LightPath Technologies, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the LifePath Technologies fiscal fourth quarter and full year 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, September 25th, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. I'd like to remind you that during the course of this 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 made by, 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 a strategic overflow 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 yours.

Thank you, operator. Good afternoon to everyone and welcome to LightPath Technologies' fiscal fourth quarter and full fiscal year 2025 financial results conference call. Pretty exciting times here at LightPath. Over the last few years, we've been working on the transformation of the company And we're now beginning to see the tangible results of these efforts. Since we likely have many new shareholders and many new listeners on this call, I will take some time to describe where we've come from, which will help put in context the recent developments. Then I will talk about specific programs that are driving our record $90 million backlog. The investment from Ondas and Unusual Machines and our next growth drivers. This will likely take up more time than usual and will come at the expense of some of the financial side. Sorry, Al. Let's start with strategy. LightPath is a 40-year-old company that for 35 out of those 40 years was a component manufacturer. The strategy of LightPath as an optical component company was strongly tied to the industry structure and worked well when the industry was small and highly technical. A component company like Lightpath could create value with its fabrication technology and at times capture that value with high margins. However, as the industry grew and changed, the structure of the industry changed and led to commoditization of optical fabrication technologies and a change in customer characteristics and supplier-customer dynamics. LightPath, unfortunately, did not adapt its strategy to that and therefore relied on being a lowest-cost provider of components and focusing on manufacturing in China to achieve that. This resulted in eroding margins, increased competition, and diminishing ability to capture the value its technologies created. This also resulted in an unhealthy reliance on both manufacturing and sales in China. By 2020, most of the company's manufacturing footprint was in China, and more than one-third of its revenue was from China. In late 2020, following a change in management, we developed and implemented a new strategic direction. Without going into great details, because honestly I could spend the whole evening talking about this, I'll just say that we realigned the company to a strategic direction that allows us to substantially grow and capture much more value from our technologies and capabilities. This is not about moving away from being a component company, as much as it is about moving into a position that will allow us to grow, improve margins, and secure our position in the supply chain. In our specific industry, with the dynamics of the technology, supply chain, and geopolitics, this means that we can grow best and impact our bottom line best if we focus on subsystems and systems that are enabled by our technologies. More specifically, doing that in the field of infrared imaging, a growing market in which we have strong differentiators. To explain a bit more about what I mean, let's look at just one of our unique differentiators, our black diamond glass. Unique materials, such as our proprietary black diamond glass, which is licensed from U.S. Naval Research Laboratories as an alternative to germanium in infrared optics, helps create value by enabling customers to do more. More, in this case, could be smaller systems. More could be cheaper systems. Or more could simply be something as trivial as as just being able to guarantee delivery of your systems to the customers with production certainty without worrying about germanium supply restrictions from China. Some companies, when they have such technology, might say something like, well, these materials are valued by my customers, so I can charge more for my materials, which is a valid point. Another company could say, let's take a step further And with our unique materials, we can sell more components, value added. So we'll do that. For us, we found that the sweet spot was going into subsystems or small systems, which we often call engineered solution. Those do not require large infrastructure of service and field support as full systems do, but still allow us to capture much more of the value. The combination of light-pass materials and our optics, together with, for example, the recently acquired subsidiary of G5 infrared, which is a leading infrared, which is a leader in thermal imaging camera, is case in point for this. G5 is known as the industry leader in long-range infrared cameras. That was the case before we acquired them, not something we created. But like its competitors, G5 was facing supply chain challenges due to global geopolitics, and primarily germanium and gallium, which are critical materials in their optics. After acquiring G5 in February, in conjunction with their team, we began the effort to redesign their systems to use our materials. Recently, we announced completion of redesign of two of those cameras. By doing so, we are positioning ourselves not only as offering the best cameras now, but also as the most reliable provider of cameras, with supply chain resiliency that no one else can offer. The result of this is massive growth we're seeing. Our backlog today is around $90 million. That is more than four times what the backlog was just a few months ago. And with more than two-thirds of this backlog in systems and subsystems, it is clear that the strategy is working. Our strategy is all about creating value and capturing value. When you have core technologies that are unique and well-positioned, they clearly create value. And it is up to the company to make the most of it by capturing as much of that value as possible. For Lightbath, it means going up the food chain. With this background behind us, I would like to now dive into some of our most recent developments and events and add some color and background to the announcement we have recently made and the large backlog I just mentioned. First, let's talk about the two recent large orders. Over the last few weeks, we announced two large orders that are really one order split into two separate POs. Those orders, totaling over $40 million, for deliveries of infrared cameras in calendar years 2026 and 2027. The customer is an existing customer that has been consistently doing business with G5 over the last few years, although not at levels anywhere near this. The applications for those cameras will be in border surveillance and counter UAVs, or CUAS, as it is often called. Let's first talk about the border surveillance. So border surveillance program, known as CTSC, is something we had previously discussed. At the time, I think in our last call, we expected the entirety of the program to include installing about 300 new surveillance towers along the southern border. And the work to be divided between three primes. One of them was our customers. Then along came the big, beautiful bill, and more than tripled the funding to Border Patrol. To our understanding, this means the number of towers along the border could go up to 1,000 towers. Some even speak about 1,200 towers. This includes not only an increase in number of towers along the southern border, but also the installation of towers in some places along the northern border. take the large increase in expected deployment, add to it supply chain constraints companies are facing, and you get a scramble to ensure supplies of cameras. Or in other words, for us, a perfect store. The border contract is an IDIQ divided among three companies. Until recently, we've been supplying cameras to only one of those three. The $40 million in orders for calendar 26 and 27 we just discussed is for another one of the prime contractors. So this is going to be in addition to the existing work we have and have been expecting and spoke about for the border. Okay, enough about the border, but there's a lot going on there, clearly. Let's go back to our $90 million backlog. Another part of our record $90 million backlog is systems for counter UAS. More specifically, powerful zoom cameras that can passively detect, classify, and track drones. Drones that are as small as 10 inches in size, for example. These cameras not only integrate into systems for detecting drones, but also integrate onto almost any weapon system that is used to counter drones by disabling the drones using different means. It could be systems named remote weapon systems, or vehicle-mounted kinetic systems, or pretty much any deployment of a counter-UAS system, which, as we all know, is a rapidly growing industry, not only in battlefields and front lines, but also in critical infrastructure, such as airports or public and private infrastructure. Currently, more than $10 million of our backlog is for cameras for counter-UAS, This is separate from the $40 million of orders I just discussed. And those specific orders were announced and discussed earlier. We expect this to continue to grow as our cameras are integrated into more and more systems. Another area of growth that we expect to see is the Navy Spear Program. L3Harris is the prime integrating this system. which is expected to be installed on all U.S. naval surface vessels. The contract, which we announced together with L3 Harris earlier this year, is expected to move into LRIP. LRIP is Low Rate Initial Production, in coming months. It has also been publicly disclosed that they expect to see the first installation and full integration into a fire control system of the first destroyer by 2027. For a system to be deployed by 2027, given all the flowdowns and processes, that timeline means that we will be working on our part very soon. This is a large program of record and a key program for the U.S. Navy, so we expect this to be a meaningful source of revenue for many more years to come. All of those are systems that we've already qualified, so all the development work is pretty much done. It's a matter of receiving and executing on the purchase orders. We feel very confident in our ability to deliver all of those, especially in light of our unique position, utilizing our proprietary black diamond materials in the cameras instead of germanium, which traditionally is the element of use for many infrared cameras. This brings me to China's ongoing export restrictions, who late last year cut off the export of germanium, as well as other critical materials, to the U.S. defense industry. China produces substantially most of the germanium globally, making a Chinese ban effectively global. In response to those events, U.S. defense contractors moved to stockpile germanium, but the ongoing ban destocked The stockpiles are running dangerously low. One executive noted in a Wall Street Journal last month that his firm is now down to safety stock. Some suppliers now hold only a few months of inventory, exposing even large firms for disruption. The result of this disruption has been a massive interest from defense customers to move away from germanium to eliminate China-related supply chain risk. Invalid interest from defense contractors in light bath proprietary black diamond glass, the replacement for germanium we licensed exclusively from NRL, has increased significantly. And while there's some lag from design to field deployment, the shift is happening and happening quickly and can be already seen in some of our numbers. So those programs are what is currently driving our large backlog and short-term growth. Now let's talk about additional programs and growth drivers in the pipeline. NGSRI is one of our most important programs in which we are developing for Lockheed Martin a system that is a key technology in their version of next-generation Stingo portable ground-to-air missile. Lockheed is competing against Raytheon in this and is now in testing stages with the customer. While I do not have any specific updates to share, I will likely not be able to answer most questions about this. I would like to commend the teams at Lockheed Martin and Visamid Group in Texas in putting together a completely new missile system in a two-year timeframe, something almost unheard of. The system is now in testing, and we expect delivery or feedback from the customer any time in the next few months. I know many are anxious to receive updates on this, as am I, to be honest. But because if we win this, according to projections we received from the customer, this could be between $50 million to $100 million of recurring annual revenue for us while in full-rate production. The only related update I can share right now is that our Texas group is in the process of moving to a larger facility, one that will be able to support the production for this system. For those that want to understand more about this system and why our camera is making such a big difference, I would suggest to search online for the term QuadStar and Lockheed Martin. Lockheed names their missile QuadStar. There is a long and detailed article that describes fairly well why Lockheed's solution can achieve better distance and overall performance due to LightPath's camera system integrated in the missile. Okay. Additionally, we also have programs such as the Apache program, which we delivered our subsystem recently and is now being integrated for testing by the customer. We have some programs related to Golden Dome, which are in design phase. And we have another program which is really unnamed, and I mentioned in the last call, is a key black diamond material program. in which the customer is actually funding equipment dedicated for that program. I can't say much about it, unfortunately. What is common to all these programs is that we believe each and every one of them could reach over $10 million of recurring revenue a year. Some of them, like the NGSRI, much more. All of those are specific programs or projects, but we also have our assemblies and optics product offering. The assemblies business includes standard and custom design of lens assemblies that customers integrate into their own cameras or systems. Part of this business is growing too, and especially assemblies that are designed to replace existing assemblies that utilize geomanium in one or more lenses. LightPath has a portfolio of lens assemblies designed so they can be used with other cameras. Those could be cameras made by FLIR, Seek Thermal, DRS, or pretty much any thermal camera manufacturer. In particular, we are seeing a growing demand for assemblies and also complete cameras for use in drones. A bit of background. Following the COVID pandemic, China emerged as a strong player in the market for low-cost thermal cameras used in applications such as drones. This is as a result of their significant state investment in technologies related to contactless temperature measurement, which are really the same technologies used in thermal imaging. While for a while, after 2021 or so, it looked like Chinese vendors might become the main source for cameras for drones, geopolitics, however, has been changing that. Ukraine, for example, has decided a while ago that it will no longer use cameras or lens assemblies made in China in their drones. Europe and the US have followed shortly after with different initiatives for domestic drone and component manufacturing. LightPath designs and produces its lens assemblies in Orlando. And in recent months, we have made investments in those capabilities, both in the U.S. and our RICO operation, which is a certified defense manufacturer in Europe. To further support the focus on those assemblies and the drone market, we have done two things. First, we've recruited Dr. Steve Mielke as VP of Engineering. The engineering discipline, which focuses on successful transition of new products into manufacturing and high-volume manufacturing of these products, is key to light path scaling in this business. Dr. Mielke brings many years of experience in doing exactly that, and we view his addition as instrumental in this effort to scale this manufacturing. Secondly, and pretty excitingly, to finance many of those efforts, we have received in a strategic investment from two leading companies in our industry, Ondas Holdings and Unusual Machines. These companies are not only key strategic customers to LightPath, they're also leading the charge in setting up manufacturing and the complete ecosystem for drones and all components and subsystems required for this in the US and the West. What LightPath is doing in bringing manufacturing of thermal imaging to the US, Anders and UMAC are doing with drone motors, complete drones, and much more than that. We're excited to be working with them and take part in building the future drone infrastructure for the U.S. and Europe. The $8 million investment received from ONDAS and UMAC will go towards expanding these efforts, and I expect these efforts to be very fruitful for all three companies and the industry as a whole. I firmly believe Lightpath is poised for great success in coming years. The 41% quarter-over-quarter growth we just announced for Q4 and the $90 million backlog is only the beginning. There are many tailwinds supporting our growth and the investments and efforts the team has made over the last five years, many of which are just starting to show. Our future is very bright. and we're excited to be here and to see it all unfold. Now, I've spoken enough, so I'll pass it on to our CFO, Al Miranda, to talk about fourth quarter and fiscal year-end results.

Please go ahead, Al. Thank you, Sam. I will keep my review to a succinct highlight of the financials this quarter. As a reminder, much of the information we're discussing during this call was also included in our press release, issued earlier today and will be included in the 10K for the period. I encourage you to visit our investor relations webpage to access these documents. Revenue for the fourth quarter of fiscal 2025 increased 41.4% to 12.2 million as compared to 8.6 million in the same year ago quarter. Sales of infrared components were 4.9 million or 40% of the company consolidated revenue. Revenue from visible components was 2.8 million or 23.2% of consolidated revenue. Revenue from assemblies and modules were 4.2 million or 34.1% of consolidated revenue. Revenue from engineering services was 0.3 million or 2.1% of consolidated revenue. Gross profit increased 6.6% to 2.7 million or 22% of total revenues in the fourth quarter of 2025, as compared to $2.5 million or 29.2% total revenues in the same quarter of the prior fiscal year. Difference in gross margin as a percentage of revenue was primarily due to an approximately half a million dollar increase in inventory reserve charges recorded in the fourth quarter of fiscal 2025, primarily related to our visible component business. Operating expenses increased 52 percent to $7.2 million for the fourth quarter of fiscal 2025, as compared to $4.7 million in the same quarter of the prior fiscal year. This increase was due to the integration of G5 Infrared following its acquisition earlier, as well as increased sales and marketing spend to promote new products, an increase in material spend internally funded new product development, an increase in the fair value of the acquisition liabilities of $1.4 million. The earn-out liability for the G5 acquisition will continue to be adjusted until it's paid out. Net loss in the fourth quarter of fiscal 2025 totaled $7.1 million, or $0.16 per basic and diluted share, as compared to $2.4 million, or $0.06 per basic and diluted share in the same quarter of the prior fiscal year. Change in net loss was driven by an increase in certain non-cash, non-operating expenses associated with the acquisition of G5 Infrared and the related financing of the acquisition. Adjusted EBITDA loss for the fourth quarter of fiscal 2025 was $1.9 million compared to a loss of $1.1 million for the same period of the prior fiscal year Although not perfect, we believe that adjusted EBITDA is a better indicator of core operating performance by excluding non-core, non-cash items. Cash and cash equivalents as of June 30, 2025 total $4.9 million as compared to $3.5 million as of June 30, 2024. As of June 30, 2025, total debt stood at $5 million. and backlog totaled 37.4 million. But as Sam noted, backlog has grown significantly since that time. I'd like to point out two significant activities we undertook during the fiscal year that we have not discussed. During the fiscal year, and especially in the fourth quarter, we migrated our global IT infrastructure to a new provider to bolster and meet the defense industry high-level security requirements. This was usually important. Without the right local and global IT infrastructure, we would severely limit our opportunities in the defense industry. Second, we successfully integrated G5 into LightPath in six months, ahead of plan and below budget. I'd like to publicly acknowledge and thank the teams from both companies that worked together to make it happen. Everyone knows acquisitions live or die based on cultural fit and integration. So thanks again to the entire team. Looking forward, our focus for fiscal 2026 supports the business opportunities that Sam described. We have a detailed go-to-market strategy that we're funding to target revenues in key high-growth areas, some of which Sam mentioned. Our prior year investments in manufacturing are bearing fruit in terms of quality and and on-time delivery. And then the next year, I expect to see margin expansion as a result. With all of the interesting accounting around acquisitions, we will continue to report and focus on adjusted EBITDA in fiscal year 2026 as a helpful measure of financial success. And then lastly, as Sam noted, subsequent to the quarter close, we announced an $8 million investment from Ondas Holdings and Unusual Machines. We are truly, truly fortunate with the quality of the existing investors in the company, and Ondas and Unusual Machines are not only a continuation of quality investors, but in addition, they're a great strategic fit for us. With that, I'll turn the call back to Sam for some closing remarks.