LightPath Technologies Q1 2027 Earnings Call Transcript

LightPath Technologies (NASDAQ:LPTH) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.

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Summary

LightPath Technologies reported a 38% year-over-year increase in revenue to $20.8 million, with gross margins improving to 41.4%, driven by a higher mix of assemblies and modules.

The company’s backlog reached a record $132.9 million, up 20% from the previous quarter, with $110.8 million expected for delivery within the next 12 months.

Strategic initiatives include reinvestment in new product development, particularly in cameras, infrared assemblies, and Black Diamond glass, with a doubling of R&D spending to $2 million.

LightPath completed its divestiture of operations in China, aligning with U.S. government requirements and strategic goals.

Future outlook is positive, with a focus on operational execution, expanding production capacity, and maintaining gross margins amid supply chain challenges.

Full Transcript

OPERATOR

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LightPath Technologies’ fiscal first quarter 2027 earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, November 10, 2026, and the earnings press release accompanying the 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 and 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 can 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 and 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 the prepared remarks, there will be a formal question-and-answer session. I would now like to turn our conference over to CEO Sam Rubin. Sam, the floor is yours.

Shmuel Rubin (President and CEO)

Thank you, operator. Good afternoon to everyone, and welcome to LightPath Technologies’ fiscal first quarter 2027 financial results conference call. Results of the first quarter are starting to show the outcome of the improvements to the operations we have been working on in the form of improved gross margins, as well as the continued positive momentum in the market in the form of growing backlog, and our focus on getting ready for the next stage of growth in the top line.

As evident in the growing 12-month backlog, backlog at the end of September was a record $132.9 million, up $22 million, or 20%, in a single quarter and up 54% from a year ago. That also represents a book-to-bill ratio of approximately 2.0 times; putting it another way, we booked roughly $2 of new orders for every dollar of product we shipped. About $110.8 million of that backlog is requested by customers for delivery within the next 12 months, which is a 30% growth over the same measure last quarter.

The 12-month backlog provides, of course, a strong indication of near-term revenue. The rest of the quarter followed the same pattern. Revenue grew 38% year over year to $20.8 million. Adjusted EBITDA was positive for the fifth quarter in a row at $1.3 million, and gross margin came in at 41.4%. The margin trajectory is consistent with what we have described previously, and we are further along. Assemblies and modules: Our cameras and optical assemblies, a central part of our strategy, were 51% of revenue this quarter compared to 40% a year ago. These products incorporate more of our proprietary technology and therefore capture more value, earning us higher margins as a result. Mix has been the biggest driver of our margin expansion, and we expect this trend to continue.

We also chose to reinvest in new product development. Spending more than doubled from a year ago to $2 million in the first quarter as we continue to invest in new product development of cameras, infrared assemblies, and Black Diamond glass. The latter is also funded through different government contracts to support development of glass, the latest of which was the Navy CLEAR program through the NSTXL Consortium. These investments are critical to our next phase of growth.

These R&D investments include, of course, the conversion of G5 cameras into Black Diamond but extend also beyond that. Last quarter we began shipping beta units of our new product line of long-wave infrared zoom lenses and cameras. As noted in our last call, this is a significant development, and I want to revisit it. G5 cameras to date have focused only on a certain segment of the overall infrared camera market. That is, G5 cameras are designed for long-range imaging from ground-based, mostly stationary installations, so those are larger, heavier systems and achieve the best overall performance in terms of detection range, but with the trade-off of being larger and heavier.

That is not a problem for stationary systems like counter-UAS or border towers, but it is not suitable for anything mobile such as airborne or even vehicle-mounted cameras. To that end, we have been investing in products to support those parts of the market too. For customers needing the performance of cooled cameras, we have been developing the Kestrel line of compact cooled cameras. Those cameras, competing with the likes of FLIR’s new Neutrino product line, are designed to fit into gimbals and payloads that have space and weight constraints.

Additionally, we have been designing a line of long-wave zoom lenses and zoom cameras, which we expect to sell at a fairly high volume because of the attractive price point of long-wave versus mid-wave systems, and for being likely the only company in the market able to deliver both of those types of cameras without using germanium. Leveraging our unique Black Diamond formulation to produce those types of cameras without the use of germanium optics is a key part of our strategy that is now starting to roll out in the form of new products.

This, we expect, will soon translate into another growth area in addition to G5’s traditional long-wave cameras that were driving much of the growth in the last few quarters. Now let me turn to the orders behind the continued growth of our backlog driving additional growth in the next few quarters, including some orders we received after quarter end. Most of them map directly to two of the three pillars we laid out at our investor day in February: Optical Assemblies and Infrared Camera Systems. I’ll start with counter-UAS. Since July 1, a leading counter-UAS and defense system supplier has placed more than $19 million of follow-on assembly orders with us — the $13 million we announced in July and another $6.3 million in October.

Altogether, that is twice what that customer ordered from us in the whole of fiscal 2026 and is part of a program we expect to keep growing. We expect to continue expanding our business with this customer, often described as a neo-prime, and it could become one of the largest customers in the next fiscal year. On the camera side, a global tech company placed an $11 million follow-on order for infrared cameras used in counter-UAS applications. What is most significant about this order is not its size, but the fact that the program includes a planned transition from germanium-based optics to Black Diamond over its life. That is exactly the type of conversion path we have been describing to you.

Turning to drones, two weeks ago after the quarter closed, we announced an order from a key defense customer for more than 50,000 optical assemblies for drone camera systems. The Department of Defense’s $1.1 billion drone dominance program is working to field hundreds of thousands of low-cost drones, and our allies are scaling as well. In addition to this initial 50,000-unit order, we expect to see more orders for optical assemblies for drones coming soon.

And to that end, we are investing in the production capacity. Our current capacity for those assemblies is just under 10,000 units a month, but we are working to increase that to several tens of thousands a month over the next 12 months, and we see potential demand could require capacity of as much as 100,000 assemblies a month down the road. The automation project we mentioned last time is a key part of that and is progressing well, as well as our investment in production.

Those orders, and all orders in our backlog, are fully funded orders, meaning none of them depend on a defense budget or any other budget to be passed. Recently we are often asked about this, so I will emphasize again that all orders on the backlog are firm, funded orders with their signed delivery dates. All of this is in addition to our existing programs of record and new product development that are all progressing to plan. While we often talk about these new programs, such as our new confidential airborne system, our different interceptor missiles, and such, it is important to note that for the most part, all of those new programs represent only a small part of our current revenue and backlog and do not represent yet the upside of revenue to come. The majority of our current revenue is by far existing recurring programs.

Turning to industry, the policy environment continues to tighten. The 2026 NDAA added germanium to the defense covered materials restrictions, with germanium sourcing restrictions beginning in December 2027. Separately, the 2026 NDAA directed the Department to develop and implement a strategy to eliminate its reliance on covered nations for optical glass and optical systems by 2030. Meanwhile, the suspension of China’s U.S.-specific export ban, which has been widely discussed in the media, does not, to our knowledge, apply to germanium.

Based on China’s published export data, it has not exported germanium to the United States and is now directing most of its germanium exports to Russia. This is probably a good point to segue to discussion on China. Last week we announced that we have completed our divestiture of all operations in China. This includes sales, manufacturing, and any other part of our operation. As of now, we can say LightPath has no facilities, no sales, and no operations in China, and because the buyer will stay a supplier to us for commercial products, we do not expect any disruption for our commercial customers.

Divesting our China operation was a key step in completing our strategic transition to where we are today. However, in addition to the realignment of strategy, this is also a requirement by the U.S. Government in order to be able to participate in certain programs. This milestone is now complete, and we are beginning to see the impact of that in some of our interactions with the government. Operational execution remains the theme of the year, whether capacity or supply chain. Growing at this rate, while the defense industry as a whole is also growing and many other companies are shifting the supply chain away from China, makes this even more challenging. First quarter revenue, as you can see, has come slightly below our expectations, mainly attributable to supply chain delays.

We have been putting significant effort into both our supply chain and growing our capacity and feel very confident in our ability to deliver on the $110 million backlog expected to deliver in the next 12 months, which will result, of course, in continued top-line growth and continued margin improvement and bottom-line profitability. To that end, our investment in our future and in our expected next stage of growth do not pertain only to capacity and product development. Last quarter we also welcomed two new executives to our leadership team. Micah Morelli, an internal promotion from the G5 team, took on the responsibilities of imaging system engineering, and Scott Palati, formerly from our key customer Anduril, joined us to head the G5 business. I am pleased to welcome both of them on board.

With that said, I will turn the call over to our CFO, Al Miranda, to walk through the first quarter financial results in more detail. Al, please go ahead.

Albert Miranda (Chief Financial Officer)

Thank you, Sam. I’ll keep my remarks brief and focused on key year-over-year financial highlights. Our earnings release issued this afternoon contains the full details, as will our 10-Q for the quarter, and both will be available on our investor relations website. For the first quarter of fiscal 2027, revenue increased 38% to $20.8 million compared to $15.1 million in the first quarter of fiscal 2026. Assemblies and modules were $10.5 million, or 51% of consolidated revenue, up 76%. Infrared components were $4.7 million, or 23% of revenue, up 15%, including approximately $1.1 million from AML. Visible components were $4.6 million, or 22% of revenue, up 19%. Engineering services were $0.9 million, or 4% of revenue.

Gross profit increased 92% to $8.6 million. Gross margin was 41.4% compared to 29.8% in the prior-year quarter, driven primarily by the higher mix of assemblies and modules. Sam elaborated on gross margins; all I can do is reiterate. We capture more value in assemblies and cameras through in-house glass and lens manufacturing, and that bears out in higher margins. Last point: $8.6 million in gross margin is a new milestone for us. Operating expenses were $10.8 million compared to $7 million a year ago. Two non-cash items are worth separating out. First, the change in fair value of acquisition earnout liabilities was $0.2 million, down from $1.3 million last year. This quarter’s amount relates to AML, which achieved its final earnout milestones during the quarter, so no AML earnout remains. The G5 earnout was fixed at $9 million in April and will be paid in January. As a result, we expect earnout remeasurements to have a minimal impact on our results going forward.

Second, stock-based compensation, which is included in SG&A, was $1.8 million compared to a year ago, primarily reflecting equity awards granted over the past year, including performance-based stock options granted to the senior management team in March. These are non-cash expenses, and their fair values are estimated in accordance with GAAP. Beyond those items, the increase in operating expense reflects investments we chose to make. New product development was $2 million, up from $0.9 million, as we added engineering staff for cameras, infrared assemblies, and new Black Diamond glass types.

The remaining SG&A growth reflects the addition of AML sales and marketing investment, IT spend driven by defense customers, cybersecurity standards, and new leadership hires. As a side note, operating expenses for Q4 fiscal year 2026 last quarter were $12.6 million. We believe the Q1 fiscal 2027 operating expense of $10.8 million is more indicative of our spending plan going forward. Net loss for the quarter improved to $1.7 million, or $0.02 per basic and diluted share, from a $2.9 million loss, or $0.07 per share loss, a year ago. Adjusted EBITDA was $1.3 million, or 6% of revenue, compared to $0.4 million, or 2% of revenue, in the prior-year quarter. This is, as Sam said, our fifth consecutive quarter of positive adjusted EBITDA.

Turning to the balance sheet, we entered the quarter with $82.9 million in cash and—sorry—we ended the quarter with $82.9 million in cash and cash equivalents compared to $93.2 million at June 30th. Cash used in operations was $8.3 million, driven by a $10.2 million investment in working capital. The largest component was inventory, which increased $13.5 million to $31.5 million, primarily in raw materials and work in process. We also made advanced purchases of critical materials to support the backlog.

Those purchases also protect our delivery schedules against delays and thinly stretched global supply chains. Accounts receivable was neutral for the quarter, and a higher accounts payable partially offset the inventory build. Our fiscal 2027 plan anticipated working capital growth, and we are executing to that plan in a growth phase. Building inventory ahead of a record backlog is a leading indicator of revenue to come. Capital expenditures were $1.9 million in cash plus approximately $0.6 million of equipment acquired through financed leases, directed primarily at manufacturing capacity, including glass fabrication and metrology.

As we discussed last quarter, we expect fiscal 2027 capital spending to continue to grow as we add capacity against the backlog. The last piece of the cash position is a reminder that the final G5 earnout payment of $9.0 million—$6.3 million in cash and $2.7 million in shares—is scheduled for the first half of January 2027. At this point in time we are comfortable with our liquidity position and its ability to drive the next stage of our growth. Our cash position and lack of significant debt puts us in a good position to actively pursue M&A opportunities in the marketplace. We seek organizations that are pre-inflection point, are strategic, accretive, and have a realistic valuation. This enables us to develop and capitalize on the target’s growth plans.

Backlog at September 30 was a record $132.9 million, up 20% from $110 million at June 30 and up 54% from $86 million a year ago. Approximately $110.8 million of that is requested by customers for delivery within the next 12 months. Short-term backlog is driving short-term and midterm capacity requirements. This fiscal year we are investing to get ahead of the backlog, and anticipated demand is still to come. As we kick off fiscal year 2027, we are again facing a substantial year-over-year growth spurt—similar, if not more, than last year.

The LightPath Technologies team is well aware of what’s ahead of us and the effort needed to succeed. We have a talented and dedicated team. Our priorities are straightforward: 1) deliver against the backlog on time, 2) keep margins where they are as volumes rise, and 3) spend on capacity where the order book justifies it. With that, I’ll turn the call back to Sam for closing remarks.

Shmuel Rubin (President and CEO)

Thank you, Al. First quarter is beginning to show the impact of our strategy not only on top line but also on gross margin while continuing to grow the backlog of future deliveries. While we continue to grow, we are also starting to see operational improvements translate into margins and financial results that we expect will continue to improve as we grow further. What remains is execution, bringing new capacity online, delivering on schedule, and turning a record backlog into revenue.

We have the orders, the balance sheet, and with the addition to our imaging system leadership, we have a strong team in place to get it done. I want to thank our employees for their work this quarter and for delivering the results that allow us to grow and become a trusted partner in the world of infrared imaging. With that, I’ll turn the call over to the operator to begin Q&A. Operator.

OPERATOR

Thank you, Sam. At this time, if you would like to ask a question, please press star one on your telephone keypad. To remove yourself from the queue at any time, please press star two. Once again, that is star one to ask a question. And we will take our first question from Richard Shannon with Craig-Hallum. Please go ahead.

Richard Shannon (Analyst)

Great. Thanks, Sam and Al, for letting me ask a couple questions here. My first one is on one of the most interesting parts of your income you just reported here, that being gross margins. You’ve had a nice track the last few quarters here, but first time you’ve reached 40-plus percent here. I think in Al’s prepared remarks towards the end you talked about keeping margins the same. I’m not sure if he’s referring to gross margins or not, but I’d love to hear how we should think about gross margins going forward here in the context of what I expect is going to be a greater mix of sub-assemblies and modules going forward.

Shmuel Rubin (President and CEO)

So. Hey Richard, how are you? We’re thinking margins going forward—start with the number four. We anticipated that if we had the mix like we did this quarter, assemblies, modules, and cameras greater than 50%, that that would put us over the top. And that’s what happened this quarter.

Richard Shannon (Analyst)

Okay, perfect. Second question is on kind of the broader supply chain capacity increase you’re going through. I think you, Sam, you alluded to a little bit, revenues a little bit shorter than what you wanted because of supply chain. Can you delineate what that was for? And then as you look forward the next, say, two to four quarters here, to what degree do you see supply chain and/or capacity as a risk to executing on the backlog?

Shmuel Rubin (President and CEO)

Yeah, supply chain is very much across the board, to be honest. But there were some specifics. Motors were definitely a sore point, which is improving significantly. Some of the optics for G5 is not yet produced in-house and so depend on external vendors which, just like us and like many other vendors, are at capacity many times, and therefore any small slips there can impact it. We also have different electronics and detectors which, you know, we pretty much have been shipping as they come in.

So we’re also seeing that we are stressing some of our vendors to sort of their limit. But we’ve been working pretty hard on that. About three months ago, four months ago, we added a director of supply chain that hit the ground running and has been developing alternative sources for places we have single source. We’ve been stocking up places where we can, which is—you can see that in the increased inventory of about $13 million. So I can’t guarantee it will not be a problem.

But definitely in Q2, the quarter we’re in now, I think we’re much, much more on top of it than we were last quarter.

Richard Shannon (Analyst)

Okay, good. That’s good to hear. My last question—I’ll jump on the line here—is hitting on a topic that you touched on briefly last quarter and then, Sam, you decided to emphasize that a little bit more, specifically the long-range infrared products, including the zoom lenses. I guess a few questions I’d love to ask here: kind of put this in the context of your mid-range cooled products—maybe applications. It sounds like some of this will be drones, but I’d love for you to kind of lay out where all you’re seeing this.

And to what degree do we have products that are ready and are already building in a backlog? Thank you.

Shmuel Rubin (President and CEO)

Yes, we do have some that are ready. They’re not yet really very significant in the backlog—meaning might be a million or two but not big enough. Applications, beyond the obvious ones which are sort of airborne systems like gimbals and pan-tilts that go on drones, on large drones, on planes and such: these cameras get integrated into remote weapon systems, into active counter-UAS systems such as lasers for shooting down the drones, the same remote weapon systems for the same purpose.

Also, in some international use cases the customer prefers the long-wave cameras because of export control restrictions. So long-wave tend to be far less restricted in export control. And therefore, even though in a cost point of view you can maybe buy a short-range or a mid-range mid-wave camera for a similar price, that camera would be constrained—would have some export restrictions that the long-wave doesn’t have on it. Also, the mid-wave cameras, because they have a cryogenic cooler, have on them a lifetime usually of two to three years, which isn’t a big deal here in the U.S., but if we’re selling a camera to a Middle East country or someone in Africa that is installing it out in the field, they don’t want to need to take it apart every two, three years, send it all the way back to the U.S. for repair and so on. So these products are really addressing not only the tradeoff of weight and size, but also some simplified export and simplified maintenance.

Richard Shannon (Analyst)

Okay, perfect. That’s a great perspective. That is all from me, guys. Thank you.

Shmuel Rubin (President and CEO)

Thank you, Richard.

OPERATOR

Thank you for your question. Once again, if you would like to ask a question, please press star one on your telephone keypad now. And we will take our next question from Clark Jeffries with Piper Sandler. Please go ahead.

Clark Jeffries (Analyst)

Thank you for taking the question. Just curious, you know, big 50,000 optical assembly order here in October, you mentioned some sort of line of sight down the road to 100,000 assemblies per month in that industry. Just any kind of comments on when you’d expect additional waves of these drone dominance orders, or what’s the connecting kind of line between one-off tens of thousands of assemblies to a pretty reliable cadence of, you know, six figures per month?

Shmuel Rubin (President and CEO)

Yeah, so right now the orders are coming in in chunks, and we expect them to continue like that for the short term, meaning we probably will soon see more orders of that size: 30, 40, 50,000 assemblies, maybe more every time. You know, at a cadence of 10,000 a month, which is roughly what we can produce now, we’re talking about orders that basically we fulfill within a few months, let’s say half a year. So from that specific customer I’d expect a similar cadence, so maybe every six months such an order or so.

What we’re looking at and starting to discuss with our customers is more long-term strategic supply agreements. So we’re not asking for, necessarily, give us a three-year order for, you know, 500,000 assemblies, but rather instead give us some forecast, give us some frameworks that we can work towards, and we will then build the capacity accordingly. The number of 100,000 sounded very high when it was first mentioned to us a few months ago. But if you look now at some of the investments Office of Strategic Capital made very recently in PDW and a couple of other companies, many of those investments are talking about capacity of a million drones a year. So while not all of them are equipped with thermal imaging, especially in the low-cost one-way drones or FPV drones, not all of them have thermal imaging. I’d say the majority are. So 100,000 is a real number, and we have very concrete plans towards getting there.

Clark Jeffries (Analyst)

Perfect. And then I just wanted to follow up on that. The funded prototype agreement under CLEAR, you know, what are the kind of outcomes that we should be watching for? You know, what kind of timeline would be reasonable for that program? Just sort of what is the output that we would expect from that germanium program?

Shmuel Rubin (President and CEO)

Yes, that program is a bit complicated in a sense. It has two parts to it. One is a technology development, so further advancing our methods of making some of those materials, whether to reduce the cost of them or improve certain aspects of the materials that the Navy wants to see improved. The other part of it is specific programs of record, and there I can’t go into too many details, but I would say that throughout the programs are embedded a few deliveries of prototypes from us that pertain to existing programs of record inside DoD that DoD would like to see switched over to Black Diamond.

So as we start delivering those prototypes—and we will not be able to share anything about this publicly—but as we start delivering it, which will be a cadence over the next two years, we expect to see them evaluated and possibly awarded as a program. So there’s a two-element to it. One is technology development, and in addition to that, second is a way of accelerating a redesign of some existing programs of record that are currently suffering from the shortage in germanium, and it’s sort of, I guess, this is a way of achieving it faster than normal.

Clark Jeffries (Analyst)

Perfect. Thank you very much.

OPERATOR

Thank you for your question. At this time, there are no further questions in the queue. I would like to turn the call back to CEO Sam Rubin.

Shmuel Rubin (President and CEO)

Okay. Thank you very much. I appreciate everyone’s time. We look forward to seeing everyone that will join us on our annual—sorry, shareholder—meeting next month and to report the progress on our implementation of the strategy. Thank you and good night.

OPERATOR

Thank you for joining LightPath Technologies fiscal first quarter 2027 earnings conference call. You may now disconnect your lines.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.