LightPath Technologies Inc (LPTH) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen.

Welcome to the LightPath Technologies quarter four earnings conference.

My name is Kate and I will be coordinator today.

At this time you are all in listen-only mode.

There will be a question and answer session following your presentation and you will receive instructions on how to ask questions at that time.

If at any time during the call you require assistance, please key star zero and an operator will be happy to assist you.

As a reminder, this conference is being recorded for replay purposes.

At this time I would like to turn the program to your host, the President and CEO of LightPath Technologies, Mr. Ken Brizel.

Sir, please go ahead.

Thank you.

Good morning.

And thank you for joining our conference call to discuss LightPath Technologies' financial and business results for the full year of fiscal 2003 and its fourth quarter which ended in June 30.

With me today is our new CFO Monty Allen, and six days on the job, and our controller Stephanie Paskowitz (ph).

Monty, would you like to cover the preamble?

Sure thing, Ken.

Thanks.

As my first public presentation for LightPath I will be very CFO-like and remind our shareholders that this call is being webcast on the Investor Relations section of the company's corporate website, which is at lightpath.com.

Please note that this conference call is the property of LightPath technologies and any taping or other commercial reproduction is prohibited without our prior written consent.

Additionally, of course, I need also to remind you that the following discussion, including the Q&A, will contain forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, including statements about LightPath's prospective market opportunities, future business plans, and financial performance.

These forward-looking statements necessarily involve risks and uncertainties.

LightPath's actual results may vary materially.

Additional information concerning factors that could cause actual results to differ from forward-looking statements can be found in LightPath's periodic filings with the SEC.

The forward-looking statements and associated risks covered during this conference call are based on current expectations as of today.

LightPath assumes no obligation to update or revise them, whether as a result of new developments or otherwise.

And with those caveats out of the way, I would like to turn the call back over to Ken Brizel, our President and CEO.

Thank you, Monty.

First, let me take a moment on behalf of the board of directors of LightPath and its shareholders to welcome you, Monty, to the post of LightPath's new Chief Financial Officer.

We're very pleased that you joined us and I look forward to working with you.

On our call today, I would like to extend my previous discussion with you concerning the direction we're following to reach profitability at LightPath.

After that, Monty will review our fourth quarter and full year results, and then I will wrap up with a summary.

LightPath's fiscal fourth quarter sales were 1.8 million.

To highlight the early signs of progress with our strategy, I want to note that each of the last three quarters of this fiscal closed year has had sales higher than the last quarter before it, even if by modest amounts.

We have no debt outstanding.

We continue our work on driving our operating costs down, our productivity up, and to diversify our customer base and rebuild sustainable sales.

I am pleased that we have identified the sustainable base of this business and we can now begin growing it again.

Throughout this last year, we've continued to attract new, and retain key personnel in all areas of the organization.

Like Monty Allen, Chief Financial Officer, Jim Magos, Senior Vice President of Sales, four new salesmen worldwide, as well as personnel in engineering, marketing and manufacturing operations.

Our modest successes this year have come from our efforts to provide new products in a broader range of optical markets.

Our fiscal 2003 market mix has notably changed.

The nontelecom market has grown from 41% of LightPath revenue in the fourth quarter of the last fiscal year, to 67% of revenue of our last quarter.

That is a significant change and is the basis of LightPath's future.

Applications in nontelecom, including industrial, datacom, hybrid fiber co ax, medical, defense, and instrumentation.

Our strategy, then, is to supply a broad product portfolio to the entire optical market.

We're continuing to improve our operating efficiency.

We've completed the consolidation and closure of Walnut, California facility, and we're continuing to reduce operating costs and improving our manufacturing productivity.

Our team did a great job in these consolidation efforts.

With the final plant consolidation, we took the opportunity to reorganize the manufacturing into product lines with identifiable leadership to provide our customers with the best production support and enhance our ability to grow each line.

Our business model is to provide customers with a full range of standard and custom optical solutions.

We remain as one of the only full service custom optical molded lens suppliers in the world, providing aspheric performance lenses for applications ranging from 200 microns to 100 millimeters.

The precision molded lens manufacturing team has improved their output by 50% over the course of the last year, and in the face of our relocation disruptions, while reducing our manufacturing lead time from 8 weeks down to 4, and improving our yield by 10%.

We believe we can continue to improve our processes going forward with both volume increases and process modifications.

This will reduce our lead time further and continue to improve our yield.

Our Gradium business has continued to penetrate new industrial high-powered YAG laser applications, and the manufacturing team is working on both capacity improvement and cost reduction.

In collimators this year, we released and began selling connectorized collimators utilizing LightPath's molded aspheres.

Also, LightPath began selling large-beam collimators for nontelecom wavelengths from 10/64 to 5/43 nanometer with sales into markets like medical, biotech, aerospace and industrial.

Finally our sales team continues to engage with customers on higher level assemblies, enabling them to obtain maximum optical performance while reducing cost.

Now I would like to turn the discussion back to Monty who will review the financials.

Thank you, Ken.

Okay.

All of the results I will discuss here are on a consolidated financial statement basis.

Plunging into the quarter, for this fourth quarter, the one ended June 30 of 2003, the company reported total net revenue of 1.79 million, compared to 3.03 million for last year's fourth quarter.

This represents a decline of 41%.

This decrease was largely due to a significant decline in collimator and isolater sales into the telecom market.

Sticking with revenues for the full fiscal year ended June 30, our sales came in at 6.79 million, versus last year's 12.51 million.

This decline is 46% and has been caused by the decline, again, of sales into the telecom capital equipment market.

What is encouraging, though, as Ken has noted, is that our sales during each of the four quarters of the 2003 fiscal year ranged from a low of 1.64 to a high of 1.79 million.

This is a narrow range and we believe it represents our base business level from which we will likely expand.

Our sales remain solidly domestic, in the U.S.

Domestic sales were 80% of fourth quarter and also 80% of full-year sales.

Sales outside the U.S. are predominantly made in Europe where we have a sales presence.

We have a reasonably diversified customer base with only one customer, that is Intel Corporation, accounting for more than 10% of sales.

Intel came in at just over 10% of sales for this last fiscal year.

In the most recent quarter, with increasing sales and continues efficiencies and production, we achieved a positive gross margin from sales.

This is another landmark.

This is the first time in five quarters that we have had positive gross margin for our quarter, and it may indicate we're moving in the right direction with our strategic emphasis on finding new sales opportunities while right-sizing our production capacity.

While we have made considerable progress, though, we continue to see some pricing pressure in some of the industry segments that we serve.

In the area of other expenses, with the facilities consolidation completed, we are working now to control both R&D and SG&A-type spending.

Compared to the fourth quarter of last year, the combination of R&D and SG&A spending is down by over 50%, or a total of over $2 million reduction.

Quarter-over-quarter, the decline is about 25% in these two categories.

Net loss for this last fourth quarter was 2.18 million, or 84 cents per share.

This compares with the fourth quarter of last fiscal year when we reported a net loss of 17.67 million, or $6.84 per share.

Last year reflecting the company's significant charges for impairment of assets as our markets declined so precipitously at that time.

Let's move on to the full year and things that affected it.

The company did adopt statement of financial accounting standards number 142, and affectionately known as FAS 142, which is entitled goodwill and other assets, and therefore we no longer amortize goodwill.

As of the date of the adoption, LightPath had remaining goodwill of approximately 2.3 million.

That was subject to the transition provisions of FASB 142.

We completed the transition on impairment analysis required by that FASB 142 and reported a transitional impairment loss of the full 2.3 million during the second quarter of fiscal 2003.

That was accounted for at that time as an accounting change.

Therefore, we have no goodwill amortization expense for fiscal 2003.

In fiscal 2003, goodwill amortization alone had amounted to approximately 1.3 million, or about 53 cents per share.

Okay.

I stated earlier, for the full fiscal year 2003 sales were 6.79 million compared to 12.51 million for the 2002 fiscal year, a decrease, as I said earlier, of approximately 46%.

Net loss for fiscal 2003 is 21.19 million, or $8.20 per share.

Fiscal 2003 included about 11 million in noncash charges.

They are detailed in a table on page two of the press release.

I'm not going to go through a detailed recitation of them here.

But if you subtract our noncash charges from our net loss, the result is about 10.19 million, which is, essentially, the company's cash usage for the full year of 2003, which is noted on page one of the press release.

For the full fiscal year of 2002, net loss had been 50.75 million, or $20.50 per share.

Last year's loss similarly included several noncash charges.

They totaled 32.21 million, and those are detailed on page two of the press release, as well.

During fiscal 2003 we had less than 200,000 in spending for capital equipment.

We do not have any plan for significant capital spending during fiscal 2004 and all capital purchases are undergoing a rigorous examination before being made.

Now for some comments on our cash flow and our cash position.

As you've been able to hear on this call, the focus for us is moving this business to a cash flow positive position.

We're not quite there yet, but we are getting closer.

In this fourth quarter we had a total cash usage of $420,000.

There were two nonrecurring sources of cash in the quarter that I should note.

One is the previously announced LightPath liquidation payment, and fixed asset sales.

Those two totaled about 400,000, and that means our operating cash usage for the quarter was about 800,000.

Year end cash and cash equivalents was at about 3.3 million as noted on page one of the press release.

We are targeting a cash flow break even quarter during this coming fiscal year.

As has been previously stated by the company, additional cash flow improvements will come from building and not cutting the business.

Our internal sales goals are now fully geared to revenue increasing, although we are not offering any official forecast or guidance on any future quarter, or for the full year of fiscal 2004.

Perhaps as we gain an understanding as to what new sales opportunities prove fruitful going forward, we will be able to consider offering company guidance on key metrics in the business.

That wraps up the financial comments.

Now it is time for Ken to wrap up the call.

All right.

Thank you.

We've identified our core skill sets, our product lines, our geographies, and the people.

We are increasingly confident that we will be a survivor.

Our business model provides customers with a full range of standard and custom optical solutions.

In our lens business, we remain as one of the only full service custom molded optical lens suppliers in the world.

We have reorganized and focused on providing our customers with value-added designs, and reduced time to market for their applications.

As our optics continue to be designed into new applications in medical, industrial, defense, communications, and instrumentation, we believe LightPath is well positioned to deliver products for these markets now and for the future.

I have now concluded my first year as the CEO.

I've had a lot of tough calls on imperfect information and a deteriorating market.

This year, this last quarter has begun to give me the confidence that we focused on for the future, rather than fixing the effects of the past.

Our emphasis going forward is on revenue generation.

Thanks for your interest and support of LightPath.

We're no longer working to salvage shareholder value but to rebuild shareholder value.

We will now open the lines up for questions from our shareholders.

Ladies and gentlemen, if you would wish to ask a question at this time, you may do so by keying star one on your touch-tone phone.

If your question has been answered, or you wish to withdraw it please key star two.

Please hold as we pause for the first question.

And at this time, sir, there are no questions.

Okay.

Well, again thank you for you interest and support of LightPath.

This will conclude the call.

Thank you, Kate.

Ladies and gentlemen, this concludes your program for today.

You may now disconnect.