Episode Details

Lantronix (LTRX) Q4 FY2026 — Fiscal Q4 FY2026 (three months to 30 June): revenue $31.2M, +8.0% YoY and +3.2% QoQ; gross margin 43.7% from 40.0%; operating loss $0.4M from $3.1M. GAAP EPS -$0.01; non-GAAP EPS $0.04 against a $0.03 bar. FULL YEAR: revenue $120.9M, DOWN 1.6% on $122.9M. A brand new unmanned systems line billed $12.6M in fiscal 2026, from what the release calls a minimal contribution the year before. In the same twelve months one customer went from just over $11M of revenue to zero - a sentence that appears only in the 10-K, never in the press release. The two very nearly cancel, which is why group revenue reads -1.6%. Take the new line out and $108.3M against $122.9M is -11.9%. THE CALL: AVOID (3/5, A REAL REPAIR, PAID FOR BY THE OWNERS) — base-case value ~$4.52 vs ~$5.37 today. KEY METRICS: - CALL: AVOID 3/5, fair value $4.52 vs the $5.37 close of 28 August (-15.9%). Bear $3.57, base $5.32, bull $8.35, weighted 35/30/35. Street: 6 analysts, 6 Buys, no Hold or Sell; four targets average $10.00, +86% above the tape and +121% above us - and not one published since the print. - THE SUBSTITUTION: $12.6M of unmanned systems revenue arrived (press release, three times) and just over $11M of one customer left (10-K Item 7, once). Excluding the new line, fiscal 2026 was $108.3M vs $122.9M = -11.9%, against a reported -1.6%. - THE SAME CAUSE TWICE: the 10-K attributes the 171bp gross margin gain primarily to the absence of that customer's lower-margin revenue, not to operating improvement. - THE MIX: Embedded IoT +15.6% to $53.6M, IoT Systems -15.2% to $58.3M, Software & Services +15.5% to $9.0M. Regionally Americas +20.2% while EMEA -30.2% and APJ -31.3% - $16.2M of annual revenue left the rest of the world. - THE BALANCE SHEET WAS BOUGHT: cash $20.1M to $60.5M and debt $11.8M to zero, funded by $44.9M of net share issuance. Shares 39.10M to 46.59M, +19.2%. Strip the raise and cash FALLS $4.5M. About $17M of the ATM remains open. - IN FAIRNESS: free cash flow was a genuine $9.3M (7.7% of revenue) - though $6.3M of it is a share-based pay add-back. Core opex held flat. 30+ unmanned engagements from ~10, NDAA-compliant, partners include Swarmer, DoD Solution and AVT Australia (CACI). - GUIDANCE: Q1 FY2027 revenue $31-33M = +7.4% at the midpoint against the year-ago quarter, NOT double digit. The full-year double-digit promise then needs +10.8% from the three quarters after it, and unmanned to reach $20-27M against $12.6M. - CONSENSUS DEFECT: the vendor's fiscal-2027 average net income of $9.0M over an average EPS of $0.234 solves to 38.4M shares. The company filed 46.7M on its 10-K cover. That $9.0M over the real count is $0.19, not $0.23. What to watch: UP: the September-quarter unmanned number tracking to management's 15-20% of fiscal 2027 revenue (about $5M in Q1); IoT Systems and the international regions stabilising. DOWN: the remaining $17M at-the-market programme being drawn near this price; the memory cost inflation the 10-K flags eating the margin gain; another concentrated customer leaving. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.