Stock in the News: LightPath Technologies, Inc. (NASDAQ: LPTH)

On Wednesday, Shares of LightPath Technologies, Inc. (NASDAQ: LPTH) rose 0.56% to $1.81. The stock recorded $1.79 as its minimum price and hit the max level of $1.84, during its most recent trading session. It traded total volume of 36,374 shares lower than the average volume of 152.87K shares.

LightPath Technologies, Inc. (LPTH) recently declared financial results for the fiscal 2018 fourth quarter and full year ended June 30, 2018.

Financial Results for the Three Months Ended June 30, 2018; Contrast to the Three Months Ended June 30, 2017:

Revenue for the fourth quarter of fiscal 2018 was $8.10M, a decrease of about $919.0K, or 10%, as contrast to the same period of fiscal 2017. The majority of the decrease was attributable to a decrease in revenues generated by the PMO product groups, with revenues from the IR product group remaining stable. Revenues from the Company’s IR products surpassed revenues generated by PMO products for the fourth successive quarter. The Company’s PMO products include both its low volume PMO (”LVPMO”) and high volume PMO (”HVPMO”) product groups.

Total revenue generated by the Company’s PMO products was about $3.40M for the fourth quarter of fiscal 2018, as contrast to $4.20M in the fourth quarter of fiscal 2017. Revenues from sales of LVPMO products reduced by about $481.0K, or 21%, in the fourth quarter of fiscal 2018, as contrast to the prior year period, mainly attributable to fewer sales to customers in the telecommunications sector and, to a lesser extent, the defense and industrial markets. Revenues from sales of HVPMO lenses reduced by about $335.0K, or 17%, in the fourth quarter of fiscal 2018, as contrast to the prior year period, mainly attributable to the continued soft demand of the telecommunications industry. Revenue generated by IR products remained at about $4.10M for both of the fourth quarters of fiscal 2018 and 2017. Revenue generated by the Company’s specialty products was about $596.0K in the fourth quarter of fiscal 2018, a decrease of about $37.0K, or 6%, contrast to $633.0K in the fourth quarter of fiscal 2017, because of the timing of customer orders.

Gross margin in the fourth quarter of fiscal 2018 was about $2.40M, a decrease of 44%, as contrast to about $4.40M in the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 30% for the fourth quarter of fiscal 2018, contrast to 48% for the fourth quarter of fiscal 2017. The primary driver of the change in gross margin was the lower sales volumes for the PMO product groups, which products historically have higher margins that the Company’s IR products. Lower margin IR products continue to represent a higher percentage of consolidated revenues, as contrast to the percentage of consolidated revenues from PMO product sales. In addition, PMO products sold to customers in the telecommunications industry command higher margins, but sales in this vertical market have declined contrast to fiscal 2017. Gross margin for the fourth quarter of fiscal 2018 was also unfavorably influenced by foreign currency fluctuations, and the rising cost of germanium, a key component in many of the Company’s IR lenses, with germanium prices increasing by 28% over the last 12 months. In addition, the Company began preparing to relocate ISP’s manufacturing operations from the Irvington, New York facility to other facilities and, in connection with this relocation process, incurred duplicative costs. Total cost of sales was about $5.70M for the fourth quarter of fiscal 2018, a boost of about $10M contrast to $4.60M for the same period of the prior fiscal year.

During the fourth quarter of fiscal 2018, total operating costs and expenses were about $2.90M, a decrease of about $304.0K, contrast to the same period of the prior fiscal year. New product development costs increased about $58.0K. Total operating costs and expenses also include the amortization of intangibles related to the acquisition of ISP.

Interest expense was about $135.0K in the fourth quarter of fiscal 2018, as contrast to about $207.0K in the same quarter of the prior fiscal year. The decrease is mainly because of the satisfaction, in full, of the promissory note issued to the sellers of ISP in the original aggregate principal amount of $60M (the ”Sellers Note”), which occurred during the third quarter of fiscal 2018.

During the fourth quarter of fiscal 2018, the Company recorded an income tax benefit of about $508.0K, contrast to an income tax benefit of about $5.10M for the fourth quarter of fiscal 2017. The tax benefit in the fourth quarter of fiscal 2017 was mainly attributable to an adjustment to the valuation allowance to the Company’s deferred taxes, related to deferred tax liabilities recognized in conjunction with the ISP acquisition. The tax benefit in the fourth quarter of fiscal 2018 is mainly attributable to adjustments to the Company’s valuation allowance against its net deferred tax assets. The Company’s tax expenses and the effective income tax rate are influenced by the mix of taxable income and losses generated in the Company’s various tax jurisdictions. LightPath has net operating loss (”NOL”) carry-forward benefits of about $750M against net income as stated on a consolidated basis in the U.S. The NOL does not apply to taxable income from foreign auxiliaries. Outside of the U.S., income taxes are attributable to the Company’s Chinese auxiliaries and to ISP’s wholly-owned partner, ISP Optics Latvia, SIA (”ISP Latvia”), a limited liability company founded under the Laws of the Republic of Latvia.

LightPath recognized foreign currency exchange losses in the fourth quarter of fiscal 2018 because of changes in the value of the Chinese Yuan and Euro in the amount of about $714.0K, which had a $0.03 unfavorable impact on basic and diluted earnings per share, contrast to a gain of $333.0K in the fourth quarter of fiscal 2017, which had a $0.01 favorable impact on basic and diluted earnings per share.

The Company stated a net loss for the fourth quarter of fiscal 2018 of about $807.0K, or $0.03 basic and diluted loss per share, contrast to net income of about $6.40M, or $0.26 basic and $0.24 diluted earnings per share for the fourth quarter of fiscal 2017. Adjusted net loss* for the fourth quarter of fiscal 2018 was also about $807.0K, contrast to adjusted net income* of about $6.40M for the fourth quarter of fiscal 2017. The decrease in net income and adjusted net income is mainly because of the about $5.10M tax benefit for the fourth quarter of fiscal 2017, contrast to a tax benefit of about $508.0K for the fourth quarter of fiscal 2018. Excluding these tax differences, the remaining $2.60M decrease in net income from the fourth quarter of fiscal 2018, as contrast to the fourth quarter of fiscal 2017, was driven by the aforementioned decrease in revenue and gross margin, and an about $10M unfavorable difference in foreign exchange gains and losses, when comparing these periods.

Weighted-average basic and diluted common shares outstanding increased to 25.738M and 27.451M, respectively, in the fourth quarter of fiscal 2018 from 24.156M and 26.222M, respectively, in the fourth quarter of fiscal 2017. The increase was mainly because of the 967,208 shares of Class A common stock issued in connection with the satisfaction of the Sellers Note, shares of Class A common stock issued under the 2014 Employee Stock Purchase Plan, and shares of Class A common stock issued as a result of the exercises of stock options and warrants.

EBITDA for the fourth quarter of fiscal 2018 was a loss of about $269.0K, contrast to earnings of about $2.30M in the fourth quarter of fiscal 2017. Adjusted EBITDA for the fourth quarter of fiscal 2018 was also a loss of about $269.0K, contrast to earnings of $2.30M in the fourth quarter of fiscal 2017. The difference in EBITDA and adjusted EBITDA between the periods was principally caused by the lower revenue and gross margin, as well as the aforementioned $10M unfavorable difference in foreign currency exchange gains and losses, when comparing these periods, which were partially offset by lower SG&A expenses.

Financial Results for the Fiscal Year Ended June 30, 2018; Contrast to the Fiscal Year Ended June 30, 2017

Revenue for fiscal 2018 totaled about $32.50M, a boost of $4.20M, or 15%, as contrast to about $28.40M for fiscal 2017. The increase in revenue is mainly attributable to an about $6.80M increase, or 73%, in revenue generated by sales of our IR products, as contrast to fiscal 2017. The increase in revenues generated by sales of infrared products was offset by decreases in sales of both our HVPMO and LVPMO lenses, mainly because of a decrease in demand from customers in the telecommunications industry. Sales to customers in the telecommunications industry reduced by about $3.10M in fiscal 2018, as contrast to fiscal 2017. Sales of IR products mainly consisted of revenues generated by sales of ISP’s IR products. Fiscal 2018 includes the financial results of ISP for the full fiscal year, whereas fiscal 2017 only included the financial results of ISP for about half of the fiscal year.

Gross margin for fiscal 2018 was about $12.50M, contrast to about $14.70M in the prior year period, a decrease of $2.20M, or 15%. Gross margin as a percentage of revenue for fiscal 2018 was 39% contrast to 52% in fiscal 2017. The change in gross margin as a percentage of revenue is mainly attributable to the change in revenue mix, with the inclusion of revenues generated by ISP for all of fiscal 2018, and the associated cost of sales, which were only included for about half of fiscal 2017. Lower margin IR revenues exceeded PMO product group revenues for fiscal 2018. Gross margin as a percentage of revenue with respect to the Company’s IR products, particularly ISP’s IR products, historically has been lower than that of LightPath’s PMO products. Gross margin for fiscal 2018 was also unfavorably influenced by the rising cost of germanium, a key component in many of the Company’s IR lenses, as well as foreign currency fluctuations. Total cost of sales was about $20.00M for fiscal 2018, a boost of about $6.30M as contrast to fiscal 2017. The increase in total cost of sales is mainly because of the increase in volume of sales, particularly as a result of IR product sales attributable to ISP, as well as a boost in overhead expenses during fiscal 2018 associated with capacity expansions in anticipation of future sales growth.

During fiscal 2018, total operating costs and expenses were about $12.20M, a boost of about $1.60M, contrast to the same period of the prior fiscal year. The increase was mainly attributable to the addition of ISP’s operating costs and expenses, counting the amortization of intangibles, for the entire fiscal year, contrast to the prior year in which ISP’s operating costs and expenses were not included until the end of the second quarter of fiscal 2017.

Interest expense was $187.0K for fiscal 2018 as contrast to $413.0K for fiscal 2017. Interest expense for fiscal 2018 was lower because of the satisfaction of the Sellers Note, in full, and the reversal of the associated fair value adjustment liability, which resulted in a gain on extinguishment of debt of about $467.0K. Excluding the impact of this gain, interest expense was about $654.0K for fiscal 2018, a boost of $241.0K as contrast to fiscal 2017. The increase is because of the inclusion of the acquisition-related loans for the full fiscal year, while this debt was only included for about half of fiscal 2017. The Sellers Note was fully satisfied on January 16, 2018, which reduced interest expense starting in the third quarter of fiscal 2018. However, because the Sellers Note was included for about half of both fiscal 2018 and 2017, the reduced interest expense in the third quarter of fiscal 2018 did not impact significantly year-over-year results.

In fiscal 2018, the Company recognized non-cash expense of $195.0K related to the change in the fair value of the warrants issued in connection with our the June 2012 private placement, contrast to non-cash expense of $468.0K in the same period of fiscal 2017. The change in the fair value of the June 2012 warrants was not influenced by actual operations but was instead strongly tied to the change in market value of the Company’s Class A common stock. The June 2012 warrants expired on December 11, 2017; therefore, there was no remaining warrant liability as of that date.

During the fiscal 2018, the Company recorded an income tax benefit of about $827.0K, contrast to an income tax benefit of about $4.30M in fiscal 2017. The income tax benefit for fiscal 2018 is attributable to changes in taxation related to certain auxiliaries in China and Latvia, as well as a decrease in the valuation allowance on the Company’s U.S. deferred tax assets. The income tax benefit in fiscal 2017 was attributable to a decrease in the valuation allowance recorded against U.S. deferred tax assets, mainly driven by the $5.40M in deferred tax liabilities recorded in conjunction with the acquisition of ISP. This benefit was offset by income tax expense associated with the Company’s Chinese auxiliaries and, to a much lesser extent, income taxes attributable to ISP Latvia.

Net income for fiscal 2018 was about $1.10M, or $0.04 basic and diluted loss per share, contrast to net income of about $7.70M or $0.39 basic and $0.36 diluted earnings per share for fiscal 2017. The about $6.60M decrease is mainly because of the about $4.30M net tax benefit for fiscal 2017, contrast to a tax benefit of about $827.0K for fiscal 2018. Excluding these tax differences, the remaining $3.10M decrease in net income from fiscal 2017 to fiscal 2018 was mainly driven by the aforementioned decrease in gross margin and increases in operating costs resulting from the inclusion of ISP’s costs for a full year, which were only included for about two quarters of the prior fiscal year, counting an about $623.0K increase in the amortization of intangibles. Adjusted net income for fiscal 2018 was $1.30M, contrast to adjusted net income of $8.20M for fiscal 2017. The adjusted net income decrease of $6.90M is driven by the aforementioned $6.60M decrease in net income, with the $273.0K difference between the periods caused by the change in fair value of the warrant liability.

LightPath recognized foreign currency exchange gains during fiscal 2018 because of changes in the value of the Chinese Yuan and Euro in the amount of about $141.0K, which had a $0.01 impact on basic and diluted earnings per share, contrast to about $78.0K in the same period of the prior fiscal year, which had no impact on basic and diluted earnings per share.

Weighted-average basic and diluted common shares outstanding increased to 25.006M and 26.811M, respectively, in fiscal 2018 from 20.001M and 21.666M, respectively, in fiscal 2017. The increase is mainly because of the issuance of 8.0M shares of Class A common stock in connection with the acquisition of ISP in December 2017. In fiscal 2018, these shares are included in the weighted average for the full year. In addition, 967,208 shares of Class A common stock were issued in January 2018 in connection with the satisfaction of the Sellers Note, which further increased the weighted-average shares in fiscal 2018.

EBITDA for fiscal 2018 was about $3.80M, contrast to about $5.90M in fiscal 2017. Adjusted EBITDA for fiscal 2018 was about $4.00M, contrast to $6.30M in fiscal 2017. The difference in EBITDA and adjusted EBITDA was principally caused by lower gross margin and higher operating expenses, because of the addition of ISP’s SG&A costs for the full fiscal year.

Cash and cash equivalents and restricted cash totaled about $6.50M as of June 30, 2018, contrast to about $8.10M as of June 30, 2017. Cash flow offered by operations was about $2.60M for the fiscal year ended June 30, 2018, contrast with $5.00M in the prior fiscal year. During fiscal 2018, the Company expended about $2.50M for capital equipment, as contrast to $2.20M in the same period of the prior fiscal year.

The current ratio as of June 30, 2018 and 2017 was 3.4 to 1. Total stockholders’ equity as of June 30, 2018 was about $35.40M, a 19% increase, and contrast to about $29.70 M as of June 30, 2017. The increase is mostly because of the issuance of Class A common stock equal to about $2.20M issued in conjunction with the satisfaction of the Sellers Note, and net income of $1.10M for the fiscal year ended June 30, 2018.

As of June 30, 2018, LightPath’s 12-month backlog increased 38% to $12.80M, as contrast to $9.30M as of June 30, 2017.

LPTH has the market capitalization of $46.41M and its EPS growth ratio for the past five years was 16.60%. The return on assets ratio of the Company was 2.20% while its return on investment ratio stands at 2.60%. Price to sales ratio was 1.43 while 28.40% of the stock was owned by institutional investors.

Chad Pitman

Chad Pitman

I am Chad Pitman and I focus on breaking news stories and ensuring we (“Stocks Market Cap”) offer timely reporting on some of the most recent stories released through market wires about “Emerging Stocks”. I have formerly spent over 3 years as a trader in U.S. Stock Market and is now semi-stepped down. I work on a full time basis for stocksmarketcap.com specializing in quicker moving active shares with a short term view on investment opportunities and trends.

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