nLIGHT, Inc. (NASDAQ:
LASR
Q1 2025 Earnings Call Transcript from May 8, 2025
nLIGHT, Inc. surpasses earning estimates. The reported earnings per share (EPS) is $-0.04, compared to an expected value of $-0.18.
Operator:
Good evening, ladies and gentlemen. Welcome to the nLIGHT, Inc. First Quarter 2025 Earnings Conference Call. Currently, all lines are set to listen-only mode. After our presentation, we’ll move into a Q&A session. Should you need urgent help at any point during today’s call, simply press 0 to reach an operator. Today’s call is scheduled for recording on Thursday, May 8th, 2025. Now, let me introduce John Marchetti, Vice President of Corporate Development and Head of Investor Relations, who will lead us off. Good afternoon to one and all.
John Marchetti:
I’m John Marchetti, Vice President of Corporate Development at nLIGHT and also heading up Investor Relations. Joining us today are Scott Keeney, who serves as the company’s Chairman and Chief Executive Officer, along with Joseph Corso, our Chief Financial Officer. This conference call includes forward-looking statements such as financial forecasts and strategic plans related to our operations, encompassing elements outside our direct influence like market risks and uncertainties detailed periodically in our Securities and Exchange Commission filings. Actual outcomes could vary significantly from what was discussed during this meeting, and we won’t provide updates to these predictions unless legally obligated. The conversation will touch upon specific non-GAAP financial metrics; you’ll find reconciliation details between these figures and their corresponding GAAP equivalents within our quarterly earnings report and investor presentation available under the ‘Investor Relations’ tab on our official site.
I’ll now hand the call over to nLIGHT’s Chairman and CEO, Scott Keeney. Over to you, Scott.
Scott Keeney:
John, we want to express our gratitude for your support. In the first quarter of 2025, we achieved impressive results with revenues, gross margins, and adjusted EBITDA surpassing even the upper limits of our projected ranges. This outstanding performance can largely be attributed to yet another record-breaking period in defense-related earnings, accounting for over 63% of our total quarterly sales—a notable increase from last year’s figure of just under half at 49%. Additionally, this surge has been bolstered by substantial increases in defense products, marking an annual rise exceeding 50%. Looking ahead, we remain well-equipped to sustain momentum within Aerospace & Defense through advanced high-power laser technologies cultivated throughout the previous twenty years—from component fabrication right down to complete system assembly—all backed by production facilities here in the U.S.
Our products in A&D are also well aligned with many of the Department of Defense’s most critical priorities, such as directed energy and laser sensing. During the first quarter, we delivered strong results in each of these critical markets. Directed energy lasers complement traditional kinetic defense 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. We continue to make progress on our HEL-TD program. As a reminder, this is a $171 million 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 record defense product revenue in the quarter and is expected to be a substantial contributor to growth through the remainder of the year. Our work on the Army’s DEM SHORAD 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. This success has increased interest in our directed energy capabilities both domestically and among our international allies.
In the U.S., we keep responding to Requests for Proposals related to the President’s Golden Dome executive directive. This initiative particularly emphasizes enhancing non-lethal missile defense technologies, where we see significant potential for growth. Given our obligation to develop such systems within the country, we feel confident about capitalizing on these prospects in the future. On another front, our collaboration with Israel on their Iron Beam project continues to advance steadily. Additionally, we’ve identified numerous international openings that should start translating into contracts soon. Across all levels of integrated operations in the directed energy sector, we’ve managed to secure income sources consistently. Consequently, we stand out as one of the broadest providers serving both domestic governmental bodies, major industry partners, and overseas collaborators.
We continue to build up speed in our laser sensing markets as well. These products encompass missile guidance, proximity detection, rangefinding, and countermeasure systems, and they’ve been integrated into various major ongoing defense initiatives that remain top priorities for the present government. Our past achievements on these projects along with initial successes in numerous confidential ventures have opened up considerable prospects within this sector. During recent fiscal periods, we’ve submitted bids for an array of fresh undertakings, boosting not only the volume but also the scale of potential engagements in our sensor portfolio. Furthermore, additional openings through the Golden Dome project may play a substantial role in fostering our defensive expansion from 2026 onwards.
The strong beginning of the year along with our expanding lineup of directed energy initiatives and laser sensing prospects makes me more confident about achieving at least a 25% boost in revenue within the aerospace and defense sector come 2025. In relation to our commercial sectors, although they continue to face difficulties, particularly in industrial and microfabrication areas, there has been some progress since the previous quarter. This recent upturn in our commercial market is mainly due to heightened sales in microfabrication; this follows the normalization of operations at our contract manufacturer based in Thailand, which now allows us to meet client needs effectively. Despite celebrating these operational improvements, weaker demand across the rest of the fiscal year remains anticipated.
Over the long-term, we maintain an optimistic outlook regarding potential expansion in metal additive manufacturing, specifically within the sectors of aerospace and defense. These industries aim to expedite their prototyping processes and fortify their supply chain resilience through localized production capacities. Before handing the discussion over to Joe to go through our Q1 fiscal figures, let me quickly address the issue of tariffs. In recent weeks, considerable effort has been directed towards assessing various hypothetical situations surrounding this matter. Despite ongoing discussions and ambiguity concerning how exactly tariff policies might evolve, certain observations can still be highlighted. The exceptionally steep tariffs could significantly affect not only economic conditions but also customer demands and procurement expenses related to materials used in our goods.
First, we do not expect a significant impact on our business in defense over the long term. Over 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 2024, to our automated facility in the Pacific Northwest and to our contract manufacturing in Thailand. Our ability to shift manufacturing between the US and 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&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.
Joe Corso:
Thank you, Scott. In the first quarter of 2025, total revenue reached $51.7 million, marking a rise of 16% from $44.5 million recorded in the initial quarter of 2024. The aerospace and defense segment reported earnings of $32.7 million for this period, showing a yearly growth rate of 50.4%, along with an 8.6% sequential uptick. This expansion can be attributed mainly to higher sales of defense-related items, particularly components destined for our HEL-TD high-energy laser project, leading to over a 150% surge when contrasted against last year’s figures. Looking ahead, we anticipate continued progress within the A&D sector during Q2 of 2025, reinforcing what Scott previously stated about projecting at minimum a 25% annual boost in revenues from the A&D domain for the entire fiscal year.
In the first quarter, revenue from our commercial markets—encompassing both industrial and microfabrication sectors—was reported at $19 million. This marks a drop of 16.8% when compared to the previous year but shows an uptick of 9.9% since the last quarter. These revenues were generally consistent with projections; however, industrial demand stayed subdued. Sequential improvements in microfabrication sales can be attributed mainly to our production partners’ ability to fulfill delayed shipments. For this quarter, total product revenue reached $35.7 million, representing a rise of 21.5%, up significantly from $29.4 million during the equivalent period in 2024. Year-on-year gains in products primarily stemmed from enhanced performance within the defense sector, although they faced some reduction in commercial market earnings. Additionally, development revenue amounted to $16 million in Q1, marking a modest climb of 5.4% relative to the prior year’s comparable timeframe.
In the first quarter, the overall gross margin stood at 26.7%, up from 16.8% during the corresponding period in 2024. The reported figure includes about a $1.9 million advantage stemming from duties reclaimed. If we exclude this one-time benefit, the adjusted gross margin for the quarter comes out to around 23%. This revised number remains beyond our forecasted upper limit due to exceeding projections across both product and development margins.
The gross margin specifically attributed to products reached 33.5% in the current quarter versus 20.9% in Q1 of last year. This improvement can be credited to increased sales volume, an advantageous shift in product types sold, along with savings from reclaimed duties. On the developmental side, the gross margin came in at 11.5%, marking progress over the previous year’s rate of 8.9% within the initial three months.
The improvement in the development gross margin mainly stemmed from the program mix during the quarter. Looking ahead, we anticipate that the development gross margin will likely stay around 8%. In the first quarter, our operating expenses amounted to $23.4 million, up from $22.2 million recorded in the corresponding period last year. On a non-GAAP basis, operating expenses stood at $17.8 million in this quarter—a minor rise from $17.2 million seen in Q1 of 2024. For the initial three months, the company reported a GAAP net loss totaling $8.1 million, equivalent to $0.16 per diluted share, versus a previous net loss of $13.8 million or $0.29 per share over the comparable prior-year timeframe. Regarding adjusted EBITDA for the opening quarter, it came out positive at $116,000 as opposed to a deficit of $4.9 million in Q1 of 2024. As far as financial standing goes, we concluded the first quarter holding combined sums of cash, cash equivalents, restricted cash, and investment securities amounting to $117 million.
In this past quarter, we utilized $20 million out of our $40 million credit facility. Considering the current uncertainties related to tariff impacts and anticipating higher requirements for working capital due to anticipated expansion in our A&D market segment, we decided it would be wise to establish an additional liquidity cushion within our financials. Our inventory levels rose to $43.8 million as of the start of the fiscal year from $40.8 million at the close of 2024. This rise in stock is mainly attributed to preparing for the expected surge in production of direct energy goods. Regarding future projections, with the data currently accessible, we anticipate revenues during the next quarter will fall between $53 million and $59 million. At the mid-point estimate of these figures—$56 million—the breakdown consists roughly of $38 million coming from sales of products and around $18 million stemming from developmental activities.
We anticipate an uptick in A&D revenues during the second quarter of 2025 compared both sequentially and year-over-year. However, ongoing challenges within our industrial and microfabrication sectors will persist through the end of this period. Regarding gross margins, product margins for Q2 should fall between 27% and 33%, with anticipated development gross margins around 8%, leading to overall gross margins ranging from 19% to 25%. Given our role as a fully integrated manufacturer, these figures hinge significantly upon output levels and how well we absorb steady fixed manufacturing expenses. Moreover, operating under conditions marked by considerable unpredictability in international commerce adds another layer of complexity. Although we do not foresee substantial downward pressures on profit margins specifically in Q2, persistent tariff structures at their present rates might result in greater margin compression moving forward into later quarters of the fiscal year.
Lastly, our forecast for the adjusted EBITDA in Q2 suggests a potential range from roughly negative $4 million to positive $1 million. We still anticipate achieving an adjusted EBITDA break-even point within the expected quarterly revenue bracket of $55 million to $60 million. Now, let me hand things over to the operator so they can open up the floor for your questions.
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