software and services: that mix was 5% to 6% a few quarters back and is now 8% to 9% of revenue, and moving it to 10% to 12% would push gross margin up. On the drone business, which we've increased to a $12 million midpoint for this fiscal year, adding more software, machine learning and AI models, and moving up the tech stack beyond camera integration into flight control and other systems will improve margin. In short, moving up the tech stack and adding higher-margin software and services are the primary levers.
Great. That's good. And maybe just as a follow-up on MediaTek, adding MediaTek as another source gives you a broader range. Is that geographically or is it a price-performance trade-off that you'll be able to do?
Good question, Kevin. It's both. Geographically, it allows us to be stronger in Asia Pacific and Europe. Qualcomm is a great partner and we've done really well with them, but adding MediaTek lets us play in some of the more price-sensitive markets and expands our geographic reach.
This concludes our question-and-answer session. I would like to turn the conference back over to Saleel Awsare for closing remarks.
Thank you again for your questions and for joining us today. We appreciate your continued interest in Lantronix and hope you will continue to join us on this journey. While we are encouraged by the progress we've made, we believe we are still ascending rapidly with a long flight ahead and plenty of altitude still to gain before reaching cruising altitude. I'll be at XPONENTIAL next week and the Needham Emerging Growth Conference, followed by the Craig-Hallum Conference later this month. I look forward to connecting with many of you there. Thank you again, and we look forward to updating you on our progress soon.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.