nLIGHT, Inc. Q3 FY2025 earnings call

• Q3 was a solid quarter with revenue at high end of guidance, gross margin and adjusted EBITDA beating expectations. • Aerospace and defense revenue at $46M, driven by HELSI-2 program component shipments and laser sensing contracts. • Commercial revenue $21.2M, with microfabrication up and industrial flat. • Gross margin expanded to 41%, showing operating model leverage. • HELSI-2 program on track for 2026 completion, DE M-SHORAD nearing delivery, laser sensing with new $50M contract. • Commercial markets stable with microfabrication and advanced manufacturing showing differentiation.

Total revenue for Q3 was $67 million, up 19% year-over-year. Aerospace and defense revenue was a record $46 million, with defense product sales growing over 70% year-over-year, contributing significantly to revenue. Commercial revenue was $21.2 million, with microfabrication sales up sequentially and industrial markets flat. Product gross margin was a record 41%, up from 29% in the same quarter last year. Adjusted EBITDA was over $7 million. Aerospace and defense revenue contribution was substantial, with directed energy and laser sensing markets performing well, while commercial had stable microfabrication and flat industrial.

• Fourth quarter revenue expected $72M-$78M, midpoint $75M with $55M product and $20M development revenue. • Sequential growth expected in A&D. • Full year 2025 A&D revenue growth to exceed 40% y-o-y. • Fourth quarter gross margin 27%-32%, products gross margin 34%-39%, development gross margin ~8%. • Adjusted EBITDA for Q4 expected $6M-$11M.

• Potential delays in program completion timelines, though currently on track. • Gross margin fluctuations due to mix changes in markets and cost factors like freight and duties. • Uncertainties in commercial market demand, particularly for cutting and welding segments.

Q: Could HELSI-2 completion date be pulled ahead?

A: Scott Keeney says they're on track for 2026 as announced.

Q: Why the gross margin guide change from Q3 to Q4?

A: Joseph Corso says it's due to freight, duties, and mix changes in markets.

Q: What's driving growth in advanced development?

A: Joseph Corso says multiple directed energy and laser sensing programs contribute, with other programs being leading indicators for future sales.

Q: Thoughts on counter-drone technology?

A: Scott Keeney says directed energy includes counter-drone as a big application.

Q: Number of customers in development product line?

A: Joseph Corso says they're working on a dozen or so programs