LightPath (LPTH) Q4 2025 Earnings Call Transcript

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DATE

Thursday, September 25, 2025 at 5 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Sam Rubin

Chief Financial Officer — Al Miranda

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TAKEAWAYS

Revenue-- $12.2 million, a 41.4% increase from $8.6 million in the prior-year period.

Backlog-- Approximately $90 million as of the Q4 FY2025 earnings call, more than four times the backlog from a few months earlier.

G5 Contribution-- G5 contributed $4.2 million to revenue

Infrared Component Sales-- $4.9 million, accounting for 40% of consolidated revenue.

Assemblies and Modules Revenue-- $4.2 million, or 34.1% of consolidated revenue.

Visible Component Revenue-- $2.8 million, or 23.2% of consolidated revenue.

Engineering Services Revenue-- $300,000, representing 2.1% of consolidated revenue.

Gross Profit-- $2.7 million, up 6.6% year-over-year. Gross margin decreased to 22% from 29.2% due to a $500,000 inventory reserve charge, mainly within visible components.

Operating Expenses-- $7.2 million, a 52% increase driven by G5 acquisition integration costs, increased sales and marketing, new product material spend, and a $1.4 million increase in the fair value of acquisition liabilities.

Adjusted EBITDA Loss-- Adjusted EBITDA loss was $1.9 million, compared to a $1.1 million loss in the same period of the prior fiscal year.

Cash & Debt-- $4.9 million in cash and cash equivalents, and $5 million in total debt.

Segment Backlog Detail-- Two-thirds of the $90 million backlog is in systems and subsystems (primarily cameras and assemblies).

Recent Orders-- Over $40 million in infrared camera orders for CY2026 and CY2027 delivery, all from a single established G5 customer, spanning border surveillance and counter-UAV applications.

Counter-UAS Backlog-- More than $10 million of backlog relates to counter-UAS camera systems, apart from the major new orders.

Navy Sphere Program-- Contract with L3 Harris is expected to enter low-rate initial production in the coming months, with full integration on a destroyer targeted by 2027.

Strategic Investment-- $8 million invested by Ondas Holdings and Unusual Machines after Q4 FY2025 to support drone and defense subsystem manufacturing expansion.

Key Material Differentiator-- The proprietary Black Diamond Glass, licensed from the US Naval Research Laboratory, is replacing germanium in response to China's export ban and growing defense industry demand.

Gross Margin Outlook-- CFO Miranda stated, "we're pretty close to 30" (referring to adjusted gross margin as of Q4 FY2025), and projects a rise to 35% within a quarter or two, and potentially 40% as the mix shifts to finished infrared camera systems.

G5 Earn-Out Targets-- The first tranche for the earn-out is $21 million in revenue with 20% EBITDA (non-GAAP), and current backlog "indicates they'll hit that first mark." according to Al Miranda.

G5 Integration-- Integration completed six months ahead of plan and below budget.

IT Infrastructure-- Migrated to a new provider to meet high-level defense cybersecurity requirements in the fourth quarter.

SUMMARY

LightPath Technologies (NASDAQ:LPTH) reported a record backlog exceeding $90 million as of the Q4 FY2025 earnings call, driven primarily by growth in systems and subsystems, including major new orders for infrared cameras. Management emphasized the significance of the proprietary Black Diamond Glass as a strategic differentiator, facilitating the shift away from reliance on Chinese-sourced germanium. Fiscal year 2025 saw the completion of the G5 acquisition integration, with G5 orders and customers contributing substantial incremental revenue beyond original expectations. The company completed strategic IT upgrades to support defense industry standards and expanded production capacity in subsidiary Visomed for both proprietary and non-Lockheed camera development.

CEO Rubin said, "The $40 million in orders for calendar years 2026 and 2027 we just discussed is for another one of the prime contractors. So this will be in addition to the existing work we have been expecting and discussed for the border."

Management stated that subsequent to quarter end, "we announced an $8 million investment from Ondas Holdings and Unusual Machines."

Backlog detail reveals about 60% of orders are slated to ship in FY2026, with the remainder extending through FY2027 and potentially into FY2028.

CFO Miranda clarified, "So it was $4.2 million, Jaeson—that was the G5 contribution to revenue."

The company is investing in manufacturing and engineering to support rapid scaling in defense and drone-related markets, including recruiting Dr. Steve Milky as VP of Engineering and expanding assembly capabilities in the US and Europe.

INDUSTRY GLOSSARY

Black Diamond Glass: A proprietary infrared optical material licensed from the US Naval Research Laboratory, offered as a domestic alternative to germanium for defense-related optics.

Counter-UAS: Systems for detecting or defeating unmanned aerial systems (drones), often used for border security and critical infrastructure protection.

LRIP: Low-Rate Initial Production; early-stage manufacturing phase for systems prior to full-scale production, particularly in defense contracts.

NGSRI: Program with Lockheed Martin developing next-generation Stinger missile systems with integrated LightPath sensors; highly material to potential recurring revenue.

IDIQ: Indefinite Delivery, Indefinite Quantity; contract structure common in defense procurement allowing multiple awardees and flexible ordering volumes.

Full Conference Call Transcript

Sam Rubin: Thank you, operator. Good afternoon to everyone, and welcome to LightPath Technologies fiscal fourth quarter and full fiscal year 2025 Financial Results Conference Call. Pretty exciting times here at LightPath. Over the last few years, we've been working on the transformation of the company, and we're now beginning to see the tangible results of these efforts. Since we likely have many new shareholders and many new listeners on this call, I will take some time to describe where we've come from, which will help put in context the recent developments. Then I will talk about specific programs that are driving our record $90 million backlog, the investment from Ondas and Unusual Machines, and our next growth drivers.

This will likely take up more time than usual and will come at the expense of some of the financial side. So, Al? So let's start with strategy. LightPath is a forty-year-old company that for thirty-five out of those forty years was a component manufacturer. The strategy of LightPath as an optical component company was strongly tied to the industry structure and worked well when the industry was small and highly technical. A component company like LightPath could create value with its fabrication technology and at times capture that value with high margins.

However, as the industry grew and changed, the structure of the industry changed and led to commoditization of optical fabrication technologies and a change in customer characteristics and supplier-customer dynamics. LightPath unfortunately did not adapt its strategy to that and therefore relied on being a lowest-cost provider of components and focusing on manufacturing in China to achieve that. This resulted in eroding margins, increasing competition, and diminishing ability to capture the value its technologies created. This also resulted in an unhealthy reliance on both manufacturing and sales in China. By 2020, most of the company's manufacturing footprint was in China, and more than one-third of its revenue was from China.

In late 2020, following a change in management, we developed and implemented a new strategic direction. Without going into great details, because honestly, I could spend the whole evening talking about this, I'll just say that we realigned the company to strategic directions that allow us to substantially grow and capture much more value from our technologies and capabilities. This is not about moving away from being a component company as much as it is about moving into a position that will allow us to grow, improve margins, and secure our position in the supply chain.

In our specific industry, with the dynamics of the technology, supply chain, and geopolitics, this means that we can grow best and impact our bottom line best if we focus on subsystems and systems that are enabled by our technologies. More specifically, doing that in the field of infrared imaging, a growing market in which we have strong differentiators. To explain a bit more about what I mean, let's look at just one of our unique differentiators, our Black Diamond Glass.

Unique materials, such as our proprietary Black Diamond Glass, which is licensed from US Naval Research Laboratories as an alternative to germanium in infrared optics, help create value by enabling customers to do in this case, could be smaller systems, more could be cheaper systems, or more could simply be something as trivial as just being able to guarantee delivery of your systems to the customers with production certainty without worrying about germanium supply restrictions from China. Some companies, when they have such technology, might say something like, well, these materials are valued by my customers, so I can charge more for my material, which is a valid point.

Another company could say, let's take a step further, and with our unique materials, we can sell more components value-added. So we do that. For us, we found that the sweet spot was going into subsystems or small systems, which we often call engineered solutions. Those do not require a large infrastructure of service and field support much more of the value as full systems do, but still allow us to capture the combination of LightPath's materials and our optics, together with, for example, the recently acquired subsidiary of G5 Infrared, which is a leader in thermal imaging cameras. G5 is known as the industry leader in long-range infrared cameras.

That was the case before we acquired them, not something we created. But like its competitors, G5 was facing supply chain challenges due to global geopolitics, and primarily germanium and gallium, which are critical materials in their optics. After acquiring G5 in February, in conjunction with their team, we began the effort to redesign their systems to use our materials. Recently, we announced the completion of the redesign of two of those cameras. By doing so, we are positioning ourselves not only as offering the best cameras now but also as the most reliable provider of cameras with supply chain resiliency that no one else can offer. The result of this is the massive growth we're seeing.

Our backlog today is around $90 million. That is more than four times what the backlog was just a few months ago. And with more than two-thirds of this backlog in systems and subsystems, it is clear that the strategy is working. Our strategy is all about creating value and capturing value. You have core technologies that are unique and well-positioned, they clearly create value. It is up to the company to make the most of it by capturing as much of that value as possible. For LightPath, it means going up the food chain.

With this background behind us, I would like to now dive into some of our most recent developments and events and add some color and background to the announcement we have recently made and the large backlog I just mentioned. First, let's talk about the two recent large orders. Over the last few weeks, we announced two large orders that are really one order split into two separate appeals. Those orders totaling over $40 million for deliveries of infrared cameras in calendar years 2026 and 2027. The customer is an existing customer that has been consistently doing business with G5 over the last few years, although not at levels anywhere near this.

Applications for those cameras will be in border surveillance and counter UAVs, or CUAS as it is often called. Let's first talk about the border surveillance. So border surveillance program known as CTSE is something we had previously discussed. At the time, I think in our last call, we expected the entirety of the program to include installing about 300 new surveillance towers along the southern border, and the work to be divided between three primes, one of them was our customer. Then along came the big beautiful bill and more than tripled the funding to Border Patrol. To our understanding, this means the number of towers along the border go up to 1,000 towers.

Some even speak about 1,200 towers. This includes not only an increase in the number of towers along the southern border but also the installation of towers in some places along the northern border. Now take the large increase in expected deployment, add to it supply chain constraints companies are facing, and you get a scramble to ensure supplies of cameras. Or in other words, for us, a perfect storm. The border contract is an IDIQ divided among three companies. Until recently, we've been supplying cameras to only one of those three. The $40 million in orders for calendar 2026-2027 we just discussed is for another one of the prime contractors.

So this is going to be in addition to the existing work we have been expecting and spoke about for the border. Okay. Enough about the border, but there's a lot going on there, clearly. Let's go back to our $90 million backlog. Another part of our record $90 million backlog is systems for Counter UAS. More specifically, powerful zoom cameras that can passively detect, classify, and track drones. Drones that are as small as 10 inches in size, for example. These cameras not only integrate systems for detecting drones but also integrate onto almost any weapon system that is used to counter drones by disabling drones using different means.

It could be systems named remote weapon systems, or vehicle-mounted kinetic systems, or pretty much any deployment of a counter UAS system, which as we all know is a rapidly growing industry not only in battlefields and frontlines but also in critical infrastructure such as airports, or public and private infrastructure. Currently, more than $10 million of our backlog is for cameras for counter UAS. This is separate from the $40 million of orders I just discussed. And those specific orders were announced and discussed earlier. We expect this to continue to grow as our cameras are integrated into more and more systems.

Another area of growth that we expect to see is the Navy Sphere program, L3 Harris is a prime integrating this system, which is expected to be installed on all US naval surface vessels. The contract, we announced together with L3 Harris earlier this year, is expected to move into LRIP, LRIP is low rate initial production, in the coming months. It has also been publicly disclosed that they expect to see the first installation and full integration into a fire control system, of the first destroyer by 2027. For a system to be deployed by 2027, given all the slowdowns and processes, that timeline means that we will be working on our part very soon.

This is a large program of record and a key program for the US Navy. So we expect this to be a meaningful source of revenue for many more years to come. All of those are systems that we've already qualified so all the development work is pretty much done. It's a matter of receiving and executing on the purchase. We feel very confident in our ability to deliver all of those especially in light of our unique position, utilizing our proprietary Black Diamond materials in the cameras instead of germanium, which traditionally is the element of use for many infrared cameras.

This brings me to China's ongoing export restrictions, who late last year cut off the export of germanium, as well as other critical materials to the US defense industry. China produces substantially most of the germanium globally, making the Chinese ban effectively global. In response to those events, US defense contractors moved to stockpile germanium, but the ongoing ban to stop the stockpiles are running dangerously low. One executive noted in a Wall Street Journal last month that his firm is now down to safety stock. Some suppliers now hold only a few months of inventory, exposing even large firms to disruption.

The result of this disruption has been a massive interest from defense customers to move away from germanium, to eliminate China-related supply chain risk. Inbound interest from defense contractors in LightPath's proprietary Black Diamond Glass, the replacement for germanium we licensed exclusively from NRL, has increased significantly. And while there's some lag from design to field deployment, the shift is happening and happening quickly and can be already seen in some of our numbers. So those programs are what is currently driving our large backlog and short-term growth. Now let's talk about additional programs and growth drivers in the pipeline.

NGSRI is one of our most important programs, in which we are developing for Lockheed Martin a system that is a key technology in their version of next-generation Stinger portable ground-to-air. Lockheed is competing against Raytheon in this and is now in testing stages with the customer. While I do not have any specific updates to share, I will likely not be able to answer most questions about this. I would like to commend the teams at Lockheed Martin and Visomed Group in Texas in putting together a completely new missile system in a two-year time frame, something almost unheard of.

The system is now in testing and we expect delivery or feedback from the customer anytime in the next few months. I know many are anxious to receive updates on this, as am I, to be honest. But because if we win this according to projections we received from the customer, this could be between $50 million to $100 million of recurring annual revenue for us while in full-rate production. The only related update I can share right now is that our tech group is in the process of moving to a larger facility that will be able to support the production for this system.

For those that want to understand more about this system and why our camera is making such a big difference, I would suggest searching online for the term QuadStar and Lockheed Martin. Lockheed names the missile QuadStar. There is a long and detailed article that describes fairly well why Lockheed's solution can achieve better distance and overall performance due to LightPath's camera system integrated into the missile. Additionally, we also have programs such as the Apache program, which we delivered our subsystem recently and is now being integrated and tested by the customer. We have some programs related to Golden Doe, which are in the design phase. And we have another program which is really unnamed.

And I mentioned in the last call is a key Black Diamond material program in which the customer is actually funding equipment dedicated to that program. I can't say much about it, unfortunately. What is common to all these programs is that we believe each and every one of them could reach over $10 million of recurring revenue a year. Some of them, like NGSRI, much more. All of those are specific programs or projects. But we also have our assemblies and optics product offering. The assemblies business includes standard and custom design of lens assemblies that customers integrate into their own cameras or systems. Part of this business is growing too.

And especially assemblies that are designed to replace existing assemblies that utilize germanium and wanner wall lens. LightPath has a portfolio of lens assemblies designed so they can be used with other cameras. Those could be cameras made by FLIR, Seek Thermal, DRS, or pretty much any thermal camera manufacturer. In particular, we are seeing a growing demand for assemblies and also complete cameras for use in drones. A bit of background. Following the COVID pandemic, China emerged as a strong player in the market for low-cost thermal cameras used in applications such as drones.

This is as a result of the significant state investment in technologies related to contactless temperature measurement, which are really the same technologies used in thermal imaging. While for a while after 2021 or so, it looked like Chinese vendors might become the main source for cameras for drones, geopolitics, however, has been changing that. Ukraine, for example, has decided a while ago that it will no longer use cameras or lens assemblies made in China in Zedgeville. US Europe and The US have followed shortly after with different initiatives for domestic drone and component manufacturing.

LightPath designs and produces its lens assemblies in Orlando, and in recent months, we have made investments in those capabilities both in The US and our RECO operation, which is a certified defense manufacturer in Europe. Further supports a focus on disassembly on those assemblies and the drone market, we have done two things. First, we've recruited Doctor Steve Milky as VP of engineering. The engineering discipline, which focuses on the successful transition of new products from into manufacturing and high-volume manufacturing of these products is key to LightPath scaling in this business. Doctor Milky brings many years of experience in doing exactly that. We view his addition as instrumental in this effort to scale this manufacturing.

Secondly, and pretty excitingly, to finance many of those efforts, we received a strategic investment from two leading companies in our industry, Ondas Holdings and Unusual Machines. These companies are not only key strategic customers to LightPath, they are also leading the charge in setting up manufacturing and the complete ecosystem for drones and all components and subsystems required for this in The US and The West. What LightPath is doing in bringing manufacturing of thermal imaging to The US, Ondas and UMAC are doing with drone motors, complete drones, and much more. We're excited to be working with them and take part in building the future drone infrastructure for The US and Europe.

The $8 million investment received from Ondas and UMAC will go towards expanding these efforts. And I expect these efforts to be very fruitful for all three companies and the industry as a whole. I firmly believe LightPath is poised for great success in the coming years. The 41% quarter-over-quarter growth we just announced for Q4, and the $90 million backlog is only the beginning. There are many tailwinds supporting our growth, and the investments and efforts the team has made over the last five years. Many of which are just starting to show. Our future is very bright, and we're excited to be here and to see it all unfold.

Now I've spoken enough, so I'll pass it on to our CFO, Al Miranda, to talk about fourth quarter and fiscal year-end results. Please go ahead.

Al Miranda: Thank you, Sam. I will keep my review to a succinct highlight of the financials. As a reminder, much of the information we're discussing during this call was also included in our press release, issued earlier today and will be included in the 10-K for the period. I encourage you to visit our investor relations web page to access these documents. Revenue for 2025 increased 41.4% to $12.2 million as compared to $8.6 million in the same year-ago quarter. Sales of infrared components were $4.9 million or 40% of the company's consolidated revenue. Revenue from visible components was $2.8 million or 23.2% of consolidated revenue. Revenue from assemblies and modules were $4.2 million, or 34.1% of consolidated revenue.

Revenue from engineering services was $300,000 or 2.1% of consolidated revenue. Gross profit increased 6.6% to $2.7 million or 22% of total revenues from 2025, as compared to $2.5 million or 29.2% of total revenues in the same quarter of the prior fiscal year. The difference in gross margin as a percentage of revenue was primarily due to an approximately $500,000 increase in inventory reserve charges recorded in 2025, primarily related to our visible component business. Operating expenses increased 52% to $7.2 million for 2025, as compared to $4.7 million in the same quarter of the prior fiscal year.

This increase was due to the integration of G5 and infrared following its acquisition earlier, as well as increased sales and marketing spend to promote new products, an increase of material spend for internally funded new product development, and an increase in the fair value of the acquisition liabilities of $1.4 million. The earn-out liability for 2025 totaled $7.1 million or $0.16 per basic and diluted share as compared to $2.4 million or $0.06 per basic and diluted share in the same quarter of the prior fiscal year. The change in net loss was driven by an increase in certain non-cash non-operating expenses associated with the acquisition of G5 Infrared and the related financing of the acquisition.

Adjusted EBITDA loss for 2025 was $1.9 million compared to a loss of $1.1 million for the same period of the prior fiscal year. Although not perfect, we believe that adjusted EBITDA is a better indicator of core operating performance by excluding non-core non-cash items. Cash and cash equivalents as of 06/30/2025 totaled $4.9 million, as compared to $3.5 million as of 06/30/2024. As of 06/30/2025, total debt stood at $5 million and backlog totaled $37.4 million. But as Sam noted, backlog has grown significantly since that time. I'd like to point out two significant activities we undertook during the fiscal year that we have not discussed.

During the fiscal year and especially in the fourth quarter, we migrated our global IT infrastructure to a new provider to bolster and meet the defense industry's high-level security requirements. This was usually important. Without the right local and global IT infrastructure, we would severely limit our opportunities in the defense industry. Second, we successfully integrated G5 into LightPath in six months ahead of plan and below budget. I'd like to publicly acknowledge and thank the teams from both companies that worked together to make it happen. Everyone knows acquisitions live or die based on cultural fit and integration. So thanks again to the entire team. Looking forward, our focus for fiscal 2026 supports the business opportunities that Sam described.

We have a detailed go-to-market strategy that we're funding to target revenues in key high-growth areas, some of which Sam mentioned. Our prior year investments in manufacturing are bearing fruit in terms of quality and on-time delivery. And in the next year, I expect to see margin expansion as a result. With all of the interesting accounting around acquisitions, we will continue to report and focus on adjusted EBITDA for fiscal year 2026 as a helpful measure of financial success. And then lastly, as Sam noted, subsequent to the quarter close, we announced an $8 million investment from Ondas Holdings and Unusual Machines.

We are truly, truly fortunate with the quality of the existing investors in the company and Ondas and Unusual Machines are not only a continuation of quality investors, but in addition, they're a great strategic fit for us. With that, I'll turn the call back to Sam for some closing remarks. Thank you.

Sam Rubin: So as we look forward, we remain very focused on the transformation of LightPath. As Al was pointing out, we've been focusing on top-line growth, and followed by that, we'll be focusing on margins and bottom line in coming quarters. Expect to see significant growth continuing and our investments in Black Diamond and other differentiators bearing fruit. Since I've spoken quite a bit before, I'll use the rest of the time for questions and answers. I'll pass it back to the operator, please.

Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And the first question comes from the line of Jaeson Schmidt with Lake Street Capital Markets. Please proceed.

Jaeson Schmidt: Hey, guys. Thanks for taking my questions. Just looking at the June, how much did G5 contribute to in that quarter? And I assume it's a big chunk of that backlog just given the significant wins you have in the pipeline, but can you break that out as well?

Al Miranda: So it was $4.2 million, Jaeson, was the G5 contribution to revenue.

Jaeson Schmidt: Okay. Perfect. And how much does it comprise of that $90 million in backlog?

Sam Rubin: I'd say two-thirds of the backlog altogether is cameras and assemblies. I'm not sure if we have it broken down now by G5 or LightPath or the rest of LightPath since I had.

Jaeson Schmidt: Okay. And then just a follow-up, and I'll jump back into the queue. Looking at the border security opportunity, obviously, a big win with the second customer. Are you expecting to be sole sourced here?

Sam Rubin: You know, I don't know what the third prime or third integrator is going to do, but we're definitely in a very, very unique position. I think I would not be surprised if we end up providing all the cameras for all the towers along this border.

Jaeson Schmidt: Okay. Perfect. Jump back into the queue. Thanks a lot, guys.

Al Miranda: Thank you. Thanks, Jaeson.

Operator: The next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Please proceed.

Glenn Mattson: Hi. Thanks for taking the question, and congrats on the great transformation these companies have gone under. Thanks, Sam, for laying out kind of an outline of that. But one thing that stood out in your remarks that I'd wanted to just flesh out a little more was I think you said that you were rapidly expanding capacity in Visomed. And if I'm not mistaken, I think the kind of core technology that got you into the hunt for this Lockheed contract. Can you just go into what kind of signal you're sending with that? Or and is there some, you know, if you don't win the Lockheed, is there other work that you could tend to pump through that?

Just some points on that would be great.

Sam Rubin: Sure. Definitely. So Visomed, when we acquired them, was a small engineering firm. Right? Less than 10 people in a very small space, very confined space where they were doing development. That's not conducive for any expansion or manufacturing. I mean, they've been cramped already. We acquired them. In addition to NGSRI, we do all the development of our uncooled cameras at that location in Texas. So they're not moving into a massive plant, maybe 10,000 square feet or so. But it will be enough both for the NGSRI and for all the non-Lockheed uncooled product. So optical gas imaging camera, drone cameras that we come out with, some of the Mantis work and so on.

So there's much more going on in that facility than just the NGSRI.

Glenn Mattson: Okay. Great. Helpful. And then, Al, can you if you add back $500,000 you talked about in the inventory write-off, still gross margin will be down sequentially. So I guess I think that's related to mix a little bit, but maybe can you confirm that? And then is there any change to the margin within that mix within each category, like any significant changes?

Al Miranda: No. In the quarter, we actually thought the mix was, let's say, typical. There's half a million I mentioned that because that's the single largest item. But there's a few other items. So if I kind of do the math you're asking, that puts us around 29.7% gross margin if I adjust for that half a million and a couple of other unusual one-time items.

Glenn Mattson: That's helpful. And then on the OpEx, is this like, I may ask SG&A side, is this the normal run right now, or was there any, you know, I know you're investing in marketing and stuff because you have a lot of stuff to sell, but is this the normal level, or is there some?

Al Miranda: No. It really isn't, Glenn. We had a lot of one-time expenses in the OpEx this quarter. G5 for the meantime. Yeah. So, I mean, to kind of ballpark it, G5 adds a million. Just, you know, for a full quarter in terms of their OpEx. And then, of course, we had M&A related expenses with lawyers.

Sam Rubin: IT. IT. Expensive.

Al Miranda: In order for us to level up in cybersecurity, we had significant IT costs. We spent a little bit on marketing. We'll do some more of that actually going forward. So there are quite a few items in there and in the quarter that are one-time.

Glenn Mattson: Okay. Okay. Great. That's very helpful. I'll jump back in the queue. Thanks again, guys.

Sam Rubin: Thanks, Glenn.

Operator: And the next question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Richard Shannon: Well, great. Thanks, Sam and Al, for letting me take some questions, and congratulations on a really nice running start here with G5. I guess I want to ask the first question just to get a definition down here. In backlog, a lot of companies report it as of the end of the prior quarter end as well as usually reported on an outgoing out one year. It seems like that may not be the case here, so I'd love for you to clarify where is that measured and over what period that measures, please.

Al Miranda: So great question. Backlog is a real order. It's a real order from a, you know, a real customer. There's no forecasting in there. You know? So real order 100%. In our case, we do accept orders that are multiple years. Right? So the $90 million Sam mentioned is more than one year. About 60% of that, 57% of that, so more in that neighborhood, is going to ship in fiscal year 2026. And then the balance of it is in fiscal year 2027. And maybe even a little bit might spill over to fiscal year 2028.

Richard Shannon: So for us, that is a bit unique because in the history of LightPath, we've not had that long lead items. That we know that orders are coming, but it's also a bit of the nature of the defense business. Right?

Richard Shannon: Yep. That makes sense, and thanks for clarifying that, Al. Now let's look forward here on the pipeline, and, Sam, you did a good job explaining some of the opportunities here. But maybe you can talk about big picture, what kind of how's the size of the pipeline here? As you've added the G5 here? Obviously, you've done a really good job converting a lot of it to backlog, but I wonder what the remaining pipeline looks like especially as you mentioned the big beautiful build that's offered some opportunities you've won. But also sitting out there from big beautiful bill and other places. And how would you quantify that if any?

Sam Rubin: Yeah. I'd say it's, like, counter UAS, I think we're just beginning. So $10 million plus whatever part of that $40 million you know, that is really just starting. And because the deployment of those systems is just starting, I think every event like what happened in the airports in Europe over the last few days and things like that accelerates all of this. I'd say most of the $40 million that order of $40 million we weren't planning or budgeting for most of it. So it's all too much gravy on top of numbers we talked about in the past for the long term. So I'd say, you know, expecting still quite a bit of growth.

Richard Shannon: Okay. Fair enough. Let me ask a question on gross margins and taking two comments from, I think, both prepared remarks and response to one of here to try to get a sense here. Sounds like from Al's comments, you're talking about maybe focusing on gross margins in a little bit of time, more focused on revenue growth today. But, also, I think if I heard you correctly, you think your gross margins excluding some unusual or more one-time dynamics could be close to 30% here. So what are the dynamics under which and time frame for which we see this gross margin improvement?

And kind of what are your goals here, obviously, getting another quarter in your belt with G5 and then also expanding capacity and other like that. Where do we think we can go with this in the next couple of years?

Al Miranda: So we can go I mean, right now, on an adjusted basis, as I just said, you know, last question, we're pretty close to 30. I think we can step up to 35. Pretty quickly in a quarter or two. And then in the longer run, as the product mix really does shift, to these larger finished infrared camera systems we're thinking 40% is where it would settle out in the midterm.

Richard Shannon: Okay. Perfect. Actually, you know what? I'll ask one last quick question here, Sam. I know you didn't want to say you didn't want to talk much about Lockheed, but I will ask a question that since you put it in your press release last quarter about expecting a decision perhaps this year or early next, is that time frame no longer valid, or you're not making a comment?

Sam Rubin: Wanna make sure about that one. Thank you. I can't comment beyond what we spoke about. So, formally, the program will be decided by next fall. Realistically, we get indication that it might be much sooner, you know, this year still, January, February, maybe, but we really don't know that much, and we've we need to be very cautious also on what we share.

Richard Shannon: Certainly understood, and I appreciate the detail, guys. Thanks. That's all for me.

Operator: The next question comes from the line of Scott Buck with H. C. Wainwright. Please proceed.

Scott Buck: Hi, good afternoon, guys. Thanks for taking my questions. Sam, I'm curious. You guys call out, you know, kind of the active redesign of some of G5's product line. What kind of lift is that, and what's the timeline look around that?

Sam Rubin: So it can vary quite a bit. I mean, we expect another one or two cameras to be redesigned or move forward in the next two, three months probably. After that, it gets a bit more complicated. So really large ones, complex very long-range ones. Take obviously much, much more effort. Trying to flow more resources at it to accelerate it. We've taken equipment from production to dedicate it also for prototyping, so that we can quickly turn it in. It's not an acute thing because we have a G5 and LightPath enough materials and access to enough materials right now to deliver what we need. It is more that, you know, we understand how uniquely it positions us.

And we're seeing an overwhelming positive response from customers for the first two that we announced that we understand that doing more will possibly drive much more business to us.

Scott Buck: That's helpful. Now does it change the way you're able to sell some of these products in the near term?

Sam Rubin: I don't know. What in what way do you mean?

Scott Buck: Just in terms of if it's gonna take months. Right, to kind of redesign some of these new, you know, kind of take it out of the, you know, the quote product catalog here in the near term?

Sam Rubin: No. No. We can still deliver the products, these are new versions, if you would, but we are seeing customers already placing orders for them before we produce even one of them. So just telling customers we're doing that and we will have a germanium-free version is driving some orders.

Scott Buck: Okay. Perfect. That's helpful. And then the second question I had the 40 or so million that you've announced with the leading global technology customer, I'm curious. Was any revenue expectation from this customer within the initial kind of $55 million of annual revenue you laid out at the time of the acquisition?

Al Miranda: So, when we did our due diligence, we thought this customer would be around $9 million on a run rate per year. So it's more than it's more than twice that now.

Scott Buck: Okay. So there's incremental revenue in there and meaningful incremental revenue with

Al Miranda: Yeah. And prior to that, that particular customer did about $4 million with G5 before we were in the picture.

Scott Buck: Okay. Perfect. Well, I appreciate the added color, guys. Thanks a lot.

Operator: The next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed.

Brian Kinstlinger: Great. Thanks so much for taking my questions, and congrats on the recent wins. I take 60% of the $90 million backlog suggests you've already got about $54 million of revenue in hand roughly, plus or minus, for next year. I'm wondering, is the company adjusted EBITDA profitable on that? Is 5% a reasonable target, plus or minus? And then as you think about profit, is that more of a second-year half of the year event? Or do you think you're already at that run rate starting next year to generate profit?

Al Miranda: So we would if I, Brian, if I look at the consensus, I would say that at this point, the consensus on revenue would have to be raised by about 10%. Right? So if you look back at where we were three months ago, you know, or four months ago when we had this discussion, from that, we do get some uplift. Obviously, we get uplift in gross margin, and we do get uplift in EBITDA. So I would expect that we would be positive on that higher level of revenue.

Brian Kinstlinger: But I based on the gross margin comments, it's gonna take some quarters to get to thirty-five. Maybe that's the second half of the year event, not first.

Al Miranda: Yep. That's exactly right. Yep.

Brian Kinstlinger: Great. So that brings me into my second question. Because in the backlog, you said you didn't separate it out to one of the previous questions. By the companies. Remind us the first tranche of what you call the first twelve-month earn-out revenue and EBITDA target, I assume you'll eventually have to split it out. And then your thoughts on both EBITDA and revenue targets and ability to meet it. Obviously, revenue seems likely, but I'm curious about more on the EBITDA side.

Al Miranda: Yes. So I thought the question was cameras and assemblies. We didn't break it out by product line. We know exactly what G5 backlog is, obviously. Right. Right? So and to refresh your memory, it was $21 million in revenue always with 20% EBITDA. So it's 21, 23, 25, and 27. Those are the earn-out targets for them. We're watching that pretty closely, obviously. The backlog, back order for them indicates they'll hit that first mark. So you know, we're actually pleased, I guess, you could say. That we're gonna end up giving them more earn-out than we expected to. But with the caveat that they've gotta deliver that 20% EBITDA as well to go with it. Right.

Brian Kinstlinger: That seems to be the only uncertain piece is if that'll happen or not, it sounds like.

Al Miranda: That's correct. Yeah.

Brian Kinstlinger: Okay. Thanks so much.

Sam Rubin: Thank you.

Operator: Ladies and gentlemen, we have concluded our Q&A session. And I'd like to turn the call back to Sam Rubin for closing remarks.

Sam Rubin: Thank you. We appreciate everyone's interest and patience as we've been going through this transformation. I can definitely say now with confidence that we're well at an inflection point and are very pleased with where we are. We expect to see this translate to gross margins and bottom line at least cash flow very soon. As well as continued growth from the top line. I look forward to reporting again in a few weeks for our first fiscal quarter and wish everyone a good day.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.

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