NASDAQ:LASR nLIGHT Q1 2025 Earnings Report $14.49 +0.27 (+1.90%) Closing price 05/23/2025 04:00 PM EasternExtended Trading$14.51 +0.02 (+0.14%) As of 05/23/2025 07:27 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast nLIGHT EPS ResultsActual EPS-$0.04Consensus EPS -$0.17Beat/MissBeat by +$0.13One Year Ago EPS-$0.17nLIGHT Revenue ResultsActual Revenue$51.67 millionExpected Revenue$47.77 millionBeat/MissBeat by +$3.90 millionYoY Revenue Growth+16.20%nLIGHT Announcement DetailsQuarterQ1 2025Date5/8/2025TimeAfter Market ClosesConference Call DateThursday, May 8, 2025Conference Call Time5:00PM ETUpcoming EarningsnLIGHT's Q2 2025 earnings is scheduled for Thursday, August 7, 2025, with a conference call scheduled on Thursday, July 31, 2025 at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by nLIGHT Q1 2025 Earnings Call TranscriptProvided by QuartrMay 8, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00I would now like to turn the conference over to John Marchetti, VP of Corporate Development and Head of Investor Relations. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:00:11Thank you, and good afternoon, everyone. I'm John Marchetti, nLIGHT's VP of Corporate Development and Head of Investor Relations. With me on the call today are Scott Keeney, nLIGHT's Chairman and CEO and Joe Corso, nLIGHT's CFO. Today's discussion will contain forward looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call, and we undertake no obligation to update publicly any forward looking statement except as required by law. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:00:51During the call, we will be discussing certain non GAAP financial measures. We have provided reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release and in our earnings presentation, both of which can be found on the Investor Relations section of website. I will now turn the call over to Enlight's Chairman and CEO, Scott Keeney. Scott? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:01:17Thank you, John. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:01:18Our first quarter results represent a strong start to 2025 with revenue, gross margin and adjusted EBITDA all above the high end of our guidance range. The outperformance was primarily driven by another quarter of record defense revenue, which represented more than 63% of total sales in the quarter, up from 49% in the same quarter a year ago. Furthermore, this growth was supported by significant expansion in our defense product sales, which grew more than 150% year over year. We are uniquely positioned to drive continued growth in A and D with leading high power laser technology developed over the past two decades across the entire technology stack from chips to full laser systems, which is supported by our U. S. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:02:06Manufacturing sites. Our products in A and D are also well aligned with many of Department of Defense most critical priorities, such as directed energy and laser sensing. And during the first quarter, we delivered strong results in each of these critical markets. Directed energy lasers complement traditional kinetic defenses by offering a deep magazine, low cost per engagement and speed of flight delivery. These systems can neutralize a wide range of targets, including drones, rockets, artillery, mortars and missiles, while also rebalancing the economics of protecting key assets. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:02:43We continue to make progress on our Healthy II program. As a reminder, this is $171,000,000 DoD program to develop a one megawatt high energy laser with a completion date expected in 2026. The shipment of critical components towards this program was a significant driver of a record defense product revenue in the quarter and is expected to be a substantial contributor to the growth through the remainder of the year. Our work on the Army's DEM SHORD effort, which is programmed to develop a 50 kilowatt high energy laser for short range air defense, continues to progress, and we expect to complete our work on this contract in the middle of the year. The success we have achieved to date in key programs reinforces the importance of our vertical integration strategy in the directed energy market, where we leverage our entire technology stack to deliver the highest performing and most cost effective high energy lasers. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:03:35This success has increased interest in our directed energy capabilities, both domestically and among our international allies. In The US, we continue to respond to RFPs and RFQs associated with the President's Golden Dome executive order, which specifically highlights nonkinetic missile defense capabilities as an area for development. With the mandate to build these systems in The United States, we believe we are well positioned to benefit from this effort over the coming years. Internationally, our work to support the Israeli Iron Beam program is progressing, and we have a growing pipeline of new opportunities that we expect to begin closing in the coming quarters. We have generated revenue at nearly every level of vertical integration in the direct energy market, and we have established ourselves as one of the most comprehensive suppliers to the US government, other prime contractors and foreign allies. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:04:29We also continue to gain momentum in our laser sensing markets. Our laser sensing products include missile guidance, proximity detection, range finding and countermeasures and have been incorporated into several significant and long running defense programs, all which remain key defense priorities under the current administration. Our historical performance on these programs and our early success on multiple classified programs have created many new opportunities for us in this market. Over the last several quarters, we have bid on multiple new programs that have increased both the number of opportunities and the size of our sensing pipeline. In addition, further opportunities in the Golden Dome initiative have emerged and could become a significant contributor to our growth in defense in 2026 and beyond. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:05:18The solid start to the year combined with our growing pipeline of both direct energy programs and laser sensing opportunities gives me increased confidence that we can grow our revenue in aerospace and defense by at least 25% in 2025. Turning to our commercial markets. Overall, our industrial and microfabrication markets remain challenging, though we did see some improvement compared to last quarter. The sequential growth in our commercial markets was driven by an increase in microfabrication sales as operations at our Thai contract manufacturing partner have stabilized, enabling us to satisfy customer demand. While we are pleased with the stabilization of manufacturing, demand is expected to remain weak through the remainder of the year. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:06:01Longer term, we remain optimistic about opportunities for growth in metal additive manufacturing, particularly within the aerospace and defense markets, as they look to accelerate prototyping timelines and build resiliency into supply chains with domestic capabilities. Before I turn the call over to Joe to review our first quarter financial results, I'd like to briefly touch on the topic of tariffs. We have spent a significant amount of time over the last couple of months evaluating many different scenarios. And while there continues to be a significant amount of debate and uncertainty around what the tariff landscape will ultimately look like, the impact of these extraordinarily high tariffs on the overall economy, demand from our customers and material costs for our products, there are a few comments I would like to make. First, we do not expect a significant impact on our business in Defense over the long term. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:06:52Over the short term, however, there may be some margin variability in our defense products as a result of the tariffs placed on some of the important materials used to manufacture these solutions. While the ultimate impact of tariffs on these products is still to be determined, we do not expect them to have a significant negative effect on our demand or long term profitability of these solutions. Outside of defense, we have shifted the production of our commercial lasers from Shanghai, which we closed in late twenty twenty four, to our automated facility in the Pacific Northwest and to our contract manufacturing partner in Thailand. Our ability to ship manufacturing between The U. S. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:07:28And Thailand should enable us to better manage tariff associated risk. In summary, I'm pleased with the strong start to 2025, particularly around the ramp of our defense products, and I'm increasingly confident about the long term growth in A and D based on our unique leadership across the technology stack for high power lasers. Let me now turn the call over to Joe to discuss our first quarter financial results. Joseph CorsoChief Financial Officer at nLIGHT00:07:52Thank you, Scott. Total revenue in the first quarter of twenty twenty five was $51,700,000 an increase of 16% compared to $44,500,000 in the first quarter of twenty twenty four. Aerospace and Defense revenue was $32,700,000 in the quarter, up 50.4% year over year and 8.6% sequentially. Growth in the quarter was driven by increased defense products revenue, which increased more than 150% compared to the same quarter a year ago, primarily due to increased deliveries of components into our Healthy II direct energy laser program. We expect A and D revenue to grow sequentially in the second quarter of twenty twenty five. Joseph CorsoChief Financial Officer at nLIGHT00:08:33And as Scott mentioned earlier, we feel increasingly confident that full year revenue from our A and D market should grow at least 25% year over year. First quarter revenue from our commercial markets, which includes industrial and microfabrication, was $19,000,000 a decrease of 16.8% year over year, but up 9.9% sequentially. Revenue from these markets was largely in line with expectations as industrial demand remained weak, and the quarter over quarter improvement in microfabrication sales was largely a result of our manufacturing partner being able to satisfy orders that had been previously unable to ship. Product revenue for the first quarter was $35,700,000 an increase of 21.5% compared to $29,400,000 in the first quarter of twenty twenty four. The year over year increase in product sales was due to growth in defense product revenue, partially offset by a decline in commercial revenue. Joseph CorsoChief Financial Officer at nLIGHT00:09:31Development revenue of $16,000,000 in the first quarter increased 5.4% compared to the same quarter a year ago. Total gross margin in the first quarter was 26.7% compared to 16.8% in the first quarter of twenty twenty four. First quarter gross margin included approximately a $1,900,000 benefit related to duty reclaim. Excluding the impact of this benefit, total gross margin for the first quarter would have been approximately 23%, which is still above the high end of our guidance range, as both product gross margin and development gross margin were ahead of expectations. Products gross margin in the first quarter was 33.5% compared to 20.9% in the first quarter of twenty twenty four. Joseph CorsoChief Financial Officer at nLIGHT00:10:17First quarter products gross margin was positively impacted by higher product volumes, a favorable mix in duty reclaim. Development gross margin was 11.5% compared to 8.9% in the same quarter a year ago. The upside in development gross margin was largely a result of program mix in the quarter. Going forward, we still expect development gross margin to remain in the 8% range. Operating expenses were $23,400,000 in the first quarter compared to $22,200,000 in the first quarter of twenty twenty four. Joseph CorsoChief Financial Officer at nLIGHT00:10:52Non GAAP operating expenses were $17,800,000 in the first quarter, a slight increase compared to $17,200,000 in the first quarter of twenty twenty four. GAAP net loss for the first quarter was $8,100,000 or $0.16 per share compared to a net loss of $13,800,000 or $0.29 per share in the same quarter a year ago. Adjusted EBITDA for the first quarter was $116,000 compared to a loss of $4,900,000 in the first quarter of twenty twenty four. Turning to the balance sheet. We ended the first quarter with total cash, cash equivalents, restricted cash and investments of $117,000,000 During the quarter, we drew down $20,000,000 from our $40,000,000 line of credit. Joseph CorsoChief Financial Officer at nLIGHT00:11:36Given the ongoing uncertainty surrounding the impact of tariffs and our expectations for increased working capital needs to support the growth in our A and D markets, we thought it was prudent to put a cash buffer in place on our balance sheet. Inventory increased to $43,800,000 at the first quarter compared to $40,800,000 at the end of twenty twenty four. The increase in inventory is primarily to support the forecasted ramp in directed energy products. Turning to guidance. Based on the information available today, we expect revenue for the second quarter to be in the range of $53,000,000 to $59,000,000 The midpoint of $56,000,000 includes approximately $38,000,000 of product revenue and $18,000,000 of development revenue. Joseph CorsoChief Financial Officer at nLIGHT00:12:21We expect A and D revenue in the second quarter of twenty twenty five to increase sequentially and year over year and weakness in our industrial and microfabrication markets to continue throughout the year. Turning to gross margin. Products gross margin in the second quarter are expected to be in the range of 27% to 33%, and we expect development gross margins to be approximately 8%, resulting in a total gross margin range of 19% to 25%. As we've mentioned previously, as a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs. In addition, we are navigating a highly uncertain global trade market. Joseph CorsoChief Financial Officer at nLIGHT00:13:04While we don't expect a significant negative impact to our margins in the second quarter, we could experience further margin pressure in subsequent quarters if the current structure and level of tariffs remain in place for the rest of the fiscal year. Finally, we expect adjusted EBITDA for the second quarter to be in the range of approximately negative $4,000,000 to positive $1,000,000 We continue to expect breakeven adjusted EBITDA with quarterly revenue in the $55,000,000 to $60,000,000 range. With that, I will turn the call over to the operator for questions. Operator00:13:38Thank you. Ladies and gentlemen, we will now begin the question and answer Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. Your first question comes from Jim Ricchiuti of Needham and Company. Operator00:14:12Please go ahead. James RicchiutiSenior Analyst at Needham & Company00:14:14Hi, thanks. Good afternoon. Maybe to start off with, can you talk to us about the line of sight you have to the product sales in A and D looking past q two? I mean, you've talked about the growth you're expecting in a and b for the full year. I'm just trying to get a sense as to what kind of visibility you have to product sales. James RicchiutiSenior Analyst at Needham & Company00:14:47Hello? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:49Right. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:51Jim, can you hear me, Jim? James RicchiutiSenior Analyst at Needham & Company00:14:53I I can. Scott, did you get that question? Or should I repeat it? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:57I apologize for the audio problems. Thanks for the question, Jim. I think the as we noted in my comments, the healthy program is certainly one of the drivers of the product revenue. We certainly have visibility with respect to to that program. We certainly have also, you know, increasing both orders and and and the funnel of opportunities and products that further contribute to our outlook to continue to improve defense broadly, but products in particular. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:15:31And that 150% growth in the quarter was certainly one of the highlights for the quarter. James RicchiutiSenior Analyst at Needham & Company00:15:39Great. On the tariff, the issue of tariffs, help us understand where you could be impacted more. Is it in the microfabrication business? Is it relating to the production in Thailand? Maybe just in broad strokes, how should we think about that going forward, you know, assuming the situation doesn't in chain doesn't change or improve? Joseph CorsoChief Financial Officer at nLIGHT00:16:10Yeah. Hi, Jim. This is Joe. I'll take that one. The area where we will be affected most, frankly, is where the the input costs are coming in from China today, and that is disproportionately affects our, industrial fiber laser business. Joseph CorsoChief Financial Officer at nLIGHT00:16:27But, you know, remember, as we think about where we are right now, we're still sitting on some inventory and the like. And so we don't expect a big impact at all in the second quarter, you know, as we go throughout the year depending on what the situation is and where these tariff rates ultimately shake out, you know, could have an impact in in q three and q four. But we're not talking about anything that we feel, you know, today is significant right on the order of a couple hundred basis points. James RicchiutiSenior Analyst at Needham & Company00:17:00Okay. Are you more concerned in that about the the potential indirect impact as it relates to just demand across some of the markets in the commercial side of the business? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:17:11Yes. I think that's that's the thing that gives us pause. It's just how is how are these, you know, dramatic increases in tariffs going to affect, you know, broader markets indirectly. And, you know, that's something that, you know, we can't possibly forecast. But, you know, our business with especially with the defense business, there's a relatively more insulated impact. James RicchiutiSenior Analyst at Needham & Company00:17:37Thank you. Operator00:17:40Your next question comes from Craig Palm of Craig Hallum. Please go ahead. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:17:47Yeah. Thanks. I had some issues joining. So, if you've already talked about some of this stuff, apologies. But, you know, you you you kept your, you know, a and d outlook the same, but I think you mentioned you're increasingly confident. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:18:01So I guess what's changed in the last couple of months? And what would you need to happen or see for you to actually increase the full year guide at some point this year? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:18:10Yes. Good. Thanks, Greg. Sorry about the audio problems. And good question. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:18:16We continue to see traction in not only The US, but also international markets for direct energy and our other applications. So I think that's a theme that we will continue to provide more information as we can release more information there. But as we just talked about, the tariffs certainly add some degree of uncertainty in the global environment, and it's just hard to determine what that's going to be. Again, it's not something that is going to directly affect us as much as perhaps others, but it certainly is a question mark in terms of how the overall economy continues to progress. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:19:07Can you address what the tariff related risk is specifically for A and D? I know you mentioned that the input cost in China on the I think more on the sort of the industrial fiber laser business. But is that something that impacts everything? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:19:23Yes. Mean, we think about certainly where we buy our products and certainly we don't have significant push there from kind of but do our suppliers have secondary pusher. Right? That that's where you just it's difficult to fully address how those tariffs are gonna flow through, you know, the broader supply chains. It's more of that. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:19:44Okay. And and just to be clear, I mean, it's you or some of your suppliers, I mean, are there secondary sources outside of China if the if the current tariff rate sticks? Like, what's everybody doing to mitigate that risk? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:20:01Well, I mean, we're as we talked about in our comments, certainly, we're pleased that we have our operations running in Thailand. Things like that, certainly, we're doing, others are doing. And I think probably every management team out there is scrambling to try to figure out what to do. And but I do think that, you know, we have relatively limited exposure especially with our A and D business. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:20:35Okay. I guess, lastly, just can you can you address the line of credit? I mean, without tapping that, you would have ended the quarter with close to $100,000,000 of cash. I mean, that seems like a pretty good buffer to me even with all these uncertainties. So maybe you can give a little bit more color there. Joseph CorsoChief Financial Officer at nLIGHT00:20:53Yes, Greg. Yes, it's fairly simple. We are expecting that the business is gonna grow in the second half of the year. We've talked about the 25% increase year over year in defense. In our remarks, we talked about we're getting more confident about that. Joseph CorsoChief Financial Officer at nLIGHT00:21:11We wanna make sure that we are thinking about, allocating capital appropriately. We've got a really attractive credit really attractive credit line. You know, the the economy, the world's a little bit bumpy right now to be able to, you know, leverage that credit line to fund some of that working capital that gives us the ability to continue to do all the other things we're doing in the business is, why we why we why we drew on it. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:21:39I mean, is there a a certain level of cash that you want on the balance sheet as a buffer no matter what? I mean, is there is there a certain number that you're sort of looking at? Joseph CorsoChief Financial Officer at nLIGHT00:21:49There's no magic number. I think we talk a lot internally about being, more than adequately capitalized at around a hundred million dollars. But, again, you have quarters in which you are going to need to invest in working capital or in CapEx that we wanna try to make sure that we are funding that, appropriately. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:22:14Yep. Okay. Alright. I know it's probably been a while since I've said it, but, you know, congrats on on the quarter. Was a pretty impressive result. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:22:21Appreciate it, Greg. Joseph CorsoChief Financial Officer at nLIGHT00:22:22Thank you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:22:23Thank you. Operator00:22:27Your next question comes from Reuben Roy of Stifel. Please go ahead. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:22:32Hey, guys. I also had some issues joining, but I guess the upside is I've got conference call music in my head for a few hours. So I guess the did you talk about it's great to hear by the way and congrats on your continued visibility and execution around A and D. Did you give an update on the commercial markets in terms of full year? Has that changed kind of from the way you were looking at that business last quarter? Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:23:02I think you said maybe down 15% to 20%, little up the those were the, I think, the guidelines. But any update there, Joe? Joseph CorsoChief Financial Officer at nLIGHT00:23:08No, Ruben. That's still where we think we are. We had a little bit of a better quarter this quarter, particularly in the microfabrication business as we were able to catch up with some, pent up demand to certain customers. So you saw a little bit of a better quarter in micro, but the general themes that we have been talking about in the broader commercial businesses are still the same. And then on top of that, we've got some incremental risk from demand related to tariffs and the like. Joseph CorsoChief Financial Officer at nLIGHT00:23:42But broadly speaking, no real change here. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:23:47Okay. And then just to follow-up on the tariff discussion. Some companies and obviously, there's a lot of moving parts here and uncertainty and it's been changing pretty rapidly. But a lot of companies have been telling us that they potentially could pass through some costs. It doesn't sound like that's an outcome that you guys are thinking that would be appropriate for your business. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:24:08Is that correct? And if so, again, are there some remedies? Or should we be thinking about some level of gross margin impact given that there are some tariffs and costs going up? I mean, even if we kind of stay steady state from here into the second half. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:24:29Yes, Ruben, it's a very complex topic, obviously. Certainly, are places where we can pass on costs and to mitigate. There's areas where we can ship production to mitigate. There's even some regulatory aspects of the AMD market where we can mitigate. So it's a complex set of topics that we're trying to grapple with, and who knows what the assumption should be for where these tariffs will land. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:24:57I think the broad outlook that we have, as Joe said, is that we don't see, you know, near term any dramatic effect on the business. Longer term, just depends on how long they last and how it affects the broader economy. So that just gives us, you know, some pause about uncertainty in the world. But I don't think there's anything we can really comment on that's specific in terms of outlook. Joe, do Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:25:23you want to add Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:25:24anything? Joseph CorsoChief Financial Officer at nLIGHT00:25:24No. The only thing I would add, Ruben, is that it's caused us to think the widen our margin range a little bit, but it's simply to account for some of that level of uncertainty, not more than that. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:25:40Okay. Got it. And the last question, any update on, funded, unfunded backlog, you know, progression there, you know, as you as you got through q one? Joseph CorsoChief Financial Officer at nLIGHT00:25:50Yeah. No, Ruben. No no major update. I think we're not in the position, you know, today where we're gonna provide that update quarter over quarter. So, but I I would say that as we continue to execute on the program, we still have the right level of, you know, funded backlog plus the unfunded portion. Joseph CorsoChief Financial Officer at nLIGHT00:26:11And then as Scott talked about, our activity around responding to proposals continues to increase and be at healthy levels. So generally speaking, we are pleased with the direction of the defense business in terms of backlog execution and the development of pipeline. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:26:36Helpful. Thank you, Joe. Joseph CorsoChief Financial Officer at nLIGHT00:26:37Thank you, Ruben. Operator00:26:40Your next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead. Troy JensenManaging Director at Cantor Fitzgerald00:26:47Okay. First, I'm still laughing at Greg Phillips. Didn't comment, but congrats on the good results here. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:26:54Hey, Strength. Troy JensenManaging Director at Cantor Fitzgerald00:26:55Hey. For Joe, Joe, for you, I heard you say 1,900,000.0 when you're talking about the cost of goods sold. Did I hear that it's an adjustment to get kind of a a onetime event? Joseph CorsoChief Financial Officer at nLIGHT00:27:05Yeah. That's the way to think about it. I I wouldn't say it so much one time, Troy. It was just, obviously, in light of what's going on in the world with tariffs. Right? Joseph CorsoChief Financial Officer at nLIGHT00:27:15We took a really hard look at opportunities this quarter, and we were able to, you know, effectively reclaim, duties that were paid, and it had a nice benefit, to margin during the quarter. We will continue to reclaim duties, but we don't expect it to be quite at that level as we move forward here in the near term. Now as tariffs continue either continue, they go up, they change, that will have an impact on what that that duty reclaim number is. But we wanted to make sure that we call that out specifically to give you a sense for what, you know, normalized gross margin would be. And so, you know, that had an impact of, you know, call it 500 basis points or so. Troy JensenManaging Director at Cantor Fitzgerald00:28:03Alright. This can you kinda maybe talk us through what you think gross margins could look like here in the middle of the year? Joseph CorsoChief Financial Officer at nLIGHT00:28:09Yes. I think we we expect gross margins to continue to expand. If you look at the midpoint of the, the midpoint of the, guidance, right, our our our products gross margin is about 30%. That's a, you know, slight expansion from where we were in q one. In q one, the margin did what we, you know, hoped it would do as we drove higher volumes. Joseph CorsoChief Financial Officer at nLIGHT00:28:37Our mix improved as we, shipped more a and d product. We recovered in microfab, and we saw some benefit from, duty duty reclaim. As we look to the second quarter, right, it's, you know, up up a couple hundred basis points. Some of that is continued growth in a and d. Right? Joseph CorsoChief Financial Officer at nLIGHT00:28:56As we talked about, we don't expect, you know, to see the same revenue expansion in microfab. Microfab has pretty good margins. So we we think as we continue to drive higher volumes, we'll get better absorption. The mix of business is at the right levels that we would expect, directionally our margins to continue, to progress and get better as we move throughout the year. Troy JensenManaging Director at Cantor Fitzgerald00:29:24Alright. Perfect. And just maybe to follow-up on Greg's questions too about the line of credit. Is there any government customers that require you to have healthier balance sheets? Is that any chance, and a reason why you do this too? Joseph CorsoChief Financial Officer at nLIGHT00:29:36No. No. Not at all. No. Troy JensenManaging Director at Cantor Fitzgerald00:29:40Okay. Alright. Perfect, guys. Alright. Well, good luck going forward. Joseph CorsoChief Financial Officer at nLIGHT00:29:43Thank you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:29:43Thanks, Troy. Operator00:29:53Your next question comes from Mark Miller of Benchmark. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:29:57Just Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:01what we're hearing today and previous, it sounds like second half will be somewhat stronger than the first half. Can you is that a good assumption? Joseph CorsoChief Financial Officer at nLIGHT00:30:11Mark, simply put, yes, it's a it's a good assumption. We expect the second half to be better than the first. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:17One of your competitors reported healthy results applications. I'm just wondering how additive business is going for you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:30:27We're making good progress in additive, and but we are focused on customers in The U. S. And Europe. And that's an area where there's more limited growth in the market relative to the markets in some other countries. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:52Thank you. Operator00:30:53Thank Operator00:31:01you, ladies and gentlemen. That concludes our question and answer session. I will now turn the conference back over to John Marchetti. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:31:11Thank you, everyone, for joining us this afternoon and for your continued interest in Enlight. We will be participating in several investor conferences this quarter. We look forward to speaking with you during those events and throughout the quarter. Have a great afternoon. Operator00:31:25This concludes today's conference. Thank you for attending. You may now disconnect your line.Read moreParticipantsExecutivesJohn MarchettiVP - Corporate Development & Investor RelationsScott KeeneyCo-Founder, CEO & ChairmanAnalystsJoseph CorsoChief Financial Officer at nLIGHTJames RicchiutiSenior Analyst at Needham & CompanyGreg PalmSenior Research Analyst at Craig-Hallum Capital Group LLCRuben RoyManaging Director - Equity Research at Stifel Financial CorpTroy JensenManaging Director at Cantor FitzgeraldMark MillerEquity Research Analyst at The Benchmark Company LLCPowered by Key Takeaways nLIGHT beat Q1 guidance with $51.7 M revenue (+16% YoY), 26.7% gross margin, and break-even adjusted EBITDA, driven by record defense revenue (63% of sales) and >150% growth in defense product sales. Strong A&D execution on the $171 M Healthy II 1 MW laser program, DEM SHORD 50 kW contract, vertical integration, and work under the U.S. Golden Dome order and Israeli Iron Beam has management confident in ≥25% A&D revenue growth in 2025. Commercial industrial and microfabrication markets remain challenged, though Q1 sequential improvement in microfabrication sales occurred as Thai manufacturing stabilized, with demand weak through year-end but long-term metal additive manufacturing prospects positive. While high tariffs on Chinese inputs may cause short-term margin variability in commercial products, nLIGHT expects minimal long-term impact on defense margins and is mitigating risk by shifting production to the U.S. and Thailand. Q2 guidance calls for $53 M–$59 M revenue (with sequential A&D growth), 27%–33% product margins, ~8% development margins, and adjusted EBITDA of –$4 M to +$1 M, sustaining the plan for breakeven EBITDA at ~$55 M–$60 M quarterly revenue. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallnLIGHT Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) nLIGHT Earnings HeadlinesQ1 Earnings Highlights: nLIGHT (NASDAQ:LASR) Vs The Rest Of The Electronic Components StocksMay 15, 2025 | msn.comCantor Fitzgerald Brokers Lift Earnings Estimates for nLIGHTMay 15, 2025 | americanbankingnews.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.May 24, 2025 | Porter & Company (Ad)nLIGHT, Inc. (LASR) Q1 2025 Earnings Call TranscriptMay 11, 2025 | seekingalpha.comEarnings Update: nLIGHT, Inc. (NASDAQ:LASR) Just Reported And Analysts Are Boosting Their EstimatesMay 11, 2025 | finance.yahoo.comEarnings call transcript: nLIGHT Q1 2025 beats EPS forecast, stock surgesMay 10, 2025 | uk.investing.comSee More nLIGHT Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like nLIGHT? Sign up for Earnings360's daily newsletter to receive timely earnings updates on nLIGHT and other key companies, straight to your email. Email Address About nLIGHTnLIGHT (NASDAQ:LASR) designs, develops, manufactures, and sells semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. The company operates in two segments, Laser Products and Advanced Development. It offers semiconductor lasers with various ranges of power levels, wavelengths, and output fiber sizes; and programmable and serviceable fiber lasers for use in industrial and aerospace and defense applications. The company also provides laser sensors, including light detection and ranging technologies for intelligence, surveillance, and reconnaissance applications; and fiber amplifiers, beam combination, and control systems for use in high-energy laser systems in directed energy applications. It sells its products through direct sales force in the United States, China, South Korea, and European countries, as well as through independent sales representatives and distributors in Asia, Australia, Europe, the Middle East, and South America. The company was formerly known as nLight Photonics Corporation and changed its name to nLIGHT, Inc. in January 2016. nLIGHT, Inc. was incorporated in 2000 and is headquartered in Camas, Washington.View nLIGHT ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Advance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong EarningsAppLovin Surges on Earnings: What's Next for This Tech Standout?Can Shopify Stock Make a Comeback After an Earnings Sell-Off? 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PresentationSkip to Participants Operator00:00:00I would now like to turn the conference over to John Marchetti, VP of Corporate Development and Head of Investor Relations. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:00:11Thank you, and good afternoon, everyone. I'm John Marchetti, nLIGHT's VP of Corporate Development and Head of Investor Relations. With me on the call today are Scott Keeney, nLIGHT's Chairman and CEO and Joe Corso, nLIGHT's CFO. Today's discussion will contain forward looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call, and we undertake no obligation to update publicly any forward looking statement except as required by law. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:00:51During the call, we will be discussing certain non GAAP financial measures. We have provided reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release and in our earnings presentation, both of which can be found on the Investor Relations section of website. I will now turn the call over to Enlight's Chairman and CEO, Scott Keeney. Scott? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:01:17Thank you, John. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:01:18Our first quarter results represent a strong start to 2025 with revenue, gross margin and adjusted EBITDA all above the high end of our guidance range. The outperformance was primarily driven by another quarter of record defense revenue, which represented more than 63% of total sales in the quarter, up from 49% in the same quarter a year ago. Furthermore, this growth was supported by significant expansion in our defense product sales, which grew more than 150% year over year. We are uniquely positioned to drive continued growth in A and D with leading high power laser technology developed over the past two decades across the entire technology stack from chips to full laser systems, which is supported by our U. S. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:02:06Manufacturing sites. Our products in A and D are also well aligned with many of Department of Defense most critical priorities, such as directed energy and laser sensing. And during the first quarter, we delivered strong results in each of these critical markets. Directed energy lasers complement traditional kinetic defenses by offering a deep magazine, low cost per engagement and speed of flight delivery. These systems can neutralize a wide range of targets, including drones, rockets, artillery, mortars and missiles, while also rebalancing the economics of protecting key assets. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:02:43We continue to make progress on our Healthy II program. As a reminder, this is $171,000,000 DoD program to develop a one megawatt high energy laser with a completion date expected in 2026. The shipment of critical components towards this program was a significant driver of a record defense product revenue in the quarter and is expected to be a substantial contributor to the growth through the remainder of the year. Our work on the Army's DEM SHORD effort, which is programmed to develop a 50 kilowatt high energy laser for short range air defense, continues to progress, and we expect to complete our work on this contract in the middle of the year. The success we have achieved to date in key programs reinforces the importance of our vertical integration strategy in the directed energy market, where we leverage our entire technology stack to deliver the highest performing and most cost effective high energy lasers. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:03:35This success has increased interest in our directed energy capabilities, both domestically and among our international allies. In The US, we continue to respond to RFPs and RFQs associated with the President's Golden Dome executive order, which specifically highlights nonkinetic missile defense capabilities as an area for development. With the mandate to build these systems in The United States, we believe we are well positioned to benefit from this effort over the coming years. Internationally, our work to support the Israeli Iron Beam program is progressing, and we have a growing pipeline of new opportunities that we expect to begin closing in the coming quarters. We have generated revenue at nearly every level of vertical integration in the direct energy market, and we have established ourselves as one of the most comprehensive suppliers to the US government, other prime contractors and foreign allies. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:04:29We also continue to gain momentum in our laser sensing markets. Our laser sensing products include missile guidance, proximity detection, range finding and countermeasures and have been incorporated into several significant and long running defense programs, all which remain key defense priorities under the current administration. Our historical performance on these programs and our early success on multiple classified programs have created many new opportunities for us in this market. Over the last several quarters, we have bid on multiple new programs that have increased both the number of opportunities and the size of our sensing pipeline. In addition, further opportunities in the Golden Dome initiative have emerged and could become a significant contributor to our growth in defense in 2026 and beyond. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:05:18The solid start to the year combined with our growing pipeline of both direct energy programs and laser sensing opportunities gives me increased confidence that we can grow our revenue in aerospace and defense by at least 25% in 2025. Turning to our commercial markets. Overall, our industrial and microfabrication markets remain challenging, though we did see some improvement compared to last quarter. The sequential growth in our commercial markets was driven by an increase in microfabrication sales as operations at our Thai contract manufacturing partner have stabilized, enabling us to satisfy customer demand. While we are pleased with the stabilization of manufacturing, demand is expected to remain weak through the remainder of the year. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:06:01Longer term, we remain optimistic about opportunities for growth in metal additive manufacturing, particularly within the aerospace and defense markets, as they look to accelerate prototyping timelines and build resiliency into supply chains with domestic capabilities. Before I turn the call over to Joe to review our first quarter financial results, I'd like to briefly touch on the topic of tariffs. We have spent a significant amount of time over the last couple of months evaluating many different scenarios. And while there continues to be a significant amount of debate and uncertainty around what the tariff landscape will ultimately look like, the impact of these extraordinarily high tariffs on the overall economy, demand from our customers and material costs for our products, there are a few comments I would like to make. First, we do not expect a significant impact on our business in Defense over the long term. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:06:52Over the short term, however, there may be some margin variability in our defense products as a result of the tariffs placed on some of the important materials used to manufacture these solutions. While the ultimate impact of tariffs on these products is still to be determined, we do not expect them to have a significant negative effect on our demand or long term profitability of these solutions. Outside of defense, we have shifted the production of our commercial lasers from Shanghai, which we closed in late twenty twenty four, to our automated facility in the Pacific Northwest and to our contract manufacturing partner in Thailand. Our ability to ship manufacturing between The U. S. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:07:28And Thailand should enable us to better manage tariff associated risk. In summary, I'm pleased with the strong start to 2025, particularly around the ramp of our defense products, and I'm increasingly confident about the long term growth in A and D based on our unique leadership across the technology stack for high power lasers. Let me now turn the call over to Joe to discuss our first quarter financial results. Joseph CorsoChief Financial Officer at nLIGHT00:07:52Thank you, Scott. Total revenue in the first quarter of twenty twenty five was $51,700,000 an increase of 16% compared to $44,500,000 in the first quarter of twenty twenty four. Aerospace and Defense revenue was $32,700,000 in the quarter, up 50.4% year over year and 8.6% sequentially. Growth in the quarter was driven by increased defense products revenue, which increased more than 150% compared to the same quarter a year ago, primarily due to increased deliveries of components into our Healthy II direct energy laser program. We expect A and D revenue to grow sequentially in the second quarter of twenty twenty five. Joseph CorsoChief Financial Officer at nLIGHT00:08:33And as Scott mentioned earlier, we feel increasingly confident that full year revenue from our A and D market should grow at least 25% year over year. First quarter revenue from our commercial markets, which includes industrial and microfabrication, was $19,000,000 a decrease of 16.8% year over year, but up 9.9% sequentially. Revenue from these markets was largely in line with expectations as industrial demand remained weak, and the quarter over quarter improvement in microfabrication sales was largely a result of our manufacturing partner being able to satisfy orders that had been previously unable to ship. Product revenue for the first quarter was $35,700,000 an increase of 21.5% compared to $29,400,000 in the first quarter of twenty twenty four. The year over year increase in product sales was due to growth in defense product revenue, partially offset by a decline in commercial revenue. Joseph CorsoChief Financial Officer at nLIGHT00:09:31Development revenue of $16,000,000 in the first quarter increased 5.4% compared to the same quarter a year ago. Total gross margin in the first quarter was 26.7% compared to 16.8% in the first quarter of twenty twenty four. First quarter gross margin included approximately a $1,900,000 benefit related to duty reclaim. Excluding the impact of this benefit, total gross margin for the first quarter would have been approximately 23%, which is still above the high end of our guidance range, as both product gross margin and development gross margin were ahead of expectations. Products gross margin in the first quarter was 33.5% compared to 20.9% in the first quarter of twenty twenty four. Joseph CorsoChief Financial Officer at nLIGHT00:10:17First quarter products gross margin was positively impacted by higher product volumes, a favorable mix in duty reclaim. Development gross margin was 11.5% compared to 8.9% in the same quarter a year ago. The upside in development gross margin was largely a result of program mix in the quarter. Going forward, we still expect development gross margin to remain in the 8% range. Operating expenses were $23,400,000 in the first quarter compared to $22,200,000 in the first quarter of twenty twenty four. Joseph CorsoChief Financial Officer at nLIGHT00:10:52Non GAAP operating expenses were $17,800,000 in the first quarter, a slight increase compared to $17,200,000 in the first quarter of twenty twenty four. GAAP net loss for the first quarter was $8,100,000 or $0.16 per share compared to a net loss of $13,800,000 or $0.29 per share in the same quarter a year ago. Adjusted EBITDA for the first quarter was $116,000 compared to a loss of $4,900,000 in the first quarter of twenty twenty four. Turning to the balance sheet. We ended the first quarter with total cash, cash equivalents, restricted cash and investments of $117,000,000 During the quarter, we drew down $20,000,000 from our $40,000,000 line of credit. Joseph CorsoChief Financial Officer at nLIGHT00:11:36Given the ongoing uncertainty surrounding the impact of tariffs and our expectations for increased working capital needs to support the growth in our A and D markets, we thought it was prudent to put a cash buffer in place on our balance sheet. Inventory increased to $43,800,000 at the first quarter compared to $40,800,000 at the end of twenty twenty four. The increase in inventory is primarily to support the forecasted ramp in directed energy products. Turning to guidance. Based on the information available today, we expect revenue for the second quarter to be in the range of $53,000,000 to $59,000,000 The midpoint of $56,000,000 includes approximately $38,000,000 of product revenue and $18,000,000 of development revenue. Joseph CorsoChief Financial Officer at nLIGHT00:12:21We expect A and D revenue in the second quarter of twenty twenty five to increase sequentially and year over year and weakness in our industrial and microfabrication markets to continue throughout the year. Turning to gross margin. Products gross margin in the second quarter are expected to be in the range of 27% to 33%, and we expect development gross margins to be approximately 8%, resulting in a total gross margin range of 19% to 25%. As we've mentioned previously, as a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs. In addition, we are navigating a highly uncertain global trade market. Joseph CorsoChief Financial Officer at nLIGHT00:13:04While we don't expect a significant negative impact to our margins in the second quarter, we could experience further margin pressure in subsequent quarters if the current structure and level of tariffs remain in place for the rest of the fiscal year. Finally, we expect adjusted EBITDA for the second quarter to be in the range of approximately negative $4,000,000 to positive $1,000,000 We continue to expect breakeven adjusted EBITDA with quarterly revenue in the $55,000,000 to $60,000,000 range. With that, I will turn the call over to the operator for questions. Operator00:13:38Thank you. Ladies and gentlemen, we will now begin the question and answer Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. Your first question comes from Jim Ricchiuti of Needham and Company. Operator00:14:12Please go ahead. James RicchiutiSenior Analyst at Needham & Company00:14:14Hi, thanks. Good afternoon. Maybe to start off with, can you talk to us about the line of sight you have to the product sales in A and D looking past q two? I mean, you've talked about the growth you're expecting in a and b for the full year. I'm just trying to get a sense as to what kind of visibility you have to product sales. James RicchiutiSenior Analyst at Needham & Company00:14:47Hello? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:49Right. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:51Jim, can you hear me, Jim? James RicchiutiSenior Analyst at Needham & Company00:14:53I I can. Scott, did you get that question? Or should I repeat it? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:14:57I apologize for the audio problems. Thanks for the question, Jim. I think the as we noted in my comments, the healthy program is certainly one of the drivers of the product revenue. We certainly have visibility with respect to to that program. We certainly have also, you know, increasing both orders and and and the funnel of opportunities and products that further contribute to our outlook to continue to improve defense broadly, but products in particular. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:15:31And that 150% growth in the quarter was certainly one of the highlights for the quarter. James RicchiutiSenior Analyst at Needham & Company00:15:39Great. On the tariff, the issue of tariffs, help us understand where you could be impacted more. Is it in the microfabrication business? Is it relating to the production in Thailand? Maybe just in broad strokes, how should we think about that going forward, you know, assuming the situation doesn't in chain doesn't change or improve? Joseph CorsoChief Financial Officer at nLIGHT00:16:10Yeah. Hi, Jim. This is Joe. I'll take that one. The area where we will be affected most, frankly, is where the the input costs are coming in from China today, and that is disproportionately affects our, industrial fiber laser business. Joseph CorsoChief Financial Officer at nLIGHT00:16:27But, you know, remember, as we think about where we are right now, we're still sitting on some inventory and the like. And so we don't expect a big impact at all in the second quarter, you know, as we go throughout the year depending on what the situation is and where these tariff rates ultimately shake out, you know, could have an impact in in q three and q four. But we're not talking about anything that we feel, you know, today is significant right on the order of a couple hundred basis points. James RicchiutiSenior Analyst at Needham & Company00:17:00Okay. Are you more concerned in that about the the potential indirect impact as it relates to just demand across some of the markets in the commercial side of the business? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:17:11Yes. I think that's that's the thing that gives us pause. It's just how is how are these, you know, dramatic increases in tariffs going to affect, you know, broader markets indirectly. And, you know, that's something that, you know, we can't possibly forecast. But, you know, our business with especially with the defense business, there's a relatively more insulated impact. James RicchiutiSenior Analyst at Needham & Company00:17:37Thank you. Operator00:17:40Your next question comes from Craig Palm of Craig Hallum. Please go ahead. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:17:47Yeah. Thanks. I had some issues joining. So, if you've already talked about some of this stuff, apologies. But, you know, you you you kept your, you know, a and d outlook the same, but I think you mentioned you're increasingly confident. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:18:01So I guess what's changed in the last couple of months? And what would you need to happen or see for you to actually increase the full year guide at some point this year? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:18:10Yes. Good. Thanks, Greg. Sorry about the audio problems. And good question. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:18:16We continue to see traction in not only The US, but also international markets for direct energy and our other applications. So I think that's a theme that we will continue to provide more information as we can release more information there. But as we just talked about, the tariffs certainly add some degree of uncertainty in the global environment, and it's just hard to determine what that's going to be. Again, it's not something that is going to directly affect us as much as perhaps others, but it certainly is a question mark in terms of how the overall economy continues to progress. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:19:07Can you address what the tariff related risk is specifically for A and D? I know you mentioned that the input cost in China on the I think more on the sort of the industrial fiber laser business. But is that something that impacts everything? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:19:23Yes. Mean, we think about certainly where we buy our products and certainly we don't have significant push there from kind of but do our suppliers have secondary pusher. Right? That that's where you just it's difficult to fully address how those tariffs are gonna flow through, you know, the broader supply chains. It's more of that. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:19:44Okay. And and just to be clear, I mean, it's you or some of your suppliers, I mean, are there secondary sources outside of China if the if the current tariff rate sticks? Like, what's everybody doing to mitigate that risk? Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:20:01Well, I mean, we're as we talked about in our comments, certainly, we're pleased that we have our operations running in Thailand. Things like that, certainly, we're doing, others are doing. And I think probably every management team out there is scrambling to try to figure out what to do. And but I do think that, you know, we have relatively limited exposure especially with our A and D business. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:20:35Okay. I guess, lastly, just can you can you address the line of credit? I mean, without tapping that, you would have ended the quarter with close to $100,000,000 of cash. I mean, that seems like a pretty good buffer to me even with all these uncertainties. So maybe you can give a little bit more color there. Joseph CorsoChief Financial Officer at nLIGHT00:20:53Yes, Greg. Yes, it's fairly simple. We are expecting that the business is gonna grow in the second half of the year. We've talked about the 25% increase year over year in defense. In our remarks, we talked about we're getting more confident about that. Joseph CorsoChief Financial Officer at nLIGHT00:21:11We wanna make sure that we are thinking about, allocating capital appropriately. We've got a really attractive credit really attractive credit line. You know, the the economy, the world's a little bit bumpy right now to be able to, you know, leverage that credit line to fund some of that working capital that gives us the ability to continue to do all the other things we're doing in the business is, why we why we why we drew on it. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:21:39I mean, is there a a certain level of cash that you want on the balance sheet as a buffer no matter what? I mean, is there is there a certain number that you're sort of looking at? Joseph CorsoChief Financial Officer at nLIGHT00:21:49There's no magic number. I think we talk a lot internally about being, more than adequately capitalized at around a hundred million dollars. But, again, you have quarters in which you are going to need to invest in working capital or in CapEx that we wanna try to make sure that we are funding that, appropriately. Greg PalmSenior Research Analyst at Craig-Hallum Capital Group LLC00:22:14Yep. Okay. Alright. I know it's probably been a while since I've said it, but, you know, congrats on on the quarter. Was a pretty impressive result. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:22:21Appreciate it, Greg. Joseph CorsoChief Financial Officer at nLIGHT00:22:22Thank you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:22:23Thank you. Operator00:22:27Your next question comes from Reuben Roy of Stifel. Please go ahead. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:22:32Hey, guys. I also had some issues joining, but I guess the upside is I've got conference call music in my head for a few hours. So I guess the did you talk about it's great to hear by the way and congrats on your continued visibility and execution around A and D. Did you give an update on the commercial markets in terms of full year? Has that changed kind of from the way you were looking at that business last quarter? Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:23:02I think you said maybe down 15% to 20%, little up the those were the, I think, the guidelines. But any update there, Joe? Joseph CorsoChief Financial Officer at nLIGHT00:23:08No, Ruben. That's still where we think we are. We had a little bit of a better quarter this quarter, particularly in the microfabrication business as we were able to catch up with some, pent up demand to certain customers. So you saw a little bit of a better quarter in micro, but the general themes that we have been talking about in the broader commercial businesses are still the same. And then on top of that, we've got some incremental risk from demand related to tariffs and the like. Joseph CorsoChief Financial Officer at nLIGHT00:23:42But broadly speaking, no real change here. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:23:47Okay. And then just to follow-up on the tariff discussion. Some companies and obviously, there's a lot of moving parts here and uncertainty and it's been changing pretty rapidly. But a lot of companies have been telling us that they potentially could pass through some costs. It doesn't sound like that's an outcome that you guys are thinking that would be appropriate for your business. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:24:08Is that correct? And if so, again, are there some remedies? Or should we be thinking about some level of gross margin impact given that there are some tariffs and costs going up? I mean, even if we kind of stay steady state from here into the second half. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:24:29Yes, Ruben, it's a very complex topic, obviously. Certainly, are places where we can pass on costs and to mitigate. There's areas where we can ship production to mitigate. There's even some regulatory aspects of the AMD market where we can mitigate. So it's a complex set of topics that we're trying to grapple with, and who knows what the assumption should be for where these tariffs will land. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:24:57I think the broad outlook that we have, as Joe said, is that we don't see, you know, near term any dramatic effect on the business. Longer term, just depends on how long they last and how it affects the broader economy. So that just gives us, you know, some pause about uncertainty in the world. But I don't think there's anything we can really comment on that's specific in terms of outlook. Joe, do Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:25:23you want to add Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:25:24anything? Joseph CorsoChief Financial Officer at nLIGHT00:25:24No. The only thing I would add, Ruben, is that it's caused us to think the widen our margin range a little bit, but it's simply to account for some of that level of uncertainty, not more than that. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:25:40Okay. Got it. And the last question, any update on, funded, unfunded backlog, you know, progression there, you know, as you as you got through q one? Joseph CorsoChief Financial Officer at nLIGHT00:25:50Yeah. No, Ruben. No no major update. I think we're not in the position, you know, today where we're gonna provide that update quarter over quarter. So, but I I would say that as we continue to execute on the program, we still have the right level of, you know, funded backlog plus the unfunded portion. Joseph CorsoChief Financial Officer at nLIGHT00:26:11And then as Scott talked about, our activity around responding to proposals continues to increase and be at healthy levels. So generally speaking, we are pleased with the direction of the defense business in terms of backlog execution and the development of pipeline. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:26:36Helpful. Thank you, Joe. Joseph CorsoChief Financial Officer at nLIGHT00:26:37Thank you, Ruben. Operator00:26:40Your next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead. Troy JensenManaging Director at Cantor Fitzgerald00:26:47Okay. First, I'm still laughing at Greg Phillips. Didn't comment, but congrats on the good results here. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:26:54Hey, Strength. Troy JensenManaging Director at Cantor Fitzgerald00:26:55Hey. For Joe, Joe, for you, I heard you say 1,900,000.0 when you're talking about the cost of goods sold. Did I hear that it's an adjustment to get kind of a a onetime event? Joseph CorsoChief Financial Officer at nLIGHT00:27:05Yeah. That's the way to think about it. I I wouldn't say it so much one time, Troy. It was just, obviously, in light of what's going on in the world with tariffs. Right? Joseph CorsoChief Financial Officer at nLIGHT00:27:15We took a really hard look at opportunities this quarter, and we were able to, you know, effectively reclaim, duties that were paid, and it had a nice benefit, to margin during the quarter. We will continue to reclaim duties, but we don't expect it to be quite at that level as we move forward here in the near term. Now as tariffs continue either continue, they go up, they change, that will have an impact on what that that duty reclaim number is. But we wanted to make sure that we call that out specifically to give you a sense for what, you know, normalized gross margin would be. And so, you know, that had an impact of, you know, call it 500 basis points or so. Troy JensenManaging Director at Cantor Fitzgerald00:28:03Alright. This can you kinda maybe talk us through what you think gross margins could look like here in the middle of the year? Joseph CorsoChief Financial Officer at nLIGHT00:28:09Yes. I think we we expect gross margins to continue to expand. If you look at the midpoint of the, the midpoint of the, guidance, right, our our our products gross margin is about 30%. That's a, you know, slight expansion from where we were in q one. In q one, the margin did what we, you know, hoped it would do as we drove higher volumes. Joseph CorsoChief Financial Officer at nLIGHT00:28:37Our mix improved as we, shipped more a and d product. We recovered in microfab, and we saw some benefit from, duty duty reclaim. As we look to the second quarter, right, it's, you know, up up a couple hundred basis points. Some of that is continued growth in a and d. Right? Joseph CorsoChief Financial Officer at nLIGHT00:28:56As we talked about, we don't expect, you know, to see the same revenue expansion in microfab. Microfab has pretty good margins. So we we think as we continue to drive higher volumes, we'll get better absorption. The mix of business is at the right levels that we would expect, directionally our margins to continue, to progress and get better as we move throughout the year. Troy JensenManaging Director at Cantor Fitzgerald00:29:24Alright. Perfect. And just maybe to follow-up on Greg's questions too about the line of credit. Is there any government customers that require you to have healthier balance sheets? Is that any chance, and a reason why you do this too? Joseph CorsoChief Financial Officer at nLIGHT00:29:36No. No. Not at all. No. Troy JensenManaging Director at Cantor Fitzgerald00:29:40Okay. Alright. Perfect, guys. Alright. Well, good luck going forward. Joseph CorsoChief Financial Officer at nLIGHT00:29:43Thank you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:29:43Thanks, Troy. Operator00:29:53Your next question comes from Mark Miller of Benchmark. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:29:57Just Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:01what we're hearing today and previous, it sounds like second half will be somewhat stronger than the first half. Can you is that a good assumption? Joseph CorsoChief Financial Officer at nLIGHT00:30:11Mark, simply put, yes, it's a it's a good assumption. We expect the second half to be better than the first. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:17One of your competitors reported healthy results applications. I'm just wondering how additive business is going for you. Scott KeeneyCo-Founder, CEO & Chairman at nLIGHT00:30:27We're making good progress in additive, and but we are focused on customers in The U. S. And Europe. And that's an area where there's more limited growth in the market relative to the markets in some other countries. Mark MillerEquity Research Analyst at The Benchmark Company LLC00:30:52Thank you. Operator00:30:53Thank Operator00:31:01you, ladies and gentlemen. That concludes our question and answer session. I will now turn the conference back over to John Marchetti. John MarchettiVP - Corporate Development & Investor Relations at nLIGHT00:31:11Thank you, everyone, for joining us this afternoon and for your continued interest in Enlight. We will be participating in several investor conferences this quarter. We look forward to speaking with you during those events and throughout the quarter. Have a great afternoon. Operator00:31:25This concludes today's conference. Thank you for attending. You may now disconnect your line.Read moreParticipantsExecutivesJohn MarchettiVP - Corporate Development & Investor RelationsScott KeeneyCo-Founder, CEO & ChairmanAnalystsJoseph CorsoChief Financial Officer at nLIGHTJames RicchiutiSenior Analyst at Needham & CompanyGreg PalmSenior Research Analyst at Craig-Hallum Capital Group LLCRuben RoyManaging Director - Equity Research at Stifel Financial CorpTroy JensenManaging Director at Cantor FitzgeraldMark MillerEquity Research Analyst at The Benchmark Company LLCPowered by