LightPath Technologies, Inc. (LPTH) on Q4 2022 Results - Earnings Call Transcript

Operator: Good afternoon. And welcome to the LightPath Technologies Fiscal 2022 Fourth Quarter Financial Results Conference Call. All participants’ will be in listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Albert Miranda, Chief Financial Officer. Please go ahead. Albert Miranda: Thank you. Good afternoon, everyone. Before we get started, I'd like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectations involve various risks and uncertainties, including the impact of COVID-19 pandemic those discussed in this periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them to be proven to be inaccurate and there can be no assurances that the results would be realized. In addition, references may be made to certain non-generally accepted accounting principles, or non-GAAP measures for which you should refer to the appropriate disclaimers and reconciliations in the company's SEC filings and press releases. Sam will begin today’s call with an overview of the business and recent development for the company. I’ll then review financial results for the fiscal year. Following our prepared remarks, there will be a formal question-and-answer session. I would now like to turn the conference over to Sam Rubin, LightPath’s President and Chief Executive Officer. Sam Rubin: Thank you, Alan. Good afternoon to everyone, and welcome to LightPath Technologies fiscal 2022 fourth quarter and full year financial results conference call. Our financial results press release was issued after the market close today and posted on our corporate website. Looking back on the fourth quarter of fiscal 2022, we see evidence of LightPath Technologies in transition. Earlier in the year, we further laid out our long-term strategy to repurpose LightPath, a provider of optical solutions, rather than a producer of components. LightPath will leverage the vast amount of engineering and design expertise built up over the years and key owned technologies to provide customers with a compelling value proposition. We believe that such a transition will result in a company that is an integral part of our customers design process, and ultimately more profitable. The area of photonics and optics is poised for significant growth and the technology is being more rapidly adopted and implemented into commercial and consumer products. Optics can be customized for different products applications based on similar core enabling technologies for a diverse customer base. The same technology and knowhow can be used for defense, telecom, and medical fields, automotive, industrial or commercial to name a few. We believe product development will be instrumental in our transition to a solutions provider. One key product we're excited about is our game changing [Indiscernible] called chalcogenide glasses [Indiscernible] with our US military approved diamond like coating. These products are an alternative to germanium, of which the US imports roughly $675 million worth a year we use in optics, primarily from Russia and China. The benefits of our materials are multilayered. We produce our Black Diamond glasses domestically, allowing for greater supply chain resilience for our partners at a lower price, while reducing reliance on foreign suppliers for germanium. Black Diamond materials have the added benefit that sensors can use them across a vast spectrum, making those materials useful for many imaging modalities for night vision all the way to thermal imaging. Traditional optics that serves those imaging modalities require at least one camera and lens system for each light spectra increasing those solutions weight and cost due to needing a specific camera system for each imaging modality. Our Black Diamond materials on the other hand will eliminate the extra lenses required today. In practical terms, a thermal and night vision product today requires two cameras, two sensors and two lens systems. With our technology coupled with multispectral detectors that are already available, such a system can become one camera performing both functions. This means half the weight, half the power consumption and half the size. To visualize this, no pun intended, picture a UAV is currently carrying multiple cameras as payload. Now, imagine this UAV with just one camera, the weight is reduced, leading to increase in distance and airtime. Also the total power consumption is reduced. Those are only two of the immediate benefits from such technology. This technology is going to be a game changer. Its applications include really any situation in which multiple cameras are used, whether airborne, handheld, soldier carried or elsewhere. In effect, every application that uses infrared imaging will transform in the coming years. And we own one of the key technologies needed to achieve that. This is a major point and a major element in our strategy. This technology is new and fast growing. And we can position ourselves front and center in this market by controlling exclusively the critical materials needed. Among other technologies and capabilities, black diamond glass is one of our essential levers transitioning from a components company to an imaging solutions provider. Now every company always wishes to do more, every company wants to grow vertically or most companies, that's a common goal. But one can't just one day wake up and say I'm a system provider instead of being a component provider. You need to give customers a reason to purchase from you something different than what they had in the past. Change in underlining technology creates an opportunity, especially where we own a crucial technology that provides us the reason for customers to come to us with the complete system. By owning the critical technology or technologies in our case, we can offer better systems than otherwise available. With the exclusivity we have on those, we are supercharging our sales team with their ability to go out and now sell solutions instead of purely components. The success of this strategy is starting to show in the record backlog we announced a couple of weeks ago, over 20% of this record backlog is now solutions significantly more weighted towards the defense business, especially in the US, as one would expect from infrared imaging business. In short, we're going down a new path, we have multiple exclusive key technologies to achieve that. Chief among them are the Black Diamond materials, and our growing backlog is starting to show the results in this effort. Overall, the strategic direction front we are doing very well. And the world geopolitical events give us now a strong background in addition, offsetting some of the short-term economic softness we're seeing. Now I want to take a moment to highlight some other key recent events that we see as further evidence of our transition to a solutions provider. In July, we announced a partnership with QuantLR to develop a free space quantum encryption system using infrared optical systems developed by LightPath. Quantum encryption is a key new technology with growing demand due to its ability to provide encryption that is resistant to any existing supercomputer and quantum computers. QuantLR has already an existing proven system for this that works on the fiber optic infrastructure. Like many other funded projects that we take on this project is allowing us to use the funds to develop a key technology in infrared optics, a key technology that later will be part of our portfolio of technologies and utilize for all our infra-red solutions including our infra-red imaging system. In the same month, we announced Seek Thermal’s micro core product winning the 2022 Best Sensors award. LightPath has an ongoing long-term relationship with Seek Thermal, and we provide today's optical solutions for their products. And in particular, for the micro core product that won that award allowing the market leading product that is small, light, accurate and lower priced than competitors. That is one example where we already achieving some of our strategy or creating unique value to the customer, leveraging our technologies and capabilities. Last month, we also shared the LightPath had reached a record $24 million backlog while backlogs fluctuate over time, we see them as a best indicator of future revenue. Looking deeper at the backlog, we see some beneficial trends. The first is the quality of the orders in the backlog, which is significantly different from what we had in the past and generally of higher value due to increased demand for custom assemblies and defense related work. We have been working diligently to ensure we have all the necessary qualifications to compete in the defense space. And those efforts appear to be paying off. The second trend we note is that there has been a significant backlog growth despite the contribution from China orders having been cut by half. Revenue diversification beyond China is a strategic priority. And our efforts there have paid off evident in the current backlog, and we plan to continue with that strategic plan. The third and final takeaway mentioned earlier also is that as I look at the backlog 20% of it comes from solutions oriented orders. As mentioned, LightPath aspires to provide optical solutions rather than simply components. Having a backlog with 20% solutions orders is an encouraging sign. While in many arenas, we see opportunity ahead of LightPath, we're not immune to market forces beyond our control. We already beginning to see the impact of recessionary slowdown in China, that we anticipate will continue in the near term. While we have been diversifying beyond China, we've increased defense and commercial business, China's still comprises a significant portion of our revenue. In addition, energy prices in Europe have spiked due to the war in Ukraine and the EU tensions with Russia. The government in Latvia has previously subsidized energy costs that had seize to do so. We expect to see a negative impact at our margins from that facility. However, I believe that despite some external headwinds, and near-term cost pressures, outlook for the company and its growth across prospects are extremely bright. As I mentioned previously, the technology is now transferable to a host of different products on a much larger scale, and applications across industries are vast. More importantly, our Black Diamond glass has the potential to revolutionize our product portfolio, and growth prospects. I want to also take a moment and thank our employees and all stakeholders who have continued to work diligently through the various transitions and hurdles we have endured. It is because of their dedication and hard work as we see a bright future in the growing company. I will now turn the call over to our CFO, Al Miranda to review the fourth quarter and fiscal year and financial results. Al? Albert Miranda: Thank you, Sam. I'd like to remind everyone that much of the information we're discussing during this call is also included in our press release issued earlier today, and will be included in the 10-K for the period. I encourage you to visit our website lightpath.com to access these documents. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist investors and an analyst in the company. As a reminder, we've been significantly impacted by the transition and business conditions in China during the fourth quarter of fiscal 2021 and into this fiscal year. Revenues from China have been recovering, but they remain well below the pre transition levels. On a consolidated basis, revenue for fiscal 2022 was $35.6 million, compared to $38.5 million in the year ago period. Sales of infrared products were $18.7 million or 52% of the company's consolidated revenue of fiscal 2022. Revenue from PMO products were $15 million or 42% of consolidated revenue, revenue from specialty products were $1.8 million or 5% of the total company revenue. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers in the industrial market. As a reminder, we experienced an increase in demand for infrared products during fiscal 2021 as demand for medical and temperature sensing applications peaked during COVID. Sales of PMO products decreased primarily due to a reduction in orders from one key customer due to a decrease in that customers market share, and pre sales in specialty products was primarily due to NRE projects for customers in the industrial and defense industries during fiscal 2022. Moving on to margins, I'd like to remind listeners that PMO margins are typically higher due to our molding technology, which enables mass production in a more automated machine process. Infrared historically was more manually produced, but with the growth in our molding technology as applied to infrared products being made from our proprietary BD6 material margins will increase from both the advantage of the material cost and using the automated molding process. Gross margins in fiscal 2022 was approximately $11.8 million compared to approximately $13.4 million during the prior fiscal year. Gross margin as a percentage of revenue was 33% for fiscal 2022, compared to 35% for the prior fiscal year. Although, fiscal 2022 at a similar product mix to fiscal 2021, the gross margin as a percentage of revenue was unfavorably impacted by the 8% year-over-year decrease in revenue, which resulted in underutilized capacity in some areas. Infrared product margins also reflect increased costs associated with the completion of the coding department in our Riga facility, which began to improve in the fourth quarter of fiscal year 2022 and will continue to improve over time as that facility works through the qualification stages for more products and begins to produce at volume. The second half of fiscal year 2022, margins were also negatively impacted by inflationary pressures and the cost of raw materials, and significantly increased energy costs, particularly in Latvia. Selling, general and administrative costs were approximately $11.2 million during fiscal 2022, a decrease of approximately $768,000 or 6%, compared to the prior fiscal year. The decrease in SG&A cost is primarily due to a decrease of approximately $800,000 of expenses associated with the previously described events that occurred at our Chinese subsidiaries, including legal and consulting fees. This decrease was partially offset due to increases in travel expenses, as well as expenses for certain value added taxes, and related taxes owed by one of our Chinese subsidiaries from prior years, which was identified and settled in fiscal 2022. Net loss for the fiscal 2022 was approximately $3.5 million or $0.13 basic and diluted loss per share, compared to $3.2 million or $0.12 basic and diluted loss per share for fiscal 2021. The decrease in net income during fiscal 2022 as compared to the prior fiscal year, was primarily attributable to a $785,000 decrease in operating income resulting from lower gross margin, which again was partially offset by lower operating expenses. We believe EBITDA is helpful for investors to better understand our underlying business operations. Our EBITDA for fiscal 2022 was approximately $1.2 million compared to EBITDA of $1.5 million for the prior fiscal year. The decrease in EBITDA for the year was primarily attributable to lower revenue and gross margin, partially offset by decreased SG&A and other expenses due to the decreases in expenses incurred related to the previously described event that occurs in our Chinese subsidiaries. As of June 30th, 2022, we had working capital of approximately $10.4 million and total cash and cash equivalents of approximately $5.5 million. More than 50% of our cash and cash equivalents were held by our foreign subsidiaries. Cash provided by operations were approximately $1.5 million during fiscal 2022, compared to approximately $4.7 million for the prior fiscal year. The decrease in cash flows from operations during fiscal 2022 is due to decrease in net income and a decrease in accounts payable and accrued liabilities, partially offset by a reduction in inventory. Our total backlog on June 30th, 2022, is approximately $17.8 million, a decrease of 17% as compared to $19.7 million at the end of the prior fiscal year. The decrease in backlog during fiscal 2022 is primarily due to the timing of annual and multiyear contract renewals. These renewals may substantially increase backlog levels at the time the orders are received, and backlog will subsequently be drawn down as shipments are made against these orders. Our annual and multiyear contracts are expected to renew in future quarters. For example, in August 2022, we announced a $4 million supply agreement for PMO with a long time European customer of precision motion control systems and OEM assemblies. That new supply agreement will go into effect in the second half of our fiscal year 2023 and is expected to run for around 12 months. And as Sam mentioned earlier, we recently announced our backlog was approximately $24 million in August. Similar to last year end call I’d like to go off script to give the investor some insight into our activities this year. A glimpse of what we're looking up, working on for next year. We certainly have been negatively influenced by world events such as COVID, the war in Ukraine, inflationary cost pressures and the beginning of a global recession. While we're not certain about these events continue in the future, we are assuming that for fiscal year 2023 they will be negatively impacting us. Even with these events, we continue to take a longer term view. In fiscal year 2022, we invested heavily in Latvia, giving the facility the ability to coat lenses locally rather than shipping back and forth to Orlando. We've just begun seeing the financial benefit of doing so in June. The ability to produce locally also means we will soon qualify for production in the defense markets in Europe. This paves the way for bringing our new multispectral Black Diamond materials for imaging to the European defense markets as well as the US market. While we did not invest in China, the new management team did make substantial efficiency improvements in the operations. Most of these facilities are now good examples of low cost flexible manufacturing. In addition, during the year we substantially changed and restructured our organization, the result of which is less headcount and less personnel expense year-over-year without sacrificing our ability to deliver quality products. Sam mentioned our historic high backlog. The mix of the backlog and our growth is heavily geared towards the US and European markets and engineered solutions. Backlog is a sign that we are moving in the direction of our strategy to continue to execute on our strategy on fiscal year 2023, we're consolidating and reconstructing our two Orlando manufacturing facilities. A step that is key to production flow, improving yields improving margins, and enabling our future growth plans in engineered assemblies. The Orlando project brings us all under one roof, but more importantly, provides the proper space and access to equipment that our engineers need to perform new product development and testing, the key to our future success. While these are the larger and more ambitious activities, our people have additional well defined projects big and small to improve efficiency and capacity, which we believe are key to margin improvement and profitability. These endeavors are the strengthening of the LightPath Foundation and are prerequisites for the execution on our growth strategy that Sam just outlined. With this review our financial highlights and recent developments included. I'll now turn the call over to the operator to begin the question and answer session. Operator: [Operator Instructions] And our first question today will come from Brian Kinstlinger with Alliance Global Partners. Operator: And our next question will come from Gene Inger with ingerletter.com. Operator: And this will conclude our question and answer session. I'd like to turn the conference back over to management for any closing remarks. Sam Rubin : Thank you. We appreciate the time you took to listen to us and follow the company. We look forward to meeting any investors at upcoming H.C. Wainwright Conference next week for the MicroCap Rodeo and MicroCap Conferences later next month. As always, management is available for any direct discussion with investors and can be contacted either through our Investor Relations, or directly through our website. Thank you and goodbye. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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LightPath Technologies, Inc. (NASDAQ:LPTH) Sees Positive Analyst Sentiment and Strategic Growth Opportunities

  • The consensus price target for NASDAQ:LPTH has increased from $3.83 to $5.50, indicating growing optimism among analysts.
  • LightPath Technologies' strategic acquisition of G5 Infrared and growth in defense contracts highlight significant growth opportunities.
  • The company has begun delivering infrared lens assemblies to a European defense customer, with the contract expected to generate $1 million to $2 million in revenue during 2025.

LightPath Technologies, Inc. (NASDAQ:LPTH) is a company that designs, develops, manufactures, and distributes optical components and assemblies. These products are used in various industries, such as defense, medical devices, automotive safety, and telecommunications. The company operates globally, selling directly to customers and through distributors, which allows it to reach a wide market.

The consensus price target for LPTH has shown a positive trend over the past year. A year ago, the average price target was $3.83, but it has increased to $5.50 in both the last month and last quarter. This suggests growing optimism among analysts about the company's stock performance, possibly due to strategic initiatives and positive industry developments.

LightPath Technologies recently held its Q2 2025 earnings conference call, where key figures like CEO Sam Rubin and CFO Albert Miranda discussed the company's financial performance and strategic outlook. The call included analysts from various firms, such as Jaeson Schmidt from Lake Street Capital Markets, who set a price target of $3 for LPTH, reflecting his expectations based on recent financial results and market conditions.

The company has announced a strategic acquisition of G5 Infrared, which is expected to enhance its capabilities in the infrared technology sector. This acquisition is likely to positively impact LightPath Technologies' market position. The company is also experiencing growth in defense contracts and high-value camera solutions, with potential contracts with Lockheed Martin, presenting compelling growth opportunities.

LightPath Technologies has commenced the delivery of infrared lens assemblies to a European defense customer, part of an agreement outlined in an October 2024 Letter of Intent. These assemblies are intended for FPV drone applications, and the contract is expected to generate between $1 million and $2 million in revenue during 2025. Despite some analysts setting a lower price target, the company's strategic moves and industry growth suggest potential for future success.

LightPath Technologies’ Price Target Raised to $4, Shares Gain 15%

LightPath Technologies (NASDAQ:LPTH) shares rose more than 15% intra-day today after Lake Street Capital Markets analysts increased the price target for the stock to $4 from $3 while maintaining a Buy rating. According to the analysts, the optics and photonics company is positioned for continued growth and stands out as a top investment idea for 2025, driven by its robust pipeline and strategic market opportunities.

After a remarkable performance this year, with shares surging 146% compared to the Russell 2000’s 12% gain, LightPath’s momentum is expected to carry into the next year. Recent years have seen revenue impacted by declines in business from China, but the company has successfully backfilled this gap, allowing its solid design wins to gain recognition.

Additionally, China’s ban on germanium exports to the U.S. is poised to benefit LightPath, as its proprietary Black Diamond materials offer a compelling alternative. This geopolitical shift could enhance the company’s market positioning, driving demand for its innovative solutions.

Key catalysts for LightPath include growing investor interest in its expanding pipeline and potential breakthroughs such as the transformational Lockheed missile program, which could provide a significant boost to revenue and market perception. The analysts also highlighted the potential for multiple expansion as these developments unfold.

While bullish on LightPath’s prospects, the firm acknowledged potential risks and challenges but remains confident in the company’s ability to capitalize on emerging opportunities.

LightPath Technologies’ Price Target Raised to $4, Shares Gain 15%

LightPath Technologies (NASDAQ:LPTH) shares rose more than 15% intra-day today after Lake Street Capital Markets analysts increased the price target for the stock to $4 from $3 while maintaining a Buy rating. According to the analysts, the optics and photonics company is positioned for continued growth and stands out as a top investment idea for 2025, driven by its robust pipeline and strategic market opportunities.

After a remarkable performance this year, with shares surging 146% compared to the Russell 2000’s 12% gain, LightPath’s momentum is expected to carry into the next year. Recent years have seen revenue impacted by declines in business from China, but the company has successfully backfilled this gap, allowing its solid design wins to gain recognition.

Additionally, China’s ban on germanium exports to the U.S. is poised to benefit LightPath, as its proprietary Black Diamond materials offer a compelling alternative. This geopolitical shift could enhance the company’s market positioning, driving demand for its innovative solutions.

Key catalysts for LightPath include growing investor interest in its expanding pipeline and potential breakthroughs such as the transformational Lockheed missile program, which could provide a significant boost to revenue and market perception. The analysts also highlighted the potential for multiple expansion as these developments unfold.

While bullish on LightPath’s prospects, the firm acknowledged potential risks and challenges but remains confident in the company’s ability to capitalize on emerging opportunities.