Syntec Optics Holdings Inc Earnings Call

Good.

Speaker Change: Afternoon, and welcome to Syntech, Opex Holdings, Inc, second quarter earnings call.

drink: My name is drink and I'll be your operator for today's call. As a reminder, this conference call is being recorded at this time all participants are in a listen only mode. I will now turn the call over to Dean Rudy simply Opex Chief Financial Officer. Please go ahead.

Dean Rudy: Thank you operator, and welcome everyone to Syntech optics second quarter earnings call Alka.

Dean Rudy: Al <unk>, Chairman and Chief Executive Officer of Syntech optics will join me today for our call to discuss the company's financial and operational results for the second quarter of 2024.

Speaker Change: Here's a few quick reminders before we start <unk>.

Speaker Change: Today's call is being webcast and our press release can be accessed along with it on the investors section of the company's website www Dot syntech optics dot com.

Second we will make forward looking statements based on current expectations. During this call actual results may differ due to factors noted in today's release and in our periodic SEC filings.

Speaker Change: Finally, we will reference some non-GAAP financial measures.

Speaker Change: Liaisons to the nearest corresponding GAAP measure.

Speaker Change: Are included in today's release and on our website.

al: With that I will turn the call over to al.

al: Thank you Jamie and thank you to everyone joining us today for Syntech optics earnings call for those of you who are newer to our story I will begin by taking a few minutes to give you some information about centex strategy and how we're executing it.

al: Syntech optics strategy is to lead the large yet often what we think on overlook market for light enabled products by offering a diverse product portfolio.

al: Tailored to blue chip customers needs.

al: This April this approach Leverages, our operation strengths and is built on solid foundation.

Speaker Change: That is financially Sal.

Speaker Change: To achieve this we are focusing on the following.

Speaker Change: One we will grow by having a large target as addressable market, which is the rapidly expanding segment of the global economy driven by light enabled technologies. This is not small it is 11% of the total global GDP for S. P. I E 2020 to reward to within this large target we will add.

Cyclical end markets by focusing on recession resistant markets, including communications defense biomedical and consumer sectors.

Speaker Change: Three we will leverage existing strengths and such end markets by utilizing our existing customer base market presence and operational capability to support all new product launches capitalizing on our unique abilities across horizontal diverse technologies.

Speaker Change: For employee retention will complement our leverage of stress we aimed to maintain what we currently have one in five employees with over 10 years and service continuing our commitment to being the best place to work for in our community.

Speaker Change: Five we will continue to build relationships with blue chip customers and expand our business with industry leaders across all end markets, including new products and space optics, and biomedical optics, our ability to be strong supply chain partners makes us a safe and dependable choice for their high precision products.

Speaker Change: Next we will also continue to develop products around core capabilities enhancing our competitive advantage by building 20 years of innovation manufacturing expertise crave secrets in patents and this way.

Speaker Change: We will continue to generate stakeholder value.

Speaker Change: We are executing this fintech strategy by continuing to be a leading provider of mission critical optics and products to advanced technology.

Speaker Change: Partners in defense Biomedical and communications equipment.

Speaker Change: Our operations span the development of advanced manufacturing processes are design and assembly of mission critical products. The integration of these products and other innovative ancillary components into subassemblies for subsystems and marketing and selling these subsystems into diverse set of markets, including biomedical disposable by medical.

Speaker Change: Defense.

Speaker Change: Consumer and communications end markets.

Speaker Change: We market.

Speaker Change: Mission critical optics through our Blue chip customers advanced technology, integrators, and OEM customers, who rely on optoelectronics light enabled devices and intelligence that requires high precision and reliability. We are a 90004 square square foot facility vertically and horizontally integrated it advanced.

Speaker Change: Manufacturing facility in Rochester, New York.

Speaker Change: Where we're headquartered.

Speaker Change: Fintech wins in the marketplace, because our customers appreciate our unique ability to achieve tough specifications at benchmark costs by deploying our patent portfolio combined with our proprietary manufacturing trade capabilities.

Speaker Change: Before discussing our growth opportunities and some of our other operational highlights I will turn back to Dean to review, our financial and operating results.

Dean Rudy: Thank you Al I will now review our results for the three and six months that ended in the second quarter. All figures are GAAP unless otherwise noted.

At the previous earnings call, we provided guidance for second quarter 2020 for revenue to be between 6.4 and $7 million.

Speaker Change: I'm excited to report that our revenue came in just above $7 million as anticipated.

Speaker Change: The 7 million in net sales for the three months ending 2024 was an increase of about 12% compared to $6 3 million in Q1 of 2024.

Speaker Change: Those sales decreased by about 9% year over year compared to $7.7 million in 2023.

Sales from products increased 20%.

Speaker Change: The decrease in net sales compared to the prior year is due to decreases in our customer tooling and nonrecurring engineering revenue streams.

Speaker Change: Tooling revenue decreased by 0.8 million for the three months ending 2024 compared to 2023 and nonrecurring engineering revenue decreased by $1 1 million for the three months ending 2024 compared to 2023.

Speaker Change: For the three months ending June 2020 for product revenue was 7.1 million as compared to $5 8 million in 2023% to 20% increase.

Speaker Change: This demonstrated we were able to convert our engineering and tooling efforts to increase production and sales.

Speaker Change: The second quarter of 2024, adjusted EBITDA was 1.32 million for the three months ending 2024.

Speaker Change: Compared to a negative 0.7 million adjusted EBITDA in the first quarter of 2024.

Speaker Change: And $1.8 million in 2023.

Speaker Change: The increase over the previous quarter was achieved by a reduction in accounting and production related expenses.

Speaker Change: Contributing factors to the year over year decrease include a 0.2 million decrease in gross profit and an increase in general and administrative expenses to enable future product launches.

Speaker Change: The company ended the second quarter of 2024 with an unused 3.7 million dollar line of credit.

Speaker Change: And unused 4.8 million dollar equipment line of credit.

Speaker Change: And a paydown of 3.2% principle on other commercial bank lines during the quarter.

Speaker Change: Our net income for the three months ending in the second quarter of 2024 was 0.3 million or one cent per share.

Speaker Change: Up from a negative 1.2 million or negative three cents per share in Q1 of 2024.

Speaker Change: And compared to 0.6 million or <unk> <unk> per share for Q2 2023.

al: Before turning the call back over to Al I would like to discuss our expectations for the third quarter of fiscal 2024.

Speaker Change: Our recent increases in ongoing sales into the communications biomedical and defense industries are expected to accelerate in the third quarter.

Speaker Change: Particularly within the communications end markets, which include space optics, and artificial intelligence deployment driven by datacenter micro lens arrays. We also anticipate growth in our mission critical products for integrated optical scopes driven by military.

Speaker Change: Equipment modernization strategy of the U S Defense Department as such third quarter 2024 revenue is expected to be in the range of $9.5 million to $11 million.

Speaker Change: We expect our gross margin to hold level or slightly improve based upon the profitability of products that are ramping up.

Speaker Change: General and administrative costs are expected to increase modestly to enable ramped up engineering quality and pilot production to support continued strong growth into the fourth quarter.

Speaker Change: Looking to the fourth quarter, we anticipate continued strength from communications and biomedical markets with additional growth coming from defense based product launches lastly, we expect to be net income positive in the second half of the year, enabling further investment to energy.

Speaker Change: <unk> our continued growth.

Speaker Change: With that I will turn the call back to al to provide additional color on our growth initiatives.

al: Thank you D last year, we expanded into space communications that Tim talked about and continue to grow sales in this sector. This aligns with our strategy to diverse diversify across markets enhancing recession resilience alongside with our products and defense biomedical and consumer.

Speaker Change: End markets. These four light enabled end markets Syntech has entered our size by Spi a nearly one five trillion and combined total global revenue.

Speaker Change: Syntech optics is poised to rapidly expand their market presence in these end markets. Our products are propelled by tailwind as we move towards laser based satellite communications versus radar based for low latency biomedical automation.

In defence equipment modernization and onshoring mission critical products use proprietary tech techniques that provide an economic model.

Speaker Change: In addition to our steady <unk>.

Gus: Mostly 10 year lifecycle products Gus during our existing portfolio for new product launches will enable strong growth into 2025 and 26.

Gus: We aim to grow our new editions.

Get the disposable optics product line to about $10 million in annual revenue within three years or.

Gus: Our space business has already reached a nearly 6 million annual run rate in our datacenter business.

Gus: That's AI based.

Gus: It's beginning to generate about 3 million annually and will expand significantly.

Gus: And do the three year time horizon, and the three year time horizon, we expect our new biomedical nano precision optics line to reach a $3 million annual run rate. This year. Additionally, our night vision optics business currently at a $3 million annual run rate is projected to grow to $10 million per year within two years since <unk> is a unique.

Gus: Provider of high performance cost effective optics for various night vision configurations. These.

Gus: These existing product launches have the potential to double our sales organically.

Gus: <unk> is also actively pursuing acquisitions to strengthen our position in the light enabled marketplace. We are excited about our future and the progress. We have made so far with that I will turn to the call to the operator, who can close it.

Speaker Change: Ladies and gentlemen, thank you for your participation and interest in Syntech Opex. This concludes today's event you may disconnect your lines and enjoy the rest of your day.

Speaker Change: Goodbye.