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BluGlass CEO Jim Haden discusses record revenue and strategic growth plans

Paul Sanger: I am Paul Sanger for the Finance News Network, and today I’m talking with Blu Glass (ASX:BLG). It has a market cap around 70 million. The company has been developing leading edge semiconductor manufacturing technology and devices for more than a decade. It is a global provider to the gallium nitride photonics industry, delivering cutting edge lasers for the industrial defense display and scientific markets. A warm welcome to Blu Glass CEO, Jim Haden. Jim, welcome back to the Network.

Jim Haden: Thank you, Paul. It’s great to be here.

Paul Sanger: Now Jim, Blu Glass continues to ramp up its technical and commercial progress. Since we last met, the business is now fully integrated following the acquisition and completed insourcing of Gamworks. Your work with the US Department of Defense as part of the ME Commons program has commenced and you posted record revenue in December quarter. How is Q. 3 ’24 commencing for the business?

Jim Haden: We are continuing to execute our plans and our growth is expected to continue with the momentum that we had. As you mentioned, we secured the largest contract in the history of the company with the ME Commons, where the US Department of Defense and DARPA said that what Blu Glass is doing is important and crucial to the security of not only United States, but its allies and to the US economy. It’s key to certain technologies like quantum electronics, which quantum electronics and quantum computing is linked to artificial intelligence. And that is just a core, whoever leads in those areas is going to be a leader and it’s vital in our interests and Australia’s and all of our allies. So I think that is key. And that 2.6 million you already saw in the last quarter led to a record quarter of 855K. for Blu Glass.

We are having continuing business discussions, more opportunities for projects. As we had mentioned in the AGM, projects are key to especially projects that support our roadmap and that’s what these projects are doing. We said this is the roadmap we want. The government is endorsing it as well as the other partners in the hub. So that is a very nice thing. And you also mentioned Gamworks and our ability to bring things into the fab. We did complete that deal with Gasworks. We moved all the equipment into our fab, and what we’re already seeing is there are opportunities for process development that we didn’t realise. And I think the cycle time and the quality, the savings and improvements in both of those areas is going to exceed where we had originally expected. And so with those benefits, there’s the addition of about 400k a year that we said we would be saving money. So we’re continuing to look at improving our operational effectiveness while we’re also trying to increase the top line revenue.

Paul Sanger: And just to quickly go back, there’s no bigger seal of approval than the US Department of Defense for the work that you are doing.

Jim Haden: It’s a very good endorsement, yes. But if you do mention that we did get a couple of other endorsements that came. There’s a company called Continuum, which is the largest quantum computing company in the world. And there is another company IonQ that is the first publicly traded quantum computing company in the world. And they both have looked at what we did. One of the leaders at Continuum said, “Nature says these are the wavelengths that we need for our quantum computers to work.” We didn’t pick that, but what BluGlass is doing is going to give us those wavelengths with their DFB laser. So it’s very important for several of the wavelengths that they need. And then the leader at IonQ said that basically one of the things that worries him is these computers are huge. These are like going back to the 1950’s size of computers that takes up entire rooms.

And so his biggest worry, what keeps him up at night is they’re very big. So how do you scale down in size and up in volume? He turned and looked at me, we were in a forum and he said, “This Blu Glass’s DFP is a solution to both those problems.” Scale down in size and up in volume.

Paul Sanger: And Jim, you’ve just been at the leading industry conference in San Francisco, Photronics West. Can you tell us a bit more about the show and provide an update on the customer engagement?

Jim Haden: There’s several customer engagements and quantum computing and quantum sensors were very big. We had a poster up with our DFBs and attendees were just coming by minute after minute to the booth. And there’s many times where staff, myself, Brad, we’re all talking to people. We had also visiting with the technical talks. So we continue to get feedback from our customers. We’ve met with customers that we previously had met with and we met new customers. And the feedback we’re getting is favorable and it’s helping us to show up our designs and to hone our roadmaps. So the show was very beneficial and it just made us more optimistic about moving forward with both research labs and OEMs and even distributors. So it was a great show all in all, Paul.

Paul Sanger: Yeah, that’s great to hear. And the business has completed a successful placement to sophisticated and institutional investors. Congratulations first off. Can you tell us what the funds you raise will be used for?

Jim Haden: Well, the first part is to continue the momentum that I just talked about. We need to keep that going. And then the roadmap that we discussed, the roadmap where we said that we are going to continue to invest in more functionality in our products and move to higher average selling prices by providing value to our customers. Well, part of that is we will need some influx of capital to bring in some new types of equipment that support the value added to our products. And so that’s one of the areas. Another area then would be our scaling to get more product out, and finally, it will cover our other operating costs that we need to keep moving as we strive for our cashflow positive.

Paul Sanger: And you also have a SVP open for existing shareholders to participate on the same terms of the placement, why should investors participate and when does it close?

Jim Haden: Well, I think that this is a very exciting time for the company. As I mentioned, we are hitting record revenues. We hit a largest contract the company has ever had, and we’re continuing in discussions to move that momentum forward. Well, we’ve increased the limits so they could apply for up to Australian $100,000 in fully paid ordinary shares. And that’s going to be at a discount to the market, Paul, that’ll be at 3.70 cents per share. But in addition to that, there’s a option that’s being attached. So one free attaching option for each of the share that they purchase, and that will be exercisable through February of 2025 at 4.60 cents per share. If that’s not enough, then there’s a piggyback option on top of that where it’ll be exercisable through the… And that’s for each option that they actually exercise. So there’s incentive to exercise beyond that through the end of the next fiscal year or expiring in February of 2027 in that range at 6.0 cents a share.

Paul Sanger: That’s a great structure, Jim. And maybe what’s the investors’ appetite, obviously you’re going to be a busy year for you in 2024. What can investors look forward to for the rest of the year? What are some of the key goals you’re trying to achieve?

Jim Haden: Well, executing on the ME Commons contract is obviously a big one because the government has endorsed us, so now it’s in our hands to execute. And in addition to that, we were invited as part of a Team Defence Australia to participate in the Sea Airspace, a leading defence conference in the United States which attracts companies from around the world. Within this quarter, we’ll complete the Gamworks qualification of all the equipment we brought in, and we’ll see the cost reductions that we are going to get from that. All of that coming together should help us to scale the products and to get more products out into our customer’s hands. And to meet the commitments to the proposals we put out there for these projects. More discussions with distributors and more alliances with key partners in the industry.

Paul Sanger: Sounds like it’s a lot of exciting months ahead, Jim. Jim, many thanks for sharing your news with us today.

Jim Haden: Thank you, Paul. It’s always a pleasure to be here.

Paul Sanger: Thanks, Jim.

Ends.