Sam Rubin is the CEO of Lightpath Technology , an American manufacturer of infrared optics and imaging systems. He transformed the company by shifting from component supply to full system integration through domestic production and strategic acquisitions. This strategy solved a critical supply chain crisis and attracted a strategic investment from the drone industry. Watch as Sam shares how he executed this transformation by refocusing Lightpath towards the value their optics enable for emerging technology and ensuring cultural alignment on every level of the organization. Read the LightPath Technologies Press Release.
Nate Wheeler is the owner of weCreate Web Design and Marketing, a nationally recognized marketing agency that helps manufacturers grow, save money, and become more efficient.
In this episode of Manufacturing Insiders we break down how important a CEOs vision and direction can be for the success of a business. Sam Rubin explains how his understanding of value of imaging technologies created a coherent vision that successfully drove decisions, acquisitions, and production for Lightpath.
Nate Wheeler (00:01)
Welcome to Manufacturing Insiders. Today I have a great guest with me, Sam Rubin. He is the CEO of Lightpath, which is a publicly traded company. He was brought in to really turn around the company right after COVID. And he’s done a great job and really kind of transitioned them from component manufacturer in the infrared and night vision sector and transform them more into an assembly and full completed product company. I hope that I’m saying that correctly. But Sam,
Sam (00:32)
Yeah, you’ve got it.
Nate Wheeler (00:34)
welcome to Manufacturing Insider. Just excited to have the conversation today.
Sam (00:38)
Absolutely good to be here, Nate.
Nate Wheeler (00:40)
Great. So just a little bit about your history. So I believe you have about 25 years in the optics space and you’ve had a lot of experience turning around companies and growing companies, yes?
Sam (00:51)
Yeah, I’m embarrassed to say it’s more like 30 years, but I
Nate Wheeler (00:54)
OK.
Sam (00:55)
like to think of myself as a 40 year old still, so I’ll go 25.
Nate Wheeler (01:01)
Okay.
Sam (01:02)
Yeah, but I spent my whole career really in optics and started on the engineering side, but always had some entrepreneurship in me. And at some point when I was at four labs, which is pretty big company now, you know, three quarters of a billion or so dollars, I got to do a lot of turnaround and fixing and sort of fell in love with that part. guess I’ve, I’m always been a big change driver and love, you know, changing things for the better, of course, hopefully for the better. And turnaround and fixing is really a lot about that. So, so
Nate Wheeler (01:42)
Yep.
Sam (01:43)
fit in nicely with that.
Nate Wheeler (01:45)
Yeah, and I know a lot of different CEOs and leaders have kind of different things that they focus on when it comes to turnaround. know, sometimes you have the efficiency, you’ve got the lean guys, and then you’ve got the people guys, you know, let’s, let’s, you know, get the right leadership in place. You know, and most people incorporate a combination, but is there like a factor that you find to be the most important in a company turnaround?
Sam (02:07)
Well, first of all, any turnaround always includes all of those, right? One level of another, right? And depends on the situation. Sometimes you will come into an incredible team and you really don’t need to worry about that part too much. It doesn’t mean that it’s not part of the turnaround, but if you’re dealt a good hand and a great team, you know, that’s not the driver there. I tend to focus on my technological area always, right? So I’m always around optics and photonics. And therefore by nature, it turns out to be very innovation or technology driven.
Nate Wheeler (02:45)
Right.
Sam (02:45)
And so almost always when I do a turnaround or when I come into a company, I have a very significant effort around the product and offering of the company. Because
Nate Wheeler (02:58)
Right.
Sam (02:59)
at end of the day, this is a technological field. Photonics, optics is really, it’s an enabling technology, if you will. So the power of optics is in what it enables other industries to do optics enables your iPhone camera to be a great camera and to be more than just a phone. Optics enable your wireless mouse to work as a pointing device and so on. So when you think about it, and at end of the day, you always have to understand what value you create, because everything is around that. The value that Optics creates is enabling other industries, enabling other applications to do something, either do it completely, which it couldn’t be done before, or just do it better and faster. And so once you understand where your value is, where you create value for your customers, because that’s where you’re going to capture value, that’s how you’re going to generate profit, then you focus on that. And in my world, that’s tends to be typically around the technology and around sort of enabling to do more things with the same technology.
Nate Wheeler (04:15)
I see. So when you came into the company, do you feel like their understanding of that value to the market was misaligned?
Sam (04:24)
Yes, so Lightbath, it was very much so. So the reason it’s not completely just a company, the reason is also a change in the industry. so optics 20, 30 years ago was a very niche technology. OK, you didn’t see it anywhere where you’re seeing it today. mean, a webcam 30 years ago was this probably massive video camera, you know, camcorder or something like that. And now all of that changed. Along the lines when optics got adopted into more more industries, the whole supply chain value chain of the technology changed. And 20 years ago, 30 years ago, Lightpath’s customers were optics companies, where companies like, if you would, Lockheed Martin or FLIR or Kodak, know, companies that optics was a core part of what they do. And so they designed the entire systems and all they needed a company like Light Path to do is just make the individual lenses. And that why, you know, it’s not only Light Path. 20 years ago, there might’ve been a thousand companies in the U.S. that were making lenses, you know, might be an exaggeration, but hundreds of companies. And now there
Nate Wheeler (05:42)
Right.
Sam (05:42)
are a handful. So the reason is the more optics got adopted into more places, the more customers wanted a complete solution and not just individual components. Leica
Nate Wheeler (05:53)
Yes.
Sam (05:56)
Failed to realize that beforehand and that’s really the change we’ve been doing. We’ve been saying, okay, we have all this great technology. Instead of taking it and just making lenses for someone else to build a camera from, we will build a camera. And if you would, instead of selling glass, we’re now selling pixels. We’re selling images because we’re selling imaging capabilities. So this change where now companies that build drones don’t want to build the whole camera systems themselves. They just want to plug it in. Companies that are integrated in optics into a flow cytometer, for example, don’t want to design the entire thing. They want to buy an optical engine and so on. So that created the opportunity for Lightpath to step up and do that. But again, it goes back to understanding where is the real value. The value of Lightpath, the real value of Lightpath wasn’t in the technology of making a lens. It was in enabling the end application. And once we started focusing on that, we realized, well, we can become much more than just a lens company. And now, you know, probably more than 50 % of our business, we’ve nearly doubled since then and more than 50% of our business is systems is solutions and not the lenses.
Nate Wheeler (07:18)
Wow. When did it get to that 50 % number?
Sam (07:23)
So we started the transition five years ago in 2020. Of course, it was during COVID, so that was a whole set by itself of
Nate Wheeler (07:33)
thing.
Sam (07:34)
challenges. It took about two years just to clean up operational stuff in the company. So there were a lot of problems globally, there was a lot of waste. We had to really button things up and sort those out before we can even start going down a path of change. And about two or three years later, we started taking baby steps. We started doing optical assemblies, saying to a customer, okay, you’re buying from us five lenses. What are you doing with that? We are putting them together to make a assembly, a zoom lens. Let us do the assembly for you. Let us design it for you and do it for you. You know, and that got us to probably about 20%. Then we started making cameras, but then to really make big leaps there and for it not to take 10 years to develop an entire portfolio, we started acquisitions. So we acquired Vizumid technologies that does one type of infrared cameras, it’s uncooled cameras.
Nate Wheeler (08:31)
Mm, okay.
Sam (08:32)
We acquired G5 infrareds that does another type of cameras, those are cooled cameras for long range detection. So two very complimentary product. All of them are based on the technology of Lightpath. In glass, in optics, in optical assembly. So it’s really very synergistic. But instead of developing an entire product line, which would take five years plus, you buy a 10. So it’s very natural for company to do that once you’re already set in a strategic direction.
Nate Wheeler (09:02)
I see. were those acquisitions, or at least some of those within the last year?
Sam (09:09)
Yeah, so Vizamit was about two years ago, almost to date,
Nate Wheeler (09:12)
Okay.
Sam (09:13)
and G5 infrared was half a year ago. Yeah.
Nate Wheeler (09:15)
Okay. Yeah, because I noticed that your capital expenditures were up about what 34 % year over year. And I was wondering if that was because you’re equipment to do this.
Sam (09:23)
Yeah, so the part of it was investing in changing the footprint. So historically, the company when it was a component company was very focused on low cost manufacturing and low cost manufacturing for industrial applications, commercial and industrial. And that naturally led to China. So when I joined five years ago, the vast majority of manufacturing was in China. And China was even 35 % of our revenue because we were selling to OEMs, to original equipment manufacturers that would buy individual lenses for us. Once we started shifting with that to more value added assemblies and systems, naturally those are done in the US more. And the sales end up in the US. China is now less than 5 % of our business. And most of our business is now defense and US oriented. So we’ve made some very large investments in the US. We tripled our footprint here. We bought manufacturing in. Most of the company altogether is in the US at this point, both in terms of revenue and people. The largest manufacturing operation is now here in Florida, where before it was in China. So a very, very different company, that requires capex for sure.
Nate Wheeler (10:45)
For sure, yeah. I mean, it definitely took some foresight, I would imagine, to make the decision because you’re increasing your cost for production by doing it in the US, but now you appear to be positioned very well compared
Sam (11:05)
Yeah.
Nate Wheeler (11:05)
to some of your competitors because of the political environment, geopolitical environment.
Sam (11:10)
Yes, some of it was luck. Some of it was foresight. know, I wish I could take credit for everything. Yeah, yeah, that’s
Nate Wheeler (11:14)
Yeah, as are all things, right?
Sam (11:18)
fine. But I’ll gladly take the credit. The reality is that, you know, it’s really stars aligned in multiple ways. know, the geopolitics really drove Chinese customers to stop buying from us regardless. And so we started looking for avenues and those tended to be more US. You know, we had a feeling that the whole situation with critical minerals like germanium and gallium is going to come to a blow at some point. And we had already a core technology of infrared glass that replaces those materials. We just, you know, doubled down on that and invested much more heavily. We went out and we licensed some additional technology for that. and we made investments and some of the investments were made actually by the government that said, you know, we found partners inside the government that understood already, you know, four years ago, it’s time to start building up manufacturing in the U.S. again. And so, you know, there was a lot of good things that aligned and it also happened to be that our operation in China had fraud going on. So it sort of incentivized me even more to, you know, reduce that one and move back to zero. But everything seems to have worked out really well now for that.
Nate Wheeler (12:45)
Yeah, very much so. Yeah, and so the material that you mentioned, so the glass is characterized as chalcogenic.
Sam (12:53)
Calcogenite. To simplify it, we call it black diamond. So we trademarked black diamond as a name. And you know, then no one needs to break their teeth trying to understand any chemical compositions like that. Yeah.
Nate Wheeler (13:07)
Right, Arsenic and selenium, yes.
Sam (13:11)
That’s one of them. Yes, so calcogenites are actually a family of materials. It’s sulfas and arsenic and selenium and others. And some of the materials we dope it are not even calcogenites, other materials. But that is sort of some of the beauty of it because historically glass or crystals that were used in infrared optics like silicon, germanium and gallium, those are naturally occurring materials. So the properties that nature gave them are the properties you have. You cannot really change them that much but once you start making glass, glass is a synthetic material, really. It’s a chemical composition. Now you can start tweaking it. And you can add a little bit more of that, a little bit less of that, and play around with that a bit more scientifically than I’m doing with my hands, but come up with now 20 compositions. They’re not slightly different from each other, but are so complementary to one another.
Nate Wheeler (14:12)
I see.
Sam (14:13)
So that’s the beauty of those materials.
Nate Wheeler (14:16)
And so the functional beauty of the materials then is the ability to integrate both infrared and night vision into the same lens.
Sam (14:25)
That’s definitely one of them. So multispectral imaging, so imaging in multiple infrared bands, if you would, at the same time through one device is a very big part. If you look at any military equipment, but even in the civilian world to some degree, there are different types of infrared cameras. Night vision, as you pointed out, is one. So it’s actually an infrared camera. So it’s then, you know, called shortwave infrareds that you can use it to look through clouds, for example, or midwave infrared, which allows you to image for a very long distance or long waves that is, you know, different functions for each one of those. Until now, each one of them was a separate camera. So if you look at a turret on a plane, you know, on a big gimbal, at the border or on a jet or on a drone, you will see multiple cameras there because each one of them serves its own function. You couldn’t combine them because each one of them uses different wave bands and that is different types of glass. So geomania works for one but it doesn’t work for the other one and silicon works for the other one but not for that one and so on. These
Nate Wheeler (15:44)
Right.
Sam (15:44)
materials work for all of those. So all of a sudden, you can now start making cameras that can do more than one function. That reduces the size, the weight, the cost, the power consumption even on a drone, everything. So that’s
Nate Wheeler (15:59)
Sure. Everything.
Sam (16:01)
one big difference. Another big difference is the complexity of the system. Because until now, optical designers had only a handful of materials to use, like germanium and silicon, that had set properties to them, like for example, sensitivity to temperature changes. Those materials are very sensitive to temperature changes. So you can take a camera and you can calibrate it to be focused here, okay, in the room, and then it will go out to the desert and it’s 30 degrees more, 40 degrees more, and it will be out of focus. Because the glass changes its properties, when the temperature changes around and with
Nate Wheeler (16:48)
Right.
Sam (16:48)
your manium and silicon in a very extreme way. So those cameras now think about it not on a handheld device where I can just focus it. think you put a drone on a camera on the drone and the drone is now in the desert at 120 degrees. But then night comes and the temperature changes drastically and drops. You’re not gonna go up there to the drone to refocus it. You need to add a motor or an engine or something that would move it and refocus it. So these materials can be insensitive to temperature changes. So you can now build the systems that does not need to be refocused when the temperature changes.
Nate Wheeler (17:31)
wow, okay.
Sam (17:33)
So think of drones that go through temperature cycles like that. A satellite, which during the daytime is baking in the sun and during nighttime is freezing in cold space. You know, those systems are extremely sensitive to temperature change today and our new materials solve those.
Nate Wheeler (17:54)
That’s phenomenal. So with the drone application, which based on the Ukraine-Russia war, I’m making the assumption that drone warfare is the future of warfare. What percentage of drones currently produced for defense applications utilize this technology?
Sam (18:18)
So I’m not a war tactician or strategist to be able to say drones are the future or not. They definitely seem to be playing a much bigger role today, of course, as a new technology. But our materials are very new. I mean, we’re just now starting to roll them out. So we’re already making cameras that are using those materials. Two weeks ago, we actually announced two new long-range zoom cameras that are using our materials and therefore completely germanium free. So this is as far as I know the first in the industry to have that. So all other cameras are still using a lot of germanium and but still you know using inventories of germaniums that exist in the West or finding some ways to get sources of germanium. But for us we’re still doing that.
Nate Wheeler (19:13)
So that’s the other big advantage. I’m sorry for interrupting you there. But that’s the other big advantage that you mentioned before was Germanium. have to source that from countries we really don’t want to be sourcing materials from, whereas these materials are available here. Yes.
Sam (19:30)
Yeah, exactly. So now it’s even worse. Right before, we were sourcing it from countries we didn’t want to source it. Now those countries won’t even sell it to us. So China stopped selling germanium to the US eight months ago. Now there were pretty significant inventories of the US and everyone was going through them and using them. But at the same time, everyone or a lot have been working with us to redesign their systems to now replace germanium with our materials.
Nate Wheeler (19:59)
Wow. So based on my research, it does appear as if there are other companies in the optics space that are using, I guess, comparable products to Black Diamond. How comparable
Sam (20:16)
Yeah.
Nate Wheeler (20:16)
are they? how do we compare those?
Sam (20:19)
Yeah, so Black Diamond is a family of products. Two of them are generic products that their formulation is publicly known, and there are at least two other companies that make those products as well.
Nate Wheeler (20:36)
I see.
Sam (20:37)
All other materials in our Black Diamond family, we own exclusively, and we do not publish the formulation for those, and therefore,
Nate Wheeler (20:46)
Hmm. And so
Sam (20:48)
they’re only ours.
Nate Wheeler (20:49)
and so those proprietary compositions are what’s in that new long range. Okay.
Sam (20:56)
Exactly. Those, the proprietary compositions are the ones that solve the problems of temperature and calibration and focus of cameras. And those are under an exclusive license from the government. They were developed at Naval Research Laboratories some years ago, and we have an exclusive license
Nate Wheeler (21:16)
you
Sam (21:17)
for them. And we’ve been, you know, working to commercialize them. And those are the really game changer, if you would, in performance of systems.
Nate Wheeler (21:27)
Yeah.
Sam (21:28)
The other two, what we call BD6 and BD2, are very generic, exist. There’s another German company that makes them, for example,
Nate Wheeler (21:37)
Mm.
Sam (21:40)
are comparable. The materials that the German company makes and what we make in terms of BD6 are very similar to one another. But the only difference is we’re a US company. We make it completely in the US.
Nate Wheeler (21:52)
Yep.
Sam (21:53)
and we’re fully qualified by Department of Defense.
Nate Wheeler (21:57)
Phenomenal man, you’re making me want to jump off this and go buy some light path stock I will I saw I noticed that yeah pretty pretty
Sam (22:03)
Well, you should. should. The fights went down for the last two days. Good time to buy. Yeah.
Nate Wheeler (22:09)
pretty big drop and I couldn’t really track down any sort of know, really good, good reason for it, but
Sam (22:17)
the micro caps have been hammered. Defense and micro caps have been hammered for the last two days.
Nate Wheeler (22:22)
Yep. Yeah, which to me is a buy opportunity across
Sam (22:25)
Yep.
Nate Wheeler (22:26)
the board. Yeah. So, you know, and then I guess if we’re going to talk more about the stock, you know, the the negative EPS, you know, could be a little bit of a red flag for somebody like how do you how do you rationalize that and what’s your outlook for that?
Sam (22:44)
Well, first of all, we’re a growth company. So we’re more focused on gaining market share and growing right now than on generating profit for dividends or anything like that. mean, there’s a time and place for everything. And there’s the right thing to do at the right time. Right now, our focus is top line and aggressive growth and market share. With it will come, already is coming, the cash flow, and will come the profitability later on. But, you know, it’s not, I don’t think people buy our stock because they think, oh, you know, these guys are gonna generate for me a dollar a year in terms of profit. So I can spend $5 on the share and, you know, within a year I’ll get a dollar back in profit, right? They’re buying us because they see, okay, this company was $30 million for a long time in revenue is now gonna be 50 to 60 million is next year maybe, you know, 100 million or whatever, I’m not guiding or giving any numbers. I’m just, you know,
Nate Wheeler (23:49)
Right, we’re up.
Sam (23:50)
implying how people might look at it. And they say, okay, that’s what I’m buying. I’m buying the, you know, exponential growth and what the company can, will deliver down the road.
Nate Wheeler (24:01)
Right. Which, I mean, I can imagine if, you know, the I don’t know how many of these systems that you’ll be replacing with this new long range camera. But, you know, if the number is big, it makes no sense why they would replace them with old technology that utilizes hard to procure substances that have less performance when you could replace it with a light path.
Sam (24:25)
The numbers are very big to a point of, know, if you look at one application alone, Border Patrol, you know, up until a few months ago, they were talking about putting a few tens of camera, new towers and cameras along the southern border, then it up to 300. Now they’re talking about more than a thousand new towers. And our… you know, cameras that go in there or hundreds of thousands of dollars apiece. So not too difficult to make the math there in terms of what it could be. You know, another one is next generation stingo missile. So we
Nate Wheeler (25:09)
Okay.
Sam (25:10)
make a camera that goes inside that missile. You know, if we go into production for us, it will be somewhere between 50 to $100 million a year in revenue. That doubles the size of the company pretty
Nate Wheeler (25:24)
Right.
Sam (25:24)
much. So there’s big money. mean, that’s the difference between selling lenses for $30 a lens and selling cameras for $30,000 a camera or $300,000.
Nate Wheeler (25:35)
Right. Well, yeah, with the Stinger missile, mean, that’s obviously a disposable application. So, you know,
Sam (25:41)
Yeah, and goodbye.
Nate Wheeler (25:42)
if you can use less cameras on that Stinger missile, that’s a huge advantage too.
Sam (25:45)
Mm-hmm. Yep. Exactly.
Nate Wheeler (25:48)
Phenomenal. No, that’s awesome. So tell me about the experience of getting into this company. And what’s the first thing you do as a new CEO? You realize that this company has some dysfunction. There’s some things that need cleaned up. What do you do? Sit down with the management team and learn everything.
Sam (26:12)
You first of all, so you first of all listen. So I have a, pretty much standard way of approaching this. And that is on my first day, I would email all senior management, all key people, you know, offering a one-on-one meeting, but in the meeting, I’m going to tell, I tell them already ahead of time, I’m going to be asking you a few questions and those questions are, you know, describe to me what you do. Describe to me how you see what the company does. What do you like about what you do? What don’t you like? And what would you really want to see changed in the company? You do that with 10 people, you’re much smarter. You do that with 20 people, you get an incredible understanding of what’s really happening and what’s really going on. And so you start from that.
Nate Wheeler (27:05)
Out of the responses that you got, was there some consistency in them? what did you find surprising about some of those answers?
Sam (27:16)
So in different companies, it was different things. So I won’t talk about Lightbath specifically, one company before that that I did, the answers across the board were we don’t have a cohesive product offering. We’ve been doing a lot of development work, but very few products came out of that. And therefore, we’re not really generating the revenue out of all the work we did in the last five years. And then when I started digging in, I realized that, yeah, the company had maybe five products, but actually developed another 20 that it just never saw all the way through into production for various reasons.
Nate Wheeler (27:56)
Federal R &D tax credits.
Sam (28:01)
So you focus down on that and you start tackling the most painful points first, right? And very quickly also start to get the feel to the vibe and to what’s broken and where it’s broken. And many times there’s one or two processes that are broken or never set up correctly and fixing them alleviates an enormous burden for many people. You know, and that process can be the new product introduction process. So it could be quoting process or order confirmation process. And you realize that, you you start digging into that and you find, my God, my production management team is spending half of their time just on quoting lead times and orders that are never on quotes that are never going to turn into orders. You know, well, okay. So something is wrong with that. You know, you fix that. You’ve instantly released half of the capacity of your production planning team.
Nate Wheeler (29:04)
Right.
Sam (29:05)
They’re grateful, they can focus on the important things and you can move on to the next thing. So you asked at the beginning, what do I focus on in a turnaround and where? I find that I move my chair around literally. I sit with different groups at first. And what I do is I see, find I move it from one to another and to another area until I fixed that one and then I moved to another area and fixed that one. And actually had a very funny story with that one where there was one area of the company that worked really well. Ladies, you know, managed it exceptionally well. Like, I didn’t need to do anything. And she saw me going through and working with each department, but with her not. And she assumed that I thought you know, that I don’t like her or I think she’s really dysfunctional and I’m not working with her. And took it really badly until, you know, she came and talked to or we talked about it and it came up and like, this is, Floor, exact opposite of what you’re thinking. You’re doing such an exceptional work. You don’t need me near you.
Nate Wheeler (30:13)
All right.
Sam (30:14)
So I’m focusing at where it’s spoken, pieces that need me, people that need my attention.
Nate Wheeler (30:20)
Right, right.
Sam (30:21)
But it just dawned on me that, you know, unless you communicate clearly, people build their own assumptions around certain events and certain things, and you really have to control the narrative.
Nate Wheeler (30:33)
Right. Yeah, no, that’s a great story. it definitely illustrates the point of not only just focusing on where the problems are, but also communicating exactly what you’re doing to people so that they don’t take
Sam (30:45)
Yeah, Yeah, exactly.
Nate Wheeler (30:48)
it the wrong way, So tell me about the acquisitions, maybe the recent acquisition. It’s obviously a very intelligent way to vertically integrate and to take on the product development role in addition to the components. How do you merge those? I I would assume they have different CRMs, ERPs, different processes. How do you put all of that together?
Sam (31:15)
Yeah. So, you know, before any of that, I think it’s really important to acknowledge that the number one reason that mergers don’t work or acquisitions fail is culture. That is the number one reason that it happens. OK, just, you know, there’s a lot written about it in different Harvard, HBR, in Harvard Business Review and MIT and what not, but that is it. So we always are working on some acquisitions. We have a pipeline, we have companies we talk to, we have companies we’re thinking about. We always make sure that the teams find a way to interact not related to the acquisition at all or to the prospect of an acquisition. So now most times it’s easy because the companies we’re buying, we’re looking at buying or already in our industry. So we most likely already work together. But if we don’t, if we don’t work closely enough together, we make up sometimes projects because that is the only way to gauge is that I can think of to gauge cultural fit in an unbiased way before you even start due diligence. And so
Nate Wheeler (32:40)
I see.
Sam (32:41)
Any acquisitions that we have done and any acquisitions that we’re going to do typically involved some significant engagement between the teams ahead of time unrelated to the acquisition.
Nate Wheeler (32:56)
Can you describe one of those projects? yeah, how does that work?
Sam (33:01)
Yeah, so we wanted to acquire Vizamid technologies. Vizamid has a great technology of a video engine, FPGA based video engine for infrared cameras. So it does a lot of the image processing and such. We were already in the process of developing, starting to develop some infrared cameras. And so very naturally, it was very easy to say, okay, let’s integrate the Vizimid video engine here and build a camera together. And that’s how I would first mantis multispectral camera came together. So, you know, it’s already a indefinite interaction between the engineers and working together and, and, you know, solving problems and so on. And you very quickly see, okay, when you hit a roadblock, you are going to hit. Are they finger pointing or are solving it? Are they yelling at each other or are they sitting down? And that’s the kind of thing you want to know before you dive into the acquisition because
Nate Wheeler (34:06)
Right.
Sam (34:07)
you know during due diligence it’s like dating. Everything is going to be rosy, everyone puts on their best show you know. It’s your you’re falling in love so everything looks great you know you can’t really tell that but, but it’s sort of like moving in together before you get engaged kind of thing, right?
Nate Wheeler (34:27)
Yeah, that’s so and I’m trying to picture how this process would work. So, you know, I’m, you know, I’m I’m your company, I’m thinking about making an acquisition. You know, I have some preliminary talks with their leadership and say, hey, we’re thinking about doing this acquisition. How do you feel about they’re like, yeah, we would be open to that. And then you say, okay, here’s what I like to do. We’re considering integrating our technology into yours. Let’s do a test project.
Sam (34:53)
That could be one way. I could just say to them, let’s think together of some project we can do. Let’s think
Nate Wheeler (34:59)
Okay.
Sam (34:59)
of a product we can develop together. You know, at end of the day, you’re buying, you buy companies because they’re creative to us, not just a bolt on revenue and not just to add, you know, here’s a company that will add $20 million in revenue. We’re buying a company or we merge with companies that we figure, okay, we have something and they have something that together makes something much bigger. So
Nate Wheeler (35:23)
Right.
Sam (35:24)
start thinking of what that much bigger thing is together and some of it can happen already informally before you merge together. So, you know, in the case of G5, for example, okay, they design optical systems using materials. They were designing some of our materials into their cameras before we did the acquisition. So
Nate Wheeler (35:48)
Okay.
Sam (35:48)
we got…We got some interaction, we got some level. G5 is very different because we actually, G5 management and Lightvaugh management have known each other for 20 something years. So it’s more like step cousins reuniting, if you would, or something like
Nate Wheeler (36:04)
Right.
Sam (36:04)
that. Which is why the integration of G5 is just so smooth and easy. It’s really incredible. But it takes some thinking. There isn’t one formula that works for everything. But once you think about what are you really trying to find, where are you really trying to make sure that things are going to work, you can typically come up with something that would help with that.
Nate Wheeler (36:31)
Sure, sure. How important do you find physical proximity between the company being acquired and your company to be? Is that a big factor?
Sam (36:42)
It depends on where your synergy is. Again, we focus on the technology and the product offering and the value creation, not on the cost saving, at least as of now when we do acquisitions. So co-locating the operations and merging them physically and the cost saving are a very small part of this always. So
Nate Wheeler (37:05)
Okay.
Sam (37:05)
at least as of now, that’s the case.
Nate Wheeler (37:08)
Okay.
Sam (37:09)
And definitely for the next few years, could see it. Unless the company happens to be down the road from here and it’s already nearly co-located, sure merging the two into one building makes life much easier.
Nate Wheeler (37:23)
Right. Yeah, and I was just wondering about like kind of evaluation of the engineering teams, you know, how well they collaborate
Sam (37:30)
Yeah.
Nate Wheeler (37:30)
with each other and things like that. Does that have to be an in-person process or is that, you know, fine virtually?
Sam (37:36)
At the end of the day, in person is what really makes a break. But if you’re really going to go and develop something together, even before the acquisition, you’re going to have to have some in-person time. So it’s going to happen.
Nate Wheeler (37:51)
Right. So I’m now talking from the perspective of a contract manufacturer, fabrication shops, machine shops, different providers that would like to get into working with larger companies that want to outsource work to them, that want to help with different aspects of the operation. How many companies do you work with like that?
Sam (38:21)
It’s funny, we were just talking about it this morning. you know, it’s amazing how much of our supply chain, and I’m very happy with that, how much of our supply chain or small local companies. So everything needs machined parts, and
Nate Wheeler (38:39)
Right.
Sam (38:40)
everything needs some secondary processes to serve. And you know, even down to painting, we have a company around the corner here that paints enclosures for us, you know, and we have a company out in Ohio that machines carbide for us, things like that. You know, the end of the day, by count of vendors, the vast majority of vendors are small companies, you know, by value a bit less because they’re very high value items like the detector that goes in a camera, those are done by very large companies typically.
Nate Wheeler (39:18)
Right.
Sam (39:20)
Yeah, we have a very good mix, I would say.
Nate Wheeler (39:22)
So when you like let’s say it’s a machine shop if you’re if you’re looking for a new supplier, you’re going to be looking for them to be a AS 9100 certified ISO certified ITAR registered.
Sam (39:34)
I still for sure, I still certified for sure. It’s a bit less critical for us, but I would say that good machine shops that can hold tight tolerances and turn around the product in a fast time, I would take anyone you know, I would be happy to work with. There’s never enough
Nate Wheeler (39:55)
Okay, yeah.
Sam (39:57)
of those.
Nate Wheeler (39:58)
Yeah, I’ve got a guy down in the Melbourne area. They are AS9100 certified, ITAR registered. Yeah, I’d love to make an introduction.
Sam (40:06)
Yeah, yeah, make an introduction.
Nate Wheeler (40:12)
Yeah, great company too. They’ve got some capacity right now, but they just started working with us about six, seven months ago with marketing and they’re really excited at the leads that have come in and we’re starting to grow them. So it’s cool, but yeah, it’s one cool thing about you know, the podcast in my main business is that I have the opportunity to just meet and work with hundreds
Sam (40:34)
Sure, yep.
Nate Wheeler (40:35)
of different manufacturers. So when it comes to literally anything, I probably know somebody that does it. So when you so when you look at a supplier, you know, whether it be, you know, fabrication, machining, injection molding, any anything that might go into your product. What makes a good relationship there? When you look at them, what makes you say, is a company I want to work with? And what makes you, on the other hand, say, I don’t know so much about this guy?
Sam (41:04)
Well, we first evaluate technical capabilities. If we talk about machine shops, we have some parts that have very tight tolerances. So do they even say they can meet those tolerances? Once they do, now is the question of can they live up to it? So that’s not always the same thing, unfortunately. Assuming they have the…technical capability to produce what we need and they live up to it and make it, then we really judge on lead time on price and on communication. So, you know, the communication part is really important because everyone at some point slips on some lead times. No one has a hundred percent on time delivery. And with the current, you know, supply chain constraints all around the world related to materials and geopolitics and so on, it gets even worse. So you really get measured then at how well you communicate the situation and what is happening. So a vendor that, you know, calls us three weeks in advance and says, Hey, I’m having problems. I’m going to be a week late. Okay. You know, at least we can plan for that. A vendor that five minutes before the end of the delivery day, calls us and says, I’m actually going to be a week late. You get pretty bad points on that because
Nate Wheeler (42:31)
Great.
Sam (42:31)
you knew you’re going to be late a while ago already or you suspected it. So
Nate Wheeler (42:35)
Right.
Sam (42:36)
waiting to the last minute to deliver the news really cripples our planning, right? Or
Nate Wheeler (42:39)
not.
Sam (42:41)
our mitigation plans for that.
Nate Wheeler (42:44)
Yep. No, and that’s the I mean, that would be the same for any industry, any business, you know, that’s just basic human consideration. So if you were to kind of break down sort of your suppliers by manufacturing subsector, what percentage would you say are machining? What percentage would you say are product finishing or injection molding or any other?
Sam (43:12)
I would say materials are a big one. So different types of glass and optical materials,
Nate Wheeler (43:21)
Mm-hmm.
Sam (43:22)
machined parts, because everything has machined parts in them. And then the camera detectors, the semiconductor camera chips, if you would, which only have a very small number of suppliers for that. So it’s a very specific product. But among machining, I mean, we probably have a dozen or so vendors here in the US easily, more like two dozens of vendors, you know, and we still send stuff overseas sometimes because of speed, not because of cost. So it’s
Nate Wheeler (43:57)
Gotcha. Okay.
Sam (43:58)
really frustrating to see that actually we can send something to be made in China and it will, with the travel and all of that, will come
Nate Wheeler (44:07)
Yeah.
Sam (44:08)
back way ahead faster than you know, any US company will do it. And it’s not because of the price that we
Nate Wheeler (44:12)
Yeah, that’s crazy. That is crazy. Yeah.
Sam (44:16)
do that. Yeah. Yeah.
Nate Wheeler (44:18)
And do you, what about like specialty metals? know, you know, Inconel.
Sam (44:23)
Yeah, we have some very unique silicon carbide and such that we use that is very, very specific quality, very specific, you know, spec to it that has to be, you know, measured in a has to be held very, very accurately. And actually, there’s only one company here in the US and another one in Japan, but we don’t buy from the Japan one. So one company here in the US that makes material to that quality and consistency.
Nate Wheeler (44:56)
that makes the material or machines the material. Makes the material, okay.
Sam (44:59)
makes the material. Afterwards, the companies for machining it, machining carbide is whole thing by itself, but
Nate Wheeler (45:04)
Yeah, right.
Sam (45:07)
making carbide of the high purity and qualities that we need. Yeah.
Nate Wheeler (45:12)
I see. Okay. Well, I mean, I don’t want to take up too much more of your time because I know you have a lot of responsibilities
Sam (45:18)
Well, yeah.
Nate Wheeler (45:20)
on your plate. But I think this is a fascinating conversation. Very, very exciting to get the chance to chat with you and learn kind of what your
Sam (45:29)
same here.
Nate Wheeler (45:30)
process was and definitely enjoy it. You know, appreciate your time.
Sam (45:35)
Absolutely good seeing you, Nate, and look forward to see this go live.
Nate Wheeler (45:38)
Awesome. Thanks, Sam.
Sam (45:39)
Thank you.