LightPath Technologies, Inc. (LPTH) Q3 2019 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the LightPath Technologies Third Quarter 2019 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 also note, today's event is being recorded. I will now pass the call off to Don Retreage, Chief Financial Officer of LightPath Technologies. Please go ahead, sir.

Thank you. Good afternoon. Before we get started, I would 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 current expectations and involve various risks and uncertainties that are discussed in the periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proved to be inaccurate and therefore, there can be no assurance that these results would be realized. In addition, references may be made to certain non-generally accepted accounting principles, or non-GAAP measures, for which you should refer to the appropriate disclaimers and reconciliations in the company's SEC filings and press releases. Following management discussion, there will be a formal Q&A session open to participants on the call. I would now like to turn the conference over to Jim Gaynor, LightPath's President and Chief Executive Officer. Please go ahead.

Thank you, and good afternoon. Welcome to LightPath Technologies' Fiscal 2019 Third Quarter Financial Results Conference Call. Our financial results press release was issued after the market closed today and posted to our corporate website. Following my remarks, our CFO, Don Retreage, will further review our financial results and provide more perspective on key areas. We will then conduct a question-and-answer session. But now on to my remarks. The first half of fiscal 2019, we experienced meaningful progress on our initiatives towards delivering sustainable improvements in long-term revenue performance, profitability and cash flow. Our fiscal 2019 third quarter results reflect broader economic conservatism as well as our changing product mix as we expand into stronger growth markets amid a competitive pricing environment for our legacy products. This affected key performance indicators for bookings and revenues, which clearly fell short of expectations in the fiscal third quarter but are reflective of our strategy to increase our penetration into the faster-growing market for infrared optics. Our strategy began implementation in large part in mid-fiscal 2017 and included our acquisition and integration of ISP Optics and related product lines, which are complementary to our investments in our next generation chalcogenide or Black Diamond IR precision molded optics products. As a result of our strategy, our product portfolio has become more diversified, including an important line of ISP Optics business, IR Optics. And by its nature requires longer cycle times and has historically produced lower gross margins. LightPath's next generation chalcogenide-based infrared precision molded optics are being offered to reduce the related direct costs and cycle times of legacy IR materials while further developing our newly accessible market channels. Our investments in the development of this material are intended to allow us to address new and existing opportunities with more competitive pricing. Although our blended gross margins have continued to improve, at least during this interim period, we're seeing some needed increases in inventory related to our infrared optics business, particularly related to the continued infrared precision molded optics rollout. The result, LightPath is well positioned in a growing and developing market and with a product portfolio that has become more diversified and complex. Today, we essentially have 2 primary sides of our business: Precision molded lenses, or PMO products, is our legacy business, which is slower growing and smaller now than our infrared or IR business. The PMO addressable market is estimated at about $300 million and grows at about 3% to 5% annually. The infrared addressable market is estimated at greater than $500 million, growing at about 7% to 10% annually. Each of these markets is impacted by seasonality and cyclicality. On assessing the PMO markets in 2016, we made it very clear that our focus as a company was on leveraging our core competencies and experience in the PMO business to become more diversified optical technologies company through a transition into the infrared-driven operation. From that high-level strategic objective, we have delivered. In fact, our insights into the PMO industry in 2016 were impressive since we were seeing pricing pressure and economic conditions globally that have brought our financial performance metrics for this area of our business lower as compared with prior years. Meanwhile, in transitioning into an infrared-led business, we have made some incredible progress, along with some bumps along the road. Our work is not done. However, as we are developing a platform for sustainable revenue growth and cash flow generation. We have investing in and have allocated a lot of time to our transition and positioning for the future. We have been consistently assessing how our growth strategies are impacted by different market conditions. One of the major differences in our changing business is the longer delivery cycle, the infrared business has compared to our PMO visible business. It is more than twice as long and the effect of that was certainly demonstrated in our third quarter. This is why we are focused on the following 3 key initiatives. First, continue to increase the backlog such that as we enter any quarter, we are at least 75% booked of our forecasted revenue. In the PMO business was the majority of our forecast, we could book and ship those products within the quarter while most of our products cannot be turned that quickly. Two, reduce the delivery cycle time for our infrared products. We are addressing this with the conversion of certain of these infrared optics from diamond turned to molded BD6. And third, continuing to implement cost reductions in our manufacturing process. Our recent investments, particularly into infrared technologies and capabilities support these initiatives and are delivering important progress. Some examples of our current progress are: Total consolidated bookings in the first 9 months of the year were $29.2 million, an increase of $1.3 million or nearly 5% over the same period of the prior fiscal year. To further improve this effort aimed at increasing the backlog, we are addressing our sales and execution efficiency, and we will be providing further insight into this effort in the coming quarters. In terms of shortening our process cycles, we are making good progress as we continue to invest in capacity and capabilities in all of our factories. Investments in systems and people are aimed at speeding our quote response time and fully integrating our capabilities between our global factories. With the increasing acceptance of our new Black Diamond or BD6 glass product line, we are expanding our glass melting and coating capabilities in our Orlando facility, expanding our coating and glass preparation capacity in China and improving our test and measurement capabilities in all the factories. Finally, for our cost-reduction efforts, we are beginning to see the benefits of several of the projects we have been implementing. Most notable is gross margin as a percent of revenue which fared very well under the circumstances. Gross margins in the preceding 5 quarters were under pressure. On the lower revenue year-over-year, our gross margin percentage in fiscal 2019 third quarter was flat compared to the prior year. This margin stability provides insight into the success of the changes we have made to our business. With the completion of the relocation of our New York facility to Orlando, we expect that by the end of June 2019, we are looking forward to a significant reduction in operating costs in subsequent quarters. To further support the growth and transition of our business, we added technical resources to bolster our engineering capabilities, which we believe is second to none globally. This enables us to better support a higher level of product development and demand that we're involved with right now. The work we did in 2018 on new designs for the telecom sector are moving into production. Several new designs went into production in the second and third quarters, and we have a number of others going forward for telecom alone, which experienced a 56% increase in revenue in the third quarter despite competitive price pressure, which lowered the ASPs by nearly 21%. On the IR side, we are having very good success on the business development front. We talked in the past about the elevated cost of the primary material used in infrared lenses, which is germanium. Along with the transition out of New York, we have been overhauling our infrared manufacturing for our own new proprietary material and lens configurations. In the middle of 2018, we announced a comprehensive production capabilities and global availability for the new line of infrared lenses made of chalcogenide compound. We developed this new compound and growing internally to produce Black Diamond glass, which has been trademarked and marketed as BD6. This lower cost alternative is expected to benefit the cost structure of some of our current infrared products and allow us to expand our product offerings in response to the market's increasing requirement for low-cost infrared optics solutions. The interest from this market has been intense. We sold some new designs and are now ramping up to production for end-market applications that include rifle scopes, range finders, sensory equipment, wearable devices for first responders and more. This is really gaining acceptance in the marketplace so it's been quite exciting. Based on this demand and interest, we are focused -- forecasting a need to continue our planned capacity increase so the investments we have been making are appropriate. Moreover, and what is even more exciting is that aside from this less expensive material, we can mold this product as opposed to diamond turning. This will enable us to bring our higher speed techniques to pair and reduce processing time. Investments are being made to add capacity for our infrared products in conjunction with the transition out of our New York facility and into our other facilities. Capital expenditures, including equipment purchased through capital leases were $2.1 million in the first 9 months of fiscal 2019. The heavier period of investment is behind us as we reduce the amount spent to about $500,000 in fiscal 2019 third quarter as compared with over $900,000 in the second quarter of fiscal 2019 and nearly $700,000 in the first quarter of fiscal 2019. Our mission is to offer our customers the best value and to be their first choice for high-value infrared and visible optics through our manufacturing locations in the U.S., China and Europe. In doing so, we believe we'll be able to increase our share of the growing markets in which we operate. The analysis we've provided here today and the meaningful effort to transition our business, we believe we have demonstrated how we are positioned to provide improved transparencies for stockholders in terms of our strategic planning and that our initiatives are aligned with our mission and objective. Our disciplined approach to capital allocation, investment and growth strategies, operational efficiency enhancements and sales and marketing activities, demonstrate our understanding that the changes in our markets and products require adjustment in how we execute our business plan. LightPath has been responding accordingly and with meaningful progress. We look forward to realizing the full benefits of these actions through the balance of the calendar year and as the global market for our industry-leading product lines improve. This concludes my formal remarks, and I'll pass the call to our CFO, Don Retreage, to produce -- to provide more details on our third quarter financial 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 our quarterly report on Form 10-Q, filed with the SEC. I encourage you to visit our website at lightpath.com and specifically the section titled Investors Relations. Now on to my remarks pertaining to the third quarter and first 9 months of fiscal 2019. Revenue for the third quarter of fiscal 2019 was $7.9 million, a decrease of 7% from the $8.5 million in the prior year period and second quarter '19. For the first -- for the 9 months of fiscal 2019, revenues were $25 million, an increase of 2% from $24.4 million in the same period of the prior year. For our geographic revenue mix, we had 37% from North America, 26% from Asia, 35% from Europe and 2% from the rest of the world. Now on to our vertical market sales review for the third quarter. Sales to catalogs and distributors was 19% of revenue, defense was 8% of revenue, industrial was 43%, commercial was 10% of revenue, medical 3% and telecom was 16% of total revenue. Bookings in the third quarter of fiscal 2019 were $6.5 million compared to $9.1 million in the third quarter of fiscal 2018 and the second quarter of 2019 bookings of $14 million. For the first 9 months of fiscal 2019, bookings were $29.2 million, up nearly 5% from $27.9 million in the prior year. Our 12-month backlog was $17.1 million at March 31, '19 compared to $12.8 million at June 30, 2018 and $18.1 million at the ending of the second quarter. In addition, we have undisclosed backlog that goes out from months 13 to 36, which together with 12-month backlog provides us with an enhanced visibility to manage the business and invest according to future manufacturing capacity needs. Moving on to additional capital investment and balance sheet matters. Cash and cash equivalents totaled approximately $4.6 million at March 31, 2019, flat as compared to the end of the previous quarter and down from $6.5 million at the start of the fiscal year. From the beginning of the year, the use of the cash primarily reflects equipment purchases for expanded production capacity, vertical integration at the other 3 global facilities. The integration component will help us streamline our manufacturing processes, thus, avoiding delays on expense associated with the involvement of multiple sites as we have been doing to date for our IR products. For the past 2 quarters, we have made considerable investments in the new manufacturing equipment, particularly in our second facility in Orlando and in connection with the expansion of our BD6 capacity. Capital expenditures for the third quarter of fiscal 2019 were approximately $500,000, bringing the total to $1.7 million in the first 9 months of fiscal 2019, plus an additional $462,000, purchased through capital lease arrangements. This compares to $2.5 million in capital expenditures and an additional $306,000 for capital leases in the first 9 months of fiscal 2018. We spent approximately $0.5 million on CapEx in the third quarter of fiscal 2019, significantly less than second quarter '19 and about half of the amount spent in prior year third quarter. In addition, total debt was reduced by $638,000 or 8.6% in the first 9 months of fiscal '19 and was refinanced during the third quarter with a new lender with more favorable terms. Our accounts receivable increased nearly $0.5 million or 9% to $5.9 million at March 31, 2019 from $5.4 million at the beginning of the fiscal year. Accounts payable were $2.4 million at the end of third quarter '19, up from $2 million at the ending of the prior year. With a higher level of bookings and anticipated revenues, we increased the amount of inventory being carried from the beginning of the year. In anticipation of increased IR business, BD6 and Ge, we increased the inventory approximately $1.2 million to $7.6 million. Net income for the third quarter of fiscal 2019 was impacted by approximately $1.3 million in non-operating items, which compared to the same quarter of last fiscal year included interest, foreign exchange and income taxes. Interest expense difference of approximately $618,000 is due to discrete items that occurred in each period. Interest expense for the third quarter of fiscal 2019 includes the write-off on unamortized debt costs from the previous loan, whereas the same quarter of the fiscal -- of prior fiscal year included a gain of $467,000 due to reversal of the fair-value adjustment liability associated with the satisfaction of sellers note when that note was satisfied. The previous loan was refinanced when we changed financial institutions due to better terms and conditions, which aligns with our developing platform for sustainable revenue growth and cash flow generation. For foreign exchange, we had an unfavorable delta of approximately $380,000 quarter-over-quarter. In terms of income taxes, there was a $345,000 unfavorable decrease quarter-over-quarter largely due to a tax benefit recorded in the third quarter of last year related to tax reform active in Latvia. For the third quarter of fiscal 2019, our tax expense is primarily related to income generated in China. All of these items significantly affected the comparability of net income for the fiscal 2019 third quarter against the third quarter of fiscal 2018. Prior to concluding our financial review, I'd like to provide a perspective on a key area, which is China tariffs. There's still a little clarity on these changes, if any, while political leaders continue to kick the can, per se, for now. However, if tariffs were to increase up to 25%, then we would see some impact, this would mean that tariffs on lenses could potentially increase from about 15% to 25%. However, 64% of our business is international and does not have to come through the U.S. We also have increased some inventories in country so that the impact would be limited for a while. If tariffs' increase does come to pass, we'll try to take advantage of these and other mitigating steps, including where we limit some of the things that we ship through the U.S. We're keeping a close watch on how this unfolds. Now to conclude my remarks, we believe we have gotten our market presence and demand criteria taking steps -- significant steps to solidify our margin profile and effectively manage our balance sheet. As we work through the fourth quarter, we are energized to be finally turning out lights in our Irvington, New York facility, leaving us with fewer but larger facilities to tighten our processes and controls and extract improved profitability starting in July, just a few months away. With this, review of our financial highlights concluded. I will turn the call back to the operator, so we may begin with our question-and-answers session.

Thank you, Mr. Retreage. We will now begin the question-and-answer session. [Operator Instructions]. And the first questions will be from Matt Koranda of Roth Capital Partners. Please go ahead.

Hi. This is Mike on for Matt. Good afternoon.

Good afternoon.

So first question, can you talk a little bit more about the decrease in pricing for telecom and if you expect ASPs to stay at depressed level over the next few years?

Well, I think what we're seeing is increasing volume particularly related around 5G and -- but that comes with a lot of intense competition, particularly out of Asian competitors, most notably South Korea and places like that where they are -- they've been starving with the telecom cycle when it was down. They were starving for business and now they're very aggressively going after some of this business. So to retain what we consider some of the premium business in this space, we've had to compete on price to some degree and I do expect that to be a kind of a permanent change in this environment. Good news, I guess is our cost structure is such that we still make decent margin on this product, just not as good as it used to be.

Okay. And also, were there any other factors driving the decrease in bookings year-over-year, besides customers pushing orders back? And since the end of the quarter, have you started to see a pickup in orders?

I would say that really, we didn't lose any business, nothing was canceled. It just was a push for a variety of reasons, a couple of our customers that were picking relatively new infrared product had electronic component supply issue, interesting enough, out of China. That delayed their -- rollout of their product, and they've since resolved that and now we see that business recovering quite rapidly, so that's good news. We introduced a couple of new products at the defense and commercial sensing tradeshow in April, and we're seeing very good pickup and interest in those products. So we have seen some increasing in the bookings and there's -- and we fully expect that stuff that got -- the majority that stuff that got pushed out of Q3, we expect to see that booked in Q4.

Okay. Thanks. That's helpful. And...

So I think it's just kind of the delay and a bump in the road.

Okay. Great. And then it sounds like BD6 is doing really well, which is great. Can you quantify the benefit you saw from BD6 in the quarter? And also maybe sort of what you expected to contribute over the next few quarters.

I think from -- there's a significant material cost in infrared products as opposed to the visible products. And to date, on the infrared side, the vast majority of the products that we've been producing have been using germanium, which is the major material that's been historically used for infrared products. And even though that price has come down some from its highs, it's still very expensive compared to [Indiscernible] BD6 material. And those -- so it's about anywhere -- depending on the configuration of the lens, how big it is, the diameter and how steep radius, et cetera, it has on it, the material usage varies quite a bit in terms of the content, so it's a little hard to get a number. But in general, it's 25% to 30% less expensive on 40% to 50% of front end of the lens, which is the material component. So as we convert some lenses that were currently made out of germanium to BD6, we'll see the benefit there. And then most of the new projects that we're doing have really been focused on using that material. So we expect to see quite a bit of growth in that material, whether it be molded or diamond turned. And within the quarter, I believe we saw a more than 200% growth of the infrared-molded product segment when we looked at that. So that's a very good indication of the uptick as compared to some of the other product lines that we're doing, even though some of the infrared products were relatively flat or even a little weak in the quarter.

Okay. And then last one for me just regarding the relocation of the Irvington facility. Can you remind us again what the annual cost savings will look like once that's completed?

Yes. I think it's going to be somewhere around $800,000 a year that we'll save from facility costs, people costs and operating costs associated with that facility.

Alright. Thanks. I'll get back in queue.

The next question will be from Marc Wiesenberger of B. Riley FBR. Please go ahead.

Thank you. Good afternoon. Can you quantify what's the long-term mix with regards to IR production between your fabricated and molded kind of moving to BD6 and where it stands now, the cadence and then the ultimate kind of goal going forward?

Short answer, that's really difficult because it's developing and it just depends on where people are going. Some of the trends, I think can speak for that. So basically, if it's a smaller lens, 24 to 25 millimeters in diameter or less, we can mold it. If it's a little bit bigger than that, then it's going to be diamond turned. What as I believe I said on the last call, we're developing internally a diamond-like coating for the chalcogenide. We expect to release that this summer. So the one weakness of our chalcogenide product is that it's a softer material than germanium and some of these other materials, which also, since they've been widely used for a long time, have wear surface coatings available. So once we have that wear surface coating available for BD6, then I think you'll see acceleration of the conversion away from germanium to this material. And so we have a major contract with a rifle scope manufacturer that's just waiting for us. He wants to convert to this material, but he needs that wear surface on his front elements. So that's going to happen, and that's a big, big shift in that product line. So there's a number of elements that are occurring that allow that shift to accelerate, but the timing and how quickly and how much the uptake is not totally dependent on us. First, we have to make it available, and which we've been doing; and secondly, they have to get it into their products and push them into the marketplace. So there's a combination of new stuff as well as conversion of old stuff and how that conversion goes is pretty tough to estimate or forecast. So that's a really tough question to answer with any accuracy, Marc. Sorry.

Understood. Not understood but that was some helpful clarity there. Kind of moving on to the -- I know you streamlined the major markets and product groups to improve some sales opportunities and business development. Can you comment on may be why that hasn't played out exactly as you expected? And how that can change going forward? And/or what's the hiccups?

Yes. I think it's just taken some time for it to flow through the fundamentals. I think it is working. I think we're still committed to that, and we're looking at some ways to increase our sales efficiency in that area, and we are not quite ready to roll out the details of that. But I think in coming quarters, we will. And we'll continue that. It's -- I don't think there's any problem with our strategy from that point of view, I think it's still valid, and we're continuing on that path. I know it's just a [Indiscernible].

Got it. One last one for me. Okay. Understood. One last for me. Just want to confirm that the timing of all the relocation activities and expansion is on track and confident that, that will be done by the end of June.

Absolutely. We're close to that now but I think we're through most of the unknowns at that point, so we will have completed the move by the end of June.

Excellent. Thanks very much.

[Operator Instructions] The next question will be from Gene Inger of ingerletter.com. Please go ahead.

Hi, Jim, it's sort of an interesting report this quarter, and I'm curious, first of all, in the report you mentioned the $700,000 charge that you anticipated in the fourth quarter related to the relocation. Where does that come from if you've been extending the costs all along?

Well, I think, I mean the majority of it is raised around the future rent on the facility once we leave it. So we still have to pay -- unless we -- and obviously, we're going to try and sublease it, but we're not counting on that in terms of how we're accruing for that cost. So that's the vast majority of that restructuring charge. And then the balance of it is the final retention and severance payments for the employees that are still working there up to this point.

So if you've been paying the rent there all along so if they charge related to that, but does that mean it would or would not significantly put a dent in the earnings or revenue picture for Q4?

Well, I mean it will run through the P&L as a restructuring I heard, so...

Yes. I know you guys worked hard on the relocation, and I'm presuming that, that did not cause the focus away from marketing products. I even noticed that you have on your website a number of unfilled job openings, including engineers and sales folks. And I wonder if that relates primarily to New York staff that's not moving to Florida or whether it relates to growth of the new products even if they are at lower margins?

Most of the -- there's a number of people that are left in New York that are not relocating. The majority of those jobs have been filled. There are constant -- there's turnover. Some of those or for that, just normal business-type things, Gene, I think from the standpoint. I don't think there's -- I don't want anybody to think that there's an issue that we don't have enough staff to move the business, that's fully covered and there's no problems with that. So this is -- some of those jobs are in anticipation of future growth that we anticipate as we do expect quite a bit of growth, particularly in the infrared business as we move through time. And also, we are always looking for the right kind of people to support that. We have ramped up our product development and technical capabilities, so a lot of these -- particularly again on the infrared side, there's a lot of new designs going on for the various opportunities that we see there, and so there's a lot of work that we're investing in that growth opportunity and the growth of the company with those resources.

Yes. Finally, Jim, speaking along those lines, I would ask just 2 things. I noticed in your last presentation, you omitted a slide that used to show your various often blue-chip customer base. I'm going to ask about as I would presume, there's still customers or maybe for competitive reasons you don't want to identify who those are? And...

No. I think we haven't lost any of those customers. That's still valid. We just decided they were may be some fresh information we wanted to put out there. We still have the same type of customer base, we still have the same level of recurring business with those customers. I think it runs greater than 60% of our customers have been with us more than 5 years, so I think we still have the same retention and stickiness in that customer base. So I wouldn't take any meaning in the fact that when we updated our deck, we made some changes like that.

The other question I might have on customers would be China because your business there has apparently picked up, especially telecom and there are over 100 EV electronic vehicles manufactured in China and I wonder if your lens capability, which you're expanding over there too, can relate to any of the products or autonomous driving that several of them are working on in terms of Chinese automotive manufacturers, and so on.

Well, I think automotive in general is a good application for a lot of our stuff, particularly what's referred to in the industry as ADAS, which is a -- it's automated, what is it? Advanced driver safety systems, I think. So these are things like driver awareness and blind spot detection, braking, the distances or maintaining distances between vehicles, all those kinds of sensing-type applications, whether they be in cabin or exterior to the vehicle, are good applications for our type of product. We're also in some designs and designed in to a couple of laser headlight-type applications, and that's continuing as well. So whether that business is in North America or China, wherever they're building cars, it's applicable. So we're -- that is a market area that we do participate in and continue to. And as a matter of fact, our Chinese facility is rated to the automotive quality standard so that we can participate in some of those designs into their...

Could you reflect on Europe? Because VW -- Volkswagen, Audi, VW have indicated that by 2025, they expect not less than 25 million or -- EV cars most with driver-assist packages and sensors as you are describing to be on the roads because they're pushing it much harder in Germany than we are.

Yes. Well, I mean some of the initial things or applications that we've done have been through European suppliers. So yes, we're involved in that market as well.

Well, that would be a significant increase that's why I'm pointing it out. So I would say, can I -- may I ask you this just to wrap up for me? If you were talking to, I think the shareholder, which obviously I am interested in or a prospective employee, could be an engineer or sales executive would like that, how do you want to inspire them over the next couple of years to come to work for LightPath or to invest in LightPath?

Well, I think, I mean the growth opportunities that we have, we have really invested in our business for the longer-term growth. So we have these opportunities. There's, as I said, there's -- the beauty of being a component manufacturer is the breadth of different types of applications that you can get involved with, which keeps life very interesting. It's never dull and I think, for example, I think one of the things that may be not have been as clear in the presentation as we could have made it is, even though the revenue was down in the quarter, our unit volume was up. So we didn't make less things, we just didn't get paid quite as much for the things that we made. A lot of that is mix and some of that is price, so we have a very bright future. We are a global company so those things -- we participate all around the world. So it's a pretty exciting company to work for. We're not so huge that people get lost in the shuffle, so I think all of those things make it very attractive to work for LightPath.

Jim, you sound pretty positive. Perhaps a little tired from the relocation, but positive about the future. So good luck and -- but we need more -- they say that proof is in the pudding, we want to see more pudding.

Yes. So do we, Gene. And I think we're -- yes, we've always taken -- tried to take the view of we want to grow as fast as we can, but we want it to be sustainable growth, we're not looking for the instant pop that goes away. And so we try to be a little bit conservative from that standpoint. And we're in it for the long haul.

Thank you. So good luck you all.

Thanks

And ladies and gentlemen, that will conclude our question-and-answer session. I would like to hand the conference back to Jim Gaynor for his closing remarks.

Thank you. So in conclusion, again, as always, we appreciate the support of our stockholders and the dedication of our expanding global team at LightPath. We've our strength and -- with our strength and presence around the world, we remain focused on our efforts to drive top line, bottom line and cash flow growth while making improvements in our overall financial condition as well as providing more valuable to our growing base of customers. We are very excited by our outlook and we'll continue to sustainable improvements. We'll talk more about our strategy and progress at the upcoming B. Riley FBR Investor Conference in Los Angeles later this month, and I look forward to seeing some of you there. Thanks for participating on today's conference call. We look forward to speaking with you next quarter.

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. At this time, you may disconnect your lines.