Good afternoon, and welcome to the LightPath Technologies Fiscal Fourth Quarter and Year-End 2020 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today’s event is being recorded. I will now pass the call off to Donald Retreage, Chief Financial Officer of LigthPath Technologies. Please go ahead.

Good afternoon. Before we get started, I would like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectations and involve various risks and uncertainties that are discussed in this periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them can prove to be inaccurate and there can be no assurance that the results will be realized. In addition, references may be made to certain non-generally accepted accounting principles or non-GAAP measures, for which you should refer to the appropriate disclaimers and reconciliations in the company's SEC filings and press releases. Following management discussions, there will be a formal Q&A session open to participants on the call. I now would like to turn the conference over to Sam Rubin, LightPath's President and Chief Executive Officer. Sam, please go ahead.

Thank you and good afternoon. Welcome to LightPath Technologies fiscal 2020 fourth quarter financial results conference call. Our financial results press release was issued after market closed today and posted to our corporate website. Following my remarks, our CFO, Donald Retreage will further review our financial results and provide more perspective on key areas. We will then conduct a Q&A session. Now, onto my remarks. Our fiscal 2020 fourth quarter and full year fiscal – full year results reflect a consistent and continuing improvement and growth of our business, while at the same time navigating the dynamic and changing conditions, caused by the effects of COVID-19 trial of business, our customers and our supply chain. Classified as an essential business, we remained open and operating to the extent possible. We continued to take all precautions to ensure that our employees remain safe and that our business operations continue. Through the fall, we are very encouraged to have ended the year by delivering growth in revenue, backlog, gross margin, gross profit, net income EBITDA and the cash balance. While reducing our total debt and financial lease balance and improving our cost structure with a reduction in operating expenses. All of this was achieved despite nearly six months of the fiscal year being impacted by COVID-19. Similar to our results in the previous quarters, our fourth quarter results continued to show consistent improvement year-over-year and consistent results throughout our fiscal year. The gross margin for the quarter ended at 39% up from 32% in Q4, 2019 while the EBITDA margin grew to 19% up from negative 3% the same period the previous year. These results reflect savings from the integration of the ISP acquisition and other efficiency related activities, as well as the favorable product mix in our PMO business. Additionally, our…

Thank you, Sam. First, I would like to mention and remind all that much about the information we're discussing during this call is also included in press release issued earlier today and in our 10-K filed with the SEC. I encourage you to visit our website at lightpath.com on specifically the section titled “Investor Relations”. Now on to my remarks pertaining to the fourth quarter and year-end fiscal 2020. Sam's remark covered some of our financial performance along with key elements of our strategic direction. So I will be specifically discussing key financial areas. Revenue for the first quarter of fiscal 2020 was approximately $9.1 million, up from $8.7 million in both third quarter and fourth quarter 2019 -- third quarter 2020 sorry and fourth quarter 2019. For the year, revenues were $35 million, up from $33.7 million in fiscal 2019. IR product revenue was $4.8 million in Q4 2020 or 53% of total revenue, up from $4.3 million or 50% in the third quarter 2020 and $4.7 million, or 54% of the total and the prior period. Visual precision -- visible precision molded optics or PMO products revenue in fourth quarter 2020 was $3.9 million or 43% of the total same as third quarter 2020 or 44% of the total in third quarter 2020 and $3.5 million or 40% of the total in the fourth quarter 2019. For the year, IR product revenues were $18.1 million or 52% of the total of 5%, up 5% from about $17.2 million, or 51% of the total in the fiscal 2019. PMO revenues were $14.6 million or 42% of the total in fiscal 2020 and up 4% from about $14 million or 42% of the total prior year. Demands of our revenue for the fourth quarter and full year in respective periods…

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Marc Wiesenberger with B. Riley FBR. Please go ahead.

Yes, thank you. Good afternoon. Very nice execution in the quarter. Currently, I think you have capacity to produce around 3 million molded lenses per year. Can you talk about the growth trajectory around the molding capacity and where you'd expect to deploy that capacity from a geographic perspective?

Yes, our capacity has definitely been growing in the last few months as we've been investing in accelerating some of the office investments in our manufacturing equipment. That reminds me in the previous quarter -- stated that we're going to expedite some of those investments which we have and which have come into effect during the last quarter and towards the end of the quarter. That's evident in the growth of our molded lenses, where we produced 1.2 million in the last quarter, which is a 33% growth compared to the quarter before that first quarter. Some of the investment of those molding machines and equipment are in our China facility. Some of them are in a U.S. facility, other parts of the investment as the targets of where we make the investments and where we need to expand capacity changes over time. Some of those investments are going to be in our facility in Riga, as well as additional investments in the U.S.

Great, thank you. Can you talk a little bit more about the progress of BD6 adoption from new customers, substitution from existing customers? Your goals for BD6 and from your product portfolio and then the resulting financial implications we should see in FY 2021?

Definitely. The results from this transition to BD6 are very encouraging as we stand right now. By nature, as the type of orders for BD6 versus germanium or altogether for thermal imaging, such that they take a long time to mature and to go from design to prototyping to actual production. One example is a large contracts that we announced a few months ago. And that only in the near future, we're going to start shipping on that contract. And that contract alone has still taken quite a while to, to reach. We have a strong pipeline of opportunities. Some of them the quoting process, many of them in the design process in which we work very closely with the customer, and some of them in the prototyping process. We believe that we have some significant winds coming down the road. Most of them will start shipping within six months or so after we get the orders. Some of them might be shorter, some of them might be longer.

Sure. You talked about solid 5G demand from China. What other geographies are you seeing that are maybe starting to accelerate and have deployments, and can you talk about these other markets outside of China?

Yes, we provide our 5G lenses into the transceiver manufacturers and transponder manufacturers. Most of them are in Asia, and by the nature of it, and by the structure of the supply chain, except for a Chinese manufacturers where we know that they are vertically integrated and when we sell them the lenses to them, we know that they mix the end equipment. With other customers we do not always know where the transceivers and in terms of geographical distribution. We do know that we supply the lenses into multiple manufacturers of 5G equipment and optical transceivers in such a varieties that we know that we're definitely not concentrated at one country or another in terms of the deployment of 5G, as we do not have the full information as to the geographical deployment.

Sure, understood. And then last one from me. I think you've talked about the emerging use cases for optics and photonics role requires supplementary technologies. Can you talk about how LightPath is positioned to meet those additional demands? Thank you.

Absolutely. And part of the organization alignment that we're going to do. First of all, now, this really is an on-going effort that will happen over the next few years. It's going to – going to be that continuously look at such opportunities and see what supplemental products or technologies or capabilities we need in order to support them. This could be a situation where a customers buying our lens and or a customer’s working [Indiscernible] complete solution. That solution also includes say a scanning mirror, which is the electronic component that moves the beam around. And we could be integrated, it could be much something much closer to home, which we've already done a couple of times, integrating the detector and actively aligning the entire optical system to deliver really a complete, closed and hermetically sealed even optical system to the customer. By nature of it, optics being going into so many different applications in so many places, the type of other components, other technology that are needed would vary drastically from one customer to another. And as we go along, we're going to see which ones makes sense for us, where can we create real value to customers?

Great, thank you very much.

The next question is from Gene Inger with ingerletter.com. Please go ahead.

Hi, Sam and Don, congratulations on navigating through the pandemic so far, and keeping the company constantly operating and forgive my sore throat. But I'll try to ask a couple questions that Riley didn't touch on. You basically covered as Sam by discussing or expanding beyond what some believe are relatively low margin commodity lenses, although you've already increased the margins on those. So good job with that. You just mentioned a moment ago, you just mentioned integrated optics, which caused me to think of your colleagues and neighbors over at Luminar. I don't know that they're going public affects you directly. But as they expand, do you, do you foresee expanded relationship or would you rather not talk about potential colleagues or customers?

Thank you, Gene. It's good to hear your voice. And thank you for the questions. First of all, I'll start by congratulating our neighbors Luminar for going public and joining us from that circuit like it's always nice to have neighbors in the neighborhood. Share with us the stock exchange. We have a good relationship with many customers and with many customers, we explore whatever value can we create to them? Where is it that we can do more for them and what are their needs? We do not comment on specific customers for the most parts. But we definitely look closely at the LIDAR marketplace and work with multiple companies developing different light of solutions at many different levels. Some of them we discuss assemblies, some of them we discussed individual components with. It's obvious that LIDAR is going to become a major application for optics in the future. We cannot know until which company will win the LIDAR rate [ph] so the best thing we can do is work with as many components as we can and support them by creating some value for them either through our knowledge of optical engineering, or by creating individual components or assemblies that will enhance their products.

That is what I assumed you meant by integrated optics. And I was really a little bit excited to look forward to many of these things that are that are that are forthcoming.

So am I.

I also wanted to thank you. I wanted to enquire with regard to China. Your subsidiaries there are wholly owned, where I think in the past there was a large fund out of Shanghai at Pudong that was an investor. I'm assuming that is now retired and the Chinese government does not have a problem with you operating as a wholly owned operation.

That's correct. We have -- we both companies are wholly owned by us 100%. We have 100% control of ours. We do not -- we're not limited by any regulatory requirements related to our Chinese subsidiary by any of the countries or any of the sites related to that. And this is very similar to the experience I had in the six years I spent in China setting up and building from scratch in large companies there. A Wolfie as it's called a wholly owned foreign entity is completely owned and controlled by the foreign -- another company. And that's exactly the case, LightPath with our two subsidiaries.

I'm glad to hear that. Could you also expand lately there is more tension between China and India. And companies like Paragon which is Israeli with wireless backhaul is benefited and because they do a lot of business in India with Vodafone, and I'm just wondering whether India barring Huawei, because of the tensions between them actually works to your benefit, with vertical integration in China so if I assume much of what you make in China is sold to Huawei or other networking companies in the country?

Yes, we don't have much direct sales into India. And as I mentioned in our previous comment, we often do not know the end use of our product, since we're sometimes two or three layers removed from the end product. So in this case, the only insight I might have is really no insight in the sense of none of our business has been affected by any of that to our knowledge, and we don't see an impact from that.

Glad to hear that. And my last question would just be Ciena’s CEO a couple of weeks back when they made their numbers for the second quarter, but he gave pretty sloppy guidance going forward and he talked about many of their customers in photonic, Lumentum is one. I think you deal with some of those customers. And that may be what you're reflecting when you're saying, your customers rescheduling delivery. But it sounds like there's a lot of orders that aren't cancelled, but they're simply pushed into the future. So isn't that giving an impression, I hope that things are looking favorable as we adjust to the new normal and migrate into the third and fourth quarters?

Yes, we definitely meant exactly that orders are being pushed out due to most of the time logistical constraints. And if I would give one example, we have one customer that has production line in three different facilities, and one facility had to close down. Those other two facilities cannot pick up the entire capacity, and hence one third of the deliveries to them would get delayed until that facility re-opens. And that’s one example. So most of those are similar to that in that sense, that other unexpected factors are affecting the supply chain or the operations and we're being asked to delay or hold off on the shipment. If it's with enough notice we can halt production and move that capacity to use something else. If it's not, we hold it in inventory.

Well, it sounds promising. And if anything, you had a good quarter, the EBITDA was great. And you did this despite these impediments with the pandemic. So I'm looking forward to good growth and welcome your leadership and hope things go well.

Thank you. I appreciate that Gene. Have a good day.

[Operator Instructions] Our next question is from Chris Witkowski [ph], a private investor. Please go ahead.

Hello, good afternoon. Congratulations on a great quarter.

Thank you.

So, regarding the 5G visible optics molded lenses. I'm not sure if I parsed your statements correctly. But it seems like you're saying that there's pending demand even outside of your backlog. That is if you tell your customers that they're holding back some orders and if you tell them that you have more capacity, you'll get more orders. Is that correct?

Yes. You understood it correctly.

All right, that's, that's good to hear. And about, about those lenses, again, the 5G lenses. Now as data rates increase, the optics have to be more precise, and are you getting certain price increases on your lenses? And does that cause a bit of the increase in the gross margin? How is the pricing going?

Don, do you want to…

About the prices. In general, yes. However, our formula in the past has been to give discounts on high volume because we had different reasons. Obviously now at full capacity, those levels are leveled out, so there won't be any great price decreases aside from what the market is demanding. So we do not foresee erosion of the price in the PMO lenses to affect us, far more in the next two or three quarters.

All right. That's great to hear. And regarding your strategic realignment, should we be looking forward to noticeably higher SG&A costs because of that in the future?

Yes, that's a great question. And we've been very disciplined and both our growth and expenses on new capabilities and new -- manpower, as well as our capital investments where we need discipline to finance all of that, so our own cash flow generated and being aware of profit margins or total EBITDA margins as we grow the business. And we intend to continue that and be as much as possible in line with what we've been doing until now. That said that might be required here and there some individual expenses on adding one or two specific skills by form of people or some unique equipment that might be a bit different than take a somewhat longer to see the return. But we do not expect that to be significantly different.

Alright, that's good to hear. And it's, it's about time we started making some real profits here. And another question. So about those temporary push outs. Can you just give us a few as to what you're experiencing now in August and September? And is that -- are you less affected now than you were in the past quarter?

I'd say it's, it's still on-going as I noted in my remarks. And we continue, we believe it will continue to be somewhat on-going until things stabilize. In most cases, it moved I'd say sort of between one customer and the another. It’s not specific customer that keeps pushing out and so on, except for maybe one or two cases. But for the most part, it's -- we see it sort of the transitioning between different geographical areas where it happens, different customers in different industries and different periods. We try as I mentioned, to be as agile as possible and to be on top of it. But given that we're running at capacity or capacity constraints, at least in in the molding part of the business. And sometimes the supply chain and the time to turn around orders is long. There's sometimes not much we can do about it, and we just end up with having a bit more inventory than we care for.

Okay, I understand that. Well, that's it for me. Thanks again and good luck.

Thank you.

Thank you.

We show no additional questions at this time, so I'd like to turn the conference back over to Mr Rubin for any closing remarks.

Thank you for participating in today's call. Before we conclude, I wanted to thank Jim Gaynor, my predecessor for the 13 years of service as the CEO of LigthPath and extend our best wishes to Jim and his family on his retirement. We look forward to speaking with you next quarter. Until then, we will be participating at the Sidoti & Company Fall -- Virtual Investor Conference on September 23. And have been invited to speak at the MicroCap Club’s Virtual Leadership Summit on September 25. Thank you again, and goodbye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.