LightPath Technologies Inc (LPTH) 2004 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the LightPath Technologies Inc. earnings conference call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation.

(OPERATOR INSTRUCTIONS)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Ken Brizel, President and Chief Executive Officer of Lighthouse Technologies Inc. Thank you -- you may begin.

Good afternoon and thank you for joining the conference call today to discuss LightPath Technologies' financial and business results for the full year fiscal 2004 and our fourth quarter which ended June 30. In the conference with me today is Monty Allen, our CFO, and our controller, Stephanie (indiscernible). Monty, will you open with the Safe Harbor statement, please?

Good afternoon. Actually, first, I want to mention that this call is being webcast through the homepage and the investor relations section of the Company's corporate website at LightPath.com. A transcript of the call will be posted on our website by tomorrow as has been our usual practice. Also 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. And of course on the legal side of the equation it is necessary for listeners to be informed 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 possible future financial performance.

These forward looking statements necessarily involve risk and uncertainties. LightPath's actual results may vary materially from any such statements made. 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 risk 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.

Okay with the Safe Harbor statement read into the records I want to remind listeners that in addition to call participants questions for this call can be submitted via our investor relations INFOBOX. That can be accessed on our website from the investor relations button on the left side of menu. From there, click on e-mail IR contact. That directory e-mails to the following e-mail account it's INV_REL@LightPath.com. Email sent to any other address will not be seen or responded to.

We got a much improved quarter and we're now eager to discuss that. I'll turn the floor back over to Ken Brizel our President and CEO.

Thank you, Monty, yes, we are very excited to tell you about the visible evidence of our progress this last quarter. First let's talk about our sales levels. LightPath's fiscal fourth quarter sales for 2004 were 2.8 million which are up from 1.8 million in the prior year's fourth quarter. And also up nicely on a quarter by quarter basis.

Compared to last year's quarter this is an increase of 50 percent and on our quarter by quarter basis this is an increase of about 40 percent. Sales strength was present throughout our product lines. Our best sales gains in dollar terms in 2004 came from GRADIUM lens and Vin (ph) assemblies followed by precision molded optics and isolators. We've worked throughout the year to improve sales by establishing some significant customer relationships that allow customers with long and steady production runs, permitting us to improve our cost throughout the chain from purchasing through the packaging and shipping.

Having enough order board coverage allows us to rely less on our distributor channel and turns business which is uncertain in timing and quantity does not permit us to gain production chain efficiency. One indicator of this change is our terms business which approached 75 percent of our quarterly sales in 2003 and has declined to 150 percent in 2004.

As noted in our press release today, we have very significantly changed our sales complexion of the business in the past three years, away from telecom which was 81 percent of our sales in fiscal 2001 and now just 18 percent in 2004. Towards customer obligations and industrial, defense, medical and other consumer markets. Just as exciting is our margin improvement and in our most recently completed quarter we achieved gross margin levels of 34 percent. Let me give you a gross margin percentage of the fourth quarter of each of these last fiscal years.

In 2002, our fourth quarter gross margin percentage was -63 percent as the full impact of declining telecom market was felt. In 2003 after a year's work and turning the business around we've reached a growth margin percentage of 4 percent. Now we have achieved in the fourth quarter 34 percent. I am really excited that our efforts of the top of our P&L are showing this kind of success.

We are working to further improve that. Stepping back to look at the whole fiscal year of 2004 we've reached a level of 24 percent on our gross margin peer for both fiscal years 2003 and 2002 our gross margin levels were at a -21 percent. This single element of our performance improvement gross margin is the most gratifying one I can site to you here today.

At this time last year, we had just brought on new managerial capabilities to strengthen us and continue to drive the turnaround of LightPath. Later in the year I was able to bring a strong manufacturing manager on board. Along with our technical and marketing leadership, the team has been largely complete through the past year. I am very optimistic about what we can do going forward. I have good reason to be optimistic. Let me talk about our backlog.

Our sales backlog grew throughout fiscal 2004, thanks to great efforts of our sales team. I will site that we call this disclosure backlog the definition of which we had disclosed in the prior SEC filings. We ended fiscal 2003 with a disclosure backlog of 1.4 million and a year later at the end of fiscal 2004, we have reached 3.3 million.

Again I think this is a demonstration of the business on sounder footing.

Any business has to have an active new product effort. In fiscal 2004, we announced our DuraYAG assembly using GRADIUM lenses, our Tex transmitter lenses and our CircuLight lenses for red and blue laser applications. Both from our precision molded optics technology and our ruggedized collimators for high-powered laser fiber applications.

These 4 new items demonstrate our cross market platforms. These products are for industrial communications, defense, consumer market applications. We have aggressive goals for fiscal 2005 to continue to extend our recent gains. We have the support of board, we had great management group and many dedicated and hard-working employees. As I

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Ladies and gentlemen, we apologize for the momentary disruption inconvenience. We are currently experiencing technical difficulties. Please remain on the line. The teleconference will continue shortly.

Reannouncing your speaker, Mr. Ken Brizel.

Hi. We have aggressive goals for fiscal 2005 to continue to extend our recent gains. We have a supportive Board of Directors, a great management group and many dedicated and hard-working employees. As I said I'm optimistic about where we are poised and still better performance for this year.

Now, to turn the call over to Monty to cover our financial information in more detail.

Sorry to have dropped out on you there, we are in the middle of the thunderstorm and I think we lost power for a short period of time.

Okay, financials. This fourth quarter was very validating of the work we're trying to do here and the rest of as Ken just said the rest of the team is really pleased and we're poised for more work here.

The results I'm going to be discussing here are on a consolidated financial stated basis. We have dissolved our horizon corporate entity and now our consolidated financial statements consists of (indiscernible) and LightPath of the current companies.

As you can note in the press release from this morning our fourth quarter revenue was reported at $2.77 million compared to $1.79 million for last years fourth quarter. This represents an increase of about 55 percent. This increase was in isolator PMO and GRADIUM 1 sales into many of our markets, multiple markets, and represents both the turnaround in general business conditions as well as our specific sales strategy successes.

For the full fiscal year ended June 30th of 2004 our sales came in at $8.33 million versus the $6.79 million in the prior year. This is an increase of 22 (indiscernible) caused by the improvement that Ken has already mentioned. Our markets are turning around, strong sales effort by our team and successful manufacturing response to this uptick.

Other sales metrics that are noteworthy is that our international sales grew right along with our total sales and still represent about 17 percent of sales in this past year. Sales outside the U.S. continue to be predominantly made into euro. Our customer base, while still reasonably diversified, narrowed a bit this year with the emergence of a couple of larger customers.

Only one customer, Intel the Corporation, accounted for more than 10 percent of sales. They came in at just about 16 percent of sales in this last fiscal year. 2 other customers accounted for more than 5 percent each.

In all four quarters of fiscal 2004, we achieved a positive gross margin. This compares with only 1 quarter of positive gross margin in fiscal 2003. Our fourth quarter was the best and showed that there is operating leverage in this business from the volume levels, get to a point somewhere past 2 million in quarterly sales. Our gross profit in the fourth fiscal quarter approached $1 million and represented a gross margin level of about 34 percent.

We are aiming for margins in the 40s and are still making business adjustments, to try and to reach that level.

We also continue to work feverishly at expense control throughout the business. We' reduced costs by diligent attention to all costs in the areas of SG&A, selling, general, and administrative and new product development during 2004. Those combined costs declined by about 33 percent from 2003 levels, which works out to over $3 million a year in year-over-year savings. That being said, however, we have added some personnel in 2004 to serve the growth needs we have had and we continue to use temps as starting personnel in production to test the suitability of the person and retain flexibility in the business to meet challenges and changes.

Net loss, then, for the fourth quarter was 1.17 million which is 36 cents per share. This compared with the fourth quarter of the last fiscal year when we reported a net loss of 2.18 million or -84 cents per share. For the full fiscal year 2004 our net loss was 5.6 million which works out to $1.98 percent -- I'm sorry $1.98 per share. This was down from 2003 loss of 21.19 million which worked out to 820 negative 820 per share.

(indiscernible) 2004. We had about $350,000 in spending for capital equipment. Based on our budget rollups and review this year it's unlikely that we would spend that much again here in fiscal 2005. Nevertheless, we anticipate spending at least 200,000 in capital as our business evolves. Some capital expenditures are a direct cash out so they're closely examined here and alternatives are also looked at before any commitments are made.

We've also been examining the use of the capital equipment lease line this year to allow us to retain those capital dollars in house.

Turning now to the matter of our cash flows and our cash position we still remain heavily committed to moving this business to cash flow positive position. 2004 was a year of progress if not the year of achievement. We expect that we will make this goal in 2005. In the fourth quarter, we had a total cash usage of $420,000 and for the whole fiscal year in 2004, we had a total cash usage of about 3.31 million which was much improved over the cash burn of almost 10 million in the prior year.

Now that 3.3 million figure which is total cash usage does not include cash inflows that we had in the third quarter from the financing that we accomplished or from the favorable legal settlement in the same quarter that we collected.

The year end cash and cash equivalent was at $2.5 million as noted in today's press release. Our total year-over-year decline in cash and cash equivalents is about 840,000. Our total cash usage in July which was just last month was under $100,000 and we anticipate that August maybe a positive cash flow month.

That being said, we buy materials for sales growth before we collect the receivables from that sales growth and so, our recent sales increases are slowing us down somewhat from reaching repeatable positive cash flow weeks and months.

So to sum up we believe we're well poised and ready for 2005. The Company policy will continue not to offer any official forecasts or guidance on any future quarter or for the full year of fiscal 2005. But we believe the comments have given you an idea of the optimism that we feel here. So Ken you can take over while we check for any email questions.

All right. Thank you Monty. On this call exactly 1 year ago today I said we were increasingly confident that we will be a survivor. I am now wholly confident of that. The only open question is where can we go from here. Our business model is showing signs of working and as it does, we can strengthen our position with our constituents, our suppliers, our customers and our employees. If we do that, you, our shareholders and constituents, should benefit. I thank you for your interest and support of LightPath and hope you are pleased with our efforts to rebuild value this year. And we will press on and do more for you going forward.

We will now open up the lines for questions from our shareholders as well as check whether or not we have any questions on our investor's relations website.

(OPERATOR INSTRUCTIONS) Mr. Brizel, there are no questions at this time.

Well, again, I want to thank you for your interest and support of LightPath Technologies. See you next time.

This concludes the teleconference. Thank you all for your participation and have a wonderful day.