Earnings call transcript: nLIGHT Q1 2025 beats EPS forecast, stock surges

In its Q1 2025 earnings call, nLIGHT Inc. (NASDAQ:LASR) reported a slight beat on its earnings per share (EPS) forecast, posting an actual EPS of -$0.16 against a forecast of -$0.17. The company also reported a revenue of $51.7 million, surpassing the expected $47.71 million. Following these announcements, nLIGHT’s stock price rose by 5.13% in regular trading hours and surged an additional 16.14% in aftermarket trading, reaching $10. According to InvestingPro data, the stock has shown significant volatility, with a beta of 2.02, though it has demonstrated strong momentum with an 8.17% return over the past week despite being down 23.33% over the past six months.

Key Takeaways

• nLIGHT reported a slight EPS beat with a reduction in net loss compared to the previous year.
• Revenue growth was driven by a strong performance in the aerospace and defense sector.
• The stock saw a significant increase in aftermarket trading, reflecting positive investor sentiment.
• The company highlighted ongoing challenges in the commercial market.

Company Performance

nLIGHT’s overall performance in Q1 2025 showed a marked improvement over the previous year, particularly in its aerospace and defense segment, which saw a 50.4% year-over-year growth. The company’s strategic pivot towards defense applications has paid off, as defense revenues now account for 63% of total sales. However, the commercial markets remain challenging, with a 16.8% decline in revenue year-over-year.

Financial Highlights

• Revenue: $51.7 million (16% increase YoY)
• EPS: -$0.16 (improved from -$0.29 in Q1 2024)
• Gross margin: 26.7% (up from 16.8% in Q1 2024)
• Adjusted EBITDA: $116,000 (compared to -$4.9 million in Q1 2024)

Earnings vs. Forecast

nLIGHT’s EPS of -$0.16 surpassed the forecast of -$0.17, a minor but positive surprise. Revenue also exceeded expectations, coming in at $51.7 million against a forecast of $47.71 million. The earnings beat, although modest, reflects the company’s successful cost management and focus on high-growth areas.

Market Reaction

The stock’s 5.13% rise during regular trading hours and a further 16.14% increase in aftermarket trading highlight strong investor confidence. This positive market reaction is attributed to the company’s better-than-expected financial performance and optimistic outlook in the aerospace and defense sector.

Outlook & Guidance

Looking forward, nLIGHT expects its aerospace and defense revenue to grow by at least 25% in 2025. The company has set a Q2 2025 revenue guidance range of $53-$59 million, indicating continued momentum in its key growth areas. However, commercial markets are anticipated to remain weak throughout the year.

Executive Commentary

CEO Scott Keeney emphasized nLIGHT’s strategic position in the defense market, stating, "We are uniquely positioned to drive continued growth in A and D with leading high power laser technology." CFO Joe Corso added, "We expect A and D revenue to grow sequentially in the second quarter of 2025," highlighting the company’s confidence in its growth trajectory.

Risks and Challenges

• The commercial market’s ongoing weakness poses a challenge to revenue diversification.
• Potential tariff impacts could affect the industrial fiber laser business.
• Increased inventory levels may indicate concerns about future demand.
• Macroeconomic pressures and geopolitical tensions could impact defense spending.

Q&A

During the Q&A session, analysts focused on the potential impacts of tariffs on the company’s industrial fiber laser business. Management reiterated its confidence in the aerospace and defense market, citing strategic flexibility in manufacturing locations to mitigate risks. The drawdown of $20 million from a line of credit was also discussed, with executives explaining it as a strategic move to enhance cash flow flexibility.

Full transcript - nLIGHT Inc (LASR) Q1 2025:

Conference Operator: I would now like to turn the conference over to John Marchetti, VP of Corporate Development and Head of Investor Relations.

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT: Thank you, and good afternoon, everyone. I’m John Marchetti, nLIGHT’s VP of Corporate Development and Head of Investor Relations. With me on the call today are Scott Keeney, nLIGHT’s Chairman and CEO and Joe Corso, nLIGHT’s CFO. Today’s discussion will contain forward looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today’s call, and we undertake no obligation to update publicly any forward looking statement except as required by law.

During the call, we will be discussing certain non GAAP financial measures. We have provided reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release and in our earnings presentation, both of which can be found on the Investor Relations section of website. I will now turn the call over to Enlight’s Chairman and CEO, Scott Keeney. Scott? Thank you, John.

Scott Keeney, Chairman and CEO, nLIGHT: Our first quarter results represent a strong start to 2025 with revenue, gross margin and adjusted EBITDA all above the high end of our guidance range. The outperformance was primarily driven by another quarter of record defense revenue, which represented more than 63% of total sales in the quarter, up from 49% in the same quarter a year ago. Furthermore, this growth was supported by significant expansion in our defense product sales, which grew more than 150% year over year. We are uniquely positioned to drive continued growth in A and D with leading high power laser technology developed over the past two decades across the entire technology stack from chips to full laser systems, which is supported by our U. S.

Manufacturing sites. Our products in A and D are also well aligned with many of Department of Defense most critical priorities, such as directed energy and laser sensing. And during the first quarter, we delivered strong results in each of these critical markets. Directed energy lasers complement traditional kinetic defenses 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 Healthy II program. As a reminder, this is $171,000,000 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 a record defense product revenue in the quarter and is expected to be a substantial contributor to the growth through the remainder of the year. Our work on the Army’s DEM SHORD 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 US, we continue to respond to RFPs and RFQs associated with the President’s Golden Dome executive order, which specifically highlights nonkinetic missile defense capabilities as an area for development. With the mandate to build these systems in The United States, we believe we are well positioned to benefit from this effort over the coming years. Internationally, our work to support the Israeli Iron Beam program is progressing, and we have a growing pipeline of new opportunities that we expect to begin closing in the coming quarters. We have generated revenue at nearly every level of vertical integration in the direct energy market, and we have established ourselves as one of the most comprehensive suppliers to the US government, other prime contractors and foreign allies.

We also continue to gain momentum in our laser sensing markets. Our laser sensing products include missile guidance, proximity detection, range finding and countermeasures and have been incorporated into several significant and long running defense programs, all which remain key defense priorities under the current administration. Our historical performance on these programs and our early success on multiple classified programs have created many new opportunities for us in this market. Over the last several quarters, we have bid on multiple new programs that have increased both the number of opportunities and the size of our sensing pipeline. In addition, further opportunities in the Golden Dome initiative have emerged and could become a significant contributor to our growth in defense in 2026 and beyond.

The solid start to the year combined with our growing pipeline of both direct energy programs and laser sensing opportunities gives me increased confidence that we can grow our revenue in aerospace and defense by at least 25% in 2025. Turning to our commercial markets. Overall, our industrial and microfabrication markets remain challenging, though we did see some improvement compared to last quarter. The sequential growth in our commercial markets was driven by an increase in microfabrication sales as operations at our Thai contract manufacturing partner have stabilized, enabling us to satisfy customer demand. While we are pleased with the stabilization of manufacturing, demand is expected to remain weak through the remainder of the year.

Longer term, we remain optimistic about opportunities for growth in metal additive manufacturing, particularly within the aerospace and defense markets, as they look to accelerate prototyping timelines and build resiliency into supply chains with domestic capabilities. Before I turn the call over to Joe to review our first quarter financial results, I’d like to briefly touch on the topic of tariffs. We have spent a significant amount of time over the last couple of months evaluating many different scenarios. And while there continues to be a significant amount of debate and uncertainty around what the tariff landscape will ultimately look like, the impact of these extraordinarily high tariffs on the overall economy, demand from our customers and material costs for our products, there are a few comments I would like to make. 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 twenty twenty four, to our automated facility in the Pacific Northwest and to our contract manufacturing partner in Thailand. Our ability to ship manufacturing between The U. S.

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 and 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, CFO, nLIGHT: Thank you, Scott. Total revenue in the first quarter of twenty twenty five was $51,700,000 an increase of 16% compared to $44,500,000 in the first quarter of twenty twenty four. Aerospace and Defense revenue was $32,700,000 in the quarter, up 50.4% year over year and 8.6% sequentially. Growth in the quarter was driven by increased defense products revenue, which increased more than 150% compared to the same quarter a year ago, primarily due to increased deliveries of components into our Healthy II direct energy laser program. We expect A and D revenue to grow sequentially in the second quarter of twenty twenty five.

And as Scott mentioned earlier, we feel increasingly confident that full year revenue from our A and D market should grow at least 25% year over year. First quarter revenue from our commercial markets, which includes industrial and microfabrication, was $19,000,000 a decrease of 16.8% year over year, but up 9.9% sequentially. Revenue from these markets was largely in line with expectations as industrial demand remained weak, and the quarter over quarter improvement in microfabrication sales was largely a result of our manufacturing partner being able to satisfy orders that had been previously unable to ship. Product revenue for the first quarter was $35,700,000 an increase of 21.5% compared to $29,400,000 in the first quarter of twenty twenty four. The year over year increase in product sales was due to growth in defense product revenue, partially offset by a decline in commercial revenue.

Development revenue of $16,000,000 in the first quarter increased 5.4% compared to the same quarter a year ago. Total gross margin in the first quarter was 26.7% compared to 16.8% in the first quarter of twenty twenty four. First quarter gross margin included approximately a $1,900,000 benefit related to duty reclaim. Excluding the impact of this benefit, total gross margin for the first quarter would have been approximately 23%, which is still above the high end of our guidance range, as both product gross margin and development gross margin were ahead of expectations. Products gross margin in the first quarter was 33.5% compared to 20.9% in the first quarter of twenty twenty four.

First quarter products gross margin was positively impacted by higher product volumes, a favorable mix in duty reclaim. Development gross margin was 11.5% compared to 8.9% in the same quarter a year ago. The upside in development gross margin was largely a result of program mix in the quarter. Going forward, we still expect development gross margin to remain in the 8% range. Operating expenses were $23,400,000 in the first quarter compared to $22,200,000 in the first quarter of twenty twenty four.

Non GAAP operating expenses were $17,800,000 in the first quarter, a slight increase compared to $17,200,000 in the first quarter of twenty twenty four. GAAP net loss for the first quarter was $8,100,000 or $0.16 per share compared to a net loss of $13,800,000 or $0.29 per share in the same quarter a year ago. Adjusted EBITDA for the first quarter was $116,000 compared to a loss of $4,900,000 in the first quarter of twenty twenty four. Turning to the balance sheet. We ended the first quarter with total cash, cash equivalents, restricted cash and investments of $117,000,000 During the quarter, we drew down $20,000,000 from our $40,000,000 line of credit.

Given the ongoing uncertainty surrounding the impact of tariffs and our expectations for increased working capital needs to support the growth in our A and D markets, we thought it was prudent to put a cash buffer in place on our balance sheet. Inventory increased to $43,800,000 at the first quarter compared to $40,800,000 at the end of twenty twenty four. The increase in inventory is primarily to support the forecasted ramp in directed energy products. Turning to guidance. Based on the information available today, we expect revenue for the second quarter to be in the range of $53,000,000 to $59,000,000 The midpoint of $56,000,000 includes approximately $38,000,000 of product revenue and $18,000,000 of development revenue.

We expect A and D revenue in the second quarter of twenty twenty five to increase sequentially and year over year and weakness in our industrial and microfabrication markets to continue throughout the year. Turning to gross margin. Products gross margin in the second quarter are expected to be in the range of 27% to 33%, and we expect development gross margins to be approximately 8%, resulting in a total gross margin range of 19% to 25%. As we’ve mentioned previously, as a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs. In addition, we are navigating a highly uncertain global trade market.

While we don’t expect a significant negative impact to our margins in the second quarter, we could experience further margin pressure in subsequent quarters if the current structure and level of tariffs remain in place for the rest of the fiscal year. Finally, we expect adjusted EBITDA for the second quarter to be in the range of approximately negative $4,000,000 to positive $1,000,000 We continue to expect breakeven adjusted EBITDA with quarterly revenue in the $55,000,000 to $60,000,000 range. With that, I will turn the call over to the operator for questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. Your first question comes from Jim Ricchiuti of Needham and Company.

Please go ahead.

Jim Ricchiuti, Analyst, Needham and Company: Hi, thanks. Good afternoon. Maybe to start off with, can you talk to us about the line of sight you have to the product sales in A and D looking past q two? I mean, you’ve talked about the growth you’re expecting in a and b for the full year. I’m just trying to get a sense as to what kind of visibility you have to product sales.

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT: Hello? Right.

Scott Keeney, Chairman and CEO, nLIGHT: Jim, can you hear me, Jim?

Jim Ricchiuti, Analyst, Needham and Company: I I can. Scott, did you get that question? Or should I repeat it?

Scott Keeney, Chairman and CEO, nLIGHT: I apologize for the audio problems. Thanks for the question, Jim. I think the as we noted in my comments, the healthy program is certainly one of the drivers of the product revenue. We certainly have visibility with respect to to that program. We certainly have also, you know, increasing both orders and and and the funnel of opportunities and products that further contribute to our outlook to continue to improve defense broadly, but products in particular.

And that 150% growth in the quarter was certainly one of the highlights for the quarter.

Jim Ricchiuti, Analyst, Needham and Company: Great. On the tariff, the issue of tariffs, help us understand where you could be impacted more. Is it in the microfabrication business? Is it relating to the production in Thailand? Maybe just in broad strokes, how should we think about that going forward, you know, assuming the situation doesn’t in chain doesn’t change or improve?

Joe Corso, CFO, nLIGHT: Yeah. Hi, Jim. This is Joe. I’ll take that one. The area where we will be affected most, frankly, is where the the input costs are coming in from China today, and that is disproportionately affects our, industrial fiber laser business.

But, you know, remember, as we think about where we are right now, we’re still sitting on some inventory and the like. And so we don’t expect a big impact at all in the second quarter, you know, as we go throughout the year depending on what the situation is and where these tariff rates ultimately shake out, you know, could have an impact in in q three and q four. But we’re not talking about anything that we feel, you know, today is significant right on the order of a couple hundred basis points.

Jim Ricchiuti, Analyst, Needham and Company: Okay. Are you more concerned in that about the the potential indirect impact as it relates to just demand across some of the markets in the commercial side of the business?

Scott Keeney, Chairman and CEO, nLIGHT: Yes. I think that’s that’s the thing that gives us pause. It’s just how is how are these, you know, dramatic increases in tariffs going to affect, you know, broader markets indirectly. And, you know, that’s something that, you know, we can’t possibly forecast. But, you know, our business with especially with the defense business, there’s a relatively more insulated impact.

Troy Jensen, Analyst, Cantor Fitzgerald: Thank you.

Conference Operator: Your next question comes from Craig Palm of Craig Hallum. Please go ahead.

Craig Palm, Analyst, Craig Hallum: Yeah. Thanks. I had some issues joining. So, if you’ve already talked about some of this stuff, apologies. But, you know, you you you kept your, you know, a and d outlook the same, but I think you mentioned you’re increasingly confident.

So I guess what’s changed in the last couple of months? And what would you need to happen or see for you to actually increase the full year guide at some point this year?

Scott Keeney, Chairman and CEO, nLIGHT: Yes. Good. Thanks, Greg. Sorry about the audio problems. And good question.

We continue to see traction in not only The US, but also international markets for direct energy and our other applications. So I think that’s a theme that we will continue to provide more information as we can release more information there. But as we just talked about, the tariffs certainly add some degree of uncertainty in the global environment, and it’s just hard to determine what that’s going to be. Again, it’s not something that is going to directly affect us as much as perhaps others, but it certainly is a question mark in terms of how the overall economy continues to progress.

Craig Palm, Analyst, Craig Hallum: Can you address what the tariff related risk is specifically for A and D? I know you mentioned that the input cost in China on the I think more on the sort of the industrial fiber laser business. But is that something that impacts everything?

Scott Keeney, Chairman and CEO, nLIGHT: Yes. Mean, we think about certainly where we buy our products and certainly we don’t have significant push there from kind of but do our suppliers have secondary pusher. Right? That that’s where you just it’s difficult to fully address how those tariffs are gonna flow through, you know, the broader supply chains. It’s more of that.

Craig Palm, Analyst, Craig Hallum: Okay. And and just to be clear, I mean, it’s you or some of your suppliers, I mean, are there secondary sources outside of China if the if the current tariff rate sticks? Like, what’s everybody doing to mitigate that risk?

Scott Keeney, Chairman and CEO, nLIGHT: Well, I mean, we’re as we talked about in our comments, certainly, we’re pleased that we have our operations running in Thailand. Things like that, certainly, we’re doing, others are doing. And I think probably every management team out there is scrambling to try to figure out what to do. And but I do think that, you know, we have relatively limited exposure especially with our A and D business.

Craig Palm, Analyst, Craig Hallum: Okay. I guess, lastly, just can you can you address the line of credit? I mean, without tapping that, you would have ended the quarter with close to $100,000,000 of cash. I mean, that seems like a pretty good buffer to me even with all these uncertainties. So maybe you can give a little bit more color there.

Joe Corso, CFO, nLIGHT: Yes, Greg. Yes, it’s fairly simple. We are expecting that the business is gonna grow in the second half of the year. We’ve talked about the 25% increase year over year in defense. In our remarks, we talked about we’re getting more confident about that.

We wanna make sure that we are thinking about, allocating capital appropriately. We’ve got a really attractive credit really attractive credit line. You know, the the economy, the world’s a little bit bumpy right now to be able to, you know, leverage that credit line to fund some of that working capital that gives us the ability to continue to do all the other things we’re doing in the business is, why we why we why we drew on it.

Craig Palm, Analyst, Craig Hallum: I mean, is there a a certain level of cash that you want on the balance sheet as a buffer no matter what? I mean, is there is there a certain number that you’re sort of looking at?

Joe Corso, CFO, nLIGHT: There’s no magic number. I think we talk a lot internally about being, more than adequately capitalized at around a hundred million dollars. But, again, you have quarters in which you are going to need to invest in working capital or in CapEx that we wanna try to make sure that we are funding that, appropriately.

Craig Palm, Analyst, Craig Hallum: Yep. Okay. Alright. I know it’s probably been a while since I’ve said it, but, you know, congrats on on the quarter. Was a pretty impressive result.

Scott Keeney, Chairman and CEO, nLIGHT: Appreciate it, Greg. Thank you. Thank you.

Conference Operator: Your next question comes from Reuben Roy of Stifel. Please go ahead.

Reuben Roy, Analyst, Stifel: Hey, guys. I also had some issues joining, but I guess the upside is I’ve got conference call music in my head for a few hours. So I guess the did you talk about it’s great to hear by the way and congrats on your continued visibility and execution around A and D. Did you give an update on the commercial markets in terms of full year? Has that changed kind of from the way you were looking at that business last quarter?

I think you said maybe down 15% to 20%, little up the those were the, I think, the guidelines. But any update there, Joe?

Joe Corso, CFO, nLIGHT: No, Ruben. That’s still where we think we are. We had a little bit of a better quarter this quarter, particularly in the microfabrication business as we were able to catch up with some, pent up demand to certain customers. So you saw a little bit of a better quarter in micro, but the general themes that we have been talking about in the broader commercial businesses are still the same. And then on top of that, we’ve got some incremental risk from demand related to tariffs and the like.

But broadly speaking, no real change here.

Reuben Roy, Analyst, Stifel: Okay. And then just to follow-up on the tariff discussion. Some companies and obviously, there’s a lot of moving parts here and uncertainty and it’s been changing pretty rapidly. But a lot of companies have been telling us that they potentially could pass through some costs. It doesn’t sound like that’s an outcome that you guys are thinking that would be appropriate for your business.

Is that correct? And if so, again, are there some remedies? Or should we be thinking about some level of gross margin impact given that there are some tariffs and costs going up? I mean, even if we kind of stay steady state from here into the second half.

Scott Keeney, Chairman and CEO, nLIGHT: Yes, Ruben, it’s a very complex topic, obviously. Certainly, are places where we can pass on costs and to mitigate. There’s areas where we can ship production to mitigate. There’s even some regulatory aspects of the AMD market where we can mitigate. So it’s a complex set of topics that we’re trying to grapple with, and who knows what the assumption should be for where these tariffs will land.

I think the broad outlook that we have, as Joe said, is that we don’t see, you know, near term any dramatic effect on the business. Longer term, just depends on how long they last and how it affects the broader economy. So that just gives us, you know, some pause about uncertainty in the world. But I don’t think there’s anything we can really comment on that’s specific in terms of outlook. Joe, do

Craig Palm, Analyst, Craig Hallum: you want to add

Joe Corso, CFO, nLIGHT: anything? No. The only thing I would add, Ruben, is that it’s caused us to think the widen our margin range a little bit, but it’s simply to account for some of that level of uncertainty, not more than that.

Reuben Roy, Analyst, Stifel: Okay. Got it. And the last question, any update on, funded, unfunded backlog, you know, progression there, you know, as you as you got through q one?

Joe Corso, CFO, nLIGHT: Yeah. No, Ruben. No no major update. I think we’re not in the position, you know, today where we’re gonna provide that update quarter over quarter. So, but I I would say that as we continue to execute on the program, we still have the right level of, you know, funded backlog plus the unfunded portion.

And then as Scott talked about, our activity around responding to proposals continues to increase and be at healthy levels. So generally speaking, we are pleased with the direction of the defense business in terms of backlog execution and the development of pipeline.

Reuben Roy, Analyst, Stifel: Helpful. Thank you, Joe.

Joe Corso, CFO, nLIGHT: Thank you, Ruben.

Conference Operator: Your next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead.

Troy Jensen, Analyst, Cantor Fitzgerald: Okay. First, I’m still laughing at Greg Phillips. Didn’t comment, but congrats on the good results here.

Scott Keeney, Chairman and CEO, nLIGHT: Hey, Strength.

Troy Jensen, Analyst, Cantor Fitzgerald: Hey. For Joe, Joe, for you, I heard you say 1,900,000.0 when you’re talking about the cost of goods sold. Did I hear that it’s an adjustment to get kind of a a onetime event?

Joe Corso, CFO, nLIGHT: Yeah. That’s the way to think about it. I I wouldn’t say it so much one time, Troy. It was just, obviously, in light of what’s going on in the world with tariffs. Right?

We took a really hard look at opportunities this quarter, and we were able to, you know, effectively reclaim, duties that were paid, and it had a nice benefit, to margin during the quarter. We will continue to reclaim duties, but we don’t expect it to be quite at that level as we move forward here in the near term. Now as tariffs continue either continue, they go up, they change, that will have an impact on what that that duty reclaim number is. But we wanted to make sure that we call that out specifically to give you a sense for what, you know, normalized gross margin would be. And so, you know, that had an impact of, you know, call it 500 basis points or so.

Troy Jensen, Analyst, Cantor Fitzgerald: Alright. This can you kinda maybe talk us through what you think gross margins could look like here in the middle of the year?

Joe Corso, CFO, nLIGHT: Yes. I think we we expect gross margins to continue to expand. If you look at the midpoint of the, the midpoint of the, guidance, right, our our our products gross margin is about 30%. That’s a, you know, slight expansion from where we were in q one. In q one, the margin did what we, you know, hoped it would do as we drove higher volumes.

Our mix improved as we, shipped more a and d product. We recovered in microfab, and we saw some benefit from, duty duty reclaim. As we look to the second quarter, right, it’s, you know, up up a couple hundred basis points. Some of that is continued growth in a and d. Right?

As we talked about, we don’t expect, you know, to see the same revenue expansion in microfab. Microfab has pretty good margins. So we we think as we continue to drive higher volumes, we’ll get better absorption. The mix of business is at the right levels that we would expect, directionally our margins to continue, to progress and get better as we move throughout the year.

Troy Jensen, Analyst, Cantor Fitzgerald: Alright. Perfect. And just maybe to follow-up on Greg’s questions too about the line of credit. Is there any government customers that require you to have healthier balance sheets? Is that any chance, and a reason why you do this too?

Joe Corso, CFO, nLIGHT: No. No. Not at all. No.

Troy Jensen, Analyst, Cantor Fitzgerald: Okay. Alright. Perfect, guys. Alright. Well, good luck going forward.

Joe Corso, CFO, nLIGHT: Thank you. Thanks, Troy.

Conference Operator: Your next question comes from Mark Miller of Benchmark. Just

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT0: what we’re hearing today and previous, it sounds like second half will be somewhat stronger than the first half. Can you is that a good assumption?

Joe Corso, CFO, nLIGHT: Mark, simply put, yes, it’s a it’s a good assumption. We expect the second half to be better than the first.

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT0: One of your competitors reported healthy results applications. I’m just wondering how additive business is going for you.

Scott Keeney, Chairman and CEO, nLIGHT: We’re making good progress in additive, and but we are focused on customers in The U. S. And Europe. And that’s an area where there’s more limited growth in the market relative to the markets in some other countries.

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT: Thank you. Thank

Conference Operator: you, ladies and gentlemen. That concludes our question and answer session. I will now turn the conference back over to John Marchetti.

John Marchetti, VP of Corporate Development and Head of Investor Relations, nLIGHT: Thank you, everyone, for joining us this afternoon and for your continued interest in Enlight. We will be participating in several investor conferences this quarter. We look forward to speaking with you during those events and throughout the quarter. Have a great afternoon.

Conference Operator: This concludes today’s conference. Thank you for attending. You may now disconnect your line.

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