LightPath Technologies(US:LPTH)2024-05-09 23:27Financial Data and Key Metrics - Revenue for the fiscal third quarter was $7.7 million, compared to $7.4 million in the year-ago period [52] - Sales of infrared components were $3.6 million, or 47% of the company's revenue in the fiscal third quarter [52] - Visible component sales decreased approximately $0.4 million, or 13%, primarily due to a decrease in sales to customers in the defense and medical industries, and sales to customers in the telecom industry in China [53] - Gross margin in the third quarter of fiscal 2024 was approximately $1.6 million, a decrease of $0.9 million, or 37%, as compared to the same quarter of the prior fiscal year [54] - EBITDA for the quarter ended March 31, 2024 was a loss of approximately $1.5 million, compared to $242,000 for the same quarter of the prior fiscal year [55] Business Line Data and Key Metrics - Revenue from visible components was $2.7 million, or 35% of revenue [43] - Revenue from assemblies and modules was $0.8 million, or 10% of total company revenue [43] - Revenue from engineering services was $0.6 million, or 8% of total company revenue [43] - Infrared component sales increased approximately $0.5 million, or 16%, primarily due to an increase in shipment against an annual contract for an international military program [44] - Engineering services increased approximately $0.4 million or 211%, primarily driven by Visimid's contract with Lockheed Martin [46] Market Data and Key Metrics - The company has been working with customers to convert their systems to use BlackDiamond materials instead of Germanium, which has lower supply chain risk and better margins [38] - The company has received a European Defense Manufacturing License, allowing participation in European defense projects that are required to be designed and produced within the EU [148] - The EU defense market grew at 12.5% to a record of $295 billion last year, and the European Union published its first-ever European defense industrial strategy, encouraging cooperation and purchases in defense technology among EU members [143] Company Strategy and Industry Competition - The company is transitioning from a component manufacturer to a provider of engineered solutions based on proprietary technologies, with a focus on three pillars of growth: Imaging Solutions, new markets such as automotive, and the defense business [24] - The company has developed unique materials like BDNL-4, which offer alternatives to Germanium and improved performance in many applications [37] - The company is collaborating with Ursinus College and University of Central Florida to develop a recycling process for BlackDiamond glass, which is expected to drive down long-term costs of adopting thermal imaging in mass market applications such as automotive [39] Management Commentary on Operating Environment and Future Outlook - The company is on a recovery trajectory and on track to return to profitability during the next fiscal year [116] - The company expects to see some of the fruit of its efforts start to come to fruition and deliver results in the coming quarters [17] - The company is making good progress and is at a turning point, with the next few quarters being critical [17] Other Important Information - The company has a backlog of approximately $22 million as of March 31, 2024, a decrease of 17% compared to $26.6 million as of March 31, 2023 [72] - The company has working capital of approximately $7.8 million and total cash and cash equivalents of approximately $3.0 million as of March 31, 2024 [71] - The company has begun the realignment process to shift resources towards LightPath 2.0 and 3.0, with the goal of reducing overhead and manufacturing costs and increasing expenses for product development and marketing [75] Q&A Session Summary Question: Details on the defense program for the new BDNL material - The program involves 150,000 lenses for an existing program of record, with prototypes expected in a year, followed by low-rate production and full rollout over a five to eight-year period [78][79] Question: Update on automotive customers and the impact of the DOT mandate - Communication with automotive customers has picked up, and some companies may start rolling out systems earlier than the mandated timeframe to gather data and fine-tune the systems [80][81][82] Question: Gross margin outlook and impact of inventory write-down - Gross margin would have been around 30% without the inventory write-down, and margins are expected to be in the low 30s for the next couple of quarters, with an increase expected as the company shifts towards LightPath 2.0 and 3.0 [103] Question: Impact of the European Defense Manufacturing License - The license is expected to have a quick impact, with at least two large defense companies in Europe already working with the company in anticipation of receiving the license [109] Question: Update on the Lockheed Martin missile program and space communications - The company has delivered on the first milestone in the Lockheed Martin missile program and is working on additional programs within Lockheed [112][113] - The company's prime customer in space communications has increased their order, and the company is involved in a small development project related to quantum encryption of optical communication [132]