Interview with Laser Photonics CFO Carlos Sardinas on the Recent Control Micro Systems Acquisition

Interview With Laser Photonics Principal Financial Officer, Carlos Sardinas, Discussing Recently Announced Control Micro Systems Transaction

Laser Photonics Corporation (LPC) (NASDAQ: LASE), a leading global developer of industrial laser systems for cleaning and other material processing applications, today shared an interview with Carlos Sardinas, VP of Finance for LPC, where he speaks on the Company’s recently announced acquisition of the assets of Control Micro Systems, Inc. (CMS). Key messages from the interview included:

  • LPC is diversifying into a new, recession-resistant vertical with attractive growth characteristics;
  • Due to financial challenges, the prior owner under-invested in the business, particularly sales and marketing, and therefore, LPC believes CMS’ products were under-monetized as well;
  • CMS counts several of the top 20 largest global pharmaceutical manufacturers as customers;
  • LPC will combine the engineering and customer support talent previously employed by CMS and LPC’s existing sales and marketing programs with the goal of creating substantial synergies.

See below for a full transcript of the interview:

1. Please explain to investors what CMS does.

Sardinas: CMS specializes in developing custom precision laser solutions for several markets; however, the business that was especially attractive to us was their laser solutions for the healthcare industry, specifically pharmaceutical drug delivery, where they address two very attractive applications: controlled-release tablet production and packaging compliance. With its laser drilling systems, CMS has established itself as a critical supplier for laser systems that create microscopic apertures in tablets, allowing for precise control over drug release rates.

2. Why were these assets especially attractive to LPC from a business, technology and market perspective?

Sardinas: There are several reasons. First, this is a huge, growing industry. According to Grandview Research, the broader market for controlled-release pharmaceuticals was $49.5 billion in 2023 and is expected to grow at a CAGR of nearly 11% through 2030. While the market for CMS’ laser systems that create precise holes in the pharmaceuticals is a tiny fraction of this market, this shows that the demand for these drug delivery methods will continue to grow, and we believe CMS is well-positioned to capture this growth.

Second, not only does this diversify our business into a new growth market, but pharmaceuticals tend to be a recession-proof, or at least highly recession-resistant industry, so we don’t expect to see much cyclicality.

The third is synergies. We believe these assets were significantly under-monetized and had become neglected after being acquired in 2022. The acquiring Company was saddled with debt and did not invest in growth initiatives like sales and marketing due to its debt load. Despite this, CMS generated more revenue (unaudited) than LPC did in 2023. We believe with the proper investment in sales and marketing programs, an area of strength for LPC, we can accelerate growth.

Finally, we see additional benefits as we acquired existing customer programs with over $2 million in unbilled contracted revenue that we can now turn into cash flow to reinvest in the business. Also, while not technically part of the deal, we hired most of the former CMS employees, who bring engineering and customer support talent to LPC.

3. Who are CMS’ previous major customers?

Sardinas: CMS has several of the top 20 largest global pharmaceutical manufacturers as its customers, including 2 in the top 10. As we invest in sales and marketing, we hope to penetrate these customers further while expanding this list in the coming years.

4. What was the purchase price for the acquisition of CMS?

Sardinas: We paid $1.05 million for the assets consisting of $950,000 in cash and $100,000 in LPC stock.

5. Finally, what are the next steps following the acquisition?

Sardinas: Laser Photonics is set to close the asset purchase agreement over the next week. As we attain control of the assets and develop our game plan, we will provide investors with relevant updates. Thank you.

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