LightPath Technologies, Inc.

Good afternoon and welcome to the LightPath Technologies Fiscal 2021 First Quarter Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. And to withdraw your question, please press star then two. Please note, today's event is being recorded. I will now pass the call off to Don Retriege, Chief Financial Officer, Lightpath Technologies.

Thank you. Good afternoon. Before we get started, I would 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 and involve various risk and uncertainties, including the impact of COVID-19 pandemic that are discussed in the periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them can prove to be inaccurate, and therefore, there can be no assurance that the results would be realized. In addition, references may be made to certain non-journally 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. Following management's discussion, there will be a formal Q&A session open to participants on the call. I would now like to turn the conference call over to Sam Rubin, LightSpath's President and Chief Executive Officer. Please go ahead.

Thank you, and good afternoon. Welcome to Lighthouse Technologies' fiscal 2021 first quarter financial results conference call. Our financial results press release was issued after the market closed today and posted to our corporate website. Following my remarks, our CFO, Donald Routridge, will further review our financial results and provide more perspective on key areas. We will then conduct a Q&A session. Now onto my remarks. Strong sales performance in the first quarter of fiscal 2021 reflects our continued trajectory of growth and performance improvements, as well as initial impact of the strategic review we presented when addressing our year-end financial results. Our growth and strong performance can be seen both sequentially compared to the fourth quarter of fiscal 2020, as well as compared to the first quarter of last fiscal year, a quarter in which we suffered from significant operational challenges that impacted results in that quarter. Despite the coronavirus pandemic, which has disrupted supply chains and caused an economic upheaval, as an essential manufacturer, we have been able to deliver strong results and have positioned the company for more profitable and long-term growth. Against the backdrop, of the pandemic and other socio-economical issues, there have been many challenges. I would like to commend our global staff for their resilience, commitment, and continued effort to support our customers while adhering to health and safety protocols to protect our coworkers and their families. Sales of all major product groups increased in the first quarter of 2021 on prior year period. Most notable has been the demand for our PMO lenses for the 5G infrastructure build-out and from our vertically integrated manufacturing platform for optics and optical assemblies made with our own BD6 material. We shipped approximately 1.3 million lenses in the first quarter, another record for the company, which is an increase of 105% from 600,000 lenses in the first quarter of last year, and 9% increase from 1.2 million lenses in the previous quarter. To meet the increasing demand for optics, we have been adding capacity through investments in equipment and process improvements in different areas. Demand-based capacity constraints began to be revealed in the third quarter and continued in the fourth and first quarter, which is why we had front-loaded investments in our manufacturing for this year. Capital expenditure in first quarter 2021 were 1.2 million, nearly four times the amount spent entire year period, and more than 25 percent greater than in the fourth quarter. It is important to note, however, that reporting on capital expenditure is based on dates of invoices, and often there is a delay between the timing of decision and order, and the actual expenditure is booked. The additional investment in machinery and related operating personnel typically take several months until achieving full-scale output, where we see more meaningful margin contributions. As such, some of the growth in capacity and some of the expeditions are still related to investments initiated in fiscal 2020. For the time being, Although we have added a production capacity in the fiscal year to date, we remain constrained on certain product lines amid the growth in both revenue and total backlog. And we intend to continue to invest in areas we believe we can get suitable returns. Both revenue and total backlog increased 26% as of September 30th, 2020, as compared to the same time last year. While our capital expenditures in recent quarters have been focused on capacity increase, as we roll out our new strategic direction and as we continue to evaluate opportunities for improvements in the organization, we are likely to identify areas for investments that will yield improvements to our operations and hence to our margins, as well as allow us to attract new business that will help shape our future and yield higher returns. As we are still experiencing growth in demand for our core products, such as molded optics, as well as a desire to address the future direction and operational improvements, we might choose to invest at a somewhat higher rate than we had in previous years. This is also aligned to the improvement in our capital management, and hence the growth in our cash position, which we have focused on and will continue to focus on. I would like to now pivot and provide an update on our new strategic direction and company transformation. In this call and in subsequent quarterly calls, I plan to provide updates on activities we are taking and outcomes of to align the organization to our new direction and execute on this strategic direction. As mentioned on our previous call and in our latest 10K, we have identified that while we have served our customers well as a component company, the world around us is changing, and photonics as a technology is being integrated into more and more industries and applications. This leads to a change in the typical customer profile with an opportunity to create and capture more value if we focus on solving the customer's optical problems and needs rather than being a supplier of components. This is made possible not only because of the changes unrolling in our market, but also because of Lightpath's unique positioning as an innovative optics company with strong capabilities in both design and manufacturing of optics. To deliver on this, there are some activities and changes we are implementing. First, the sales process. Along the lines of what I had just discussed, and for the purpose of context, in the component business, we engage with the customers once they have a complete optical system design, such that the customers engage with us at the point in which they need to procure the component. In the solutions-oriented business, which we are moving towards, the process is different. We would ideally engage with the customers at an earlier stage, so that we are part of the design process. In other words, instead of receiving an optical design from the customer and fabricating the individual components for them, we are going to design the optical systems for the customer's systems and produce the entire optical assembly. To achieve this, we are implementing some changes in our sales process and structure. Although we will continue to work with and pursue business through our traditional processes that have been successful to date. We have created a new role of business development whose responsibility is to engage with customers early on and begin our interaction at the system specification stage. We have also established an internal rapid response team that is able to work with customers on their needs and turn around designs, or solutions quickly. Lastly, our sales team is switching from a product-based focus to an account-based focus, thus making the customers' need the center of attention as opposed to product or technology. Secondly, to be able to offer unique capabilities to our customers, and to be able to design and deliver great solutions. Our product development is now focusing on adding products and capabilities that will allow us to enhance the performance of the customer's system. One such recent example is the addition of a new high-index moldable glass to our product offering. Such a glass allows achieving higher numerical aperture, which in turn translates to better light collection efficiencies or tighter optical focus, all of which are in very important specs in optical system design. Third, as we focus on solutions that naturally mean focusing on higher value contracts with longer durations, as seen in the nearly $2.7 million contract we announced last February, which we will soon commence delivery against, Often, those contracts are multi-year contracts. In the past, we had disclosed at the end of each quarter our backlog for the forward 12-month period. This view did not include any longer-term supply agreements that extended beyond a one-year period, and that we expect now to see more of. As such, and to be able to provide a more complete picture of the outcome of those efforts, We will now be reporting our complete backlog and not the 12-month backlog we previously reported. It is our belief that this will allow investors to have a better picture of our progress with the new strategic direction. Additionally, as expected, we are also engaging into more solution-based opportunities with customers that have a higher unit value and longer-term engagement. Though we are early Early on in this new strategic path, we currently have in our pipeline a number of early-stage opportunities. Each has the potential of being a multi-year engagement with over $1 million of annual spend for each of them, which we see as a positive sign for the potential of this strategy. Finally, I would like to address the recent global developments related to COVID-19. While we have been lucky enough to not be significantly impacted by the situation, as I mentioned in previous calls, the dynamic nature of the situation leads to changing conditions and significant uncertainty. In the previous quote-unquote wave, we have seen some customers prefer taking delivery of products, whether due to change in demand or due to physical closure of their facilities. In this time around, we have not yet experienced such situations. However, we are seeing signs from some of our customers in Europe of potential reductions or order postponements pertaining to some demand during the time of this wave, which may impact future quarters. At the same time, sales to academic customers, which were significantly impacted in the previous wave, are now not showing the same pattern. Additionally, as we did six months ago, our teams are evaluating potential impact to our supply chains and will be adjusting our inventory levels for raw materials to ensure business continuity in our manufacturing. The results today The results announced today reflect continued sales growth, improving manufacturing efficiencies, and ongoing management of expenses. Our disciplined cash management has allowed us to hold a consistent cash balance at the end of the quarter from beginning of fiscal year at $5.4 million, despite the substantial increase in capital expenditures, while further reducing our total debt. Don will review our cash flow and investments in greater detail during his remarks. We are very pleased with the progress made in the first quarter of fiscal 2021 and are upbeat about future results and implementation of our strategy based on our strengths and our core capabilities to address the largest and fastest growing trends in our industry for visible and infrared solutions. Now, I will pass the call over to our CFO, Donald Retriege, to provide more details on our first quarter of fiscal 2021. Thank you, Sam.