Q2 2024 LightPath Technologies Inc Earnings Call

Participants

Albert Miranda; Chief Financial Officer; LightPath Technologies Inc

Shmuel Rubin; President & CEO; LightPath Technologies Inc

Jaeson Schmidt; Analyst; Lake Street Capital Markets, LLC

Scott Buck; Analyst; H.C. Wainwright & Co., LLC

Brian Kinstlinger; Analyst; Alliance Global Partners

Glenn Mattson; Analyst; Ladenburg Thalmann

Gene Inger; Analyst; ingerletter.com

Presentation

Operator

Good afternoon, everyone, and welcome to the LightPath Technologies fiscal second quarter 2024 financial results conference call. (Operator Instructions) 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.

Albert Miranda

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 our current expectations, involve various risks and uncertainties, as discussed in its periodic SEC filings. Although the company believes that these 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. We refer to these as non-GAAP financial measures. Please refer to our SEC reports and certain of our press releases, which include reconciliation of non-GAAP financial measures and associated disclaimers.
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. 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.

Shmuel Rubin

Thank you, Al, and good afternoon to everyone, and welcome to LightPath Technologies' fiscal quarter 2024 financial results conference call. Our financial results press release was issued after the market closed today and posted on our corporate website.
First, I’d like to apologize for any coughing or horsey sound. My throat is still recovering from COVID I had recently. Second quarter was underscored by a key first order in our partnership with Lockheed Martin for an imaging engineered solution. The ongoing integration of Visimid acquisition and progress with customers transitioning from the use of germanium to the use of our BlackDiamond material. All these developments continue to highlight our strategic shift from a components manufacturer to a value-added solutions provider.
To recap for our investors, LightPath has been transitioning in the last few years from a pure components manufacturer focused on being the lowest cost provider to 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 growth specifically of our market share in the defense business. All of which are driven by our unique technologies and materials.
All three pillars of growth tie and support our transition from a components manufacturer to a provider of engineered solutions based on our proprietary technologies. This transition began a couple of years ago, starting from customized lens assemblies, which is all what we call LighPath 2.0 through cameras solutions. The first of which was our innovative Mantis broadband infrared camera, which enables both new applications and capabilities for our customers and significant growth in that direction coming from the Visimid acquisition.
Visimid Technologies, a small engineering firm based out of Dallas, Texas, does to the back end of thermal cameras what LightPath has been doing for the front end of those cameras. LightPath has been tailoring and customizing the optics for cameras based on our best optical technologies, and Visimid customizes and tailors the video processing engine and support electronics for the same cameras. Like LightPath's business model for customizing optical assemblies to be used in infrared cameras, Visimid established itself as the go-to for customized for customizing the electronics and software part of uncooled infrared cameras. In fact, we estimate has customized for Lightbox electronics and software of our Mentor schedule together would resubmit. We now extend our offering to customize imaging solutions to include wholly integrated camera modules, increasing the offering to existing customers and providing us a bigger share of those customers spent.
During the second quarter, we continued the integration of visit with a focus on new products in fire, safety and defense. This acquisition, added the capability to produce end-to-end custom imaging cores and a new engineering capabilities that allow us to be involved earlier with our customers' design cycle and increase our likelihood of servicing service designs through manufacturing. We are integrating visited customers in custom imaging cores into new camera products, several of which demonstrated at the recent SHOT Show in Las Vegas and some we're working to customers with customers to develop customized solutions. All these products are utilizing spins amid unique video engine in conjunction with our optics to develop low weight, high efficiency solutions for drones, UAVs as well as industrial applications such as gas leak sensing, process control and early fire detection. Shortly after the acquisition of estimated Lockheed Martin awarded with Summit and Lightpath a major project for the design development and later on the manufacturing of a complete imaging system for a new project in the midfield division, which the award came, what will be up to $7.5 million for the development money, 4.7 million of that was already in a formal purchase order and is now part of our backlog.
Okay.
Interest project, Lockheed Martin is competing against another prime defense contractor to develop a new missile system at first, the development portion of this project was expected to last until 2028, at which point the end customer would decide if the production is awarded to Lockheed Martin or its competitor. However, there is significant pressure now to shorten this time line as much as possible. And as such, the decision point has recently been pulled in, and we now expect that the decision regarding the production award will be as early as 2026 to 2 years ahead of the schedule we shared during the announcement of our initial award. If Lockheed Martin is selected for the production, we expect an initial production order for around 10,000 units. Our ASP per unit is between 5,000 to $10,000. That will put the initial expected production would have been north of 50 million. That is a production order to LightPath. Additionally, the volumes for follow up production have also increased with the potential now for tens of thousands of units of units. The demand and shorten timelines for the project are being impacted by recent geopolitical escalation results so far are very positive and our customers, in fact, very confident. And so confident about the solution that they're looking to begin investing in production of the units even before an official decision is made. As such, we expect that Lightpath might start building up the production line this year already the basic infrastructure from this production line has already been prepared and paid for as part of our recent expansion of our Orlando facility and the specific equipment that will be needed is expected to be paid for by Department of Defense. Once in production, we will be delivering this assembly in volume, estimated tens of thousands of assemblies over the program lifetime. And again, with ASPs for LightPath between 5,000 to $10,000 per system with thousands of dollars per unit and tens of thousands of units expected in that program. The ultimate selection of light of Lockheed Martin Bison military would likely result in a substantial revenue opportunity for us. This is exactly the direction we've been looking to transform the Company to which the new strategy and it is now happening, look, its decision to outsource the development of such an important part of this system is due to what's due to its technical capabilities yet the decision to then further engage with us at the scales are now engaging. And the potential manufacturing of this is due to the combination of LightPath and visit with our manufacturing capabilities, capacities and most important, the ability to integrate the entire system. And while our strategy for having three pillars of growth are designed, such that we don't put all our eggs in one basket or one product for that matter. This award by a major prime with the massive potential for revenue on the manufacturing side is seen by us as a big wind tower strategy and the execution of that Foods acquisition of bismuth and our own investment in expansion in the U.S. and development of camera technologies, I could probably spend this entire call only on the specific project and activity, given that we expected to lead to tens of millions of dollars in annual revenue. But this is only one of multiple projects and multiple opportunities we have going up, all of which are in similar scales. I will talk briefly about some of the rest of it.
Turning to the automotive market, as previously mentioned, our lens assembly system has already been qualified by one of the largest car companies. Since then, we have shipped samples through qualification by another large Tier one and begins a qualification process that is expected to take a few months. Last call, we shared that the first company was reevaluating their time line in light of recent changes to the EV market. While our technology is not specific to EV. We found that most of our automotive Tier one customers were looking to roll out this technology in ENZREV.s and that was their main focus at the time with dynamics of the market now changing, we expect that some of our Tier one customers will begin rolling out this technology in more traditional vehicles. We are also seeing signs from the market that automotive companies are waiting for further development in the Department of Transportation's announcement from May on every intention of mandating emergency braking system and mandating improvement on that for that technology and nighttime operation. We don't expect any major developments in the very short term, but we're still confident that this technology is going to be implemented in the automotive space and that we are one of the leaders in this technology and use case. Therefore, we will still see we will still see this as something that would lead to the same volumes we spoke about before, which are over 1 million assemblies a year for each one of the car companies with ASPs up to $50 per vehicle for LightPath.
Last thing I will update on inferred materials and replacing germanium. To recap. Litepoint has developed over the years and mainly over the last two years some exclusive unique materials that can be used instead of germanium in infrared imaging systems. China announced on July fourth, export restrictions on germanium and with China being the largest exporter of this material. This has become a big deal since then. And even prior to that, actually, we've been working diligently to come with customers to have the systems redesigned use our materials instead of germanium, we even took some steps a few months ago of proactively canceling some customer orders for germanium optics to free up our capacity for making optics from these new materials. So this has paid off well with customers now fully engaged in the process and focused on redesign of their systems testing of prototypes and starting to order systems with new optics to specific examples I'd like to share. One includes our largest customer, which makes imaging devices for supporting this customer began by evaluating the use of our material in only one of their products and has recently let us know that they would like to now work with us on all their product.
Another customer who is in the defense business has announced in the recent SHOT Show a new gun sight product that is using only our Black Diamond glass unit with NoJo medium and say I've even gone as far as seeing publicly for that going forward, all new products are going to be designed only with Black Diamond materials, a major win for our directions. All of this, all of these have so far been using mainly our existing BD6 materials. In December, we finally took delivery of a piece of equipment called the refrac diameter and measurement system for optical glass. This will now enable us to speed up the manufacturing readiness of some of the new materials we license from anywhere. We expect the first material BD&L fall to be formally released later this month. Bd&l four is an example of a materials that not only replaces germanium. It actually offers advantages versus germanium by having a negative thermal optic coefficient. That is the change of the optical index as a function of temperature BD&L for enables optical designers to design optical systems that are optically and passively compensated for changes in temperature. This is a big deal for airborne systems. For example, where today changes in ambient temperature at different altitudes require refocusing the cameras to compensate for this BD&L four is expected to become an important material for thermal cameras. In drones and other airborne systems variants, a large range of temperature.
To conclude our shift in strategic directions beginning to show the results we were looking for both in winning some major programs and in revenue growth in that area. At the same time, our three separate areas of growth solutions, defense and automotive continue to generate multiple independent opportunities that many of them have a potential for tens of billions of dollars of new revenue tail opportunity, resulting in a healthy pipeline of large scale opportunities that any of them alone can be transformative to our business.
Last, I would like to welcome Kim Carter, who joined our Board of Directors last week as an independent director replacing Leesburg. So it had retired after 25 years with the Company, I would like to thank Mr. Lee Berkeley's, diligent work over the years, and welcome Mr. Peter Kim was formerly the Chief Technology Officer from the U.S. space. Force and has retired as a two star general. Having a person as Mr. on our Board of Directors is important as we continue to move forward with our focus on becoming a systems company with a strong focus on defense. And as always, I would like to focus our importance to thank our employees and stakeholders who have continued to work diligently through the various transitions and hurdles we have endured. We see a bright future and a growing company because of their dedication, patience and hard work. Now I will return the call to our CFO, Al Miranda, to review second quarter financial results. Al?

Albert Miranda

Thank you, Sam. You can rest your voice for a little bit.

Shmuel Rubin

Thank you.

Albert Miranda

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 will be included in the 10 Q for the period. I encourage everyone to visit our website at lightpath.com. To access these documents and to see some of our new products. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist assist investors in analyzing the Company.
On a consolidated basis, revenue for the fiscal second quarter were $7.3 million compared to $8.5 million in the year ago period. Sales of infrared components were $3.6 million or 49% of the Company's consolidated revenue in the fiscal second quarter. Revenue from visible components was $2.7 million or 37% of revenue. Revenue from assemblies and solutions were $1 million or 13% of total Company revenue. Revenue from engineering services was 0.1 million or 1% of total Company revenue. Infrared components sales increased approximately 283,000 or 9%, primarily due to an increase in shipments against an annual contract for an international military program. This contract was also renewed during the first quarter of fiscal 2024 for a higher dollar value than in the previous year. Visible component sales decreased approximately $1.2 million or 31%. All this is primarily due to the ongoing trend in China excuse me, in the telecom industry in general this quarter, we also experienced declines in Europe due to recessionary conditions, particularly in Germany and in the U.S. due to the timing of Defense contract deliveries. Assembly Solutions revenue decreased approximately 241,000 or 20%, and that's primarily due to timing of shipments against a multi-year contract with a defense customer that was partially offset by the addition of VisaNet revenue.
Gross margin in the second quarter of fiscal 2024 was approximately $2.2 million, a decrease of 1.1 million or 33% as compared to the same quarter of the prior fiscal year. Total cost of sales was approximately $5.1 million for the second quarter of fiscal 2024 compared to approximately $5.2 million for the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 30% for the second quarter of fiscal 2024 compared to 38% for the same quarter of the prior fiscal year. And the decrease in gross margin as a percentage of revenue is due to the decrease in visible component sales, which typically have higher margins than our IR components product group, which comprised a greater portion of our sales for the second quarter of fiscal 2024.
Selling general administrative costs were approximately $2.9 million for the second quarter of fiscal 2024, a decrease of approximately $172,000 or 6% as compared to approximately $3 million for the same quarter the prior fiscal year. The decrease in SG&A costs was primarily due to a decrease in stock-based compensation, partially offset by an increase in wage.
The net loss for the second quarter of fiscal 2024 was approximately 1.7 million or $0.05 basic and diluted loss per share compared to 0.7 million or $0.09 basic and diluted loss per share for the same quarter of the prior fiscal year. The increase in net loss of approximately $1 million for the second quarter of fiscal 2024 as compared to the same quarter of the prior fiscal year was primarily due to the decrease in revenue and gross margin, partially offset by other income of approximately 190,000 from our Chinese subsidiary for the return of funds previously misappropriated by our former Chinese management team as a result of the ongoing legal proceedings. This is the last bit of activity that we expect to have related. So that situation, our EBITDA for the quarter ended December 31st, 2023 was a loss of approximately 454,000 compared to an income of 207,000 for the same quarter of the prior fiscal year. The decrease in EBITDA in the second quarter of fiscal 2024 was primarily due to lower sales and gross margin, again, partially offset by the mentioned Chinese since October.
Turning to the results for the first half of fiscal 2024, revenue was $15.4 million, only a 3% decrease from $15.8 million in the same period of the prior fiscal year. Sales of infrared components were $7.4 million or 48% of the Company's consolidated revenue for the first half of fiscal 2024, revenue from visible components was 5.4 million or 35% of consolidated revenue. Revenue from assemblies and solutions were $2.2 million or 15% of the total company revenue and revenue from engineering services was $0.4 million or 2% of total Company revenue in the first half of the fiscal year, infrared components sales increased almost 1 million or 14%, primarily due to increase in shipments against an annual contract for international military programs. Visible component revenue decreased approximately 1.8 million or 25%. Again, this is primarily due to the ongoing trend in China and the telecom industry in general. However, we also experienced declines in Europe due to recessionary conditions and in the U.S. due to timing of Defense contract shipments. Assembly Solutions revenue increased approximately 150,000 or 7%, primarily due to the addition of Visy made revenue, which was partially offset by a decrease in shipments against the multiyear contract that I mentioned regarding the quarter.
If I take a step back and look at Red revenue. Our visible components are declining. However, in the first half, revenue increased in infrared components, assemblies and solutions and engineering services, which aligns well with our strategic plans. As of December 31st, 2023, we had working capital of approximately $9.1 million and total cash, cash equivalents and restricted cash of approximately 5.9 million, of which greater than 25% of our cash and cash equivalents was held by our foreign subsidiaries. Cash provided by operations was approximately 851,000 for the first half of fiscal 2024 compared to cash used in operations of approximately 751,000 for the same period of the prior fiscal year. Cash provided by operations for the first half of fiscal 2024 was largely driven by a decrease in accounts receivable as sales were higher in the fourth quarter of fiscal 2023 than in each of the first two quarters of fiscal 2024. Cash used in operations in the first half of fiscal 2023 reflected a decrease in accounts payable and accrued liabilities during that period, resulting from the payment of certain expenses related to previously disclosed events that occurred at our Chinese subsidiaries. Capital expenditures were approximately 1.5 million for the first half of fiscal 2024 compared to approximately 412,000 in the same period of the prior fiscal year. The spending in the first half of fiscal 2024 is largely driven by the Orlando facility expansion in excuse me, where we constructed additional tenant improvements in our Orlando facility, subject to our continuing lease of which the landlord agreed to provide $2.4 million in tenant improvement allowances. The balance of the tenant improvement cost is estimated to be $3.7 million during the first half of fiscal 2024. We expended 994,000 towards this project with the remaining estimated 380,000 expected to be expended during the second half of fiscal 2024, pending the final construction invoices, we also expended approximately 722,000 net of cash acquired to acquire VISaer made during the first half of fiscal 2024. Our total backlog at December 31st, 2023, was approximately $21.2 million, a decrease of 28% as compared to $29.4 million as of December 31st, 2022 compared to the end of fiscal 2023. Our total backlog decreased by 2% during the first half of fiscal 2024. The decrease in backlog during the first half of fiscal 2024 is primarily due to shipments of several annual and multi-year contract renewals, which orders were added to the backlog in prior periods. In the second quarter of previous years, we have typically received a contract renewal from our largest cloud customer for infrared products made of germanium. However, as previously discussed, we have decided to reduce the amount of optics we produce from germanium, both to reduce real, do reduce our risk of supply chain disruption and more importantly, to work with customers to convert their systems to use the optics made of our own Black Diamond materials. As such, in the second quarter of fiscal 2024, we did not book our typical annual renewal order for germanium optics for this customer and said, we continue to work with this customer as well as other customers converter systems to use Black Diamond optics.
With this review of our financial highlights and recent developments concluded, I'll now turn the call over to the operator to begin the question-and-answer session.

Question and Answer Session

Operator

(Operator Instructions) Jaeson Schmidt, Lake Street.

Jaeson Schmidt

Yes, thanks for taking my questions. I just wanted to start with the Lockheed program. You mentioned unit production units might begin even before the decision date. Just curious if this is something you're hearing from the customer or is this industry chatter?

Shmuel Rubin

I guess, a combination of both both, but as you know, but directly from the customer, this is the customer is actually extremely confident in this solution and the superiority of this solution and they want us to start setting up some production lines of physical production line in Orlando, where we're going to do production in the very near future to start gearing up to this expectation is that once the decision is made, the Army will want units as soon as possible and they're willing to make some bets in that direction.

Jaeson Schmidt

Yes, Chad, no, that's certainly good to hear. And that leads me to my next question. And I know it's going to be dependent on the program, but at a high level, how should we think about your total revenue capacity now with the expansion completed in Orlando?

Albert Miranda

Yes, exactly. As you said that the very dependent on the program, if we were to continue with the current business mix, meaning not a lot of cameras in the and mainly growth coming from infrared assemblies, then revenue capacity in Orlando before altogether would probably go to could go to as much as EUR50 million, I think or even though even below the current expansion, I think we should do 60 to 70 million.
Okay.
But very, very dependent on where that comes from if it's individual components, but probably less the more complicated things, the less space per dollar of revenues that they take and the more we would grow the assembly of the Lockheed, for example, or any of the cameras actually doesn't require an enormous amount of space. A lot of it is very automated calibration systems and assembly processes. And so we can probably serve this entire Lockheed program from the clean room, extra clean room space.

Shmuel Rubin

We built in Orlando and still have room to expand in other programs as well in the multi-mission, Josh, that's really helpful.

Jaeson Schmidt

And then just the last one from me and I'll jump back into queue. I know China is becoming less of a focus for you guys but just curious if you think that business has bottomed yet.

Albert Miranda

Yes, I definitely think it has bottomed. I mean, in reality, you know, at least if you talk about China or Asia. Most of our revenue in what we call the China operation actually comes out of out of China and from Thailand from Vietnam customers that we call, we bundle it in the China part, but it's not really in China. Our revenue in China is very low, and we're not counting on that part really recovering if you would to anything near what it was I mean, just to recap the China operation, we're delivering about 12 million of revenue in 2020, and it is down to EUR3 million. And so all that EUR9 billion of revenues that vanished in China was really made up for in the US and Europe and which is why you have the growth in US and Europe or it's very strong even if the consolidated numbers structures.

Jaeson Schmidt

Okay.
Understood.
Okay.
Thanks a lot, guys.

Shmuel Rubin

Thanks.

Operator

Scott Buck, H.C. Wainwright.

Scott Buck

Hi, good afternoon, guys. Thanks for taking my questions for Dan. You mentioned in the release the I know on the call here the acceleration of reduction for the Lockheed project. I'm curious whether the geopolitical environment is causing you to see kind of similar uptick in demand or acceleration of interest in other parts of the business.

Shmuel Rubin

But yes, definitely, I mean, we've heard some uptake and in some areas of the business, for example, customers amidst well that builds some of the home and the systems for Vision Systems for the Israeli military and so on had had a big push on the orders to rebuild some systems that were destroyed the on October seventh from during the war. And of course, Ukraine continues indirectly to drive some demand for some of the optics, and that's just beginning to grow. I think the US is only now really starting to replenish. Some of the inventory is depleted some unfortunately, we don't make ammunition directly, which is from what I understand, one of the things that is the most shortage, but definitely the optics and the cameras that go on some of these the drones and loitering munition of growing demand and pipeline.

Scott Buck

And a follow-up to an earlier question is it sounds like you guys have the capacity to be able to handle, not just the Lucky project, but also perhaps one of these other potential deals you're working on as well, right?

Albert Miranda

Yes, absolutely. I think when it comes to those kind of projects that all tens of millions of dollars in potential revenue. We probably with the capacity we have worldwide and balancing things worldwide can probably handle two, maybe even three of some great.

Scott Buck

And then last one for me. I'm curious, how are you thinking about the unrestricted cash balance here and how that it bridges you to 2026 and beyond when maybe some of these larger deals kick in, we also ventured into this quarter?

Albert Miranda

Yes.
Great. Great question. So baked into this quarter, we actually were or this first half of the year, we were operating cash flow positive and we'll continue to be operating cash flow positive. Cash has gone down in the first half. That's largely because of the Orlando facility. We're still still paying invoices still receiving and paying invoices there and the investment of another coating machine that we made in Riga. But the big chunks of that CapEx spend for this fiscal year's over. So in the second half of the fiscal year, we're just going to dribble out on the normal actually below average CapEx. So from a cash flow perspective, I feel pretty confident that we'll be.
Okay.

Scott Buck

I mean that's it for me, guys. Thanks a lot.

Shmuel Rubin

Thank you, Scott.

Operator

Brian Kinstlinger, Alliance Global.

Brian Kinstlinger

Hi there.
This is Trevor on for Brian. And my first question pertains to your backlog. Last, you mentioned that despite the lost revenue from annuals through your germanium contracts, that you're working on transitioning this IMiD to drive some meaningful backlog starting in 2Q. Did that happen this quarter? And if so, is there a sizable portion of the backlog that's attributable to some of that you quantified?

Albert Miranda

Yes, definitely the Lockheed Martin, 4.7 million portion in the backlog and that entered during Q2 is purely visit as well as a few other smaller projects. But but right now, I'd say around 5 million of the backlog probably is felt because of it.

Brian Kinstlinger

Okay.
Thank you. And then secondly, with the Lockheed partnership, just wanted to clarify, is Lightpath competing with anyone for the component that you're creating for Lockheed?
Or is it guaranteed that if Lockheed selected that Lightpath will be in every delivered missile the latter, we will be the sole source and Lockheed part, and it's a very big deal.

Albert Miranda

That's why Lockheed actually was extremely supportive of our acquisition of estimate from their point of view, it's a significant bet that they made in that direction. And at the time they decided, oh, we're going to decide on it with them. It was a standalone nine people company. And so the acquisition of the visit by LightPath actually played a major role in this, and I sort of gave peace of mind to Lockheed in it, but we are definitely on the only one developing that part for Lucky.

Brian Kinstlinger

Great.
That's great to hear.
Last question.
While I appreciate the strong demand from the defense industry, although we know it's like, you know, lumpy and can be unpredictable. Your products and Mantas specifically has really strong commercial applications like the flame detection recycling centers that you've mentioned in the past couple of quarters. So how do you go about building a healthy portion of a backlog that is more predictable? Like are you doing anything there like looking to hire more personnel, increased marketing spend, et cetera, just trying to get an idea.
Thanks.

Albert Miranda

No, that's a great question. And really a lot of our focus now is around sales and soon will be on the marketing of those products. So far, if you look at myself as CEO, I tend to move around the business and focus my time on where it's needed. And right now, absolutely my time is focused on the sales of these new cameras, new product, and we're building up more in the sales team with tooling up to align ourselves to that.

Shmuel Rubin

And we're working very hard to lock in some strategic partnerships in some of those areas.

Albert Miranda

Again, we can't do everything. It's we're just we're not going to build a sales team now that will go off the 500 different camera companies company customers for cameras, and so strategic relationship and alliances with key players in some of those areas of firefighting of process control of drones, and they're going to be key for fast scaling up.
And then in relation to the backlog and the fire detection for which we already have a running business for those cameras. They're not going to give us annual orders and they give us a forecast and we work off of that. So we'll never see that in the backlog.

Brian Kinstlinger

All right. Great.
Makes sense. Thanks, guys.
Thanks.

Operator

Glenn Mattson, Ladenburg.

Glenn Mattson

Hi.
Thanks for taking the question. So it was about seven months ago that China made the announcement of the export ban for medium. So at the time, I thank you for standing by mentioned a timeframe of like how long it takes to your customers to design and get your alternatives through the kind of nine to 12 month timeframe. And so I guess I'm curious about how that's going and if there should be some expectation of of that to start to kick in kind of in the second calendar half of this year. And and that may also relate to the one customer didn't renew yet on the backlog side just to use them, as example, but just across the customers that in general, can you give us a sense of how that process has gone up so that that's a great question.

Albert Miranda

And frankly, it's going really well. I mentioned a couple of customers, an example. One of them is that largest customer for the sporting part, you know, typically our annual orders from that customer have been between 46 million as much as 6.5 million, I think, on one year and we haven't renewed that. Our expectation now is really four the entire product line of that customer to possibly convert to using Black Diamond materials. What we're seeing is that things have gone gotten even worse with germanium At first, I think many customers were still accessing germanium through inventories to Romania maybe was making its way out of China in different ways and different creative ways that play. But that is decreasing significantly. And as of now from what we know China has given zero export licenses to any germanium is at its final destination in the U.S. And so they're very very specific in sort of what they're going after there. And so we have two large customers for handheld devices, gun sights, binoculars and so on. They probably have around $10 million of potential revenue between the two of them, both of them. We're working very hard to convert over the next week. I think we're actually shipping some more samples to do to them. One of them already converted one product, I would say, which I mentioned it during the short term, they announced the new product and they also made it very clear at the SHOT Show to ourselves and anyone else that was asking that all new products are being designed only with Black Diamond now.
So I think we're doing we're doing very well, I wish it could be faster than the time it takes.
But the but unfortunately, doing some of those also require some of the capacity and capabilities that is used for day-to-day production and we can't disrupt it too much.
So it's a balance we play.
But I think I'm sorry, Glenn, it took some Chinese made the announcement in July, and I would say, and Sam, you can disagree, but it took until maybe November and December for the customers to start feeling.

Glenn Mattson

Yes, absolutely.

Albert Miranda

Of that announcement and start to scramble looking for a solution. And our conversations with those customers didn't give them confidence that they were going to continue to get dramatic, right? So when it was clear that we weren't going to solve weren't going to be able to solve their germanium problem that prompted them to take action.

Shmuel Rubin

But it took, I would say, a good six months before they realize that was real Yes, which is why our largest customer first wanted just one product we designed.
But as we were working on that, they started realizing how difficult the situation is and immediately switched over to saying let's redefine everything.
Right, right.

Glenn Mattson

Okay, great. That's very helpful on the backdrop and I don't know if you'd be pursuing morale, but could you give us a sense of as you look at your back half of your fiscal year, you know, you mentioned in the prepared remarks the view about European recessionary conditions and things like that. Can you just give us a sense of how you feel about and, you know, all the factors coming together with that potential of this or if there's any potential further disruption from the lack of supply or the supply drying up on the germanium side or and then maybe the new designs back in India or maybe there's some revenue coming through on the manpower side of things like that. Can you just give us a general sense of how you're feeling about the revenue top line and in 2H versus 1H?
Yes.

Albert Miranda

So it's interesting that the situation, the softening in Europe is really more around the visible optics where there's a lot more competition globally and a lot of price pressure. But our production capacity and all that kind of good stuff. And those products tend to have industrial applications that sort of deliver next where, as you know, deliver more to consumer oriented products. And that's where we're seeing the softening the infrared side because the infrared components, even without the major the major contracts on the infrared side, we're still seeing growth in Europe and in the U.S. and demand in Europe, Europe and the U.S. for infrared components and the assemblies and solution type start of the business. But where we're seeing the sort of the the economics impact is on the visible component side. And again, they tend to lead towards a more direct path to a consumer product. So that's what we're seeing in Europe. And I don't I don't have a crystal ball and I don't say the recession word, if you Google, a Europeans are like we were a year ago, nobody wants to see the recession word, but there are economies or contracts.

Glenn Mattson

Right, right. That's helpful. So then when you factor that in plus all the other moving parts and when you think about the top line outlook, can you give us any DARRELL sense of directionally how you feel about the second half versus first half? And that's it for me.

Albert Miranda

So my gut tells me that this this past Q2 was the softest quarter, we're going to experience. So in Q3, we should see a little bit of an uptick in Q4 and a little bit of an uptick. Again, it's the visible components that sort of what we worry about and you kind of nailed it with that, but they're in decline regardless. So it's just happening a bit faster than we would have predicted six months or a year ago.

Glenn Mattson

Okay, great.

Operator

(Operator Instructions) Gene Inger, ingerletter.com.
Mr. Inger, you're line is open? You had it muted on your end.

Gene Inger

Yeah, you hear me now.

Operator

Yes, we do. Thank you.

Gene Inger

I apologize. I muted that has occurred. And as Sam, I hope you're feeling better high now as well.
And my first question, I'd like to start with something you haven't touched on, which is the annual meeting and the paperwork that was pending due to that problems from the previous management before you guys began an enormous task of turning around this small company. And I'm wondering if you can tell us if all of that is not of concern to shareholders.

Albert Miranda

Yes, absolutely. Thanks. I appreciate it. Definitely could have touched on that. I'm very, very glad to see that it's all completely resolved now. And to recap, it was pointed out by some external group that there were some problems in the registration of the company that went back all the way to 1995 when the 71 split of reverse split was done and was done incorrectly or so. And so we had to postpone the annual shareholder meeting to it filed with the Delaware Court of Chancery Court for a collection of the registration since we couldn't go back and locate all shareholders from 1995 to have them rebuild that. And all of that is behind us last week the day before the Annual Shareholder Meeting, the court ruled on that of fixed leverage inflation and well done. We're in very good standing now. And I think I can say that at this point, every single issue that we have found in the last three years since been fixed, just very briefly, let me ask you a couple of more questions.

Gene Inger

One, Scott Harris, Chairman of the Board, and I appreciate the new Board members by the way, the former major general as well as a business manager, I believe, brought over from Luminor. A are you bringing in more people intentionally from Luminor? And B, is there a any linkage between Lightpath and the private company that Scott is the CEO of called inflection book. And I mentioned that because the Pentagon is in the process of jump-starting at several key application. I wondered if some of that includes quantum computing photonics? And I wonder if this is or can involve Lightpath in the future.

Albert Miranda

Yes. Well, first of all, we're not the poaching specifically on luminal and and I don't think with targeting specifically, it doesn't happen to be that the luminal has recruited some great people over the years and there are some opportunities that have come up in which we recruited people that were in the past and moving out even the near past of the long-term past has some great people joined us from their end.
Secondly, as it comes to Scott, the new venture, which is extremely interesting about did encourage everyone to take a look at that inflection and like many things that is extremely heavy on photonics and Quantum, all things, Quantum, Quantum sensors, quantum computing, Quantum communication. They are all very photonics oriented and driven. We have a very strong person species in free space, optical communication, primarily in space. And that ties very much directly into science at Quantum communication and also indirectly into some of the quantum of work that is being worked on by many companies in friction being one of them. And we'll always be very happy to see optics find finding more uses and more places to be. I get an extreme Joy out of even the simplest thing we're seeing is that the quantum engine might be replacing something as simple as the radio receivers.

Gene Inger

And it's mind-blowing to see optics play a role in something like radio communications and any of it relate as well to enemy submarines and to detection systems because I know you're doing spacecraft went down communication, you haven't really touched on that with anymore specificity. Can you can you elaborate?

Albert Miranda

Yes, we have actually a couple of cameras systems that are one of them we're going to have any day now. I think a version of Mantas that we're going to release that are of extreme interest for this for threat detection and counter-UAS detection, Texor detection of cruise missiles as they come in and other things all of those. We have two cameras systems, two separate camera systems that we're working with customers on that show very, very promising results in that directly.

Gene Inger

Do these relate to the U.S. Navy licenses, we haven't heard much more about.

Albert Miranda

Yes, the U.S. leaving license enables a lot of that. And as I mentioned, we expect within the next two to three weeks to release the first material formally from the from the Navy license BD&L for. But in reality, the Mantas came about it has already been using those materials for over a year now we simply are now formally announcing yet the material made available to us.

Gene Inger

I think you have mentioned one that your 100 Mantos cameras likely produced or sold this year, does this year mean fiscal year or are you talking about this calendar year and this fiscal year?

Shmuel Rubin

Pretty much on track for that?

Albert Miranda

I think.

Gene Inger

Okay. Now I would like to ask you was just an overview. The military has been stunned by the Gaza war and by Ukraine because they see the swarming of drones and how that offsets not only jet fighter aircraft and maybe you're working on the F-35, maybe not of the improvements, but also there you don't want to fire a million dollar missile intercept, the $5,000 cheap drones that we've learned in the Red Sea. So I wonder whether Lightpath benefits or suffers from the prospect of fewer costly missile systems and that would intercept or work that Tom and I hope to have that in the future.

Albert Miranda

Yes. Yes. Well, once we are done with the development of the Lockheed missile and hopefully one Smith for such as awarded to Lockheed my my personal wishes and see if I have a mid-cycle and everything, they see a development or even a butterfly. And but realistically, I think what we're seeing is a very strong drive towards integrating more and more passive detection capabilities such as infrared cameras for detecting some of those drones today, you simply cannot use a radar for detecting the drones coming in for something the Ukraine has taught us and have learned. Unfortunately, it's very hard to wait as well doesn't suffer that because of fighting an adversary such as the Teva organization and not a state, but in Ukraine, Russia wall, for example, in what is called in and near of adversarial and adversaries that has capabilities close to yours. You suddenly realize you cannot use a radar to detecting drones because the moment you turn it on and mid-funnel is locked onto the V12 and we'll help you within minutes seconds and sort of the use of cameras is very important to have our camera that I mentioned for detecting threats from a distance one version of Mantas and one version of the different camera of extreme importance because they can do that in $10,000 as opposed to a CAD50,000 cameras that is often used today. So I think we have something very unique there that that will pay off really well.

Gene Inger

Sam, now that Thank you. I feel better, and I appreciate the aspirational goals that you have outlined in the presentations as well lately. And I know it takes time and I know how hard it is. So good luck, and we'll keep watching it.

Shmuel Rubin

Thank you, Jake, and thank you very well.

Operator

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

Shmuel Rubin

Thank you. I appreciate everyone's joining the call and the patience that our shareholders show that we are not only turning around the Company but also plotting the new direction.
And now finally delivering on it big time, the Lockheed Martin, the automotive, the cameras each one of those are tens of millions of dollars in annual revenue that will be coming down the road, very big deal. The company is going to look completely different a few years from now, and I'm excited to continue along this path.
Thank you, everyone.

Operator

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