Laser Photonics Corporation (NASDAQ:LASE) Q4 2023 Earnings Call Transcript

Laser Photonics Corporation (NASDAQ:LASE) Q4 2023 Earnings Call Transcript April 15, 2024

Laser Photonics Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to Laser Photonics Fourth Quarter 2023 Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel from Hayden IR. Thank you. You may begin.

Brian Siegel: Thank you, Doug. 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 actual results to differ materially from those that the company anticipates. These risks and uncertainties include, but are not limited to, 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 are made or may make or update the factors that may cause actual results to differ materially from those that they forecast. I will now turn the conference over to Wayne. Wayne, take it away.

Wayne Tupuola: Good morning, ladies and gentlemen. Thank you for joining us. This morning, we reported fourth quarter and full year 2023 results. As part of our press release, I wrote a letter to investors reviewing our 2023 highlights and provide a detailed commentary on what to expect for 2024. On today’s call, I will review the quarter, our highlights from 2023 and then outline some of the exciting plans we have for 2024. Before I do this, however, I wanted to introduce Carlos Sardinas, who joined us as VP, Finance at the beginning of April. Carlos brings a wealth of relevant finance and accounting experience, having served in these roles at L3 Harris Technologies and its predecessors. Welcome, Carlos. We’re excited to have you join us.

Before reviewing our quarter, I wanted to address our late filings and impending restatement for 2022. As you know, we are a young public company. And since coming public, we had some turnover in our finance leadership and made an auditor change. These moves came from the lessons we gained throughout the year, concerning the auditor change as part of stating — starting of engagement. Our new auditor did a thorough 2-year review of our financial reporting and asked us to make some changes. Upon reviewing and auditing our 2022 financial statements, our new auditors determined certain previously reported items required statement. Specifically, revenue and AR were not recognized in accordance with ASC 606, and there was a liability related to stock that we issued post-IPO, which was incorrectly recorded under cost of goods sold and needed to be reclassified.

These classifications drove the restatement of our 2022 results and the delay in filing our 2023 10-K as we corrected these items as well as early quarters. We are working to hopefully file our 10-K today. Now that we’re addressing these audit concerns and have brought on Carlos to oversee our finance and accounting, we hope to improve our transparency and financial reporting. We had a strong fourth quarter and revenue growing 673% to $0.8 million versus the restated $0.1 million last year. We saw strength in our CleanTech product lines, which made up 80% of the unit sales during the quarter. We also made significant progress on the customer front by adding 10 customers. These customers came from industrial aviation, energy, maritime and educational industries.

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Q&A Session

Next, I’d like to remind you about the seasoning behind — reasoning behind the noticeable shift in our operating expenses compared to last year. As we said at our IPO and repeated throughout the year, we expected to make significant strategic investments in sales and marketing activities to penetrate existing customers, further identify new potential customers and educate the market about the benefits of our CleanTech product line. One of these investments was participating in a major trade show that attracted more attention than we initially anticipated, the fact that the show helped us win several new orders while building a $70 million-plus pipeline of opportunities for us to pursue over the next 12 months. Based on these early returns, we are confident that the positive impact of these strategic investments will [Indiscernible] throughout the remainder of 2024, setting a strong foundation for sustainable growth and profitability in the near future.

On the cost side, the higher revenue and improved gross margin helped reduce operating losses from $3 million last year to $1.9 million this year. While net losses decreased from $3 million to $0.4 million, our loss per share improved from $0.38 to $0.05. During 2023, we had numerous milestones, I believe, will set us up for future success. With respect to our CleanTech products, we introduced a 3,000-watt system, which will help further differentiate LPC from expanding our cleaning capabilities at the high end of the market. We also developed the CleanTech Robotic Cell Enclosures to reduce safety risk significantly. This programmable enclosure will have the ability to leverage AI to handle several important tasks simultaneously, providing significant efficiencies and reducing [Indiscernible] risk.

We also launched two industry-specific product lines, DefenseTech and MARLIN. DefenseTech addresses laser cleaning and ingrained applications for the military and Department of Defense. It leverages both CleanTech and MarkStar products that has seen early success in the Army, Navy and Air Force. And we’ll talk more in a little bit about our sales and marketing efforts for this market in conjunction with Fonon Technologies. MARLIN is targeted at the maritime industry, specifically smaller crowd vessels. We see this opportunity as having $0.5 million total addressable market, and our portable handheld system is ideal for the smaller cleaning surface treatment areas. Next, I’m going to discuss our relationship with Fonon Corporation. In 2023, ICT transferred the bulk of its LPC stock to Fonon, making the company our largest shareholder.

Fonon has a portfolio of exciting IP for laser, semiconductor and additive manufacturing technologies, including CleanTech, that it plans to monetize to Laser Photonics Corp and its other subsidiaries. In the coming months, we expect to restructure both organizations with LPC becoming a publicly traded majority owned subsidiary of Fonon Corporation. Once the reorganization occurs, LPC will focus on sales, marketing and product development for industrial markets while also serving as Fonon’s manufacturing arm. At the same time, our sister subsidiary Fonon Technologies, which is set up as a government military contractor, will continue to focus on sales and marketing of our DefenseTech line and those customers. An example of why we are doing this happened last October when we expanded our market opportunity into laser cutting with — by licensing Fonon’s high-power turbo piercing technology, which enables cold cutting of materials that would otherwise warp under the heat of a laser.

This technology will serve as the basis for our SaberTech product line and as other — another way for us to expand our total addressable market. In summary, we see our relationship with Fonon as a very synergistic relationship for the companies and shareholders, and we plan to keep you appraised of any developments as things move forward. As we look to 2024, I foresee an exciting year ahead. So far, we announced a significant expansion in our distribution and technology partnerships. During the first quarter, we linked the distribution agreement with Fastenal, a large industrial distributor, for our laser cleaning and protective — personal protective equipment products for the industrial market. More recently, we announced a technology partnership with Brokk, the leading manufacturer of advanced remote-controlled demolition machines, where we will integrate our technology into the robots.

This is a great deal for us as Brokk is one of two companies that provides these machines for nuclear decommissioning, which brings a large pipeline for repeated sales, as these robots become contaminated and need to be replaced frequently. On the government and military side, Fonon and LPC signed a sales and distribution agreement with Incredible Supply and Logistics, or ISL, a leading marketer and distributor to these bodies. We believe this will help expand and accelerate our sales of the DefenseTech product lines going forward. Moving to our product roadmap, we expect to release several exciting new products and next-generation upgrades this year. Starting with the latter, we plan to introduce the next-generation CleanTech systems. Some of the key new features include the ability to customize the power and frequency setting of the system, enable a wider range of materials that can be cleaned.

Certain models will be also a reduction in form factor, lower power requirements and other upgrades. Higher-power systems will be IoT-ready and come with Ethernet and WiFi support. We believe this next-generation system will enhance the user experience while expanding our sales funnel. Returning to SaberTech. We will revamp the Titan FX, our large-format cutting system. The new system will come with automatic sheet metal loading and unloading systems that will load metal sheets into Titan, cut them and unload the pieces to a rack system. With this automation, customers can run the Titan 24/7 to have plenty of material ready for their production shifts. Finally, we will reinvigorate sales of our legacy laser engraving systems by introducing the MarkStar VIN.

This initiated — initiative directly responds to the recently passed California Senate Bill 55, which requires all motor vehicle catalytic converters to be marked with a VIN. This system will have specific capabilities and features targeted at complying with this new legislation, ensuring that automotive manufacturers and repair shops can easily adhere to the law. By incorporating this legal requirement into our product’s capability, we aim to explore and capitalize on untapped potential within the automotive market. In summary, with our new products, distribution and technology partnerships and increased sales and marketing efforts, we have built an estimated pipeline of over $70 million. While this won’t all close this year, we believe it sets us up for improved results in 2024 and beyond and bodes well for our medium- to long-term growth prospects.

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

Operator: [Operator Instructions] There are no questions in the queue at this time.

Brian Siegel: Okay. I’ve got an online question. Wayne, with sales to such key customers as GE, Emerson, the U.S. military, when might we begin to see some repeat orders? It appears many of these sales are one and done test orders, and they haven’t led to anything more substantial.

Wayne Tupuola: Yes. Thanks for the question, Brian. So these opportunities are developed in our pipeline as we acquire these interest levels from high-profile customers, and these customers are inquisitive of the technology and how to incorporate it into an environment. And these are sometimes long and drawn-out processes because, as you know, laser cleaning is a new technology to disrupt sand blasting, abrasive sand blasting. And therefore, there’s a monumental task of developing standard operating procedures to replace the old and introduce the new. So with that being said, once we inquire interest from these high-profile customers, such as GE or Emerson, they basically decide at the high level to make these changes within their companies.

Because it’s just a monumental change throughout the entire organization, procedures need to be developed, and therefore, it takes time for the change to happen. But nonetheless, these changes happen rapidly. Once these systems are in place, procedures are drawn, and they can proceed with the purchase.

Brian Siegel: I’ve got one — another question. This one is about Fonon. Fonon has existed for more than a decade under the control of ICT and its controlling shareholder. If Fonon has strategic advantages that Laser Photonics does not have, why was not — why was Fonon not taken public in the first place rather than Laser?

Wayne Tupuola: What we’ve seen was a development of behind-the-scenes work that Fonon has done with Laser Photonics, and obviously, it was a success story with Laser Photonics going to market, which is the ultimate goal. When you’re developing technology and you’re commercializing it, it took a while for Fonon to position itself for entrance into the public market. So at the time, it wasn’t ready. So now we’re ready.

Brian Siegel: Okay. That appears to be all the questions we have today. Operator, you can close the call.

Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.