LightPath Technologies, Inc.

Good day and welcome to the Light Path Technologies Fiscal Fourth Quarter 2024 Earnings 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 questions, please press Start and Choose. Please note this event is being recorded. I would now like to turn the conference over to Albert Miranda, Chief Financial Officer. Please go ahead.

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 current expectations. involve various risks and uncertainties as discussed in its periodic 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 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 or GAAP. We refer to these as non-GAAP financial measures. Please refer to our SEC reports and certain of our press releases, which include reconciliations 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 and the full year. 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 fourth quarter and full year 2024 financial results conference call. As always, our financial results press release was issued after the market closed today and posted to our corporate website. Physical 2024 was an important year in our transformation from a pure component supplier to a system provider, delivering during the year new products, new contracts, and starting to see growth driven by these new product lines. Just over three years ago, we set on a new course with a new strategic direction, taking us from being a pure component supplier to a systems or solutions provider. For those not familiar with this, I will provide a brief overview. Prior to this shift, LightPath has been, for the greater part of 30 years, an optical component provider. What many years ago was a unique technology, molded optics, had become over the years a crowded marketplace, going through the classic transformation and commoditization. As such, LightPath's core business was eroding, unit prices decreasing, and with them margins and profits. In 2021, we set a course on a new strategic direction, one that leverages some of our key technologies to deliver subsystems and system-level solutions instead of just components. Aiding in this have been two important shifts happening in our industry. First, optics, or photonics more generally, as a whole, is being used in more and more applications and industries. More times than not, those new customers starting to use the technology seek a partner that will provide a complete optical solution rather than components they would need to build in themselves. So essentially, the structure of the supply chain of our industry is changing, creating an opening or an opportunity for a company like LightPath to become a solutions provider. This transformation has been very successful, and in this fiscal year, we reported that 20% of our revenue came for those activities. This type of revenue hardly existed before we began going down this path. The second change happening that enabled us has been around infrared imaging technologies, which have been evolving at a fast rate, finding their way into a growing number of uses and therefore expanding the TAM, Total Addressable Market. Our core technologies, both that we owned already and developed internally through licensing and through acquisitions, are all centered around infrared imaging technologies, allowing us to create significant differentiators in this fast-growing market space. The outcome of that has been growth in our infrared components business, to be now 44% of our overall revenue in the last fiscal year. overtaking the legacy business of PMO, of precision molded optics. Both of those growth areas more than offset the drastic decline in that legacy precision molded optics business that we've seen. Today, at the conclusion of our fiscal 2024 year, we can see the positive outcomes of this shift, and more importantly, the exponential growth we are seeing coming as a result of that. We're seeing coming down the road as a result of that. Through our investment in differentiating technologies, we have positioned ourselves as a leader in the field of interoperability. With an exclusive license from the government to commercialize new materials developed at NRL, as well as our partnership with the Department of Defense, Defense Logistics Agency, around replacing germanium in DoD applications, we not only are the go-to partner for everyone looking to phase out germanium, but have also earned ourselves a seat at the table in some of the most important discussions and projects in the defense world. And by the way, our defense sales are at an all-time high right now. For example, in April we announced a first design win of one of our new glass materials from NRS. In this program of record, we are the sole source for a key part of a new infrared imaging system. which we expect could bring revenues in tens of millions of dollars a year in production. Four years ago, we could only dream of being in such a position, of not only being part of a key program, but also being the sole source for it. This program, by the way, is a program of record, which means it is a line item in congressional budget and funded for several years into the future. And this is just one of multiple programs we have now. Exclusive materials are winning us those programs, in all of which we're sole source due to our exclusivity. And naturally, since those are all defense programs, we're a bit limited in what we can share, but try to share as much as we can. In addition to our investment in materials as differentiating technologies, we also invested in development of our camera technologies. as well as the important acquisition of the Visamit technologies a year ago, which fed into this. With those new technologies and further leveraging our unique materials and other differentiators, we have built, over the last couple of years, a portfolio of unique thermal cameras that have created a strong entry point for us into a system-level product and enable us to now curve out a market share in a market estimated to be $9 billion of TAM and growing rapidly. Our efforts in the camera business started with introducing Mantis, an innovative broadband or multispectral infrared camera that is a first of its kind and enabled purely by our unique materials from NRS. Mantis served as a perfect innovative product to draw attention to us as a new camera manufacturer, positioning us as an innovative entrant and opened the door to important conversations with customers. As a result of that, we not only became a camera supplier, but started working with customers on their unique needs, leading to more products that are driven by the customer request and needed in the market. This includes thermal cameras for harsh environments, high-sensitivity cameras for unique applications such as gas detection, and most recently, camera system for inspecting and optimizing performance of furnaces in power plants, steel mills, paper mills, and more. We're especially proud of this new product because of its price tag of $30,000 per unit, representing better than which represents better than anything else the transformation the company has gone through, from selling lenses with ASPs of dollars or tens of dollars at best, to now selling cameras in thousands or tens of thousands of dollars. This is significant, of course, for future growth of the company, as selling 100 cameras at $30,000 each has a completely different math to our top-line growth than selling just lenses that go into those cameras. what used to be our prior business model. Similar to the materials technology differentiators that has already landed us one program of record, our camera technologies differentiator has landed us the Lockheed Martin missile program. Under this program, LightPath's subsidiary Visamit Technologies, which we acquired last year, is developing for Lockheed Martin a new camera system that will be part of a missile system. Due to pressing needs from the customer, the U.S. Army, the program is now on a very accelerated timeline. Though it started only a year ago, we have already achieved a worthy qualification of our subsystem and can begin shipping units for flight tests, which we're going to do over the next few months. The program is potentially transformative for LightPath, Not only is it exactly the type of business we were targeting in our new strategy, but the size of the opportunity can completely transform us. If Lockheed Martin wins against Raytheon, which they are competing against, we expect to be seeing revenues between 50 million to 100 million a year once in full production. Though we are still in development, the progress of this project is so fast that Lockheed and the customer are already looking to start setting up for LVIP, low-rate initial production, next year, which is the last step before full production. For a company our size, $35 million or so in revenue, a contract like this that could be $50 to $100 million can completely transform us. And although there is a possibility that Lockheed will not win this against Trafion, we know that this technology we developed is so transformative and important that the same customer is already integrating it into at least two additional programs. This technology, by the way, was developed by Visamin prior to the acquisition and moved from R&D into program of record, shortly after we acquired Visamid for about $3 million last summer. Another exciting development on the camera front is our play on AI technology. AI technology is making an impact in many areas, and many customers and users are looking for ways to leverage some of those advancements in the technology for their own use case or applications. One important area AI technology has evolved is in vision, where neural networks can be trained to do many of the tasks that until now required a human operator. For example, inspecting items on a production line, identifying an object of someone entering into a space, such as an intruder or a drone, and so on. In fact, so much work has been done on applications for use of AI in vision that ideas and trained modules are abundant and growing rapidly. In conversations with customers, we learned that the challenge is not so much what to do with an AI model, but rather how to do it. Currently, anyone wanting to implement an AI module in real life has one of two options. Using a virtual service such as AWS and other data or GPU centers, or installing an NVIDIA or equivalent GPU system. The first one, using AWS or other online services, requires streaming, which clogs the bandwidth, and in many times, facilities do not allow that due to cybersecurity constraints, not to mention big delays and latency of the images. The second option, using an NVIDIA GPU or so, requires use of a device such as GPUs that has a very high power consumption and very high upfront costs, limiting its usefulness in most field applications. To overcome that, and to not only make it possible to implement AI in the camera, but also affordable in cost and power, total cost of ownership, we have integrated a powerful AI accelerator chip made by Israeli Halo into the camera. This AI chip can accept neural networks in standard formats, such as ONNX or TensorFlow or others, and run those AI modules in the camera's video pipeline at a very low power consumption and almost no latency, with high computational power of 26 stops per second. This offering of a so-called AI-ready camera, if you would, has generated significant talk and interest in the industry. And we are now working with some very interesting projects and customers that have already advanced AI solutions and need a friendly hardware to implement it on. Taking this approach of focusing only on the hardware and not developing an AI neural network ourselves is driven by two of our core values. Focus, and in this case, focusing on what we are good and letting our customers focus on what they are good at, and value creation. In this case, the value creation is making AI implementation easier for our customers. Okay, after talking about those two pillars of growth, out of our known three pillars of growth, I'll give a quick update and overview about the third one, automotive. As those that follow us know, LightWave has been working with several Tier 1 and Tier 2s in the auto world to develop and qualify thermal imaging solutions for use in ADAS. Though we were already on track to start delivering units to an OEM for a new car module, a new mandate set by National Highway Traffic Safety Administration, NHTSA, has impacted that implementation negatively in the short term. but created a much bigger long-term opportunity. According to the new rule, by 2029, all new cars should include an emergency braking system that can identify pedestrians in pitch dark conditions from a certain distance. To achieve that, it looks like thermal imaging is going to be adopted into all of those systems. which means a much, much larger addressable market than estimated at first, even though further out than we hoped at first. From our conversations in the industry, we believe the auto industry is going to use this time to develop a solution that will allow thermal cameras to be installed behind the windshield of the car. This, in turn, will significantly simplify some of the challenges faced today in terms of environment and location of the camera in the car. LightPath has solutions for both scenarios, cameras sitting inside the car or outside or behind the windshield, and we will continue to work on those with our customers. The automotive opportunity is still very significant for us, though the timeline is shifted further compared to our prior conversations. According to what we currently see, we will continue to ship lower volumes in the incoming couple of years and see volume shipments begin to ramp up in our fiscal 2027. Okay, I will now turn this call to CFO Al Miranda to talk about numbers in fourth quarter and full year. Go ahead, Al.