NLIGHT, INC. Q1 FY2025 earnings call

• First quarter results were strong with revenue, gross margin, and adjusted EBITDA above guidance range. Defense revenue was a key driver, with over 63% of total sales, up from 49% the prior year. Defense product sales grew over 50% YOY.
• Unique position in A&D with high-power laser technology from chips to full systems, supported by US manufacturing. Work on HEL-TD and Army's DEM SHORAD programs progressing. Interest in directed energy capabilities growing domestically and internationally.
• Laser sensing markets have historical performance and new opportunities, with bid activity increasing. Commercial markets remain challenging but saw some improvement in microfabrication due to stabilized Thai manufacturing. Long-term optimism in metal additive manufacturing for aerospace and defense.
• Evaluating tariff impact; no significant long-term impact expected on defense, but short-term margin variability possible. Shifted commercial laser production from Shanghai to US and Thailand to manage tariff risk.

Aerospace and defense revenue in the first quarter of 2025 was $32.7 million, up 50.4% year over year and 8.6% sequentially. Defense revenue represented more than 63% of total sales in the quarter, up from 49% in the same quarter a year ago. Defense product sales grew more than 50% year over year. Commercial markets, including industrial and microfabrication, had first quarter revenue of $19 million, a decrease of 16.8% year over year but up 9.9% sequentially. Product revenue for the first quarter was $35.7 million, an increase of 21.5% compared to the first quarter of 2024. Development revenue was $16 million, increasing 5.4% compared to the same quarter a year ago.

• Expect Q2 revenue to be in the range of $53 million to $59 million, with midpoint $56 million including $38 million product revenue and $18 million development revenue.
• A&D revenue expected to increase sequentially in Q2. Products gross margin in Q2 expected to be 27%-33%, development gross margin ~8%, total gross margin 19%-25%.
• Adjusted EBITDA for Q2 expected to be in the range of approximately negative $4 million to positive $1 million. Breakeven adjusted EBITDA expected with quarterly revenue $55 million to $60 million.

• Tariffs pose uncertainty; impact on commercial markets, particularly industrial fiber laser business, with potential indirect demand impact. Margin pressure possible in subsequent quarters if tariffs remain.
• Uncertainty around global trade market and its effect on overall economy and customer demand.

Q: Talk to us about the line of sight to product sales in A&D looking past Q2.

A: Scott Keeney mentioned visibility with respect to programs like HEL-TD and increasing orders/opportunities funnel.

Q: How are tariffs impacting the business, particularly in microfabrication and production in Thailand?

A: Joe Corso said tariffs disproportionately affect industrial fiber laser business, but limited impact in Q2, potential impact in Q3/Q4.

Q: What's changed to make you increasingly confident in A&D outlook?

A: Scott Keeney noted traction in US and international markets for direct energy and other applications.

Q: Address tariff-related risk for A&D?

A: Scott Keeney said it's complex, with limited exposure in A&D, but uncertainty in global economy.

Q: Update on commercial markets full-year outlook?

A: Joe Corso said commercial outlook remains same, with slight improvement in microfabric but tariffs add incremental risk.

Q: Talk about gross margin and tariff pass-through?

A: Scott Keeney said complex, with some ability to pass costs, but no specific outlook. Joe Corso said margin range widened due to tariff uncertainty.

Q: Update on funded and unfunded backlog?

A: Joe Corso said no major update, but pleased with defense business backlog execution and pipeline.

Q: Talk about gross margin expectations for mid-year?

A: Joe Corso said gross margins expected to continue expanding due to higher volumes, better mix, and continued growth in A&D.

Q: Second half outlook compared to first half?

A: Joe Corso said second half expected to be stronger than first half.

Q: Additive manufacturing business update?

A: Scott Keeney said making progress but focused on US and Europe markets with limited growth compared to other regions.