Laser Photonics Corp

NASDAQ:LASE

Q3-2024 Earnings Call

[Operator]

Greetings, and welcome to the Laser Photonics Third Quarter 2024 Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel with Hayden Investor Relations. Please go ahead.

[Brian Siegel]

Thank you, operator. With me today are Wayne Tupuola, Laser Photonics' CEO; and Carlos Sardinas, the company's VP of Finance. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause the actual results to differ materially from those that the company anticipates.

These risks and uncertainties include, but are not limited to, the specific risks and uncertainties discussed in the reports the company periodically files with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that is made or may make or to update the factors that may cause actual results to differ materially from those they forecast. I will now turn the call over to Wayne, Laser Photonics' Chief Executive Officer.

[Wayne Tupuola, executive]

Good morning, everyone, and thank you for joining us today to review Laser Photonics third quarter results. Before I get into the third quarter, I'm excited to share details about our recent acquisition of Control Micro System, CMS, which was finalized shortly after the close of the quarter. We used a portion of the $3 million in funds we raised in August to make this acquisition, which represents a transformative opportunity for LPC by expanding our footprint into the healthcare and pharmaceutical industries, particularly in controlled release drug delivery and counterproofing pills, while also providing incremental synergies in industry markets.

CMS specializes in custom precision laser systems. Their key products for life sciences are laser drilling systems that create microscopic apertures and tablets for controlled release drug delivery and systems that mark pills to prevent counterfeiting. They also make customs laser solutions for industrial and other markets, which we believe present some interesting opportunities that were previously not exploited.

These capabilities align well with LPC's vision of innovating solutions that impact critical industries. The pharmaceutical market, especially in the drug delivery technologies is expected to grow at nearly 11% annually through 2030. This acquisition diversifies LPC into a high-growth recession-resistant sector, giving us a buffer against economic cyclicality and providing stability to our CleanTech revenue stream as we work to expand penetration rates for this technology.

CMS already serves several of the world's largest pharmaceutical companies providing a platform for us to deepen relationships with major industry players and expand our client base in the sector. Due to underinvestment from its previous order, we believe CMS products were not fully monetized in both the pharma and custom laser side.

With LPC's robust sales and marketing infrastructure, we see significant potential to unlock value. CMS also brings over $2 million in unbilled contracted revenue, which we can convert to immediate cash flow this and next quarter. Additionally, we retained most of the CMS engineering and support staff adding their expertise to our existing teams. Our immediate focus will be on integrating the CMS team and products into the LPC's operations while driving forward with our ongoing initiatives.

We remain committed to innovating in our core industrial laser markets, particularly in surface treatment, anti-drone systems and expanding our reach globally. In summary, the CMS acquisition aligns with LPC's growth strategy, diversifying our portfolio and setting the foundation for scalability and sustained revenue growth in new verticals.

Now I'll review our results. This quarter, we navigated a challenging period with a decrease in sales and increased costs driven by our strategic investments and expanding human resource sales and administrative functions. These decisions, while impacting our short-term performance are integral to supporting our future growth and setting the stage for long-term success.

Laser Photonics Corp is steadfast in its mission to establish itself as a leader in laser technology solutions for industrial applications, even considering recent temporary financial setbacks. Our commitment to investing in groundbreaking technologies aligns with our vision of expansion, positioning us to leverage emergency opportunities and enhance operational efficiency moving forward.

The recent acquisition of CMS, along with its intellectual property and patents related to software and optical mechanical capabilities, positions Laser Photonics Corp to advance the development of Class 1 products and AI Robotic Cells. These developments will pave the way for future innovation stemming from this foundational research.

In the spirit of innovation, we have made significant strides in the research and development of our advanced products including the BlackStar Laser Wafer Dicing system and our [indiscernible] shape 3D metal additive manufacturing technology.

With higher precision and efficiency, these systems will be essential in meeting growing demand in both the defense and industrial markets.

We look forward to bringing more information on these technologies in future investor updates. Additionally, our focus during the quarter has been in advancing 2 pivotal product concepts, the Laser Shield Anti-Drone System, LSAD and the Next-Gen CleanTech Robotic Cell. The LSAD represents our proactive approach to addressing security challenges while the CleanTech Robotic Cell reflects our commitment to innovation in automated manufacturing solutions.

Together, these initiatives not only highlight our dedication to advancing in laser technology but also reinforce our strategy of continuous development as we work towards commercialization. By nurturing these technologies through rigorous research and development, Laser Photonics Corp is well positioned to capitalize on future laser solutions in a rapidly evolving market. Although sales were down for the quarter, we closed several key deals that are strategically significant for LPC's growth and marketing position.

We secured a sale of our CleanTech Industrial Roughening Laser 3050 or CTIR-350 to Acuren, a global leader in nondestructive testing or NDT services. This sale marks the beginning of a promising relationship with Acuren, which is exploring LPC's laser technology to enhance their asset protection service across industries, including chemical, power generation and aerospace. The partnership positions LPC as a preferred provider for Acuren's ongoing purchasing program allowing us to expand our footprint in the NDT market.

We also achieved a sale to the U.S. Navy at Pearl Harbor further establishing LPC's footprint in the defense sector. This sale underscores the reliability and performance of our laser system in demanding environments. The Navy's decision to use our CleanTech laser technology aligns with their need for safe, efficient and environmental compliant maintenance solutions for their fleet, you need increasingly echoed across other military branches.

We expect our existing partnership with Brokk now bringing our laser power robotic and handheld systems to the Asia Pacific region. By joining forces with Brokk Australia, LPC's advanced laser technology will now serve industries such as mining, construction and defense across Australia, New Zealand and neighboring markets.

This partnership uniquely addresses operational challenges in hazardous environments by pairing LPC's laser system with Brokk's remote-controlled robotic solutions, enhancing both safety and productivity for operators in the field. We also had a significant sale in the renewal energy technology market, where our CleanTech product will be used to enhance the manufacturing process for hyper-pure polysilicon solar cells. Each of these sales highlight how LPC has cultivated relationships that position us for sustained growth in strategic verticals, including defense, nondestructive testing and heavy industrial applications. These customers and partnerships provide a foundation for future sales, upsell opportunities and expansion into markets.

Thank you to our shareholders and employees for their unwavering support and dedication. We look forward to delivering on our strategic initiatives and building on our recent achievements to drive long-term value. I will now turn it over to Carlos to review our financials.

[Carlos S. Sardinas, executive]

Thank you, Wayne. Revenue was down 22% from last year at $800,000, although it is up sequentially by 21% from the second quarter. Encouragingly, our mix continues to be dominated by CleanTech, leading to a 1,140 basis point improvement in gross margin to 85.8%. Operating expenses increased by 25% due to our investment in resources to manage our anticipated growth, including the addition of HR, sales and administrative personnel. The combination of these items led to higher operating losses of $1.4 million and a net loss of $1.6 million.

Loss per share expanded to $0.13 from previous $0.11 per share. While our share count increased to $13.3 million from $8.3 million due to the acquisition of licenses from Fonon and our August capital raise, which netted a total of $2.6 million.

As we look forward, we are excited to combine CMS and LPC. CMS brings with it, over $2 million in existing orders, which we expect to ship over the next few months. And they continue to add new orders to their backlog for 2025 as well. We are also optimistic that momentum for CleanTech will pick up over the next few quarters as we continue to grow our pipeline and convert a portion of it to orders. With that, operator, we can close out the call.

[Operator]

Thank you. This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.