LightPath (LPTH) Q2 2026 Earnings Call Transcript

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Date

Wednesday, February 11, 2026 at 5 p.m. ET

Call participants

• Chief Executive Officer — Sam Rubin
• Chief Financial Officer — Albert Miranda

Takeaways

• Revenue -- $16.4 million, up 120% year over year, representing record quarterly sales.
• Infrared component sales -- $5 million, or 31% of total revenue.
• Visible component sales -- $3.4 million, or 21% of total revenue.
• Assemblies and modules revenue -- $7.2 million, comprising 44% of total revenue.
• Engineering services revenue -- $700,000, representing 4% of quarterly revenue.
• Gross profit -- $6 million (37% of revenue), up 212% from the prior year quarter; improvement driven by higher assemblies and module margins.
• Adjusted EBITDA -- $600,000 positive, compared with a loss of $1.3 million one year prior.
• Net loss -- $9.4 million, or $0.20 per share; excluding the $7.6 million G5 earnout revaluation, net loss was $1.8 million.
• Operating expenses -- $14.6 million, up from $4.4 million a year ago; the increase was mostly due to a $7.6 million non-cash adjustment for the G5 earnout.
• Cash & cash equivalents -- $73.6 million at quarter-end, reflecting the $65 million net proceeds from secondary capital raise.
• Debt -- $800,000 total outstanding following the $5.4 million repayment of acquisition notes.
• Backlog -- $97.8 million at period-end, with two-thirds attributed to higher-margin systems and subsystems.
• Capital raise -- $65 million net proceeds, increased from $40 million due to investor demand; proceeds targeted for growth investments, M&A, and not for covering operating losses.
• Acquisition of Amorphous Materials -- Adds manufacturing for chalcogenide glass of up to 17-inch diameter, enabling redesign and Black Diamond conversion for all G5 cameras by autumn.
• G5 Infrared performance -- $80 million of new G5 orders booked since the acquisition, compared to $15 million in revenue the prior year.
• Compliance positioning -- "We are positioned as a supplier of choice for mission-critical defense and aerospace applications" due to exclusive Black Diamond chalcogenide glass and alignment with NDAA and FCC regulations.
• Significant programs pipeline -- Nine programs with $10 million-plus annual potential now in pipeline; Lockheed Martin (NYSE:LMT) missile program and Navy SPEIR cited as ongoing contributors.
• Manufacturing footprint -- Dual Black Diamond production sites established in Orlando, Florida, and Texas, reducing single-point operational risk.
• Internal targets achieved early -- CFO Miranda reported, "We achieved [gross margin at or above 35%, EBITDA positive, and operating cash flow positive] one or two quarters earlier than planned."

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Risks

• CFO Miranda stated, "Gross margin on engineering services was also much more favorable in the second quarter due to a nonrecurring engineering project," which may not recur in future periods.
• CEO Rubin cautioned, "Satellite development takes time. The government works in two-year trenches, which means the next designs, the ones we plan to be part of, are not going to go out for at least another two years."

Summary

LightPath Technologies (NASDAQ:LPTH) reported record revenue and gross margin for the quarter, reflecting the completion of its transformation into a vertically integrated provider of high-value infrared optics and camera systems. The recent acquisition of Amorphous Materials enables in-house production of larger-diameter Black Diamond chalcogenide glass, opening up new markets in long-range and space-based imaging. Positive adjusted EBITDA and operating cash flow were achieved ahead of schedule, aided by strong assembly, module, and camera growth, primarily from G5 Infrared. Management stressed the urgency of executing growth initiatives within a three-year competitive window, supported by a $65 million capital raise earmarked for expansion and M&A activity. Ongoing compliance with newly-enacted U.S. defense procurement rules and FCC restrictions positions the company favorably for government contracts.

• CEO Rubin highlighted, "So in summary, the first step of our transformation, I can say, is now complete and very well," confirming the company's shift from component to system supplier.
• The NDAA ban on optics and components sourced from China and similar nations creates a demand tailwind for U.S.-manufactured Black Diamond offerings.
• Management reported the company is "now in an execution mode," with priorities including conversion of backlog to revenue, and expansion of germanium-alternative products.
• Internally, LightPath targets gross margin at or above 35% by the fourth quarter, with the adjusted figure already achieved ahead of schedule.

Industry glossary

• Chalcogenide glass: A specialized glass containing elements from Group 16 (chalcogens), such as sulfur or selenium, used for its infrared transparency in optical systems.
• Black Diamond: LightPath's proprietary chalcogenide glass, licensed from the U.S. Naval Research Laboratories, positioned as a domestic alternative to germanium for infrared applications.
• G5 Infrared: Acquired entity specializing in long-range infrared cameras, now integrated into LightPath's systems portfolio.
• NDAA (National Defense Authorization Act): U.S. legislation mandating domestic sourcing for defense-related products, including prohibitions on certain optical materials and components from covered nations.
• FCC Covered List: The Federal Communications Commission's registry of communications equipment and services banned or restricted for posing security risks, expanded to include non-U.S. drones and their components.

Full Conference Call Transcript

Thank you, Operator. Good afternoon to everyone, and welcome to LightPath Technologies, Inc. fiscal second quarter 2026 Financial Results Conference Call. We entered calendar year 2026 having completed the first part of our transition to a vertically integrated provider of high-value infrared optics and camera systems geared towards driving higher revenue and gross margins. The second quarter demonstrates this transition with measurable commercial success, record revenue, and margin improvement. The progress we have made is reflected in record orders, a growing systems backlog, and increasing customer adoption of our technologies.

Sam Rubin: As well as, and maybe more importantly, improvements in our margins and cash flow. Today, LightPath Technologies, Inc. is a fundamentally different company. The past several years, we have transformed from a precision optical component company into a vertically integrated provider of high-value infrared optics and camera systems, with offerings that range from proprietary materials all the way through complete imaging solutions. I will share some context on this transformation, discuss some of our programs driving the growth, and the acquisition of AMI, Amorphous Materials. At the core of our platform is Black Diamond, our proprietary chalcogenide glass licensed exclusively from U.S. Naval Research Laboratories as a domestic supply-chain-secure alternative to germanium for infrared imaging.

This positions us securely with the Fiscal Year 2026 National Defense Authorization Act (NDAA), which mandates elimination of U.S. defense reliance on optical glass, components, and systems sourced from Russia, China, and other covered nations no later than 01/01/2030. With defense acquisition timelines already requiring action in the near term, our optical assemblies, infrared cameras, and thermal imaging systems are designed, manufactured, and delivered in full alignment with these requirements. We believe we are positioned as a supplier of choice for mission-critical defense and aerospace applications. It has been about a year since our acquisition of G5 Infrared, the producer of the industry's leading long-range infrared cameras for surveillance and counter-UAS.

The G5 acquisition is a prime example for leveraging a unique differentiator, in this case our germanium alternatives, to enable the acquired company to do more than they could do alone—far more in this case. Since we acquired G5 a year ago, G5 has booked more than $80,000,000 of new orders for their product compared to $15,000,000 of revenues the prior year. Some of it is because they were at the right place at the right time, such as border patrol spending, counter-UAS solutions, and more.

And part of it is because at LightPath, using the Black Diamond material, we enable G5 to be able to execute far better than anyone else out there because we have a secured, vertically integrated supply. To date, we have publicly announced a redesign of only two of the cameras. But with the acquisition of Amorphous Materials, we can now complete the remaining five and soon make all of G5’s cameras using Black Diamond. So let us talk a bit about the acquisition of Amorphous Materials, an industrial manufacturer of complementary chalcogenide glass melting technologies, in particular for large-diameter optics. Amorphous is a more than fifty-year-old company with a strong industry reputation, founded by Dr.

Ray Hilton Sr., who was considered one of the pioneers in the commercialization of chalcogenide glass. He also, by the way, wrote the leading book about chalcogenide glass. The significance of large-diameter Black Diamond lenses is, well, significant. In the world of optics, the further distance you want to detect an object, the larger the optics needs to be. Cameras or devices for relatively short distances, such as hundreds of meters, have optics that are between one inch to five inches in diameter. That is plenty of size for applications such as close-range security, firefighting cameras, gun sights, and so on. If now one wants to detect objects that are kilometers or miles away, size of the optics grows.

For example, G5 long-range cameras, the most long-range ones, have lenses that are as much as 250 mm, or 10 inches, in diameter. If now you want to detect from space, say, a mid-sized launch, the size of the optics needs to grow even larger. This is partially why some of the larger detection satellites can be the size of a small bus. Until this acquisition, LightPath Technologies, Inc. was melting its glass in the shape of a cylinder, five inches in diameter.

Using some additional techniques, we have been able to turn that glass into six inches of optics, but not the sizes needed for most of our G5 most higher-end cameras, and definitely not the size needed for satellite cameras. Amorphous Materials, which we just acquired, melts the glass using a somewhat different technology. That technology, which we can easily adapt for use in our Black Diamond glass, can melt the glass at sizes of 10 inches and, with some additional processing, can reach sizes of 17 inches. So why is this a big deal?

Well, first of all, our own G5 systems, a significant part of our growth driver, the most higher-end cameras, or the longest-range cameras if you would, used primarily for drone detection, have lenses that are as much as 10 inches in diameter. Until now, we could redesign only the smaller cameras to use Black Diamond. Now we are full steam ahead at redesigning all of their cameras, and by the autumn time, we expect to have G5 cameras using Black Diamond instead of germanium, all of the cameras. We expect to be able to make as many long-range cameras as the market can take.

So while our competitors are still struggling to find the solution for the germanium situation, we will be able to make as many cameras as we want. Second, this ability to make large-diameter Black Diamond now opens the door to any application of long-range imaging. Think about airborne gimbals and pods, think ground-based imaging systems, and so on, and most importantly, space. The U.S. government, through different agencies and programs, primarily the Glide Phase Interceptor and other programs, is going to launch dozens if not hundreds of satellites for missile tracking and detection. Let us take one example of such recent awards—all public information—to demonstrate the potential magnitude of this.

SDA’s Space Development Agency awarded in December $3,500,000,000 to build 72 Tracking Layer satellites. Those are all based on infrared cameras. Public information, which one can easily look up, shows that is $48,000,000 per satellite. While we see the satellites as primarily a camera, they do more than that.

Sam Rubin: And so the infrared camera system typically is about a third of the overall cost of the satellite. So that is $16,000,000 per satellite. This includes a complex sensor system as well as other things. But from our point of view, most importantly, is an optical system. That optical system, oftentimes referred to as a telescope, is a pretty complex system that includes, well, you guessed it, large-diameter optics. So until now, Black Diamond was not even considered for use in those applications, and even though it has incredible properties suited just for that use case in terms of thermal behavior and such.

So we had a couple of space-related programs in our category of potential $10+ million programs, but those were small, definitely small compared to what we are facing now. So now we get to play a major role in this. So couple that with SDA’s very recent announcement, I think, last week for a constellation of 300 to 500 satellites in low Earth orbit, and satellites in low Earth orbit have a fairly short lifespan, and this is, as they say, a whole new ballgame for us. However, a word of caution. Satellite development takes time.

The government works in two-year trenches, which means the next designs, the ones we plan to be part of, are not going to go out for at least another two years. So this is a huge potential for us, but it is not immediate.

Sam Rubin: Now I would be remiss if I told you that this is the only reason for the acquisition. There is more. Until three weeks ago, before we did the acquisition, LightPath Technologies, Inc. was producing glass only in one location, in Orlando, Florida, and we were potentially one hurricane away from a significant downtime in glass production. Now we have two manufacturing locations for Black Diamond. We are going to duplicate between Orlando and Amorphous’ facility in Texas for operation. Also until three weeks ago, we kept adding and adding capacity in Orlando. With this acquisition, we get another 50% boost to capacity and ability to add more in a more cost-effective manner.

And last, until three weeks ago, we might have been worried about significant competition popping up. But now we acquired and own some of the most innovative and best teams capable for glass technologies in the U.S. And so once the acquisition of the standalone might only look like $3,000,000 in annual revenue, this is a significant acquisition in more ways than meets the eyes.

Sam Rubin: Okay.

Sam Rubin: Other things in the quarter. Prior to the acquisition and in the few weeks before the quarter ended, we completed a secondary raise in the market. We went out to raise $40,000,000. We received offers that were significantly, significantly more than that, and so we ended up increasing the size to $60,000,000. Together with the green shoe option that the banks immediately exercised, we ended up with approximately $65,000,000 in net proceeds. The purpose of the raise is for investments in our future. LightPath Technologies, Inc. is not burning cash in operation, and we did not raise money to burn it in operation.

This quarter we are reporting on is, in fact, the second quarter of positive adjusted EBITDA and with net cash flow from operations being positive again. So the raise is really about growth and investment. As we have outlined before, we have a very specific strategy when it comes to decisions on investments and acquisitions. The bottom line is that we have a very unique technology, set of technologies, and we believe that we are well positioned to leverage those to capture some significant market share on the subsystem and system level. However, that window of opportunity is not infinite.

And while we always continue to develop more differentiators, competition keeps working, and they will catch up on our older differentiators at some point while we add the new differentiators and so on and so on.

Sam Rubin: So we have a window of approximately, we think, three years, maybe three to four years, in which we can grab a significant market share and position the company as a dominant player in our field. Given the compressed time frame, we cannot do this purely through organic growth and through investing only the cash we generate, as much as I would prefer it that way. We need to accelerate some of those activities to make a real dent in that time frame. Hence, the war chest of cash and the plans to use it. I will emphasize again, this is not about burning cash in operation or anything like that.

It is rather a very calculated set of investments and M&A opportunities in the near future.

Sam Rubin: So now strategy and direction.

Sam Rubin: In the short term, we have some very large programs we are working on. We have the Lockheed Martin missile program that is moving along well, and Lockheed Martin, our customer for subsystems we make, has announced earlier, or last month actually, a successful flight test. And while I would love to be able to share more information, we are at this point, as we recently mentioned, confined to sharing only what our customers share publicly. So nothing else on this other than us continuing to be pleased with the progress.

Sam Rubin: Multiple other programs such as border towers, Navy SPEIR, and others are progressing. Some might be slower than we want, some might be faster, but pretty much on track. Overall, we are doing pretty well there. We continue to work also on our second tier of programs, the ones we said have $10,000,000 potential or more a year, and those continue—we continue to add to those. Just last month, we had another program join that club, and now we have, I guess, nine programs that have potential of $10,000,000 or more.

Other developments that we had last quarter include Congress passing the National Defense Authorization Act (NDAA), which included this year a requirement for Department of Defense to stop using any optics components or even glass originating from certain nations including China. This, of course, plays very well to our position as the largest manufacturer of infrared glass in the U.S., as well as our realignment of the organization over the last few years, away from China and back to manufacturing in the U.S.

So together with our Black Diamond, and now also the empty portfolio of glasses from Amorphous Materials, all of which are produced in the U.S. and therefore NDAA compliant, we actually do not need to do anything new to comply with this, other than continuing investing in glass production. Also last quarter, the FCC, Federal Communications Commission, issued a new ruling that everyone expected, but everyone expected that to be a ban about drones made by DJI actually, commonly referred to as a DJI ban, or at most it to be in general about Chinese drones.

The FCC, however, took this a few steps further and added to the FCC Covered List all drones and critical components used in any country outside the U.S., ally or not. Critical components are defined by Defense Contract Management Agency, and they include, as you guessed, cameras and sensors.

Sam Rubin: So this was a surprise to us, a very positive surprise, but yet a surprise.

Sam Rubin: So in terms of how this impacts us, there are two aspects. The first is the simplest one—that is optical assemblies. We already produce optical assemblies here in the U.S., NDAA compliant and now FCC compliant, and many of those are already used on drones. So that part, we are well aligned and prepared. Check. Second part is cameras. To that extent, we are still evaluating what role we want or can play in the drone side of cameras, other than the optics, of course.

There are clearly some opportunities in providing cameras for the larger drones, but we also need to evaluate whether or what we want to do in the area of FPV drones, those are the one-directional cheaper drones. The price targets there are very aggressive, and it is not entirely certain what the direction will be, sir. But we are looking into that, so stay tuned to some news, sir. So in summary, the first step of our transformation, I can say, is now complete and very well. We have moved from components to systems and from commoditized supply to strategic technology leadership.

We are replacing constrained China-linked materials with a domestic, scalable, and proprietary alternative, and we are converting that differentiation into multiyear contracts, strategic investments, and long-term relationships with some of the most sophisticated defense and industrial customers in the world.

Sam Rubin: Our next phase, which includes now rapid scaling over the next three years, is beginning and will be aided by our war chest of capital and will build on what we have done so far to win significant market share. I will be discussing that and more during our virtual Investor Day webcast in a couple of weeks. I will now turn the call over to our CFO, Albert Miranda, to talk about the second quarter fiscal 2026 financial results. All yours, Al.

Albert Miranda: Thank you, Sam. I will keep my review to succinct highlights of the financials this quarter. As a reminder, much of the information we are discussing during this call was also included in our press release issued earlier today and will be included in the 10-Q for the period. I encourage you to visit our investor relations web page to access these documents. Revenue for Q2 2026 increased 120% to $16,400,000 as compared to $7,400,000 in the same year-ago quarter. Sales of infrared components were $5,000,000, or 31%. Revenue from visible components was $3,400,000, or 21%. Revenue from assemblies and modules was $7,200,000, or 44% of consolidated revenue. Revenue from engineering services was $700,000, or 4%.

Although G5 was the largest contributor to the revenue increase, our revenue from legacy LightPath business also grew substantially quarter over quarter. Excuse me. Gross profit increased 212% to $6,000,000, or 37% of total revenues, in Q2 2026, as compared to $1,900,000, or 26% of total revenues in the same year-ago quarter. The increase in gross margin as a percentage of revenue is primarily driven by the increase in revenue from assemblies and modules, cameras, which generally have higher margins. Gross margin on engineering services was also much more favorable in the second quarter due to a nonrecurring engineering project for a defense contractor.

In addition, gross margins for infrared components have improved due to a more favorable mix and the resolution of certain manufacturing issues that negatively impacted the second quarter of the prior fiscal 2025. Operating expenses for Q2 2026 were $14,600,000, up from $4,400,000 in Q2 2025, an increase of $10,200,000. Of that $10,200,000 increase, $7,600,000 relates to the quarterly fair value adjustment of the G5 earnout liability. The quarterly adjustment will continue through 2027 when the earnout period ends. Excluding the $7,600,000 earnout revaluation, the underlying operating expense increase was $2,600,000, or 6%, compared to last year's second quarter. This results in a normalized operating expense of $7,100,000 for Q2 fiscal 2026 versus $4,400,000 in the prior year period.

The $2,600,000 year-over-year increase primarily reflects the integration of G5 following its acquisition, G5’s operating expenses, M&A costs related to Amorphous, higher sales and marketing spending, additional corporate expenses, and increased personnel costs driven by key executive vacancies that are now being filled. Net loss in Q2 2026 totaled $9,400,000, or $0.20 per basic and diluted share, as compared to $2,600,000, or $0.07 per basic and diluted share, in the same year-ago quarter. The year-over-year increase in net loss for Q2 2026 was primarily attributable to the change in fair value of the acquisition liabilities of $7,600,000 for the earnout related to the acquisition of G5.

Excluding the earnout adjustment, the net loss for Q2 fiscal 2026 would have been $1,800,000, an improvement from the prior fiscal year Q2. Adjusted EBITDA for Q2 2026 was $600,000 positive, compared to an adjusted EBITDA loss of $1,300,000 for the same year-ago quarter. Although not perfect, we believe that adjusted EBITDA is a better indicator of core operating performance by excluding non-core, non-cash items. With all the interesting accounting around acquisitions, we will continue to report adjusted EBITDA in fiscal year 2026 and in 2027 as a helpful measure of financial success. Cash and cash equivalents as of 12/31/2025 totaled $73,600,000 as compared to $4,900,000 as of 06/30/2025, reflecting our successful capital raise in the second quarter.

Sam mentioned that the use of cash is very calculated and strategic. We have established plans, timelines, milestones, and returns on cash for the initiatives Sam mentioned and others. These planned investments are focused on revenue-generating activities in the short and midterm while still maintaining a war chest for future opportunities. In Q2, we also paid the acquisition notes of $5,400,000 in full, and as of 12/31/2025, total debt stood at $800,000. Backlog totaled $97,800,000. We are pleased with the progress of the financials this quarter. We do not give guidance, but we do set targets for ourselves, and we have given indications to the investment community that the financials are and will improve gradually in the near term.

Q2 is a good moment to share a little more. Internally, we planned on gross margin at or above 35% by Q4, EBITDA positive by Q2, and operating cash flow positive

Sam Rubin: By Q3.

Albert Miranda: We achieved those targets one or two quarters earlier than planned, so it is a good moment to reflect on where we are and our progress. That said, we are by no means done. Looking forward, we have a detailed operating growth plan that is segregated into three components. These components support the strategy that Sam mentioned. First, continued support of our existing business. Second, invest in our already known and identified growth opportunities, much of which you already know from these earnings calls and from our investor presentation. And third, investments in new business. These are things that are not yet known.

The operating growth plan is an 18 to 24 month plan for resource allocation to meet current backlog deliveries and be prepared for the expected new revenue growth. The vast majority of cash, CapEx, and human resources are pointed at the substantial growth opportunities while smaller amounts of resources are allocated for our existing business growth. The approach allows us to match resources to opportunities that are close in time and have better returns. This may mean investing now for revenue in future quarters, but the return on the investment in the midterm justifies the business initiatives. In all, we are well positioned to execute on our growth plan.

I will now turn the call back to Sam for some closing remarks.

Sam Rubin: Thanks. A few short closing remarks and then Q&A. So thanks again for everyone to join us. We are now in an execution mode. The deep transformation is largely behind us. We have moved from component to system, leveraging our proprietary material and other technologies, and have built a vertically integrated platform aligned with where the defense procurement is headed. The result this quarter reflects the shift: revenue up 120%, gross margins at 37%, backlog around $100,000,000, two-thirds of which is higher-margin systems and subsystems. Our near-term priorities are clear: deliver on schedule at quality, expand our germanium-alternative product variants across the G5 portfolio, and convert backlog to revenue while protecting margins.

The capital raise gives us the resources to add capacity and personnel as needed, as well as evaluate potential strategic M&A. Between border surveillance, counter-UAS, naval programs like SPEIR, and the missile program we have with Lockheed—or missile programs—we have multiple paths to material revenue growth over the next several years, all supported by a technology and supply chain position that cannot be easily replicated. With that, I will turn the call over to begin the Q&A. Operator?

Operator: Thank you. We will now open for questions. Our first question is from Austin Moeller with Canaccord Genuity. Hi, good afternoon. Great quarter. So just my first question here, I was just looking at the 10-Q, and sales to Europe were significantly greater this quarter. Is that due to one specific customer? Is that due to NATO spending in your facility in Latvia? And is that specifically camera products like the G5?

Sam Rubin: So it is the latter. It is NATO spending in defense in Europe and Israel, by the way, which we couple under Europe here. These are not yet camera systems, so we currently are not selling the camera systems out of Europe.

Sam Rubin: Or unless, Al, this does include G5 shipments to Europe. Sorry.

Albert Miranda: Yeah, so some of it does come back to the U.S. We lose trail of it, so it does go to the U.K., it does go through the European market, but some of it comes back to the U.S., and unfortunately, we do not have that see-through data for the

Albert Miranda: the

Albert Miranda: cameras that are coming back into the U.S.

Sam Rubin: Okay. So just a follow-up

Sam Rubin: okay.

Austin Moeller: So you talked a little bit about the opportunity to make up to 17-inch diameter Black Diamond lenses and going after Golden Dome and military ISR. Are you also looking at building the lenses for optical satellite links?

Sam Rubin: Yeah. We do that already. We have a quite a good business of free-space optical communication between satellites. I think a pretty dominant position in that market, and that actually continues to grow. I think we are in discussion with the customer about increasing capacity for that quite a bit. It is a different type of lenses. Those are much smaller lenses, and it is more, I would say, a classical molded optics business.

Austin Moeller: Great. That is very helpful. Nice quarter.

Operator: Thank you. Our next question is from Richard Shannon with Craig-Hallum.

Richard Shannon: Well, thanks, Sam and Al, for taking my questions, and also congratulations on your great progress here recently. Apologies here, I am on the road today and got on the call late. But, Sam, the first question is really what I heard part of as I was jumping in the line here. You were talking about a three-year window. I am going to have to ask you to repeat that. I want to hear the whole story, and I am sure I will have a follow-on to this. But it seems like a fairly important dynamic of what you are building towards here. So if you can go into that, that would be great, please.

Sam Rubin: Yeah. I mean, one needs to feel the differentiator hardly ever lasts forever. And so in my view, differentiation is something we need to continue to add on and innovate and acquire or develop. But the current differentiators, we have a window of opportunity where everyone is struggling with germanium. We have our solutions that right now put us at an incredible place. I am sure people are not sitting back and just accepting it, and there is some work elsewhere to either develop other materials or develop other supply chains for germanium. And while our materials still outperform germanium in many of the cases, there are going to be some customers that will be more

Sam Rubin: competitive with us

Sam Rubin: once they have supply of germanium, and I expect that to be no earlier than three years, probably five years. So to be on the cautious side, I am saying a three-year window in which we really have the runway to go out and capture significant market. Now the beautiful thing about defense is once you are in, you are in. So in the three years, programs we win, we are going to be in them for the lifetime of programs. And once people start using and seeing the differentiation and the quality of our materials, they are not going to go back to germanium as easily.

Sam Rubin: But

Sam Rubin: you know, no advantage is forever, so we need to be aware of that and just prepare accordingly.

Richard Shannon: Okay. Well, that is a very helpful way to understand and couch that. Maybe taking that understanding here and also using some wording that Al used about directing your resources here. Obviously, that is creating a level of urgency, which I am sure was already there anyway. But trying to make sure that you capture all these opportunities while you have the advantage, where are you pointing these resources? Where do you have most constraints both, you know, material systems in terms of manufacturing capacity, partnerships, headcount, whatever? Where are you most worried? What is your greatest focus? What is your longest-term, you know, your longest poles in the tent you are working rapidly towards solving?

Sam Rubin: I would say capacity and product development. So product development is a certain type of investment. It obviously is a bit more impactful on the P&L than it is on the balance sheet and such, and it is more of an acceleration to try and capture as much as we can in terms of product. So G5 has a great position in the long-range imaging. We want to capture more than that, probably down to low.

Sam Rubin: And

Sam Rubin: sorry,

Sam Rubin: And in terms of capacity, it is pretty much across the board, but glass has been a constraint, and we have been adding a lot, as we have been saying, and this acquisition lets us add more, and we will continue to add. And then assembly and fabrication, different areas, but those—it is more of a one-time sort of catch-up, I think, rather than big spending over the years. Al, anything to add to that?

Albert Miranda: I would just say we knew this was coming, and we are as prepared as we can be for it.

Richard Shannon: Okay. Fair enough. Maybe my last question, I will jump out of line here. And I do not know if you addressed this before I got on the call here, but obviously, you have been moving towards converting all of your relevant cameras and subsystems and whatever to Black Diamond. And I know you talked about your first camera in the G5 portfolio last quarter here. Do you have any more conversions you have talked about? And what is kind of the plan here, or kind of the time frame by which you can convert all of the relevant cameras over to this, over to Black Diamond? How long is that going to take you to do that?

Richard Shannon: Thanks.

Sam Rubin: I think within this calendar year, for sure. We are targeting much sooner than that, but let us say, by the autumn is our goal, or end of the autumn.

Richard Shannon: Okay. Perfect. I will jump out of line, guys. Thank you.

Operator: Okay. Thank you, Richard.

Operator: Our next question is from Jaeson Schmidt with Lake Street Capital Markets.

Jaeson Schmidt: Hey, guys. Thanks for taking my questions.

Jaeson Schmidt: Looking at the Amorphous acquisition, just curious if you could discuss some of the programs they were in, and then how you are thinking about the ability to kind of scale that $3,000,000 run rate that they had.

Sam Rubin: Yeah. So Amorphous has really one main customer,

Sam Rubin: a large defense prime, that accounts to, I cannot remember exactly, probably 80% of their revenue, give or take. And that is with two major airborne platforms that they are on. I do not want to speak out of line, but I think that on the Amorphous website, which is still up and running, there are some references to which programs, so someone can go there and just find it, so I do not give away information I am not supposed to give. But Amorphous has always only provided material. Brilliant people, incredible team, which we love and enjoy working with, and incredible capabilities in the material science, but it sort of stops there.

So you take those and you add all the value adds that LightPath has. We can fabricate components from it. We can mold lenses. So chalcogenide—one of the advantages of these materials is they can be molded—but no one has been molding the Amorphous AMT material. So we can mold them, we can coat them, we can use them in assemblies. So we are sort of opening up the range of offerings by Amorphous to their customers significantly more. And there will also be some situations in which we might use some of Amorphous materials in our systems, but that is less likely. The Black Diamond tends to be a better fit for us.

Jaeson Schmidt: Okay. That is helpful.

Jaeson Schmidt: And then just looking at gross margin, understanding the dynamics on the strength in

Jaeson Schmidt: December,

Jaeson Schmidt: how should we be thinking about the March quarter here?

Albert Miranda: So we had some favorable events. The engineering contract was a very high-margin contract,

Albert Miranda: and so that was favorable and unusual.

Albert Miranda: I look at it this way, Jaeson. On a year-to-date basis, we are at 33%. We have been signaling, and I even said it,

Albert Miranda: that 35% is our goal.

Albert Miranda: So I think if we stay there, we are pretty safe.

Jaeson Schmidt: Okay. That is helpful. And then the last one for me, and I will jump back in the queue.

Jaeson Schmidt: Obviously, really impressive top line in December. Were you at all impacted by the government shutdown, though?

Albert Miranda: No.

Jaeson Schmidt: No.

Sam Rubin: Yeah. I do not think so. No.

Jaeson Schmidt: Perfect. Thanks, guys.

Sam Rubin: Thank you.

Operator: Our next question is from John Hickman with Ladenburg Thalmann. Hi. Can you hear me okay? I can hear you, John. How are you? Hi. Thanks. My question has basically been answered except I was wondering if you could give us some kind of sense of what the cost difference is to a customer of a 5 mm Black Diamond lens versus a 15. So if I am a customer,

John Hickman: for the lens, what do I have to—what is the cost differential to the—

Sam Rubin: I do not have the numbers off the top of my head, but it is sort of, you know, obviously it is material difference cost, but what comes into play when you go from something like 5 to 15 in diameter is how many lenses can fit in a coating chamber. So, you know, a coating chamber is a fixed cost, and it costs $5,000 to run a coating, and so if you have 5 mm lenses, you have a boatload of them inside the chamber. If you have 15 mm lenses, you have far less, a third of the amount, and so you have the cost of the coating go up.

John Hickman: Okay. Okay. Well, thank you. That is helpful. Congratulations on the quarter, and I will take the rest of my questions offline. Thanks, John.

Sam Rubin: Thank you.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to Mr. Sam Rubin for his closing remarks.

Sam Rubin: Okay. I guess my second closing remark is that, yeah, so to summarize where we stand, we have completed transformation from component to vertically integrated system company. Yet another record backlog and a record revenue quarter—keep breaking the record, which is nice. We have a well-capitalized balance sheet now, strong technology position, very good positioning in terms of the NDAA deadline and the FCC ruling, and, really, now it is about execution: shipping products on time, converting backlog to revenue, expanding margin, and improving bottom line. So thank you, everybody. Looking forward to speaking to you next quarter, or for those that will be joining us on our virtual Investor Day call in two weeks’

Sam Rubin: time.

Sam Rubin: Thank you, and good night.

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

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