LightPath Technologies, Inc. (LPTH) Q3 2015 Earnings Report, Transcript and Summary

Good afternoon and welcome to the LightPath Technologies Fiscal 2015 Third Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Ms. Dorothy Cipolla, Chief Financial Officer and Corporate Vice President. Please go ahead.

Thank you and good afternoon. Welcome to the LightPath Technologies' fiscal 2015 third quarter financial results conference call. Our call today will be hosted by Mr. Jim Gaynor, President and CEO. Following management’s discussion, there will be a formal Q&A session open to participants on the call. Before we get started, I would like to remind you that during the course of this conference call, we will be making a number of forward-looking statements that are based on our current expectations and involve various risks and uncertainties that are discussed in our periodic SEC filings. Although, we believe that the assumptions underlying these statements are reasonable, any of them can prove to be inaccurate and there can be no assurance that the results will be realized. With that out of the way, it's now my pleasure to introduce Mr. Jim Gaynor, President and CEO of LightPath.

Thank you, Dorothy and welcome to everyone who has joined us on the call today. We appreciate your interest in LightPath. I will open with an overview of the operational results, highlights and recent developments and then we will turn the call over to Dorothy for a more in-depth review of our financials. We will then open the call to your questions. As you may have seen from our financial results press release issued this afternoon, we had an excellent fiscal 2015 third quarter that reflects the actions taken in the first half of the year to accelerate sales and improve our operating efficiency. Momentum in bookings from the first half of the year has accelerated in the third quarter which bodes well for revenue growth and forward periods. We reported a 100% increase in this sequential quarter rate of backlog growth as our global sales of optical and infrared products gained traction. Order bookings contained – I’m sorry – continued to improve from the second quarter, which reflects broadly across our business line. As a result, our 12 month backlog increased approximately 10% to $6.15 million as of March 31, 2015. Driven by the growth in our backlog that has been increasing through the course of the year is not surprising that revenue for the third quarter of fiscal 2015 increased 6% as compared to the prior year. And we are only in the very early stages of the implementation of our strategic growth initiatives that we discussed on the second quarter conference call. Our order intake remains strong in the third quarter with solid bookings across all six of the major markets we served. We booked significant orders in our specialty product segment and saw continued improvement in our infrared business. The key component of this growth strategy was our focus on our new line of infrared products. Infrared revenues increased by more than 193% in the third quarter of fiscal 2015, compared to the third quarter of fiscal 2014. Albeit offer small base, we are pleased with a 170% increase in sales of infrared products in the first nine months of fiscal 2015 versus 2014. The acceleration of the rate of growth of 158% from the first six months of the current fiscal as compared to the same period of fiscal 2014. Somewhat offsetting our growth has been the weakness experienced in China. Particularly for our high volume precision molded optics business, due to the declining economic growth that is now its sixth year. Despite this regional trend, our global diversification strategies have resulted in revenue growth, an increased shipments across all other business segments in major markets. Another component of our strategic growth plan as discussed in the second quarter conference call goes beyond top line improvement and moves down to profitability, our gross margin improved to 50% for the quarter reflecting the initiatives taken in the first half of the year and the strong revenue level. This is the highest gross margin as a percentage of revenue we have reported in over four years. As a result of the continued strength in booking and the improvement in workforce productivity, we expect further improvement in profitability. As noted in prior call, the start off and ramp up of our second manufacturing facility in China, temporarily increased our cost basis. And turn this list to prior period losses as we invested in both our new manufacturing facility and concurrently expanding our product line and improving our marketing processes. Beginning in the first quarter, we felt the impact of newly added manufacturing personnel and other redundant cost as we transition the work to the new facility. I'm pleased to report that we’ve now essentially complete with the transfer which is the head of our original schedule. Based on our streamlined and enhanced global marketing processes, customers are increasingly recognizing the advantage of our molded optics and proactively bringing LightPath into their product development. We are benefiting from growth in both visible precision molded optics and infrared optics product lines, and operational efficiency to drive improved profitability. Selling, General &Administrative expenses is a percent of sales improved by 80 basis points in the third quarter versus the prior year period, and by 370 basis points is compared to second quarter of 2015, which we had a substantial amount of redundant costs and other one-time items. The higher revenues improved gross margin and ongoing management of expenses drove a significant increase in operating income. EBITDA was $210,000 in the third quarter of fiscal 2015 compared to an EBITDA lose of about $1,000 in the third quarter of last year. While the company’s net loss per share in a 9 month period was reduced by 33% in the third quarter of 2015 alone. We return to profitability with a net income of approximately $90,000 or $0.01 per share, compared to a net loss of $133,000 or $0.01 per share negative for the third quarter at fiscal 2014. When we announced the implementation of the strategic growth initiatives in an organizational – position plan, we intend as to better position to accelerate revenue growth beyond on what we’ve already achieved and elevate our profitability. Principally by the transition to the technical sales process as leverage is success of our existing demand creation model. Our order backlog and revenue growth reflect the initial success of these efforts. Another benefit of these plans is an estimated annual reduction of operating expenses of 5% to 10% or savings of approximately $200,000 to $375,000 per year up on complete implementation. We are in track to realize those savings as SG&A expenses declined by approximately $47,000 or 4% in the third quarter, as compared with the prior year. But we did this with a larger base of revenues, infrared production line begin to reach production levels and additional manufacturing. As an integral component to our new plant, LightPath has aligned its sales and marketing efforts to elevate its demand-creation model to an even more technically based approach as its addressable markets have proven to be increasingly receptive to the Company’s product lines. It is with this plan in mind that we doubled our lens manufacturing capacity to the opening earlier in the year of the manufacturing facility in Zhenjiang. During fiscal 2015 third quarter as previously disclosed the company received gross proceeds of approximately $1.3 million from the sale of common stock to Pudong Science & Technology Investment Company. Pudong beneficially owns 14.9% of the company’s outstanding shares of common stock, which includes about $931,000 shares pursuant to private placement and balance of the stock acquired through the open market purchases. We are pleased that Pudong has lead successive investments to become one of our largest shareholders. In turn, we have used the proceeds from the direct investment in our old capital to deliver returns on our investment as revenues, margins, and profits have all grown. We are committed to further improving upon this progress and firmly believe that it is achievable. I’ll now turn the call over to our CFO, Dorothy Cipolla. To provide additional detail on our third quarter results.

Thank you Jim. First I’d like to mention that much of the information we’re discussing during this call is also included in the press release issued earlier today and in on Form 10-Q, which was filed today. I encourage you to visit our website at lightpath.com. And specifically the section entitled Investor Relations. I’ll now review financial performance and operational details for our fiscal 2015 third quarter which ended March 31. Revenue for third quarter was approximately $3.2 million, an increase of 6% as compared to last year. The growth was attributable to an increase in sales of our Specialty Products and increase in sales of infrared products. This marks the second consecutive quarter where we have experienced year-over-year increases in sales of both of these product lines. The gross margin as a percentage of revenue in the third quarter was 50%, compared to 49% in the third quarter last year, an increase from 38% on a sequential basis from the second quarter of 2015. The improvement in gross margin as a percentage of sales was driven by higher sales volume, production efficiency, and look significantly the elimination certain cost associated with the transition to the company’s newest manufacturing facility in China, which had been a drag on our prior period. We expect our margin to improve from these prior levels as we return to a normalized cost base, which for manufacturing at a lower cost base in Zhenjiang as compared with Shanghai and take advantage of the overall leverage in our model with increased revenue. Specifically in prior periods, we had incurred higher wages associated with the overlapping manufacturing workforces during the transition of production between our two facilities in China including severance to Shanghai staff as production was moved to Zhenjiang. Over the course of the last three quarters, we have reduced our headcount in Shanghai from 121 to 25. Remaining in Shanghai will be our sales, development engineering and some administrative functions including purchasing and customer support. Essentially all manufacturing operations are now moved to Zhenjiang. On an adjusted basis, to reflect the normalized non-redundant cost basis without severance charges and other related expenses, the gross margin in the second quarter would have been 41% as compared with 50% in the third quarter. During the third quarter, total cost and expenses decreased by approximately $29,000 compared to the same period last year. The decrease was due to lower cost for materials and outside consultants partially offset by increased wages. Total operating income for the third quarter was approximately $206,000 as compared to approximately $43,000 last year. Net income for the third quarter was approximately $90,000, which included a $106,000 of a non-cash expense for the change in the fair value of the warrant liability or $0.01 per basic and diluted share. This compares to a net loss of $133,000, which included a $131,000 of a non-cash expense for the change in the fair value of the warrant liability or $0.01 per basic and diluted share last year. Excluding the non-cash effect from the change in the fair value of the warrant liability, net income in the third quarter would have been $196,000, a significant improvement from the net loss of $394,000 in the second quarter of 2015, where we have a lot of overlapping cost in the net loss of $2,000 in the third quarter of last year. Adjusted earnings before interest taxes depreciation and amortization and change in the fair value of the warrant liability, which we call adjusted EBITDA for the third quarter was approximately $315,000 compared to approximately $130,000 in the third question last year. The difference in this adjusted EBITDA in the same period was principally caused by higher net income recognized in the three months this year, please refer to our SEC filings in our website for EBITDA reconciliation. Now I would like to talk about the results for the nine months ended March 31. Revenue for the first nine months of 2015 totaled approximately $9.2 million an increase of 5% as compared to last year. The increase was attributable to an increase of sales of precision molded lenses and 170% increase in sales of infrared products. The gross margin percentage for the first nine months was 42% compared to 46% in the same period last year. The high level of revenues in the current fiscal year drove total manufacturing cost of $5.3 million for the first three quarters an increase of approximately $680,000 compared to last year. We incurred additional cost due to the higher direct wages associated with the ramp up in infrared production, the overlapping manufacturing workforces during the transition of production between the two China facilities and severance for terminated Shanghai staff as production was moved to the new facility. During the first nine months, total cost and expenses increased by approximately $327,000 compared to last year. The increase was primarily due to an increase in professional service fees in support of strategic growth initiative, and wages partially offset by lower stock compensation expense. With an operating loss in this first half of the year partially offset by a return to profitability in the fiscal third quarter. Total operating loss for the first three quarters was approximately $709,000 compared to an operating loss of approximately $205,000 for the same period last year. Once again, with the losses from the first half of the year, partially offset by net income in the third quarter. Net loss for the first nine months was approximately $348,000 which included $375,000 of non-cash income for the change in the fair value of the warrant liabilities or $0.02 per basic and diluted common share. This compared with a net loss of $416,000 which included $185,000 non-cash expense for the change in the fair value of the warrant or $0.03 per basic and diluted share for the same period last year. Cash and cash equivalents totaled approximately $1 million as of March 31 an increase of about 20% from December 31. The company received gross proceeds of approximately $1.3 million from the sale of common stock with Pudong Science & Technology Investment, Cayman Company Limited in January 2015. A portion of the proceeds in this funding was used to pay down the company’s balance of accounts payable, which was reduced by about 23% as of March 31 from December 31 down. As of March 31, company's 12-month backlog was $6.2 million, a 10% increase from December and 44% improvements on the beginning of the fiscal year. With this review of our financial highlights concluded, I will turn the call back to the operator. So we may begin the question-and-answer session.

Thank you, Ms. Cipolla. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Michael [indiscernible]. He is a Private Investor.

Hey, Jim and Dorothy. This is really sounds great. And I just following up on my past questions over the years, I have three. First, may be you could talk a bit about Europe, the LASER World of PHOTONICS show up coming in Munich. And what AMS has been doing? And what the prospects are in contrast to the weakness in China?

Well, I think Europe has started to improve a little bit. AMS continues to be a very significant our call on the customer of ours and they seem to be doing a very good job. We see some of the established customers we have over there increasing their business. We had one particular large customer. We did a custom job for his doubled his run rate there just recently. So we see some signs of strength in Europe. And some of those types of products are offsetting, what some of the weakness that we see in China. And it’s a nice mix change as well might, because some of these products that are coming and even though the volumes are lower, the prices are much higher than the business that is weak in China. So if one of our segments has to be down a little bit, the right one is down, if you want to look at it.

Are you fishing the new molding and blower cost for IR and seen much interest?

Actually, we are. The guys over there just a few weeks ago made a pretty good circuit with Americas. And there is a significant, some of a larger infrared customers there we have now or currently are some European theater and there is quite bit of interest in what we are able to do. And I think we will have a good some very good success and strength in that business and some very interesting things happen in the future.

Great. A couple of conferences call, you’re very excited about projectors and what you have seen in some of the capabilities and I know – we had some – there were some issues there and dropped orders and things. I’m wondered, if you could give us some up-to-date prospects on where you see the lens business going with projectors?

Well, I mean, in those commercial projectors I think we still see it as a nice new application for us. It hasn’t turned up to be as strong as we originally thought it would be. But it is still progressing. There is again – its has been impacted by some of the weakness in China. Because couple of the major guys that we were doing business with in that particular application where trainees OEM customers and they’ve been a little bit but we do see some renewed activities starting to happen with them. So I think its still a nice piece of business for us going forward. I don’t think it’s quite as strong as we originally thought it might have been. When we started it. But still work lot of venture force.

Great. And last question is really – that one I often asked you about Thailand and – businesses there recovering from the disasters and I wondered that’s – they’re still back there and starting to order from you.

The answer is yes, and actually that’s another business. That is showing quite a bit of strength. The main customer we had – we have several customers that we deal through a web in Thailand and it goes and most of that business goes through a contract management fraction, which have to be fiber net and we see quite a bit of strength coming out of that. One of the main customers we had where we’re designed into their products. So that business to another photonics company. And that photonics company has actually become much more active than they were. And we see the opportunity for that business to double and maybe even triple from the volume side that we were originally projecting there. So I think that assurance signs of strength and I think from the flood and disaster that they have, they pretty much fully recovered.

Great. Well, last question is I appreciate Dorothy the information on the headcount in Shanghai. What’s the overall headcount peak days and how it is changes from the last conference call?

Let me take that. Just did a little math Mike [indiscernible] facilities. We were about 165 in total. We’ve got about – we’re in that 78 range in Xinjiang now, which is remade continue to increase the direct labor there a little bit. But we’re pretty fully staffed now. And then we’ve got grown a little bit in Orlando with the ramp up of the infrared business. So we’ve got about 60 people here.

And you moved into the new space, you were…

Yes, the new office is in Orlando. We’ve moved in, it’s very nice. They are still working on the renovations to the existing space, but we’re working around that, but I think within another week or two that will be completed. So the employees seem to appreciate the sprucing up of the space that we did as well as it added – it expanded, we took advantage of the lease terms and expanded our clean room to make some more hi-tech testing areas in the clean room and we expanded our pre-form policing area for the infrared process as part of that renovation. And those processors are – clean room will be done in another week or so and pre-form room is already back into production.

Terrific, terrific, I look forward to seeing may be one at the next annual meetings. Thank you again. Thanks for the great report.

Well, thank you for your support.

Next question comes from the location of John Nobile with Taglich Brothers. Please go ahead.

Hey, good afternoon Jim and Dorothy, thanks for taking my question.

Hey, John.

Hey, John.

A very nice gross margin by the way you got in Q3. I just wanted to know if that included any negative impact by the transitional in China or this is a totally done deal within effect year, gross margins whatsoever in the third quarter.

I think all the negative impacts from the transition was in the first two quarters and this quarter is pretty clean from the perspective.

Okay. So this is actually a clean quarter I'm looking at sort of a 50% and last year was about 49%. But both last year and this year, it seems to be the high point in you think gross margins as far as quarterly basis is concerned. Q3 for some reason seems to be higher than key reasons for that or is that just an anomaly that I should be looking at this is may be something to consider going forward at this level?

I think the gross margins at this level are about right – and as the volumes continue to increase, we still got a little bit of leverage left in it so they could actually improve from this point. In the first half we took some actions around reducing the overheads and stuff we had particularly associated with the infrared process, as we had doubled – kind of made that a separate organization in an effort to get it established. And now that it is its folded back in and we were able reduce some overhead. The other big count that may be improvement was the change from Shanghai it is in Zhang, where we have much lower cost structure than what Shanghai was. So even if there wasn’t the redundancy that we had during the transition which is done now, we would still see an improvement in gross margin just from the lower operating cost base that we have in Zhang. So I think 50 plus is where we should be expecting gross margins to be going forward particularly is the kind of revenue levels that we obtained.

It’s a nice improvement, definitely. I don’t know if I should expect that much in the transition into Zhang Jing correctly where I…

Well, you murdered just the way is do.

So apparently there was much to be gained across the sales wise in that that regard.

Yes. Well, I mean the labor costs are significantly lower in Jing Zhang than they were in Shanghai as well as some of the facility services and those kinds of things. Even electricity is less expensive there than it is in Shanghai. And those are – so we are talking – now we’re going to take full advantage of all of those things.

And regards to China, again, the sales you had mentioned obviously weak in the quarter. I was wondering if you can break out the third quarter sales in China and just give your outlook for that region in Q4.

I think what we see is some slow recovery in our business even though the economy still remains weak. I mean I expected to start to improve and pick up a little improvement phase in 2016, our fiscal would start in July because the Chinese government has started to inject stimulus into the economy again, and that generally translates into some improvement in construction. And when the construction market picks up over there then we’ll see some advantage in our industrial tool type segment. So I think in a going forward, we expect to see some improvement there. The other thing that is happened in with respect to the Chinese business is laser tool business, which obviously one of the higher volume but lower margins for us has been picked up by some strength in the telecom and fiber laser markets, which are lower volume than much higher prices. So our average ASP of the stuff we are selling in China currently has almost doubled. And I think that business will continue and then if we can layer on the improvement in the industrial tools would be that much better. So we see some improvement from the type of product that we are selling in general in China. With those additional market segments picking up and I think is – and we will and we’re start to see some of the volume comeback in the laser tool business. So its trying to break the total revenues out from that segment is not the way we typically look at it John because some of the what we call that high volume, lower price, PMO product that we sell into other segments and other geographies then it goes through Orlando, so its kind of gets mixed up.

Okay. And on the last call you mentioned that there were minimal sales in the second quarter from the $1 million aspheric lens order, I think that was in the later half of 2014. But I remember you said you expected it to ramp up in the third quarter. So I just wanted to see how much did this order actually contribute to your third quarter sales and…

It didn’t, it didn’t ramp up in the third quarter [indiscernible] still remains weak.

And what about in Q4, I mean do you have any indication that we could see this may be – I mean that was a significant size order so that’s why we just asking about…

Yes, I think, I mean we still expected to take off there has been some small activity with it, but it is taking longer than the customer had expected. That goes through one of the larger customers that we have in the China direct market. And third quarter of his business was very weak, but we have seen some improvement towards the end of the quarter and he’s starting to buy some volume again, which he had pushed off as he was working injecting his inventories.

Okay.

Well I think we will see some improvement going forward in the fourth quarter and into the first quarter.

Okay. That is being obviously it just contributing a small amount in these quarters. It could be going on for several more quarter. Hopefully, there will be a significant ramp where you can satisfy this order in a couple of quarters. But as far as you see right now in Q4, it could be a little pick up, but nothing very significant.

That’s the way I would characterize it, yes.

Okay, and just be on the same side. I look at it that way. And just one more question, in regard to infrared sales, obviously, you filed some pretty strong growth rates off a small base. But I was curious if you can actually breakdown what percentage of the total sales were related to – what infrared sales and how that compared to a year ago. I mean what percentage infrared in this quarter and then looking back of last year’s third quarter, what was the percentage? Just o see what you’re looking at this….

Infrared sales in the third quarter were about 9% of revenue. And I think that…

So it must be very small…

Percentage just kind of talk about that in term of where it was last year, right.

Okay, so for this – the last year must have been very small. So 9% of total revenue and obviously that’s a very strong growing market and you’ve anticipate the level you are at now. I can do the math to figure out what that was in revenue? That’s still going to show some pretty significant growth going forward.

Yes, we believe that. That rate of growth will, you may not hit those – the phenomenal numbers that we’ve had here because the base growth but we expect very strong in some market and what’s happening is a couple of things John. One of the phenomena have happened finally in the marketplace is, it took a long time for the engineers and designers to really get comfortable and accept silicon carbide material over uranium material that they were used to use in and so now it has been accepted and they are willing to look at the material system that we used to mold as an accepted processes. So where we use to have to spend a lot of time educating people on why we were bringing light work and all its advantages. We don’t spend as much as time with that people are now familiar enough with them to assist them in the processes and in fact now they are coming and seeking it out as a lower price alternative for their optics. So we are not haven’t to work – we start to work pretty hard but we are not having the work quite as hard to give all the opportunities because some of them coming to us as suppose to have to dig them out of the marketplace. So that’s a nice change in the trend we see that, the other thing that we see is. As the commercial applications begin to take hold and the other elements particularly the sensors and those kinds of things comedown in cost, the commercial application are expanding and that’s where we see tremendous growth opportunity for this product line. And now people are talking significant quantities of optics, we use to talk to guys and get excited when they would talk us about 100 lenses. Now they are talking to us about 50,000 or 100,000 lenses. So things are changing in that marketplace and with the kinds of things that are going on. Particularly in the home security, not just home security, but in security type applications, in sensing type applications and in these commercial and consumer type applications such as you see with the smartphone conversion cameras, they plug into your smartphone and convert that camera into an infrared scanner.

Okay. Did you have – have you mentioned that the backlog for infrared was up strongly or did I confusing that with total backlog. With infrared backlog at this point is up significantly.

Probably it was up I mean we didn’t really break it out when we talked about total backlog I think.

Okay. But as we stand now infrared backlog is higher than it was for your quarter?

Yes.

Okay. All right, that’s about all I have. Thanks for taking my questions.

You’re welcome.

[Operator Instructions] Our next question comes from Steven Donovan with LightPath. Please go ahead.

Hi. Jim and Dorothy.

All right, Steven, how are you?

Hi. Steve.

I’m good. Thank you for all of your good progress. One question, can you talk about the backlog and what’s the guidelines are for inclusion in the backlog and whether or not, deciding of non-disclosure agreement has an effect on whether if something its put into backlog and if the backlog is the same or the principles for the backlog apply the same, where audits from Europe, China and the U.S. Just talk about the backlog.

Okay. I think that we talk about is – what we call out this disclosure backlog and what that really means is –that is product, that is shippable within the next 12 months and it kind of a rolling number, it’s always 12 months in it’s scope. I don’t think there are any differences on, and then what we put in the backlog is to where it’s booked from. I mean, it’s an order from Europe or an order from China or North America it’s all put in the backlog in the same manner. The other part of it is I don’t think there are any restrictions from a NDA point of view on what’s in the backlog or not in the backlog. I don’t think that applies at all.

So if you signed a non-disclosure agreement and you get an order, that order would be in the backlog.

Correct.

Correct. It’s a [indiscernible] purchase orders received and it’s a firm order placed in our system and its part of the backlog.

And there is a purchase order require deposit or anything or is it just a purchase order?

Mostly, those are just purchase orders. Now, if it’s like 10b like an order that we would get for non-recurring engineering charge, where we might get paid portion of it upfront to cover tooling cost or something like that, and then we wouldn’t be able to recognize. We would recognize that is an order, but not as revenue until we completed the work. So I think from that standpoint, Steven, let’s – it’s pretty clean I mean the backlog that we are talking about is business that we have there is other backlog that beyond 12 months. So we make it, for example, a blanket order that has an extended period on it. But the only portion that we were talking about is a portion of falls within 12 months being shippable within 12 months.

Okay.

So there could be some backlog that’s beyond that, for example a multi-year type deal or something like that.

So it’s a pretty straight forward number.

Yes, it’s very straight forward.

And then I saw they announcing more orders and I’ve been disappointed that they haven’t been any announcements on it – any of the horizons. And then I thought that might be, because you saw a non-disclosures agreement. What’s the situation with non-disclosure and announcements?

Well, I think a lot of our orders are pretty routine purchase orders. We could announce more of them I guess than we do a kind of sets a president in terms of when you start talking about the size of these orders and how much we have to disclose and something happens we’ve taken all back. Those kinds of things, so we try from that perspective, Steven, just to announce things that we feel are very significant in material to the company. And it’s kind of a subjective decision as to what size order falls into that category. The other thing is a lot of customer I mean we could talk about some of these things and they are more powerful. Obviously, if you can associate the end customer with them, but most of the time, the end customer doesn’t want to be associated with that kind of announcement. And from our perspective, we don’t always want to put it out there. So our competitors know where we are dealing and where we are having success.

Yes, so generally it’s a secret.

Right. Yes, I mean just – it’s a secret from the standpoint that we are trying to protect our business and whether the customer is willing to share a joint announcement or not.

Yes, that makes sense. Okay. Well, thanks and I will talk to you next time.

Okay, Steve, thank you.

Our next question is comes from Mr. Brad [indiscernible] Private Investor. Please, go ahead.

Hi, Jim.

Hi Brad, how are you?

Good. So we heard a lot about growth initiative and stuff like that. What’s your forward-looking guidance on Q4 and full year 2016?

Well, I mean as you know, when we had this discussion, before we don’t really give that kind of guidance. I do expect that the trends that we’ve been reported. I see no reason why they won’t continue. We are in a period, right now. Where we are seeing very strong quarter intake and resulting revenues are starting to flow through the system. So I don’t see reason. The momentum that has been demonstrated, it’s not going to continue in the foreseeable forward-looking period.

So when you mean now you are talking about the 100% growth rate and increase in the growth rate of the back orders is continuing to increasing at 100% or you…

Well, I don’t know, if the rate of growth will from quarter-to-quarter will continue at a 100%. But I do think we are going to – our business has grown historically and our base business has grown around 10%. I think we will beat that, and then as the infrared business continues to grow. It should increase that number, because that’s the developing product for us.

So revenue growth greater than 10%. Okay, thank you.

All right.

Our next question comes from Robert Ainbinder with Newport Company Securities. Please, go ahead sir.

Hi Jim, hi Dorothy. Can you hear me?

Yes, Bob we got you.

Hi, bob.

How are you?

Very good. Thank you.

Great, great. So I think what we’re all obviously looking forward to hear is seeing that infrared business really starts you to take all then and see a significant increase in top line revenue with where you have the margins of the business right now. Obviously that happens and we start to see a lot of money flow to the bottom line and obviously that leaves to higher stock price. So with that in earlier in the call you talked about the fact that you are – when you are discussions with some potential cost amounts with the infrared line you talk mean the 50,000 and the 100,000 in stead of 100. So can you both can understand and I can understand exactly what that – an order like that could be to top line and bottom line numbers what’s the average selling prices for infrared line is for those type of orders.

Thank you, bob. There is an interesting phenomenal going on in the infrared. Now let me say that there is a price range that’s not to do similar to our standard position mode of optics type brands, which is based on size and volume of the lenses and sales. So typically we’re expecting on average ASPs for our infrared line in total, which includes the subsystems that we do, which are assemblies where you have multiple lenses and a housing and mounted type stuff. And just a single lenses you get that range in you put all those things together I think our average pricing is going to be between $40 and $50. And that’s means you were selling some stuff in the $5 and $10 range and then we’re selling some stuff in the $100 and $200 range and you mix all that together. So it’s really a wide variety as you get into the higher volumes small lens type stuff in those individual prices tend to be lower. And what you see mostly because of the market pricing that’s required for the end product, as well as there is increasing competition, particularly coming out of the Asia. You’re seeing some price pressure on this product line much faster than you would expect to see on our product line of this new variety, it’s not really getting its full day in the sun we got to enjoy that initial product life cycle we make pretty decent margin and game back some of your investment. What we’re seeing is some real price compression and some price competition. Now having said that, the good news is given our manufacturing capabilities and our low cost operation platforms both in Orlando and in China, we can maintain pretty decent margins and compete even at very low prices in this segment. And we’re taking those steps to make sure that we stay that way. So I think we’ve seen prices they are going to range in very high volumes in that $5 to $10 range all the way up to $200 to $300 for these lenses. I don’t know if I answered you but there’s a quite a range that’s hard to pin it down.

Okay. So we’re still when we’re looking at these types of orders, we’re talking in the millions of dollars instead of hundreds.

Yes.

Okay, so I got believe that then those type of orders are yet to be factored into your growth rate of 10% to 15% right?

They have not.

Okay, very good. So when we start to see those type of orders that growth rate could certainly accelerate.

Yes. And I’ll tell you, when we land one of those we will probably make some kind of an announcement about it.

Very good. Okay, great that was my question. Thank you so much.

All right.

There is no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Gaynor, for any closing remarks.

Thank you. In conclusion, we appreciate to support our shareholders and a dedication of our global team of LightPath. We remain focused on our efforts to drive revenues for our – major product lines and to continue to drive benefits from the leverage in our businesses, we improve our profitability in generation of cash flow. With the progress that has been made and our plans for continued execution we look forward to delivering long-term profitable growth, which may deliver meaningful returns to further benefits of our shareholders. Thanks again, and we look forward to speaking to you with our next quarterly report.

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