Lightpath ((LPTH)) has held its Q2 earnings call. Read on for the main highlights of the call.
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In a recent earnings call, LightPath Technologies expressed a mixed sentiment, highlighting both positive strategic moves and significant challenges. The company’s strategic acquisition and potential for revenue growth were overshadowed by supply chain disruptions, decreased gross profit, increased operating expenses, and a higher net loss.
Strategic Acquisition of G5 Infrared
LightPath Technologies announced its acquisition of G5 Infrared, marking a transformative step as the company shifts from purely manufacturing optical components to becoming a solutions and subsystem provider. This acquisition is set to align with the company’s strategic transition and is expected to play a pivotal role in its future growth.
Potential Large Contracts
Following the acquisition, G5 Infrared is poised to secure several substantial defense contracts. These contracts, moving from low rate initial production to full-scale production, could potentially generate $21 million to $27 million in revenue over the next two years, signaling a robust pipeline for LightPath.
Record Revenue Expectations
LightPath and G5 Infrared are projected to generate a combined revenue exceeding $55 million in the next year. This forecast represents a significant uptick from prior revenues, underscoring the financial impact of the recent acquisition and strategic shifts.
Advancements in Imaging Solutions
As LightPath transitions to higher average sales price products, the company is moving from selling lenses for single dollars to advanced cameras priced up to $500,000. This shift indicates a substantial increase in value creation and market positioning, aligning with the company’s strategic objectives.
Supply Chain Disruptions
Supply chain issues, particularly China’s export restrictions on germanium, have delayed shipments worth over $750,000. These disruptions pose a challenge to LightPath’s operational capabilities and timelines.
Decreased Gross Profit and Increased Operating Expenses
The company reported an 11% decrease in gross profit, down to $1.9 million, alongside a 12% increase in operating expenses. These financial pressures are attributed to elevated legal and consulting fees, as well as increased spending on sales and marketing.
Net Loss Increase
LightPath’s net loss for the quarter rose to $2.6 million, up from $1.7 million in the same quarter of the previous fiscal year. This increase was driven by the combination of lower gross profit and higher SG&A expenses.
EBITDA Loss
The company reported an EBITDA loss of $1.5 million, compared to a $0.5 million loss in the prior fiscal year. This increase in EBITDA loss is primarily due to decreased gross profit and heightened expenses.
Forward-Looking Guidance
LightPath Technologies provided optimistic guidance for the future. The strategic acquisition of G5 Infrared is anticipated to boost revenue significantly, with projections of exceeding $55 million in the next 12 months. The company foresees substantial revenue contributions from defense projects with major players like Lockheed Martin. Despite current supply chain challenges, LightPath is optimistic about fulfilling backlogged orders and capturing new market opportunities, aiming for enhanced gross margins and a long-term EBITDA margin goal of 15%.
In summary, LightPath Technologies is navigating a complex landscape of opportunities and challenges. While the acquisition of G5 Infrared and potential revenue growth are promising, the company must address significant issues like supply chain disruptions and increased operational costs. The earnings call painted a picture of cautious optimism, with strategic moves poised to position LightPath for future success.
