Lantronix Reports Fourth Quarter and Fiscal Year 2007 Results

M2M Device Networking Net Revenues Grow 13 Percent Contributing 88 Percent of Fiscal Year 2007 Sales


IRVINE, Calif., Sept. 6, 2007 (PRIME NEWSWIRE) -- Lantronix, Inc. (Nasdaq:LTRX), a leader in device networking and data center management technologies, today announced financial results for the fourth quarter and fiscal year ended June 30, 2007.

Fiscal Year 2007 Highlights



  *  Net revenues of $55.3 million, a 7% increase compared to
     $51.9 million in fiscal year 2006.
  *  Net loss decreased 43% to $(1.7) million or $(0.03) per
     basic and diluted share compared to $(3.0) million, or
     $(0.05) per basic and diluted share, in fiscal year 2006.
  *  Device networking machine-to-machine (M2M) revenues were
     88% of total net revenues, driven by year-over-year growth
     of 12% in device enablement net revenues and 16% in device
     management net revenues.
  *  Reduced selling, general and administrative (SG&A) expenses
     by $1.0 million, or 4% compared to fiscal year 2006 and
     increased research and development (R&D) expenses by
     $1.4 million or 23%.

Quarter Ended June 30, 2007 Highlights



  *  Net revenues of $14.7 million, an 8% increase compared to
     $13.7 million for the quarter ended June 30, 2006.
  *  Net loss of $(89,000), or $(0.00) per basic and diluted
     share compared with net income of $1.5 million or $0.02
     per basic and diluted share for the quarter ended
     June 30, 2006.  Net income for the year ago period
     included other income of $1.3 million from the sale of the
     company's interest in Xanboo, Inc.
  *  Device networking M2M revenues increased 13% to $12.9
     million or 88% of total revenues, driven by 6% growth
     in device enablement net revenues and 50% growth in device
     management net revenues.

President and Chief Executive Officer Marc Nussbaum stated, "In fiscal year 2007, we grew the device networking M2M business and successfully executed our plan to expand the market and applications we address. The number of new product launches was unprecedented, while we simultaneously reduced SG&A expenses to partially offset our planned increased investment in R&D. The strategy of strengthening and expanding our products in the categories of device management and external device enablement, as well as our ongoing initiatives to drive the embedded device enablement lines, has begun delivering results as demonstrated by fiscal year 2007 growth in all three product categories."

Nussbaum continued, "We exited the fourth quarter of fiscal year 2007 in a strong position to deliver growth throughout fiscal year 2008 and beyond as we believe our new products are beginning to gain traction. In the quarter ended June 30, 2007, the following product lines each delivered greater than 30% growth in revenues compared to the same period in fiscal year 2006: WiFi 802.11 wireless products, device server industrial products and data center management console server products. In addition, shipments of our innovative SecureLinx Spider(tm) distributed KVM (Keyboard, Video, Mouse) product for remote management of Windows servers, exceeded management's expectations during the fourth quarter ended June 30, 2007, its first quarter in production. We have increased our product breadth and continued to drive adoption by simplifying and lowering the cost to deploy M2M device networks. Last year we announced our intention to enter the M2M middleware business with our ManageLinx device management platform, now in early testing. We view the M2M market as a very large opportunity, and we are investing for the long term."

Fiscal Year 2007 Financial Results

For the fiscal year ended June 30, 2007, net revenues were $55.3 million, an increase of 7% compared to $51.9 million in the fiscal year ended June 30, 2006. Net loss decreased to $(1.7) million, or $(0.03) per basic and diluted share, from $(3.0) million, or $(0.05) per basic and diluted share in fiscal year 2006.

Fiscal year 2007 device enablement net revenues increased 12% to $39.7 million or 72% of total net revenues compared to $35.4 million or 68% of total net revenues for fiscal year 2006. Device management net revenues increased 16% to $8.9 million or 16% of total net revenues compared to $7.7 million or 15% of total net revenues for fiscal year 2006. Non-core net revenues decreased 24% to $6.7 million or 12% of total net revenues compared to $8.8 million or 17% of total net revenues for fiscal year 2006. Lantronix continued to de-emphasize its non-core legacy products in fiscal year 2007.

Gross profit margin for fiscal year 2007 was 51.2%, compared to 51.3% for fiscal year 2006.

Total operating expenses were $30.8 million or 56% of net revenues for fiscal year 2007, compared to $31.2 million or 60% of net revenues for fiscal year 2006.

Quarter Ended June 30, 2007 Financial Results

Lantronix reported net revenues of $14.7 million for the fourth quarter ended June 30, 2007, compared with $13.7 million for the fourth quarter ended June 30, 2006. Lantronix reported a net loss for the fourth fiscal quarter ended June 30, 2007 of $(89,000) or $(0.00) per basic and diluted share, compared with net income of $1.5 million, or $0.02 per basic and diluted share, for the fourth quarter ended June 30, 2006. Net income for the fourth quarter ended June 30, 2006 included other income of $1.3 million from the sale of Lantronix's interest in Xanboo, Inc.

Device enablement net revenues increased 6% to $10.0 million or 68% of total net revenues compared to $9.5 million or 69% of total net revenues, for the fourth quarter ended June 30, 2006. Device management net revenues increased 50% to $2.9 million or 20% of total net revenues compared to $1.9 million or 14% of total net revenues for the fourth quarter ended June 30, 2006. Non-core net revenues decreased 20% to $1.8 million or 12% of total net revenues compared to $2.3 million or 17% of total net revenues for the fourth quarter ended June 30, 2006.

Gross profit margin was 50.8% for the fourth quarter ended June 30, 2007, compared to 53.9% for the fourth quarter ended June 30, 2006. The decrease in gross profit margin percent was attributable to inventory-related reserves, product mix and pricing discounts.

SG&A expenses were $5.7 million compared to $5.9 for the fourth quarter ended June 30, 2006. Research and development expense was $1.9 million compared to $1.7 million for the fourth quarter ended June 30, 2006.

Balance Sheet Highlights

At June 30, 2007, Lantronix had cash, cash equivalents and marketable securities of $7.7 million compared to $7.8 million at June 30, 2006. Working capital increased to $5.6 million at June 30, 2007 compared to $5.4 million at June 30, 2006.

Recent New Product Highlights



  *  The SecureLinx IT data center family was extended with two
     new products as the company entered the remote/branch office
     market with the SecureLinx Spider distributed KVM (Keyboard,
     Video, Mouse) solution for Windows servers and the SecureLinx
     Branch Office Manager for Linux servers and infrastructure
     equipment.

  *  Lantronix introduced a new product platform, ManageLinx(tm),
     a suite of hardware and software enterprise middleware
     solutions that provide secure remote access and management
     capabilities to virtually any networked device residing on
     the other side of a corporate firewall.

  *  Industrial Device Networking was expanded with a new family
     of industrial Ethernet switches. The XPress-Pro SW(tm) series
     consists of five and eight-port managed and unmanaged
     hardened Ethernet switches to provide a full range of
     connectivity solutions for use in harsh environments.

  *  The company announced a family of M2M device networking
     system-on-silicon chip level products based on our
     award-winning XPort(r) technology. This new product line
     opens up new opportunities where a chip may be desirable
     over an embedded module.

Fiscal 2008 Outlook

Nussbaum continued, "With new products as a catalyst, our outlook for fiscal year 2008 is for device networking to exceed 95% of sales and deliver year-over-year growth of approximately 15% to 18% compared to 13% growth in fiscal year 2007. In fiscal year 2008, as we exit the remaining non-core product lines, we expect a decline up to $5.0 million, or 70% in non-core net revenues compared to fiscal year 2007. Including the impact of non-core products, total year-over-year revenue growth is expected to be 5% to 7% in fiscal year 2008. The impact of exiting the non-core products will negatively affect our year-over-year growth during fiscal year 2008, and we believe it will have a negligible impact on year-over-year growth beginning in fiscal year 2009.

"Gross margins are expected to be comparable to fiscal year 2007 levels and our outlook includes profitability from operations in fiscal year 2008. As revenues increase, growing account receivables and inventory will drive the need for increased working capital. In the first fiscal quarter of 2008 we may use up to $500,000 in cash to meet anticipated working capital requirements."

Conference Call and Webcast

Management will conduct a conference call with simultaneous webcast today at 8:00 a.m. Eastern time. President and Chief Executive Officer Marc Nussbaum and Chief Financial Officer Reagan Sakai will be on the call to discuss fourth quarter and fiscal year 2007 results and answer questions.

Interested parties may participate in the conference call by dialing 800-599-9816 (International dial-in 617-847-8705) and entering passcode 30246071. The live webcast of the conference call may be accessed by visiting About Us: Investor Relations: Presentations at the Lantronix web site at http://www.lantronix.com.

A telephonic replay of the conference call will be available through September 20, 2007 by dialing 888-286-8010 (international dial-in 617-801-6888) and entering passcode 82880513. The webcast will be archived on the Company's web site for twelve months.

About Lantronix

Lantronix, Inc. (Nasdaq:LTRX) is a leading innovator in device networking or M2M (Machine-to-Machine) technology. The company specializes in wired and wireless hardware and software solutions which allow virtually any electronic product to be network-enabled in order to remotely access, monitor and control it over a network or the Internet. The Lantronix Device Network Architecture (DNA) includes device enablement solutions which provide a direct network connection to equipment and machines for remote monitoring and control, and device management solutions which extend the ability to remotely manage IT equipment and literally thousands of networked devices, regardless of location, from a central point of access. Lantronix provides customizable technologies and solutions that are used by original equipment manufacturer (OEMs) design engineers to network-enable their products, IT administrators to manage data center and network infrastructure, and systems integrators to provide complete, remote device management solutions for their customers. With nearly two decades of networking expertise and more than 30,000 customers worldwide, Lantronix solutions are used in every major vertical market including security, industrial and building automation, medical, IT/data centers, transportation, retail/POS, financial, government, consumer electronics/appliances, and pro-AV/signage. The company's headquarters are located in Irvine, California. For more information, visit www.lantronix.com.

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

Lantronix is a registered trademark, and SecureLinx and SecureLinx Spider, ManageLinx and XPress-Pro SW are trademarks of Lantronix, Inc. All other trademarks are properties of their respective owners.

This news release contains forward-looking statements, including statements concerning our outlook in fiscal year 2008 for our device networking business, our ability to deliver continued growth, the potential growth of the M2M market, our exit from our remaining non-core product lines, the overall revenue of Lantronix in future periods, future cash balances, operating expenses, gross margins, anticipated working capital requirements and potential future profitability. 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: final accounting adjustments and results; quarterly fluctuations in operating results; our ability to identify and profitably develop new products that will be attractive to its target markets, including products in our device networking business and the timing and success of new product introductions; changing market conditions and competitive landscape; government and industry standards; market acceptance of our products by our customers; pricing trends; actions by competitors; future revenues and margins; changes in the cost or availability of critical components; unusual or unexpected expenses; and cash usage including cash used for product development or strategic transactions; and other factors that may affect financial performance. For a more detailed discussion of these and other risks and uncertainties, see our SEC filings, including our Form 10-K for the fiscal year ended June 30, 2007 and our recently filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. 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.



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



                       Three Months Ended             Years Ended
                           June 30,                     June 30,
                     ---------------------      ----------------------
                       2007         2006           2007         2006
                     --------     --------      --------      --------

 Net revenues (a)    $ 14,710     $ 13,685      $ 55,306      $ 51,943
 Cost of                                                     
  revenues (b)          7,241        6,308        26,964        25,276
                     --------     --------      --------      --------
 Gross profit           7,469        7,377        28,342        26,667
                     --------     --------      --------      --------
 Operating expenses:                                                  
  Selling,                                                    
   general and                                                
   administrative       5,687        5,867        23,243        24,203
  Research and                                                
   development          1,864        1,714         7,362         5,999
  Litigation                                                  
   (recovery)                                                 
   settlement                                                
   costs                  --         (255)           90           960
  Amortization                                                
   of purchased                                               
   intangible                                                 
   assets                 18           18            72            20
  Restructuring                                               
   charge                                                     
   (recovery)             --           12            --           (17)
                     --------     --------      --------      --------
 Total operating                                             
  expenses              7,569        7,356        30,767        31,165
                     --------     --------      --------      --------
 (Loss) income                                               
  from                                                       
  operations             (100)          21        (2,425)       (4,498)
 Interest                                                    
  income                                                     
  (expense),                                                 
  net                      (9)           9           (13)           46
 Other income,                                               
  net                      16        1,378           749         1,376
                     --------     --------      --------      --------
 (Loss) income                                               
  before                                                     
  income taxes            (93)       1,408        (1,689)       (3,076)
 Provision                                                   
  (benefit)                                                  
  for income                                                 
  taxes                    (4)         (60)           34           (31)
                     --------     --------      --------      --------
 Net (loss)                                                  
  income             $    (89)    $  1,468      $ (1,723)     $ (3,045)
                     ========     ========      ========      ========
                                                             
 Basic net                                                   
  income (loss)                                              
  per share          $  (0.00)    $   0.02      $  (0.03)     $  (0.05)
                     ========     ========      ========      ========
 Diluted net                                                 
  income (loss)                                              
  per share          $  (0.00)    $   0.02      $  (0.03)     $  (0.05)
                     ========     ========      ========      ========
                                                             
 Basic                                                       
  weighted-                                                  
  average shares       59,879       58,883        59,603        58,702
                     ========     ========      ========      ========
 Diluted                                                     
  weighted-                                                  
  average shares       59,879       60,314        59,603        58,702
                     ========     ========      ========      ========
                                                             
 (a) Includes                                                
  net revenues                                               
  from related                                               
  party              $    283     $    340      $  1,073      $  1,376
                     ========     ========      ========      ========
                                                             
 (b) Includes                                                
  amortization                                               
  of purchased                                               
  intangible                                                 
  assets             $      5     $     19      $     16      $    570
                     ========     ========      ========      ========
 



             CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEETS
             (In thousands, except share and per share data)



                                          June 30,            June 30,
                                            2007                2006
                                        ----------          ----------
 ASSETS
 Current Assets:
 Cash and cash equivalents                 $ 7,582            $ 7,729
 Marketable securities                          97                 88
 Accounts receivable (net of 
  allowance for doubtful 
  accounts of $105 and $84 at
  June 30, 2007 and 2006, 
  respectively)                              3,411              3,087
 Inventories, net                           10,981              8,113
 Contract manufacturers' 
  receivable                                 1,270              1,049
 Settlements recovery                           --             15,325
 Prepaid expenses and other  
  current assets                               578                577
                                        ----------          ---------
  Total current assets                      23,919             35,968

 Property and equipment, net                 1,911              1,589
 Goodwill                                    9,488              9,488
 Purchased intangible assets, 
  net                                          485                610
 Officer loans (net of 
  allowance of $3,115 at June
  30, 2007 and 2006)                           129                122
 Other assets                                   26                 38
                                        ----------          ---------
 Total assets                             $ 35,958           $ 47,815
                                        ==========          =========

 LIABILITIES AND STOCKHOLDERS'
  EQUITY
 Current Liabilities:
 Accounts payable                         $ 11,017            $ 7,865
 Accrued payroll and related 
  expenses                                   1,993              1,596
 Warranty reserve                              446                693
 Restructuring reserve                          --                 80
 Accrued settlements                         1,068             16,767
 Other current liabilities                   3,808              3,595
                                        ----------         ----------
 Total current liabilities                  18,332             30,596
 Long-term liabilities                         256                230
 Long-term capital lease 
  obligations                                  142                211

 Commitments and contingencies

 Stockholders' equity:
 Preferred stock, $0.0001 par
  value; 5,000,000 shares 
  authorized; none issued and
  outstanding                                   --                 --
 Common stock, $0.0001 par 
  value; 200,000,000 shares 
  authorized; 59,879,488 and 
  59,204,172 shares issued and 
  outstanding at                                --                 --
 June 30, 2007 and 2006, 
  respectively                                   6                  6
 Additional paid-in capital                184,953            182,857
 Accumulated deficit                      (168,173)          (166,450)
 Accumulated other 
  comprehensive income                         442                365
                                        ----------         ----------
 Total stockholders' equity                 17,228             16,778
                                        ----------         ----------
 Total liabilities and 
  stockholders' equity                    $ 35,958           $ 47,815
                                        ==========         ==========


            

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