LightPath Technologies, Inc.

Good afternoon, everyone, and welcome to the LightPath Technologies Fiscal Second Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a 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 telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. At this time, I'd like to turn the conference over to Al Miranda, LightPath's Chief Financial Officer. Please go ahead, Al.

Thank you. Good afternoon, everyone. Before we get started, 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 our current expectations, involve various risks and uncertainties, as discussed in its periodic SEC filings. Although the company believes that these assumptions underlying these statements are reasonable, any of them can be proven to be inaccurate, and there could be no assurances that the projected results would be realized. In addition, references may be made to certain financial measures that are not in accordance with generally accepted accounting principles. We refer to these as non-GAAP financial measures, Please refer to our SEC reports and certain of our press releases, which include reconciliation of non-GAAP financial measures and associated disclaimers. Sam will begin today's call with an overview of the business and recent developments for the company. I will then review financial results for the quarter. Following our prepared remarks, there will be a formal question and answer session. I would now like to turn the conference over to Sam Rubin, Lightpath's president and chief executive officer.

Thank you, Al. Good afternoon to everyone and welcome to Lightpath Technologies' fiscal quarter 2024 financial results conference call. Our financial results press release was issued after the market closed today and posted on our corporate website. First, I'd like to apologize for any coughing or hoarse sound. My throat is still recovering from COVID I had recently. The second quarter was underscored by a key first order in our partnership with Lockheed Martin for an imaging engineered solution, the ongoing integration of Vis-a-Mid acquisition and progress with customers transitioning from the use of germanium to the use of our black diamond material. All these developments continue to highlight our strategic shift from a component manufacturer to a value-added solutions provider. To recap for our investors, LightPath has been transitioning in the last few years from a pure component manufacturer focused on being the lowest cost provider to value-added partner for complete solutions based on optical technologies, whose differentiators are mostly technological. Along those lines, we have been focusing on three pillars of growth. Imaging solutions, such as cameras, growth in new markets, such as automotive, and growth specifically of our market share in the defense business, all of which are driven by our unique technologies and materials. All three pillars of growth tie and support our transition from a component manufacturer to a provider of engineered solutions based on our proprietary technologies. This transition began a couple of years ago, starting from customized lens assemblies which are what we call LightFast 2.0, through camera solutions, the first of which was our innovative Mantis broadband infrared camera, which enables both new applications and capabilities for our customers, and significant growth in that direction coming from the Visamid acquisition. Visamid Technologies, a small engineering firm based out of Dallas, Texas, does to the back end of thermal cameras what LightPath has been doing for the front end of those cameras. LightPath has been tailoring and customizing the optics for cameras based on our base optical technologies, and Visamid customizes and tailors the video processing engine and support electronics for the same cameras. Like LightPath's business model for customizing optical assemblies to be used in infrared cameras, Visamid established itself as a go-to for customizing the electronics and software part of uncooled infrared cameras. In fact, Visamid has customized full light paths, electronics, and software of our Mantis camera. Together with Visamid, we now extend our offering to customize imaging solutions to include wholly integrated camera modules. increasing the offering to existing customers and providing us a bigger share of those customers' spend. During the second quarter, we continued the integration of Bizomid with a focus on new products in fire safety and defense. This acquisition added the capability to produce end-to-end custom imaging cores and the new engineering capabilities that allow us to be involved earlier with our customers' design cycle and increased our likelihood of servicing those designs through to manufacturing. We are integrating Visamid's custom imaging cores into new camera products, several of which demonstrated at the recent SHOT Show in Las Vegas, and some we're working with customers to develop customized solutions. All these products are utilizing Visamid's unique video engine, in conjunction with our optics to develop low-weight, high-efficiency solutions for drones, UAVs, as well as industrial applications such as gas leak sensing, process control, and early fire detection. Shortly after the acquisition of Vizimid, Lockheed Martin awarded Vizimid and Lightbath a major project for the design, development, and later on, the manufacturing of a complete imaging system for a new project in their missile division. With the award came what will be up to $7.5 million for the development money. $4.7 million of that was already in a formal purchase order and is now part of our backlog. In this project, Lockheed Martin is competing against another prime defense contractor. to develop a new missile system. At first, the development portion of this project was expected to last until 2028, at which point the end customer would decide if the production is awarded to Lockheed Martin or its competitor. However, there is significant pressure now to shorten this timeline as much as possible, and as such, the decision point has recently been pulled in, and we now expect that the decision regarding the production award will be as early as 2026, two years ahead of the schedule we shared during the announcement of our initial award. If Lockheed Martin is selected for the production, we expect an initial production order for around 10,000 units. Our ASP per unit is between $5,000 to $10,000. That will put the initial expected production order to be north of $50 million, that is the production order to light path. Additionally, the volumes for follow-up production have also increased, with the potential now for tens of thousands of units. The demand and shortened timeline for the project are being impacted by recent geopolitical escalations. Results so far are very positive, and our customers, in fact, are very confident and so confident about their solution that they're looking to begin investing in production of the units even before an official decision is made. As such, we expect that Lightpath might start building up the production line this year already. The basic infrastructure for this production line has already been prepared and paid for as part of our recent expansion of our Orlando facility. And the specific equipment that will be needed is expected to be paid for by Department of Defense. Once in production, we will be delivering this assembly in volume, estimated tens of thousands of assemblies over the program lifetime. And again, with ASPs for light path, between $5,000 to $10,000 per system. With thousands of dollars per unit and tens of thousands of units expected in that program, the ultimate selection of Lockheed Martin by the military would likely result in a substantial revenue opportunity for us. This is exactly the direction we've been looking to transform the company to with the new strategy, and it is now happening. Lockheed's decision to outsource the development of such an important part of their system was due to Vizimid's technical capabilities. Yet the decision to then further engage with us at the scale they're now engaging and the potential manufacturing of this is due to the combination of LightPath and Vizimid with our manufacturing capabilities, capacities, and most important, the ability to integrate the entire system. And while our strategy for having three pillars of growth are designed such that we don't put all our eggs in one basket or one product, for that matter, this award by a major prime with the massive potential for revenue on the manufacturing side is seen by us as a big win to our strategy and the execution of that through the acquisition of VizMid and our own investment in expansion in the U.S. and development of camera technologies. I could probably spend this entire call only on this specific project and activity, given that we expect it to lead to tens of millions of dollars in annual revenue. But this is only one of multiple projects and multiple opportunities we have going on, all of which are in similar scale. So I will talk briefly about some of the rest. Turning to the automotive market, as previously mentioned, our lens assembly system has already been qualified by one of the largest car companies. Since then, we have shipped samples for qualification by another large Tier 1 and began the qualification process that is expected to take a few months. Last call, we shared that the first company was re-evaluating their timeline in light of recent changes to the EV market. While our technology is not specific to EV, we found that most of our automotive Tier 1 customers were looking to roll out this technology in their EVs, as that was their main focus at the time. With dynamics of the market now changing, we expect that some of our Tier 1 customers will begin rolling out this technology in more traditional vehicles. We're also seeing signs from the market that the automotive companies are waiting for further development in the Department of Transportation's announcement from May on their intention of mandating emergency braking system and mandating improvement for that technology in nighttime operation. We don't expect any major developments in the very short term, but we're still confident that this technology is going to be implemented in the automotive space and that we're one of the leaders in this technology and use cases. Therefore, we will still see this as something that would lead to the same volumes we spoke about before, which are over a million assemblies a year for each one of the car companies with ASPs up to $50 per vehicle for light paths. Last thing, I will update on infrared materials and replacing germanium. To recap, LightPath has developed over the years, and mainly over the last two years, some exclusive unique materials that can be used instead of germanium in infrared imaging systems. China announced on July 4th export restrictions on germanium, and with China being the largest exporter of this material, this has become a big deal. Since then, and even prior to that actually, we've been working diligently with customers to have their systems redesigned to use our materials instead of germanium. We even took the step a few months ago of proactively cancelling some customer orders for germanium optics to free up our capacity for making optics from these new materials. This has paid off well. with customers now fully engaged in the process and focused on redesign of their systems, testing our prototypes and starting to order systems with new optics. Two specific examples I'd like to share. One includes our largest customer, which makes imaging devices for sporting. This customer began by evaluating the use of our material in only one of their products. and has recently let us know that they would like to now work with us on all their products. Another customer, who is in the defense business, has announced in the recent SHOT Show a new gun sight product that is using only our black diamond glass in it, with no germanium. And they have even gone as far as saying publicly that going forward, all new products are going to be designed only with black diamond materials. a major win for our directions. All of these have so far been using mainly our existing BD6 material. In December, we finally took delivery of a piece of equipment called a refractometer, a measurement system for optical glass. This will now enable us to speed up the manufacturing readiness of some of the new materials we licensed from NRS. We expect the first material, BDNL4, to be formally released later this month. BDNL4 is an example of a material that not only replaces germanium, but actually offers advantages versus germanium. By having a negative thermo-optic coefficient, that is the change of the optical index as a function of temperature, BDNL4 enables optical designers to design optical systems that are optically and passively compensated for changes in temperature. This is a big deal for airborne systems, for example, where today, changes in ambient temperature at different altitudes require refocusing the cameras to compensate for this. BDNL4 is expected to become an important material for thermal cameras in drones and other airborne systems to experience a large range of temperatures. To conclude, our shift in strategic direction is beginning to show the results we were looking for, both in winning some major programs and in revenue growth in that area. At the same time, our three separate areas of growth, solutions, defense, and automotive, continue to generate multiple independent opportunities, that many of them have the potential for tens of millions of dollars of new revenue per opportunity. resulting in a healthy pipeline of large-scale opportunities that any of them alone can be transformative to our business. Last, I would like to welcome Kim Kreider, who joined our Board of Directors last week as an independent director, replacing Lou Lieberg, that had retired after 25 years with the company. I would like to thank Mr. Lieberg for his diligent work over the years. and welcome Ms. Kreider. Kim was formerly the Chief Technology Officer for the U.S. Space Force and has retired as a two-star general. Having a person as Ms. Kreider on our board of directors is important as we continue to move forward with our focus on becoming a systems company with a strong focus on defense. And as always, I would like to thank our employees and stakeholders who have continued to work diligently through the various transitions and hurdles we have endured. We see a bright future and a growing company because of their dedication, patience, and hard work. Now, I will return the call to our CFO, Alan Miranda, to review second quarter financial results. Alan?