Investor Presentation - Lantronix: IoT Connectivity ... · SELECTED FISCAL YEAR AND QUARTERLY...

Investor

PresentationMarch 2019

Copyright © Lantronix 2018. All rights reserved.COMPANY CONFIDENTIAL. DO NOT DISTRIBUTE

Forward-Looking Statements

COMPANY CONFIDENTIAL. DO NOT DISTRIBUTE 2

This presentation contains forward-looking statements, including statements concerning our business and product development plans and

strategies, the perceived benefits of our products, and our future growth and financial performance. Any statement relating to our plans, goals,

expectations or any future event should be considered a forward-looking statement. While we have based our forward-looking statements on

our current assumptions and expectations, forward-looking statements are not guarantees of future performance and are subject to substantial

risks and uncertainties. As a result, our actual results could differ materially from those indicated in our forward-looking statements, and you

should not rely on any of these forward-looking statements.

Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking

statements include the risks and uncertainties described in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and

Exchange Commission, or SEC, as well as in our other filings with the SEC. In addition, new risks emerge from time-to-time and we cannot

predict all future risks or assess the impact of all risks to our business. Our forward-looking statements are based on our view as of the date

they are made. Except as require by law, we expressly disclaim any intent or obligation to update any forward-looking statements after the date

hereof becauseof new information, futureeventsor otherwise.

This presentation references certain non-GAAP financial measures, including non-GAAP net income (loss). A reconciliation of the non-GAAP

financial measures to the corresponding GAAP financial measures, along with important information regarding our disclosure of the non-GAAP

financials, is provided in Appendix A.

3

OUR MISSION

CREATING SECURE DATA ACCESS & MANAGEMENT

SOLUTIONS FOR THE INDUSTRIAL IOT

Our mission is to be the leading supplier of IoT solutions that

enable companies to dramatically simplify the creation,

deployment, and management of IoT projects while providing

secure access to data for applications and people.

COMPANY CONFIDENTIAL. DO NOT DISTRIBUTE

Lantronix

Enabling the Industrial

Internet of Things

• Global provider of secure data access and

management solutions for Industrial IoT

• Industry leading connectivity solutions that are

easy to deploy and accelerate time to market

• Millions of devices connected worldwide

• Strong Blue Chip customer base

• Significant financial momentum and operating

leverage

IoT Pure Play

Return to Growth with

Margin Expansion

Global Revenue• Americas 55%

• EMEA 30%

• APJ 15%

Experienced

Leadership Team


5

PROVEN LEADERSHIP TEAM

Paul Pickle

CEO (effective 4/22/19)

Michael A. Fink

VP, OperationsFathi Hakam

VP, Engineering

Shahram Mehraban

VP, Marketing

Kurt Scheuerman

VP, General Counsel

Tom Morton

VP, Human Resources

Kevin Yoder

VP, WW Sales


Jeremy Whitaker

CFO

OUR GROWTH

STRATEGY


Expand SaaS IoT P lat fo rm w i th New IoT and ITM App l icat ions

Pursue Strateg ic Acqu isi t ion Opportun it ies

Grow IoT Revenue w i th New Gateway Products

Pursue M arket Share Gains w i th IT M anagement Products

what

STRONG BASE OF GLOBAL BLUE-CHIP CUSTOMERS

W e l l P o s i t i o ne d i n K e y Ma r ke t S e gme nt s

RETAIL INDUSTRIAL ENERGY / UTILITIESHEALTHCARE SMART BUILDING

TRANSPORTATION FINANCIALS EDUCATIONMILITARY & GOV’T TELECOM


http://www.rockwellautomation.com/

FAVORABLE SECULAR TRENDS

Integration of

Renewables &

Distributed

Energy

Rise of

Robotics &

Automation

Connected

Healthcare &

Remote

Patient

Monitoring

Smart Building

Integration

Increase

Government &

Defense

Spending

M2M, Big

Data, Analytics


THE

LANTRONIX

DIFFERENCE

Lantronix takes care of IoT

connectivity, management

and security so our

customers can take care of

their business

Reducing total cost of

ownership

Reducing OEM time

to market


Industrial hardened

solutions

10%

12%

12%

10%

10%

12%

9%

10%

10%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Implementation complexity

Cost/funding concerns

Security concerns

Ranked 1st Ranked 2nd Ranked 3rd

Top 3 Issues with IoT Deployments

9

IOT SOLUTIONS FROM THE DEVICE TO THE DATA CENTER

New Connected

Devices

Legacy Devices

Network

Lantronix

Embedded

Modules

& Gateways

Data Center

Lantronix

External Device

Gateways

Lantronix

IT Management

Solutions


Broad Suite of IIoT Solutions

11

IOT GATEWAYS &

BUILDING BLOCKS

Connectivity Without

Complexity

IT MANAGEMENT

SOLUTIONS

Management of Enterprise

IT Infrastructure

MANAGEMENT

SOFTWARE

Scalable Software Made Simple


LANTRONIX IOT GATEWAYS

Secure and certified enterprise-ready

connectivity, network intelligence and

management at scale for industrial and

commercial devices and machines

Embedded IoT Gateways

• Ideal to drop into any new or

inflight design

• Small size ideal for high-

volume integration

External IoT Device Gateways

• Ideal for connecting existing

devices and machines

• Or, when it is desirable to keep

connectivity external to asset

xPico 240Mid-range

Ethernet, Wi-Fi

PremierWave

2050Enhanced Ethernet,

Wi-Fi Bluetooth

SGX5150Ethernet, Wi-Fi

Bluetooth

PremierWave

XC HSPA+Ethernet, Cellular

xPico 250Mid-range

Ethernet, Wi-Fi

Bluetooth

XPort EdgeSerial to Ethernet


SGX5150-MDEthernet, Wi-Fi

Bluetooth

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiZo7y2qd7TAhWg14MKHe4yBTgQjRwIBw&url=https://en.wikipedia.org/wiki/Dime_(United_States_coin)&psig=AFQjCNEnjFhij3jHPT3_soGgF7uP3ROu6A&ust=1494265078224922

Lantronix IT Management

ADVANCED CONSOLE MANAGER BRANCH OFFICE MANAGER REMOTE KVM-OVER-IP

Enterprise Data Centers &

Development LabsRetail Store & Branch Offices Kiosks, Digital Signs, Test Labs


MACH10 Management Software PlatformRecurring Revenue Through SaaS Model

Global Device Manager

Gateway Central

ConsoleFlow

for IoT OEMs

for Lantronix Gateways

for Lantronix Console Managers


THE LANTRONIX DIFFERENCE IN ACTION

Connecting

Weighing

Scale for

Higher

Efficiency


Enabling

Secure Smart

Meter

Integration

Increasing

Warehouse

Efficiency

Through Fast

Roaming

Enabling

Secure

Medical

Device

Connectivity

Connecting

Hospital

Devices

Securely to the

WiFi Network

Enabling New

Business

Models in

Retail

16

Operating Results


SELECTED FISCAL YEAR AND QUARTERLY FINANCIAL DATA

$-

$10,000

$20,000

$30,000

$40,000

$50,000

FY15 FY16 FY17 FY18

Net Revenue by Product Line

IoT ITM Other

47.3% 47.7%

52.7%55.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

$(4,000)

$(3,000)

$(2,000)

$(1,000)

$-

$1,000

$2,000

$3,000

$4,000

FY15 FY16 FY17 FY18

Gross Margin and Profitability

GAAP Income Non-GAAP Income GPM %


* R e f e r t o A p p e n d i x A f o r r e c o n c i l i a t i o n o f N o n - G A A P f i n a n c i a l m e a su r e s

$7,889 $9,061

$10,391

$13,544

$24,407 $25,545

$4,989 $5,962

$8,073

$9,568

$18,925 $19,367

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

FY15 FY16 FY17 FY18 Q1 FY19 Q2 FY19

Liquidity

Working Capital Cash

SELECTED QUARTERLY FINANCIAL PERFORMANCE



$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Net Revenue by Product Line

IoT ITM Other

47.9% 48.1% 48.0% 47.0%

52.1% 51.8%

55.5%

51.3%52.7%

55.7%56.8% 57.1%

54.9% 55.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

$(1,000)

$(500)

$-

$500

$1,000

$1,500

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Gross Profit Margin % and Profitabil ity

GAAP Income Non-GAAP Income GPM %

SELECTED BALANCE SHEET INFORMATION

(In thousands except price per share

data)

June 30, December 31,

2018 2018

Cash and Cash Equivalents $ 9,568 $ 19,367

Accounts Receivable, Net 4,244 6,134

Inventories, Net 8,439 9,352

Total Current Assets 23,270 36,024

Current Liabilities 9,726 10,479

Working Capital 13,544 25,545

Common Shares Outstanding 18,908 22,213

RSUs Outstanding 140 699

Stock Options Outstanding 3,931 3,352

Weighted Average Exercise Price Per Option $ 1.73 $ 1.76


Invest in one of the few public company IoT pure plays

▪ Es t a b l i s he d g lo b a l I o T s o lut io ns p r o vid e r w i t h b lue c hip c us t o me r b a s e

▪ Se a s o ne d le a d e r s hip t e a m w / s ig ni f i c a nt e nt e r p r i s e e xp e r ie nc e

▪ Pur s uing f a s t g r o w ing I o T ma r k e t w i t h d o ub le d ig i t CAG R

▪ M ACH1 0 p la t f o r m a nd r e la t e d s o f t w a re a p p l i c a t io ns e na b le inc r e me nt a l g r o w t h

o p p o r t uni t y

Significant growth potential

▪ I n FY 1 8 , r e p o r t e d G AAP p r o f i t & ne a r l y d o ub le d no n - G AAP p r o f i t

▪ Bus ine s s mo d e l w i t h s ig ni f i c a nt o p e r a t ing le ve r a g e

▪ No lo ng - t e r m d e b t , nine c o ns e c ut i ve q ua r t e r s o f i nc r e a s e d c a s h

▪ Sub s t a nt ia l NO L f e d e r a l c a r r y o ve r

▪ Ne w p r o d uc t s la unc he s w i t h d e s ig n w in mo me nt um

▪ I no r g a nic s t r a t e gy c a n a c c e le r a t e g r o w t h

SUMMARY


[email protected]


22

(In thousands) Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 FY16 FY17 FY18

GAAP Net Income (Loss) $ 225 $ 344 $ 752 $ (83) $ 277 $ (1,962) $ (277) $ 680

Non-GAAP Adjustments:

Share-based Compensation 310 295 292 478 451 870 912 1,169

Depreciation and Amortization 109 110 106 105 114 759 594 442

Interest Expense (Income) , Net 5 5 4 4 (60) 32 23 18

Other (Income) Expense, Net (1) 1 9 10 (8) (61) 3 8

Withholding Taxes on Stock Grants 3 4 4 6 2 4 12 14

Severance and Restructuring Costs - (21) - 323 - 533 246 506

Provision (Benefit) for Income Taxes 38 29 6 40 14 63 68 98

Total Non-GAAP Adjustments 464 423 421 966 513 2,200 1,858 2,255

Non-GAAP Net Income (Loss) $ 689 $ 767 $ 1,173 $ 883 $ 790 $ 238 $ 1,581 $2,935

L a n t r o n i x b e l i e v e s t h a t t h e p r e s e n t a t i o n o f n o n - G A A P f i n a n c i a l i n f o r m a t i o n , w h e n p r e s e n t e d i n c o n j u n c t i o n w i t h t h e c o r r e s p o n d i n g G A A P m e a s u r e s , p r o v i d e s i m p o r t a n t s u p p l e m e n t a l i n f o r m a t i o n t o m a n a g e m e n t a n d i n v e s t o r s r e g a r d i n g f i n a n c i a l a n d b u s i n e s s t r e n d s r e l a t i n g t o t h e C o m p a n y ' s f i n a n ci a l c o n d i t i o n a n d r e s u l t s o f o p e r a t i o n s .

T h e n o n - G A A P f i n a n c i a l m e a s u r e s d i s c l o s e d b y t h e C o m p a n y s h o u l d n o t b e c o n s i d e r e d a s u b s t i t u t e f o r , o r s u p e r i o r t o , f i n a n c i a l m e a s u r e s c a l c u l a t e d i n a c c o r d a n c e w i t h

G A A P , a n d t h e f i n a n c i a l r e s u l t s c a l c u l a t e d i n a c c o r d a n c e w i t h G A A P a n d r e c o n c i l i a t i o n s o f t h e n o n- G A A P f i n a n c i a l m e a s u r e s t o t h e f i n a n c i a l m e a s u r e s c a l c u l a t e d i n a c c o r d a n c e w i t h G A A P s h o u l d b e c a r e f u l l y e v a l u a t e d . T h e n o n - G A A P f i n a n c i a l m e a s u r e s u s e d b y t h e C o m p a n y m a y b e c a l c u l a t e d d i f f e r e n t l y f r o m , a n d t h e r e f o r e m a y n o t

b e c o m p a r a b l e t o , s i m i l a r l y t i t l e d m e a s u r e s u s e d b y o t h e r c o m p a n i e s . T h e C o m p a n y h a s p r o v i d e d r e c o n c i l i a t i o n s o f t h e n o n- G A A P f i n a n c i a l m e a s u r e s t o t h e m o s t d i r e c t l y c o m p a r a b l e G A A P f i n a n c i a l m e a s u r e s . M a n a g e m e n t b e l i e v e s t h a t n o n - G A A P n e t i n c o m e ( l o s s ) i s a n i m p o r t a n t m e a s u r e o f t h e C o m p a n y ' s b u s i n e s s . M a n a g e m e n t

u s e s t h i s f i n a n c i a l m e a s u r e t o m o n i t o r a n d e v a l u a t e o n g o i n g o p e r a t i n g r e s u l t s a n d t r e n d s t o g a i n a n u n d e r s t a n d i n g o f o u r c o m pa r a t i v e o p e r a t i n g p e r f o r m a n c e .

APPENDIX A: Reconciliation of Non-GAAP Financial Measures


23

(In thousands) Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 FY16 FY17 FY18

Net Revenue $ 11,336 $ 11,601 $ 12,037 $ 12,279 $ 12,114 $ 40,592 $ 44,730 $ 45,580

Gross Profit $ 6,314 $ 6,584 $ 6,876 $ 6,741 $ 6,661 $ 19,378 $ 23,580 $ 25,368

% of Net Revenue 55.7% 56.8% 57.1% 54.9% 55.0% 47.7% 52.7% 55.7%

GAAP Net Income (Loss) $ 225 $ 344 $ 752 $ (83) $ 277 $ (1,962) $ (277) $ 680

Non-GAAP Net Income

(Loss)$ 689 $ 767 $ 1,173 $ 883 $ 790 $ 238 $ 1,581 $2,935

▪ M a i n t a i n e d g r o ss p r o f i t % a t m i d - 5 0 s d e sp i t e

t a r i f f i m p a c t

▪ R e t u r n t o G A A P p r o f i t a b i l i t y

▪ 1 2 t h c o n se c u t i v e q u a r t e r o f n o n - G A A P n e t

i n c o m e

Q2 FY 2019 HIGHLIGHTS:

SELECTED INCOME STATEMENT INFORMATION

▪ 2 n d y e a r o f se q u e n t i a l r e v e n u e g r o w t h

▪ 3 0 0 B P i m p r o v e m e n t i n g r o ss p r o f i t %

▪ N e a r l y d o u b l e d n o n - G A A P n e t i n c o m e

FY 2018 HIGHLIGHTS:



Minimum impact from

Other (EOL) products

going forward

Significant progress

with meaningful

design-wins

New WiFi products

entering the market

IoT Software and SaaS

offerings launched

Inorganic growth

opportunities can

accelerate growth


LANTRONIX DRIVERS FOR ACCELERATED GROWTH

Accelerating the development of secure connected machines

xPico 200 Series of Embedded IoT Gateways

Leading Embedded Solution for Managed Industrial Wi-Fi Connectivity

AGV Robot Connected Weighing Scale Traffic Control Systems Medical ScannerDrone


XPort EdgeN e xt G e n e r a t i o n E m b e d d e d E t h e r n e t G a t e w a y & D e v i c e S e r ve r

I n d u s t r i a l I O T - A c c e l e r a t e d .

Next generation of the leading embedded

Ethernet device server providing full IoT

gateway connectivity to any device with serial

capability

26

Connected Door Locks Commercial Smart Meter Connected Cash Drawer Connected Parking MeterGaming Machines


27

LANTRONIX GATEWAY CENTRAL

Configuration, Management & Monitoring For Lantronix Gateways

… in the Cloud

Centralized Directory for IoT Gateways

Automate Updates

Monitor Network Statistics and

Configure Alerts

MINIMIZE TRUCK ROLLS.

INCREASE EQUIPMENT UPTIME.

Seamless Upgrade to Global Device Manager


LANTRONIX

VALUE

PROPOSITION

Industrial

Networking

Experience

10-15 Years

Product Life

Industrial

Temperature

Industrial

Grade

Security

Industrial

Protocols

Ruggedized

Hardened

Designs


Reducing Complexity, Risk, and

Time-to-Market for Delivering Industrial

IoT Solutions

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Investor Presentation - Lantronix: IoT Connectivity ... · SELECTED FISCAL YEAR AND QUARTERLY...

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