Business Overview
nLIGHT, Inc. (NASDAQ:LASR) is a leading provider of high-power semiconductor and fiber lasers, serving customers across the industrial, microfabrication, aerospace, and defense markets. With a rich history of technological advancements and a relentless focus on innovation, nLIGHT has carved out a unique position in the rapidly evolving laser technology industry.
Founded in 2000 and headquartered in Camas, Washington, nLIGHT has established itself as a pioneer in the design, development, and manufacturing of critical laser components. The company's journey began with a focus on developing innovative semiconductor laser technology. In 2003, nLIGHT built its first manufacturing facility in Vancouver, Washington to support growing demand for its products. A significant milestone in the company's growth came in 2012 when nLIGHT acquired Liekki Corporation, a Finland-based manufacturer of specialty optical fibers and fiber lasers. This acquisition allowed nLIGHT to vertically integrate its production and broaden its product offerings. In 2015, the company further expanded its manufacturing capabilities by opening a new state-of-the-art facility in Camas.
nLIGHT's product portfolio spans a wide range of applications, including industrial cutting and welding, microfabrication processes, directed energy systems, and laser-based sensing technologies. The company's semiconductor lasers, fiber lasers, and fiber amplifiers have found widespread adoption across various industries, positioning nLIGHT as a trusted partner for customers seeking high-performance, reliable, and cost-effective laser solutions.
Financials
The company's financial performance has been a mixed bag in recent years. In 2023, nLIGHT reported total revenue of $209.92 million, a decrease of 13.4% compared to 2022. Net income for the year stood at a loss of $41.67 million, compared to a loss of $54.58 million in 2022. The company's operating cash flow and free cash flow in 2023 were $10.09 million and $4.75 million, respectively.
During the first half of 2024, nLIGHT has seen a sequential improvement in its financial results. For the second quarter of 2024, the company reported revenue of $50.51 million, up 13% from the previous quarter but down 5.2% year-over-year. Gross margin improved to 24%, and the company's net loss narrowed to $11.73 million, compared to a net loss of $13.8 million in the first quarter of 2024. Operating cash flow for Q2 2024 was negative $4.23 million, with free cash flow at negative $6.38 million.
nLIGHT operates in two reportable business segments: Laser Products and Advanced Development. The Laser Products segment, which includes sales of semiconductor lasers, fiber lasers, fiber amplifiers, and other related directed energy laser products, generated revenue of $34.46 million in Q2 2024, with a gross margin of 32.2%. The Advanced Development segment, primarily focused on research and development contracts in the Aerospace and Defense market, reported revenue of $16.05 million in Q2 2024, with a gross margin of 8.7%.
Geographically, North America accounted for 70.6% of nLIGHT's revenue in Q2 2024, up from 64.4% in Q2 2023. China represented 6.1% of total revenue, slightly up from 5.4% in the same period last year, while the rest of the world accounted for 23.3%, down from 30.2% in Q2 2023.
Market Performance
nLIGHT's performance in the Aerospace and Defense (A&D) segment has been a bright spot, with revenue from this end market growing 26% sequentially in the second quarter of 2024. The company's success in securing new contracts and executing on existing programs in directed energy and laser sensing applications has been a key driver of this growth.
In the commercial markets, nLIGHT has faced some headwinds. Revenue from the Industrial and Microfabrication segments declined in the second quarter compared to the previous year, due to lower customer demand and deteriorating market conditions. However, the company has continued to invest in new product development and strategic partnerships to address the evolving needs of these end markets.
One such partnership is the collaboration agreement with industry leader EOS to optimize additive manufacturing processes. nLIGHT's programmable beam shaping laser technology, known as Corona AFX, has been integrated into EOS's metal 3D printing systems, enabling significant productivity gains and lower cost per part for customers.
Risks and Challenges
Risks facing nLIGHT include ongoing supply chain challenges, pricing pressure from competitors, and the potential for a broader economic slowdown, which could impact demand across its diverse end markets. The company also faces litigation risks, as it has been involved in a patent infringement lawsuit with Lumentum Operations LLC since 2022. It's worth noting that nLIGHT has faced legal challenges in the past, including a dispute with Lumentum regarding the ownership of certain patents in 2017, which was eventually resolved in 2019 after several years of litigation.
Future Outlook
Despite these challenges, nLIGHT remains well-positioned for long-term growth. The company's focus on innovation, its vertically integrated business model, and its diversified customer base across high-growth industries provide a solid foundation for future success. As nLIGHT continues to navigate the dynamic laser technology landscape, investors will be closely watching the company's ability to capitalize on emerging opportunities and deliver sustainable financial performance.
For the third quarter of 2024, nLIGHT expects continued sequential revenue growth in the range of $53 million to $58 million, with a midpoint of $55.5 million. This includes $39.5 million of product revenue and $16 million of development revenue. The company anticipates third quarter 2024 products gross margin to be in the range of 28% to 32%, and development gross margin to be approximately 8%, resulting in an overall gross margin range of 22% to 26%. Adjusted EBITDA for the third quarter is expected to be in the range of negative $2 million to positive $1 million. nLIGHT continues to see breakeven adjusted EBITDA with quarterly revenues in the $55 million to $60 million range.
Company History and Global Presence
In 2021, nLIGHT celebrated its 20th anniversary, marking two decades of growth and innovation in the laser technology industry. Today, the company operates multiple facilities in the U.S. and abroad, employing over 1,000 people worldwide. This global presence and extensive experience position nLIGHT as a key player in the high-power laser solutions market, serving a diverse set of end markets and continuing to drive technological advancements in the field.
Liquidity and Financial Position
As of June 30, 2024, nLIGHT maintained a strong balance sheet with $114.56 million in cash, cash equivalents, and marketable securities. The company's debt-to-equity ratio stood at 0.0556, indicating a conservative capital structure. nLIGHT has access to a $40 million revolving credit facility with Banc of California, set to expire in September 2024, with no outstanding amounts as of the end of Q2 2024. The company's current ratio of 6.10 and quick ratio of 4.60 suggest a solid short-term liquidity position.
In conclusion, while nLIGHT faces challenges in certain market segments, its strong position in the Aerospace and Defense sector, ongoing product innovation, and solid financial footing provide a foundation for potential future growth. The company's ability to navigate market fluctuations and capitalize on emerging opportunities in high-power laser applications will be crucial in determining its long-term success.