Laser Photonics Corporation (NASDAQ:LASE) Q2 2023 Earnings Call Transcript

Laser Photonics Corporation (NASDAQ:LASE) Q2 2023 Earnings Call Transcript August 17, 2023

Operator: Greetings, and welcome to the Laser Photonics Corp.’s Second Quarter Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel, Investor Relations. Thank you, sir. You may begin.

Brian Siegel: Thank you, Maria. With me today are Wayne Tupuola, Laser Photonics CEO; and Jade Barnwell, who just joined the company as CFO. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, the specific risks and uncertainties discussed in the reports that we filed periodically with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. I will now turn the conference call over to Wayne. Take it away, Wayne.

Wayne Tupuola: Thank you, Brian, and good morning, everyone. Thank you for joining Laser Photonics Corp.’s quarterly earnings call. I’m going to [indiscernible] CEO of Laser Photonics Corp., and I’m thrilled to share some exciting updates with you today. We reported a soft quarter in Q2 reporting revenue of $1 million as compared to $1.35 million for the same period in 2022. The decrease was primarily related to delayed CapEx spending by customers. While this impacted our second quarter results, I’m encouraged by the progress in our sales and marketing efforts in expanding our pipeline, which are expected to drive long-term positive sales trends. Given that in our target markets of materials [facing] automotive, aerospace and semiconductor, laser cleaning products fall under CapEx spending.

Sales cycles can take 6 to 12 months and often fluctuate quarter-to-quarter. In recent quarters, economic conditions, including interest rate increases, have been putting pressure on sales with respect to interest rates — higher rates have caused customers to delay capital equipment spending as many customers, large and small [indiscernible] companies, to purchase our equipment. In Q1, we began increasing R&D investments to maintain our technological superiority. We equipped our application center with state-of-the-art robotic laser blasters and developed new complementary technologies. Moving forward, we intend to make further investments in R&D to innovate and guarantee the company’s long-term future, and I will touch on one of these platforms in a minute.

Before I go into some of our exciting product innovations that are coming from our R&D investments, I’d like to welcome Jade Barnwell to the team as our newly appointed CFO. Jade has proven success in managing financial growth at larger companies, and we look forward to leveraging the experience she brings. Now I’d like to introduce our latest product developments, the Titan FX platform, for the aerospace industry. This new large platform was designed for laser cutting applications, but we also integrated it into our CleanTech product line to enhance that offering. The platform is designed to provide increased safety as it has fully enclosed frame that meets Class 1 product enclosure standards for the laser industry. The significance of this is twofold.

First, we developed this new platform in response to conversations with an existing large aerospace customer. The aerospace industry has held off using laser cutting capabilities for decades due to safety concerns related to creating stress cracks caused by the heat generated from laser applications. To this day, laser cutting is limited to rough cutting and later defers to downstream CNC machining capabilities. The Titan FX platform revolutionizes laser-cutting applications with our unique laser cold-cutting feature that enables the platform to work with heat sensitive materials without compromising quality or precision. This capability opens up new possibilities for various industries, including aerospace, automotive and electronics, where materials such as composites and plastics require delicate treatment.

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Moreover, our TurboPiercing technology enables rapid advanced perforations, enhancing production efficiencies and reducing cycle times for our customers. By streamlining their operations, we are helping customers achieve greater productivity that meet strict deadlines. Second, the newly developed Titan FX large format design can also be used for CleanTech Class 1 product enclosures, therefore, integrating cutting-edge laser safety features with our renowned laser blasting capabilities. The Titan FX platform will combine 2 essential elements for our CleanTech products, unmatched laser blasting power and enhanced laser safety. With our advanced laser technology, we already offer precision and efficiency that sets us apart from the competition.

Now by incorporating laser safety into our product enclosure, we provide our customers with a comprehensive solution that addresses their needs for both performance and safety. In today’s manufacturing work environment, most of our customers are safety conscious. Therefore, Laser Photonics is stepping up to the plate and providing solutions to modern day problems for the modern day workforce. Automation is also key to running a smooth and efficient manufacturing facility. The Laser Photonics focuses on helping its customers achieve this. Looking ahead, we are confident that the Titan FX platform will further strengthen our position as a leader in laser technologies. We anticipate strong demand from industry seeking advanced laser solutions that combine performance, precision and safety.

By expanding our product offering to cater to the needs of CleanTech and other sectors, we are well positioned for growth and new market opportunities. In conclusion, Laser Photonics Corp.’s Titan FX platform for CleanTech Class 1 product enclosures represents a groundbreaking development as we continue to push the boundaries of innovation in the industry. And we are excited about the prospects and the positive impact this new development will have on our customers’ operations and overall safety. Thank you for your continued support, and we remain committed to delivering cutting-edge solutions that will drive success and growth for Laser Photonics Corp. I will now turn the call over to Jade for a detailed financial update.

Jade Barnwell: Thank you, Wayne, and welcome, everyone. As Wayne mentioned, our second quarter revenue decreased from the same period last year by 28% to $1 million. Our gross margin on those second quarter revenue increased by 600 basis points year-over-year to approximately 71% as our mix was more heavily weighted towards our higher-margin CleanTech systems. Operating income was breakeven this quarter, but benefited from a $700,000 mark-to-market from noncash stock issuance costs related to our IPO, which as mentioned on last quarter’s call, [was Saturday] in April and therefore, needed to be mark-to-market upon delivery. Beyond this noncash cost, the most significant change in our operating cost structure was the increase in sales and marketing resources, R&D investments, NASDAQ and SEC compliance costs and went for our new facility.

GAAP net income and earnings per share were breakeven, down from last year’s $0.3 million and $0.07, respectively. Excluding the previous mark-to-market gains, net loss and loss per share would have been $0.7 million and $0.08, respectively. From a balance sheet and cash flow perspective, we finished the quarter with $9.9 million in cash and no debt. This balance represents a $0.9 million decline during second quarter resulting from our operating activities. Now I’d like to provide some commentary about the full year 2023. Looking at our operating expenses and given our continued growth investments in R&D, sales and marketing and expanding our distribution channel, we expect these costs to rise further throughout the rest of the calendar year.

That concludes my prepared remarks for today. We can now move to questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Chuck Lipson with CSL Associates.

Chuck Lipson: Wayne, we have a pretty demoralized shareholder base. There’s been a lot of management changes, projections haven’t been made. And we keep hearing about all the opportunities that we have. Why have sales declined? When we’ve been going to the trade shows, we haven’t heard — we keep hearing this remarkable amount of opportunities for our lasers and yet the sales aren’t there at all. When and how are we going to turn the ship around? When do we start seeing some sales? We just got some projections that marketing costs are going to increase, but why is sales fail to materialize? Fortunately, we still have some cash, but it’s — we used to hear about new customers almost weekly. And now we haven’t heard of a new customer in months. Could you give us why we should have a lot of hope going forward [indiscernible] pessimistic?

Wayne Tupuola: Yes. Thanks for your question, Chuck. And I think if we reviewed from the starting of the company, back in 2020, where we showed the initial start and a lot of R&D went into the products and an aggressive move to try to gain confidence in adapting this particular technology because that’s the first phase of our gain in scale model, which is for the customers to adapt the technology and adopt. Many of these organizations have received the beta units, and they formed protocols and procedures into the manufacturing process would take some time. Now we’ve gained some tractions in the initial start with the first 3 years the company has been in business. And we put a lot of investments from our parent founder, ICT Investments, which have put a lot of investments.

And unfortunately, we could take the company as far as we could then decided to take it to market. And once that happened, we spent quite some time doing so, and it sort of delayed the momentum that we had going. So with this being said, most of the growth that you’ve been seeing from the end of — or mid-stage of 2022 into the first quarter of 2023 was a result of prior to investments into the company moving forward. So now that we’re fully funded, we need to continue the progress, continue getting the good news out through a strategic marketing plan, which we’ve incorporated. We’ve grown the marketing department, and we have a phenomenal group down there that’s going to basically get the news out. And this being said, it takes about 6 months to get the message out and then you have the sales cycle that will take another 6 months.

So this is an investment year, obviously, after the fund are raising, and we expect to see good results in the near future. I hope that this has answered your question as far as what we experienced, and we see a lot of positive traction. We have a very good sales group that’s making monumental leaps and growth in acquiring the new interest in this disruptive technology. We took it to market, addressing a $46 billion opportunity, and I think it’s greater than that globally because most people are trying to transition out of the hazardous abrasive sandblasting. And I think it takes time for them to exit that particular type of process and develop new protocols and procedures. Most of the characteristics of this technology has just been sanctioned by most coating companies that were giving directions on how abrasive blasting works.

And now they need to develop laser blasting criteria for government agencies and the private sector as well. So my — yes, go ahead.

Chuck Lipson: So it’s all well and good. But last year, we had like — I think it was the Navy, we had the Emerson, we had GE. I take it, they all had beta platforms for our product, have we heard back from them? Are we making any progress in getting real orders?