NLIGHT, INC. Q3 FY2024 earnings call

• Aerospace and defense business grew 59% YOY with record A&D product revenue; directed energy interest growing, HELSI 2 and Army's DE M-SHORAD programs making progress; Israel's IRON BEAM project involves nLIGHT. • Commercial markets: microfabrication up 40% sequentially; industrial has growth challenges with cutting and welding; additive manufacturing introducing new products like Corona AFX-2000. • Ceased manufacturing operations in Shanghai, transitioning to Thailand and U.S. facilities.

Third quarter revenue was $56.1 million. Aerospace and defense revenue was $30.3 million, 54% of total revenue, growing 59% year-over-year. Microfabrication revenue was $14.3 million, 25% of total revenue, up 19% year-over-year. Industrial revenue was $11.6 million, 21% of total revenue, down 41% year-over-year. Products gross margin was 28.8% and overall gross margins were 22.4%.

• Fourth quarter revenue expected $49M-$54M (midpoint $51.5M) with $36.5M product and $15M development revenue. • Products gross margin 21%-25%, development gross margin ~8%, overall gross margin 17%-21%. • Adjusted EBITDA for Q4 expected -$5M to -$2M. • Estimate breakeven adjusted EBITDA at $55M-$60M quarterly revenue.

• Volatility in commercial markets, especially industrial; continued competition from Chinese laser suppliers impacting industrial sales. • Timing uncertainties in delivery of defense backlog due to new and innovative directed energy-related products.

Q: Talk to line of sight to product revenue in A&D beyond Q4.

A: Strong backlog, visibility into continued growth in defense products in directed energy and sensing.

Q: Engagement with defense primes in Israel on IRON BEAM?

A: Deep engagement, supplier to IRON BEAM, involved in current and future development.

Q: Improvement in microfabrication market?

A: From existing long-term customer orders in the quarter.

Q: Commercial business guidance decline?

A: Volatility in commercial business, microfabrication lumpy, industrial under pressure.

Q: Backlog progress?

A: Yes, seeing expansion in orders and design wins in directed energy and sensing.

Q: Dollar content in directed energy systems?

A: U.S. spend ~$1B/year, Israel adding multi-hundred million/year, nLIGHT participates at component to high integration levels.

Q: Low power in commercial?

A: Related to additive manufacturing lasers, market shift from cutting to higher power.

Q: Margin profile of backlog?

A: Better than recent reporting, challenge is absorption of fixed costs.

Q: Backlog linearity?

A: Not linear, depends on program progress like HELSI 2 with non-linear development work