LightPath Technologies, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LightPath Technology's second quarter 2026 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 11, 2026, 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 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 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 will 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 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 our prepared remarks, there will be a 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 LifeMath Technologies' fiscal second quarter 2026 financial results conference call. We entered calendar year 2026 having completed the first part of our transition to a vertically integrated provider of high value infrared optics and camera systems geared towards driving higher revenue and gross margins. The second quarter demonstrates this transition with measurable commercial success, record revenue, and margin improvement. The progress we have made is reflected in record orders, a growing systems backlog, and increasing customer adoption of our technologies, as well as, and maybe more importantly, improvements in our margins and cash flow. Today, Lifepath is a fundamentally different company. Over the past several years, we have transformed from a precision optical component supplier into a vertically integrated provider of high-value infrared optics and camera systems. and offerings that range from proprietary materials all the way through complete imaging solutions. I'll share some context on this transformation, discuss some of our programs driving the growth and the acquisition of AMI on both its materials. At the core of our platform is Black Diamond, our proprietary chalcogenide glass licensed exclusively from U.S. Naval Research Laboratories. as a domestic supply chain secure alternative to germanium for infrared imaging. This positions us securely with the Physical Year 2026 National Defense Authorization Act, NDAA, which mandates elimination of U.S. defense reliance on optical glass components and systems sourced from Russia, China, and other covered nations no later than January 1, 2030. With defense acquisition timelines already requiring action in the near term, our optical assemblies, infrared cameras, and thermal imaging systems are designed, manufactured, and delivered in full alignment with these requirements. We believe we are positioned as a supplier of choice for mission-critical defense and aerospace applications. It has been about a year since our acquisition of G5 infrared, the producer of the industry's leading long-range infrared cameras for surveillance and counter UAS. The G5 acquisition is a prime example for us leveraging a unique differentiator, in this case our germanium alternatives, to enable the acquired company to do more than they could do alone, far more in this case. Since we acquired G5 a year ago, G5 has booked more than $80 million of new orders for their products, compared to $15 million of revenue the prior year. Some of it is because they were at the right place at the right time, such as Border Patrol spending, counter-UAS solutions, and more. And part of it is because that under LightPath, using the Black Diamond materials, we enable G5 to be able to execute far better than anyone else out there because we have a secured vertically integrated supply chain. To date, we have publicly announced the redesign of only two of their cameras, but with the acquisition of amorphous materials, we can now complete the remaining redesigns and soon make all of G5 cameras using Black Diamond. So let's talk a bit about the acquisition of Amorphis Materials, an industrial manufacturer of complementary chalcogenide glass melting technologies, in particular for large diameter optics. Amorphis is a more than 50-year-old company with a strong industry reputation, founded by Dr. Ray Hilton Sr., who was considered one of the pioneers in the commercialization of chalcogenide glass. He also, by the way, wrote the leading book about chalcogenide glass. The significance of large diameter black diamond lenses is, well, significant. In the world of optics, the further distance you want to detect an object, the larger the optics needs to be. Cameras or devices for relatively short distances, such as hundreds of meters, have optics that are between one inch to five inches in diameter. That is plenty of size for applications such as close range security, firefighting cameras, gun sites, and so on. If now one wants to detect objects that are kilometers or miles away, the size of the optics grows. For example, G5 long range cameras, the most long range ones, have lenses that are as much as 250, that's 250 millimeters or 10 inches in diameter. If now you want to detect from space, say a missile launch, size of the optics needs to grow even larger. This is partially why some of the larger detection satellites can be the size of a small bus. Until this acquisition, LightBath was melting its glass in the shape of a cylinder, five inches in diameter. Using some additional techniques, we've been able to turn that glass into six inches of optics. but not the sizes needed for most of our G5 most higher-end cameras and definitely not the size needed for satellite cameras. Amorphous materials, which we just acquired, melt the glass using a somewhat different technology. That technology, which we can easily and are easily adapting for use in our black diamond glass, can melt the glass at sizes of 10 inches and with some additional processing can reach sizes of 17 inches. So why is this a big deal? Well, first of all, our own G5 cameras, a significant part of our growth driver. The most higher end cameras, or the longest range cameras, if you would, used primarily for drone detection, have lenses that are as much as 10 inches in diameter. Until now, we could redesign only the smaller cameras to use black diamond. Now, we're full steam ahead at redesigning all of their cameras. And by the autumn time, we expect to have G5 cameras to be using black diamond instead of germanium, all of the cameras. We expect to be able to make as many long-range cameras as the market can take. So while our competitors are still struggling to find a solution for germanium situation, we will be able to make as many cameras as we want. Second, this ability to make large diameter black diamond now opens the door to any application of long-range imaging. Think about airborne gimbals and pods. Think ground-based imaging systems and so on. And most importantly, space. The U.S. government, through different agencies and programs, primarily the Golden Dome program, is going to launch dozens, if not hundreds, of satellites for missile tracking and detection. Let's take one example of such recent awards, all public information, to demonstrate the potential magnitude of this. SVA, Space Development Agency, awarded in December $3.5 billion to build 72 tracking layer satellites. Those are all based on infrared cameras. Public information, which one can easily look up, That is $48 million per satellite. While we see the satellites as primarily a camera, they do more than that. And so the infrared camera system typically is about a third of the overall cost of the satellite. So that is $16 million per satellite. This includes a complex sensor system as well as other things. But from our point of view, most importantly, is an optical system. That optical system, oftentimes referred to as a telescope, is a pretty complex system that includes, well, you guessed it, large diameter optics. So until now, Black Diamond was not even considered for use in those applications. And even though it has incredible properties suited just for that use case in terms of thermal behavior and such, So we had a couple of space-related programs in our category of potential 10-plus-million-dollar programs, but those were small, definitely small compared to what we're facing now. So now we get to play a major role in this. So couple that with SDA's very recent announcement, I think last week, for a constellation of 300 to 500 satellites in low-Earth orbit, and satellites in low-Earth orbit have a fairly short lifespan. And this is, as they say, a whole new ballgame for us. However, a word of caution. Satellite development takes time. The government works in two-year tranches, which means the next designs, the ones we plan to be part of, are not going to go out for at least another two years. So this is a huge potential for us, but it's not immediate. I would be remiss if I told you that this is the only reason for the acquisition. There is more. Until three weeks ago, before we did the acquisition, LightPath was producing glass only in one location in Orlando, Florida. And we were potentially one hurricane away from a significant downtime in glass production. Now we have two manufacturing locations for Black Diamond. We're going to duplicate between Orlando and Amorphis facility in Texas all operations. Also until three weeks ago, we kept adding capacity in Orlando. With this acquisition, we get another 50% boost to capacity and ability to add more in a more cost-effective manner. And last, until three weeks ago, we might have been worried about significant competition popping up. But now we acquired and own some of the most innovative and best teams capable for glass technologies in the U.S. And so while the acquisition as a standalone might only look like $3 million in annual revenue, this is a significant acquisition in more ways than meets the eyes. Okay, other things in the quarter. Prior to the acquisition and a few weeks before the quarter ended, we completed a secondary raise in the market. We went out to raise $40 million. We received offers that were significantly, significantly more than that. And so we ended up increasing the size to $60 million, which together was the green shoe option that the banks immediately exercised. ended up with approximately $65 million in net proceeds. The purpose of the raise is for investments in our future. LightPath is not burning cash in operation, and we do not raise money to burn it into operation. This quarter we're reporting on is, in fact, the second consecutive quarter of positive adjusted EBITDA, and with a net cash flow from operations being positive again. So the race is really about growth and investment. As we have outlined before, we have a very specific strategy when it comes to decisions on investments and acquisitions. The bottom line is that we have a very unique technology set of technologies, and we believe that we are well positioned to leverage those to capture some significant market share on the subsystem and system level. However, that window of opportunity is not infinite. And while we always continue to develop more differentiators, competition keeps working, and they will catch up on our older differentiators at some point while we add new differentiators, and so on and so on. So we have a window of approximately, we think, three years, maybe three to four years, in which we can grab a significant market share and position the company as a dominant player in our field. Given the compressed timeframe, we cannot do this purely through organic growth and through investing only the cash we generate, as much as I would prefer it that way. We need to accelerate some of those activities to make a real dent in that timeframe, hence the war chest of cash and the plans to use it. I will emphasize again, this is not about operations or burning cash in operations or anything like that, but rather a very calculated set of investments and M&A opportunities in the near future. So, now strategy and direction. In the short term, we have some very large programs we're working on. We have the Lockheed Martin missile program that is moving along well. And Lockheed Martin, our customer from subsystems we make, has announced earlier, or last month actually, a successful flight test. And while I would love to be able to share more information, we are at this point, as we recently mentioned, confined to sharing only what our customers share publicly. So nothing else on this other than us continuing to be pleased with the progress. Multiple other programs, such as Border Towers, Navy Spear, and others are progressing. Some might be slower than we want, some might be faster, but pretty much on track. Overall, we're doing pretty well there. We continue to work also on our second tier of programs, the ones we said have 10 million potential or more a year, and we continue to add to those. Just last month, we had another program join that club, and now we... Yes, ninth program that has potential of $10 million or more. Other developments that we had last quarter include Congress passing the National Defense Authorization Act, NDAA, which included this year a requirement for Department of War to stop using any optics components or even glass originating from certain nations, including China. This, of course, plays very well to our position as the largest manufacturer of infrared glass in the U.S., as well as our realignment of the organization over the last few years away from China and back to manufacturing in the U.S. So together with our Black Diamond and now also the M-tier portfolio of glasses from Amorphis Materials, all of which are produced in the U.S. and therefore NDAA compliant. So we actually don't need to do anything new to comply with this other than continuing investing in glass production. Also last quarter, the FCC, Federal Communication Commission, issued a new ruling that everyone expected. But everyone expected that to be a ban about drones made by DJI, actually commonly referred to as a DJI ban. Or at most, it to be in general about Chinese drones. The FCC, however, took this a few steps further and added to the FCC-covered list all drones and critical components used in any country outside the US, ally or not. Critical components is defined by Defense Contract Management Agency, and it includes, as you guessed, cameras and sensors. So this was a surprise to us, a very positive surprise, but yet a surprise. So in terms of how this impacts us, there are two aspects. The first is the simplest one, and that is optical assemblies. We already produce optical assemblies here in the U.S., NDAA compliant and now FCC compliant, and many of those are already used on drones. So for that part, we're well aligned and prepared. Check. Second part is cameras. To that extent, we're still evaluating what role we want or can play in the drone side of cameras, other than the optics, of course. There are clearly some opportunities in providing cameras for the larger drones, but we also need to evaluate whether or what we want to do in the area of FPV drones, those are the one-directional, cheaper drones. The price targets are very aggressive. and it's not entirely certain what the direction will be there. But we're looking into that, so stay tuned to some news there. So in summary, first step of our transformation I can say is now complete and very well. We have moved from components to systems and from commoditized supply to strategic technology leadership. We're replacing constraint China-linked materials with a domestic scalable and proprietary alternative. And we're converting that differentiation into multi-year contracts, strategic investments, and long-term relationships with some of the most sophisticated defense and industrial customers in the world. Our next phase, which includes now rapid scaling over the next three years, is beginning and will be aided by our war chest of capital and will build on what we have done so far. to win significant market share. I will be discussing that and more during our virtual Investor Day webcast in a couple of weeks. For now, I'd like to turn the call over to our CFO, Al Miranda, to talk about the second quarter fiscal 2026 financial results. All yours, Al.

Thank you, Sam. I'll keep my review to succinct highlights 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 10Q for the period. I encourage you to visit our investor relations webpage to access these documents. Revenue for the second quarter of fiscal 2026 increased 120% to $16.4 million as compared to $7.4 million in the same year-ago quarter. Sales of infrared components were $5 million, or 31%. Revenue from visible components was $3.4 million, or 21%. Revenue from assemblies and modules were $7.2 million, or 44% of consolidated revenue. Revenue from engineering services was $0.7 million, or 4%. Although G5 was the largest contributor to the revenue increase, our revenue from legacy light path business also grew substantially quarter over quarter. Excuse me. Gross profit increased 212% to 6 million or 37% of total revenues in the second quarter of 2026 as compared to 1.9 million or 26% of total revenues in the same year ago quarter. The increase in gross margin as a percentage of revenue is primarily driven by the increase in revenue from assemblies and modules cameras, which generally have higher margins, gross margin on engineering services was also much more favorable in the second quarter due to a non-recurring engineering project for a defense contractor. In addition, gross margins for infrared components have improved due to a more favorable mix and the resolution of certain manufacturing issues that negatively impacted the second quarter of the prior fiscal 2025. Operating expenses for the second quarter of fiscal 2026 was $14.6 million, up from $4.4 million in Q2 of fiscal 2025, an increase of $10.2 million. Of that $10.2 million increase, $7.6 million relates to the quarterly fair value adjustment of the G5 earn-out liability. Quarterly adjustment will continue through Q3 of fiscal 2027 when the earn-out period ends. Excluding the $7.6 million earn-out revaluation, the underlying operating expense increase was $2.6 million, or 60%, compared to last year's second quarter. This results in a normalized operating expense of $7.1 million for Q2 fiscal 2026, versus 4.4 million in the prior year period. The 2.6 million year-over-year increase primarily reflects the integration of G5 following its acquisition, G5's operating expenses, M&A costs related to amorphous, higher sales and marketing spending, additional corporate expenses, and increased personnel costs driven by key executive vacancies that are now being filled. Net loss in the second quarter of fiscal 2026 totaled $9.4 million or $0.20 per basic and diluted share as compared to $2.6 million or $0.7 per basic and diluted share in the same year-ago quarter. The year-over-year increase in net loss for the second quarter of fiscal 2026 was primarily attributable to the change in fair value of the acquisition liabilities of $7.6 million for the earn-out related to the acquisition of G5. Excluding the earn-out adjustment, the net loss for Q2 fiscal year 26 would have been $1.8 million in improvement from the prior fiscal year Q2. Adjusted EBITDA for the second quarter of fiscal 2026 was $0.6 million positive compared to an adjusted EBITDA loss of $1.3 million for the same year-ago quarter. Although not perfect, we believe that the adjusted EBITDA is a better indicator of of core operating port performance by excluding non-core, non-cash items. With all the interesting accounting around acquisitions, we will continue to report adjusted EBITDA in fiscal year 2026 and in 2027 as a helpful measure of financial success. Cash and cash equivalents as of December 31st, 2025 totaled $73.6 million. as it compared to 4.9 million as of June 30th, 2025, reflecting our successful capital raise in the second quarter. Sam mentioned that the use of cash is very calculated and strategic. We've established plans, timelines, milestones, and returns on cash for the initiative Sam mentions and others. These planned investments are focused on revenue generating activities, in the short and mid-term while still maintaining a war chest for future opportunities. In Q2, we also paid the acquisition notes of $5.4 million in full. And as of December 31st, 2025, total debt stood at $0.8 million. Backlog totaled $97.8 million. We are pleased with the progress of the financial of this quarter. We don't give guidance, but we do set targets for ourselves, and we've given indications to the investment community that the financials are and will improve gradually in the near term. Q2 is a good moment to share a little more. Internally, we planned on gross margin at or above 35% by Q4, EBITDA positive by Q2, and operating cash flow positive by Q3. We achieved those targets one or two quarters earlier than planned. So it's a good moment to reflect on where we are and our progress. That said, we are by no means done. Looking forward, we have a detailed operating growth plan that is segregated into three components. These components support the strategy that Sam mentioned. First, continued support of our existing business. Invest in our already known and identified growth opportunities, much of which you already know from these earnings calls and from our investor presentation. And in three, investments in new business. These are things that are not yet known. The operating growth plan is an 18 to 24-month plan for resource allocation to meet current backlog deliveries and be prepared for the expected new revenue growth. The vast majority of cash, capex, and human resources are pointed at the substantial growth opportunities, while smaller amounts of resources are allocated for our existing business growth. The approach allows us to match resources to opportunities that are close in timing and have better returns. This may mean investing now for revenue in future quarters, but the return on the investment in the midterm justifies the business initiatives. In all, we are well-positioned to execute on our growth plan. With that, turn the call back to Sam for some closing remarks.