Lantronix (NASDAQ:LTRX) Q4 2026 Earnings Call

0:00 Good day, and welcome to the Lantronix twenty twenty six Fourth Quarter Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions.

0:27 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. 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 Alsire. 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 ks and 10 Qs.

1:21 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. Thanks, Brent, and thank you everyone for joining today's call.

1:57 The fourth quarter marked strong finish to fiscal twenty twenty six. 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 31,200,000 and a 300% increase in non GAAP EPS to $04 Both metrics were within our guidance range. Importantly, our embedded IoT solutions, which includes our drone business grew 34% year over year.

2:46 Gross margins remained strong at about 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 twenty twenty six 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 field 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.

3:54 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.

4:15 That win came against the backdrop of record defense funding with the U. S. Department of War year marking over $13,000,000,000 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.

5:18 Market. The move created a significant tailwind for domestic trusted supply 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 two thirty two proclamation imposing new tariffs on foreign made drones and components aimed at reducing reliance on foreign suppliers and building out domestic manufacturing capacity.

6:04 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.

6:56 This makes autonomy essential and autonomy requires powerful AI computer 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 and GPS denied environments positioning us at the center of this long term transition. Against this backdrop, we delivered $12,600,000 in unmanned systems revenue in fiscal twenty twenty six, above the midpoint of our most recent guidance range.

7:44 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 two recent partnerships we formed in the unmanned systems market. The first is with DoD Solution, an Estonian Ukrainian developer of on board autonomy technology for drones and other unmanned systems. By combining Lantronix's edge compute solutions and engineering expertise with DoD Solutions' Aura autonomy platform, we are supporting a range of demanding applications.

8:42 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. ABT has designed its payload around our system and module platform, which is purpose built for high performance AI and robotics applications. Together, these partnerships demonstrate Lantronix's growing presence across the global unmanned systems ecosystem. Additionally, we recently announced a collaboration with Swarmer, a U. S.-based drone autonomy software company.

9:33 Together, we are developing a production ready compute platform that combines Swarmers combat proven software with roughly four times the onboard processing power focused on Group one 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 swarmers scaled across U. S. And allied defense programs. With that, let me turn to our IoT Systems Solution business. After navigating several quarters of federal government shutdowns, which created extended procurement cycles, we are beginning to see conditions improve.

10:23 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 data scale platform, a purpose built AI infrastructure rack for large scale inference and training workloads.

11:14 We provide dedicated remote access to the critical networking and computer 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 the Seema Networks industrial IoT business, including its Nido global tracking platform for $11,700,000 which closed this month. The tuck in acquisition adds approximately $5,000,000 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 assets financial profile, we view this as a highly favorable transaction and one that is immediately accretive to earnings.

12:11 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.

12:26 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 percent. With this acquisition on a pro form a basis, our software and services revenue mix increases about 10 of total company revenue.

12:53 This represents a meaningful step towards a more predictable higher margin business model. Beyond the immediate financial benefits, we see meaningful cross sell potential. Neuro 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, Niro's software and our hardware provide customers with a more vertically integrated end to end asset monitoring solution.

13:45 In summary, I'm encouraged by our performance in fiscal twenty twenty six 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 twenty twenty seven, we believe Lantronix is better positioned than ever to benefit from long term growth trends reshaping edge computing and connectivity.

14:36 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? Thanks, Saleel. I'll begin with our fourth quarter and fiscal twenty twenty six financial results and some of the key drivers behind our performance, after which I'll provide our outlook for our first fiscal quarter ending 09/30/2026. For fiscal twenty twenty six, revenue was nearly $121,000,000 representing 8% growth over fiscal twenty twenty five revenue of just over $111,000,000 excluding Grids for Tice.

15:28 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 $12,600,000 above the midpoint of the $10,000,000 to $14,000,000 range we provided last quarter. Revenue for the fourth quarter was $31,200,000 representing both sequential and year over year growth. Our IoT Systems Solutions rebounded in the quarter, contributing more than $15,000,000 of revenue after slower ordering patterns in the prior two quarters related to the government shutdowns in late calendar twenty twenty five and early twenty twenty six. As we've said over the past several quarters, we viewed those federal headwinds as timing related rather than reflective of underlying demand.

16:19 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.

17:10 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 twenty twenty seven. 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. Leveraging our fabless operating model and diversified manufacturing partners, we identified these trends early and proactively secured supply.

18:02 Looking at our expenses and profitability. GAAP operating expenses in the fourth quarter of fiscal twenty twenty six were 14,000,000 slightly down from the $14,100,000 in the prior quarter and down approximately 5% from $14,700,000 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 twenty twenty six improved to $269,000 or $01 per share compared to GAAP net loss of $2,600,000 or $07 per share in the year ago quarter. On a non GAAP basis, net income of $1,800,000 or $04 per share compares to $1,500,000 or $04 per share in the prior quarter and was an improvement from the $01 per share in the year ago quarter.

19:00 Moving to the balance sheet. We raised just over $44,000,000 in net proceeds during the quarter through our public and ATM offerings, bringing our year end cash balance to more than $60,000,000 We also repaid the remaining $8,700,000 of debt and ended the fiscal year debt free.

19:19 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 and D, go to market initiatives and strategic M and A. During the current quarter and full fiscal year, we generated positive operating cash flow of approximately $1,900,000 and $9,900,000 respectively. Net inventories were $25,800,000 as of 06/30/2026, compared to $26,400,000 last quarter and $26,400,000 in the year ago quarter. Lastly, our outlook for the first quarter of our fiscal twenty twenty seven, which ends 09/30/2026, is as follows: We expect revenue to be in the range of $31,000,000 to $33,000,000 Non GAAP EPS is expected to be in the range of $04 to $06 per share.

20:18 With that, I'll turn the call back to Saleel for closing remarks. Thanks, Brent. Fiscal twenty twenty six was a year of measurable progress. We've turned the core business to grow, established Unmanned Systems as a meaningful contributor, expanded recurring revenue and significantly strengthened our financial position. Along the way, we continued 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.

21:04 From minimal revenue contribution a year ago, we delivered $12,600,000 in fiscal twenty twenty six after raising our outlook three times. We tripled our active engagements, expanded our global customer and partner base and move further out the technology stack.

21:27 In fiscal twenty twenty seven, we expect Unmanned Systems to represent 15% to 20% of total revenue, continued growth beyond these levels in subsequent years. We enter fiscal twenty twenty seven 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 economy ecosystem, we believe Lantronix is becoming the go to edge compute company for unmanned systems.

22:14 And with that, operator, we will now open the call for questions.

22:21 Thank you. We will now begin the question and answer session. The first question will come from Austin Bollig with Needham. Please go ahead.

22:58 Hey, guys. Thanks for taking my question and congrats on the strong results and really strong traction in the unmanned business. And so, just maybe just to dive in a little bit into your guys' newest fiscal twenty twenty seven 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?

23:26 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're working with over 30 vendors now. We've shipped to over a dozen already.

23:45 And not only are we doing unmanned systems, specifically drones, but we're also in the counter U. S. 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 twenty twenty seven and the numbers are based on where we see it today.

24:06 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 13,000,000 in fiscal twenty twenty six, like should we be assuming this could be at least maybe $25,000,000 in 2027?

24:29 Yes, we should be there around the 25 plus range for fiscal twenty twenty seven. Awesome. Thank you. 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?

24:56 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 these this tariff policy could support additional design win opportunities for us.

25:16 On the actual tariff side of things, we 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. 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 NDA certified and in the mid term country of origin, United States Of America. So I feel this is going to be helpful for Lantronix.

26:03 Awesome. All right, guys. Well, keep up the great work. We'll be in touch. Thank you so much, Austin.

26:12 The next question will come from Scott Buck with Titan Partners. Please go ahead. Hey, good afternoon, guys. Thanks for taking my questions. I'm curious between Swarmer and the DoD solutions and I guess all the Ukraine linked programs, what percentage of unmanned revenue is tied to Ukraine end demand?

26:33 And how do you think about that revenue in a ceasefire scenario?

26:40 So, Scott, thank you for that question. Our drone revenue for the last twelve months of fiscal twenty twenty six and fiscal twenty twenty seven, for fiscal twenty twenty six it's mainly U. S. Based, big majority of it. Fiscal twenty twenty seven, 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 ceasefire or what have you,

27:12 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 that ceasefire happens in Ukraine.

27:35 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?

27:56 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, 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,

28:20 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, of some the network infrastructure and other products that might have had some headwinds against them earlier in the fiscal twenty twenty six with government shutdowns and things like that. So we think the offset between those two kind of keeps us in similar range to where we've been company wide. And Scott, let just

28:57 add a little bit more color to your question about specifically in Ukraine. I think the message I wanted to make sure comes through, we have expanded our reach. We talked about Ukrainian customer, we talked about a big win in Australia with CACI, which is a big company U. S. Headquartered. We've 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. Perfect. I appreciate that and congrats on the strong result guys.

29:33 Thank you. The

29:37 next question will come from Josh Sullivan with Jones Trading. Please go ahead. Hey, good evening. Just a follow-up on the two thirty two decision. Have you seen any change in behavior activity from customers since the announcement?

29:57 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 NDA and TA certified. And then when I mentioned to them, we are going to start obviously doing more manufacturing out of our testing in 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

30:32 interest in us being U. S. Headquartered and delivering solutions here, so I think it's a big plus for us. Got it. And then on the neuro acquisition, now that you're software, hardware end to end solution, what other markets might that take you into or what does that capability allow you to do?

30:52 Yes. So if you think about Nido asset tracking, we've got they already have 125,000 tags out there. So two things as you think about the markets, they've been very focused on restoration and fleet tracking. Lantronix have 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.

31:37 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're going to see an upsell from our side from our hardware business that we have. So it's a great fit. Gross margins in the 60% plus, we really like it and it helps the company overall.

32:04 And more importantly, it takes our software and services business that I've been saying was 5% to 6%, we took it to 7% to eight I want it to be over 10%. Guess what guys, we took it to over 10%.

32:19 And then I guess on the LC9000, 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 timeframe?

32:32 Yes. Thanks for the SSC 9,000. For those on the call, it's 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. And in that one, we are sitting in their rack. I think it's called the data scale rack that they have and we are sitting in that rack.

32:59 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 $05,000,000,000 and we're just getting started with this. Seminoa is one proof point of our SLC 9,000 and the product is ready and it's already started to ship. And I'll add to it, Samenova picked us because of our ease of use, our reliability and our zero touch provisioning that we've designed in. Additionally, we've our APIs integrated with their tools. So this is a long term business for us as I think about it.

33:43 Great. Thank you. I'll leave it there. Thanks. The next question will come from Jason Schmidt with Lake Street. Please go ahead. Hey guys, thanks for taking my questions. Just first starting on the drone markets, Lil, given your comments about the traction you're seeing globally, are you continuing to expand the sales team and infrastructure focused on this market?

34:10 Jason, 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

34:45 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. 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?

35:14 Yes. Jason, 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, 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. Thanks a lot guys. Thank The next question will come from Christian Schwab with Craig Hallum Capital Group. Please go ahead.

36:03 Great. Good quarter. Good outlook, guys. I just want to one quick question and then another follow-up. The cash at quarter end that you highlighted, did that take into account the recent tuck acquisition or should that be reduced? 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 or proceeds had taken place as of year end. Okay. I just wanted to get that quick math. 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.

37:06 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 twenty twenty seven? How should we think about that? 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 2026, 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.

37:56 We believe that business should grow. And we are with that mindset that we are seeing design and activity, a 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. Great. Thank you for that clarity. And then my last question just as it relates to gross margins, as we layer in and expand our ARR in higher gross margin portions of the business, potentially helping 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?

38:56 Christian, we do think there's opportunity to grow the gross margin throughout fiscal twenty twenty seven, 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 twenty twenty six. And certainly, 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.

39:43 Great. And then my last question as far as future potential strategic M and A, Sleel, 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 twenty twenty seven? 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 two areas: Unmanned Systems, increasing our strength in their move up the drone stack And secondly is on recurring revenue. Both of those areas we like.

40:34 And we have a list of companies we are looking at, some even we are engaged with. So yes, we are moving forward on that, Christian. Great. No other questions. Thank you. Thank you, Christian. The next question will come from Austin Moeller with Canaccord. Please go ahead. Hi, good afternoon, Saleel and Brent. 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 SOMs at scale in Eastern Europe, how would you expect the gross margins on SOMs to compare in Eastern Europe relative to what you might get on the Drone Dominance program at the higher build rates?

41:30 Yes. Thanks for that, Austin. With respect to our European business or potential European businesses, I think the gross margins on our SOMs 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. 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? Yes, the AVT, which is a CACI company Austin, I'm sure you're familiar with them, big company in The U. S, a defense tech company.

42:21 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 NDA and TAA certification. I'll be meeting some of them shortly at one of the shows coming up. So we've been very carefully going. North America started in Europe, working with Australian opportunity, which is it's a good size 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.

43:07 So our breadth is improving every day. Super exciting. I'll pass it back there. Thanks. Thank you so much for that question. This concludes our question and answer session. I would like to turn the conference back over to Salil Asaray for any closing remarks. Thank you again for your questions and joining us today. We appreciate your continued interest in Lantronix and your support throughout the year. Fiscal twenty twenty six marked important progress in our journey. The strategy that was beginning to take flight is now delivering measurable results. As we enter fiscal twenty twenty seven, we are continuing our climb with greater momentum, a stronger platform, a clear visibility to multiple opportunities that we expect will drive double digit revenue growth for the full year.

44:05 In September, I will be at the Piper Sandler Government and Defense Tech CEO Summit in Washington, D. C, the Lake Street BIG Conference and the Gabelli Aerospace and Defense Symposium in New York and the Needham Summit in Minneapolis. Thank you very much everybody. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.