Lightpath Technologies Inc (LPTH) Q4 2023 Earnings Call Transcript

Good afternoon, everyone, and welcome to the LightPath Technologies Fiscal Fourth Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. At this time, I'd like to turn the conference over to Al Miranda, LightPath's Chief Financial Officer. Please go ahead, Al.

Thank you. Good afternoon, everyone. Before we get started, I'd 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, involve various risks and uncertainties as discussed in its periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proven to be inaccurate, and there can be no assurances that the projected results would be realized. In addition, references may be made to certain financial measures that are not in accordance with generally accepted accounting principles or GAAP. We refer to these as non-GAAP financial measures. Please refer to our SEC reports and certain of our press releases, which include reconciliations of non-GAAP financial measures. Sam will begin today's call with an overview of the business and recent developments for the company. I will then review financial results for the quarter and fiscal year. Following our prepared remarks, there will be a formal question-and-answer session. I would now like to turn the conference over to Sam Rubin, LightPath's President and Chief Executive Officer. Sam?

Thank you, Al. Good afternoon to everyone, and welcome to LightPath Technologies' Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. Our financial results press release was issued after the market closed today and posted on our corporate website. The fourth quarter was highlighted by significant developments in several of our pillars of growth, which I have been discussing as part of our strategic shift from a component manufacturer to a value-added solutions provider. To recap for our investors, LightPath has been transitioning in the last few years from a pure component manufacturer focused on being the lowest cost provider to a value-added partner for complete solutions based on optical technologies whose differentiators are mostly technological. Along those lines, we have been focusing on three pillars of growth: imaging solutions, such as cameras; growth in new markets, such as automotive; and the defense business, all of those driven by our differentiating technologies such as our proprietary material. As previously outlined, one pillar of growth revolves around the defense business, increase, driven mainly by leveraging our unique infrared material. To achieve significant growth and market share in that established defense market while still commanding a premium, we're leveraging these exclusive materials for infrared imaging as an entry point into new programs and to become the supplier of choice for infrared optics in the aerospace and defense industry. One advantage of our materials is that they are an alternative to germanium, the dominant material used in lenses for infrared imaging. The DoD and the White House have identified germanium as a strategic vulnerability within the supply chain. With most of the germanium originating from China and Russia, alternatives are strategically important. China is the world's largest supplier and recently announced a limit on the exports of gallium and germanium. Our family of chalcogenide glasses branded as Black Diamond or BD is the leading alternative for germanium. In anticipation of this possibly happening and to mitigate the potential supply chain liability, we have been working with the DoD and various government agencies to accelerate the qualification and the readiness of our new materials. Most of this work is funded directly by those agencies. Recently, we announced the U.S. Department of Defense via the Defense Logistics Agency, DLA, will provide the funding necessary to qualify our Black Diamond chalcogenide glass as a substitute for germanium. These materials will be in addition to our BD6 material, which is already fully qualified and field deployed in multiple systems. The DLA funding will be made in two phases. The first phase of $250,000 is earmarked explicitly for three of LightPath's Black Diamond glasses. The second phase is expected to cover the remaining six materials and total approximately $1 million. While new defense contracts can take a significant amount of time to come to fruition, this is a very positive lead indicator to the success of this strategy. This most recent announcement represents one of multiple fundings we have received to support the development of these materials, totaling over $2 million to date. Those funds are not included in our published backlog numbers. Currently, we can produce up to 10 tons a year of BD materials. According to different public estimates, the U.S. defense market consumes between 50 to 150 tons of germanium annually for the use in optics alone. Therefore, we are also discussing with DoD about the possible increase in capacity. Our recent expansion in Orlando facility sets the foundation for such a capacity expansion. Previously, our BD6 raw material would only be available in the form of finished optical lenses or integrated assembly in our customer solutions. However, the time it takes to produce prototypes for new optical design is one of the challenges to customers looking to make a change and to move away from germanium into new materials. So to aid the market transition from germanium into the new materials, we will make our most popular glass, BD6, available as raw material. Doing so will help accelerate the transition away from germanium. We are also mindful that export restrictions could have a short-term adverse effect on sales of our products that currently use germanium, and that while the recent developments around our material support significant growth in that area for LightPath, it does take about two years from the moment a system is redesigned until we see volume production orders. The second pillar of the growth strategy concerns the adoption of thermal imaging in more applications, and right now, primarily with a focus on automotive. In the last two to three years, we have been working with multiple automotive companies at different levels of the supply chain to design, test and qualify thermal imaging as an additional safety sensor, primarily for emergency braking systems. Those efforts are often independent of some of the other activities and advancements in automotive such as LiDAR or autonomous vehicles. On May 29, the U.S. Department of Transportation Institute of Highway Safety announced their intention to set a rule mandating emergency braking systems in all new cars and have explicitly called out the gap in performance of those systems at night, naming thermal imaging as a technology that could solve this. Since this announcement, we have seen increased interest in those solutions and customers looking to possibly deploy those systems to more car models than originally discussed. We are very pleased to have had a two-year head start on many of the other players, time which we used to get field qualified by at least one major car manufacturer and established ourselves as an important player in this field. Our success in positioning ourselves in this market has led to some of our customers including and using our name in their proposals as a selling point. And in one case, at least in one case, a car manufacturer specifically suggesting to potential vendor that they work with us. The ASPs between $20 to $50 per car. This can be transformational to the company. This technology relies on our infrared materials, molding technology and design and assembly at a subsystem level, all of which really providing a successful proof for our strategy to leverage those technologies to become a solutions provider. The third pillar of growth, which ties directly into the first two, is our transition from a component manufacturer to a provider of engineered solutions based on optical technology. This transition began a couple of years ago, starting with customized lens assembly, which we tend to call LightPath 2.0. Through camera solutions, the first of which is our innovative Mantis broadband infrared camera, which we announced in December and which is enabling our customers to do things they could not do before. The latest step in this transition is acquisition of Visimid Technologies. Visimid Technologies does to the back end of the thermal cameras, what LightPath has been doing to the front end, the optics. Like LightPath's business model of customizing optical assemblies to be used in infrared cameras and then making the large profit in production, Visimid has established itself as the go-to for customizing the electronics and software part of uncooled infrared cameras. In fact, Visimid has customized for LightPath the electronics and software of our Mantis camera. Together with Visimid, LightPath can now extend our offering of customized imaging solutions to include a wholly integrated camera core, where the camera can be customized from its electronics, software and optics, producing an integrated calibrated camera core for OEM customers to integrate into their systems. With Visimid, our engineered solutions business will now have two distinct offerings. One is the customized solutions, as I just described. The second is offering standard products that are derivatives of such projects, which we can then offer to customers with little to no customization. An example of that is a new product we announced last week of a high frame rate thermal camera core, something that was developed by Visimid some time ago, and now we can offer it as a standard product. In short, the Visimid acquisition boosts not only our technical capability by adding more disciplines such as electronics and software but also brings with it a portfolio of designs we can commercialize and a pipeline of new project opportunities. The complexity of those opportunities leads to the fact that some of them have the potential of engineering charges of millions of dollars per project. To conclude, we believe that with our expanded manufacturing facility in Florida, the acquisition of Visimid, and the recent developments in automotive and defense, we are well positioned to take advantage of the larger opportunities that lie ahead and continue transforming the company to grow it substantially above its current size. Lastly, before I pass the mic over to Al, I would like to commend our team for the ongoing growth of sales in the U.S. We ended the fiscal year with a 19% growth, 19% growth in the U.S. sales year-over-year. While this is not easily evident in our consolidated view due to the sharp decline of sales in China, it is a major achievement in our biggest and most important market. And for that, I want to congratulate the team. It is the hard work and focus on execution that is positioning LightPath to deliver on the promises of our technology and capability and translate that into growth and shareholder value. With that in mind, I will now turn the call to our CFO, Al Miranda, to review our fourth quarter and year-end financial results. Al?

Thank you, Sam. I'd like to remind everyone that much of the information we're discussing during this call is also included in our press release issued earlier today and in the 10-K for the period. I encourage you to visit our website at lightpath.com to access the documents. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist the investors. On a consolidated basis, revenues for the fiscal fourth quarter were $9.7 million, compared to $8.9 million in the year ago period. Sales of infrared products were $5.5 million or 56% of the company's consolidated revenue. Revenue from precision molded optics, or PMO products, was $3.2 million or 33% of consolidated revenue. Revenue from specialty products was $1 million or 11% of total company revenue. The increase in infrared product sales was primarily driven by sales of diamond-turned infrared products and is primarily attributable to customers in the defense and industrial markets. The decrease in PMO revenue is primarily attributed to a decrease in sales to customers in the telecom and commercial markets, which is partially offset by increases in defense and industrial customers. PMO sales in China continue to be soft across all industries. The increase in specialty optics during the quarter was a result of increased sales of custom visible lens assemblies to the medical industry. Gross margin in the fourth quarter of fiscal 2023 was approximately $3.1 million, an increase of 10%, as compared to approximately $2.8 million in the same period of the prior fiscal year. Total cost of sales was approximately $6.6 million for the fourth quarter of fiscal 2023, compared to approximately $6.1 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 32% for both the fourth quarters of fiscal '23 and fiscal '22. The mix of revenue by product group for the fourth quarter of fiscal '23 was more heavily weighted towards specialty products with less PMO products, which typically have similar margins, while the percentage of infrared products was similar, as compared to the same period of the prior fiscal year. Selling, general and administrative expenses were approximately $3 million for the fourth quarter of fiscal 2023, an increase of approximately $223,000 or 8%, as compared to approximately $2.8 million in the same period for the prior fiscal year. The increase in SG&A cost is primarily due to increase in stock compensation and other personnel-related costs, including commissions on higher sales. We also incurred costs of approximately $140,000 in the quarter associated with the acquisition of Visimid, which closed in July 2023. Net loss for the fourth quarter of fiscal 2023 was approximately $809,000 or $0.02 basic and diluted loss per share, compared to $1.4 million or $0.05 basic and diluted loss per share for the same quarter of the prior fiscal year. The decrease in net loss for the fourth quarter of fiscal 2023 is primarily due to a favorable difference in the provision for income taxes. Our EBITDA for the quarter ended June 30 was approximately $72,000, compared to $107,000 for the same period of the prior fiscal year. The decrease in EBITDA in the fourth quarter of fiscal 2023 was primarily attributable to an increase in operating expenses, including SG&A and new product development, which were partially offset by higher revenue and gross margin. Turning now to our fiscal 2023 full-year results. Revenue for the year was $32.9 million, a decrease of approximately $2.6 million or 7%, as compared to $35.6 million in the prior fiscal year, driven both by PMO and IR products. Sales of infrared products were $16.7 million or 51% of the company's consolidated revenue in fiscal 2023. Revenue from PMO products was $13.4 million or 41% of consolidated revenue. Revenue from specialty products was $2.8 million or 8% of total company revenue. The decrease in infrared product sales was primarily driven by sales of BD6-based molded infrared products particularly to customers in China, commercial and industrial markets. These decreases were partially offset by increased revenue from BD6-based products driven by customers in the defense industry as Sam mentioned earlier. Sales of diamond-turned infrared products were nearly flat for fiscal year '22 and '23. However, there were shifts in customer mix. The decrease in PMO revenue is primarily attributable to a decrease in sales to customers in the telecom and commercial markets, again, partially offset by increases in defense and industrial customers. Again, on a fiscal year basis, PMO sales in China continue to be soft across all industries. The increase in specialty optics during the year was a result of increased demand for collimator assemblies and increased sales of custom visible lens and assemblies to the medical industry. On a global level, revenue has shifted geographically as well as based on product. Year-over-year sales increased in the U.S. by 19% as Sam mentioned earlier. It decreased in China by 55% and decreased in the EU by 27%. U.S. sales can be attributable to our shift towards defense products and a positive economy. China's decline is similarly two-fold, a poor economy and a lack of demand for telecom and industrial products in the country. The EU decline is a little more nuanced. Germany, which is a large market for us is in a mild recession or flat. But the real decline is related to a key customer's annual contract and the year-over-year timing of deliveries, and therefore, more transitory than really a trend that we're seeing in the EU. While the 19% growth in the U.S. might not be easily evident when looking at our consolidated numbers, we do view it as a very important validation of our strategy and execution of this strategy. Gross margins in fiscal 2023 were approximately $11.1 million, a decrease of 6%, as compared to approximately $11.8 million in the prior fiscal year. Total cost of sales was approximately $21.9 million for fiscal 2023, compared to approximately $23.7 million for the prior fiscal year. Gross margin as a percentage of revenue was 34% for fiscal 2023, compared to 33% for fiscal 2022. The lower revenue level for fiscal 2023, as compared to the prior fiscal year resulted in less contribution towards fixed manufacturing costs. Improving the gross margin of 34% at that lower revenue level reflects the benefit of a number of the operational and cost structure improvements that we have been implementing. Those improvements were partially offset by some elevated costs in the second half of fiscal 2023 as the construction and consolidation of the Orlando facility required us to temporarily outsource certain production processes adding to costs. SG&A costs were approximately $11.4 million for the fiscal 2023, an increase of 2%, as compared to approximately $11.2 million in the prior fiscal year. The increase in SG&A for fiscal year 2023 is primarily due to increase in stock compensation, partially due to direct retirements that occurred during the second quarter of fiscal 2023, as well as increases in other personnel-related expenses and the Visimid closing costs mentioned. Net loss for fiscal 2023 was approximately $4 million or a $0.13 basic and diluted loss per share, compared to $3.5 million or $0.13 basic and diluted loss per share for the prior fiscal year. The increase in net loss for fiscal 2023, as compared to fiscal 2022, is attributable to approximately $927,000 increase in operating loss resulting from lower revenue and gross margin and increased operating expenses. Our EBITDA for fiscal 2023 was a loss of approximately $355,000, compared to income of $1.2 million for fiscal 2022. The decrease in EBITDA for fiscal year 2023 is primarily attributable to lower revenue gross margin, coupled with increased SG&A expenses and a significant decrease in other income. As of June 30, 2023, we had working capital of approximately $14.9 million and total cash, cash equivalents and restricted cash of approximately $7.1 million, of which greater than 25% of our cash and cash equivalents was held by our foreign subsidiaries. During fiscal year 2023, we had a lot of activity around cash management. First and most significantly, we had an oversubscribed equity raise in January, contributing $9.2 million in cash. During the course of the year, we used cash in operations of approximately $2.8 million cash burn. We invested $3.1 million in capital expenditures in production, plant and equipment predominantly in Orlando. In the normal course of business, we paid down $900,000 in debt. In addition, we used $1 million to pay our debt down and renegotiate to remove onerous terms and conditions from our credit facility with BankUnited. Doing so also included using cash to secure the current loan but simultaneously enabled us to make the subsequent Visimid acquisition, an important strategic move as Sam mentioned. The last item of substantive note is the increase in accounts receivable of $1.4 million which occurred in Q4 and is directly related to $9.7 million in sales for the quarter. Inventory also increased, particularly in WIP in the second half of our fiscal year. The increase in AR and inventory contributed to the aforementioned $2.8 million of operating cash burn. Both AR and inventory will stabilize in Q1 and Q2 of fiscal 2024. That said, we feel well positioned on cash for the company's growth in fiscal year 2024. Lastly, the increase in backlog during the first nine months of fiscal 2023 was primarily due to several large customer orders. One such order was a $4 million supply agreement with a long-time European customer of precision motion control systems and OEM assemblies. Shipments on these large orders began in the fourth quarter and were shipped during the following 12 to 18 months. This review of our financial highlights and recent developments is concluded, I'll now turn the call over to the operator to begin the question-and-answer session.

We will now begin the question-and-answer session. Our first question is from Brian Kinstlinger with Alliance Global Partners.

Hey, guys, this is Shervin on for Brian. Thanks for taking my questions and congrats on a good quarter.

Thank you.

I have a handful of questions. Starting off with Mantis. When do you expect the valuations to end and lead to production decisions? Do you have any greater visibility or confidence when production will start to ramp?

Yes. To provide an update on the Visimid acquisition, we are seeing an increase in interest from some of their customers regarding Mantis and related activities. We anticipate shipping several hundred units this fiscal year, whether in various forms through Mantis or integrated into other Visimid products. The most promising application we see is in fire or flame detection, a $2 billion market for optical flame detectors, where Mantis can significantly enhance sensitivity and functionality. Our goal is to collaborate with existing flame detector vendors, particularly those with a large installed base that can quickly implement a Mantis-based solution. This year, we expect to deliver a couple of hundred units.

Great. That's awesome to hear. So a similar question, but when it comes to supporting autonomous braking systems, are you working or looking to work directly with Tier 1s or the OEMs? And how long before significant adoption there? I know that the Department of Transportation made that announcement, but are you seeing demand start to move as suppliers get ready?

Yes, that's a great question. At this point, we're not working directly with Tier 1 suppliers. Instead, we're collaborating with integrators who then engage with Tier 1. This is where we prefer to be regarding our exposure and the necessary requirements. As for the rollout, we have mentioned one company that we are already qualified with, and we are currently in negotiations for a supply agreement with them. If everything proceeds as planned, we expect to begin shipments or product sales towards the end of this fiscal year.

Great. Also awesome to hear. Last couple of questions. Like you mentioned, government tends to move pretty slow. I know you mentioned one opportunity already within the DoD, but how do you think about the adoption of BD6 and other materials to replace the dependence on germanium? Are there other opportunities that are higher in the pipeline that are looking to replace germanium with BD6? And I have another follow-up.

Yes. BD6 is already fully qualified and integrated into many systems. The primary focus at this stage is on the new materials because none of these materials can directly replace germanium; multiple types are necessary. Moreover, the new materials provide benefits over germanium, such as smaller systems or improved performance in extreme temperatures, which are among the most significant advantages we have observed. Currently, there are two major systems undergoing redesign, and we expect to receive technical details for one of them in the next couple of months. While the government typically moves slowly, there are instances where they are trying to expedite the process.

Speaking of one-to-one, you mentioned that right now, you guys have the production passage of 10 tons per year of the Black Diamond material versus currently 50 to 150 tons in germanium are consumed per year. Thinking about tons, if you're weighing them both, does 1 ton of BD replace 1 ton of germanium?

You would likely need more Black Diamond to replace germanium because germanium currently has the advantage of being recyclable into new ingots, a technology that does not yet exist for Black Diamond. We are reviewing this project with the Department of Defense for potential funding, as it could significantly reduce the long-term costs of Black Diamond. However, without that technology, an initial greater quantity of Black Diamond would be necessary to produce the same number of lenses as germanium.

That perfectly segues into my next question in terms of the DLA funding to qualify the other BD products. I know government, again, we said, moves slow. How soon are you expecting this first phase of funding? And then once you receive the funding, how long does it take to qualify the other BD products? And are there expanded use cases outside of BD6 with your other BD products?

Yes, the government does move slowly, as mentioned. The DLA project has been in progress for a year. It just so happened that it was signed and completed around the time China announced its germanium plans, but that seems more like coincidence than a sudden rush from the government. We actually began working on that project a few months ago, so we have a head start. By the end of this calendar year, in the next three to four months, we expect to be nearing completion of the first phase of the DLA. Their payments to us will be gradual, so we won’t have to wait until the project's end to receive the funding. We anticipate that by the first quarter of next calendar year, which is our fiscal third quarter, we will begin shipping those materials to customers for integration into their systems. The sense of urgency is clear among many customers, and we are collaborating closely with them to allow them to start redesigning or designing their systems with our materials now, rather than waiting for formal manufacturing readiness. We support this by providing them with data as we measure and produce small quantities of materials. Generally, they can use this information to fine-tune or complete about 80% of their design work so that by the time specs are finalized and everything is complete, they will already be well ahead in their redesign process.

Great, thank you for answering all my questions. Really, really excited to see all these growth drivers kick in.

Same here, absolutely. Good to hear from you. Thank you.

Next question is from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Hey, thank you for the question. Sam, I remember during our last conversation, you mentioned the export controls on germanium that China has implemented and how those haven't fully taken effect yet. You were in a wait-and-see approach regarding potential supply levels for the market. Could you provide us with an update on that? Additionally, I believe you mentioned having some long-term contracts and future contracts for germanium to secure your supply in the medium term. Can you update us on that as well?

Yes, sure. So to put it into perspective, we consume about 1 ton of germanium a year, which we buy from China, used to be some from Russia, from China in the form of what's called a pre-generated blank. So a raw material that is shaped close to the size of a finished lens, and then we process it into a finished lens, coat it, in times assemble it, but it's part of either components or subsystems that we set. So even in our own case, we're not completely switched over to BD6 and everything. There are some cases where germanium is still needed. At this point, we started submitting the different export licenses already in mid-July to our vendors in China for the next shipment of germanium. The end users that they then submitted to the government got kicked back a few times, went back and forth, different changes in that until everyone was clear on what information and format they want. And they currently believe that those shipments, which we started working on in mid-July, will ship out of China in mid-November. However, once they receive their export license, it is an export license for all shipments related to that order. And since we secure our supply of germanium for one year at a time, that means that at least for the next six months, six to eight months, we should be able to get shipments from China under those export licenses, assuming we do receive them by mid-November. I have not yet heard of anyone that has the export license that did not receive or had it denied. But yes, I've also not heard of anyone that actually got approved yet. So to the best of my knowledge, no germanium has shipped out of China, at least in the segments of optics and the people we speak to since that started, and mid-November is probably the earliest it would be.

Okay. And then you have supply up until about that point or beyond that as of what you have?

We actually have enough to keep going beyond that point also.

Right, and can you just give investors kind of a sense of like what the backup plan would be if something like that were to get disrupted?

Yes. To us, this means working more closely with our customers and providing them with an incentive to redesign their systems to utilize BD6. In the long run, such a disruption could be beneficial for us. In the short term, it might result in a revenue impact of a few million dollars over a 12-month period, probably around $4 million to $5 million. However, we are putting in significant effort to prevent that scenario and ensure we have a backup plan involving BD6 or other Black Diamond projects. Additionally, there is a stockpile of germanium at the Defense Logistics Agency's strategic materials that we could access for projects intended for Department of Defense use, allowing us to purchase material from that stockpile if needed.

Thanks for that. If the next round of germanium comes through, it would likely be at a higher price. Is there a possibility to pass along that price increase? Or is that...

No, we secure our pricing for a year, so there won't be any changes. We've noticed some signs of price increases. What concerns us most is that when we request a quotation, its validity period is very short. Previously, you would receive a quotation and have about a month to place an order, but now vendors sometimes offer quotes that are only valid for a week. One vendor even provides a quote that is valid for just three days. This suggests that they are anticipating price volatility and are hesitant to commit to lower prices.

That's helpful information. Al, I'm interested in the gross margin on a sequential basis. I understand that in Q3 there were delays in shipments due to the upgrade of your facilities, which likely contributed to a lower performance. I'm curious about the PMO being relatively flat sequentially. Could you provide some insight into the sequential changes in gross margin, considering that the facilities are now operational? Is there a potential ramp-up period impacting this? Your clarification would be appreciated.

Yes. Most of the challenges we faced were due to the facility being shut down in Q3. We outsourced a significant portion of the infrared coating, which resulted in higher costs and logistics expenses that carried into Q4. We worked hard to catch up in Q4, nearly overcoming the shortfall from Q3, but this came at a financial cost. We also put in extra hours to meet customer orders. While it was somewhat disappointing for us, we anticipated that we would need to invest money to meet delivery dates for our customers.

Okay. And then going forward, you have an expectation on the gross margin side to kind of trend a little better given the move into more specialty products and as those facilities are more mature or whatever? And just what's the thought process for gross margins looking at that?

So margins should continue to tick up at this current Q4 mix. But to be honest, I'd like to see the Q4 mix also become more favorable. So in Q2, I think the mix looks similar. And our Q3, I think we'll get a more favorable mix. So higher expectations for margins in Q3 and Q4. So it's two things, it's the overall improvement and certainly, the Orlando construction now being done-done will improve our results, but it's also a little bit more of a favorable mix in the back half of the year.

Great. And the last one for me. On the China side, do you think that you're at a base level now that that decline is complete? Or are you concerned that there can be more run off there?

I believed we were at a base level a year ago. Yes, every time I think it can't get worse, somehow it does.

Unfortunately…

You'll read the news. I mean there was a Bloomberg article today that just is predicting a complete doom-and-gloom scenario in China. I find it hard to believe that I'm rooting for the Chinese government here.

Okay, great. Alright, well thanks for color, everybody and have a good night.

Thank you, Glenn.

Your next question is from Scott Buck with H.C. Wainwright. Please go ahead.

Hi, everyone. Thank you for your time. I have a question regarding China. What percentage of total revenue does China represent now? Additionally, Sam, how do you see China as a longer-term target market?

Yes. I'll address the second part while we gather details for the first question. Currently, China, even with the customers we still have, is primarily focused on lower-end, commoditized parts, with some telecom involved. It likely doesn't hold significant strategic value for us. At this time, our investments in manufacturing and the facility we have are being utilized as much as possible, but I don't anticipate any major developments from China other than the regular movement of products based on the use of that facility.

Less than 10%, Scott.

Less than 10%, okay. That’s it from me, guys. I appreciate it. Thank you and congrats on the quarter.

Absolutely.

Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Sam Rubin for any closing remarks.

Thank you, everyone, for taking the time today to follow LightPath Technologies. We appreciate the trust placed with us by our stakeholders and look forward to future calls where we further discuss the fruits of our efforts to retool the business and move the company forward. Thank you, and good night.

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