Blueprint
For Immediate Release
LightPath Technologies Reports Financial Results for
Fourth Quarter and Fiscal 2019
ORLANDO,
FL – September 12, 2019 – LightPath
Technologies, Inc. (NASDAQ: LPTH) (“LightPath,”
the “Company,” or “we”), a leading
vertically integrated global
manufacturer, distributor and
integrator of
proprietary optical
and infrared components and high-level
assemblies, today announced financial results for its fourth
quarter and fiscal year ended June 30, 2019.
Fiscal 2019 Fourth Quarter and Full Year Highlights:
●
Revenue for the
fourth quarter of fiscal 2019 was $8.7 million, an increase of 8%,
as compared to $8.1 million in the fourth quarter of fiscal 2018.
Revenue for the full year was $33.7 million for fiscal 2019, an
increase of 4%, as compared to $32.5 million in fiscal
2018.
●
12-month backlog
was $17.1 million at June 30, 2019, an increase of 33%, as compared
to $12.8 million at June 30, 2018.
●
Net loss for the
fourth quarter of fiscal 2019 was $1.8 million, compared to a net
loss of $807,000 for the fourth quarter of fiscal 2018. The fiscal
2019 period includes non-recurring charges of $845,000 relating to
the relocation of our New York facility (the “Irvington
Facility”) and a non-cash reversal of $406,000 of income tax
benefits recorded in the first half of fiscal 2019, due to a change
in the Company’s estimated utilization of net operating loss
(“NOL”) carryforward benefits for fiscal
2019.
●
EBITDA* loss for
the fourth quarter of fiscal 2019 was $219,000, compared to an
EBITDA loss of $269,000 in the fourth quarter of fiscal
2018.
●
Capital
expenditures, including equipment financed through capital leases,
totaled $2.5 million for fiscal 2019, a decrease of 25%, as
compared to $3.3 million in the prior fiscal year. Capital projects
continue to support global growth initiatives and product
development, including enhanced capacity for infrared
(“IR”) products.
●
Total debt,
including capital leases, was $6.6 million at June 30, 2019, a
decrease of 11% as compared to $7.4 million at June 30,
2018.
●
Cash and cash
equivalents were $4.6 million at June 30, 2019, compared to $6.5
million at June 30, 2018. The decrease in cash of $1.9 million, or
29%, from the prior year end is primarily related to capital
expenditures and debt reduction.
* This
press release includes references to non-GAAP financial measures.
Please see the heading “Use of Non-GAAP Financial
Measures” below for a more complete explanation.
Management Comments
Jim
Gaynor, President and Chief Executive Officer of LightPath,
commented, “In the fiscal 2019 fourth quarter and full year,
LightPath experienced encouraging market acceptance of its
diversified portfolio of visible and IR lenses. While fiscal 2019
revenue growth for IR products was 8% and precision molded optics
(“PMO”) products was 4% (19% and 4%, respectively, for
the fourth quarter of fiscal 2019), it was not as high as we had
expected. We believe three factors negatively impacted our 2019
performance:
1.
Relocation of the
Irvington Facility: We believed that we would not be able to expand
the Irvington Facility to meet the anticipated IR volume growth and
certainly would not have the capacity to pursue defense IR
opportunities. We decided to relocate the Irvington Facility
to our facilities in Orlando, Florida and Riga, Latvia. In
connection with this relocation, we expended $1.2 million in fiscal
2019, $845,000 of which was in the fourth quarter of fiscal 2019.
These costs are expected to be more than offset with savings of at
least an equal amount in fiscal 2020, and will position LightPath
for more IR volume. In addition, because the Orlando facility is
ITAR certified, we can now participate in U.S. defense-related IR
opportunities.
2.
Impact of tariff
increases: Our China facility exports about 55% of its production.
In fiscal 2019, we paid approximately $940,000 in tariffs. This
represents an increase of $400,000 as compared to tariffs paid in
fiscal 2018, $175,000 of which was incurred in the fourth quarter
of fiscal 2019. We are evaluating and implementing several
strategies that we believe will mitigate most of the impact of
these tariffs starting in the second quarter of fiscal 2020,
assuming no further changes are made to the U.S. trade
policy.
3.
Tax impact: In the
fourth quarter of fiscal 2019, we were impacted by the reversal of
a non-cash deferred tax asset benefit that we took in the first
half of 2019. Since our U.S. entities incurred a loss for fiscal
2019, we will not be able to utilize this benefit within the fiscal
year and, therefore, reversed the benefit recorded in the first
half of fiscal 2019 during the fourth quarter in the amount of
$406,000.”
Mr.
Gaynor continued, “We also had several disappointing
operational impacts in fiscal 2019 that were not managed
effectively, ultimately impacting our financial
performance:
1.
Demand generation:
While we did increase the 12-month backlog to record levels, we
were unable to significantly increase our volume of customers to
support our fiscal 2019 plan expectations.
2.
Demand fulfillment:
The length of the IR sales and manufacturing cycles are much longer
than our PMO cycles, and it impacted our scheduling and delivering
of orders beginning in the second half of fiscal 2019.
3.
The relocation of
the Irvington Facility and moving those operations to our Orlando,
Florida and Riga, Latvia facilities, gave rise to additional and
redundant costs, as well as manufacturing inefficiencies,
especially in the coatings area which impacted our IR gross
margins. However, because of our prior investments in BD6
materials, we were able to offset some of those cost
impacts.”
“On
a more positive note, there are four main points that we want to
highlight from our results for fiscal 2019:
1.
Our IR product
group continues to grow rapidly with the addition of our BD6
material system and the releases of many new products, including a
family of thermal imaging lens assemblies.
2.
Our PMO product
group remains stable, with moderate growth driven by 5G
demand.
3.
We expect to
benefit significantly from the savings generated by closing the
Irvington Facility beginning in fiscal 2020.
4.
We have sufficient
cash flow to fund operational growth through continued investments
in product development, manufacturing capacity, and expansion of
customer base.”
Mr.
Gaynor continued, “We have laid out several initiatives to
improve our financial performance. Our business model is to provide
high quality, low cost, innovatively designed products across a
broad array of markets, at the fastest total time to market
possible. We track and report revenue by three major product groups
(PMO, IR optics, and specialty products), which are supported by
three distinct product capabilities: molded optics (visible and
IR), thermal imaging optics, and custom optics. While each of these
product capabilities have very different design, manufacturing, and
financial models, they all fit our overall business model. To
address the demand generation and fulfillment issues and continue
to grow our revenue streams, we have commenced a number of actions
to ensure we can proactively take maximum advantage of our
capabilities. First, we have created the new position of Chief
Operating Officer to better balance supply to demand by combining
sales, operations, and engineering under a single leader. Second,
we have staffed a product management function for each major
product capability. Product managers are responsible for managing
each product portfolio and target the most profitable high-growth
opportunities that align with our capabilities. Third, we will be
making further marketing knowledge investments by creating a new
senior executive position responsible for strategic business
development and assessing industry optical lens requirements.
Collectively, these organizational changes and investments are
designed to improve our execution and reduce time to market, which
we believe will yield more profitable growth.”
“Our
vision is to be the most competitive supplier of optical lenses
that will ultimately enhance value for our stockholders. Our
strategy going forward is to position LightPath at the intersection
of our unique competencies and the optical lens requirements of our
target industries, with the shortest time to
market.”
“Our
facility consolidation and other previously announced
organizational changes are expected to allow for the investments in
marketing and product management while still reducing total
operating costs and expenses and improving EBITDA*. EBITDA* for
fiscal 2019 was 6% of revenue. If we adjust this for the
non-recurring costs related to relocation of the Irvington
Facility, EBITDA* would have been 10% of revenue. If we further
consider the cost improvements we expect from the facility
relocation, coating improvements and material cost savings we have
procured from our vendors, we believe EBITDA* would have been in
the range of 12% to 15% of revenue in fiscal 2019, which is closer
to our target range. We believe we are firmly on track to deliver
on our vision for the benefit of our customers and all
stakeholders,” Mr. Gaynor concluded.
Financial Results for the Three Months Ended June 30, 2019,
Compared to the Three Months Ended June 30, 2018
Revenue
for the fourth quarter of fiscal 2019 was approximately $8.7
million, an increase of approximately $657,000, or 8%, as compared
to $8.1 million in the same period of the prior fiscal year.
Revenue generated by PMO products was approximately $3.5 million
for the fourth quarter of fiscal 2019, an increase of approximately
$130,000, or 4%, as compared to $3.4 million in the same period of
fiscal 2018. Although sales of PMO products to customers in the
telecommunications and industrial markets increased by
approximately $290,000 and $110,000, respectively, these increases
were offset by decreases in sales to customers in the commercial
market. Revenue generated by IR products was approximately $4.7
million in the fourth quarter of fiscal 2019, an increase of
approximately $754,000, or 19%, compared to approximately $4.0
million in the same period of fiscal 2018. This increase was
primarily driven by an increase in sales of molded IR products to
customers in the industrial, defense and commercial markets. The
primary drivers of the increase in demand for these products
continue to be industrial applications, firefighting cameras and
other public safety applications. Revenue generated by specialty
products, which includes revenue for non-recurring engineering
(“NRE”) projects, was approximately $490,000 in the
fourth quarter of fiscal 2019, a decrease of approximately
$227,000, or 32%, as compared to approximately $718,000 in the same
period of fiscal 2018. This decrease is primarily due to
lower sales to customers in the medical and industrial markets,
with fewer NRE projects. The decrease in sales to customers in the
medical market is due to the timing of customer orders. The
decrease in sales to customers in the industrial market is
primarily due to a slowdown in light detection and ranging
(“LIDAR”) development projects and the related
assemblies. NRE revenue is project based and the timing of any such
projects is wholly dependent on our customers and their project
activity.
Sales
of IR products comprised 54% of the Company’s consolidated
revenue in the fourth quarter of fiscal 2019, as compared to 49% of
the total sales in same period of the prior fiscal year. PMO sales
represented 40% of consolidated revenues in the fourth quarter of
fiscal 2019, compared to 42% of total sales in the same period of
fiscal 2018. Specialty products revenue represented 6% of
consolidated revenue in the fourth quarter of fiscal 2019, down
from 9% in the same period of fiscal 2018.
Gross
margin in the fourth quarter of fiscal 2019 was approximately $2.8
million, an increase of 16%, as compared to approximately $2.4
million in the same quarter of the prior fiscal year. Gross margin
as a percentage of revenue was 32% for the fourth quarter of fiscal
2019, as compared to 30% for the same period of the prior fiscal
year. Total cost of sales was approximately $5.9 million for the
fourth quarter of fiscal 2019, an increase of approximately 5%,
compared to $5.7 million for the same period of the prior fiscal
year. The increase is driven by higher sales, coupled with certain
cost increases, such as elevated costs including labor costs,
manufacturing inefficiencies, and increased overhead expenses
associated with the relocation of the Company’s the Irvington
Facility, which are non-recurring. Although the Company expected to
have higher costs for fiscal 2019 due to this relocation,
management expects costs to improve beginning in fiscal 2020, as
the facility relocation was complete as of June 30, 2019. In
addition, cost of sales for the fourth quarter was negatively
impacted by higher duties and freight charges resulting from newly
effective tariffs. The Company is evaluating and implementing a
number of strategies to mitigate the current and future impact of
tariffs.
During the fourth quarter of fiscal 2019, total operating costs and
expenses were approximately $3.9 million, an increase of
approximately $976,000, as compared to the same period of the prior
fiscal year. Selling, general and administrative
(“SG&A”) costs increased by approximately $921,000,
primarily due to approximately $845,000 of non-recurring expenses
related to the relocation of the Irvington Facility. Management
expected SG&A costs to be elevated for fiscal 2019 as part of
this facility relocation. On a long-term basis, the consolidation
of the Company’s manufacturing facilities is expected to
reduce operating and overhead costs. New product development costs
increased by approximately $82,000, or 19%, due to increased wages
related to additional engineering employees to handle the higher
level of product development work, particularly for new BD6 lenses.
The increases in new product development and SG&A costs were
offset by decreases in the amortization of intangibles, and gains
on disposals of equipment.
Interest
expense, net, was approximately $124,000 in the fourth quarter of
fiscal 2019, compared to approximately $135,000 in the same period
of the prior fiscal year. The decrease is due to the refinancing of
the Company’s previous term loan with a new lender, which
occurred during the third quarter of fiscal 2019. The Company
expects interest expense to continue to be lower in fiscal 2020,
due to more favorable terms associated with the new term
loan.
During
the fourth quarter of fiscal 2019, the Company recorded income tax
expense of approximately $496,000, compared to an income tax
benefit of approximately $508,000 for the same period of the prior
fiscal year. The Company’s tax expenses and benefits, and the
effective income tax rate, are impacted by the mix of taxable
income and losses generated in the Company’s various tax
jurisdictions. Income tax expense for the fourth quarter of fiscal
2019 includes the reversal of $406,000 of income tax benefits
recorded in the first half of fiscal 2019, due to a change in the
Company’s estimated utilization of NOL carryforward benefits
for fiscal 2019. The remainder of the income tax expense for the
fourth quarter of fiscal 2019 is attributable to income taxes on
the income generated by one of the Company’s Chinese
subsidiaries, LightPath Optical Instrumentation (Zhenjiang) Co.,
Ltd (“LPOIZ”). The income tax benefit for the fourth
quarter of fiscal 2018 was primarily attributable to adjustments to
the Company’s valuation allowance against its U.S. net
deferred tax assets. LightPath has NOL carry-forward benefits of
approximately $74 million against net income as reported on a
consolidated basis in the U.S. The NOL does not apply to taxable
income from foreign subsidiaries. Outside of the U.S., income taxes
are attributable to the Company’s wholly-owned subsidiaries
in China.
LightPath
recognized foreign currency exchange losses for the fourth quarter
of fiscal 2019 due to changes in the value of the Chinese
Yuan and Euro, against
the U.S. Dollar, in the amount of approximately $113,000, which had
no impact on basic and diluted earnings per share, compared to
losses of $714,000 in the fourth quarter of fiscal 2018, which had
a $0.03 unfavorable impact on basic and diluted earnings per
share.
Net
loss for the fourth quarter of fiscal 2019 was approximately $1.8
million, or $0.07 basic and diluted loss per share, compared to
approximately $807,000, or $0.03 basic and diluted loss per share
for the fourth quarter of fiscal 2018.
Weighted-average
shares of common stock outstanding were 25,813,895 basic and
diluted, in the fourth quarter of fiscal 2019, compared to
25,738,138 basic and diluted in the fourth quarter of fiscal 2018.
The increase in the weighted-average shares of common stock
outstanding was due to shares of Class A common stock issued under
the Employee Stock Purchase Plan (“2014 ESPP”), and
upon the exercises of stock options and restricted stock units
(“RSUs”).
EBITDA*
loss for the fourth quarter of fiscal 2019 was approximately
$219,000, compared to an EBITDA* loss of approximately $269,000 in
the fourth quarter of fiscal 2018. The slight improvement in
EBITDA* is primarily the result of the increase in gross margin,
coupled with an approximately $601,000 decrease in foreign exchange
losses for the fourth quarter of fiscal 2019, as compared to the
same period of the prior fiscal year. These favorable changes were
offset by approximately $845,000 in restructuring costs related to
the relocation of the Irvington Facility during the fourth quarter
of fiscal 2019.
Financial Results for the Fiscal Year Ended June 30, 2019, Compared
to the Fiscal Year Ended June 30, 2018
Revenue
for fiscal 2019 totaled approximately $33.7 million for fiscal
2019, an increase of $1.2 million, or 4%, as compared to
approximately $32.5 million for fiscal 2018. Revenue generated by
PMO products was approximately $14.1 million, an increase of
approximately $576,000, or 4%, compared to $13.5 million in fiscal
2018. The increase is primarily due to increased sales to customers
in the telecommunications market, partially offset by a decrease in
sales to customers in the commercial market. Revenue generated by
IR products was approximately $17.3 million for fiscal 2019, an
increase of approximately $1.3 million, or 8%, as compared to
approximately $16.0 million in fiscal 2018. This increase was
primarily driven by our new line of BD6 molded IR products,
including thermal imaging assemblies. The increased demand for our
IR products continues to be led by industrial applications,
firefighting cameras and other public safety applications. We have
entered into several new supply agreements with new customers for
these types of products, and we expect this business to continue to
grow. Revenue generated by our specialty products, which includes
NRE project revenue, was approximately $2.4 million for fiscal
2019, a decrease of $644,000, or 21%, compared to $3.0 million for
fiscal 2018. This decrease is due to timing of orders from
customers in the defense industry, as well as some customer
development projects related to LIDAR applications that did not
continue in fiscal 2019.
Sales
of IR products comprised 51% of the Company’s consolidated
revenue in fiscal 2019, as compared to 49% of total sales in the
prior fiscal year. PMO sales represented 42% of consolidated
revenues fiscal 2019, consistent with fiscal 2018. Specialty
products revenue represented 7% of consolidated revenue in fiscal
2019, down slightly from 9% in the prior fiscal year.
Gross
margin was approximately $12.5 million for both fiscal 2019 and
2018. Total cost of sales was approximately $21.2 million for
fiscal 2019, compared to $20.0 million for the prior fiscal year.
Gross margin as a percentage of revenue for fiscal 2019 was 37%,
compared to 39% in fiscal 2018. The increase in cost of sales, and
associated decrease in gross margin as a percentage of revenue, is
primarily the result of certain cost increases, such as the
elevated costs associated with the relocation of the Irvington
Facility, which are non-recurring, and higher duties and freight
charges resulting from newly effective tariffs, which primarily
impacted the PMO product group. In addition, gross margin for
fiscal 2019 was lower as a result of the decrease in specialty
products revenue, due to the absence of higher margin orders and
projects, which benefited gross margin in the prior year. With
respect to IR products, the Company began to see some benefit from
its margin improvement efforts in the second half of fiscal 2019
with respect to both existing products and our new BD6-based
products. With respect to material costs, the standard material for
the majority of our IR products continues to be germanium, which
has inherent pricing volatility. As the Company converts many of
these products to its BD6 material, the Company expects IR margins
to improve over time. While sales of IR products made with this
material more than doubled in fiscal 2019, as compared to the prior
fiscal year, these products still represent less than 20% of IR
revenue and, therefore, have not yet had a significant impact on
gross margin. We expect them to represent the majority of our IR
sales in the future. With respect to the relocation of the
Irvington Facility, although the Company expected to have higher
costs associated with the relocation of the Irvington Facility for
fiscal 2019, management expects costs to improve beginning in
fiscal 2020 as the facility relocation was complete as of June 30,
2019.
During fiscal 2019, total operating costs and expenses were
approximately $13.6 million, an increase of approximately $1.5
million, as compared to fiscal 2018. This increase was primarily
driven by SG&A costs, particularly the approximately $1.2
million in non-recurring expenses related to the relocation of the
Irvington Facility to LightPath’s other lower-cost facilities
in Orlando, Florida, and Riga, Latvia. In addition, new product
development costs increased by approximately $398,000, due to
increased wages related to additional engineering employees to
handle the higher level of product development work associated with
our new line of BD6-based products.
In
fiscal 2019, interest expense was approximately $697,000, compared
to approximately $187,000 in the prior fiscal year. In fiscal 2019,
interest expense includes the write-off of debt costs of
approximately $94,000 associated with the refinancing of the
Company’s previous term loan with a new lender. In fiscal
2018, net interest expense was reduced by a gain of approximately
$467,000 associated with the satisfaction of the note payable to
the sellers of ISP Optics Corporation (the “Sellers
Note”), in full, and the reversal of the related fair value
adjustment liability. Excluding these discrete items, interest
expense decreased by approximately $51,000 for fiscal 2019, as
compared to fiscal 2018, due to the more favorable terms associated
with the new term loan entered into during the third quarter of
fiscal 2019.
During
fiscal 2019, LightPath recorded income tax expense of approximately
$455,000, compared to an income tax benefit of approximately
$827,000 for the prior fiscal year. For fiscal 2019, income tax
expense is largely attributable to income generated by one of the
Company’s Chinese subsidiaries, LPOIZ. The income tax benefit
for fiscal 2018 is attributable to changes in taxation related to
certain subsidiaries in China and Latvia, as well as a decrease in
the valuation allowance on the Company’s U.S. deferred tax
assets.
LightPath
recognized foreign currency exchange losses in fiscal 2019 due to
changes in the value of the Chinese Yuan and Euro against the U.S. Dollar,
in the amount of approximately $436,000, which had a $0.02
unfavorable impact on basic and diluted earnings per share,
compared to a gain of $141,000 in fiscal 2018, which had a $0.01
favorable impact on basic and diluted earnings per
share.
Net
loss for fiscal 2019 was approximately $2.7 million, or $0.10 basic
and diluted loss per share, compared to net income of approximately
$1.1 million, or $0.04 basic and diluted earnings per share for
fiscal 2018. Adjusted net loss* for fiscal 2019 was also
approximately $2.7 million, compared to adjusted net income* of
approximately $1.3 million for fiscal 2018.
Weighted-average
shares of common stock outstanding were 25,794,669, for both basic
and diluted, in fiscal 2019, compared to basic and diluted shares
of 25,006,467 and 26,811,468, respectively, in fiscal 2018. The
increase in the weighted-average basic common stock shares was
primarily due to 967,208 shares of Class A common stock issued
during the third quarter of fiscal 2018 in conjunction with the
satisfaction of the Sellers Note, and, to a lesser extent, shares
of Class A common stock issued under the 2014 ESPP, and upon the
exercises of stock options and RSUs.
EBITDA*
for fiscal 2019 was approximately $1.9 million, compared to
approximately $3.8 million in fiscal 2018. Adjusted EBITDA* for
fiscal 2019 was also approximately $1.9 million, compared to
approximately $4.0 million in of fiscal 2018. The decrease in
adjusted EBITDA between the periods was primarily due to
restructuring costs of approximately $1.2 million incurred during
fiscal 2019 related to the relocation of the Irvington Facility. In
addition, foreign exchange losses increased by approximately
$577,000 in fiscal 2019, as compared to fiscal 2018.
Cash,
cash equivalents and restricted cash totaled approximately $4.6
million as of June 30, 2019, compared to approximately $6.5 million
as of June 30, 2018. Cash provided by operations was approximately
$411,000 for the fiscal year ended June 30, 2019, compared to
approximately $2.6 million in the prior fiscal year. The decrease
in cash flow from operations is primarily the result of
non-recurring costs associated with the relocation of the Irvington
Facility, as well as increases in inventory and accounts
receivable. During fiscal 2019, the Company expended approximately
$1.9 million for capital equipment and acquired an additional
$530,000 in equipment through capital leases, as compared to the
same period of the prior fiscal year when the Company expended $2.5
million and acquired an additional $763,000 through capital
leases.
The
current ratio as of June 30, 2019 was 3.1 to 1, compared to 3.3 to
1 as of June 30, 2018. Total stockholders’ equity as of June
30, 2019 was approximately $33.5 million, compared to approximately
$35.4 million as of June 30, 2018. The net decrease is due to the
net loss for the fiscal year ended June 30, 2019.
As of
June 30, 2019, LightPath’s 12-month backlog remained strong
at $17.1 million, an increase of 33% as compared to $12.8 million
as of June 30, 2018. The increase in LightPath’s 12-month
backlog from the first quarter to the second quarter of fiscal 2019
was largely due to the renewal of a large annual contract during
the second quarter, which LightPath began shipping against during
the third quarter of fiscal 2019. During the remainder of fiscal
2019, bookings and shipments remained fairly consistent, yielding a
continued strong level of backlog.
*Use of Non-GAAP Financial Measures
To
provide investors with additional information regarding financial
results, this press release includes references to EBITDA, adjusted
EBITDA, adjusted net income (loss), and gross margin, all of which
are non-GAAP financial measures. For a reconciliation of these
non-GAAP financial measures to the most directly comparable
financial measures calculated in accordance with GAAP, see the
tables provided in this press release.
A
“non-GAAP financial measure” is generally defined as a
numerical measure of a company’s historical or future
performance that excludes or includes amounts, or is subject to
adjustments, so as to be different from the most directly
comparable measure calculated and presented in accordance with
GAAP. The Company’s management believes that these non-GAAP
financial measures, when considered together with the GAAP
financial measures, provide information that is useful to investors
in understanding period-over-period operating results separate and
apart from items that may, or could, have a disproportionately
positive or negative impact on results in any particular period.
Management also believes that these non-GAAP financial measures
enhance the ability of investors to analyze underlying business
operations and understand performance. In addition, management may
utilize these non-GAAP financial measures as guides in forecasting,
budgeting, and planning. Non-GAAP financial measures should be
considered in addition to, and not as a substitute for, or superior
to, financial measures presented in accordance with
GAAP.
The
Company calculates EBITDA by adjusting net income to exclude net
interest expense, income tax expense or benefit, depreciation, and
amortization. Similarly, the Company calculates adjusted EBITDA by
adjusting net income to exclude net interest expense, income tax
expense or benefit, depreciation, amortization, and the change in
the fair value of the warrants issued in connection with the
private placement in June 2012, which warrants expired in December
2017.
The
fair value of the warrants issued in connection with the private
placement in 2012 was re-measured each reporting period until the
warrants were either exercised or expired. Each reporting period,
the change in the fair value of these warrants was either
recognized as non-cash expense or non-cash income. The change in
the fair value of the warrants had a significant correlation to the
change in the market value of the Company’s Class A common
stock for the period being reported and was not impacted by actual
operations during such period. Management believes that excluding
the change in the fair value of these warrants enhances the ability
of investors to analyze and better understand the underlying
business operations and performance.
The
Company calculates adjusted net income (loss) by adjusting net
income (loss) to exclude the change in the fair value of the
warrants issued in connection with the private placement in June
2012.
The
Company calculates gross margin 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 cost structure and provides funds for 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.
Investor Conference Call and Webcast Details
LightPath
will host an audio conference call and webcast on Friday, September
13 at 8:30 a.m. ET to discuss its financial and operational
performance for the fourth quarter and fiscal year ended June 30,
2019.
Date:
Friday, September 13, 2019
Time:
8:30 AM (ET)
Dial-in
Number: 1-877-317-2514
International
Dial-in Number: 1-412-317-2514
Webcast:
https://services.choruscall.com/links/lpth190913.html
Participants
should dial-in or log-on approximately 10 minutes prior to the
start of the event. A replay of the call will be available
approximately one hour after completion through September 27, 2019.
To listen to the replay, dial 1-877-344-7529 (domestic) or
1-412-317-0088 (international), and enter conference ID #
10134249.
About LightPath Technologies
LightPath
Technologies, Inc. (NASDAQ: LPTH) is a leading global, vertically
integrated provider of optics, photonics and infrared solutions for
the industrial, commercial, defense, telecommunications, and
medical industries. LightPath designs, manufactures, and
distributes proprietary optical and infrared components including
molded glass aspheric lenses and assemblies, infrared lenses and
thermal imaging assemblies, fused fiber collimators, and
proprietary Black
DiamondTM
(“BD6”) chalcogenide-based glass lenses. LightPath also offers custom optical
assemblies, including full engineering design support. The Company
is headquartered in Orlando, Florida, with manufacturing and sales
offices in Latvia and China.
LightPath’s
wholly-owned subsidiary, ISP Optics
Corporation, manufactures
a full range of infrared products from high performance MWIR and
LWIR lenses and lens assemblies. ISP’s infrared lens assembly
product line includes athermal lens systems used in cooled and
un-cooled thermal imaging cameras. Manufacturing is performed
in-house to provide precision optical components including
spherical, aspherical and diffractive coated infrared lenses.
ISP’s optics processes allow it to manufacture its products
from all important types of infrared materials and crystals.
Manufacturing processes include CNC grinding and CNC polishing,
diamond turning, continuous and conventional polishing, optical
contacting and advanced coating technologies.
For
more information on LightPath and its businesses, please visit
www.lightpath.com.
Forward-Looking Statements
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, continued improvements in
our financial results,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, including its most recent
Annual Report on Form 10-K. 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.
Contacts:
Jim Gaynor,
President & CEO
LightPath
Technologies, Inc.
Tel:
407-382-4003
jgaynor@lightpath.com
|
Donald O.
Retreage, Jr., CFO
LightPath
Technologies, Inc.
Tel: 407-382-4003
x329
dretreage@lightpath.com
|
Jordan
Darrow
Darrow
Associates
Tel: 512-551-9296
jdarrow@darrowir.com
|
(tables
follow)
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
|
|
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$4,604,701
|
$5,508,620
|
Restricted
cash
|
-
|
1,000,000
|
Trade accounts
receivable, net of allowance of $29,406 and $13,364
|
6,210,831
|
5,370,508
|
Inventories,
net
|
7,684,527
|
6,404,741
|
Other
receivables
|
353,695
|
46,574
|
Prepaid expenses
and other assets
|
754,640
|
1,058,610
|
Total current
assets
|
19,608,394
|
19,389,053
|
|
|
|
Property and
equipment, net
|
11,731,084
|
11,809,241
|
Intangible assets,
net
|
7,837,306
|
9,057,970
|
Goodwill
|
5,854,905
|
5,854,905
|
Deferred tax
assets, net
|
652,000
|
624,000
|
|
289,491
|
381,945
|
Total
assets
|
$45,973,180
|
$47,117,114
|
Liabilities
and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$2,227,768
|
$2,032,834
|
Accrued
liabilities
|
871,912
|
685,430
|
Accrued payroll and
benefits
|
1,730,658
|
1,228,120
|
Deferred rent,
current portion
|
539,151
|
86,560
|
Loans payable,
current portion
|
581,350
|
1,458,800
|
Capital lease
obligation, current portion
|
404,424
|
307,199
|
Total current
liabilities
|
6,355,263
|
5,798,943
|
|
|
|
Capital lease
obligation, less current portion
|
640,284
|
550,127
|
Deferred
rent
|
5,118,364
|
290,804
|
Loans payable, less
current portion
|
500,143
|
5,119,796
|
Total
liabilities
|
12,614,054
|
11,759,670
|
|
|
|
Stockholders’
equity:
|
|
|
Preferred stock:
Series D, $.01 par value, voting;
|
|
|
500,000 shares
authorized; none issued and outstanding
|
—
|
—
|
Common stock:
Class A, $.01 par value, voting;
|
|
|
44,500,000 shares
authorized; 25,813,895 and 25,764,544
|
|
|
shares issued and
outstanding
|
258,139
|
257,645
|
Additional paid-in
capital
|
230,321,324
|
229,874,823
|
Accumulated other
comprehensive income
|
808,518
|
473,508
|
|
(197,928,855)
|
(195,248,532)
|
Total
stockholders’ equity
|
33,459,126
|
35,357,444
|
Total liabilities
and stockholders’ equity
|
$46,073,180
|
$47,117,114
|
LIGHTPATH
TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income
(Loss)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Revenue,
net
|
$8,745,278
|
$8,088,377
|
$33,749,088
|
$32,525,471
|
Cost of
sales
|
5,916,343
|
5,653,725
|
21,230,168
|
19,997,740
|
Gross
margin
|
2,828,935
|
2,434,652
|
12,518,920
|
12,527,731
|
Operating
expenses:
|
|
|
|
|
Selling, general
and administrative
|
3,084,101
|
2,163,350
|
10,498,651
|
9,218,346
|
New product
development
|
522,203
|
440,145
|
2,016,615
|
1,618,994
|
Amortization of
intangibles
|
283,521
|
329,270
|
1,220,664
|
1,317,082
|
Loss (gain) on
disposal of property and equipment
|
15,821
|
(3,573)
|
(77,047)
|
(258)
|
Total costs and
expenses
|
3,905,646
|
2,929,192
|
13,658,883
|
12,154,164
|
Operating income
(loss)
|
(1,076,711)
|
(494,540)
|
(1,139,963)
|
373,567
|
Other income
(expense):
|
|
|
|
|
Interest expense,
net
|
(123,578)
|
(134,736)
|
(697,113)
|
(186,948)
|
Change in fair
value of warrant liability
|
-
|
-
|
-
|
(194,632)
|
Other income
(expense), net
|
(65,702)
|
(686,343)
|
(388,041)
|
241,040
|
Total other income
(expense), net
|
(189,280)
|
(821,079)
|
(1,085,154)
|
(140,540)
|
Income (loss)
before income taxes
|
(1,265,991)
|
(1,315,619)
|
(2,225,117)
|
233,027
|
Income tax
provision (benefit)
|
495,699
|
(508,399)
|
455,206
|
(827,077)
|
Net income
(loss)
|
$(1,761,690)
|
$(807,220)
|
$(2,680,323)
|
$1,060,104
|
Foreign currency
translation adjustment
|
55,843
|
(22,774)
|
335,010
|
178,112
|
Comprehensive
income (loss)
|
$(1,705,847)
|
$(829,994)
|
$(2,345,313)
|
$1,238,216
|
|
|
|
|
|
Earnngs (loss) per
common share (basic)
|
$(0.07)
|
$(0.03)
|
$(0.10)
|
$0.04
|
Number of shares
used in per share calculation (basic)
|
25,813,895
|
25,738,138
|
25,794,669
|
25,006,467
|
Earnings (loss) per
common share (diluted)
|
$(0.07)
|
$(0.03)
|
$(0.10)
|
$0.04
|
Number of shares
used in per share calculation (diluted)
|
25,813,895
|
25,738,138
|
25,794,669
|
26,811,468
|
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Stockholders'
Equity
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June
30, 2017
|
24,215,733
|
$242,157
|
$225,492,252
|
$295,396
|
$(196,308,636)
|
$29,721,169
|
Issuance of common stock
for:
|
|
|
|
|
|
|
Exercise of
warrants
|
433,810
|
4,338
|
529,980
|
—
|
—
|
534,318
|
Employee Stock Purchase
Plan
|
19,980
|
200
|
48,391
|
—
|
—
|
48,591
|
Exercise of stock options,
net
|
127,813
|
1,278
|
224,723
|
—
|
—
|
226,001
|
Settlement of Sellers
Note
|
967,208
|
9,672
|
2,237,392
|
|
|
2,247,064
|
Reclassification of warrant
liability upon exercise
|
—
|
—
|
685,132
|
—
|
—
|
685,132
|
Stock-based compensation on stock
options & RSUs
|
—
|
—
|
656,953
|
—
|
—
|
656,953
|
Foreign currency translation
adjustment
|
—
|
—
|
—
|
178,112
|
—
|
178,112
|
Net income
|
—
|
—
|
—
|
—
|
1,060,104
|
1,060,104
|
Balances at June
30, 2018
|
25,764,544
|
257,645
|
229,874,823
|
473,508
|
(195,248,532)
|
35,357,444
|
Issuance of common stock
for:
|
|
|
|
|
|
|
Employee Stock Purchase
Plan
|
20,871
|
209
|
38,229
|
—
|
—
|
38,438
|
Exercise of stock options,
net
|
28,480
|
285
|
13,482
|
—
|
—
|
13,767
|
Stock-based compensation on stock
options & RSUs
|
—
|
—
|
394,790
|
—
|
—
|
394,790
|
Foreign currency translation
adjustment
|
—
|
—
|
—
|
335,010
|
—
|
335,010
|
Net loss
|
—
|
—
|
—
|
—
|
(2,680,323)
|
(2,680,323)
|
Balances at June
30, 2019
|
25,813,895
|
$258,139
|
$230,321,324
|
$808,518
|
$(197,928,855)
|
$33,459,126
|
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
|
Net (loss)
income
|
$(2,680,323)
|
1,060,104
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization
|
3,464,156
|
3,403,581
|
Interest
from amortization of debt costs
|
117,261
|
19,685
|
(Gain)
loss on disposal of property and equipment
|
(77,047)
|
(258)
|
Stock-based
compensation on stock options & RSU, net
|
394,790
|
373,554
|
Provision
for doubtful accounts receivable
|
(6,658)
|
(16,417)
|
Change
in fair value of warrant liability
|
—
|
194,632
|
Change
in fair value of Sellers note
|
—
|
(396,163)
|
Deferred
rent amortization
|
370,701
|
(81,475)
|
Inventory
write-offs to reserve
|
125,234
|
187,547
|
Deferred
tax benefit
|
(28,000)
|
(533,806)
|
Changes in
operating assets and liabilities:
|
|
|
Trade accounts
receivable
|
(833,665)
|
618,393
|
Other
receivables
|
(306,348)
|
(15,997)
|
Inventories
|
(1,405,020)
|
(1,330,994)
|
Prepaid
expenses and other assets
|
392,925
|
(685,260)
|
Accounts
payable and accrued liabilities
|
883,179
|
(178,138)
|
Net
cash provided by operating activities
|
411,185
|
2,618,988
|
|
|
|
Cash flows from
investing activities
|
|
|
Purchase
of property and equipment
|
(1,931,835)
|
(2,517,685)
|
Proceeds
from sale of equipment
|
683,250
|
—
|
Net
cash used in investing activities
|
(1,248,585)
|
(2,517,685)
|
|
|
|
Cash flows from
financing activities
|
|
|
Proceeds from
exercise of stock options
|
13,767
|
226,001
|
Proceeds from sale
of common stock from Employee Stock Purchase Plan
|
38,438
|
48,591
|
Loan
costs
|
(92,860)
|
(61,253)
|
Borrowings on loan
payable
|
5,813,500
|
2,942,583
|
Proceeds from
exercise of warrants, net of costs
|
—
|
534,318
|
Payments
on loan payable
|
(6,831,503)
|
(4,716,536)
|
Payments
on capital lease obligations
|
(342,871)
|
(287,354)
|
Net
cash used in financing activities
|
(1,401,529)
|
(1,313,650)
|
Effect of exchange
rate on cash and cash equivalents and restricted cash
|
335,010
|
(364,048)
|
Change in cash and
cash equivalents and restricted cash
|
(1,903,919)
|
(1,576,395)
|
Cash and cash
equivalents and restricted cash, beginning of period
|
6,508,620
|
8,085,015
|
Cash and cash
equivalents and restricted cash, end of period
|
$4,604,701
|
$6,508,620
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Interest
paid in cash
|
$500,985
|
$546,306
|
Income
taxes paid
|
$406,526
|
$386,471
|
Supplemental
disclosure of non-cash investing & financing
activities:
|
|
|
Purchase of
equipment through capital lease arrangements
|
$530,253
|
$763,247
|
Landlord
credits for leasehold improvements
|
$309,450
|
—
|
Reclassification
of warrant liability upon exercise
|
—
|
$685,132
|
Derecognition
of liability associated with stock option grants
|
—
|
$283,399
|
Conversion of
Sellers Note to Common Stock
|
—
|
$2,247,064
|
To
supplement our consolidated financial statements presented in
accordance with U.S. GAAP, we provide additional non-GAAP financial
measures. Our management believes these non-GAAP financial
measures, when considered together with the GAAP financial
measures, provide information that is useful to investors in
understanding period-over-period operating results separate and
apart from items that may or could, have a disproportionally
positive or negative impact on results in any particular period.
Our management also believes that these non-GAAP financial measures
enhance the ability of investors to analyze our underlying business
operations and understand our performance. In addition, our
management may utilize these non-GAAP financial measures as guides
in forecasting, budgeting, and planning. Any analysis on non-GAAP
financial measures should be used in conjunction with results
presented in accordance with GAAP. A reconciliation of these
non-GAAP financial measures with the most directly comparable
financial measures calculated in accordance with GAAP is presented
in the tables below.
LIGHTPATH TECHNOLOGIES, INC.
Reconciliation
of Non-GAAP Financial Measures and Regulation G
Disclosure
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$(1,761,690)
|
$(807,220)
|
$(2,680,323)
|
$1,060,104
|
Change in fair
value of warrant liability
|
—
|
—
|
—
|
194,632
|
Adjusted net income
(loss)
|
$(1,761,690)
|
$(807,220)
|
$(2,680,323)
|
$1,254,736
|
% of
revenue
|
-20%
|
-10%
|
-8%
|
4%
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$(1,761,690)
|
$(807,220)
|
$(2,680,323)
|
$1,060,104
|
Depreciation and
amortization
|
923,195
|
911,577
|
3,464,156
|
3,403,581
|
Income tax
provision (benefit)
|
495,699
|
(508,399)
|
455,206
|
(827,077)
|
Interest
expense
|
123,578
|
134,736
|
697,113
|
186,948
|
EBITDA
|
$(219,218)
|
$(269,306)
|
$1,936,152
|
$3,823,556
|
Change in fair
value of warrant liability
|
—
|
—
|
—
|
194,632
|
Adjusted
EBITDA
|
$(219,218)
|
$(269,306)
|
$1,936,152
|
$4,018,188
|
% of
revenue
|
-3%
|
-3%
|
6%
|
12%
|