LightPath Technologies, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Lightbar Technologies' second quarter fiscal 2025 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, February 13, 2025. And the earnings press release accompanying this conference call was issued before the market opened today. I did 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 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 assurance 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 in certain of our press releases, which include reconciliations of non-GAAP financial measures and associated disclaimers. CEO Sam Rubin will begin today's call with an overview of today's acquisition of G5 Infrared, a strategic overview of the business and recent developments for the company, while CFO Al Miranda will then review financial results for the quarter. Following the prepared remarks, there will be a formal question and answer session. I would now like to turn the conference over to CEO Sam Rubin Sam, the floor is all yours.

Thank you, operator.

Good afternoon to everyone, and welcome to LightBath Technologies' second quarter fiscal 2025 financial results conference call. Given the important news we announced this morning regarding the acquisition of G5 Infrared, I will be dedicating most of my remarks today to this topic. The acquisition of G5 Infrared is a key and transformative event for LightPath and is a natural continuum of the strategic transition the company has been undertaking for the last few years. As a reminder, up until about four years ago, LightPath was a pure play optical component manufacturer. The core technology for LightPath up until that point, precision glass molding, was an innovative technology in the early 2000s. which gradually became commercialized and constantly commoditized over the last 20 years. What was a leading differentiator for the company years ago has become, by 2020, a widely deployed technology with aggressive and ample competition, pushing Lightpath out of the market. In late 2020, shortly after I joined and consequently built a new leadership team, we outlined a new strategy that leverages our differentiators into a more value-added position, with the goal to eventually become a solutions and subsystem provider, all of which is still in the optics space, where we have strong domain expertise with the ultimate goal of becoming a system supplier. We started the journey by first offering optical assemblies based on our optical components. then began to offer compact thermal cameras, such as our Mantis multispectral camera. And later on, through the acquisition of Vizimid technologies in the summer of 2023, we added advanced capabilities in video engine and camera cores for uncooled infrared cameras. The acquisition of Vizimid also came at a critical, pivotal point for the Vizimid team. But shortly after the acquisition, Visamid and LightBath were awarded a large development contract with Lockheed Martin for a new missile program, a contract that has the potential to translate to between $50 to $100 million a year in revenue from that one program alone. Similarly, though not as large, Visamid and LightBath have several other large programs in various stages. many of which have the potential of bringing more than $10 million a year in new revenue from each one of those programs. The addition of G5 infrared, as you will see, fits in naturally into what we have been building and is a logical next step in our journey. Not only do G5's products complement LightPath's products perfectly, but G5 is also at a pivoting point. about to be awarded some large lucrative defense programs that will be moving into LRIP. LRIP is Low Rate Initial Production. We'll be moving into LRIP very soon, and from there, shortly into full-scale production. So with this background now framing where we have come from and where we are, let's dive into the acquisition itself. G5 was established in 2011 by a seasoned team that this was the second or even third time around. The first time around, DIOP, D-I-O-P, was a household name in our industry, establishing a big part of what was Axies back in the mid-2000s, and later sold to General Dynamics for $643 million in 2009. This highly accomplished team, led by Lou Fantosi, are well known in the industry as the ones that always deliver the highest quality, effectively gold standard cameras in long range imaging. These infrared cold camera systems are used in places where extreme sensitivity of detection is needed, such as detecting people from miles away, or vehicles, or drones from tens of miles away. And I will talk more about that later. And as is often the case in optics, just like LightBath leverages its black diamond glass to make best-in-class optical systems and uncooled cameras, G5 also has its own optical coating services group, another element in the secret source of these high-end camera systems. These coatings are part of what makes their cameras perform the way they do. And this coating service offered to external customers also accounts for a highly profitable service revenue that makes up to 20% of G5's revenue. These coating capabilities also fit very well with LightPath's infrared component business and will add a critical capacity to that of the LightPath business. So clearly, G5 is a successful and well-aligned business delight path in and by itself. This is also evident from their growth rates, winning businesses, and solid financial performance, delivering strong margins and EBITDAs of around or higher than 20% consistently. And while the financial profile is important, growth is too. So I'd like to dive in a bit into the product and technology and how this translates to revenue. Lightbox's transition to move from a pure play component to a subsystem or solution provider and from there to a system supplier can be characterized in many ways. But probably one of the best indicators to where a company fits in the food chain are ASPs or average sales price of its products. When I joined Lightbar from 2020, the company was, as we mentioned, a component company, and its products, individual lenses, had ASPs ranging from $1 for the really commoditized telecom lenses to up to, say, $100 for the more complex diamond-turned lenses. In 2021 to 2022, we gradually transitioned into offering assemblies, a more complex engineered optical product. That resulted in assemblies in ASPs going from $100 to $500, already more complex by itself. But while ASPs in and by themselves are not the goal per se, they're a good leading indicator to the complexity of the product and the offering, and hence to the value created by that product. And as many strategy books will tell you, creating value followed by capturing value is how one creates a strategy that leads to sustainable profits and growth. And so we went from single-digit ASPs to three-digit ASPs. Next came our uncooled cameras, such as our Mantis innovative multispectral uncooled camera, which was our ticket into the world of cameras. Those products of cameras had ASPs of $10,000 to begin with. And through more complex cameras for oil and gas industries, we're now selling cameras with ASPs of $30,000, which is really a leap into five-digit ASPs, if you would. Again, not the gold by itself, but an indicator. Now comes G5 with cooled mid-infrared cameras. ASPs of their products start from $50,000 for their entry-level cameras, short-range detection cameras, up to $500,000 for the high-end, long-range detection cameras. And when we say long-range, we're talking about cameras that can detect the presence of a vehicle from as far as 68 kilometers away, 42 miles, that is. So very, very impressive products. So in the span of four years, we've gone from selling lenses at single-dollar lenses and declining, unfortunately, to assemblies at hundreds of dollars, to uncooled cameras at thousands of dollars, and now to adding cooled cameras at tens or hundreds of thousands of dollars per degree. G5 is also a fast-growing business with a significant pipeline of new business opportunities with multiple programs and records expected to begin production in the next two years, driving strong growth far beyond their existing revenue base. Their long-range cameras are used for detecting objects at, well, long ranges, if you would. The two main applications are around detection of drones, also known as counter UAS or CUAS, and detection of people and vehicles. The former, counter UAS, is a fast-growing application in which G5's cameras with their proprietary image stabilization software, ATCOM, are considered the best performer in terms of detection range. One of the programs of record G5 is designed into includes placing those cameras on hundreds of naval vessels for passive detection of incoming threats, such as drones, missiles, and more. The word passive is actually pretty important in this. As we've all seen in the Ukraine conflict battlefield, if one uses an active system such as a radar to detect incoming drones and missiles, the radar of the mission immediately turns you into a target. And so passive detection of incoming threats is one of the fastest-growing technologies today and one that G5 systems are by far the leader in. In this application, G5 sells cameras to integrators that place them into larger systems with pan tilt and motion control and build a complete system for detection and tracking of such threats. A second leading application is perimeter and border security. Here, the same camera technology is used on towers along the border and for perimeter security in critical infrastructure like stadiums, power plants, and more. has a long history with cameras for border security and has already hundreds of cameras installed along the border. With the limited lifetime of cryogenic coolers in such systems, G5 also provides an ongoing service for repair of those hundreds of cameras, which is a great revenue stream that we expect to grow significantly more in the coming years. More specifically, G5 provides now cameras that are used in the Customs and Border Patrol CTSE towers. And just last month received the first award and order for the new surveillance towers of Customs and Border Patrol. That's part of Homeland Security Department. We expect to be able to announce soon more detail about those programs, both the naval and the Border Patrol one. So a highly accretive acquisition brings over $15 million in preliminary unaudited revenue in 2024 and brings us to a point where we expect our combined revenue in the next 12 months to exceed $55 million, placing us in a completely new place altogether. And while we don't provide guidance for future quarters specifically, I would encourage everyone to study the future earn-outs that are part of this acquisition, as it gives a very clear picture of what G5 management expects the business to look like in the next 24 months. I will give you a hint that the earn-out for the first year includes projections of revenue between $21 to $27 million from G5 alone, compared to $15 million last year. And that gives the pink a pretty good taste into the kind of growth rates we're looking at. So I'd like now, with the time left, to switch gears a minute and to talk about the previous quarter. The previous quarter was impacted in two ways by one major event. That event was on December 5th, China announced further restrictions on germanium exports. now completely banning sale of any germanium to any U.S. company and to the U.S. and to any dual-use applications. And while we have prepared for this moment both by significantly reducing our germanium business and by preparing our black diamond substitutes, we did not escape completely unharmed out of that. Once China announced those restrictions, practically all shipments out of China suffered one way or another. This means materials that are not related even to this ban, like zinc selenide and zinc sulfide, were also completely stopped for a while. To us, this means that more than three quarters of a million dollars of revenue from last quarter could not ship in the last few weeks of the quarter. and had to move into this quarter within now. I will emphasize that we haven't lost a single dollar of revenue. There wasn't any cancellation, and we don't expect to lose any of that. It is simply a matter of timing. When all orders, when all shipments out of China came to a halt, that impacted also non-Germanian business of ours for a short period of time. We expect this to recover very soon, although what we're seeing is that Chinese companies like Vital are completely stopping shipping any optics altogether, not only Germania. But we have many other suppliers, and we're building into that and are recovering from that small hiccup. It's unfortunate because we report our numbers, of course, on a quarterly basis, and something that happens in the last two or three weeks in a quarter is really just, for us, a matter of timing of revenue and not a business issue. But when reporting on quarterly numbers, it appears that way. At the same time, we also saw that the new restrictions are finally leading our customers to make the move to our alternative materials. We are seeing an influx of interest in those materials and are extremely encouraged by this. As a reminder, systems need to be redesigned to replace germanium with our materials. And so what we're seeing now is a very significant effort to start the redesign process by pretty much all customers related to this. With some systems, such as our customer for FPV drone optics that we announced last quarter, the redesign is fairly straightforward and allows us to get it done within weeks. But in other more complex systems, this takes months. And we're seeing quite a bit of this happening now. We're not only working with customers to help those redesigns, we're also taking a look at our manufacturing capacity to prepare the needed capacity to make the glass needed for these programs once the redesign and qualification is done. As a reminder, we spent nearly $6 million in our Orlando facility over the last few years preparing the infrastructure needed for growth. We do not expect to need to outlay any significant additional capital for this increase in capacity. We expect to be increasing our glass capacity significantly in coming months, but with fairly modest investment in that. 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 gas detection camera, on new contracts, such as our FPV drone optics, and many other things that we reported over the last few months. And I will be also available, as always, to answer questions on those. But now I'd like to turn the call over to our CFO, Al Miranda, to talk about our second quarter fiscal 2025 financial results. Al, please go ahead.