Slide 1: Company Overview August 2012
Company Overview August 2012
Slide 2: Safe Harbor
Page 2 Safe Harbor This presentation contains forward - looking statements, including statements concerning financial results, anticipated market growth, market size, market vision, product features and availability timing, competitive assessments, the Company’s expectations concerning its operating
Slide 3: Lantronix Overview
Page 3 Lantronix Overview ( Nasdaq: LTRX ) • Global provider of smart machine - to - machine (“M2M”) connectivity solutions over wired and wireless networks • New product strategy expands addressable market by ~4x • Industry leadership and brand name recognition • B lue chip customers in 5 key verti
Slide 4: Management Team
Page 4 Management Team Jeremy Whitaker , Chief Financial Officer * • Former Lantronix Vice President of Finance, returned to join turnaround • Broad perspective with both outside auditor (Ernst & Young) and internal finance and accounting experience at multiple publicly traded companies Tom Morton ,
Slide 5: Lantronix Ecosystem
Page 5 Lantronix Ecosystem Enabling the smart network and flow of actionable data . . .
Slide 6: The World of M2M
Page 6 The World of M2M M2M is using a device sensor or meter t o capture an event temperature, level, status relayed through a network wireless, wired or hybrid t o an application software program that translates the event into capture performance, need to be meaningful information restocked, temp
Slide 7: M2M Connectivity is Growing Rapidly
Page 7 M2M Connectivity is Growing Rapidly Commercial and consumer M2M device connections by industry sector, worldwide, 2020 Source : “Imagine an M2M world with 2.1 billion connected things …” Analysys Mason, 2011 M2M device c onnections expected to grow at a CAGR of 36% from 2010 to 2020
Slide 8: Current Product Lines: External and Embedded
Page 8 Current Product Lines: External and Embedded • Simple and cost effective machine to cellular, wired and wireless Ethernet networks FY’12 Revenue: $ 35.8MM • Manage multiple mission critical machines from one location; plug and play print solution for iPad and iPhone FY’12 Revenues: $9.6MM Cle
Slide 9: Growth Strategy
Page 9 Growth Strategy Capitalize on trends in the M2M connectivity market by leveraging our existing platforms to expand addressable markets and gain share in current segments • Expand addressable market by introducing innovative new products and organizing resources to release on average one new p
Slide 10: Production Shipments: New Product Releases
Page 10 Production Shipments Product Name Description Q3 CY12 xPrintServer ™ – Home Edition iPad /iPhone printing to network and USB printers xSenso ™ Network enable analog sensors Q2 CY12 xPico ™ World’s smallest embedded device server to network enable machines PremierWave ® XC Cellular connectivi
Slide 11: New Product Family: xPrintServer
Page 11 New Product Family: x PrintServer ™ First new p roduct i nitiated by new management team xPrintServer ™ – Network and Home Editions • CONNECT: – Designed specifically for networked and/or USB printers – Print wirelessly from any iPad ®, iPhone® or iPod® to virtually any networked and/or USB
Slide 12: xPrintServer: Product Reviews
Page 12 x PrintServer : Product Reviews “It’s truly plug - and - play. And it just works!” “The xPrintServer make me giddy with glee!” “xPrintServer overcomes Apple’s printing gap, with amazing simplicity.” “You’re going to love this product!” “Set - up is drop - dead simple!” “xPrintServer is fanta
Slide 13: Accelerate Growth: Expanding Lantronix Addressable Market
Page 13 Accelerate Growth: Expanding Lantronix Addressable Market New p roduct s trategy expands e stimated addressable market by over 4x Source: Primarily based upon internal estimates using source data from IDC & Harbor Research $ - $500 $1,000 $1,500 $2,000 $2,500 $3,000 2011 2012 2013 2014 2015
Slide 14: World Class Global Customer Base
Page 14 World Class Global Customer Base Security Industrial Automation IT / Data Center Medical Energy Over 3 million devices connected
Slide 15: Global Sales & Distribution Network
Page 15 Global Sales & Distribution Network Lantronix Offices (California HQ, Netherlands, Hong Kong, and Japan) Major Distributors (Ingram Micro, Arrow, CDW, Tech Data, Symmetry, Mouser, Sphinx, ACAL, Atlantik , Nissin and others) Lantronix Regional Sales Offices (San Francisco, Chicago, Boston, Ne
Slide 16: Progress During the Past Year
Page 16 Progress During the Past Year x New CEO, CFO and recruited and retained experienced management team x Implemented strategy to expand both existing market share and new market segments x Revitalized focus on expanding IP portfolio x Reduced operating expenses, lowered breakeven point x Non -
Slide 17: Financial Information
Tuesday, August 28, 2012 | Page 17 | Confidential. © 2010 Lantroni x . FINANCIAL INFORMATION
Slide 18: Improvement to Operating Results
Page 18 Improvement to Operating Results Restructuring & Cost Containment o During FQ2’12, reduced headcount by ~11% o Reduced spending on outside services o Tightened spending throughout company o Focus spending on R&D, and away from SG&A o Actions taken during FQ2’12 expected to save over $2MM per
Slide 19: Improving Gross Margins
Page 19 Improving Gross Margins Actions taken to return gross margins to historical range of 49% to 51% 40.0% 42.0% 44.0% 46.0% 48.0% 50.0% 52.0% FQ1'11 FQ2'11 FQ3'11 FQ4'11 FQ1'12 FQ2'12 FQ3'12 FQ4'12 Gross Margin Corporate Target of 49% to 51%
Slide 20: Target Model
Page 20 Target Model Highly leveraged operating model provides for accelerated income growth FQ1’12 FQ2’12 FQ3’12 FQ4’12 Target Model (1 - 2 year) Target Model (3 year) Gross Margin % 47.4% 48.2% 48.8% 50.7% 49% - 51% 49% - 51% GAAP Operating Income (Loss) % (12%) (13%) 0% (1%) 0% - 3% 5% - 7% Non -
Slide 21: Selected Condensed Balance Sheet Information
Page 21 Selected Condensed Balance Sheet Information ( i ) LTRX sold 3.9MM common shares during Q4 FY’12 generating approximately $9.5MM in net cash proceeds. Fiscal Year Ends on June 30th (In millions, except price per share data) Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Cash and Cash Equivalents 5.8$ 4.
Slide 22: Selected Income Statement Information
Page 22 Selected Income Statement Information Fiscal Year Ends on June 30th (In millions) FY'11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 FY'12 Net Revenue $49.3 $11.2 $10.5 $12.1 $11.6 $45.4 Y/Y Change 6% (8%) (18%) (2%) (4%) (8%) Gross Profit $24.4 $5.3 $5.0 $5.9 $5.9 $22.1 % of Net Revenue 49.5% 47.4% 48.2% 48
Slide 23: Lantronix: Highlights
Page 23 x Energized management team with over 150 years of M2M and communication electronics experience x New market and product strategy expands addressable market by ~ 4x x Revenue growth expected to outpace growth of operating expenses x Actions taken to reduce non - GAAP operating expense and se
Slide 24: Thank You
LANTRONIX’ CONNECT SMART. DO MORE. THANK YOU LANTRONIX
Slide 25: Appendix A: Use of Non-GAAP Financial Measures
Page 25 Appendix A: Use of Non - GAAP Financial Measures Lantronix believes that the presentation of non - GAAP financial information, when presented in conjunction with the corresponding GAAP measures, provides important supplemental information to management and investors regarding financial and b
Slide 26: Appendix A: Reconciliation of Non-GAAP Financial Measures
Page 26 Appendix A: Reconciliation of Non - GAAP Financial Measures Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 2011 2012 GAAP net income (loss) (678)$ (579)$ (399)$ (3,615)$ (1,444)$ (1,377)$ (41)$ (178)$ (5,271)$ (3,040)$ Non-GAAP adjustments: Cost of revenue: Share-based compensation 25 11 10 17 13 9