Lantronix, Inc. Reports Third Quarter Fiscal 2006 Profit, Record Revenues of $13.1 Million and Fiscal Year-To-Date Device Networking Growth of 17.2 Percent


IRVINE, Calif., May 4, 2006 (PRIMEZONE) -- Lantronix, Inc. (Nasdaq:LTRX), a leader in device networking technologies, today reported results for its third fiscal quarter ended March 31, 2006.

Lantronix recorded revenues of $13.1 million for the quarter ended March 31, 2006, an increase of 6.2% from the same period in fiscal 2005 and the highest quarterly revenue in sixteen quarters.

Revenues for the device networking category in the third fiscal quarter were $8.7 million, an increase of 11.2% compared to the same period in fiscal 2005. For the nine month period ended March 31, 2006, device networking revenues were $25.9 million, an increase of 17.2% compared to $22.1 million in the same period last year.

Revenues for the company's IT management category in the third fiscal quarter were $2.9 million, a decrease of 2.6% compared to the same period in fiscal 2005 and an increase of 1.4% compared to the prior quarter. This is the second consecutive sequential increase in the IT management category in over a year. For the nine month period ended March 31, 2006, IT management revenues were $8.5 million, a decrease of 9.2% from $9.4 million in the same period last year.

Revenues for non-core products in the third fiscal quarter were $1.5 million, a decrease of 2.6% from the same period in fiscal 2005. For the nine month period ended March 31, 2006, non-core product revenues were $3.8 million, a decrease of 19.7% compared to $4.8 million in the same period last year.

Gross profits were 50.3% for the third fiscal quarter, compared with 46.2% for the same period a year earlier.

Net income for the three month period ended March 31, 2006 was $399,000 or $0.01 per diluted and basic share compared to a net loss of $(1.4) million or $(0.02) per diluted and basic share for the same period last year. Net income for the quarter included a $1.6 million class action litigation settlement recovery as a result of one insurance carrier increasing its contribution to the class action settlement.

Cash, cash equivalents and marketable securities increased $158,000 to $7.4 million during the quarter, representing the company's fourth sequential quarter of positive cash results.

In May, the Company entered into a six year patent cross-license agreement and settled related litigation with Digi International.

Chief Executive Officer and President Marc Nussbaum commented, "We are pleased to report continued solid growth in device networking this past quarter. Despite the third fiscal quarter historically being one of the slower periods of the year, we posted double digit year-over-year growth in this category, driven by increased volume of our popular XPort products. In March, our newest addition to this line, the XPort AR (architect series) won EDN Magazine's Innovation of the Year Award for most innovative embedded system for 2005. While performance of the IT management business has negatively affected overall results for the first half of fiscal 2006, this past quarter we continued to see improvement in this category with our second quarter of modest sequential growth."

FISCAL 2006 OUTLOOK

Fiscal year-to-date, revenues in the device networking category have grown approximately 17% and the IT management category declined 9%. Combined, the core business grew 9% and total revenues (including non-core products) grew 6% year-to-date. Due to lower than expected performance of the IT management category, we expect to achieve the low range of our annual guidance of 14%-19% in core revenue growth and 10%-15% overall revenue growth for fiscal 2006.

Nussbaum concluded, "While IT management has underperformed this past year, we anticipate design-wins of our data center products at several Fortune 500 companies will drive growth in this category over the next few quarters. The market for device networking products continues to be strong and we expect acceleration in this market throughout the remainder of fiscal 2006 and 2007. With strengths in both the data center and device enablement, we believe Lantronix is uniquely positioned to innovate and lead the industry."

CONFERENCE CALL AND WEBCAST

The company is scheduled to hold a conference call today at 5:00 PM Eastern time to discuss third quarter fiscal 2006 financial results. Investors can access the call at www.lantronix.com. Investors can also access the conference call by dialing 800-510-0178 (international dial-in: 617-614-3450) and entering passcode 41725443.

A replay of the conference call will be available via the company's website, www.lantronix.com, starting at 7:00PM Eastern Time. To access a replay of the conference call, starting at 7:00 PM Eastern Time on May 4, investors can also call 888-286-8010 (international dial-in: 617-801-6888) and enter passcode 27201015. The replay will be available through May 18, 2006.

About Lantronix

One of the emerging Internet megatrends is the connecting of everyday devices to other machines and businesses. Adoption of machine-to-machine (M2M) networking technology is expected to continue accelerating over the next decade.

Lantronix, Inc. (Nasdaq:LTRX) provides technology solutions that deliver Net Intelligence(tm), helping businesses remotely manage network infrastructure equipment and rapidly network-enable their physical electronic devices. Lantronix connectivity solutions securely link a company's electronic assets through the network, allow access to business-critical data within each device and convert that data into actionable information. With this new intelligence, companies can achieve greater efficiencies, reduce resource consumption and proactively transform the way they do business. The leader in device networking and secure remote management solutions, Lantronix was founded in 1989 and has its worldwide headquarters in Irvine, California. For more information, visit www.lantronix.com.

The Lantronix logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1735

Lantronix is a registered trademark of Lantronix, Inc. All other trademarks are properties of their respective owners.

This news release contains forward-looking statements, including statements concerning expectations to achieve the low range of our annual guidance in core revenue growth and overall revenue growth, future strength of the device networking market, the company's expectation of design wins for our datacenter products that will continue to drive growth, and being positioned to innovate and lead the industry. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties that could cause actual reported results and outcomes to differ materially from those expressed in the forward-looking statements, including but not limited to: quarterly fluctuations in operating results; changing market conditions; government and industry standards; market acceptance of Lantronix products by its customers; pricing trends; actions by competitors; future revenues and margins; changes in the cost or availability of critical components; the outcome of significant litigation, unusual or unexpected expenses; cash usage; and other factors that may affect financial performance. For a more detailed discussion of these and other risks and uncertainties, see the company's recent SEC filings, including its Form 10-Q for the fiscal quarter ended March 31, 2006. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.



          SELECTED CONSOLIDATED UNAUDITED BALANCE SHEET DATA
                            (In thousands)

                                          March 31,       June 30,
                                            2006            2005
                                          ---------      ---------

 Cash and cash equivalents                $   7,355      $   6,690
 Marketable securities                           94             85
 Accounts receivable, net                     1,799          2,582
 Inventories, net                             6,877          6,828
 Goodwill                                     9,488          9,488
 Purchased intangible assets, net               649            559
 Total assets                                46,558         30,053

 Accumulated deficit                       (167,595)      (163,082)
 Total stockholders' equity                  15,032         18,468


       SELECTED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
                 (In thousands, except per share data)

                                Three Months Ended   Nine Months Ended
                                     March 31,           March 31,
                                 -----------------   -----------------
                                  2006      2005      2006      2005
                                 -------   -------   -------   -------
 Net revenues (a)                $13,063   $12,303   $38,258   $36,256
 Cost of revenues (b)(c)           6,467     6,614    18,903    18,754
 Cost of revenues - share-based
  compensation                        24        --        65        --
                                 -------   -------   -------   -------
 Gross profit                      6,572     5,689    19,290    17,502
                                 -------   -------   -------   -------
 Operating expenses:
  Selling, general and
   administrative (c)              5,875     5,477    17,837    18,905
  Selling, general and
   administrative - share-based
   compensation                      171         1       499       154
  Research and development (c)     1,517     1,292     4,125     5,008
  Research and development -
   share-based compensation           55         5       160        10
  Amortization of purchased
   intangible assets                  --        15         2        63
  Restructuring recovery              --       (29)
  Litigation settlement
   (recovery) costs               (1,385)       --     1,215        --
                                 -------   -------   -------   -------
 Total operating expenses          6,233     6,790    23,809    24,140
 Income (loss) from operations       339    (1,101)   (4,519)   (6,638)
 Interest income, net                 16         3        37        19
 Other income (expense), net          57      (194)       (2)      348
                                 -------   -------   -------   -------
 Income (loss) before income
  taxes                              412    (1,292)   (4,484)   (6,271)
 Provision for income taxes           13        70        29       240
                                 -------   -------   -------   -------
 Income (loss) from continuing
  operations                         399    (1,362)   (4,513)   (6,511)
 Income from discontinued
  operations                          --        --        --        56
                                 -------   -------   -------   -------
 Net income (loss)               $   399   $(1,362)  $(4,513)  $(6,455)
                                 =======   =======   =======   =======

 Basic income (loss) per share:
  Income (loss) from continuing
   operations                    $  0.01   $ (0.02)  $ (0.08)  $ (0.11)
  Income from discontinued
   operations                         --        --        --        --
                                 -------   -------   -------   -------
 Basic net income (loss)
   per share                     $  0.01   $ (0.02)  $ (0.08)  $ (0.11)
                                 =======   =======   =======   =======
 Diluted income (loss) per share:
  Income (loss) from continuing
   operations                    $  0.01   $ (0.02)  $ (0.08)  $ (0.11)
  Income from discontinued
   operations                         --        --        --        --
                                 -------   -------   -------   -------
 Diluted net income (loss)
  per share                      $  0.01   $ (0.02)  $ (0.08)  $ (0.11)
                                 =======   =======   =======   =======
 Basic weighted-average shares    58,758    58,642    58,643    58,381
                                 =======   =======   =======   =======
 Diluted weighted-average shares  60,289    58,642    58,643    58,381
                                 =======   =======   =======   =======

 (a) Includes net revenues from
     related party               $   430   $   280   $ 1,036   $  896
                                 =======   =======   =======   =======
 (b) Includes amortization of
     purchased intangible
     assets                      $    31   $   363   $   551   $ 1,092
                                 =======   =======   =======   =======

 (c) Excludes share-based compensation expense, which is presented
     separately by respective expense category.


            

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