Press release·03/03/2025 08:53:38

LightPath Technologies: Navigating Challenges and Charting a Strategic Course

Introduction

LightPath Technologies is a global optics company with a rich history dating back to 1985. Headquartered in the United States, the company has major facilities in China and Latvia, allowing it to serve customers worldwide. Over the years, LightPath has evolved from a limited partnership to a publicly traded corporation, continuously expanding its capabilities and product offerings.

Subsidiaries and Acquisitions

LightPath’s growth strategy has involved strategic acquisitions to bolster its capabilities. In 2005, the company formed a wholly-owned subsidiary in China, LPOI, to provide sales and support functions. This was followed by the establishment of LPOIZ in 2013, which serves as the company’s primary manufacturing facility in China.

In 2016, LightPath acquired ISP and its wholly-owned subsidiary, ISP Latvia. ISP is a vertically integrated manufacturer of infrared products, while ISP Latvia specializes in high-precision optics. More recently, in July 2023, the company acquired Visimid Technologies, an engineering and design firm focused on thermal imaging, night vision, and IoT applications.

Product Groups

LightPath’s product offerings are divided into four main groups:

1. Infrared Components: This group includes both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. The company’s proprietary BlackDiamond glass technology enables the production of high-performance, cost-effective infrared optics.

2. Visible Components: This product group consists of visible precision molded optics with various applications. LightPath’s glass molding technology allows for the production of both low and high volumes of aspheric optics.

3. Assemblies and Modules: This group comprises other value-added products, including both infrared and visible components, such as mounted lenses, optical assemblies, collimator assemblies, and custom specialty optics.

4. Engineering Services: This represents the services LightPath provides to customers through product development agreements, where the company engineers new products to fit the customer’s specific needs.

Growth Strategy

LightPath is undergoing a strategic shift, transitioning from a pure component manufacturer to a supplier of imaging subsystems and systems. This transition is driven by the company’s core technological differentiators, such as its BlackDiamond glass and proprietary molding technologies, which allow it to provide more value-added solutions to customers.

The company aims to leverage its in-house domain expertise in photonics, advanced optical technologies, and manufacturing capabilities to become a partner for its customers’ optical engine needs. By providing tailored optical solutions and subsystems, LightPath seeks to build long-term supply relationships and capture greater value.

Financial Performance

Revenue

In the second quarter of fiscal 2025, LightPath’s revenue was approximately $7.4 million, a 1% increase compared to the same quarter of the prior fiscal year. This growth was driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.

For the first half of fiscal 2025, revenue was approximately $15.8 million, a 3% increase compared to the same period of the prior fiscal year. The increase was again driven by growth in visible components and engineering services, while infrared components and assemblies and modules saw declines.

The decrease in infrared components revenue was primarily due to a reduction in sales against a large annual contract for Germanium-based products, which the company decided not to renew. This decision was made to reduce the risk of supply chain disruptions and to focus on converting customers to LightPath’s proprietary BlackDiamond materials.

Gross Profit and Margin

In the second quarter of fiscal 2025, gross profit was approximately $1.9 million, a decrease of 11% compared to the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 26%, down from 30% in the same quarter of the prior year. The decrease in gross margin was primarily due to differences in product mix and some manufacturing yield issues in infrared components, which were resolved late in the second quarter.

For the first half of fiscal 2025, gross profit was approximately $4.8 million, an increase of 6% compared to the same period of the prior fiscal year. Gross margin as a percentage of revenue was 30%, up from 29% in the same period of the prior year. The increase in gross margin was primarily due to a more favorable product mix, with increases in both visible components sales and engineering services, which typically have higher margins than infrared components.

Expenses and Net Loss

Selling, general, and administrative (SG&A) costs increased by 17% in the second quarter of fiscal 2025 and 20% in the first half of fiscal 2025, compared to the same periods of the prior fiscal year. This increase was primarily due to higher legal and consulting fees related to business development initiatives, including $175,000 in costs related to the acquisition of G5 in the second quarter and $585,000 in the first half of the year.

New product development costs increased by 26% in the second quarter of fiscal 2025, driven by materials consumed for continued development of infrared assembly products. For the first half of the year, new product development costs were approximately the same as the prior year, as an increase in material spend was offset by a decrease in personnel costs.

Amortization of intangibles decreased in both the second quarter and first half of fiscal 2025, due to the amortization of the backlog intangible associated with the Visimid acquisition reaching full amortization during the first quarter.

Net loss for the second quarter of fiscal 2025 was approximately $2.6 million, or $0.07 per share, compared to $1.7 million, or $0.05 per share, in the same quarter of the prior fiscal year. For the first half of fiscal 2025, net loss was approximately $4.2 million, or $0.11 per share, compared to $3.1 million, or $0.08 per share, in the same period of the prior fiscal year. The increases in net loss were primarily attributable to lower gross profit, higher SG&A and new product development costs, and higher interest expense.

Potential Impact of Economic Conditions and Policies in China

LightPath’s operations in China expose the company to economic, political, legal, and social conditions in the country. China’s economic growth has slowed in recent years, which has led to lower demand for the company’s products in China and lower revenues and net income for its Chinese subsidiaries.

Additionally, China has announced export limitations on Germanium and Gallium, two materials commonly used in infrared optical components. This has resulted in supply disruptions and significant price increases for Germanium. As a result, LightPath has proactively canceled customer orders for Germanium-based products and is working with customers to convert their systems to use the company’s proprietary BlackDiamond materials instead.

Further, the U.S. and China have implemented additional tariffs on goods imported from each other, which could have a negative impact on LightPath’s operations and financial results. The company has strategies in place to mitigate the impact of these tariffs, but the long-term effects remain uncertain.

Liquidity and Capital Resources

As of December 31, 2024, LightPath had working capital of approximately $5.4 million and total cash and cash equivalents of approximately $3.2 million, with 60% of the cash held by its foreign subsidiaries.

The company has access to additional capital through its shelf registration statement and at-the-market equity program, as well as a recent public offering that raised approximately $9.2 million in net proceeds. Additionally, in February 2025, LightPath announced a strategic acquisition and related financing, including the issuance of a new series of preferred stock.

Cash used in operations was approximately $2.4 million for the first half of fiscal 2025, compared to cash provided by operations of $0.9 million in the same period of the prior fiscal year. The decrease was primarily due to the net loss, coupled with payments against accounts payable and accrued liabilities, as well as increases in prepaid expenses and accounts receivable.

Capital expenditures were $0.2 million in the first half of fiscal 2025, compared to $1.5 million in the same period of the prior fiscal year, which included costs related to the expansion of the Orlando Facility and the acquisition of Visimid.

Key Performance Indicators

LightPath’s management regularly reviews several key performance indicators to assess the company’s business and make operational decisions. These include:

1. Sales Backlog: LightPath’s total backlog at December 31, 2024 was approximately $19.8 million, a decrease of 4% compared to the prior year, but an increase of 3% from the end of fiscal 2024. The backlog fluctuates based on the timing of multi-year contract renewals and shipments against these orders.

2. Revenue by Product Group: The company tracks revenue performance across its four product groups, with visible components and engineering services showing growth, while infrared components and assemblies and modules experienced declines.

3. EBITDA: LightPath uses EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as a non-GAAP measure to evaluate its relative performance. EBITDA was a loss of approximately $1.5 million in the second quarter of fiscal 2025 and a loss of $2.0 million in the first half of the year, compared to losses of $0.5 million and $0.9 million, respectively, in the same periods of the prior fiscal year.

Outlook and Conclusion

LightPath is navigating a challenging environment, with economic conditions and trade policies in China impacting its operations and financial performance. The company’s strategic shift towards providing more engineered solutions and subsystems, leveraging its proprietary technologies, is a promising path forward, but it will require continued investment and execution.

The company’s recent acquisitions, such as Visimid Technologies, are expected to enhance its capabilities and position it for growth in emerging markets like thermal imaging and night vision. However, the integration and realization of synergies from these acquisitions will be critical to the company’s success.

Overall, LightPath is facing a mix of headwinds and opportunities. Its ability to navigate the changing market landscape, effectively manage its supply chain, and execute on its strategic initiatives will be key to driving long-term profitability and shareholder value.