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COMPANY CONFIDENTIAL. DO NOT DISTRIBUTE Copyright © Lantronix 2017. All rights reserved.
Forward-Looking Statements
This presentation contains forward-looking statements, including statements concerning our business plans, our product development
strategies, and our target financial model. 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 expectations, forward-looking statements 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, among others, changes in customer demand, the extent to which we are able to develop successful new products, changes
to the rate of decline of our legacy products, and 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.
Our forward-looking statements are based on our view as of the date they are made. We expressly disclaim any intent or obligation to update
any forward-looking statements after the date hereof.
Lantronix
Enabling the Industrial Internet of
Things
• Global provider of secure data access and
management solutions for Industrial IoT
• Innovator known for leading edge connectivity
solutions that are easy to deploy and help accelerate
time to market
• Millions of devices connected worldwide
• Strong Blue Chip customer base
• Based in Irvine California - company founded in 1989
• NASDAQ listed: LTRX
IoT Pure Play Established public company investing in Growth Market
Fiscal Year
Ended June 30, 2017 $44.7M Revenue 10% YoY Growth
Global Revenue Americas 55% EMEA 30% APJ 15%
Experienced Leadership Team Focused on Growth
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PROVEN LEADERSHIP TEAM
Jeffrey Benck President & CEO
Jeremy Whitaker
CFO
Sanjeev Datla
CTO
Kevin Yoder
VP, WW Sales
Michael A. Fink
VP, Operations
Daryl Miller
VP, Engineering
Shahram Mehraban
VP, Marketing
Kurt Scheuerman
VP, General Counsel
Tom Morton
VP, Human Resources
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OUR MISSION
CREATING SECURE DATA ACCESS AND 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.
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Expand i nto Software Bus iness
Pursue Market Share Ga ins wi th I T
Management Pr oducts
Gr ow I oT R evenue wi th New Wire less Gateway Products
OUR GROWTH
STRATEGY
Product Portfolio
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IOT GATEWAYS & BUILDING
BLOCKS
Connectivity Without Complexity
IT MANAGEMENT SOLUTIONS
Management of Enterprise
IT Infrastructure
MANAGEMENT SOFTWARE
Scalable Software Made Simple
what
WELL POSITIONED IN KEY MARKET SEGMENTS
S t r o n g b a s e o f g l o b a l b l u e - c h i p c u s t o m e r s
RETAIL INDUSTRIAL ENERGY / UTILITIES HEALTHCARE SMART BUILDING
TRANSPORTATION FINANCIALS EDUCATION MILITARY & GOV’T TELECOM
$190B Module/Sensor
Addressing Expanding IoT
Opportunity
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$315B Module/Sensor
$193B Application Software
$73B IoT Platform
2016 2020 Source: IDC t
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
LANTRONIX IOT GATEWAYS
PRODUCT PORTFOLIO
Secure and certified enterprise-ready connectivity, network intelligence and
management at scale for industrial and commercial devices and machines
Embedded IoT Gateways (Wi-
Fi & Bluetooth) Ideal to drop into any new or inflight design and their tiny size is perfect for high-volume integration
IoT Device Gateways
(Wi-Fi & Cellular) Ideal for connecting existing
devices and machines or when it is desirable to keep connectivity
external to asset
xPico 240 Mid-range
Ethernet, Wi-Fi
xPico 250 Mid-range
Ethernet, Wi-Fi
Bluetooth
PremierWave 2050 Enhanced Ethernet, Wi-Fi
Bluetooth
SGX5150 Ethernet, Wi-Fi
Bluetooth
PremierWave
XC HSPA+ Ethernet, Cellular
Now Sampling
Launched Spring of 2016 Launched Fall of 2016
Now Sampling
In Beta
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O E Ms n e e d t o d e v e l o p s e v e r a l s o f t wa re
a p p l i c a t i o n s
?
? ?
? ?
? ? ?
?
?
? ?
E x i s t i ng I o T p l a t f o rms a r e l i m i t e d t o p r o v i d i ng
c l o ud c o n n e c t i v i t y a n d c l o ud - b a s e d I T b u i l d i n g
b l o c k s
B u i l d i ng s c a l a b l e m a na g e me nt s o f t w a re i s n o t a c o r e c o m pe t e nc y o r p r i o r i ty f o r m o s t I o T
O E Ms
HTML5 CSS3
Javascript
Angular Typescript
Apache NGNIX
REST APIs
User Management Access Control
Security MySQL
MongoDB ChartJS/D3D
SMS Email
Push
Distributed Software Design
Multi-tenancy
DevOps Billing
Portals
MQTT Metering
Installers
Licensing
Bui ld ing an IoT so lut ion represents a s ignif icant opportunity to enhance business va lue, but i t i s complex and requires a substant ial investment.
THE OEM IOT APPLICATION CHALLENGE
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THE SOLUTION: LANTRONIX MACH10
The I oT Appl icat ion Deve lopment a nd Deployment Software P lat form
OEM-Centric. System Integrator Friendly.
We Built It, So That OEMs Don’t Have To.
Add Google-like search, automated device monitoring, text and push notifications. No expensive redesign.
Enhance Existing Applications
Start from higher ground with pre-tested IoT application building blocks. Not IT building blocks
Develop New IoT Applications
Go to market faster with Lantronix developed IoT management applications powered by MACH10
Leverage Ready-to-Use Applications
MACH10
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Operating Results
Established A Foundation
for Growth
N e w C E O , C T O , V P W W S a l e s , V P M a r k e t i n g
C o n s o l i d a t e d A P A C a n d J a p a n
O p e n e d n e w I n d i a I o T s o f t w a r e l a b
R e s t r u c t u r e d E M E A s a l e s o r g a n i z a t i o n
Getting the right team in place
R a t i o n a l i z e d c h a n n e l a n d r o u t e s t o m a r k e t
F o c u s e d m a r k e t i n g a n d s a l e s p i p e l i n e d i s c i p l i n e
A c h i e v i n g m a r k e t s h a r e g a i n s
I m p r o v e d g r o s s m a r g i n s , r e t u r n e d t o n o n - G A A P p r o f i t a b i l i t y
Driving operational excellence
S t o p p e d i n v e s t m e n t i n m o b i l e p r i n t i n g
L a u n c h e d n e w I o T g a t e w a y p r o d u c t s
I n i t i a t e d M A C H 1 0 I o T P l a t f o r m d e v e l o p m e n t
Executing on new product strategy
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(In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY16 F17
Net Revenue $ 10,940 $11,222 $11,524 $ 11,044 $ 40,592 $ 44,730
Gross Profit $ 5,700 $ 5,812 $ 6,398 $ 5,670 $ 19,378 $ 23,580
% of Net Revenue 52.1% 51.8% 55.5% 51.3% 47.7% 52.7%
GAAP Net Income (Loss) $ (104) $ 41 $ (162) $ (52) $ (1,962) $ (277)
Non-GAAP Net Income (Loss) $ 265 $ 444 $ 484 $ 388 $ 238 $1,581
5 % Y O Y N e t R e v e nu e G r o w t h
M a i nt a i ned G r o s s M a rg i n s A b o v e 5 0 %
O p e ra t i n g N e a r G A A P B r e a k e v e n
6 t h C o n s e c ut i v e Q u a r t e r o f N o n - G A AP P r o f i t a b i l i t y
Q4 FY 2017 HIGHLIGHTS:
SELECTED INCOME STATEMENT INFORMATION
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RETURN TO REVENUE GROWTH IN FY17
R e v e n u e i n $ 0 0 0 s
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
FY16 FY17
IoT ITM Other
A n n u a l N e t R e v e nu e G r o w t h o f 1 0 %
I m p r o v e d G r o s s M a rg i n s t o 5 2 . 7 % f r o m 4 7 . 7 %
R e d uc e d G A A P L o s s f r o m $ 2 . 0 M t o $ 2 7 7 K a n d O p e ra t i n g N e a r G A A P b r e a k e v e n
I n c r e a s e d N o n - G A A P I n c o me f r o m $ 2 3 8 K t o $ 1 . 6 M
I n c r e a s e d c a s h b a l a nc e f r o m $ 6 M t o $ 8 . 1 M
FY 2017 HIGHLIGHTS:
SELECTED BALANCE SHEET INFORMATION
(In thousands except price per share data) June 30, June 30,
2016 2017
Cash and Cash Equivalents $ 5,962 $ 8,073
Accounts Receivable, Net 3,164 3,432
Inventories, Net 6,584 6,959
Total Assets 27,779 30,132
Current Liabilities 7,598 8,989
Non-Current Liabilities 463 455
Working Capital 9,061 10,391
Common Shares Outstanding 17,254 17,809
RSUs Outstanding 460 300
Stock Options Outstanding 3,606 4,184
Weighted Average Exercise Price Per Share $ 1.85 $ 1.78
Invest in one of the few public company IoT pure plays
Establ i shed g lobal I oT so lut ions provider wi th b lue ch ip customer base
New l eadership t eam w/ s igni f i cant enterpr i se exper ience
Pursuing fa st g r owing I oT ma rket wi th double d ig i t CAGRs
MACH10 I oT p lat form enables i ncrementa l g r owth opportuni ty
Solid operational execution and improving fundamentals
10% r evenue gr owth for FY17
Operat ing near GAAP break -even a nd generat ing non -GAAP prof i t
Bus iness model wi th s igni f i cant operat ing l everage
No l ong-term debt, ca sh f low pos i t ive
Substant ia l NOL federa l c arryover ($88.5M a s o f 6/30/2017)
SUMMARY
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(In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY16 FY17
GAAP Net Income (Loss) $ (104) $ 41 $ (162) $ (52) $ (1,962) $ (277)
Non-GAAP Adjustments:
Share-based Compensation 201 220 224 267 870 912
Depreciation and Amortization 151 153 151 139 759 594
Interest Expense, Net 7 6 5 5 32 23
Other (Income) Expense, Net 3 (4) (2) 6 (61) 3
Withholding Taxes on Stock Grants - 5 5 2 4 12
Severance and Restructuring Costs - - 246 - 533 246
Provision (Benefit) for Income Taxes 7 23 17 21 63 68
Total Non-GAAP Adjustments 369 403 646 440 2,200 1,858
Non-GAAP Net Income (Loss) $ 265 $ 444 $ 484 $ 388 $ 238 $ 1,581
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 c i 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 o p e r a t i n g e x p e n s e s , n o n - G A A P n e t i n c o m e ( l o s s ) a n d n o n - G A A P n e t i n c o m e ( l o s s ) p e r s h a r e a r e i m p o r t a n t m e a s u r e s 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 e a f o r e m e n t i o n e d n o n - G A A P m e a s u r e s 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 p a 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 . N o n - G A A P o p e r a t i n g e x p e n s e s c o n s i s t o f o p e r a t i n g e x p e n s e s e x c l u d i n g ( i ) s h a r e - b a s e d c o m p e n s a t i o n a n d r e l a t e d p a y r o l l t a x e s ( i i ) d e p r e c i a t i o n a n d a m o r t i z a t i o n ; a n d ( i i i ) r e s t r u c t u r i n g a n d s e v e r a n c e c h a r g e s . N o n - G A A P n e t i n c o m e ( l o s s ) c o n s i s t s o f n e t i n c o m e ( l o s s ) e x c l u d i n g ( i ) n o n - G A A P a d j u s t m e n t s t o o p e r a t i n g e x p e n s e s , ( i i ) i n t e r e s t i n c o m e ( e x p e n s e ) , ( i i i ) o t h e r i n c o m e ( e x p e n s e ) , a n d ( i v ) i n c o m e t a x p r o v i s i o n ( b e n e f i t ) .
APPENDIX A: Reconciliation of Non-GAAP Financial Measures