Lightwave Logic, Inc. (LWLG) Earnings Call Transcript & Summary

Thank you. Greetings. Welcome to the LightWave Logic Q2 2026 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Nick Teves of Investor Relations. Thank you, Nick. You may begin.

Thank you, Operator, and good morning, everyone. Thanks for joining us today for LightWaveLogic's second quarter financial results and business update call. I'm joined on today's call by LightWaveLogic's President and Chief Executive Officer, Eve LeMet, and LightWaveLogic's Chief Financial Officer, Fred Grafham. Please note that this call is in listen-only mode for the duration of the call and that a replay will be posted to the company's website shortly after the call concludes. Some of the matters we'll discuss on this call, including statements and our business outlook, are forward-looking, and as such, this call speaks only as of today, August 11, 2026. Such statements may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The matters discussed on this call are subject to known and unknown risks and uncertainties, and these risks and uncertainties could cause actual operating results to differ materially from those expressed in the call. more detailed description of the risks our company faces is more fully described by the company under caption risk factors included in our most recent form 10-K and 10-Q. As always, LightWave Logic assumes no obligation to update the information presented on this conference call. Lastly, you are cautioned that any time sensitive information may no longer be accurate at the time replay listening or transcript reading.

With that, I'll turn the call over to Yves. Hey, good morning, everyone, and thank you for joining us. The second quarter of 2026 represented another step forward. transition from technology development to commercialization. As you'll hear today, we expanded to five stage three customers. made excellent progress with our multiple foundry engagements, with the first wafers expected to be delivered this month. But let me start with a bigger picture. AI is being adopted and scaled at an incredible rate. And when something grows this fast, bottlenecks show up everywhere. The industry talks about the availability of compute, the memory wall, interconnect bandwidth, power supply. power and cooling. We can debate which one is the biggest constraint at any particular point in time. The more important point is that they are all real, they are all connected, and each one has to be addressed if AI infrastructure is going to keep scaling. For Lightwave Logic, the part of the problem we are focused on is the interconnect. Putting more processors into an AI cluster only helps if those processors can move enormous amounts of data between each other quickly and efficiently. In simple terms, the network has to keep up with the compute. Today, it simply doesn't. As clusters become larger and denser, copper reaches its practical limits over longer distances, and power consumption becomes a bigger part of the networking problem. That is why optical networking and silicon photonics in particular is going through quickly. We are seeing it in actual foundry results, not just in industry forecasts. In their latest calls, Global Foundries said its communication infrastructure and data center business grew more than 60% year-over-year, driven in part by optical networking, and that it expects its Silicon Satellites revenue to more than double in 2026. Tower Semiconductor reported that its silicon settings revenue grew by more than 270% year-over-year and said it is targeting a $1 billion annualized run rate in the fourth quarter. Those are significant numbers and they show how quickly silicon photonics is moving into the mainstream of AI infrastructure. This is a part of the AI infrastructure problem that Lightwave Logic is working to fix. Whether the application is scale up, scale out, or scale across, the industry needs more bandwidth, less power, and smaller devices that can be easily integrated with silicon and manufactured at scale. or perkinamine electro-optic polymers, are designed to make silicon photonics faster and more power efficient with a much smaller footprint. Just as important, they are designed to fit into the foundry and packaging infrastructure the industry already uses. We are not asking the market to build completely new manufacturing systems around us. We are working to make the silicon photonics platform better. Let me now turn to our Silicon Photonics Foundry work with our partners. I am pleased to report that we are making good progress. We currently have three dedicated fund reruns underway. We expect to receive two sets of wafers from those programs during this month of August. The third foundry is expected to deliver its wafers in the fourth quarter. We are also preparing a dedicated run with a source foundry and working towards a tape-out later this year. Taken together, these four programs give us several parallel paths. advancing our technology and supporting our customers. As we discussed on our first quarter call, several of the silicon photonics foundries are under pressure because they are dealing with a combination of very strong customer demand, process development for novel materials, and the need to catch up on capacity investment. Those pressures have not disappeared. In fact, the growth recently reported publicly by some of the leading players shows just how quickly demand for silicon photonics is increasing. Despite this pressure, two foundries are on track to ship wafers to Lightwave Logic this month. Receiving the wafers is an important milestone, but it's not the end of the process. Once the wafers arrive, our team begins the back-end work. That includes depositing the polymer, encapsulating it, preparing the devices for testing, and then completing the characterization work. We will work closely with our customers throughout that process to confirm that the devices meet their performance requirements and to understand any changes that may be needed. The funders are learning from these runs as well. The objective is not simply to show that they can process high bandwidth slot modulators. We are working with them to fine-tune the process, improve yield and device performance, and and make the overall manufacturing flow more efficient and repeatable. That work is essential if we want to move from individual prototype runs to qualification and ultimately generate revenues with volume manufacturing. Our active foundry ecosystem now includes Global Foundry, Tower Semiconductor, Siltera, and a fourth partner that remains unnamed. We believe having several foundry options is important for our customers and for the long-term scalability of our platform. We will continue strengthening these relationships while also looking for opportunities to add new foundry partners in the future. Now let me move to customers. We continue to see strong interest from companies looking for better ways to meet the speed, power, and size requirements of AI networks. Contrast is important, but what matters to us is moving this discussion into real programs with real engineering work behind them. This quarter, a new unnamed Fortune Global 500 customer moved into stage three of our design win process. With the addition of this new customer, it brings our total number of stage three programs to five. This new customer program is initially focused on scalar cross transceivers using coherent modulation. While a lot of the AI discussion is focused on scale up and scale out, Scale Across is making a strong comeback as a critical part of next generation AI factory. The practical limits of building ever-larger data centers are forcing operators to connect multiple campuses located a few miles to tens of miles apart into one virtual data center. This requires extensive use of ultra-high-speed optical links. dense wavelength division multiplexing, and coherent modulation. Stage 3 is where the work becomes much more concrete. We are no longer talking only about requirements or running an initial evaluation. We are working with our customers and generating resources on prototypes, foundry runs, device processing, and testing. For all of our Stage 3 programs, the job now is to meet the technical milestones required for qualification and eventually Stage 4. The next milestones include the delivery, back-end processing, and testing of chips, as mentioned earlier. We expect the fourth quarter to be very busy for our customer facing technical staff and engineering team. In parallel, we are working to turn these technical programs into commercial agreements covering material supply, licensing and engineering work with volume production as a longer-term goal. One such material supply and licensing agreement is already in place and we are actively negotiating a new agreement with another customer whose program is the most advanced on the path to productization with the goal of beginning volume production in the second half of 2027. I want to be clear about the process. These programs take time. Foundry schedules, design changes, packaging and system testing can all affect the pace. We are pleased with the progress, but we are not going to get ahead of the data of all the customers. Our focus is on doing the work, meeting the next milestone, and earning the right to move each program forward. At this point, I would like to welcome Fred Grafam, our new Chief Financial Officer. and bring the type of financial, human, and operational experience we felt we needed to bring LightWave Logic to the next level. I'm very happy to have him on the team. Fred will take you through our second quarter results and the main financial items for the period. Fred, welcome to LightWave Logic, and over to you. Thank you, Yves, and good morning, everyone.

I'm very pleased to have joined Lightwave Logic at this important stage in the company's evolution and to be speaking with you for the first time today. While I am still early in my tenure, I have been highly encouraged by the strength of our technology, the caliber of our team, and the significant market opportunity ahead as the industry seeks solutions to increasing bandwidth and power efficiency demands. My initial focus has been on understanding the business, our customer engagement and commercialization priorities, and ensuring the finance organization is well positioned to support the company's next phase of growth. Working closely with EASE and the leadership team, I am focused on disciplined execution, capital allocation and transparent communications with our shareholders. on my experience in public company finance, strategic transactions, and investor relations, I look forward to helping advance our strategic objectives and effectively communicating our progress to the investment community. I look forward to meeting with many of you in the months ahead and discussing our progress. With that, let me turn to our financial results for the quarter. During the second quarter of 2026, the company maintained a strong balance sheet while continuing to invest in technical development, manufacturing readiness, customer engagement, and infrastructure initiatives that support product commercialization. Revenue for the quarter was approximately $33,000 compared with $26,000 in the prior year period. As of June 30th, 2026, the company had approximately $100,000 of deferred revenue that will be recognized upon achievement of certain milestones under an existing joint development agreement. Net loss was $6.6 million, or 4 cents per share, compared with a net loss of approximately $5 million, or 4 cents per share, in the second quarter of 2025. Our operating expenses continue to reflect targeted investments to advance technology readiness and support future commercialization, including research and development, intellectual property expansion, foundry ecosystem integration, manufacturing scale-up activities, customer engagement, and organizational infrastructure needed to support long-term growth. Research and development expense for the quarter was approximately $3.9 million, compared with $2.6 million in the prior year period, reflecting continued investment in device performance, reliability, qualification, and integration activities. General administrative expenses for the quarter was approximately $3.4 million compared with approximately $2.3 million in the prior year period, primarily reflecting investments in personnel, systems, and processes designed to strengthen the infrastructure necessary to support future growth and commercialization. We ended the quarter with $95.9 million in cash, cash equivalents, and marketable securities, providing significant financial flexibility to execute our strategic priorities. Cash used in operating activities was approximately $9.9 million during the first six months of 2026, compared with $7.3 million in the prior year period, reflecting continued investment in fabrication runs, prototype device development, manufacturing capacity, and commercial expansion. Capital expenditures totaled approximately $1.5 million during the first six months of the year, and we're focused on supporting production readiness and strengthening our IT infrastructure. In summary, we remain focused on aligning our investments with the company's commercialization priorities and long-term value creation strategy. During the second quarter, we strengthened the organization through targeted hiring, increasing headcount by 25% sequentially, particularly in areas critical to manufacturing scale-up, test engineering, and commercial development. We also invested in equipment and clean room expansion to enhance perkinamine manufacturing capabilities and expand quality control processes while continuing to strengthen our IT and systems infrastructure. Collectively, these investments are enhancing our operational readiness, supporting customer engagement activities, and positioning the company to capitalize on our commercial opportunities. Looking ahead, we remain committed to maintaining a strong balance sheet while deploying capital thoughtfully to support commercialization and long-term value creation. We believe our financial position and operational investments provide a solid foundation to execute against our strategic priorities and support future growth. With that, I will turn the call back to Yves.

Thank you, Fred. Before we go to questions, I want to come back on the five priorities we set for 2026. you a straightforward view of where we stand. Our first priority was to move, is to move, our Stage 3 programs closer to Qualification and Stage 4. The important change here is that more of these programs are moving from planning into execution. We now have five customers at stage three and several are approaching the point where foundry-built devices can be tested against specific customer requirements. The wafer deliveries expected in August and the fourth quarter should give us a much clearer technical picture and set up the next decision with those customers. The second priority was commercialization. We are building the commercial framework alongside the engineering work instead of waiting until the qualification is complete. One material supply and licensing agreement is already in place and discussion on the second are active with the customer furthest along to all the products. The conversation is increasingly about how we move together through qualification and into production, not simply whether the technology is interesting. The third priority was to reduce foundry risk and give customers credible manufacturing options. Access to silicon photonics capacity and support for a novel material were major constraints when we began. Today, we are working across four foundry relationships at different stages of execution. Each run builds process knowledge, gives customers more flexibility, and it helps make polymer integration repeatable rather than one-off engineering exercise. The fourth priority was to extend platform performance at 200 Gbps, 400 Gbps and beyond. The opportunity is also broadening. Beyond scale up and scale out, we now have a stage three scale across program using coherent modulation. These applications place different demands on the modulator, but they all require higher bandwidth, lower power, and a print. next Foundry devices will let us test those advantages in customer-relevant designs and manufacturing flows, not only in the lab. Our fifth priority was to prepare the company operationally for a potential production ramp beginning in 2027. Our expansion plans for perkinamine production in Denver are progressing well, with new staff being trained, new equipment being commissioned to increase our batch size and overall production output. If I had to summarize our product position today, I would say that the different parts of the strategy are coming together. Customer programs, foundry execution, device performance, and commercial discussions are increasingly converging. We are not at the finish line, but the next steps are concrete, measurable, and much closer in front of us. job is to execute them well. I want to finish by thanking our employees for the work they put every day. our customers and foundry partners for working through these programs with us, and our shareholders for their continued support. We appreciate it. With that, I will turn it back to Nick and Fred and I will take your questions.

Thank you, Eve. When we announced this call, we invited investors to submit their questions ahead of time. We'd like to thank those investors who took the time to do so, and we appreciate your continued engagement. What are the biggest bottlenecks inside the Foundry ecosystem today? capacity, process development, yield learning, packaging, or test availability.

Excellent question. We talked earlier about the current business pressure on funders for building bare silicon photonics chips. They must increase capacity, establish new production sites, transition to 300 millimeter wafers and bringing new materials such as electro-optic polymers. We should also take a look at what we call BEOL at Lightwave Logic. It means back end of line. integration of perkinamine on a bare silicon photonic chip. We have mentioned in earlier calls that this process is currently done in-house at Lightwave Logic in Colorado. but that we are engaged with external partners in outsourcing this step for high-volume production. This is an important project for LightwaveLogic in 2026 and 2027. We are working with one of our lead customers to build a scalable back-end production line so we can scale the production across all aspects of the final product, the perkinamine production. front-end silicon photonics production and the back-end of line process.

Does the current cash balance provide enough runway to reach the targeted production ramp and assuming no major change in the development timeline?.

Thanks for the question. We strengthened our balance sheet through capital raises completed in late 2025 and early 2026, positioning the company to support its commercialization objectives and plan plan scale-up activities. We continue to closely monitor our progress and align operating and capital investments with key business and development milestones. With no debt and approximately $96 million in cash and marketable securities at the end of the second quarter, we believe we have the financial flexibility to execute on our current organic growth strategy.