LTRX

Image source: The Motley Fool. Wednesday, Aug. 26, 2026 at 4:30 p.m. ET Chief Financial Officer - Brent Stringham President and Chief Executive Officer - Saleel Awsare Operator: Good day, and welcome to the Lantronix 2026 Fourth Quarter Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Brent Stringham, Chief Financial Officer. Please go ahead. Brent Stringham: Good afternoon, everyone, and thank you for joining our fiscal fourth quarter earnings call. Joining me today is our President and Chief Executive Officer, Saleel Awsare. A live and archived webcast of today's call will be available on the company's website. In addition, you can find the call-in details for the phone replay in today's earnings release. During this call, we may make forward-looking statements, which involve risks and uncertainties that could cause our results to differ materially from current expectations. We encourage you to review the cautionary statements and risk factors contained in today's earnings release, which was furnished to the SEC and is available on our website and other SEC filings such as our 10-K and 10-Qs. Lantronix undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Additionally, during the call, we will discuss non-GAAP financial measures. Today's earnings release, which is posted in the Investor Relations section of our website, describes the differences between our non-GAAP and GAAP reporting and presents reconciliations for the non-GAAP financial measures that we use. With that, I will now turn the call over to Saleel. Saleel Awsare: Thanks, Brent, and thank you, everyone, for joining today's call. The fourth quarter marked a strong finish to fiscal 2026. Over the course of the year, we transformed our operating model, strengthened our balance sheet and built the foundation for profitable growth. We are now seeing the tangible results of that work. Our continued strong execution drove 8% year-over-year revenue growth to $31.2 million and a 300% increase in non-GAAP EPS to $0.04. Both metrics were within our guidance range. Importantly, our embedded IoT solutions, which includes our drone business, grew 34% year-over-year. Gross margins remained strong at above 44%, reflecting our team's disciplined execution as we accelerate momentum across the business. Turning to the broader operating environment, starting with Unmanned Systems. Fiscal 2026 was the year our drone opportunity progressed from early validation to a meaningful growth engine for Lantronix. We set the foundation in Q4 last year when we secured our first drone win with Red Cat powering Teal Drones' Black Widow platform for the U.S. Army's short-range reconnaissance program. As a Blue UAS approved platform, this was a rigorous qualification process, and we believe we won the program because of our deep camera expertise and years of experience in camera tuning, sensor fusion, and the complex software integration required for military-grade imaging. Our status as a North American supplier was also a key factor. With NDAA and TAA compliance now table stakes for defense programs, a trusted domestic supply chain mattered as much as our deep technical capabilities. That win came against a backdrop of record defense funding with the U.S. Department of War earmarking over $13 billion for autonomous systems in 2026 alone, alongside a clear and growing requirements for secure U.S.-made technology. From there, we built on the early momentum, adding several customers, including Sightline, Trillium Engineering, and others to our drone roster. Over the course of the fiscal year, we scaled our broader unmanned systems engagements from roughly 10 in Q1 to over 30 today. That growth accelerated following a major regulatory shift in December 2025 when the FCC restricted China-based DJI, historically the dominant drone supplier from introducing new products into the U.S. market. The move created a significant tailwind for domestic trusted supplier platforms, like ours and was soon followed by meaningful U.S. government funding to accelerate the deployment of domestic drone technologies. And just a couple of weeks ago, that regulatory momentum was further reinforced by the action from Washington, the President signed a Section 232 proclamation imposing new tariffs on foreign-made drones and components aimed at reducing reliance on foreign suppliers and building out domestic manufacturing capacity. While the FCC's action in December focused on restricting new foreign-made drones and components from entering the market, this latest action is broader, directly targeting the economics of importing drones and related components across the existing market. This is another clear tailwind for domestic NDA compliant suppliers like Lantronix, and we expect it to accelerate the shift towards domestically manufactured alternatives. Just as important, we are seeing the industry focus shift from simply building more drones to making drones increasingly autonomous. At the scale governments and commercial operators envision, there simply won't be enough trained pilots to operate every drone and training new operators takes time. This makes autonomy essential and autonomy requires powerful AI compute at the edge, what we call physical AI, and that's exactly where Lantronix fits. Our edge compute platform enables the onboard intelligence that allows drones to perceive, navigate and execute missions autonomously in GPS-denied environments, positioning us at the center of this long-term transition. Against this backdrop, we delivered $12.6 million in unmanned systems revenue in fiscal 2026, above the midpoint of our most recent guidance range. Importantly, this momentum extends beyond defense. We are also seeing growing adoption across commercial, industrial, agricultural, drone as a first responder and counter-UAS applications, reinforcing the breadth of our unmanned systems opportunity. Our international expansion is also progressing well, including 2 recent partnerships we formed in the unmanned systems market. The first is with DoD Solution, an Estonian Ukrainian developer of onboard autonomy technology for drones and other unmanned systems. By combining Lantronix' edge compute solutions and engineering expertise with DoD Solutions' AURA Autonomy platform, we are supporting a range of demanding applications. This partnership also strengthens our presence in Europe and Ukraine, where demand for our solutions continue to grow. Our second partnership is with AVT Australia, a CACI company that develops gimbal camera payloads for drone manufacturers. AVT has designed its payload around our system on module platform, which is purpose-built for high-performance AI and robotics applications. Together, these partnerships demonstrate Lantronix' growing presence across the global unmanned systems ecosystem. Additionally, we recently announced a collaboration with Swarmer, a U.S.-based drone autonomy software company. Together, we are developing a production-ready compute platform that combines Swarmer's combat proven software with roughly 4x the onboard processing power focused on Group 1 unmanned aerial systems. This collaboration highlights the strength of our hardware, software integration and engineering services, while creating a path to long-term production revenue as Swarmer scales across U.S. and allied defense programs. With that, let me turn to our IoT System Solutions business. After navigating several quarters of federal government shutdowns, which created extended procurement cycles, we are beginning to see conditions improve. Q4 revenue grew 16% sequentially, driven by a recovery in our out-of-band management portfolio, strength in network switches and early signs of stabilization in our federal business. Within out-of-band management, we are seeing growing traction in the data center space as edge compute and AI infrastructure deployments accelerate the need for remote monitoring and control of critical IT and data center equipment. One proof point of this is SambaNova Systems, where our out-of-band solution is deployed as a part of their DataScale platform, a purpose-built AI infrastructure rack for large-scale inference and training workloads. We provide dedicated remote access to the critical networking and compute infrastructure within that platform. Moving to our critical infrastructure monitoring vertical, just over a month ago, we took another step forward in our platform strategy by acquiring Vecima Networks' Industrial IoT business, including its Nero Global Tracking platform for $11.7 million, which closed this month. The tuck-in acquisition adds approximately $5 million in annual revenue, with the majority coming from ARR and gross margin in the mid to high 60s range. Based on the purchase price relative to the asset's financial profile, view this as a highly favorable transaction and one that is immediately accretive to earnings. Just as important, it advances a strategy we've been executing deliberately over the past several quarters, layering more software onto our hardware base to expand recurring revenue. That strategy is increasingly visible in our revenue mix. Our software and services mix has steadily increased throughout the year, moving from 5% to 6% of revenue and then to 7% to 8%. With this acquisition, on a pro forma basis, our software and services revenue mix increases about 10% of total company revenue. This represents a meaningful step towards a more predictable, higher-margin business model. Beyond the immediate financial benefits, we see meaningful cross-sell potential. Nero brings an installed base of roughly 125,000 device tags across fleet, municipal, restoration and industrial asset tracking markets, creating a natural opportunity to deploy our cellular gateways, modems, edge compute products and connectivity solutions. Together, Nero's software and our hardware provide customers with a more vertically integrated end-to-end asset monitoring solution. In summary, I am encouraged by our performance in fiscal 2026 and the significant progress we achieved. Our focused execution, disciplined operating approach, and strengthened organization are providing tangible results. We are meaningfully scaling our presence in high-growth verticals, increasing the contribution of software-enabled recurring revenue, and continuing to realize operating leverage from a more efficient cost structure. As we enter fiscal 2027, we believe Lantronix is better positioned than ever to benefit from long-term growth trends reshaping Edge Compute and connectivity. With strong momentum, a differentiated portfolio, and a clear strategic roadmap, we are excited about the opportunities ahead and remain committed to creating long-term shareholder value. With that, I turn the call back to Brent to cover financial results. Brent? Brent Stringham: Thanks, Saleel. I'll begin with our fourth quarter and fiscal 2026 financial results and some of the key drivers behind our performance, after which I'll provide our outlook for our first fiscal quarter ending September 30, 2026. For fiscal 2026, revenue was nearly $121 million, representing 8% growth over fiscal 2025 revenue of just over $111 million, excluding Gridspertise. Our growth was driven by more than 15% annual growth in embedded IoT solutions, led by Unmanned Systems. As Saleel mentioned, Unmanned Systems revenue reached $12.6 million, above the midpoint of the $10 million to $14 million range we provided last quarter. Revenue for the fourth quarter was $31.2 million, representing both sequential and year-over-year growth. Our IoT systems solutions rebounded in the quarter, contributing more than $15 million of revenue after slower ordering patterns in the prior 2 quarters related to the government shutdowns in late calendar 2025 and early 2026. As we've said over the past several quarters, we viewed those federal headwinds as timing related rather than reflective of underlying demand. The 16% sequential growth we delivered in the fourth quarter reinforces that view. Turning to our gross margins. In the fourth quarter, GAAP gross margin was 43.7%, up from 43.1% in the prior quarter and 40% a year ago. On a non-GAAP basis, gross margin was 44.1% compared with 43.6% in the prior quarter and 40.6% a year ago. The year ago period was impacted by aged inventory charges and higher duties and tariffs. The sequential improvement reflects a combination of favorable revenue mix, including stronger performance in system solutions and the continued focus of our operations team on supply chain efficiency and execution. Looking ahead, we believe these efforts, together with our disciplined approach to cost management, should support gross margins at or near current levels in fiscal 2027. Let me also briefly address the broader supply environment, which we continue to monitor closely. Memory availability has tightened and prices have increased as AI infrastructure and hyperscaler data centers consume a growing share of industry supply. This is an industry-wide dynamic affecting the embedded compute market broadly and is not unique to Lantronix. We believe our early preparation has positioned us well in this constrained environment. By leveraging our fabless operating model and diversified manufacturing partners, we identified these trends early and proactively secured supply. Looking at our expenses and profitability. GAAP operating expenses in the fourth quarter of fiscal 2026 were $14 million, slightly down from the $14.1 million in the prior quarter and down approximately 5% from $14.7 million in the year ago period. We continue to observe the leverage in our OpEx model based on the actions we took last year and the ongoing cost discipline that we are executing on. GAAP net loss for the fourth quarter of fiscal 2026 improved to $269,000 or $0.01 per share compared to GAAP net loss of $2.6 million or $0.07 per share in the year ago quarter. On a non-GAAP basis, net income of $1.8 million or $0.04 per share compares to $1.5 million or $0.04 per share in the prior quarter and was an improvement from the $0.01 per share in the year ago quarter. Moving to the balance sheet. We raised just over $44 million in net proceeds during the quarter through our public and ATM offerings, bringing our year-end cash balance to more than $60 million. We also repaid the remaining $8.7 million of debt and ended the fiscal year debt-free. Our strong balance sheet gives us the flexibility to execute our growth strategy while remaining disciplined and opportunistic in allocating capital to the highest return opportunities across R&D, go-to-market initiatives and strategic M&A. During the current quarter and full fiscal year, we generated positive operating cash flow of approximately $1.9 million and $9.9 million, respectively. Net inventories were $25.8 million as of June 30, 2026, compared to $26.4 million last quarter and $26.4 million in the year ago quarter. Lastly, our outlook for the first quarter of our fiscal 2027, which ends September 30, 2026, is as follows: we expect revenue to be in the range of $31 million to $33 million. Non-GAAP EPS is expected to be in the range of $0.04 to $0.06 per share. With that, I'll turn the call back to Saleel for closing remarks. Saleel Awsare: Thanks, Brent. Fiscal 2026 was a year of measurable progress. We returned the core business to growth, established unmanned systems as a meaningful contributor, expanded recurring revenue and significantly strengthened our financial position. Along the way, we continue transforming Lantronix from a broad-based hardware provider into a focused solutions platform, combining compute, connectivity, physical AI, software and services at the intelligent edge. Unmanned Systems is the clearest proof point. From minimal revenue contribution a year ago, we delivered $12.6 million in fiscal 2026 after raising our outlook 3x. We tripled our active engagements, expanded our global customer and partner base and moved further up the technology stack. In fiscal 2027, we expect unmanned systems to represent 15% to 20% of total revenue, with continued growth beyond these levels in subsequent years. We enter fiscal 2027 with multiple engines of profitable growth, the strongest financial position in our history and confidence in our ability to deliver double-digit revenue growth. As we continue to move further up the technology stack and expand our role across the broader autonomy ecosystem, we believe Lantronix is becoming the go-to edge compute company for unmanned systems. And with that, operator, we will now open the call for questions. Operator: [Operator Instructions] The first question will come from Austin Bohlig with Needham. Austin Bohlig: Congrats on the strong results and really strong traction in the unmanned business. And so guys, just maybe just to dive in a little bit into your guys' newest fiscal '27 drone guide. Just would love to get a sense of like what your visibility looks like into this number? And does this largely just assume the engagements that you have today? Saleel Awsare: Thank you for the question, Austin. And specifically to the guide, it does have into the visibility we have today and the engagements. And what I want to clarify is we are working with over 30 vendors now. We've shipped to over a dozen already. And not only are we doing unmanned systems, specifically drones, but we're also in the counter UAS area. We actually shipped to a couple of customers in the last quarter. So the breadth of the opportunity is there. We've seen decent visibility as we started fiscal '27, and the numbers are based on where we see it today. Austin Bohlig: Okay. Perfect. And maybe just to kind of get a little bit more color on this 15% to 20% of revenues. Is it fair to assume that like from an absolute dollar perspective, you guys did almost $13 million in fiscal '26. Like should we be assuming this could be at least maybe $25 million in '27? Saleel Awsare: Yes. Yes, we should be there around the $25 million-plus range for fiscal '27. Austin Bohlig: Awesome. And then just one last quick one here. Just would love to know, is there any big impact to you guys, both positively and negatively related to the new drone tariffs that were announced a couple of weeks ago? Brent Stringham: Yes. I think, Austin, I'll take that one. It's definitely a structural tailwind for our drone business. Being an NDAA and TAA compliant solutions provider, we believe that this tariff policy could support additional design win opportunities for us. On the actual tariff side of things, we don't see a meaningful impact based on the way some of our components are imported today as more general purpose modules as opposed to specific drone components. So the things that we import from Taiwan and other areas we're not anticipating a meaningful impact at this time. Saleel Awsare: Yes. Austin, let me add one more thing. As you're well aware, we've got a big facility in Plymouth, Minnesota, and we are ramping up there to provide our drone customers with products with a TAA NDAA certified and in the midterm country of origin, United States of America. So I feel this is going to be helpful for Lantronix. Operator: The next question will come from Scott Buck with Titan Partners. Scott Buck: I am curious, between Swarmer and the DoD Solution and I guess all the Ukraine link programs, what percentage of unmanned revenue is tied to Ukraine and demand? And how do you think about that revenue in a ceasefire scenario? Saleel Awsare: So Scott, thank you for that question. Our drone revenue for the last 12 months of fiscal '26 and fiscal '27, for fiscal '26, it's mainly U.S.-based, big majority of it. Fiscal '27, the Ukraine portion is not a meaningful portion specifically with the one customer that we talked about and we mentioned. So I don't see a measurable concern for a cease fire or what have you because the growth, we have just changed how war is conducted, and this requires the ability to have unmanned systems, more specifically unmanned systems with autonomy. And that is where we fit. So I don't anticipate any big issues with specifically if that cease fire happens in Ukraine. Scott Buck: Great. That's helpful color. And then my second question, just on gross margin. As unmanned scales, do you start to see some mix pressure there? Or does the progress or kind of growth in the software and services offset that? Brent Stringham: Yes. Thanks, Scott. I'll take that one. You're right. With the growth -- expected growth of our module business related to unmanned and drones, there is natural pressure. Those -- the margins in that business are slightly below kind of our corporate average in the low to mid-40s there. So we do see potential pressure. But as you mentioned, we expect to continue to grow some of the higher-margin sides of our business, including the ARR, which Saleel talked about with the acquisition and seeing a return to growth in some of our other businesses that carry higher margins, some of the network infrastructure and other products that might have had some headwinds against them earlier in the fiscal '26 with government shutdowns and things like that. So we think the offset between those 2 kind of keeps us in a similar range to where we've been company-wide. Saleel Awsare: Scott, let me just add a little bit more color to your question about specifically in Ukraine. I think the message I want to make sure comes through, we have expanded our reach. We talked about a Ukrainian customer. We talked about a big win in Australia with CACI, which is a big company, U.S. headquartered. We're talking about -- and you're going to hear more in the next call about international expansion beyond North America. So I want to be clear, we are going global, and we're seeing traction globally. Scott Buck: Congrats on the strong results, guys. Operator: The next question will come from Josh Sullivan with JonesTrading. Joshua Sullivan: Just a follow-up on the 232 decision. Have you seen any change in behavior or activity from customers since the announcement? Saleel Awsare: Yes. So Josh, thank you for that question. This is Saleel. It's pretty fresh, but we have had a few customers come to us pretty quickly to make sure that we are NDAA and TAA certified. And then when I mentioned to them, we are going to start obviously doing more manufacturing out of our testing area in Plymouth, Minnesota, they were very happy to hear that. So as I said earlier in my prepared remarks and even what Brent said, we believe this is a good tailwind for us, especially with our solutions. So interest in us being U.S. headquartered and delivering solutions here. So I think it's a big plus for us. Joshua Sullivan: Got it. And then on the Nero acquisition, now that you're a software, hardware end-to-end solution, what other markets might that take you into? Or what does that capability allow you to do? Saleel Awsare: Yes. So if you think about Nero asset tracking, we've got -- they already have 125,000 tags out there. So 2 things as you think about the markets. They have been very focused on restoration and fleet tracking. Lantronix has been very focused on managing diesel power generators at cell sites with the big MNOs. Think about how we can start putting that together. That was a part of our overarching strategy that we did this deal for. They bring a strong software backbone to us. It ties in with our perception software that we have, and really goes after new markets that we are going after, and they will be able to get us there faster. Secondly, we have hardware, right. Nero Global Tracking did not have their own hardware. They were buying hardware from other companies. Our cellular modems and gateways are a perfect fit into that, so we are going to see an upsell from our side, from our hardware business that we have. It is a great fit, gross margins in the 60% plus. We really like it, and it helps the company overall. More importantly, it takes our software and services business that I have been saying was 5% to 6%, we took it to 7% to 8%, I want it to be over 10%. Guess what, guys? We took it to over 10%. Joshua Sullivan: And then I guess on the SLC 9000, what does the rollout of that product look like? What's the TAM there? Obviously, a huge market, but curious what you think you can access there over kind of what time frame? Saleel Awsare: Yes. Thanks for the SLC 9000. For those on the call, it is our out-of-band product, and I mentioned in my prepared remarks that we won a design with a company called SambaNova Systems out of Silicon Valley. Heavily funded by Intel. In that one, we are sitting in their rack. I think it is called the DataScale Rack that they have, and we are sitting in that rack. So we are excited about as they go deploy their racks, and each rack has accelerated nodes, host servers, and our box on the top. So it gives you remote access to it. We believe the TAM in this market could be over $500 million, and we are just getting started with this. SambaNova is one proof point of our SLC 9000, and the product is ready and it has already started to ship. I will add to it, SambaNova picked us because of our ease of use, our reliability, and our zero-touch provisioning that we have designed in. Additionally, our API is integrated with their tools, so this is a long-term business for us as I think about it. Operator: The next question will come from Jaeson Schmidt with Lake Street. Jaeson Schmidt: Just first starting on the drone market. a little, given your comments about the traction you're seeing globally, are you continuing to expand the sales team and infrastructure focused on this market? Saleel Awsare: Jaeson, thank you for that question. And yes, we are expanding the go-to-market as we think about the future. As a matter of fact, we kicked off the fiscal year with having a drone summit with all the stakeholders at Lantronix meeting for literally a week going through all the opportunities, how do we need to go tackle them. So we've added resources in North America. We've added resources in Europe. We're also going to be adding some resources in advocacy in Washington, D.C. So we're really all a big effort going on to do this. And I really feel this is going to pay really well for us. The ROI is going to be wonderful for it. Jaeson Schmidt: Okay. That's really helpful. And then just as a follow-up, obviously, the memory availability remains tight, and there's some pricing pressure out there. are you guys going to pass through some of these prices as part of your price mitigation strategy? Brent Stringham: Yes. Jaeson, we're working closely with customers on the memory issues that everybody seems to be facing right now. So from a cost pass-through standpoint, we're obviously trying to be careful, but working with customers on what's most reasonable for both parties. And I think in general, most parties out there kind of expect those costs to be passed through. And so that's kind of the direction we're seeing others heading so. Operator: The next question will come from Christian Schwab with Craig-Hallum Capital Group. Christian Schwab: Great. Good quarter, good outlook, guys. I just want to -- one quick question and another follow-up. The cash at quarter end that you highlighted, did that take into account the recent tuck-in acquisition -- or should that be reduced? Brent Stringham: Yes. So our cash at June 30, our fiscal year-end that we reported, we had not closed the acquisition yet, Christian. So no disbursements of any cash proceeds that had taken place as of the year-end. Christian Schwab: Okay. I just wanted to get that quick math. And as we look at your outlook for next fiscal year, excluding the unmanned systems, which you've given great clarity on, we ran into multiple headwinds that we've addressed over the last few quarters in the remaining part of the business, let's just lump it and call it all IoT systems. Given the strong sequential growth in the quarter and new opportunities, for example, in the out-of-band product that you highlighted, would you expect that portion of the business to be like a 5% to 10% growth business or maybe even better than that in fiscal year '27? How should we think about that? Saleel Awsare: Yes. So Christian, thank you for that question. So we had a 16% growth quarter-over-quarter. The first half of the fiscal year of '26, as you remember, we had government shutdowns. And some of that business is our federal business. So that was affected by that. I'm just being careful as I give you guides and we want to be intelligent about how we go about doing it. We believe that business should grow. And we are -- with that mindset that we are seeing design and activity, one piece of data is something called quote activity for this business, and that is doing really well. So as I said, we expect the company to grow double digit, and we are confident we can deliver that. I believe we can deliver that. So stay tuned as we move forward, but we grew 16% quarter-over-quarter. Christian Schwab: Great. And then my last question, just as it relates to gross margins. As we layer in and expand our ARR and higher gross margin portions of the business, potentially helping to offset any type of pressure you may have as far as component costs. Do you think gross margins could improve throughout the course of the year? Or do you expect them to be relatively stable? Brent Stringham: Yes. Christian, we do think there's opportunity to grow the gross margin throughout fiscal '27, especially as we see, as I mentioned earlier, an uptick in some of these other businesses that do carry higher gross margins as compared to what we -- how we performed in fiscal '26. And certainly, the ARR that comes along with the acquisition and to the extent we can continue to ramp that up, we should see margins pick up slightly. Now as I mentioned before, there is maybe a little headwind on the other side with some of the growth in modules on the drone and UAS business. But net-net, I think there's opportunity to grow the margins. Christian Schwab: Great. And then my last question as far as future potential strategic M&A. Saleel, do you have a target list of companies that you're looking at or targeting? Or should we not really anticipate any further tuck-in acquisitions, for example, in fiscal year '27? Saleel Awsare: Yes. We've been very deliberate and thoughtful as to how we run this company. We've got cash on the balance sheet. We want to grow in 2 areas: unmanned systems, increasing our strength in there, move up the drone stack. And secondly is on recurring revenue. Both of those areas we like. And we have a list of companies we are looking at and some even we are engaged with. So yes, we are moving forward on that, Christian. Operator: The next question will come from Austin Moeller with Canaccord. Austin Moeller: Nice quarter. Just my first question here, it sounds like Putin wants to call a general mobilization to invade Kyiv from the north. So if you start producing and shipping songs at scale in Eastern Europe, how would you expect the gross margins on songs to compare in Eastern Europe relative to what you might get on the drone dominance program at the higher build rates? Brent Stringham: Yes. Thanks for that, Austin. With respect to our European business or potential European businesses, I think the gross margins on our songs there, it's reasonable to think they might be slightly more challenged than maybe what we've seen here in our -- in the growth we've seen over the last year here, mostly in the U.S. Austin Moeller: Okay. And how does the AVT Australia opportunity open up the -- does that open up the TAM for SOMs and drones in Asia Pacific? Or does that -- will that also open up the opportunity in Asia Pacific and the Middle East for tactical drones? Saleel Awsare: Yes. The AVT, which is a CACI company, Austin, I'm sure you're familiar with them, a big company in the U.S., a defense tech company. So right now, our understanding is it's Asia Pacific, it's Europe, some America and some in the Middle East. So it really does open up. And we are also actively engaged with customers now in Japan. As you know, they're thinking about NDAA and TA certification. I'll be meeting some of them shortly at one of the shows coming up. So we've been very thoughtfully going. North America started in Europe, working with Australian opportunity, which is it's a good-sized opportunity for us. So as I said earlier, when somebody else asked me a question, we're going internationally, and we are spreading internationally. We are putting go-to-market resources. So our breadth is improving every day. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Saleel Awsare for any closing remarks. Saleel Awsare: Thank you again for your questions and joining us today. We appreciate your continued interest in Lantronix and your support throughout the year. Fiscal 2026 marked important progress in our journey. The strategy that was beginning to take flight is now delivering measurable results. As we enter fiscal 2027, we are continuing our climb with greater momentum, a stronger platform, a clear visibility into multiple opportunities that we expect will drive double-digit revenue growth for the full year. In September, I will be at the Piper Sandler Government & Defense Tech CEO Summit in Washington, D.C., the Lake Street BIG Conference, and the Gabelli Aerospace & Defense Symposium in New York, and the Needham Summit in Minneapolis. Thank you very much, everybody. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Lantronix, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lantronix wasn’t one of them. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Lantronix (LTRX) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Revenue: Fiscal Q4 2026 revenue was $31.2 million, reflecting 8% year-over-year growth. Full-Year Revenue: Fiscal 2026 revenue was nearly $121 million, an 8% increase over fiscal 2025. Non-GAAP EPS: Q4 non-GAAP EPS was $0.04, a 300% increase year-over-year. GAAP Net Loss: Q4 GAAP net loss improved to $269,000, or $0.01 per share, compared to a loss of $2.6 million in the year-ago quarter. Non-GAAP Net Income: Q4 non-GAAP net income was $1.8 million, or $0.04 per share. Gross Margin: Q4 GAAP gross margin was 43.7%, up from 40% a year ago; non-GAAP gross margin was 44.1%. Operating Expenses: Q4 GAAP operating expenses were $14 million, down approximately 5% year-over-year. Unmanned Systems Revenue: Fiscal 2026 unmanned systems revenue reached $12.6 million. Embedded IoT Solutions Growth: Embedded IoT solutions, including the drone business, grew 34% year-over-year. IoT System Solutions Revenue: Q4 IoT system solutions contributed more than $15 million in revenue, up 16% sequentially. Cash Flow: Q4 operating cash flow was approximately $1.9 million; full-year operating cash flow was $9.9 million. Cash Balance: Year-end cash balance was more than $60 million, with the company ending the fiscal year debt-free. Acquisition: Acquired Vasima Networks' industrial IoT business for $11.7 million, adding approximately $5 million in annual revenue. Guidance: For fiscal Q1 2027, the company expects revenue in the range of $31 million to $33 million and non-GAAP EPS of $0.04 to $0.06. Warning! GuruFocus has detected 4 Warning Signs with LTRX. Is LTRX fairly valued? Test your thesis with our free DCF calculator. Release Date: August 26, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Lantronix Inc (NASDAQ:LTRX) delivered strong Q4 results with 8% year-over-year revenue growth to $31.2 million and a 300% increase in non-GAAP EPS to $0.04, both within guidance. Embedded IoT solutions, including the drone business, grew 34% year-over-year, with unmanned systems revenue reaching $12.6 million in fiscal 2026, above the midpoint of guidance. The company is well-positioned to benefit from regulatory tailwinds, including the FCC's restriction on DJI and the Section 232 tariffs on foreign-made drones, which favor domestic NDAA-compliant suppliers like Lantronix. The acquisition of Vasima Networks' industrial IoT business adds approximately $5 million in annual revenue with high gross margins in the mid-to-high 60s, and is immediately accretive to earnings. Lantronix ended fiscal 2026 debt-free with over $60 million in cash, providing financial flexibility for strategic M&A and growth initiatives. Gross margins remained strong at approximately 44%, reflecting disciplined execution and favorable revenue mix, with expectations to maintain or slightly improve margins in fiscal 2027. The company is expanding its global footprint with partnerships in Europe, Ukraine, and Australia, and is seeing growing traction in commercial, industrial, and agricultural drone applications. The out-of-band management portfolio is gaining traction in the data center market, with a design win at SambaNova Systems for AI infrastructure racks. Software and services revenue mix increased to over 10% on a pro forma basis, moving towards a more predictable, higher-margin business model. Management expects double-digit revenue growth in fiscal 2027, with unmanned systems projected to represent 15% to 20% of total revenue. The company faces potential gross margin pressure from the growth of its module business in unmanned systems, which carries slightly lower margins than the corporate average. Memory availability has tightened and prices have increased due to AI infrastructure demand, which could impact costs and supply chain stability. The federal business experienced headwinds from government shutdowns, leading to extended procurement cycles, though conditions are improving. The company's guidance for fiscal 2027 relies on visibility from current engagements, which may limit upside if new opportunities take longer to materialize. International expansion, particularly in Eastern Europe, may result in more challenged gross margins compared to US-based business. The recent Section 232 tariffs could have indirect impacts on component costs, although the company currently sees minimal direct impact. The company's reliance on a fabless operating model and diversified manufacturing partners may expose it to supply chain disruptions, especially in a constrained memory environment. The acquisition of Vasima Networks' business may face integration risks, including cross-selling challenges and operational execution. The drone market is highly competitive, and the company's success depends on maintaining its NDAA/TAA compliance and technical edge. The company's revenue growth is partly dependent on regulatory actions and government funding, which could change with political shifts. Q: What is the revenue guidance for unmanned systems in fiscal 2027, and what visibility supports this target?A: CEO Saleel Awsare stated that the guidance is based on current visibility and engagements. The company is working with over 30 vendors, has shipped to over a dozen, and is also active in counter-UAS applications. He confirmed that fiscal 2027 unmanned systems revenue should be in the $25 million-plus range, representing 15% to 20% of total revenue. Q: What is the expected impact of the new Section 232 drone tariffs on Lantronix?A: CFO Brent Stringham noted the tariffs are a structural tailwind for the drone business as an NDAA/TAA-compliant provider, potentially supporting additional design opportunities. He clarified that the company does not anticipate a meaningful direct impact from the tariffs because its components are imported as general-purpose modules rather than specific drone components. CEO Saleel Awsare added that the company is ramping up manufacturing at its Plymouth, Minnesota facility to provide TAA/NDAA-certified products with U.S. country of origin. Q: How will the Vasima Networks (Nero) acquisition impact the company's financial profile and strategy?A: CEO Saleel Awsare explained that the $11.7 million tuck-in acquisition adds approximately $5 million in annual revenue, with the majority coming from ARR and gross margins in the mid-to-high 60s. It is immediately accretive to earnings. The acquisition increases the software and services revenue mix to over 10% of total company revenue on a pro forma basis. The Nero platform brings an installed base of roughly 125,000 device tags, creating cross-sell opportunities for Lantronix's cellular gateways, modems, and edge compute products. Q: What is the outlook for gross margins in fiscal 2027 given the growth in unmanned systems and the Nero acquisition?A: CFO Brent Stringham stated that while the growth in the module business related to drones may create some natural margin pressure (with margins in the low-to-mid 40s), this should be offset by growth in higher-margin businesses, including the ARR from the Nero acquisition and a return to growth in other businesses like network infrastructure. Net-net, he believes there is opportunity to grow gross margins slightly throughout fiscal 2027. Q: How is the SLC 9000 out-of-band management product performing, and what is the market opportunity?A: CEO Saleel Awsare highlighted a design win with SambaNova Systems, where the SLC 9000 is deployed as part of their purpose-built AI infrastructure rack. He noted the product provides dedicated remote access to critical networking and compute infrastructure. He believes the TAM for this market could be over $500 million, and the product is already shipping. SambaNova selected Lantronix for its ease of use, reliability, and zero-touch provisioning capabilities. Q: What is the revenue exposure to Ukraine, and how would a ceasefire scenario impact the business?A: CEO Saleel Awsare stated that for fiscal 2026, the majority of unmanned systems revenue was U.S.-based. For fiscal 2027, the Ukraine portion is not a meaningful portion of revenue. He does not see a measurable concern from a ceasefire because the growth is driven by the fundamental shift in how warfare is conducted, requiring unmanned systems with autonomy, which is where Lantronix fits. Q: Is the company expanding its sales team and infrastructure to support the drone market?A: CEO Saleel Awsare confirmed that the company is expanding its go-to-market efforts. They kicked off the fiscal year with a drone summit involving all stakeholders. Resources have been added in North America and Europe, and they plan to add advocacy resources in Washington, D.C. He believes this investment will provide a strong ROI. Q: How is the company addressing the tightening memory supply and price increases?A: CFO Brent Stringham stated that the company is working closely with customers on cost pass-through arrangements, which are generally expected in the industry. He noted that the company identified these trends early and proactively secured supply through its fabless operating model and diversified manufacturing partners. Q: What is the growth outlook for the IoT Systems Solutions business excluding unmanned systems?A: CEO Saleel Awsare noted that the business grew 16% sequentially in Q4, recovering from federal government shutdown headwinds in the first half of fiscal 2026. He stated that quote activity for this business is doing really well and that the company expects to deliver double-digit revenue growth overall for fiscal 2027. Q: Are there further M&A opportunities being considered for fiscal 2027?A: CEO Saleel Awsare confirmed that the company has a target list of companies and is actively engaged with some. The focus areas for M&A are unmanned systems (to increase strength and move up the drone stack) and recurring revenue. He stated the company is moving forward on this front. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved 8% year-over-year revenue growth in the fourth quarter, driven by a 34% surge in embedded IoT solutions, particularly within the drone business. Successfully transitioned the drone opportunity from early validation to a core growth engine, scaling active engagements from 10 to over 30 within the fiscal year. Capitalized on regulatory shifts, including FCC restrictions on foreign competitors and new U.S. tariffs, which created a structural tailwind for NDAA-compliant domestic suppliers. Expanded the 'Physical AI' strategy by providing high-performance edge compute platforms necessary for autonomous drone navigation in GPS-denied environments. Strengthened the software and services mix to 7-8% of revenue, aiming for over 10% following the strategic acquisition of Vecima Networks' Industrial IoT business. Recovered IoT System Solutions momentum with 16% sequential growth as federal procurement cycles stabilized following earlier government shutdowns. Maintained disciplined gross margins above 44% through supply chain efficiency and proactive procurement of memory components despite industry-wide tightening. Projecting double-digit total revenue growth for fiscal 2027, with Unmanned Systems expected to contribute 15% to 20% of total company revenue. Anticipating Unmanned Systems revenue to reach approximately $25 million-plus in fiscal 2027 based on current visibility and active vendor shipments. Expects the Nero Global Tracking acquisition to be immediately accretive, adding roughly $5 million in high-margin annual recurring revenue. Planning to leverage a debt-free balance sheet and $60 million cash position for opportunistic R&D, go-to-market expansion, and strategic M&A. Assumes gross margins will remain stable or improve as higher-margin software and infrastructure products offset potential mix pressure from high-volume drone modules. Acquired Vecima Networks' Industrial IoT business for $11.7 million to accelerate the transition toward a predictable, software-enabled recurring revenue model. Eliminated all corporate debt by repaying the remaining $8.7 million, significantly improving financial flexibility for future growth initiatives. Identified memory supply tightening and price increases as a persistent industry-wide headwind, mitigated by a fabless model and early supply securing. Established a domestic manufacturing ramp-up in Plymouth, Minnesota, to meet increasing demand for 'Country of Origin: USA' certified defense products. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed the $25 million-plus target is supported by engagements with over 30 vendors and expansion into counter-UAS applications. The guidance reflects current visibility into existing contracts and the broadening of the customer base beyond early defense wins. The Section 232 proclamation is viewed as a structural tailwind that improves the economics for domestic suppliers like Lantronix. Management noted that customers are already inquiring about NDAA/TAA certification and U.S.-based manufacturing capabilities in response to the tariffs. Management clarified that Ukraine-related revenue is not a 'meaningful portion' of the fiscal 2027 forecast, with the majority of growth coming from U.S. and allied programs. Stated that a potential ceasefire would not derail growth because the conflict has permanently shifted global defense requirements toward autonomous unmanned systems. The acquisition provides a software backbone for 125,000 existing device tags, creating an immediate upsell path for Lantronix cellular gateways and modems. It bridges the gap between asset tracking and critical infrastructure monitoring, specifically for mobile network operators and industrial fleet markets.

Lantronix (NASDAQ:LTRX) shares jumped 15.3% in pre-market trading after the company delivered fiscal fourth-quarter 2026 results that surpassed revenue forecasts and outlined an upbeat outlook for the new financial year. Fourth-quarter revenue reached $31.2 million, rising 8% from a year earlier and coming in ahead of Wall Street expectations. Non-GAAP earnings per share of $0.04 were in line with analyst forecasts and represented a 300% improvement year over year. Profitability also strengthened considerably during the quarter. Lantronix narrowed its GAAP net loss to $269,000 from $2.6 million in the comparable period last year, while gross margin improved to 43.7% from 40%. Investors also welcomed management’s expectations for further momentum in fiscal 2027. Lantronix is forecasting double-digit revenue growth, supported in particular by its unmanned systems business. The segment generated $12.6 million of revenue during fiscal 2026, exceeding the midpoint of the company’s previous guidance. For the first quarter of fiscal 2027, Lantronix expects earnings per share of between $0.04 and $0.06, compared with the analyst consensus of $0.04. The company’s financial position provides another positive element, with Lantronix finishing the year debt-free. Its recent inclusion in the Russell 3000 Index could also increase the company’s exposure among institutional investors. CEO Saleel Awsare highlighted the consistency of the recent performance, saying the company “closed the year with our fifth consecutive quarter of sequential revenue growth.” A favourable wider market environment provided additional support for the share-price reaction, with the NASDAQ advancing 1.2% and the S&P 500 gaining 0.5%. Strength across U.S. equities, particularly technology-related names, helped reinforce the positive response to Lantronix’s latest results. Analyst sentiment had also improved in the run-up to the earnings announcement. Canaccord recently lifted its price target for Lantronix to $11, while Jones Trading initiated coverage of the company with a Buy rating. The combination of stronger-than-expected revenue, substantial improvement in profitability, a debt-free balance sheet and expectations for double-digit fiscal 2027 growth helped fuel the sharp rise in Lantronix shares. The market reaction also suggests growing investor confidence in the company’s shift away from traditional connectivity hardware and towards potentially higher-margin opportunities in Edge AI and defence-focused unmanned systems. Continued progress in these areas could provide Lantronix with additional growth opportunities as it moves through fiscal 2027. Lantronix stock price

Lantronix, Inc. (LTRX) came out with quarterly earnings of $0.04 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.01 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this company would post earnings of $0.05 per share when it actually produced earnings of $0.04, delivering a surprise of -20%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Lantronix, which belongs to the Zacks Computer - Networking industry, posted revenues of $31.15 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.50%. This compares to year-ago revenues of $28.84 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Lantronix shares have not added anything since the beginning of the year versus the S&P 500's gain of 12.2%. While Lantronix has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Lantronix was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.05 on $32 million in revenues for the coming quarter and $0.29 on $138.2 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Computer - Networking is currently in the top 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Aviat Networks, Inc. (AVNW), another stock in the broader Zacks Computer and Technology sector, has yet to report results for the quarter ended June 2026. This company is expected to post quarterly earnings of $0.50 per share in its upcoming report, which represents a year-over-year change of -39.8%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Aviat Networks, Inc.'s revenues are expected to be $109.58 million, down 5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lantronix, Inc. (LTRX) : Free Stock Analysis Report Aviat Networks, Inc. (AVNW) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Lantronix, Inc.? Here are five stocks we like better. Lantronix delivered improved fiscal 2026 results: Fourth-quarter revenue rose 8% to $31.2 million, non-GAAP EPS increased 300% to $0.04, and the GAAP net loss narrowed significantly. The company also ended the year debt-free with more than $60 million in cash. Unmanned systems became a key growth driver, generating $12.6 million in fiscal 2026 revenue and expanding to more than 30 engagements. Management expects the business to generate more than $25 million and represent 15% to 20% of total revenue in fiscal 2027, supported by demand for compliant domestic drone technology. The $11.7 million Vecima Industrial IoT acquisition added the Nero tracking platform, approximately $5 million in annual revenue and higher-margin recurring software sales. Lantronix forecast first-quarter fiscal 2027 revenue of $31 million to $33 million and expects double-digit revenue growth for the full year. Lantronix (NASDAQ:LTRX) reported fiscal fourth-quarter revenue of $31.2 million, up 8% from a year earlier, as growth in embedded IoT solutions and unmanned systems helped the company finish fiscal 2026 with higher sales, improved profitability and a debt-free balance sheet. Non-GAAP earnings per share rose 300% year over year to $0.04, within the company’s guidance range. GAAP net loss narrowed to $269,000, or $0.01 per share, from a loss of $2.6 million, or $0.07 per share, in the prior-year quarter. → What Rising Delivery Forecasts Say About Rivian's Stock Prospects For the full fiscal year, Lantronix reported nearly $121 million in revenue, representing 8% growth from fiscal 2025 revenue of just over $111 million excluding Gridspertise. The company said embedded IoT solutions revenue rose more than 15% for the year, led by its unmanned systems business. President and CEO Saleel Awsare said unmanned systems progressed during fiscal 2026 from an early-stage opportunity into a “meaningful growth engine” for the company. Unmanned systems revenue reached $12.6 million for the year, above the midpoint of Lantronix’s prior $10 million to $14 million outlook. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? The company’s drone business includes its Edge Compute platform and systems-on-modules, or SOMs, used in applications requiring onboard computing, camera processing, sensor fusion and autonomous operations. Awsare said Lantronix expanded its broader unmanned systems engagements from roughly 10 in the first fiscal quarter to more than 30 by year-end, and had shipped to more than a dozen customers. Lantronix cited its work with Red Cat’s Teal Drones Black Widow platform for the U.S. Army’s short-range reconnaissance program, as well as customer and partner relationships with Sightline, Trillium Engineering, DoD Solution, AVT Australia and Swarmer. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding The company said U.S. regulatory actions affecting foreign-made drones and components could support demand for domestic suppliers. Awsare pointed to the FCC’s December 2025 restrictions on China-based DJI introducing new products in the U.S. market, as well as a more recent Section 232 proclamation imposing tariffs on foreign-made drones and components. CFO Brent Stringham said the tariffs are a “structural tailwind” for Lantronix’s drone business because of its NDAA- and TAA-compliant offerings. He said the company does not currently expect a meaningful direct tariff impact on its imported components because they are brought in as general-purpose modules rather than drone-specific components. For fiscal 2027, Lantronix expects unmanned systems to account for 15% to 20% of total revenue. In response to an analyst question, Awsare said unmanned systems revenue should be in the “$25 million-plus range” for the year. IoT system solutions revenue exceeded $15 million in the fourth quarter, aided by a 16% sequential increase as ordering patterns improved following federal government shutdowns in late calendar 2025 and early 2026. The company said the rebound was driven by recovery in its out-of-band management portfolio, network switch demand and early stabilization in its federal business. Lantronix also highlighted an out-of-band management design win with SambaNova Systems. Its solution is deployed in SambaNova’s DataScale platform, providing remote access to networking and computing infrastructure in AI-focused data center racks. Awsare said Lantronix believes the addressable market for its SLC 9000 out-of-band product could exceed $500 million. During the current quarter, Lantronix closed its $11.7 million acquisition of Vecima Networks’ Industrial IoT business, including the Nero Global Tracking platform. The acquired business contributes approximately $5 million in annual revenue, with most of that tied to annual recurring revenue and gross margins in the mid- to high-60% range, according to the company. Lantronix said the acquisition is immediately accretive to earnings and raises its software and services revenue mix above 10% of total revenue on a pro forma basis. Nero has an installed base of about 125,000 device tags across fleet, municipal, restoration and industrial asset-tracking markets. Management said it sees cross-selling opportunities for Lantronix cellular gateways, modems, Edge Compute products and connectivity offerings. Fourth-quarter GAAP gross margin was 43.7%, compared with 40% a year earlier, while non-GAAP gross margin was 44.1%, up from 40.6%. Stringham attributed the improvement to favorable revenue mix, stronger system solutions performance and supply-chain execution. The company said memory availability has tightened and prices have risen amid demand from AI infrastructure and hyperscale data centers. Lantronix said it had prepared by securing supply through its fabless model and diversified manufacturing partners. Stringham said the company is working with customers regarding cost pass-throughs where appropriate. Fourth-quarter GAAP operating expenses were $14 million, down from $14.7 million a year earlier. Fiscal-year operating cash flow was approximately $9.9 million, while fourth-quarter operating cash flow was about $1.9 million. Year-end cash exceeded $60 million after Lantronix raised more than $44 million in net proceeds through public and at-the-market offerings. The company repaid its remaining $8.7 million of debt and ended fiscal 2026 debt-free. For the fiscal first quarter ending Sept. 30, 2026, Lantronix forecast revenue of $31 million to $33 million and non-GAAP EPS of $0.04 to $0.06. Management said it expects double-digit revenue growth for the full fiscal year, while Stringham said gross margins could remain near current levels and may have room to improve as higher-margin recurring revenue and other businesses expand. Lantronix, Inc is a provider of secure data access and management solutions designed to simplify the deployment, monitoring and control of devices and equipment across a wide range of industries. Headquartered in Irvine, California, the company develops hardware and software products that enable connectivity for smart devices, industrial machinery, IT infrastructure and other systems in the Internet of Things (IoT) ecosystem. Founded in 1989, Lantronix was among the early innovators in serial-to-Ethernet device networking and has since expanded its portfolio to include secure console servers, device servers, gateways and embedded modules. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Lantronix Q4 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Fourth-Quarter Revenue Increased 8% Year- Over- Year to $31.2 Million GAAP EPS of ($0.01) Non-GAAP EPS of $0.04 Fiscal 2026 Unmanned Systems Revenue of $12.6 Million, Above the Midpoint of the Prior Guidance Range $60 Million in Cash and No Debt at Year-End Company Expects Double-Digit Revenue Growth in Fiscal 2027 IRVINE, Calif., Aug. 26, 2026 (GLOBE NEWSWIRE) -- Lantronix Inc. (Nasdaq: LTRX), a global provider of Edge AI and Industrial IoT solutions that power NDAA-compliant unmanned systems, critical infrastructure and resilient enterprise networks, today reported results for the fiscal fourth quarter and full year ended June 30, 2026. Management Commentary“Fiscal 2026 was a year of measurable progress for Lantronix,” said Saleel Awsare, president and CEO of Lantronix. “We returned the core business to growth, significantly strengthened our balance sheet, and closed the year with our fifth consecutive quarter of sequential revenue growth. We also established unmanned systems as a meaningful growth engine, expanded recurring revenue, and continued transforming Lantronix from a broad-based hardware provider into a more focused, higher-margin solutions platform. “Today, we are seeing strong momentum across our three strategic focus areas: unmanned systems, critical infrastructure, and enterprise networking. Unmanned systems grew from a minimal contribution a year ago to $12.6 million in fiscal 2026 revenue, and we expect the business to represent 15% to 20% of total revenue in fiscal 2027. As we move further up the technology stack and expand our role across the broader autonomy ecosystem, we believe Lantronix is becoming the go-to edge compute company for unmanned systems. At the same time, our IoT Systems business is reaccelerating, and the Nero Global Tracking acquisition is expanding ARR while moving Software & Services above 10% of total revenue on a pro forma basis. We enter fiscal 2027 in the strongest financial position in our company’s history, with multiple engines of profitable growth and confidence in our ability to deliver double-digit revenue growth in the year ahead.” Q4 FY2026 Financial Results Net Revenue: $31.2 million GAAP EPS: ($0.01) Non-GAAP EPS: $0.04 FY2026 Financial Results Net Revenue: $120.9 million GAAP EPS: ($0.10) Non-GAAP EPS: $0.15 Q4 FY2026 and Recent Business Highlights Unmanned Systems Momentum Acquired Vecima Networks’ Industrial IoT business, including its Nero Global Tracking SaaS platform, which is expected to add approximately $5.3 million of annual revenue, including approximately $4.5 million of ARR, and approximately 125,000 asset tags under management. On a pro forma basis, the acquisition increases Software & Services to more than 10% of total company revenue. Launched the SLC 9000 Out-of-Band console manager integrated with Percepxion, targeting the AI data center networking market with secure remote access, autonomous provisioning and cloud-native fleet management to minimizing downtime and cut deployment costs. Added to the Russell 3000® Index as part of the 2026 reconstitution, reflecting Lantronix’s progress toward higher growth, higher-value end markets and broadening the Company’s visibility within the investment community. Q1 FY2027 Financial Outlook Revenue: $31.0 million to $33.0 million Non-GAAP EPS: $0.04 to $0.06 Conference Call and WebcastManagement will host an investor conference call and audio webcast today (Wednesday, Aug. 26, 2026) at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its results for the fiscal fourth quarter and full year of 2026. To access the live conference call, investors should dial 1-844-802-2442 (U.S./Canada) or 1-412-317-5135 (international) and indicate they are participating in the Lantronix fiscal 2026 fourth-quarter call. The webcast will also be available simultaneously via the investor relations section of the Company’s website. Investors can access a conference call replay starting at approximately 4:00 p.m. Pacific Time on Aug. 26, 2026, on the Lantronix website. A telephonic replay will also be available through Sept. 2, 2026, by dialing 1-855-669-9658 (U.S./Canada) or 1-412-317-0088 (international) and entering passcode 3642439. About Lantronix Lantronix Inc. (NASDAQ: LTRX) is a global leader in Edge AI and Industrial IoT solutions that power NDAA-compliant unmanned systems, critical infrastructure and resilient enterprise networks. It delivers intelligent computing, secure connectivity and remote management for mission-critical applications enabling customers to optimize operations, enhance security and accelerate digital transformation. Its comprehensive portfolio of hardware, software and services powers applications ranging from mission-critical autonomous platforms and edge analytics for critical infrastructure to intelligent surveillance and secure network management. By bringing intelligence to the network edge, Lantronix helps organizations achieve efficiency, security and a competitive edge in today’s AI-driven world. For more information, visit the Lantronix website. Discussion 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 business trends relating to the company’s financial condition and results of operations. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends to gain an understanding of our comparative operating performance. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations of the non-GAAP financial measures to the financial measures calculated in accordance with GAAP should be carefully evaluated. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Non-GAAP net loss consists of net loss excluding (i) share-based compensation and the employer portion of withholding taxes on stock grants, (ii) depreciation and amortization, (iii) interest income (expense), (iv) other income (expense), (v) income tax provision (benefit), (vi) restructuring, severance and related charges, (vii) acquisition related costs, (viii) impairment of long-lived assets, (ix) amortization of purchased intangibles, (x) amortization of manufacturing profit in acquired inventory, (xi) fair value remeasurement of earnout consideration, and (xii) loss on extinguishment of debt. Non-GAAP EPS is calculated by dividing non-GAAP net income by non-GAAP weighted-average shares outstanding (diluted). For purposes of calculating non-GAAP EPS, the calculation of GAAP weighted-average shares outstanding (diluted) is adjusted to exclude share-based compensation, which, for GAAP purposes, is treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method. Guidance on earnings per share growth is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of certain items that have been excluded from the forward-looking non-GAAP measures, and a reconciliation to the comparable GAAP guidance has not been provided because certain factors that are materially significant to Lantronix’s ability to estimate the excluded items are not accessible or estimable on a forward-looking basis without unreasonable effort. Forward-Looking Statements This news release contains forward-looking statements, including statements concerning our expectations for revenue and earnings for the first quarter of fiscal 2027, revenue for our unmanned systems and drone business for fiscal 2027, and revenue growth for fiscal 2027; our positioning to become the provider of choice for unmanned systems compute and strengthen our business as a critical platform partner to the unmanned ecosystem; and our expectations regarding the future benefits of our recent collaborations, partnerships and customer wins. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry, and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our results or experiences, or future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. Other factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: the effects of negative or worsening regional and worldwide economic conditions or market instability on our business, including effects on purchasing decisions by our customers; our ability to mitigate any disruption in our and our suppliers’ and vendors’ supply chains due to changes in U.S. trade policy, including recently increased or future tariffs, a pandemic or similar outbreak, wars and recent conflicts in Europe, Asia and the Middle East, hostilities in the Red Sea, or other causes; our ability to successfully convert our backlog and current demand; the impact of a pandemic or similar outbreak on our business, employees, customers, supply and distribution chains and the global economy; our ability to successfully implement our acquisition strategy or integrate acquired companies; uncertainty as to the future profitability of acquired businesses, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions; acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties; our ability to continue to generate revenue from products sold into mature markets; our ability to develop, market, and sell new products; our ability to succeed with our new software offerings; our use of AI may result in reputational, competitive or financial harm and liability; fluctuations in our revenue due to the project-based timing of orders from certain customers; unpredictable timing of our revenues due to the lengthy sales cycle for our products and services and potential delays in customer completion of projects; our ability to accurately forecast future demand for our products; delays in qualifying revisions of existing products; constraints or delays in the supply of, or quality control issues with, certain materials or components; difficulties associated with the delivery, quality or cost of our products from our contract manufacturers or suppliers; risks related to the outsourcing of manufacturing and international operations; difficulties associated with our distributors or resellers; intense competition in our industry and resultant downward price pressure; rises in inventory levels and inventory obsolescence; undetected software or hardware errors or defects in our products; cybersecurity risks; our ability to obtain appropriate industry certifications or approvals from governmental regulatory bodies; changes in applicable U.S. and foreign government laws, regulations, and tariffs; our ability to protect patents and other proprietary rights and avoid infringement of others’ proprietary technology rights; issues relating to the stability of our financial and banking institutions and relationships; the level of our indebtedness, our ability to service our indebtedness and the restrictions in our debt agreements; the impact of rising interest rates; our ability to attract and retain qualified management; and any additional factors included in our Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the Securities and Exchange Commission (the “SEC”) on Aug. 29, 2025, including in the section entitled “Risk Factors” in Item 1A of Part I of that report; in our Quarterly Report on Form 10-Q for the fiscal quarter ended Dec. 31, 2025, filed with the SEC on Feb. 5, 2026, including in the section entitled “Risk Factors” in Item 1A of Part II of such report; and in our other public filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, investors are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the Nasdaq Stock Market LLC. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections. ©2026 Lantronix, Inc. All rights reserved. Lantronix is a registered trademark. Other trademarks and trade names are those of their respective owners. Lantronix Investor Contact:        Matt Glover and Greg RoblesGateway Group, Inc. [email protected]

(Bloomberg) -- Wall Street is eagerly anticipating Nvidia Corp.'s (NVDA) earnings on Wednesday afternoon, not so much for what the numbers will say about the chip giant, but for what they mean to artificial intelligence investors and the market itself. Most Read from Bloomberg Lutnick's Intervention in Canada Talks Draws Praise, Blame Apple Gears Up to Launch Its First New Mac Mini in Two Years Xi Signals Defiance as US Threatens Sanctions Over Iran Help US Weighs More Trade Measures Against Canada After Retaliation Bessent's Mentor Druckenmiller Calls Bond Buying a Mistake "Nvidia is the best barometer for AI spending," said Rob Conzo, chief executive officer of the Wealth Alliance, which owns Nvidia shares in several portfolios. "It will help determine if hyperscalers are still accelerating, from an infrastructure perspective, or if they're becoming more disciplined." The company's shares have been on a wild ride this year, sinking through the winter, then soaring through the spring, and bouncing around all summer. They're coming off a seven-day losing streak, matching the longest since 2019, in which they lost 7.5%. And that follows a 19% leap from late July through mid-August. All told, Nvidia is up 14% in 2026, a decent showing but still a far cry from its past performance. At this time last year, the stock had gained 34%, and in 2024 it was soaring more than 150%. The reason is hardly a secret, with investors increasingly cautious about the durability of the AI trade with inflation remaining high, interest rates rising and geopolitical risks all over the place, whether it's the US's military and economic war with Iran or its trade war with Canada. The tech-heavy Nasdaq 100 Index suffered its worst month in more than a year in July, falling 6.6% as investors dumped the shares of companies exposed to the AI buildout amid concerns about how much longer the heavy spending would last. But since its July 29 trough, the index has regained much of that lost ground, led by memory and storage companies like Sandisk Corp. and chipmakers such as Marvell Technology Inc. Wall Street expects Nvidia to deliver stellar results for the fiscal second quarter, which ended July 31. Analysts project that revenue nearly doubled from a year ago, which would be the fastest pace in two years, as did net income, according to data compiled by Bloomberg. That, however, isn't what the market is focused on. Rather, investors want to hear what Chief Executive Officer Jensen Huang has to say about capital spending by its biggest customers, future demand and a spate of new financing deals that involve Nvidia. Price increases will also be top of mind after some of the company's customers were told that the cost of servers with its AI chips will rise more than 15% in some cases, due to surging memory costs. "This will be a very interesting report, but it isn't so much about the numbers," Conzo said. "The forward guidance discussions will be far more in view." Earlier this month, Nvidia said it's partnering with Wall Street firms including Goldman Sachs Group Inc., BlackRock Inc. and Apollo Global Management Inc. to provide $500 billion in financing for AI infrastructure. Nvidia also agreed to spend as much as $105 billion to back a data center campus in Ohio that will be leased by OpenAI. "They're going to need to discuss those two big partnerships or agreements in good detail and sort of calm the market's fears around the circularity of financing," said Shaon Baqui, a senior equity analyst at Janus Henderson, which holds a substantial position in Nvidia. The big questions from investors are how much of Nvidia's revenue is being driven by its own financing and if it's creating or bringing forward demand. Huang's comments alone likely won't be enough to resolve some of the issues the market is having with AI investments at the moment, according to Daniel Pilling, portfolio manager at Sands Capital Management, which owns the stock. "It's going to be a really important quarter for them, not because of what they're doing on the balance sheet, but what they're doing off the balance sheet," said Brian Mulberry, chief market strategist at Zacks Investment Management, which holds Nvidia shares. "It effectively makes Jensen Huang kind of like the pope of AI. He gets to bless any of these deals." Even with a market capitalization of more than $5 trillion, the biggest in the world, Nvidia's equity valuation has been steadily eroding this year. At roughly 19 times earnings expected over the next 12 months, the stock is close to the cheapest it has been since late 2018, before AI exploded and when the chipmaker's market value was less than $100 billion. "Nvidia isn't the most exciting part of the market, or even the AI trade, anymore," said Randy Hare director of equity research at Huntington National Bank, which owns the stock. "Right now the tightness is in the memory space, the optical area, energy. Momentum is shifting from semis to other parts of infrastructure, and from there it could shift to hyperscalers again." In terms of trading into the earnings, Nvidia shares haven't performed well after its results over the last few quarters, falling the day after five of its last six reports, according to data compiled by Bloomberg. The options market is pricing in a roughly 5% swing in either direction. Of course, the shares could get a boost from a strong report and forecasts that calm investors' nerves, potentially reinvigorating the broader AI trade. Wall Street will be listening for updates on Nvidia's Vera Rubin and Blackwell chip sales as well as its outlook for gross margins. "Their stock in my view is at a bit of a nexus, like a bit of a turning point," said Melissa Otto, head of technology, media and telecommunications research at Visible Alpha. "We're going to get a lot more visibility, hopefully, and commentary around Rubin and the performance of Blackwell." Tech Chart of the Day Top Tech Stories Meta Platforms Inc. and state attorneys general have discussed a possible mid-trial settlement of a blockbuster case accusing the company of deliberately designing Facebook and Instagram to addict teens, people familiar with the matter said. OpenAI said that its new Jalapeno chips performed better than Nvidia's current lineup during testing, underscoring the company's progress developing AI processors in-house. SoftBank Group Corp. is talking with investment banks about a potential $10 billion to $20 billion bond offering to help refinance a loan for its investment in US tech giant OpenAI, according to people familiar with the matter. Apple announced upgraded Mac mini and Mac Studio desktop computers, giving the in-demand machines major processor upgrades. Earnings Due Earnings Postmarket: --With assistance from Subrat Patnaik and David Watkins. Most Read from Bloomberg Businessweek The Diamond Industry's Old Guard Wants You to Buy 'Natural' Plus-Size Clothes Are Disappearing at Retailers in GLP-1 Era Drones, Balloons and Sound Waves: New Ways to Fight the World's Fires Moldy Peanuts Can Be Deadly. The Solution Is More Mold New York's Israeli Restaurants Are Doing Better Than You Might Think ©2026 Bloomberg L.P.

Download the Complete Report Here Key Takeaways: Revenue accelerated sharply from 1Q26, with SkyKnight license delivery and cash collection providing a better indication of underlying commercial progress than reported revenue alone. SWMR reported 2Q26 revenue of $216,413, up 56.6% y/y from $138,206 and more than 10x the $20,325 reported in 1Q26. The company invoiced approximately $1.5 million under the SkyKnight program and collected $1.4 million following license delivery, while only approximately $0.2 million was recognized as revenue, $0.1 million was deferred and the remaining amount was recorded as an advance. Certain deployment, integration and market-development payments associated with the program also reduced recognized revenue under the combined arrangement, creating a meaningful gap between commercial activity and revenue in the quarter. SkyKnight remains the clearest validation of SWMR’s licensing model, with contracted value expanding approximately 34% only weeks after the initial award without consuming the original upgrade optionality. The program’s contracted license value increased from approximately $2.9 million to $3.9 million after Meta Bureau increased projected production of its fixed-wing platform, while existing operating-system-to-full-autonomy upgrade options remain intact and could still lift the combined arrangement to approximately $14.2 million. Importantly, the approximately $1.0 million incremental award was outside the scope of the initial option structure rather than an exercise of previously disclosed upgrades. The original arrangement covered full-autonomy licenses across SkyKnight’s quadcopter and fixed-wing platforms together with operating-system licenses on planned production that can subsequently be upgraded to SWMR’s full platform. This structure gives SWMR two potential monetization layers as partner volumes grow: additional autonomy licenses as manufacturers increase production and higher-value software attach when OS-only units are upgraded over time. Oak Grove extends SWMR’s commercialization funnel beyond OEM integration into operator training and U.S. defense-channel exposure. SWMR’s relationship with Oak Grove Technologies integrates its autonomy software with the Chimera UAV platform, making Oak Grove the first U.S.-based company to integrate Swarmer’s autonomous software into its platform. Integration, testing and operational fielding were completed in late 2025 in Eastern Europe across ~100 test flights spanning varied weather and mission profiles, providing additional validation of the technology on a U.S. platform. Following the initial integration effort, the integrated Chimera systems remained overseas through early 2026 to support continued testing, operator evaluation and training before returning to Oak Grove’s U.S. headquarters for incorporation of operational feedback into future mission and training requirements. The partnership also benefits from Oak Grove’s established training and operational support activities with the U.S. special operations community, giving operators hands-on exposure to autonomous systems under realistic conditions and broadening SWMR’s customer-acquisition channel beyond direct OEM engagement. Combined with SWMR’s 100,000+ combat missions in Ukraine, the relationship provides a potential bridge between battlefield-proven autonomy and U.S. operator adoption, with the key commercial proof point remaining conversion of testing and training activity into funded defense programs. Lantronix creates a potentially scalable distribution wedge by embedding SWMR’s operating system at the compute layer rather than requiring software adoption after a drone is already designed. The collaboration is developing an NDAA-compliant compute platform for Group 1 unmanned systems with more than 400% greater onboard processing capability, targeting what SWMR sees as an underserved performance gap between lower-end Raspberry Pi systems and higher-end NVIDIA Jetson solutions commonly used for autonomy. With more than seven million drones projected to be manufactured this year, an embedded compute-layer position could provide SWMR with a scalable route into a substantially larger installed base. Strategically, the opportunity is larger than hardware integration alone: SWMR intends for its operating system to be embedded on the compute platform, allowing customers to upgrade to full autonomy through software rather than completing a separate integration. If adopted broadly, that architecture could shift customer acquisition earlier in the OEM design cycle, increase the installed base of upgradeable SWMR-enabled platforms, and create a lower-friction OS-to-full-stack monetization path. It also preserves the software-led business model because SWMR’s primary economics would remain tied to software penetration and upgrades rather than manufacturing the unmanned system itself. Brightline and Molfar expand the combat-data flywheel beyond platforms already running SWMR software, potentially accelerating AI development without waiting for every OEM integration to scale. SWMR continues to cite more than 100,000 real-world combat missions as a core source of telemetry, sensor information and operational feedback, but the new relationships broaden the available training dataset. Brightline provides access to operational data across unmanned platforms already used within the U.S. special operations community, including platforms whose manufacturers have not yet integrated SWMR, while Molfar contributes verified open-source and battlefield intelligence datasets to the AI training pipeline. The strategic implication is that model development can increasingly benefit from third-party operating data rather than only the installed SWMR fleet. This could broaden the range of mission profiles and operating conditions available for model training, strengthening the feedback loop between data capture, model improvement and subsequent deployment as the platform scales. Powerus illustrates both the scalability of SWMR’s integration model and why revenue can remain a lagging indicator even after technical work is complete. Integration work under the Powerus MOU has begun across several air and maritime platforms, with integration on familiar hardware configurations potentially requiring only 2-4 weeks including field testing, while substantially different platforms can require several months. More importantly, software integration does not itself trigger meaningful revenue. Once integration is completed, the manufacturer must still secure buyers for the finished platform, which are typically government customers operating through longer acquisition cycles. This creates a multi-stage funnel from MOU to integration, field testing, OEM production, government procurement and finally software revenue recognition. The relatively short 2-4 week integration period for familiar platforms indicates the technical layer can scale efficiently, but end-customer procurement remains the principal gating factor between integration progress and recognized revenue. The partnership strategy is broadening beyond defense deployments into dual-use autonomy applications, expanding SWMR’s addressable market without changing the core software architecture. In addition to Oak Grove, Lantronix, Brightline, Molfar and Powerus, SWMR is working with Tekmara and Florida International University to evaluate autonomous drone swarms for environmental monitoring and coastal restoration applications. These initiatives broaden the addressable use case beyond kinetic operations while leveraging the same multi-vehicle coordination architecture developed through more than 100,000 combat missions. The Tekmara/FIU initiative will evaluate coordinated autonomous operations across air, surface and underwater domains, using FIU’s Aquarius Reef Base as a real-world testing environment for persistent environmental monitoring and restoration. This supports SWMR’s broader dual-use strategy, with potential applications across environmental restoration, disaster relief, wildfire detection, search and rescue and other public-sector missions. Commercially, however, the initiatives remain at different stages of maturity, and the quarter did not disclose material revenue from these newer programs. We therefore view these programs as incremental extensions of the platform and customer funnel, with greater strategic relevance as they progress toward funded deployments and repeat licensing. Post-quarter leadership changes consolidate executive responsibility under Alex Fink while strengthening SWMR’s communications and market-development capabilities. Effective July 2026, Serhii Kupriienko resigned as Global CEO while remaining on SWMR’s Board, and President and U.S. CEO Alex Fink assumed the role of principal executive officer reporting directly to the Board. SWMR does not intend to appoint a successor Global CEO, streamlining the prior dual-CEO structure as the company scales commercialization and strategic execution. Separately, Swarmer promoted Garrett Kasper to Chief Communications Officer, bringing 30 years of experience across defense, aerospace, intelligence and cybersecurity, including prior work at L3Harris Technologies on the VAMPIRE counter-UAS program. In the expanded role, he will oversee global marketing, branding and corporate communications, supporting customer awareness and market development across U.S. and allied defense channels. SWMR expects gross margins to remain attractive as revenue scales, although they may moderate as engineering services are incorporated into customer contracts. 2Q26 gross margin increased to 84.8% from 59.4% y/y, providing early evidence of the high-margin economics embedded in the licensing model. Currently, cost of sales primarily consists of web-based data services, resulting in relatively low direct costs. As the company scales, engineering support is expected to increase COGS as a percentage of revenue, with management currently targeting approximately 80% gross margins, although the methodology remains under development and may vary by deal. While the current revenue base remains small, sustaining margins near this level as licensing scales would be an important driver of the operating leverage embedded in the 2027E profitability outlook. Operating expenses increased sharply as SWMR scaled its operations and transitioned to a public-company cost structure. 2Q operating expenses rose to $7.5 million from $0.9 million y/y, driven primarily by higher personnel, engineering and product-development costs, as well as increased legal, consulting and professional expenses. SG&A increased to $5.7 million from $0.3 million y/y, while R&D rose to $1.8 million from $0.6 million, reflecting investment ahead of the expected licensing ramp. The quarter also included one-time equipment purchases and $1.2 million of non-cash stock compensation, meaning reported expenses were partly elevated by non-recurring and non-cash items. The key forward consideration is whether software revenue can begin scaling across this expanded cost base, rather than requiring a meaningful reduction in investment to reach profitability. Capital formation is providing SWMR with greater flexibility to fund growth and pursue strategic opportunities as it expands beyond its core autonomy software offering. Cash and equivalents increased to $25.3 million at June 30 from $9.3 million at December 31, supported by IPO proceeds and equity financing, with a further $17.9 million raised through August 10, taking cumulative ELOC proceeds above $26 million. The stronger liquidity supports continued investment in engineering and platform integration while giving SWMR capacity to invest in or acquire complementary defense technologies and potentially broaden its value capture beyond software licensing. This aligns with the broader strategic vision recently articulated by Chairman Erik Prince around identifying and scaling battlefield-proven defense technologies that may lack capital, commercial infrastructure or international distribution. However, the strategy remains subject to acquisition execution risk and shareholder dilution from equity-funded capital deployment. Street estimates embed a hockey-stick revenue ramp as SWMR moves toward scaled license activation. Street estimates sourced from TIKR suggest revenue of $4.24 million in 2026E before rising to $25.0 million in 2027E and $40.0 million in 2028E, with EBITDA margin inflecting to 17.8% in 2027E and 28.3% by 2028E. With 2Q26 revenue of $0.2 million despite $1.4 million received from SkyKnight, the key focus now shifts to whether deferred/advance amounts and the broader partnership pipeline convert into recognized revenue in 2H26 and beyond, with SkyKnight recognition, OS-to-full-autonomy upgrades and additional OEM production providing the clearest paths to the expected 2027E step-up. Disclaimer: Exec Edge does not publish proprietary estimates, ratings, price targets, or investment recommendations. The valuation discussion below is illustrative only and is based on company filings, management commentary, and third-party data and estimates. It does not constitute a recommendation, price target, rating, or prediction of future pricing. SWMR trades at a clear premium to broader public-market peers, but we believe that premium is defensible given its combat-validated software model, hardware-agnostic architecture and higher-margin licensing potential. SWMR currently trades at approximately 22x 2027E sales, reflecting its early commercialization stage and significant operating investment. However, the valuation also reflects SWMR’s positioning as a combat-validated, platform-agnostic autonomy software provider rather than a traditional defense hardware or drone manufacturer, with the company increasingly expanding its ecosystem through OEM integrations, compute partnerships, operational data relationships and potential strategic acquisitions. The multiple declines to 14x based on 2028E sales (source: TIKR), highlighting the meaningful forward valuation compression as the expected software-license ramp scales. In our view, further support for the current premium will depend on converting SkyKnight, Powerus, Lantronix and other integrations into scaled deployments, recurring software revenue and improving profitability. SWMR’s premium to public drone peers is notable, but defensible given its hardware-agnostic software model, combat validation and stronger margin potential. Relative to the broader listed comp set, SWMR’s higher multiple reflects a business model with less hardware intensity, greater software attach potential and a path toward materially higher gross margins as licensing scales, while sustained relative outperformance will depend on converting integrations and license deployments into recurring revenue and positive EBITDA. Street positioning also remains constructive, with a consensus price reference of approximately $60 providing an additional external valuation benchmark. Private-market defense-autonomy valuations also support premium forward revenue multiples for differentiated platforms. A recent Financial Times report indicates Helsing was valued at approximately 32x forecast 2026 revenue, Shield AI at approximately 21x revenue, and Anduril at approximately 13x forward revenue. Against this range, SWMR’s approximately 22x 2027E sales multiple sits within the premium private-market autonomy range. While differences in scale, maturity, valuation period and hardware exposure limit direct comparability, SWMR’s hardware-agnostic architecture, 100,000+ combat missions and high-margin licensing model provide a defensible basis for premium positioning as commercial adoption scales. Read Exec Edge’s Initiation on Swarmer Inc. Here Subscribe to our Weekly Newsletter to Receive All Research Contact: Executives-Edge.com [email protected] The post Swarmer’s SkyKnight & Platform Expansion Builds Commercial Momentum – Quarterly Update Report appeared first on ExecEdge.