Lantronix, Inc. (LTRX) Cash Flow Statement

The OCF-to-net-income ratio is negative in nine of ten quarters simply because the denominator is a loss, so the more useful reading is that every loss-making quarter still produced positive operating cash, ranging from $340K to $3.6M. This divergence appears to be structural rather than incidental, since stock compensation of $1.3M-$2.5M per quarter plus depreciation of roughly $1.0M-$1.9M consistently exceed the reported losses. Investors should treat the loss as economically meaningful nonetheless, since the addbacks that bridge to positive cash flow represent real dilution or non-cash charges rather than earnings power.

The margin range is unusually wide for a business with essentially fixed capital spending, which implies the volatility is coming from the working capital line rather than operations; 2025Q2's 0.8% FCF margin coincided with a $6.5M net acquisition outflow and a $619K working capital drag. Recent quarters show FCF of $1.7M-$3.5M against net losses of $0.3M-$1.4M, so cash generation appears to be improving faster than reported profitability. Because the trend tracks the income statement's cost-driven loss narrowing rather than a revenue breakout, the durability of this FCF level warrants further investigation against the still-depressed revenue base.

Capex running at roughly one-eighth of D&A would normally signal underinvestment, but the $6.5M acquisition in 2025Q2 suggests the gap is largely amortization of acquired technology and customer relationships, not a starved fixed-asset base. The asset-light profile does insulate free cash flow, as capex consumed only about 6% of operating cash flow over the window. Still, heavy intangible amortization means the D&A addback inflates operating cash flow relative to any economic replacement need, so the cash conversion quality looks better than the raw OCF figure alone suggests.

The largest working capital contributions arrived while revenue was shrinking, which is consistent with receivable and inventory liquidation rather than improved operating efficiency, and may indicate the company was harvesting its balance sheet to fund operations. The sharp deceleration to a $308K contribution in 2026Q4, alongside revenue recovery, suggests the pool of easy working capital cash may be exhausting, raising the question of whether future operating cash flow must be carried by earnings conversion instead. The negative $2.7M working capital swing in 2024Q4 shows the line can reverse quickly, so investors should monitor whether collections keep pace with the revenue rebuild.

A gap of this magnitude relative to cumulative losses means the accrual base is dominated by non-cash items, so reported net income and cash flow are effectively measuring different things for this business. Working capital supplied a further $8.1M of the difference, implying that only a modest portion of operating cash flow originated from core earnings conversion. If working capital reverses and dilution continues at the current pace, the cumulative gap could narrow without any improvement in underlying profitability, a scenario that would weaken the case built on cash generation.