Q2 2025 LightPath Technologies Inc Earnings Call
And the earnings press release accompanying this conference call.
<unk> issued before the market opened today.
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 expectation involve various risks and uncertainties as discussed in the periodic S E SEC filings.
Although the company believes that the assumptions underlying these statements are reasonable.
Any of them can be proven to be inaccurate and there could be no assurance that the projected results will be realized.
In addition references made by maybe.
Made to certain financial measures that are not in accordance with generally accepted accounting principles or GAAP.
We refer to these as non-GAAP financial measures.
Please refer to our S E C reports and certain of our press releases, which include reconciliations of non-GAAP financial measures and associated disclaimers.
Some rubin: C E O. Some rubin will begin today's call with an overview of today's acquisition of G Fi and freight.
Speaker Change: Our strategic overview of the business and recent developments for the company, while CFO asthma, Linda will then review financial results for the quarter.
Speaker Change: Following the prepared remarks, there will be a formal question and answer session.
Speaker Change: I would now like to turn the conference over to CEO Sam Rubin.
Speaker Change: Ma'am the floor is all yours.
Sam Rubin: Thank you operator, good afternoon to everyone and welcome to Lakes Bos technologies second quarter fiscal 2025 financial results Conference call.
Sam Rubin: Given the important news we announced this morning regarding this acquisition with G. Five infill that I wouldn't be dedicating most of my remarks today to this topic.
Sam Rubin: The acquisition of G. Five infrared is a key and transformative events I'd like to pause and just like natural continuum of the spin.
Teachers transitions the company has been undertaking.
Sam Rubin: Last few years.
Sam Rubin: As a reminder, up until about four years ago lifestyles with a pure play optical components manufacturer.
Sam Rubin: Core technology for life pulse up until that point precision glass molded well the innovative technology in the early two thousands which gradually became commercialized and constantly commoditized over the last 20 years.
Sam Rubin: Well it was a leading differentiator for the company years ago has become by 2020, a widely deployed technology with aggressive and ample competition pushing glide path out of the market.
Speaker Change: In late 2020, shortly after I joined and consequently, built a new leadership team, we outlined a new strategy that leverages, our differentiator into more value added position.
Speaker Change: With the goal to eventually become a solution and substitute them because I don't know.
Speaker Change: All of which it still ends up right.
Speaker Change: Where we have strong domain expertise with the ultimate goal of becoming a system supplier.
Speaker Change: We started the journey playful offering optical assembly based on our optical component.
Speaker Change: And then it began to also complex thermal cameras, but shows our Memphis multi spectral camera.
Speaker Change: And later on it was acquisition of wisdom and technology into some of the 'twenty to 'twenty three we added advanced capabilities and video engine and camera calls for uncalled infrared cameras.
Speaker Change: The acquisition of visit rates also came with a critical pivotal point from the vitamin tea, but shortly after the acquisition visit and light false were awarded a large development contract with Lockheed Martin for numerous phone Poland.
Speaker Change: Our contracts that has the potential to translate to between $50 million to $100 million a year in revenue from that one program alone.
Speaker Change: Similarly, though not as large vitamin D lifestyle.
Speaker Change: The large programs in various stages, many of which have the potential of bringing more than $10 billion a year of a new revenue from each one of those programs.
Speaker Change: Yeah.
Speaker Change: The additional G. Five minutes forget as you will see fits in naturally into what we have been building and is the logical next step in our journey.
Not only do G five product complements lifestyles products perfectly, but <unk>. Five has also I think pivoting point, our belt to be awarded some large lucrative defense programs that will be moving into elevate elevators low rate initial production.
Speaker Change: We'll be moving into elevate very soon and from 10 shortly into full scale production.
Speaker Change: So with this background now framing where we have come from and where we are let's dive into like position itself.
Speaker Change: She five was established in 2011 by a seasoned team.
The second wave and third time around.
Speaker Change: The first time around Doyle D. I O P with a household name in our embassy establishing a big part of what was ex <unk>.
Speaker Change: Axes back in the mid two thousands.
Speaker Change: And later sold to general dynamics for $643 million in 2009.
This highly accomplished team led by Lucent Tobey.
Speaker Change: Well known in the industry is the one that always deliver the highest quality effectively gold standard cameras and long range imaging.
Speaker Change: These infrared cooled camera system.
Speaker Change: Used in places where the sensitivity of detection is needed such as detecting people. Some models the way all vehicles or drones from tens of miles away.
Speaker Change: And then we'll talk more about that later.
Speaker Change: Yeah.
Speaker Change: And as is often the case in optics, just like flight path Leverages, its black diamond exhaust to make best in class optical systems and uncles kimba.
Speaker Change: <unk> also has its own optical coating services group another element in the secret source of these high end camera systems.
Speaker Change: These coatings are part of what makes the camera performance what do you think do.
Speaker Change: And this coating service offered to external customers also accounts for a highly profitable service revenue.
Speaker Change: Does that make it up to 20% of G five revenue.
Speaker Change: These coating capabilities also fit very well with lifestyle infrared components business and we believe will be a critical capacity does that will add critical capacity because that sounds like pasta.
Speaker Change: So clearly G. Five is successful and well aligned business to lifestyle and then by itself.
Speaker Change: This was also evident from St closely winning businesses and solid financial performance, delivering strong margins and ebitdas overwhelmed a higher than 20% consistently.
Speaker Change: And while the financial profile, it's important Gulf Institute.
Speaker Change: To dive in a bit into the products and technology and how this translates to revenue.
Speaker Change: Lifestyle transition to move from a pure play component to a sub system solution provider and some sensor system to play out can be characterized in many ways.
Speaker Change: It's probably one of the best indicators as to where the company fits into the food chain.
Speaker Change: ASP or average sales places all of its products.
Speaker Change: When I joined late fall from 2020, the company will say, Matt as we mentioned a components company and its products individual lenses has ASB ranging from $1 really commoditized telecom lenses to up to say $100 for the more complex diamond tons lenses.
Speaker Change: In 2021 to 'twenty to 'twenty, two we gradually transition didn't offering assemblies.
Speaker Change: More complex engineered optical product.
Speaker Change: Resulted in assembly in Asp's going from Huntington to $500.
Speaker Change: I'll, let you know more complex by itself.
Speaker Change: But while asp's in and by themselves are not the goal per se. So a good leading indicator to the complexity of the product and the offering and hence the value created by this type of product.
Speaker Change: And as many strategy books will tell you creating value followed by capturing value is have one creates a strategy that leads to sustainable profit growth.
Speaker Change: And so we went from single digit to have speeds to free dish.
Speaker Change: Next came out on cooled cameras, such as our innovative multi spectral and cooled camera, which once our tickets into the world of cameras.
Speaker Change: Those products have cameras had asp's or $10000 to begin with and through more complex templates for oil and gas industry. We're now selling cameras asp's from $30000, which is really a leap into five digits.
Speaker Change: Again, not the goal by itself puts an indicator.
Speaker Change: Now it comes G five with cooled mid infrared cameras.
Speaker Change: Speeds of that product stops from $50000 for the entry level cameras short range detection cameras up to $500000 for the high end long range detection catalysts.
Speaker Change: And what do we say long range, we're talking about cameras that can detect the presence of a vehicle from his father is 68 kilometres away 42 miles.
Speaker Change: So very very impressive.
Speaker Change: So it is a span of four years, we've gone from selling lenses at single dollar lenses and declining Unfortunately through assembly functions of dollars to uncle kept with the thousands of dollars and now adding cooled cameras at tens or hundreds of thousands of dollars personally.
Speaker Change: G. Five it's also a fast growing business with a significant pipeline of new business opportunities with multiple programs of records.
Speaker Change: To begin production next two years.
Speaker Change: Driving strong growth far beyond that of existing revenue.
Speaker Change: The long range cameras or used for detecting objects that are well long ranges if she wants.
Speaker Change: The two main applications or detection of Jones also known as counter UAS Heath UAS.
Speaker Change: And detection of people and vehicle the former counter UAS is a fast growing application in which she finds cameras.
Speaker Change: Their proprietary image stabilization software at column are considered the best performer in terms of detection range.
Speaker Change: One of the programs of record and <unk> five is designed into includes placing those cameras on huntington's of naval vessels.
Speaker Change: Passive detection of full passive detection of incoming fit such as drones My father in law.
Speaker Change: The west, perhaps if it's actually pretty important in this.
Speaker Change: As we've all seen them in the Ukraine conflict battlefield. If one uses an active system such as a radar to detect incoming from missile. They don't submission immediately turns you into a target.
Speaker Change: So testing detection of incoming threats as one of the fastest growing technologies today.
Speaker Change: And one of the G. Five systems are by far the leader of it.
Speaker Change: In this application G. Five cameras, the integrators that to place them into largest systems with Pan tilt and motion control and build a complete system for detection and tracking of such for it.
Speaker Change: A second leading application perimeter of and for the security.
Speaker Change: Here's the same camera technology is used on towers, along the border and perimeter security and critical infrastructure stadiums power plants and more.
Speaker Change: G five heavily long history with cameras for border security and hassle of Eddie hundreds of cameras installed along the border.
Speaker Change: With the limited lifestyle cryogenic coolers and such systems G. Five also provides the ongoing service for repair of those hundreds of cameras.
Speaker Change: Which is a great revenue stream that we expect to grow significantly more in the coming years.
Speaker Change: More specifically G. Five provides them cameras that are used in like customs and border patrol C. T. S E tablets.
Speaker Change: And just last month with the first award and order for the new surveillance towers of custom and border patrol.
Speaker Change: That's part of Homeland Security Department.
Speaker Change: We expect to be able to announce in more detail about this program, both the naval and the border patrol.
Speaker Change: So a highly accretive acquisition brings over $15 million in preliminary unaudited revenue in 2024.
Speaker Change: And brings us to a point, where we expect our combined revenue in the next 12 months to exceed $55 million.
Speaker Change: A completely new place altogether.
Speaker Change: And while we don't provide guidance for future quarters, specifically I would encourage everyone to studies the future earn out that's a possible acquisition.
Speaker Change: It gives me very clear picture of what G. Five management expect the business to look like in the next 24 months.
Speaker Change: I won't give you a hint that the earn outs for the first year include projections of revenue between 21% to $27 million from G. Five alone compared to $15 million last year.
Speaker Change: That gives us I think a pretty good taste into the kind of growth rates, we're looking at.
Speaker Change: So I'd like to know what is the time left to switch gears a minute and talk about the last the previous quarter.
Speaker Change: In the previous quarter was impacted by two in two ways by one major event that event was on December 5th China announced further restrictions on germanium export.
Now completely banning sale of any germanium to any U S company and because the U S and two any dual use applications.
Speaker Change: And while we have prepared for this moment oops by significantly reducing our germanium business and by preparing the Blackstone Raymond our black Diamond substitutes, we did not escape completely unharmed albums that.
Speaker Change: One China.
Speaker Change: Sections.
Speaker Change: Technically all shipments out of China suffered one way or another.
Speaker Change: This means the materials that are not related even to the spend like zinc selenide zinc sulphide well so completely stopped for a while.
Speaker Change: To us this means that's more than three quarters of millions of dollars of revenue from last quarter could not ship in the last few weeks of the quarter.
Speaker Change: You have to move into this quarter, we're in now.
Speaker Change: I will emphasize that we havent lost a single dollar of revenue there wasn't any cancellation and we don't expect to lose the stadiums that it is simply a matter of timing when all orders when all shipment itself with China came to hold that impacted or non germanium business. Some of that was for short.
Speaker Change: At this time, we expect this to become a very soon.
Speaker Change: So what we're seeing.
The Chinese companies like vital all completely stuffing shipping any uptick altogether not only germanium.
Speaker Change: But we have many other suppliers and we are building into that and I'll be covering forms that small hiccup.
Speaker Change: Unfortunate because we report our numbers of course on quarterly basis, and some things that happened in the last two or three weeks in a quarter.
Speaker Change: It's really just for us and that's what the timing of revenue and not a business issue, but when reporting on a quarterly basis.
Speaker Change: Numbers it appears that way.
Speaker Change: At the same time, we also towards the new restrictions are finally, leading our customers to make the move to alternative materials.
Speaker Change: We are seeing an influx of interest in those materials and extremely encouraged by this.
Speaker Change: As a reminder, the systems need to be redesigned to replace germanium without what materials.
Speaker Change: And so what we're seeing now is a very significant effort to stop the redesign process like pretty much all customers related to this.
With some system such as our customer for SPV drove the optics that we announced last quarter. The redesign was fairly straightforward and allows us to get it done within a week.
Speaker Change: But nothing more complex system. It takes months and we're seeing quite a bit of this happening that we're not only working with customers to help them three design.
Speaker Change: We're also taking a look at our manufacturing capacity to prepare the needed capacity to makes the glass needed for these programs once the redesign and qualification and stuff.
Speaker Change: As a reminder, we spent nearly $6 million in that well under facility over the last few years preparing the infrastructure needed for growth, we do not expect to need to alkylate and significant additional capital for this increase in capacity, we expect to be increasing our.
Speaker Change: Glass capacity significantly in coming months, but with fairly modest investment.
Speaker Change: Okay. Since we're running out of time and I can't really cover everything that happened last quarter I will encourage everyone to review some of the recent press releases on new products, such as guests detection camera on new contracts such as highway FPV drove an uptick and many other things that we reported over the last.
Speaker Change: A few bumps and I will be also available to answer questions.
Speaker Change: But now I would like to turn the call over to our CFO Alexander to talk about that with second quarter of fiscal 2025 financial result.
Speaker Change: Please go ahead.
Speaker Change: Thank you Sam I'll keep my review to sink highlighted the financials this quarter.
Speaker Change: As a reminder, 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-Q for the period.
Speaker Change: I encourage you to visit our Investor relations webpage to access these documents.
Speaker Change: Revenue for the second quarter of fiscal 2025 increased one 5%.
Speaker Change: <unk>.
Two $7 4 million as compared to $7 3 million in the same year ago quarter.
Speaker Change: Sales of infrared components were $3 1 million or 42%.
Speaker Change: Revenue from visible components was $2 8 million or 37%.
Revenue from assemblies modules were <unk> 9 million or 12%.
Speaker Change: Revenue from Engineering services was <unk> 7 million or 9%.
Speaker Change: Gross profit decreased 11%.
Speaker Change: <unk> to $1 9 million or 26% of total revenues in the second quarter of 2025 as compared to $2 2 million or 30% of total revenues in the same year ago quarter. The.
Speaker Change: The decrease in gross margin as a percentage of revenue was primarily driven by differences in the product mix.
Speaker Change: Coupled with minor and typical manufacturing yield issues exasperated by a slowdown in supply chain, which Sam discussed, mostly attributable to China exports and impacting visible and infrared components.
Speaker Change: Operating expenses increased 12% to $4 4 million for the second quarter of fiscal 2025 as compared to $4 million in the same quarter of the prior fiscal year the.
Speaker Change: The increase was primarily due to higher legal and consulting fees related to business development initiatives, including 174000 in expenses associated with <unk> acquisition announced today.
Speaker Change: Product development costs of about 200000 higher than the comparative quarter as well as increased sales and marketing spend to promote new products.
Speaker Change: Net loss in the second quarter of fiscal 2025 totaled 2.2 dollars 6 million or seven cents per basic and diluted share as compared to $1 7 million or <unk> <unk> per basic and diluted share in the same quarter of the prior fiscal year.
Speaker Change: The increase in net loss was primarily attributable to lower gross profit coupled with the increased SG&A and new product development cost as well as higher interest expense.
Speaker Change: EBITDA loss for the second quarter of fiscal 2025 was $1 5 million compared to a loss of <unk> 5 million for the same period of the prior fiscal year. The decrease in EBITDA in the second quarter of fiscal 2025 was primarily attributable to lower gross profit coupled with increased SG&A, including <unk>.
Speaker Change: Legal and consulting expenses related to business development initiatives.
Speaker Change: Including acquisition costs and higher product development cost.
Speaker Change: Cash and cash equivalents as of December 31, 2024 totaled $3 2 million as compared to $3 5 million as of June 32024.
Speaker Change: As of December 31, 2024, total debt stood at $3 9 million and backlog totaled $19 8 million.
Speaker Change: As Sam noted today, we announced the acquisition of <unk>, which had preliminary unaudited revenue of $15 million in calendar year 2024.
Speaker Change: Expectation is for the combined companies to generate $55 million in revenue in the 12 months following todays acquisition.
Speaker Change: Subsequent to quarter end and to finance the <unk> acquisition for $27 million of total consideration.
Speaker Change: We issued $25 5 million or six 5% fixed convertible preferred equity as well as private placements totaling $1 5 million.
Speaker Change: And two senior secured promissory notes totaling $5 4 million.
Speaker Change: Following the close of the transaction. The August 2020 for bridge promissory note of $3 million will be fully converted and no longer outstanding.
The $25 5 million of preferred is mostly held by a fundamental investor that takes a concentrated position with a long term perspective, and a few investments terms and conditions are not toxic and our clean as possible the investor will.
Speaker Change: Also become a board member for a five year term to assist in our growth plans. We consider this new investor as a partner to our business.
Speaker Change: In closing I would view the acquisition of <unk>, a robust tool to supercharge, some near term potential of white past, particularly in the defense space with the introduction of high margin high ASP and incremental products. We see this as providing an expedited path to achieving our long term goal of 15 <unk>.
Speaker Change: <unk> EBITDA margins.
Speaker Change: Finding light path as a platform company focused on disciplined strategy and delivering value to our shareholders as we scale and grow.
Sam Rubin: With that I'll turn the call back to Sam for some closing remarks.
Sam Rubin: Thank you everyone for taking the time today to attend our call.
Sam Rubin: Looking ahead, we will continue to drive the future of imaging athene through our proprietary black diamond optic leveraging our clear advantage capabilities and supply chain security, that's compared to legacy germanium based solutions.
Sam Rubin: We've defined the catalyst in industrial defense and camera solution market taken in tandem with our acquisition of G. Five providing an entrance into the cooled infrared camera space. We believe calendar 2025, we will build additional momentum towards our lifestyles.
Sam Rubin: Three point of vision.
Sam Rubin: Becoming a leading next generation optics and imaging solutions provider.
Sam Rubin: With that I will now turn the call over to the operator to begin the questions and.
Sam Rubin: Operator.
Sam Rubin: Yes.
Sam Rubin: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: If you would like to ask a question. Please press star and one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: Okay.
Speaker Change: The first question comes from the line of Jason Smith from Lake Street Capital markets. Please go ahead.
Jason Smith: Hey, guys. Thanks for taking my questions I just wanted to start on the gross margin in December you noted some kind of manufacturing yield issues. Just curious if those have been fully resolved.
Speaker Change: Sorry, Jim.
Speaker Change: And I are sitting together, so we usually the sky content, yeah that'll be one of them.
Speaker Change: Yeah.
Speaker Change: So our yield issues in this quarter, we're not we're not particularly bad.
Speaker Change: Say it was normal.
There's you don't get 100% yield, particularly with coatings.
Speaker Change: They were minor the problem was sort of exasperated by the fact that.
Speaker Change: We usually have more material, we can get extra materials, we plan for it we have it so when we have yield issues and not a fast and quick source to some of the materials coming out of China.
Speaker Change: The ways our ability to deliver so.
Speaker Change: So a normal yield issue becomes.
Speaker Change: Not normal yield issue if you will.
Speaker Change: Yeah.
Speaker Change: Okay that makes sense and then obviously it sounds like you guys are pretty familiar with G. Five just curious sorry, the customer overlap between the two companies and Relatedly. The cross selling opportunities you guys are envisioning and if if there are cross selling opportunities are those sort of.
Speaker Change: Eight into big growth expectations reflected in the earn outs.
Speaker Change: Yeah, I'll take that one there's definitely some great opportunities there and we're seeing a lot of excitement from the customer so.
Speaker Change: To begin with on just some of the optics path, which is the easiest to answer.
Speaker Change: <unk> has a very good and robust optical coating services.
Speaker Change: Naturally service many of our customers already and as that aspect does that's pumped as sort of an easy vein natural part.
Speaker Change: When it comes to the camera path, which is really where a lot of our growth. We expect will come from most times. When you see today a system that has dues cooled infrared cameras. It will very very often have a uncalled cameras that goes with it if you look at the some of the companies.
Speaker Change: Like phylum sense at all which is debate part of Motorola.
Speaker Change: And you look at the product offering the same pan tilt systems, a gimbal will have a short range camera and cooled camera like cowboy like cowboy uncalled cameras and the long range camera from <unk> five next to it so.
Speaker Change: Selling opportunities there it's tremendous Siemens also in optical gas imaging often times in a gas field there will be many small uncalled cameras like our guests camera and then one launch cooled camera, which obviously naturally it's much more expensive in over $100000, but it's not one of them.
Speaker Change: Stable to actually quantify exactly how much gas is leaking. So it gets put into the places where the smaller camera and fight densify leaked to begin with.
Speaker Change: And so on so.
Speaker Change: There's some great opportunities that we feel.
Speaker Change: And as of now those are not baked into the numbers the revenue numbers for <unk> five and the earn out is based on their projections and save on expectations of revenue without any synergy.
Speaker Change: Okay. That's helpful. And then just last one for me and I'll jump back into queue. How should we think about the gross margin profile for your bed Chief high business.
Al do you want to take that.
Speaker Change: So the.
Speaker Change: The camera business has.
Speaker Change: Higher margins than the white path visible.
Speaker Change: Or infrared component business so.
Speaker Change: And then in terms of expectations the margin will blend upwards with the portfolio being added.
Speaker Change: Perfect. Thanks, a lot guys.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question comes from the line of Glenn Mattson from Ladenburg Thalmann. Please go ahead.
Speaker Change: Hi, guys and congrats on the acquisition I.
Speaker Change: Couldn't help but notice that your comment on that.
Speaker Change: When you were talking about G five a little bit about.
Speaker Change: You said, you mentioned something about about to be awarded several large programs and and and that you should be moving into L. Rip that out I'm, just trying to understand that language because.
Speaker Change: Ah, yes, normally I guess, you can say about to be awarded unless you had the business pretty secure or or is it just.
Speaker Change: To give you some color on that.
Speaker Change: One of them one of them as a matter of days literally I mean, it's in the final negotiations.
Speaker Change: And when I say elevated I mean, just to put it into perspective. The Naval program for example for the prototype that.
Speaker Change: We expect the order any day now it could be several million, let's say $2 million to $3 million for prototypes when it goes into production. So elevate because it's just the beginning of low rate initial production and scaling we're expecting just could be $10 million to $20 million a year.
Speaker Change: Yeah.
Speaker Change: Ah, Okay, and you said the time frame on that remind me you mentioned it.
Speaker Change: So.
Speaker Change: So.
Speaker Change: But now in the next six to eight months and then we expect elevate towards the end of this calendar year.
Speaker Change: Okay. Thanks.
Speaker Change:
Speaker Change: That's helpful and.
Speaker Change: Yeah, just on the synergies I missed part of your answer on the last question, but.
Speaker Change: One thing that struck me was that in the press release, you talked about multiple programs of record for G. Five is there an opportunity to use those as a funding vehicle whereby you could cross sell better your.
Speaker Change: Cooled cameras and things.
Speaker Change: Yeah.
Speaker Change: Exactly that's exactly that so when you look at our many of the system deployed they would very often has a mix of both uncalled and cooled cameras together.
Speaker Change: So you know as the uncles cameras of course can cannot detect is a range of those cameras. So you use them for a short range detection and but because the so so much cheaper than the long range ones in the cold ones you would sometimes deploy a few of them and have them looking different angles, and then you will use the sort of the big.
Speaker Change: Koons, how long range camera on the Pan tilt, where you would pointed to where one of the unquote cameras saw something maybe so oftentimes it's a combination of both.
Speaker Change: And.
Speaker Change: I know why would sales team is.
Speaker Change: It's extremely excited and can't wait to start cross selling on both sides.
Speaker Change: Right right I guess that that really makes it sound like a strategic fit like you mentioned.
Speaker Change: And just lastly.
Speaker Change: The exposure to some of the it's use but the Chinese can you remind us how much.
Speaker Change: Of your businesses is still exposed to that.
Speaker Change: You know as you move towards that.
Speaker Change: As you know Chris towards different thanks.
Speaker Change: Yeah I'll do you do you have a number of insights on how much do we still have.
Speaker Change: So we have $2 million of sales.
Speaker Change: In germanium in the U S, but I would say is at risk.
Speaker Change: Because of the restrictions right to bring germanium. So we're sourcing that locally switching to local sourcing which is a project that's been going on for.
Speaker Change: Several weeks.
Speaker Change: Have also a couple of million dollars of germanium sales in Europe.
Speaker Change: But at much less risk because Latvia and the end users for those products are not on the Chinese no sell list.
Speaker Change: But nonetheless, we'd like to move all of that product out of germanium as well in Europe.
Speaker Change: But and we have similar plans to migrate but the urgency isn't there yet like it is now in the United States.
Speaker Change: Alright, and just to add on but 2 million in the U S. L.
Speaker Change: First of all we're going to supply those by sourcing locally, but the local sources of germanium as everyone knows very very limited.
Speaker Change: It's not really a longer term strategy. So once we supply to $2 million of germanium orders in the U S. We will no longer be doing any germanium business umbrella.
Speaker Change: Okay. Okay, great. That's it for me, thanks, guys and congrats again.
Speaker Change: Thank you thanks.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Olin Hirschmann from H I G. S investment. Please go ahead.
Olin Hirschmann: Hi, congratulations on the acquisition.
Speaker Change: Going back to some of the earlier comments. So you mentioned on the acquisition is it just random questions. You mentioned Motorola as an example is that a current customer.
Olin Hirschmann: We're using it as an actual customer example.
Speaker Change: Yes.
Speaker Change: With all of that.
Speaker Change: A very large customer of Chi five yes.
Speaker Change: Yeah.
Uh huh.
Speaker Change: To those that don't know Motorola is one of the leading companies in perimeter security and safety equipment. So, let's say a very major parts of the business for us.
Speaker Change: Okay, and you know my I don't I'm not an expert in this space my impression is that'd be very long range infrared cameras or a newer.
Speaker Change: Type of security.
Speaker Change: Well on way of doing things.
Speaker Change: Is that is that true is this early on in the use of infrared, particularly long ranging for red for simple there's definitely runway separately.
Speaker Change: Yeah definitely for counter UAS.
Speaker Change: Counter UAS and perimeter security they have not been really used too much until now.
Speaker Change: In border patrol G. Five actually has quite the installed base there and when does the Pos systems were not as long range, because the technology advancement, especially the at home capability and <unk> personnel, we've seen stabilization.
Speaker Change: Significantly.
Speaker Change: But also in border patrol the cameras were not as widely spread as they are now they're talking about putting get these towers every couple of miles. So so so it's a much much larger installed base is going to be.
Speaker Change: In perimeter security I mean this is now really growing this is every data center. When you look at it now to data centers, all like Fort Knox, the secured with very dogs and with the most advanced systems and so we expect that market to really take off considerably the relationship.
Speaker Change: <unk> has with Motorola is very significant for that and our sales team will have a format flip people also gonna be pivotal.
Speaker Change: <unk> got into that when the whole world of counter UAS and detecting drones in the as we all know from the news that is only getting started I mean, that's going to be huge.
Speaker Change: And just finally, just in terms of those shipments that pushed out being in this quarter and just in general are we seeing are you know.
Speaker Change: That's coming through and how do you have any comments on the current quarter I'm saving huh.
al: Yeah Al do you want to talk about that.
al: So we shipped most of that already orange.
al: In the first six weeks of this quarter the stock that pushed out.
al: My concern is that the supply chain is not speeding up out of China. So we did get some good indications.
al: <unk> is being released.
al: But the the releases that have come are still small to really too small to be honest. So.
al: On the one hand, we could close the gap so theres no rollover from.
al: No no.
al: This quarter.
al: Or we could end up at the end of Q3.
al: Coming up a bit short again because of the same sort of roll forward problem.
al: Got it I mean, it really comes down to sort of like every day.
al: Checking with customs to see what comes through and what's approved and license.
al: It's day by day thing really.
al: And and how is the rest of the business.
al: Doing it so that some of the newer programs ramping.
al: So the new business that we're ramping and particularly in the assemblies and of course I like this business.
al: It doesn't take up as much space it doesn't use as much capital equipment.
al: And with.
al: With the Asps as the way they are and the margins high.
al: Historically highest or anything else we do.
al: Like it so.
al: Keep encouraging salmon the sales team to bring in more of the assemblies in core business for sure.
al: Okay.
al: I think we haven't given any update on the Lockheed Martin project to you know just shortly.
al: Going very well on track with the shipping Flightworthy units for actual flight tests and the funds, which all three.
al: Really exciting for us personally.
al: And we're moving along very well with Lockheed go from this program and the two other derivative programs in which located already integrating our camera systems into two more programs.
al: Thanks, so much.
al: What I was wanted to hear.
al: Thank you.
The next question comes from the line of Scott Buck from H C. Wainwright. Please go ahead.
Scott Buck: Hi, Good afternoon, guys. Thanks for taking my questions and congrats on the transaction.
al: I guess it is.
al: That's the first thing guys I, hopefully I didn't miss it but could you give just a little bit of background on how the deal came together, where they actively out looking for a sooner or.
al: We're just more I guess organic in the way it came about.
al: Suite.
al: Like you know many of the acquisitions, we contemplate a G. Five as a company we've had a ongoing relationship with and in this case that goes back nearly 30 years well before he joined late fall.
al: ISP optics has been a supplier partner for G. Five back once they went dial up and later vaccines in the general dynamics and someone's like Bob. So so we've known each other already you know pretty well.
al: <unk>.
al: We got some feelings with the belt to go out and possibly start shopping around and we did a bit of a preemptive strike. If you would and just essentially picked it up before they went and formally engaged the bank.
al: And does that extend where we've always been very clear that we are on the lookout for acquisitions.
al: I think we've been very clear that we could see acquisitions in two forms one could be like the limit is small technical groups that specific technologies and ovens would be larger like G. Five which would be in the $15 million to $20 million of revenue profitable with strong margins and those are the.
al: Type of acquisitions, we we have at any given point in time multiple acquisition opportunities all ideas that we keep on keep in touch with well keep an eye out for.
al: We always always make sure that any acquisition, we do have people that we know and if we don't know them then we proactively.
Proactively engage in some joint project to get to know each other because as anyone that has done and many of you would know the number one reason for fail of acquisitions is culture.
al: So a culture fit and getting to know each other we don't know yet is very important for us in this case, we've simply known each other for a very long time. So it was very easy.
al: Alright, so if I could if I could add onto that Glenn. So we mentioned that this is not the first time for this group to come together and create a company. They didnt have a good experience with the last time.
al: Last time they sold.
It was general dynamics, they basically picked it apart use the technology moves it around planet Earth.
al: And the current owners sellers.
al: Didn't really like the outcome that came with that for the people that were working there and had been loyal to them.
al: So Sam is a 100% right in terms of cultural fit but also strategic fit in our plans for them is to grow that location and the way the original founders imagined it and continue on that path.
al: A long way towards them, feeling warm and fuzzy about the situation with us and not going to investment bankers to try and sell it outside.
al: And they believe they left money on the table by not doing that and we can argue that all day long, but that's their belief.
al: And yet another reason why the cultural fit and everything else about lightpath was attractive to them.
al: Great I appreciate that Salman al that was helpful. And then second one just a quick modeling question is there any seasonality in their business that we should be thinking about as we model are the out quarters here.
al: Yes, there is seasonality.
al: I'm, not 100% confident yet and how it looks but typically.
al: If you're using our fiscal year [laughter] their third.
al: Q3, and Q4 as Y on revenue and then Q1 and Q2 is heavy on revenue.
al: Don't have the exact mix is.
al: It's really something I want to confirm with the management team next week, when we start going through the <unk>.
al: More detailed forecast versus the ones we used currently.
al: And get a better handle on it.
al: I'll help you guys trying to understand what that looks like.
al: Great I appreciate it guys. That's all I had thank you.
al: Okay. Thank you.
Speaker Change: The next question comes from the line of Bryan King Slingo from Alliance Global Partners. Please go ahead.
Speaker Change: Great. Thanks, so much with the $55 million revenue target implies significant growth from <unk> from the 15 million.
Speaker Change: I joined late so hopefully I'm not repeating I just joined when Glen was asking questions.
Speaker Change: And the few programs that you expect to drive this growth with G. Pipe. Those are awarded have you started shipping against these contracts or sub contracts and at what point do you expect these shipments to meaningfully ramp in their order in order to achieve this growth.
Speaker Change: Yeah. So one of the programs the border patrol they received the first or the last month and already began shipping towards that.
Speaker Change: Because that's the one that's on a very I'd say, you're going to pocket and confirmed.
Speaker Change: The second one the naval ships.
Speaker Change: Shipments, we expect any day now as a purchase order for that and those would be for the initial seven units I'm not sure if something like that.
Speaker Change: So I'm thinking about that.
Speaker Change: We're towards the end of the year that will scale into low rate initial production.
Speaker Change: Other than that the rest of many of our programs.
Speaker Change: And are all in different security and defense some of them confirmed and some of them fairly confident but.
Speaker Change: I can say is that in this case, the founders and the owners of <unk> five.
Literally put their money where the mouth is.
Speaker Change: By putting a significant bet on Tuesday, Oh no.
Speaker Change: That is for the next 12 months the volume demand is I'm hitting revenues of between 21% to 27 billion.
Speaker Change: Yeah and then.
Speaker Change: Given the commentary on seasonality at least a modest knowing that the March and the June quarter are their weakest.
Speaker Change: Well.
Speaker Change: Light path as a combined company be profitable assuming you close.
Speaker Change: As expected and you have a full June quarter will will that be a profitable quarter.
Speaker Change: From an EBITDA perspective.
Speaker Change: Al.
Speaker Change: From an EBITDA perspective, we should be positive.
Speaker Change: Right and then okay.
Speaker Change: Sorry, I missed the prepared remarks can you comment on whether you're beginning to see a ramp in demand disorders. I know last quarter. You commented you expected several customers where begin ordering.
Speaker Change: Second half and here we are so I'm curious has that ramped up as you'd expected.
Speaker Change: Yes, we've already been taking orders and shipping more more and more of their photos camera orders the gas detection ones are not ramping as fast as we thought they would.
Speaker Change: I think for guests protection, we still need to go through some quantification test of measuring or giving you actual performance number of how much gas it can detect and parts per million.
Speaker Change: And Thats something that we didn't realize we really can't begin significant sales before we have stuff that's ongoing right now with the customer site and hopefully city.
Speaker Change: So I'm, hoping that the guests the optical gas imaging cameras are going to start scaling up very soon.
Speaker Change: Great and the last question I have I don't know if you addressed this.
Speaker Change: Is there anything that keeps you up at night about tariffs, whether it's for your customers whether it was for your suppliers anything that debt at your carefully watching.
Speaker Change: So we're we're.
Speaker Change: We started immediately yeah.
Speaker Change: We started almost immediately line item tariffs to our customers and we're passing it through.
Speaker Change: It's it's transparent and our customers see it they know it this includes purchase orders already in house.
Speaker Change:
Speaker Change: For the U S market, our customer base seems to have accepted the fact that this is happening.
Speaker Change: Yeah.
Speaker Change: I had the al.
Speaker Change: Stay up at night because of the tariffs I don't think that would be that impactful to us.
Speaker Change: Do worry about the supply chain of materials I mean, this side effect of when China announced the ban on germanium and suddenly companies like vital materials stopped exporting any materials periods.
Speaker Change: That was took us completely by surprise and isn't over yet so you know companies like vital standalone selling materials altogether ultimately germanium.
Speaker Change: So I would be a bit more about that pops, but.
Speaker Change: Many people life profit was one of them, but many players working day and night to recreate the industrial base in the U S frankly.
Speaker Change: Some I'm very.
Speaker Change: Confident about that longer term, but I think we are we do still have a few months the transitory effects related to material supply.
Speaker Change: And then I have one follow up I mean, you clearly had been preparing for this for many years there is no doubt about it.
Speaker Change: But my question would be what percentage of your business relies on.
Speaker Change: Imports from China.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Well al what's the.
Speaker Change: I mean, because when we see imports from China. It could be also like our regular glass lenses made it permanent.
Speaker Change: From an overall APAC, maybe maybe I'm just thinking about the material I mean, you're talking about.
Speaker Change: Getting through them again.
Having trouble.
Speaker Change: I'm, sorry, I'm guessing you were talking about your medium on the eye on the exports that were having trouble on the supply chain.
But oh.
Speaker Change: The funny thing so material called zinc selenide and zinc sulfide that's available from other countries as well, but we were just fine from a Chinese vendor even suppliers that's material lots of China.
Speaker Change: Yeah. So we obviously could go better than you know.
Speaker Change: From a revenue perspective, Brian it's 8 million, let's call it 8 million into Europe, and the U S coming out of China.
Speaker Change: The germanium risks are the ones that I mentioned earlier $2 million in the U S and $2 million in Europe.
Speaker Change: Obviously the U S is high risk Europe is I would say moderate risk at this point.
Speaker Change: So that's kind of rough numbers rough high level numbers.
Speaker Change: Sounds right. So we knew what the germanium was and we knew what the risk wasn't have known for a while we've been trying to get out of it for a while right switch customers.
The surprise that came in.
Speaker Change: In the quarter back in December as companies like vital who just shut everything down.
Speaker Change: Nobody could have predicted that we know nobody could have predicted it because our competitors.
Speaker Change: Our customers are all in the same places we are.
Speaker Change: Right. Okay. Thanks for taking all my questions Congrats.
Brian: Thank you Brian.
Brian: Thank you.
Speaker Change: The next question comes from the line of Richard Shannon from Craig Hallum Capital Group. Please go ahead.
Richard Shannon: Well hi, Sam Thanks for taking my questions and congratulations on what looks like a really nice steel.
Speaker Change: Let me ask a quick high level question following Sam your comments in your prepared remarks about <unk>. Five you said they had a really big pipeline can you quantify or characterize that in any way by itself were relative to the pipeline that lightpath has itself.
Speaker Change: Yes, I think their programs of records that we're seeing the border patrols and meaningful.
Speaker Change: Very good.
Speaker Change: What we expect them to be and are in full production from typically those programs.
Speaker Change: Anywhere from $5 million to $20 million a year.
Speaker Change: In what the potential during production worthy and since there was all military or defense related programs of record in the program of record means it's a line item in the defense budget and contiguous budget. So you can actually go in and look it up in the formal congressional budget.
Speaker Change: Those programs. So typically a tiered rollout followed by many years afterwards, the spare parts and repairs, which are very very lucrative.
Speaker Change:
Speaker Change: So we're looking at the business that could easily easily be alone in the.
Speaker Change: $50 million to $60 million sitting in a metals you know two or three years.
Speaker Change: Yeah.
Speaker Change: Okay perfect. That's a helpful way to think about it.
Speaker Change: Yeah.
Speaker Change: You mentioned a number of applications for the products from G. Five here and all of them sound interesting border control, obviously, a key thing for us and our current U S administration.
Speaker Change: Data centers, obviously resonate with everybody that tracking AI, but it's one that's really stood out to me I'm really interested in is the drones are I think you'd see you asked or some acronym I don't really understand maybe you could talk about what's what's going on there it sounds like a particularly useful and extremely important near term application for the defense community maybe.
Speaker Change: You can talk about what's going on there and how big is the pipeline are you expecting from that.
Speaker Change: Yeah, Yeah definitely because that's the largest program to begin with the naval program.
Speaker Change: And Thats also the largest customer in Motorola I think a lot of the systems go into that and essentially.
Speaker Change: Is how do you.
Speaker Change: Detect drones or other small objects like that movement.
Speaker Change: In the best way without active measure necessarily so of course, a lot of those could be detectors detected with lead or active systems, but those are often times give out too much information about your location and where those systems.
Speaker Change: We've all seen in Ukraine. So you end up needing to have a passive system to be able to detect drones and objects like that and so a few technology is being looked at as acoustic technology as I'm trying to detect the noise of the drone.
Speaker Change: Different microwave trying to detect the transmission of the drilling the partisan transmitting and so on but by far the best technology known as they are right now.
Speaker Change: Institutes infrared cameras and it has to be an infrared camera in not visible camera because of course, you need to be able to see it tonight with all the lights are flashing and all of that you need to be able to see it in many different conditions.
Speaker Change: And so right now those are mainly midway of cameras and that's what a <unk> 5 million suffering but well also be expanding into shortwave camera so even multispectral.
Speaker Change: Both short wave and mid wave together, because shortwave cameras can seafood clubs for example could seafood different adverse.
Speaker Change: Environmental conditions, so and this is where our black diamond materials really designed for multi spectral imaging will play a major role together was the gen five technology.
Speaker Change: So what we're seeing is these cameras getting installed now multiple of them in.
Speaker Change: Important locations that are very sensitive on pan tilt systems at all of them, taking and looking around.
Speaker Change: You were talking about the cameras can do 20 times as much. So they can start from a very wide field of view and zoom into small objects.
Speaker Change: They can do I mean, the performance is just insane to be able to detect the tiny drilling from 10 miles away as the optically is just a very very impressive technology.
Speaker Change: Okay great.
Speaker Change: Great detail there Sam I think an extra time I will I'll get back in the queue, but thank you very much.
Thank you Richard.
Speaker Change: Thank you.
Speaker Change: As there are no further questions I would now have the conference over to Sam Rubin for his closing comments.
Speaker Change: Okay. Thank you all for attending very very exciting times for us if it wasn't apparent from our remarks.
Speaker Change: We're extremely excited and happy to be able to be here at this point with the steel I.
I look forward to meeting some of you in person in that way Investor Day February 25th and I would also like to call anything call by welcoming the <unk> team to the lifestyle family. We very much look forward to working together and seeing what great things, we can be doing together soon thank you everyone and good night.
Yeah.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, the conference of Lightpath Technologies has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: [music].