LightPath Q1 2026 Call: Contradictions Emerge on Germanium/BlackDiamond, Missile Program, and Gross Margin Targets

Date of Call: November 11, 2025

Financials Results

• Revenue: $15.1M, up 79% YOY (vs $8.4M a year ago)
• EPS: $0.07 loss per basic and diluted share, compared to $0.04 loss in the prior year quarter
• Gross Margin: 30% of revenue (gross profit $4.5M), compared to 34% (gross profit $2.8M) prior year; gross profit up 58% YOY

Guidance:

• No formal numeric guidance; management is targeting Q2 revenue roughly similar to Q1 and declined to provide firm guidance.
• Expect gross margin expansion, targeting ~35% by fiscal year end.
• Expect adjusted EBITDA to remain positive and will continue to report adjusted EBITDA as a key metric.
• Scaling driven by CapEx (glass furnaces, facility moves); OpEx not expected to materially increase.
• Priorities: convert backlog to revenue, expand germanium-free variants, scale production and hiring.

Business Commentary:

* Revenue and Backlog Growth: - LightPath Technologies reported revenue of $15.1 million for Q1 2026, up 79% year-on-year. - The company's backlog reached approximately $90 million, more than four times the level from just a few short quarters ago. - The growth in revenue and backlog was driven by record orders, customer adoption of systems, and strategic investments from partners like Ondas and Unusual Machines.

• Shift to Systems and Subsystems:
• More than two-thirds of LightPath's backlog is now in systems and subsystems, reflecting a deliberate move up the value chain.
• This shift is expanding margins and deepening customer relationships, as customers rely on LightPath for critical capabilities and supply assurance.

• The strategy is part of a broader transformation aimed at converting differentiation into multiyear contracts with sophisticated defense and industrial customers.

• Germanium-Free Solutions and Market Demand:

• The company is converting its camera and subassembly portfolio to BlackDiamond glass, replacing germanium to improve supply chain resiliency and system performance.
• This transition is driven by strong demand due to supply chain disruptions and geopolitical factors, with customers prioritizing reliable and secure domestic alternatives.

• LightPath has secured significant orders for its germanium-free cameras, including an $18.2 million order for deliveries in 2026 and a follow-on order of $22.1 million for 2027.

  

• Expansion and Capacity Increase:

• LightPath is expanding its production capabilities to meet future demand, including adding capacity for BlackDiamond glass manufacturing and camera integration in Orlando.
• Investments are being made to scale up production, with a focus on the strategic NGSRI program and other missile programs.
• The expansion is intended to support significant production volumes required for the Lockheed NGSRI program and other strategic ventures.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlights 'record orders,' backlog ~ $86–90M (more than 4x prior quarters), revenue +79% YOY to $15.1M, and positive adjusted EBITDA of $0.4M, while announcing strategic investments and capacity expansion to convert backlog into higher-margin systems.

Q&A:

• Question from Richard Shannon (Craig-Hallum): Are you seeing China ease germanium supply and how fast are you converting your cameras/subassemblies to BlackDiamond glass; how quickly will customers transition?
  Response: Customers are avoiding reliance on Chinese germanium and favor BlackDiamond for supply assurance and better performance; conversions are underway but paced by engineering resources and current backlog-delivery priorities.

• Question from Richard Shannon (Craig-Hallum): Where are you having to add capacity (internal or supplier) and on what timeframe will constraints be resolved?
  Response: Adding capacity in Latvia and Orlando and investing in glass furnaces; main external constraint is focal-plane-array vendors; most other elements are vertically integrated and being scaled now.

• Question from Richard Shannon (Craig-Hallum): Any thoughts on sales progression for December quarter and EBITDA follow-through?
  Response: No formal guidance; management is aiming to replicate Q1 sales in Q2 and expects adjusted EBITDA to remain positive.

• Question from Glenn Mattson (Ladenburg Thalmann): Is the NGSRI award timing still expected in late 2025/early 2026 and does the upgraded Texas facility signal high confidence?
  Response: Timeline is uncertain due to the government shutdown and pending flight tests, but the company is making shared early investments with Lockheed to be ready to scale if awarded.

• Question from Glenn Mattson (Ladenburg Thalmann): With systems/subsystems being higher margin, how do you see gross margin directionally medium/long term?
  Response: Management expects margin expansion to about 35% by fiscal year end; Q1 was 30% with mix headwinds from higher IR component sales.

• Question from Glenn Mattson (Ladenburg Thalmann): Will scaling operations materially increase OpEx?
  Response: No major OpEx increase expected; scaling is driven mainly by CapEx (furnaces, equipment) and modest assembly/line investments.

• Question from Jaeson Schmidt (Lake Street Capital Markets): How many $10M-plus annual revenue opportunities do you have in the pipeline?
  Response: Approximately 7–8 potential $10M+ programs are in the pipeline.

• Question from Jaeson Schmidt (Lake Street Capital Markets): Will capacity expansion cause noise in gross margin in the December quarter?
  Response: No — management does not expect margin disruption from the December-quarter capacity additions and anticipates margin improvement.

• Question from Jaeson Schmidt (Lake Street Capital Markets): Is G5 still roughly two-thirds of the backlog?
  Response: Yes — G5-related orders remain roughly two-thirds of the backlog, with some fluctuation.

• Question from Orin Hirschman (AIGH Investment): What is driving the potential sizable awards — are they mostly long-range infrared cameras or other trends?
  Response: The primary driver is BlackDiamond glass enabling better performance and supply-resilient solutions; key opportunities are counter‑UAS and mid/long‑range infrared camera programs.

• Question from Orin Hirschman (AIGH Investment): Is there other technology that can spot drones from similar distances without RF?
  Response: Thermal imaging is uniquely capable for long‑range visual validation; other sensors (radar, acoustic, RF) still require visual confirmation before kinetic actions.

• Question from Orin Hirschman (AIGH Investment): Do you ship systems directly to the military or to integrators who do the defense integration?
  Response: Cameras and systems are sold to integrators and defense primes (not directly to the military) who perform final integration.

• Question from Orin Hirschman (AIGH Investment): Do integrators keep the drone under surveillance and perform calculations to support countermeasures?
  Response: Yes — integrators handle pan‑tilt tracking and analytics (azimuth, range estimates, some atmospheric calculations) to support engagement decisions.

• Question from Orin Hirschman (AIGH Investment): Are there other missile programs using similar technology in discussion?
  Response: Yes — two additional missile programs are integrating the company's technology, though they are earlier stage than NGSRI.

• Question from Orin Hirschman (AIGH Investment): Are those other missile programs likely to proceed to production or further along?
  Response: They are earlier stage but development should be faster now because qualification and harsh‑environment testing are complete; production timelines remain uncertain.

• Question from Orin Hirschman (AIGH Investment): Do you have a non‑GAAP OpEx number excluding acquisition-related charges handy?
  Response: No — management indicated they do not have a non‑GAAP OpEx excluding acquisition charges available.

Contradiction Point 1

Germanium and BlackDiamond Availability and Conversion

It involves the company's strategy and timeline for transitioning from germanium to BlackDiamond glass, which impacts product availability and customer demand.

Has there been any change in non-China germanium sourcing? How fast is the camera portfolio transitioning to BlackDiamond, and what customer adoption rate is expected? - Richard Shannon (Craig-Hallum)

20251112-2026 Q1: The germanium situation is dynamic, with China focusing on non-defense acquisition. Customers are cautious about supply disruptions. BlackDiamond's performance exceeds germanium, but convincing customers to switch is challenging. Conversion of cameras is resource-dependent, prioritizing short-term revenue over redesign. - Sam Rubin(CEO)

What is the status of germanium availability, and how quickly are you converting your camera and subassembly portfolio to BlackDiamond? How quickly do you expect customers to adopt BlackDiamond? - Richard Shannon (Craig-Hallum Capital Group LLC, Research Division)

2026Q1: Germanium is still needed, but customers are cautious about relying on it due to instability. Most customers who switched over will remain with BlackDiamond even if material is available. Conversion of our cameras is a resource-intensive process, and priority is on short-term revenue delivery before conversion. - Sam Rubin (President, CEO & Director)

Contradiction Point 2

Missile Program Progress

It highlights discrepancies in the timeline and progress of a key missile program, which could influence investor expectations and strategic partnerships.

Is the NGSRI award expected in late 2025 or early 2026? What does the Texas facility upgrade signal? - Glenn Mattson (Ladenburg Thalmann)

20251112-2026 Q1: The government shutdown has delayed the NGSRI award. Both Lockheed and Raytheon units are ready for flight tests, but down selection may not occur until late November or December. - Sam Rubin(CEO)

Is the missile program with Lockheed Martin the final decision? - Richard Shannon (Craig-Hallum)

2025Q3: Customer testing of systems is expected this summer or early fall, with a potential decision even earlier if the technology performs as promised. The formal decision is expected by October 2026. - Sam Rubin(President and CEO)

Contradiction Point 3

Gross Margin Target and Expectations

It involves the company's financial projections and strategies, specifically regarding gross margin targets, which are key indicators for investors.

Can you explain the year-over-year gross margin impact and the long-term target? - Glenn Mattson (Ladenburg Thalmann)

20251112-2026 Q1: Gross margin was impacted by sales mix, with more IR components sold. Target is to reach 35% by fiscal year-end. - Albert Miranda(CFO)

How is the shift in sales mix affecting gross margin? - Glenn Mattson (Ladenburg Thalmann & Co. Inc., Research Division)

2026Q1: We aim to increase gross margin to 35% by year-end. The sales mix in Q1 brought down gross margins, but we exceeded revenue targets. We are happy with the sales mix but would like to see a stronger margin. - Albert Miranda (CFO, Secretary & Treasurer)

Contradiction Point 4

Capacity and Production Challenges

It involves the company's ability to meet production demands and capacity requirements, which directly impacts revenue and operational efficiency.

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20251112-2026 Q1: Capacity improvements are needed across the board, especially in glass manufacturing. Current capacity is insufficient and quickly booked. Some vendors face constraints, primarily detector companies relying on germanium. Long-term capacity investments are necessary. - Sam Rubin(CEO)

Does G5 Infrared production face capacity constraints? - Scott Buck (H. C. Wainwright)

2025Q3: Capacity constraints relate mainly to supply of components, which we are addressing. Assembly capacity at G5 is sufficient, and LightPath operations in Latvia can support optics production. Overall, I'm not concerned about capacity. - Sam Rubin(President and CEO)

Contradiction Point 5

Gross Margin Improvement Expectations

It relates to financial projections and operational goals, which are crucial for investors and stakeholders to assess the company's performance and future outlook.

Can you explain the year-over-year impact on gross margin and the long-term target? - Glenn Mattson (Ladenburg Thalmann)

20251112-2026 Q1: Gross margin was impacted by sales mix, with more IR components sold. Target is to reach 35% by fiscal year-end. - Albert Miranda(CFO)

What drives and when can we expect gross margin improvement? - Richard Shannon (Craig-Hallum)

2025Q4: Gross margins are close to 30% now, with a target of 35% within a quarter or two and 40% in the midterm. - Albert Miranda(CFO)