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LightPath Technologies(LPTH) - 2024 Q3 - Quarterly Results

Press Release Summary Fiscal 2024 Third Quarter & Subsequent Highlights LightPath Technologies reported third-quarter fiscal 2024 revenue of $7.6 million, with a net loss of $2.6 million, highlighting progress on a Lockheed Martin development order, a European Defense license, and the commercial launch of its new BDNL-4 infrared glass, with total backlog at $22.0 million Q3 FY2024 Key Metrics | Metric | Value | | :--- | :--- | | Revenue | $7.6 million | | Net Loss | $2.6 million | | EBITDA Loss | $1.5 million | | Total Backlog (as of Mar 31, 2024) | $22.0 million | - 18% of Q3 revenue was attributed to LightPath 2.0 products, which are customized lens assemblies, solutions, and related engineering services5 - Key strategic achievements include delivering the first milestone for a Lockheed Martin order, receiving a European Defense license, launching the new BlackDiamond-NRL infrared glass (BDNL-4), and securing a design win for BDNL materials in a new airborne DoD program5 Management Commentary Management emphasized the company's strategic shift from a component manufacturer (LightPath 1.0) to a value-added solutions provider (LightPath 2.0), which now constitutes 18% of revenue, supported by progress on a $4.7 million initial order with Lockheed Martin, obtaining a European Defense license, expanding production capabilities in Latvia, and commercially launching its new BDNL-4 infrared glass for a major DoD program - The company is strategically shifting to "LightPath 2.0", focusing on customized lens assemblies and solutions, which accounted for 18% of revenue in Q34 - Delivered the first milestone of a $4.7 million initial order with Lockheed Martin for an advanced electro-optical thermal system, with a successful program potentially leading to substantial production revenue opportunity4 - Obtained a European Defense license, enabling direct supply to the EU defense market, which grew 12.5% to $295 billion in 2023, with expanded capacity in its Latvia facility to support this46 - Commercially launched the new BlackDiamond-NRL infrared glass, BDNL-4, as a Germanium substitute, already designed into a new airborne DoD system expected to require over 150,000 lenses6 Financial Results 2024 Fiscal Third Quarter Financial Results For the third quarter of fiscal 2024, revenue increased 4% year-over-year to $7.7 million, driven by a 16% rise in IR components and a 211% surge in engineering services, which offset declines in visible components and assemblies, though gross margin fell to 21% from 34% due to product mix shift and an inventory write-down, leading to a widened net loss of $2.6 million and an EBITDA loss of $1.5 million Q3 FY2024 vs Q3 FY2023 Financial Summary | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $7.7M | $7.4M | +4% | | Gross Margin | $1.6M (21%) | $2.5M (34%) | -37% | | SG&A Costs | $3.2M | $2.8M | +15% | | Net Loss | $(2.6)M | $(1.2)M | +117% | | EPS (basic & diluted) | $(0.07) | $(0.03) | +133% | | EBITDA | $(1.5)M | $0.2M | - | Q3 FY2024 Revenue by Product Group (YoY) | Product Group | Q3 FY2024 Revenue | % Change YoY | | :--- | :--- | :--- | | Infrared ("IR") components | $3.6M | +16% | | Visible components | $2.7M | -13% | | Assemblies & modules | $0.8M | -16% | | Engineering services | $0.6M | +211% | - The decrease in gross margin percentage was primarily due to a shift in product mix towards lower-margin IR components and a significant inventory revaluation write-down from cost reduction efforts8 - The increase in SG&A costs was mainly driven by higher wages, including additions from the Visimid acquisition, and increased legal fees9 2024 Fiscal Year-To-Date Financial Results For the first nine months of fiscal 2024, revenue slightly decreased by 1% to $23.1 million, with a 15% increase in IR components and a 213% rise in engineering services offset by a 21% decline in visible components, while gross margin contracted to 26% from 34%, leading to an increased net loss of $5.7 million and an EBITDA loss of $2.4 million Nine Months FY2024 vs FY2023 Financial Summary | Metric | Nine Months FY2024 | Nine Months FY2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $23.1M | $23.2M | -1% | | Gross Margin | $6.1M (26%) | $8.0M (34%) | -24% | | SG&A Costs | $8.7M | $8.4M | +3% | | Net Loss | $(5.7)M | $(3.2)M | +78% | | EPS (basic & diluted) | $(0.15) | $(0.11) | +36% | | EBITDA | $(2.4)M | $0.4M | - | Nine Months FY2024 Revenue by Product Group (YoY) | Product Group | Nine Months FY2024 Revenue | % Change YoY | | :--- | :--- | :--- | | Infrared ("IR") components | $11.0M | +15% | | Visible components | $8.1M | -21% | | Assemblies & modules | $3.1M | 0% | | Engineering services | $0.9M | +213% | - The decrease in gross margin was primarily due to a higher proportion of sales from lower-margin infrared products and the inventory revaluation in Q315 - Other income for the period included a $190,000 gain from the recovery of funds previously misappropriated by the company's former Chinese management team17 Financial Condition and Other Information Liquidity and Capital Resources For the first nine months of fiscal 2024, cash provided by operations was $456,000, a significant improvement from the $920,000 used in operations in the prior-year period, mainly due to a decrease in accounts receivable, with capital expenditures of $1.9 million primarily for the Orlando facility expansion and $847,000 spent on the acquisition of Visimid Cash Flow and Capital Expenditure Summary (Nine Months FY2024) | Metric | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | | Cash from Operations | $456,000 | $(920,000) | | Capital Expenditures | $1.9 million | $2.3 million | | Visimid Acquisition (net) | $847,000 | N/A | - The positive shift in operating cash flow was largely driven by a decrease in accounts receivable21 - Capital expenditures were mainly for the Orlando Facility expansion, with $1.3 million spent in the first nine months of fiscal 2024 out of a total project cost of $3.7 million22 Sales Backlog As of March 31, 2024, the total sales backlog was $22.0 million, a 17% decrease from $26.6 million a year prior, but a 1% increase since the end of fiscal 2023, with the year-over-year decrease attributed to shipments against multi-year contracts and a strategic decision to reduce production of Germanium-based optics, which delayed a typical large renewal order as the company actively works with customers to transition them to its proprietary BlackDiamond materials Backlog Comparison | Date | Backlog Amount | YoY Change | | :--- | :--- | :--- | | March 31, 2024 | $22.0 million | -17% | | March 31, 2023 | $26.6 million | N/A | - The backlog increased by 1% during the first nine months of fiscal 2024 compared to the end of fiscal 202323 - The YoY decrease is partly due to a strategic shift away from Germanium optics, resulting in the non-renewal of a typical large annual order as the company works to convert customers to its BlackDiamond materials23 Appendix: Financial Statements Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $49.7 million, down from $53.5 million at June 30, 2023, primarily due to a decrease in cash and restricted cash, while total liabilities increased slightly to $18.0 million from $17.6 million, and total stockholders' equity decreased to $31.7 million from $36.0 million, reflecting the net loss for the period Balance Sheet Summary (unaudited) | Account | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $3.0M | $4.7M | | Total current assets | $15.5M | $21.8M | | Total assets | $49.7M | $53.5M | | Total current liabilities | $7.7M | $6.8M | | Total liabilities | $18.0M | $17.6M | | Total stockholders' equity | $31.7M | $36.0M | Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a net loss of $2.6 million for the three months ended March 31, 2024, and a net loss of $5.7 million for the nine-month period, representing a significant increase in losses compared to the $1.2 million and $3.2 million losses in the respective prior-year periods Income Statement Summary (unaudited) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Revenue, net | $7,699,175 | $7,409,648 | | Gross margin | $1,606,187 | $2,535,404 | | Operating loss | $(2,583,196) | $(960,214) | | Net loss | $(2,597,534) | $(1,163,270) | Income Statement Summary (unaudited) | Metric | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Revenue, net | $23,092,060 | $23,249,228 | | Gross margin | $6,106,214 | $7,993,661 | | Operating loss | $(5,617,147) | $(2,752,111) | | Net loss | $(5,653,573) | $(3,238,031) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $36.0 million at June 30, 2023, to $31.7 million at March 31, 2024, primarily driven by a cumulative net loss of $5.7 million over the nine-month period, partially offset by stock-based compensation and common stock issuances - Total stockholders' equity decreased from $35,952,525 at June 30, 2023 to $31,708,558 at March 31, 202440 - The primary driver of the decrease in equity was the net loss of $5,653,573 for the nine-month period3840 Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2024, the company generated $456,343 in cash from operating activities, a reversal from the $920,586 used in the prior year, with cash used in investing activities at $2.4 million mainly for property/equipment purchases and the Visimid acquisition, and cash used in financing activities at $2.1 million primarily for loan repayments, resulting in an overall decrease of $4.0 million in cash, cash equivalents, and restricted cash during the period Cash Flow Summary (Nine Months Ended March 31) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $456,343 | $(920,586) | | Net cash used in investing activities | $(2,375,091) | $(2,259,655) | | Net cash (used in) provided by financing activities | $(2,069,670) | $7,532,646 | | Change in cash, cash equivalents and restricted cash | $(3,985,538) | $4,395,006 | Reconciliation of Non-GAAP Financial Measures The company provided a reconciliation of net loss to EBITDA, a non-GAAP measure, reporting an EBITDA loss of $1.5 million for the third quarter of fiscal 2024 and $2.4 million for the nine-month period, compared to EBITDA losses of $242,226 and $427,360 in the respective prior-year periods Reconciliation of Net Loss to EBITDA (unaudited) | Metric | Three Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net loss | $(2,597,534) | $(5,653,573) | | Depreciation and amortization | $1,042,850 | $2,985,850 | | Income tax provision | $5,798 | $121,402 | | Interest expense | $37,649 | $149,048 | | EBITDA | $(1,511,237) | $(2,397,273) |