LightPath's Q4 2025 Earnings Call: Contradictions Emerge on Lockheed Decision Timeline, Revenue Guidance, and G5's Financial Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 25, 2025

Financials Results

• Revenue: $12.2M, up 41.4% YOY (vs. $8.6M prior-year quarter)
• EPS: $(0.16) per basic and diluted share, compared to $(0.06) in the prior-year quarter
• Gross Margin: 22%, compared to 29.2% in the prior-year quarter; adjusted for ~$0.5M inventory reserve and other items, ~29.7%

Guidance:

• ~57%–60% of the ~$90M backlog to ship in FY2026; remainder in FY2027 (some into FY2028).
• Expect significant top-line growth to continue.
• Gross margin ~30% adjusted today; targeting ~35% within 1–2 quarters and ~40% midterm as mix shifts to systems.
• Expect adjusted EBITDA to turn positive on higher revenue; margin lift more weighted to 2H FY2026.
• Navy SPEIR moving into LRIP in coming months; first destroyer integration expected by 2027.
• NGSRI decision formally due by next fall, possibly sooner; Texas facility expansion supports production.
• Additional G5 camera redesigns (germanium-free) expected in 2–3 months; customers already placing orders.

Business Commentary:

* Record Backlog and Growth: - LightPath Technologies reported a record backlog of $90 million, which is more than 4x larger than it was previously. - This growth is primarily due to the successful integration of infrared camera systems and the shift in strategy to focus on subsystems and systems enabled by their proprietary technologies.

• Increased Revenue and Order Wins:
• LightPath's revenue for the fourth quarter increased 41.4% to $12.2 million compared to the previous year's quarter.

• The significant revenue increase and backlog growth are attributed to new orders, including a $40 million contract for infrared cameras and the expansion of their border security program.

• Impact of Strategic Acquisitions:

• The acquisition of G5 Infrared contributed $4.2 million to LightPath’s Q4 revenue.

• The integration of G5's capabilities, particularly in long-range infrared cameras, has expanded LightPath's offerings and increased market traction.

• Challenges and Opportunities in Supply Chain:

• LightPath's strategy to utilize proprietary materials like Black Diamond glass, replacing germanium, addresses global supply chain disruptions caused by Chinese export restrictions.
• This strategic shift is attracting interest from defense contractors seeking to eliminate supply chain risks, contributing to new orders and market growth.

Sentiment Analysis:

• Management highlighted a record ~$90M backlog (over 4x in recent months), two large IR camera orders totaling >$40M for 2026–2027, and 41% Q/Q revenue growth. They expect gross margin to step to ~35% within 1–2 quarters and ~40% midterm, with adjusted EBITDA turning positive on higher revenue. Net loss increased due to noncash acquisition-related items, but the team emphasized accelerating demand and supply-chain advantages from Black Diamond glass.

Q&A:

• Question from Jaeson Schmidt (Lake Street Capital Markets): How much did G5 contribute to June-quarter revenue, and how much of the backlog is G5-related?
  Response: G5 contributed $4.2M in Q4 revenue; about two-thirds of the ~$90M backlog is cameras and assemblies (not broken out by G5 vs. legacy).

• Question from Jaeson Schmidt (Lake Street Capital Markets): For the border security program, could you become sole-source?
  Response: They’re in a uniquely strong position and may end up supplying all towers, though the third prime’s plans are unknown.

• Question from Glenn Mattson (Ladenburg Thalmann): What does expanding Visimid capacity signal, and is there work if Lockheed isn’t won?
  Response: Visimid is moving to ~10,000 sq. ft. to support NGSRI and broader uncooled products (OGI, drone cameras, Mantis); not dependent on Lockheed.

• Question from Glenn Mattson (Ladenburg Thalmann): Excluding the $0.5M inventory charge, how did gross margin look?
  Response: Mix was typical; adjusting for the $0.5M and other one-time items, gross margin was ~29.7%.

• Question from Glenn Mattson (Ladenburg Thalmann): Is Q4 OpEx a normal run rate?
  Response: No; OpEx included one-time items (G5 integration, M&A, IT, marketing). G5 adds ~$1M per full quarter to OpEx.

• Question from Richard Shannon (Craig-Hallum): How do you define backlog and over what period will it ship?
  Response: Backlog is firm POs (no forecasts). ~57%–60% ships in FY2026; the rest in FY2027, with a small portion possibly into FY2028.

• Question from Richard Shannon (Craig-Hallum): How does the remaining pipeline look, including impacts from new funding (“Big Beautiful Bill”)?
  Response: Counter-UAS is just starting; the >$40M order was largely incremental to plans, and management expects further growth.

• Question from Richard Shannon (Craig-Hallum): Gross margin trajectory and targets?
  Response: Adjusted margin near 30% now; targeting ~35% within 1–2 quarters and ~40% midterm as mix shifts to higher-value camera systems.

• Question from Richard Shannon (Craig-Hallum): Timing for the Lockheed NGSRI decision?
  Response: Formal decision by next fall; could be sooner (late 2025/early 2026), but they can’t provide further detail.

• Question from Scott Buck (H.C. Wainwright): Timeline and impact of G5 product redesigns to remove germanium?
  Response: Another 1–2 cameras should be redesigned in 2–3 months; larger long-range models take longer; customers are already ordering the new versions.

• Question from Brian Kinstlinger (Alliance Global Partners): With ~60% of backlog shipping in FY2026, will adjusted EBITDA be positive, and when do margins improve?
  Response: Consensus revenue should rise ~10%; they expect positive adjusted EBITDA on that higher revenue, with gross margin improvement more in 2H.

• Question from Brian Kinstlinger (Alliance Global Partners): G5 earn-out targets and likelihood of achieving them?
  Response: Earn-out revenue hurdles are $21M/$23M/$25M/$27M with 20% EBITDA; backlog indicates the first target should be met, contingent on EBITDA delivery.