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8-K - CURRENT REPORT - LIGHTPATH TECHNOLOGIES INC | lpth_8k.htm |
Exhibit 99.1
LightPath Technologies Reports Fiscal 2018 Third Quarter Financial
Results
Diversification of Product Groups and End Markets
Deliver
Bookings Growth of 50% from Prior Year
ORLANDO,
FL – May 14, 2018 – 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 the fiscal
2018 third quarter ended March 31, 2018.
Fiscal 2018 Third Quarter Highlights:
●
Revenue for the
third quarter of fiscal 2018 was approximately $8.5 million, even
as compared to the third quarter of fiscal 2017, and increased by
2% from approximately $8.4 million in the second quarter of fiscal
2018.
●
Bookings in the
third quarter of fiscal 2018 increased by 50% to $9.2 million from
$6.1 million in the prior year period.
●
Net income for the
third quarter of fiscal 2018 was approximately $1.2 million, as
compared to approximately $101,000 for the third quarter of fiscal
2017 and approximately $423,000 in the second quarter of fiscal
2018.
●
EBITDA* for the
third quarter of fiscal 2018 was approximately $1.6 million, as
compared to approximately $1.3 million in the third quarter of
fiscal 2017 and approximately $1.2 million in the second quarter of
fiscal 2018.
●
12-month backlog
was approximately $12.9 million at March 31, 2018, representing an
increase of 5% compared to $12.3 million at December 31, 2017, and
representing an increase of 38% compared to $9.3 million at June
30, 2017.
●
LightPath made
significant investments of approximately $2.5 million in the first
three quarters of fiscal 2018 in global growth initiatives and
product development, including enhanced capacity for infrared
products.
●
LightPath
refinanced its debt, including fully satisfying the promissory note
issued to the sellers of ISP Optics Corporation (“ISP”)
and reducing its total debt by $3.6 million during the third
quarter of fiscal 2018.
●
Cash balance at
March 31, 2018 was approximately $6.4 million.
*This
press release includes references to earnings before interest,
taxes, depreciation, and amortization (“EBITDA”),
adjusted EBITDA, adjusted net income, and gross margin, all of
which are non-GAAP financial measures. 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. Our management believes that
certain 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. A reconciliation of GAAP to non-GAAP results is
provided in this press release in the accompanying tables. A more
complete explanation of these measures is also included below under
the heading “Use of Non-GAAP Financial
Measures.”
Management Comments
Jim
Gaynor, President and Chief Executive Officer of LightPath,
commented, “Our third quarter fiscal 2018 results demonstrate
the success achieved in our efforts to diversify our business and
the areas where we can expect to deliver meaningful growth going
forward. As expected, in the third quarter of fiscal 2018, revenues
generated by our infrared products surpassed revenue generated by
our precision molded optics (“PMO”) products. We
targeted the infrared market in order to further diversify our
revenue streams in a larger and faster growing market. Our total
revenues increased, as compared to the second quarter of fiscal
2018, but remained flat as compared to the third quarter of fiscal
2017 due to softness in the telecommunications
sector.”
“Overall
bookings increased to $9.2 million in the third quarter of fiscal
2018, compared to $6.1 million in the prior year period, an
increase of 50%. Bookings represent new orders added to our
backlog. Strength in the industrial market is leading the way for
our key vertical end markets. In the third quarter of fiscal 2018,
approximately $4.0 million of bookings represented orders from the
industrial market, followed by over $1.3 million in orders from the
defense market. It appears that the telecommunications sector may
be rebounding based on our bookings, with orders from this market
beginning to increase as compared to prior quarters. The industrial
and medical sectors showed significant growth in bookings from the
second quarter of fiscal 2018 to the third quarter of fiscal 2018.
Excluding a one-year supply agreement for $5 million with a single
customer, which was booked in the second quarter of fiscal 2018,
total bookings in the third quarter of fiscal 2018 would have
increased by 30%, compared to $7.1 million in the second quarter of
fiscal 2018. As a result of our strong bookings performance in the
third quarter of fiscal 2018, our 12-month backlog was
approximately $12.9 million at March 31, 2018, an improvement from
$12.3 million at the end of the second quarter and $9.3 million at
the beginning of fiscal year 2018.”
“While
continuing to focus on top line growth initiatives, we are also
managing our profitability and cash flow measures. From 2014
through 2016, we successfully increased gross margins for our PMO
products, which remain in excess of 50% today, while expanding PMO
production capacity and volumes. Now, we are focusing on our
infrared products, including increasing our gross margins, which
have ranged from 30% to 40% since the acquisition of ISP, as well
as expanding production capacity. To this end, we are making the
necessary investments at our manufacturing facilities in Zhenjiang,
China, Riga, Latvia and Orlando, Florida to lower the cost of
producing our infrared products, which will also give us
redundancies to prevent capacity constraint issues as the infrared
business continues to grow. For example, we recently leased an
additional 12,000 square feet of space in Orlando, which will allow
us to expand our staff and engineering needs.”
“During
the first three quarters of fiscal 2018, we invested $2.5 million
in capital expenditures to increase our global production capacity
by approximately 60%, depending on product mix. At the same time,
our cash balance remained strong. In the third quarter of fiscal
2018 we reduced our debt, which will further enhance future cash
flow due to the reduction in interest service. Total debt was
reduced by $3.6 million, or 34%, during the third quarter of fiscal
2018, including the elimination of a portion of the financing
incurred in connection with the ISP acquisition in exchange for
shares of our common stock and cash. We expect net interest expense
in the fourth quarter of fiscal 2018 to be approximately $126,000,
compared to an average of approximately $200,000 in interest in
each of the first two quarters of fiscal 2018.”
“Following
the second quarter of fiscal 2018, during which we bolstered our
global presence from a product development and capacity standpoint,
we ended the third quarter of fiscal 2018 with a strengthened
financial position and a highly diversified and growing group of
product lines and end markets to drive increased profitability and
cash flow.”
Financial Results for the Three Months Ended March 31, 2018,
Compared to the Three Months Ended March 31, 2017
Revenue
for the third quarters of fiscal 2018 and fiscal 2017 was
approximately $8.5 million. Revenues generated by the
Company’s infrared products, primarily attributable to ISP,
was approximately $4.2 million in the third quarter of fiscal 2018,
an increase of approximately $383,000, or 10%, compared to
approximately $3.8 million in the third quarter of fiscal 2017.
Additionally, for the third quarter in a row, revenues from the
Company’s infrared products surpassed revenues generated by
the Company’s PMO products. Industrial applications,
firefighting cameras and other public safety applications are the
primary drivers of the increased demand for infrared
products.
Total
revenues generated by the Company’s PMO products was
approximately $3.6 million for the third quarter of fiscal 2018, as
compared to $4.0 million in the third quarter of fiscal 2017.
Revenues from sales of low volume PMO (“LVPMO”)
products increased by approximately $231,000, or 13%, in the third
quarter of fiscal 2018, as compared to the prior year period,
primarily attributable to higher sales to customers in the medical
industry. These increases were offset by an approximately $612,000,
or 29%, decrease in sales from high volume PMO
(“HVPMO”) lenses during the third quarter of fiscal
2018 as compared to the prior year period, primarily attributable
to continued soft demand from the telecommunications industry.
Revenue generated by the Company’s specialty products was
approximately $628,000 in the third quarter of fiscal 2018, an
increase of approximately $112,000, or 22%, compared to $516,000 in
the third quarter of fiscal 2017. This growth was led by demand
from the defense industry, automotive industry, and for collimators
used in a variety of end markets, including light distance and
ranging (“LIDAR”) sensing and auto safety. This is a
relatively new focus area for LightPath, given that it expects
these projects to deliver a future stream of larger production
quantities.
Gross
margin in the third quarter of fiscal 2018 was approximately $3.3
million, a decrease of 22%, as compared to approximately $4.2
million in the same quarter of the prior fiscal year. Gross margin
as a percentage of revenue was 39% for the third quarter of fiscal
2018, compared to 50% for the third quarter of fiscal 2017. The
change in gross margin as a percentage of revenue is attributable
to several factors, including: (i) a shift in the sales mix within
infrared products, with a higher percentage of sales derived from
contract sales and a smaller percentage of sales derived from
custom products, (ii) fewer sales of higher margin high volume PMO
products to the telecommunications industry, and (iii) an
unfavorable shift in foreign currency exchange rates at the
Company’s offshore manufacturing locations, while
approximately 90% of sales are transacted in United States
(“U.S.”) dollars. In addition to these factors, the
cost of Germanium, a key component in many of the Company’s
infrared lenses, has increased by 28% over the last 12 months.
While this cost increase has been accounted for in the pricing of
the Company’s custom products, it has raised the costs of the
Company’s products sold under a long-term contract. Of the
eleven percentage point gross margin change quarter-over-quarter,
five percentage points are attributable to currency fluctuations
and the Germanium material cost increase. Total cost of sales was
approximately $5.2 million for the third quarter of fiscal 2018, an
increase of approximately $944,000, compared to $4.3 million for
the same period of the prior fiscal year.
During the third quarter of fiscal 2018, total operating costs and
expenses were approximately $3.1 million, an increase of
approximately $133,000, compared to the same period of the prior
fiscal year. New product development costs also increased slightly,
by approximately $76,000. The Company expects future selling,
general and administrative expenses (“SG&A”) and
new product development costs to remain at similar levels during
the remainder of fiscal 2018, which includes reductions in certain
areas and increased spending in growth and profitability
initiatives. Total operating costs and expenses also include the
amortization of intangibles related to the acquisition of
ISP.
In the
third quarter of fiscal 2018, LightPath recognized net interest
income of approximately $343,000, primarily due to the
satisfaction, in full, of the promissory note issued to the sellers
of ISP in the original aggregate principal amount of $6 million
(the “Sellers Note”), and the reversal of the related
fair value adjustment liability, which resulted in a gain of
approximately $467,000. Excluding the impact of this gain, interest
expense was approximately $124,000 in the third quarter of fiscal
2018, compared to approximately $193,000 in the third quarter of
fiscal 2017. This decrease is primarily due to the full
satisfaction of the Sellers Note during the third quarter of fiscal
2018. The Company expects future interest expense to remain at
similar levels during the remainder of fiscal 2018, excluding the
gain associated with the satisfaction of the Sellers
Note.
During
the third quarter of fiscal 2018, the Company recorded an income
tax benefit of approximately $183,000, compared to income tax
expense of approximately $266,000 for the third quarter of fiscal
2017. The decrease in tax expenses and the effective income tax
rate were primarily attributable to the mix of taxable income and
losses generated in the Company’s various tax jurisdictions.
We have net operating loss (“NOL”) carry forward
benefits of approximately $84 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. Income taxes are
attributable to the Company’s Chinese subsidiaries and to
ISP’s wholly-owned subsidiary, ISP Optics Latvia, SIA
(“ISP Latvia”), a limited liability company founded
under the Laws of the Republic of Latvia. During the second quarter
of fiscal 2018, the statutory tax rate applicable to one of the
Company’s Chinese subsidiaries, LightPath Optical
Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”)
decreased from 25% to 15% in accordance with an incentive program
for technology companies in China. Effective January 1, 2018, the
Republic of Latvia enacted tax reform, which resulted in the
recognition of a tax benefit of approximately $206,000, due to the
reduction of the previously recorded net deferred tax liability to
zero during the three months ended March 31, 2018.
In
December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the
“2017 Act”), which changes existing U.S. tax law and
includes various provisions that are expected to affect companies.
Among other things, the 2017 Act (i) changes U.S. corporate tax
rates, (ii) generally reduces a company’s ability to utilize
accumulated net operating losses, and (iii) requires the
calculation of a one-time transition tax on certain foreign
earnings and profits (“E&P”) that had not been
previously repatriated. In addition, the 2017 Act impacts a
company’s estimates of its deferred tax assets and
liabilities. Pursuant to U.S. GAAP, changes in tax rates and tax
laws are accounted for in the period of enactment, and the
resulting effects are recorded as discrete components of the income
tax provision related to continuing operations in the same period.
LightPath continues to evaluate the impact of the 2017 Act on its
financial statements. Based on initial assessments to date,
LightPath expects the one-time transition tax on certain foreign
E&P to have minimal impact because the Company anticipates that
it will be able to utilize existing net operating losses to
substantially offset any taxes payable on foreign E&P.
Additionally, the Company expects significant adjustments to its
gross deferred tax assets and liabilities; however, the Company
also expects to record a corresponding offset to its estimated full
valuation allowance against its net deferred tax assets, which
should result in minimal net effect to the provision for income
taxes.
Net
income was approximately $1.2 million, or $0.05 basic and $0.04
diluted earnings per share, for the third quarter of fiscal 2018,
compared to net income of approximately $101,000, or $0.00 basic
and diluted earnings per share for the third quarter of fiscal
2017. The increase in net income is primarily due to (i) the
aforementioned changes in other income, which were all favorable,
(ii) the absence of $748,000 in expenses associated with the change
in fair value of the June 2012 warrant liability, which did not
impact the third quarter of 2018 because the June 2012 warrants
expired in December 2017, and (iii) the aforementioned income tax
benefit.
Adjusted
net income, which is adjusted for the effect of the non-cash change
in the fair value of the June 2012 warrant liability, was
approximately $1.2 million in the third quarter of fiscal 2018, as
compared to $849,000 in the same period of fiscal
2017.
LightPath
recognized foreign currency exchange gains in the third quarter of
fiscal 2018 due to changes in the value of the Chinese
Yuan and Euro in the
amount of approximately $446,000, which had a $0.02 impact on basic
and diluted earnings per share, compared to a gain of $18,000,
which had a $0.00 impact on basic and diluted earnings per share,
in the same period of the prior fiscal year.
Weighted-average
basic and diluted common shares outstanding increased to 25,546,512
and 27,281,010, respectively, in the third quarter of fiscal 2018
from 23,818,136 and 25,628,703, respectively, in the third quarter
of fiscal 2017. The increase was primarily due to the 967,208
shares of Class A common stock issued in connection with the
satisfaction of the Sellers Note, shares of Class A common stock
issued under the 2014 Employee Stock Purchase Plan, and shares of
Class A common stock issued as a result of the exercises of stock
options and warrants.
EBITDA
for the third quarter of fiscal 2018 was approximately $1.6
million, compared to approximately $1.3 million in the third
quarter of fiscal 2017. Adjusted EBITDA, which eliminates the
non-cash income or expense related to the change in fair value of
the June 2012 warrant liability, was approximately $1.6 million in
the third quarter of fiscal 2018, a decrease of 23%, as compared
with approximately $2.0 million for the same period of the prior
fiscal year. The difference in adjusted EBITDA between the periods
was principally caused by lower gross margin and higher SG&A
expenses resulting from the addition of ISP’s SG&A costs,
offset by foreign currency gains.
Financial Results for the Nine Months Ended March 31, 2018,
Compared to the Nine Months Ended March 31, 2017
Revenue
for the first nine months of fiscal 2018 was approximately $24.4
million, an increase of approximately $5.1 million, or 26%, as
compared to the same period of the prior fiscal year. The first
nine months of fiscal 2017 included the financial results of ISP
for approximately one full quarter. The increase from the first
nine months of the prior fiscal year is attributable to an
approximately $6.9 million increase, or 131%, in revenues generated
by infrared products, primarily attributable to ISP, partially
offset by: (i) an approximately $366,000 decrease, or 6%, in sales
of LVPMO lenses, primarily attributed to the telecommunications and
data communications industries and (ii) an approximately $1.4
million, decrease, or 24%, in sales of HVPMO lenses, primarily
attributed to applications for certain industrial tools and lower
sales to customers in the telecommunications industry.
Gross
margin in the first nine months of fiscal 2018 was approximately
$10.1 million, a decrease of 3%, as compared to approximately $10.4
million in the same period of the prior fiscal year. Gross margin
as a percentage of revenue was 41% for the first nine months of
fiscal 2018, compared to 53% for the first nine months of fiscal
2017. The change in gross margin as a percentage of revenue is
primarily attributable to the inclusion of revenues generated by
ISP, and the associated cost of sales, which were not included
until the end of the second quarter of fiscal 2017. Gross margin as
a percentage of revenue with respect to ISP’s products
historically has been lower than the Company’s existing
products. In addition, the Company offered a pricing discount in
connection with a large contract in exchange for increased volume
production orders from the customer, which impacted its gross
margin by approximately 4% of revenue during the first nine months
of fiscal 2018. Gross margins for the first nine months of fiscal
2018 also were unfavorably impacted by foreign currency
fluctuations, and the rising cost of Germanium, which is used in
the production of the Company’s infrared lenses. Total cost
of sales was approximately $14.3 million for the first nine months
of fiscal 2018, an increase of approximately $5.3 million, as
compared to the same period of the prior fiscal year. The increase
in total cost of sales is primarily due to the increase in volume
of sales, particularly as a result of sales attributable to
ISP.
During
the first nine months of fiscal 2018, total operating costs and
expenses were approximately $9.2 million, an increase of
approximately $1.9 million, compared to the same period of the
prior fiscal year. The increase was primarily attributable to the
addition of ISP’s SG&A and other costs, which were not
included until the end of the second quarter of fiscal 2017. The
increase in total operating costs and expenses was primarily due
to: (i) an approximately $942,000 increase in wages, (ii) an
approximately $683,000 increase in amortization of intangibles,
(iii) an approximately $240,000 increase in IT services and
consulting, (iv) an approximately $376,000 increase in travel and
other expenses, and (v) an approximately $280,000 increase in
professional fees, all of which was offset by the absence of
approximately $653,000 in expenses related to the acquisition of
ISP incurred during the first nine months of fiscal 2017. The
Company expects future SG&A costs to remain at similar levels
during the remainder of fiscal 2018.
During
the first nine months of fiscal 2018, the Company recognized net
interest expense of approximately $52,000, primarily due to the
satisfaction of the Sellers Note, in full, and the reversal of the
fair value adjustment liability, which resulted in a gain of
approximately $467,000 during the third quarter of fiscal 2018.
Excluding the impact of this gain, interest expense was
approximately $519,000 for the first nine months of fiscal 2018,
compared to approximately $206,000 in the first nine months of
fiscal 2017. The increase is due to the inclusion of the
acquisition term loan and the Sellers Note, which was only included
for approximately three months of the first nine months of fiscal
2017. The Sellers Note was fully satisfied in January 2018, which
decreased interest expense beginning in the third quarter of fiscal
2018.
In the
first nine months of fiscal 2018, the Company recognized non-cash
income of approximately $195,000 related to the change in the fair
value of warrant liability in connection with the June 2012
warrants, compared to approximately $458,000 in the same period of
the prior fiscal year.
During
the first nine months of fiscal 2018, the Company recorded an
income tax benefit of approximately $319,000, compared to income
tax expense of approximately $772,000 for the first nine months of
fiscal 2017. The decrease in our tax expenses and effective income
tax rate were primarily attributable to the mix of taxable income
and losses generated in our various tax jurisdictions. During the
second quarter of fiscal 2017, the statutory tax rate applicable to
LPOIZ decreased from 25% to 15% in accordance with an incentive
program for technology companies in China. The lower rate applies
to LPOIZ’s 2017 tax year, beginning January 1, 2017.
Accordingly, we recorded a tax benefit during the second quarter of
fiscal 2018 related to this retroactive rate change. Through
December 31, 2017, ISP Latvia was subject to a statutory income tax
rate of 15%. Effective January 1, 2018, the Republic of Latvia
enacted tax reform, which resulted in the recognition of a tax
benefit of $206,000 during the nine months ended March 31, 2018,
due to the reduction of the previously recorded net deferred tax
liability to zero.
Net
income was approximately $1.9 million, or $0.08 and $0.07 basic and
diluted earnings per share, respectively, during the first nine
months of fiscal 2018, compared to net income of approximately $1.3
million or $0.07 per basic and diluted earnings per share for the
first nine months of fiscal 2017. The increase in net income is
primarily due to the aforementioned changes in other income, which
had a favorable impact, as well as the aforementioned income tax
benefit. Net income for the first nine months of fiscal 2018 was
also affected by increases in the following: (i) amortization of
intangibles, (ii) SG&A expenses, (iii) interest expense, and
(iv) new product development costs, as compared to the prior year
period. All of the amortization of intangibles and a portion of the
increase in SG&A expenses during the first nine months of
fiscal 2018 were related to the Acquisition of ISP. Due to the
timing of the ISP acquisition, the results of ISP were not included
until late in the second quarter of fiscal 2017.
Adjusted
net income, which is adjusted for the effect of the non-cash change
in the fair value of the June 2012 warrant liability, was
approximately $2.1 million during the first three quarters of
fiscal 2018, as compared to $1.8 million in the same period of
fiscal 2017.
LightPath
recognized foreign currency exchange gains during the first three
quarters of fiscal 2018 due to changes in the value of the Chinese
Yuan and Euro in the
amount of approximately $854,000, which had a $0.03 impact on basic
and diluted earnings per share, compared to a loss of $254,000,
which had a $0.01 impact on basic and diluted earnings per share,
in the same period of the prior fiscal year.
Weighted-average
basic and diluted common shares outstanding increased to 24,763,458
and 26,618,956, respectively, in the first three quarters of fiscal
2018 from 18,621,072 and 20,145,976, respectively, in the first
three quarters of fiscal 2017. The increase was primarily due to 9
million shares of Class A common stock issued in connection with
the acquisition of ISP, including the satisfaction of the Sellers
Note and, to a lesser extent, shares of Class A common stock issued
under the 2014 Employee Stock Purchase Plan and shares of Class A
common stock issued as a result of the exercises of stock options
and warrants.
EBITDA
for the first three quarters of fiscal 2018 was approximately $4.1
million, compared to approximately $3.6 million in the first three
quarters of fiscal 2017. Adjusted EBITDA, which eliminates the
non-cash income or expense related to the change in fair value of
the June 2012 warrant liability, was approximately $4.3 million in
the first three quarters of fiscal 2018, an increase of 7%, as
compared with approximately $4.0 million for the same period of the
prior fiscal year. The difference in adjusted EBITDA was
principally caused by lower gross margin and higher SG&A costs,
due to the addition of ISP’s SG&A costs, offset by
foreign currency gains.
Cash
and cash equivalents totaled approximately $6.4 million as of March
31, 2018 and approximately $8.1 million as of June 30, 2017. Cash
flow provided by operations was approximately $2.7 million for the
first three quarters of fiscal 2018, compared with $2.9 million in
the same period of the prior fiscal year. During the first three
quarters of fiscal 2018, the Company expended approximately $2.5
million for capital equipment, as compared to $1.4 million in the
same period of the prior fiscal year.
The
current ratio as of March 31, 2018 and June 30, 2017 was 3.7 to 1
and 3.4 to 1, respectively. Total stockholders’ equity as of
March 31, 2018 was approximately $36.1 million, a 21% increase,
compared to approximately $29.7 million as of June 30, 2017. The
increase is largely due to the issuance of Class A common stock
equal to approximately $2.2 million issued in conjunction with the
satisfaction of the Sellers Note, and net income of $1.9 million
for the first three quarters of fiscal 2018.
As of
March 31, 2018, LightPath’s 12-month backlog increased by 38%
to $12.9 million, as compared to $9.3 million as of June 30, 2017,
which reflects strong booking for most of the Company’s
product lines and the booking of a large infrared annual contract
during the second quarter, which the Company began shipping against
in the third quarter of fiscal 2018.
*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, 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 expired in December
2017.
The
fair value of the warrants issued in connection with the private
placement in 2012 is re-measured each reporting period until the
warrants are exercised or expire. Each reporting period, the change
in the fair value of these warrants is either recognized as
non-cash expense or non-cash income. The change in the fair value
of the warrants has a significant correlation to the change in the
market value of the Company’s Class A common stock for the
period being reported and is not impacted by actual operations
during such period. Management believes that by 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 by adjusting net income 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 Monday, May 14 at
4:30 p.m. ET to discuss its financial and operational performance
for the third quarter, ended March 31, 2018.
Date:
Monday, May 14, 2018
Time:
4:30 PM (ET)
Dial-in
Number: 1-877-407-9210
International
Dial-in Number: 1-201-689-8049
Webcast:
http://www.investorcalendar.com/event/28905
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 May 28, 2018. To
listen to the replay, dial 1-877-481-4010 (domestic) or
1-919-882-2331 (international), and enter conference ID
#28905.
About LightPath Technologies
LightPath
Technologies, Inc. (NASDAQ: LPTH) is a leading global, vertically
integrated provider of optics, photonics and infrared solutions for
the industrial, defense, telecommunications, testing and
measurement, 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 gradient index GRADIUM® 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 New York, 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
|
|
Dorothy Cipolla, CFO
|
|
Jordan Darrow
|
LightPath Technologies, Inc.
|
|
LightPath Technologies, Inc.
|
|
Darrow Associates, Inc.
|
Tel: 407-382-4003
|
|
Tel: 407-382-4003 x305
|
|
Tel:
512-551-9296
|
jgaynor@lightpath.com
|
|
dcipolla@lightpath.com
|
|
jdarrow@darrowir.com
|
Web: www.lightpath.com
|
|
Web: www.lightpath.com
|
|
Web:www.darrowir.com
|
(tables
follow)
LIGHTPATH
TECHNOLOGIES, INC.
|
||
Consolidated
Balance Sheets
|
||
(unaudited)
|
||
|
|
|
|
March
31,
|
June
30,
|
Assets
|
2018
|
2017
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$6,388,164
|
$8,085,015
|
Trade accounts
receivable, net of allowance of $19,358 and $7,356
|
5,672,071
|
5,890,113
|
Inventories,
net
|
6,409,118
|
5,074,576
|
Other
receivables
|
59,375
|
29,202
|
Prepaid expenses
and other assets
|
1,043,603
|
641,469
|
Total current
assets
|
19,572,331
|
19,720,375
|
|
|
|
Property and
equipment, net
|
12,322,111
|
10,324,558
|
Intangible assets,
net
|
9,387,240
|
10,375,053
|
Goodwill
|
5,854,905
|
5,854,905
|
Deferred tax
assets
|
285,000
|
285,000
|
Other
assets
|
137,084
|
112,323
|
Total
assets
|
$47,558,671
|
$46,672,214
|
Liabilities
and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$2,039,090
|
$1,536,121
|
Accrued
liabilities
|
514,479
|
966,929
|
Accrued payroll and
benefits
|
1,113,840
|
1,896,530
|
Loans payable,
current portion
|
1,458,800
|
1,111,500
|
Capital lease
obligation, current portion
|
219,688
|
239,332
|
Total current
liabilities
|
5,345,897
|
5,750,412
|
|
|
|
Capital lease
obligation, less current portion
|
271,175
|
142,101
|
Deferred
rent
|
400,605
|
458,839
|
Deferred tax
liabilities
|
-
|
182,349
|
Warrant
liability
|
-
|
490,500
|
Loans payable, less
current portion
|
5,479,565
|
9,926,844
|
Total
liabilities
|
11,497,242
|
16,951,045
|
|
|
|
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; 25,730,544 and 24,215,733
|
|
|
shares issued and
outstanding
|
257,305
|
242,157
|
Additional paid-in
capital
|
229,749,154
|
225,492,252
|
Accumulated other
comprehensive income
|
496,282
|
295,396
|
Accumulated
deficit
|
(194,441,312)
|
(196,308,636)
|
Total
stockholders’ equity
|
36,061,429
|
29,721,169
|
Total liabilities
and stockholders’ equity
|
$47,558,671
|
$46,672,214
|
LIGHTPATH
TECHNOLOGIES, INC.
|
||||
Consolidated
Statements of Comprehensive Income
|
||||
(unaudited)
|
||||
|
|
|
|
|
|
Three
months ended
|
Nine
months ended
|
||
|
March
31,
|
March
31,
|
||
|
2018
|
2017
|
2018
|
2017
|
Revenue,
net
|
$8,503,628
|
$8,490,042
|
$24,437,094
|
$19,360,109
|
Cost of
sales
|
5,211,602
|
4,267,318
|
14,344,015
|
9,007,180
|
Gross
margin
|
3,292,026
|
4,222,724
|
10,093,079
|
10,352,929
|
Operating
expenses:
|
|
|
|
|
Selling, general
and administrative
|
2,362,578
|
2,329,762
|
7,054,996
|
6,190,705
|
New product
development
|
384,380
|
308,394
|
1,178,849
|
853,939
|
Amortization of
intangibles
|
329,270
|
304,809
|
987,812
|
304,809
|
Loss on disposal of
property and equipment
|
—
|
—
|
3,315
|
—
|
Total costs and
expenses
|
3,076,228
|
2,942,965
|
9,224,972
|
7,349,453
|
Operating
income
|
215,798
|
1,279,759
|
868,107
|
3,003,476
|
Other income
(expense):
|
|
|
|
|
Interest
expense
|
(118,890)
|
(154,639)
|
(434,671)
|
(167,832)
|
Interest expense
-debt costs
|
461,686
|
(38,338)
|
382,459
|
(38,338)
|
Change in fair
value of warrant liability
|
-
|
(748,169)
|
(194,632)
|
(457,784)
|
Other income
(expense), net
|
484,531
|
27,985
|
927,383
|
(228,935)
|
Total other income
(expense), net
|
827,327
|
(913,161)
|
680,539
|
(892,889)
|
Net income before
income taxes
|
1,043,125
|
366,598
|
1,548,646
|
2,110,587
|
Provision for
income taxes
|
(183,154)
|
265,774
|
(318,678)
|
771,600
|
Net
income
|
$1,226,279
|
$100,824
|
$1,867,324
|
$1,338,987
|
Foreign currency
translation adjustment
|
77,477
|
38,636
|
200,886
|
113,818
|
Comprehensive
income
|
$1,303,756
|
$139,460
|
$2,068,210
|
$1,452,805
|
|
|
|
|
|
Earnngs per common
share (basic)
|
$0.05
|
$0.00
|
$0.08
|
$0.07
|
Number of shares
used in per share calculation (basic)
|
25,546,512
|
23,818,136
|
24,763,458
|
18,621,072
|
Earnings per common
share (diluted)
|
$0.04
|
$0.00
|
$0.07
|
$0.07
|
Number of shares
used in per share calculation (diluted)
|
27,281,010
|
25,628,703
|
26,618,956
|
20,145,976
|
LIGHTPATH
TECHNOLOGIES, INC.
|
||||||
Consolidated
Statement of Stockholders' Equity
|
||||||
Nine
months ended March 31, 2018
|
||||||
(unaudited)
|
||||||
|
|
|
|
Accumulated
|
|
|
|
Class A
Common
|
Additional
|
Other
|
|
Total
|
|
|
Stock
|
Paid-in
|
Comphrehensive
|
Accumulated
|
Stockholders’
|
|
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Equity
|
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
|
93,813
|
938
|
193,212
|
—
|
—
|
194,150
|
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
|
—
|
—
|
562,795
|
—
|
—
|
562,795
|
Foreign currency
translation adjustment
|
—
|
—
|
—
|
200,886
|
—
|
200,886
|
Net
income
|
—
|
—
|
—
|
—
|
1,867,324
|
1,867,324
|
Balances at March
31, 2018
|
25,730,544
|
$257,305
|
$229,749,154
|
$496,282
|
$(194,441,312)
|
$36,061,429
|
LIGHTPATH
TECHNOLOGIES, INC.
|
||
Consolidated
Statements of Cash Flows
|
||
(unaudited)
|
||
|
Nine months
ended
|
|
|
March
31,
|
|
|
2017
|
2016
|
Cash flows from
operating activities
|
|
|
Net
income
|
$1,867,324
|
$1,338,987
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization
|
2,492,003
|
1,240,232
|
Interest
from amortization of debt costs
|
13,704
|
3,861
|
Loss
on disposal of property and equipment
|
3,315
|
—
|
Stock-based
compensation
|
279,397
|
319,182
|
Bad
debt expense
|
(11,868)
|
(29,551)
|
Change
in fair value of warrant liability
|
194,632
|
457,784
|
Change
in fair value of Sellers Note
|
(396,163)
|
34,476
|
Deferred
rent amortization
|
(58,234)
|
(66,710)
|
Inventory
write-offs to reserve
|
134,052
|
47,895
|
Deferred
tax expense
|
(205,884)
|
(40,000)
|
Changes in
operating assets and liabilities:
|
|
|
Trade accounts
receivables
|
312,026
|
(1,032,243)
|
Other
receivables
|
(29,018)
|
142,919
|
Inventories
|
(1,013,201)
|
(253,179)
|
Prepaid
expenses and other assets
|
(409,137)
|
171,753
|
Accounts
payable and accrued liabilities
|
(500,237)
|
595,624
|
Net
cash provided by operating activities
|
2,672,711
|
2,931,030
|
|
|
|
Cash flows from
investing activities
|
|
|
Purchase
of property and equipment
|
(2,481,715)
|
(1,412,738)
|
Acquisiton
of ISP Optics, net of cash acquired
|
—
|
(11,777,336)
|
Net
cash used in investing activities
|
(2,481,715)
|
(13,190,074)
|
|
|
|
Cash flows from
financing activities
|
|
|
Proceeds from
exercise of stock options
|
194,150
|
—
|
Proceeds from sale
of common stock from employee stock purchase plan
|
48,591
|
19,632
|
Loan
costs
|
(60,453)
|
(72,224)
|
Borrowings on loan
payable
|
2,942,583
|
5,000,000
|
Proceeds from
issuance of common stock under public equity placement
|
—
|
8,730,209
|
Proceeds from
exercise of warrants, net of costs
|
534,318
|
584,679
|
Net
payments on loan payable
|
(4,351,836)
|
—
|
Payments
on capital lease obligations
|
(196,790)
|
(141,874)
|
Net
cash (used in) provided by
financing activities
|
(889,437)
|
14,120,422
|
Effect of exchange
rate on cash and cash equivalents
|
(998,410)
|
62,119
|
Change in cash and
cash equivalents
|
(1,696,851)
|
3,923,497
|
Cash and cash
equivalents, beginning of period
|
8,085,015
|
2,908,024
|
Cash and cash
equivalents, end of period
|
$6,388,164
|
$6,831,521
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Interest
paid in cash
|
$417,550
|
$91,525
|
Income
taxes paid
|
$562,491
|
$344,820
|
Supplemental
disclosure of non-cash investing & financing
activities:
|
|
|
Purchase
of equipment through capital lease arrangements
|
$306,220
|
$230,000
|
Reclassification
of warrant liability upon exercise
|
$685,132
|
$509,771
|
Derecognition
of liability associated with stock option grants
|
$283,399
|
$352,765
|
Sellers
Note issued to acquire ISP Optics, at fair value
|
—
|
$6,327,208
|
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
|
(Unaudited)
|
(Unaudited)
|
||
|
Quarter
Ended:
|
Nine Months
Ended:
|
||
|
March 31,
2018
|
March 31,
2017
|
March 31,
2018
|
March 31,
2017
|
Net
income
|
$1,226,279
|
$100,824
|
$1,867,324
|
$1,338,987
|
Change in fair
value of warrant liability
|
—
|
748,169
|
194,632
|
457,784
|
Adjusted net
income
|
$1,226,279
|
$848,993
|
$2,061,956
|
$1,796,771
|
% of
revenue
|
14%
|
10%
|
8%
|
9%
|
|
(Unaudited)
|
(Unaudited)
|
||
|
Quarter
Ended:
|
Nine Months
Ended:
|
||
|
March 31, 2018
|
March 31, 2017
|
March 31, 2018
|
March 31, 2017
|
Net
income
|
$1,226,279
|
$100,824
|
$1,867,324
|
$1,338,987
|
Depreciation and
amortization
|
866,329
|
721,636
|
2,492,003
|
1,240,232
|
Provision fo
rincome taxes
|
(183,154)
|
265,774
|
(318,678)
|
771,600
|
Interest
expense
|
(342,796)
|
192,977
|
52,212
|
206,170
|
EBITDA
|
$1,566,658
|
$1,281,211
|
$4,092,861
|
$3,556,989
|
Change in fair
value of warrant liability
|
—
|
748,169
|
194,632
|
457,784
|
Adjusted
EBITDA
|
$1,566,658
|
$2,029,380
|
$4,287,493
|
$4,014,773
|
% of
revenue
|
18%
|
24%
|
18%
|
21%
|