First Quarter Highlights:
- Revenue for the first quarter of fiscal 2014 was $2.81 million compared to $2.89 million for the first quarter of fiscal 2013. Revenue first quarter of fiscal 2013 benefited from a large purchase order related to work under the Defense Advanced Research Projects Agency’s (“DARPA”) development program.
- Revenue for our precision molded optics increased 6% from the first quarter of 2013.
- Gross margin for the quarter increased to 47% as compared to 41% for the first quarter of fiscal 2013.
- Cash on hand as of September 30, 2013 was $2.88 million as compared to $1.57 million on June 30, 2013.
- Net loss was $80,000 or $0.01 per common share, basic and diluted, for the first quarter of fiscal 2014 compared to net income of $101,000 or $0.01, basic and diluted, for the first quarter of fiscal 2013.
- Adjusted earnings before interest, taxes, depreciation, amortization and change in fair value of warrant liability (“Adjusted EBITDA”) was approximately $168,000 for the first quarter of fiscal 2014.
- Backlog increased by 7% from June 30, 2013 to approximately $4.42 million as of September 30, 2013.
“Other areas of progress include measures to improve profitability. Gross margin has consistently improved, with an increase of 31% from the gross margin for fiscal 2012 compared to our most recently completed quarter. The gross margin in the first quarter of fiscal 2014 was 47%, a substantial improvement from 36% for fiscal 2012 and 44% for fiscal 2013.”
“The combination of higher top line performance and improved profitability has led to an increase in cash flow generation. As compared with the average cash generated by operations of approximately $101,000 per quarter in fiscal 2012 and approximately $140,000 per quarter in fiscal 2013, we generated cash flow from operations of approximately $251,000 in the first quarter of fiscal 2014. Sales volume of precision molded optics was 530,000 lenses in the fist quarter of fiscal 2014, as compared to an average of 408,000 lenses per quarter in fiscal 2012, and an average of 550,000 lenses per quarter in fiscal 2013.”
“These improvements have been partially offset by the lower prices associated with our shift to high volume applications, albeit at very good margins. As the low-cost, high volume business segment becomes a larger percentage of our overall business, the average selling prices, which are on average approximately 13% lower, impacts our rate of revenue growth. In the first quarter of fiscal 2014, our improved cash flow allowed us to further invest in the expansion of our global sales and marketing efforts, increase our production capacity, and broaden our precision molded optics and infrared product lines. These investments better position the Company to take advantage of anticipated sales growth.”
“As a result, our expenses were approximately $176,000, or 15%, higher in the first quarter of fiscal 2014 as compared to the first quarter last year. One half of this increase was due to a reclassification of several members of the R&D staff whose salaries were charged to cost of goods sold while working on the DARPA project last year and an increase in fees and sales tax on capital purchases for investments increasing our capacity to support current and anticipated growth. The remainder of the increase was for continued investment in our infrared business. These investments in our future, which led to a modest loss in the first quarter, are a necessary trade-off such that we may be positioned to capitalize on numerous market expansion opportunities that we believe will lead to meaningful returns on investment going forward.”
“New orders received in the first quarter of fiscal 2014 recovered from the fourth quarter of fiscal 2013 to $3.5 million, but a de-booking of $300,000 from one of our digital projector customers, who cancelled the order due to technical issues unrelated to the optics, brought net bookings to $3.2 million. This strong order performance increased our 12-month backlog as of September 30, 2013 to $4.42 million, an increase of 7% as compared to June 30, 2013.”
“In our fourth quarter of fiscal 2013 we outlined the major market drivers for our business which primarily revolve around optical network expansion to support increasing bandwidth demand. We continue to see this growth in our business, particularly in China and other Asia/Pacific markets. New orders from China sales increased 33% in the first quarter of fiscal 2014 as compared to last year’s quarterly average and we anticipate this to continue to grow during the balance of this fiscal year. We remain confident in our growth prospects going forward with burgeoning demand for our precision molded optics and increasing interest in our infrared product line.”
Financial Results for Three Months Ended September 30, 2013
Revenue for the first quarter of fiscal 2014 totaled approximately $2.81 million compared to approximately $2.89 million for the first quarter of fiscal 2013, a decrease of 3%. The decrease from the first quarter of the prior fiscal year was attributable to revenue in the prior period of $253,000 for a large purchase order from a customer in connection with the DARPA Low Cost Thermal Imaging Manufacturing Program, partially offset by an increase in sales for the Company’s precision molded lenses for the telecommunications market.
Revenue for precision molded optics increased 6% compared to the first quarter of fiscal 2013. Growth in sales for the next several quarters is expected to be derived primarily from the precision molded lens product line, driven by the telecommunications sector’s need for expanded infrastructure to support mobile internet demand; the industrial tool sector, which is benefiting from an improving Chinese market; demand for fiber laser delivery systems; and entry into the digital projection market. Infrared products, now being designed and introduced, are expected to accelerate the Company’s growth more meaningfully during the balance of fiscal 2014.
The gross margin as a percentage of revenue in the first quarter of fiscal 2014 was 47%, up from 41% in the first quarter of fiscal 2013 and an improvement from 45% in the fourth quarter of fiscal 2013. Total manufacturing costs of $1.49 million decreased by approximately $223,000 in the first quarter of fiscal 2014 as compared to the same period of the prior fiscal year due to a decrease of $166,000 in direct costs associated with the DARPA related purchase order and lower coating costs for molded optics.
Selling, general and administrative expenses were $1.08 million for the first quarter of fiscal 2014, an increase of approximately 10% from the prior quarter. Total costs and expenses were $1.38 million in the first quarter of fiscal 2014, an increase of $177,000, or nearly 15%, from $1.20 million in the same period of the prior year. The increase in expenses reflects the Company’s growth strategies that include a global sales and marketing expansion, as well as new product development expenses which increased 39% year-over-year. New products for the infrared business include lines for thermal imaging cameras, gas sensing devices, night vision systems, automotive driver awareness systems, thermal weapon gun sights and infrared counter measure systems, among others. Total operating loss for the first quarter of fiscal 2014 was approximately $62,000 as compared to a loss of $27,000 for the same period in fiscal 2013.
In the first quarter of fiscal 2014, the Company recognized a non-cash expense of approximately $19,000 related to the change in the fair value of derivative warrants issued in connection with a private placement of securities in June 2012. In the first quarter of fiscal 2013, the Company recognized non-cash income of $96,000 for the change in fair value of these warrants. The warrants have a five year life and this fair value will be re-measured each reporting period until the warrants are exercised or expire.
Net loss for the first quarter of fiscal 2014 was $(80,000) (including the $19,000 non-cash expense for the change in the fair value of the warrant liability) or $(0.01) per basic and diluted common share, compared with net income of $101,000 (including the $96,000 non-cash income for the change in the fair value of the warrant liability) or $0.01 per basic and diluted common share for the same period in fiscal 2013. Non-GAAP net loss, excluding the change in the fair value of the warrant liability, for the first quarter of fiscal 2014 was $(61,000) or $0.00 per share compared to non-GAAP net income of $5,000 or $0.00 per share in the first quarter of fiscal 2013.
Weighted-average basic shares outstanding increased to 13,567,712 in the first quarter of fiscal 2014 from 11,771,902 in the first quarter of fiscal 2013. The increase in weighted-average shares outstanding was primarily due the issuance of shares of common stock related the conversion of debentures to common stock, exercises of warrants, and shares issued for the Company’s employee stock purchase plan.
Cash and cash equivalents totaled approximately $2.88 million as of September 30, 2013 from $1.57 million at the beginning of the fiscal year. The increased cash balance led to an improvement in the Company’s current ratio as of September 30, 2013 which was 4.06:1 as compared to 3.75:1 as of June 30, 2013. Total stockholders’ equity as of September 30, 2013 was approximately $6.99 million compared to $5.43 million as of June 30, 2013.
As of September 30, 2013, the Company’s 12-month backlog was $4.42 million compared to $4.14 million as of June 30, 2013.
Investor Conference Call and Webcast Details:
LightPath will host an audio conference call and webcast on Thursday, November 7, at 4:30 p.m. EDT to discuss the Company’s financial and operational performance for the first quarter of fiscal 2014.
Conference Call Details
Date: Thursday, November 7, 2013
Time: 4:30 p.m. EDT
Dial-in Number: 1-800-870-4263
International Dial-in Number: 1-412-317-0790
It is recommended that participants dial-in approximately 5 to 10 minutes prior to the start of the call. A transcript archive of the conference call will be available for viewing or download from the Company’s website at www.lightpath.com shortly after the call is concluded.
About LightPath Technologies
LightPath manufactures optical products including precision molded aspheric optics, GRADIUM® glass products, proprietary collimator assemblies, laser components utilizing proprietary automation technology, higher-level assemblies and packing solutions. The Company's products are used in various markets, including industrial, medical, defense, test and measurement and telecommunications. LightPath has a patent portfolio that has been granted or licensed to it in these fields. For more information visit www.lightpath.com.
LightPath prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The discussions of the Company’s results as presented in this release include use of non-GAAP measures “EBITDA” and “gross margin,” as well as an adjusted Non-GAAP net income. Gross margin is determined by deducting the cost of sales from operating revenue. Cost of sales includes manufacturing direct and indirect labor, materials, services, fixed costs for rent, utilities and depreciation, and variable overhead. Gross margin should not be considered an alternative to operating income or net income, which is determined in accordance with GAAP. The Company believes that gross margin, although a non-GAAP financial measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the Company’s cost structure and provides funds for our total costs and expenses. The Company uses gross margin in measuring the performance of its business and has historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner.
EBITDA is a non-GAAP financial measure used by management, lenders and certain investors as a supplemental measure in the evaluation of some aspects of a corporation's financial position and core operating performance. Investors sometimes use EBITDA as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation, amortization, loss on extinguishment of debt, change in fair value of warrants and interest expense. EBITDA also does not include changes in major working capital items such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not a good indicator of a business’s cash flows. The Company uses EBITDA for evaluating the relative underlying performance of its core operations and for planning purposes. The Company calculates EBITDA by adjusting net loss to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term "Earnings Before Interest, Taxes, Depreciation and Amortization" and the acronym "EBITDA." EBITDA calculations can be found at the end of the tables that follow.
Non-GAAP net income excludes the non-cash impact from mark-to-market adjustments related to the Company’s warrants issued in connection with the Company’s private placement in June of 2012. The Company believes that this non-GAAP measure is helpful in understanding the Company’s underlying operating results. Non-GAAP net income is not in accordance with, or an alternative to GAAP net income (net loss) and may not be comparable to information provided by other companies.
This news release includes statements that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our ability to expand our presence in certain markets, future sales growth, continuing reductions in cash usage and implementation of new distribution channels. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, factors detailed by LightPath Technologies, Inc. in its public filings with the Securities and Exchange Commission. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.