nLIGHT at Cantor Fitzgerald Conference: Defense Strategy Focus

On Wednesday, 12 March 2025, nLIGHT Inc. (NASDAQ: LASR) presented at the Cantor Fitzgerald Global Technology Conference, emphasizing its strategic pivot towards the defense sector. The company showcased a promising yet challenging outlook, with significant revenue growth from defense technologies, counterbalanced by the need for clear use cases in the U.S. defense strategy.

Key Takeaways

• nLIGHT is shifting focus to defense, with over 60% of Q4 revenue from this sector.
• A $171 million HELSI2 program aims to develop a one-megawatt laser.
• The company expects a 25% growth in its Aerospace and Defense business by 2025.
• Total backlog stands at $399 million, with $167 million funded and shippable within two years.
• nLIGHT leverages a vertically integrated model for competitive advantage.

Financial Results

• Defense Revenue Growth:

- 60% of Q4 revenue derived from defense.

- Anticipated 25% year-over-year growth in the Aerospace and Defense sector by 2025.

• Backlog:

- Total backlog of $399 million, with $167 million funded and shippable in two years.

• Gross Margins:

- Government development revenues have gross margins of 8% to 9%.

• Revenue Projections:

- Aiming to scale defense business to multiples of $100 million over the next 3-5 years.

• Commercial Revenue Impact:

- Commercial side remains margin accretive due to shared infrastructure.

Operational Updates

• HELSI2 Program:

- $171 million investment to create a one-megawatt laser, with deliverables accelerating in late 2024.

• DEM SHORAD Program:

- $35 million contract for a 50-kilowatt laser for Stryker vehicles, with most revenue already recognized.

• Technology and Products:

- Offers lasers from low to high power, using coherent beam combination technology.

• Vertical Integration:

- Produces semiconductor lasers, fiber amplifiers, and beam directors, enhancing competitive edge.

Future Outlook

• U.S. Defense Strategy:

- Need for defined use cases for directed energy weapons.

• Israel’s Iron Beam:

- Potential for mid-single-digit revenue from component level, rising to 40% with integration.

• Bidding Opportunities:

- Engaged in bids ranging from $10 million to $100 million.

Q&A Highlights

• Competitive Landscape:

- Competes against major primes and laser vendors; vertical integration is a key differentiator.

• Tariffs:

- Not expected to significantly impact business.

• DEM SHORAD Program:

- High-energy laser delivery for Stryker vehicle integration, with testing in 2025.

For further insights, readers are encouraged to refer to the full conference call transcript.

Full transcript - Cantor Fitzgerald Global Technology Conference:

Unidentified speaker: Alright. Thanks, everybody, for making it bright and early here on Wednesday. I’m fortunate enough to have the CEO excuse me, CFO. I didn’t mean to give you a promotion here.

Joe Corso from nLIGHT and John Marchetti, IR. More than just IR, John? Treasurer of other things or

John Marchetti, Treasurer and corporate development, nLIGHT: Treasurer and corporate development. Awesome.

Unidentified speaker: All right, perfect. So guys, thanks for making it. How about let’s just start with just a quick introduction of yourself and nLIGHT.

Joe Corso, CFO, nLIGHT: Yeah. So I’m Joe Corso. I’m the company CFO. I’ve been with nLIGHT for about five years. And prior to that, I actually worked as an investment banker.

Perfect.

Unidentified speaker: A quick background on nLIGHT?

Joe Corso, CFO, nLIGHT: Yes. So let me talk a little bit about nLIGHT. So nLIGHT today is about a twenty five year old company went public in 2018. We are focused exclusively on lasers that go into a wide range of end markets. When the company went public in 2018, the end market exposure was about 80% to what we call commercial markets and 20% in defense.

And China was a big piece of it. Fast forward five or six years, and today that really has flipped. So today we are much more of a defense technology oriented company. We still do all of that commercial work, but we leverage the same amount of vertical integration that we apply to the commercial markets, to the defense markets as well. About $200,000,000 of revenue headquartered in the Pacific Northwest and few other areas in The U.

S. Perfect.

Unidentified speaker: All right. I just got a quick question for John. I got to shoot out here. So the Jets, the Giants and Chick fil A employees, what do they have in common? I don’t know.

None of them work on Sunday.

John Marchetti, Treasurer and corporate development, nLIGHT: Thank you very much.

Unidentified speaker: All right, quick. So I want to start with the defense business. Obviously, that’s the exciting part of your business. So a couple of big programs that we know of, a lot that we don’t. But let’s start with the LC2 program.

Joe Corso, CFO, nLIGHT: Yes. So maybe I’ll take one quick step back. Today, as we ended our Q4, we did north of 60% of our revenue was in defense, and that grew throughout the year. We think in 2025, the defense portion, that A and D portion of our business should grow 25% year over year. And that’s really supported by very good visibility by backlog.

So we’ve got about $399,000,000 of backlog, just under $170,000,000 of that is funded. But the point is we are working under a contract that support that type of a number. You mentioned one of the big programs that we are working on is what we call the HELSI2 initiative, which is high energy laser scaling initiative. That is a $171,000,000 program that was awarded to nLIGHT. So that $171,000,000 is all nLIGHT.

And the aim of that program is to deliver a one megawatt laser for the directed energy market. NLIGHT, in the past, had been awarded a prior incarnation of that program where we delivered a 300 kilowatt class high energy laser for the directed energy market, which exceeded the program’s objectives. In addition, that program was a 48,000,000 award to nLIGHT. A few other primes were awarded that, one of whom was awarded $100,000,000 to develop effectively the same laser. And so I bring that up because part of what we are doing here is not just trying to push the technology and the capabilities in that laser, but also understanding how to develop and build these lasers at cost.

So at some point they can be integrated into the battlefield.

Unidentified speaker: Okay. So of that 171, how much have you guys recognized? Have you reported that?

Joe Corso, CFO, nLIGHT: We haven’t reported specifically how much we’ve recognized, but I will tell you that we are still in the, to use a baseball analogy, the early innings

Unidentified speaker: of that.

Joe Corso, CFO, nLIGHT: The other thing that’s important about that is nLIGHT develops our own proprietary technology that we can use in those programs. So in 2025, a lot of the growth that you’ll see in the A and D side of our business and at some point, we’ll probably get to it. The product revenue that we drive and grow in 2025 will be due to the nLite developed hardware that is selling into this development program. Right. Got you.

Okay. So I think it’s the one megabyte development program. Right. Gotcha. Okay.

So I think

Unidentified speaker: it’s, the one megawatt laser is deliverable in 2026. I think you guys have stated publicly that, the second half shipments in the second half of ’twenty four are expected to accelerate. Excuse me, started shipping in the second half of ’twenty four expected to accelerate this year.

Joe Corso, CFO, nLIGHT: Correct. So again, that 25% revenue growth in A and D, a good bit of that will be as we continue to ramp the production, the delivery of the nLIGHT hardware that’s being delivered into that particular program. So that’s exactly right. Okay, perfect. So then another one that we know about, I’m probably going to mispronounce it, but the DEM SHORAD.

Yes, perfect. So DEM SHORAD. So DE is for directed energy and the M SHORAD is for the mobile short range air defense. So there’s been a lot in the, you know, in the press recently about the need globally, not just in The US, but elsewhere of, of short range air defense. And so that particular program was a $35,000,000 award that nLIGHT received to build a 50 kilowatt high energy laser that was going to be integrated into a Stryker vehicle.

So that is a program that today we are we’ve recognized not all but most of the revenue on that particular program. So far, it’s gone, gone quite well. We’re really pleased with, one, winning that award and, two, being able to deliver our technology into that program. We have a different way of combining laser beams, and, you know, and we expect good things out of that particular laser. The other thing that I will highlight, I talked before about a one megawatt class laser versus a 50 kilowatt class laser.

Right? The one megawatt is, you know, 20 times more powerful than the 50, but both, have a place. Actually, you can go even lower power, and be effective in the overall directed energy laser market. So, nLIGHT is able to leverage what we can do to address all we talk about it as low, medium and high. So you can think about low power as 10 kilowatts, medium power, 5,100 kilowatt class.

And then really the high power is 300 kilowatt class and above. We have products and technologies in each of those, in each of those domains today. And we think that they, they all have an area, to play in directed energy. So what is a Stryker vehicle? A Stryker vehicle is, it’s, it’s a, it’s a maneuverable eight by eight.

What do you, how would you describe it? Marine

Unidentified speaker: Let the marine It’s an

John Marchetti, Treasurer and corporate development, nLIGHT: armored personnel carrier.

Joe Corso, CFO, nLIGHT: Armored personnel carrier. Okay.

Unidentified speaker: Alright. Perfect.

Unidentified speaker: And it’s

Unidentified speaker: mainly for short range that’s more of a shooting down the smaller Yeah.

Joe Corso, CFO, nLIGHT: Good. So the you know, if you think about the threats that are out there today, right, you can think about low power lasers being effective against drones, right? If you think about the mid power, now you’re talking about rockets, artillery, mortar. And then when you go to the highest powers, now you’re talking about what are called strategic threats. So you’re talking about cruise missiles, hypersonics, etcetera.

Right. Okay.

Unidentified speaker: All right. Perfect. All right.

Unidentified speaker: So I think the first maybe commercial application for the DE product might have been Israel’s iron beam application. I know when that was announced, you guys’ stock had a nice move on that. I think you guys have confirmed that you’re designed into that. But can you just talk about shipments and which components are you using? Or maybe try

Joe Corso, CFO, nLIGHT: to size the opportunity for you. Yeah. So first, what I would say is that Israel has done a great job of driving and developing and getting directed energy lasers into in theater. Right? They are arguably the furthest along at least publicly around doing that.

And so they call their program the directed energy portion of their program. They’ll call it Iron Beam. I think Iron Beam is complements what a lot of people understand as Iron Dome, which is a kinetic the kinetic way of short range air defense. So what was announced was that there was 500,000,000 that was delivered to Israeli Prime to deliver a single system in 2025. In addition to that $500,000,000 the prior administration, authorized $1,200,000,000 of supplemental aid for the procurement of directed energy laser.

I’ll just call them components for now to help the Israelis continue to sort of field those directed energy laser systems. For nLIGHT, today, when you think about what that could mean from a revenue perspective for us, that’s kind of mid single digits based on where as a percentage of the overall high energy laser system. If we move further up the stack, right, that goes into the mid teens. And then at some point, you’re developing a high energy laser, that’s more like 40% of the BOM would be the HEL, which would be nLite revenue. Now again, that’s hypothetical, right, in terms of what we are doing today is we are supplying on the on the component level.

Okay.

Unidentified speaker: Can you go over that again? You said a $500,000,000 for one system?

Joe Corso, CFO, nLIGHT: Five well, dollars 500,000,000 was delivered to two primes, right, to develop and publicly stated to deliver and field one system in 2025. Now not all of that 500 is expected to be into a single system. So there will be more than one system that is developed with that 500 to get into the specifics of system costs. I can’t do that. But the idea is that in 2025, you’re going to have a fielded 100 kilowatt class directed energy laser in Israel.

Unidentified speaker: So for some reason, I thought that they plan to have the whole iron beam up and running by the end of this year,

Joe Corso, CFO, nLIGHT: but you’re just No. No. This is

John Marchetti, Treasurer and corporate development, nLIGHT: the first stage.

Unidentified speaker: The first stage. Okay.

Unidentified speaker: All right. Perfect.

Unidentified speaker: So how about I know The U. S. Now is talking about doing an Iron Dome type of application. What do you know about Trump’s plans for?

John Marchetti, Treasurer and corporate development, nLIGHT: I think from an Iron Dome perspective, right, it’s still very early stages. What ultimately is going to be required, I think is still very much up in the air. I will say we’ve seen a ton of requests for information proposals. We’ve been spending a lot of time with a number of different agencies and a number of different primes on all host of programs that are coming to market. I think, you know, ultimately, you know, non kinetic weapons were called out within that mission statement.

So I think that’s very, very important for us on the directed energy side. But I think even more so than that, a piece of our defense business that probably doesn’t get as much attention is on the laser sensing side, right? And that’s something where, you know, the vast majority of what we do is classified. But you could think of it as really doing, you know, we like to say that within our defense business, right, we use lasers to either disable and destroy something or, you know, detect and identify something, right. And on that sensing side, that’s really what we’re doing.

And so there’s a lot of programs that are being evaluated right now under the Golden Dome initiative around long range sensing identification, ways to complement radar to get much more sophisticated detail back on identifying objects. And so there’s a lot of work that we’ll be doing on that side of the business as well.

Unidentified speaker: So if I just kind of go back to the Iron Beam and Iron Dome in Israel, I think what I had learned is that the Iron Dome didn’t work for smaller objects like mortar and drones flying in, right, like that. So then they needed to complement Iron Dome with Iron Beam. I think about The US, I guess I’m not worried about Mexico and Canada

Unidentified speaker: shooting mortars in the right way. Maybe at least,

Unidentified speaker: right? But I mean, does The US need a laser base or are they is it going to be more of a rocket based like the Israeli application?

John Marchetti, Treasurer and corporate development, nLIGHT: Well, I I think if you think about it, right, what we’ve always talked about in directed energy is that it is a complement to Kinetic Systems. So you talk about Iron Dome. Iron Dome has worked remarkably well for Israel, right? And it’s less about, oh, it doesn’t it isn’t successful against some of those smaller threats, if you will, as much as there’s a real economic mismatch, right, in defense versus offense today. So you look at what’s been going on in the Red Sea, the cost to launch a drone attack or an unmanned aerial attack against shipping is in the thousands.

And yet the cost to defend against that is in the millions, right? If I have to shoot a missile to defend against a drone, I’m spending $1,000,000 or $2,000,000 to defend against a $10,000 or 100,000 threat. And so the Iron Dome has it’s not so much a situation where it can’t shoot out some of those things. It’s quite frankly, it’s a math problem, right? If I’ve got a limited arsenal, there are certain things that I do know I have to defend against.

And there’s others that maybe, you know, if I’m tracking them and they’re going to fall into, you know, unpopulated areas or things like that, I let those fall. So I don’t waste my arsenal. And that’s where directed energy ultimately can be a really good complement to kinetic weapons, right, as part of a whole layered defense strategy. I can now hopefully match my response to the appropriate threat. Sure.

Unidentified speaker: That makes sense. Yes. I think what I read too about the Iron Dome is that when they launch a missile to shoot something down, they launch two, right, in case one misses, but they’re like $50 each. So it’s like $100,000 kind of per kind of threat coming in.

John Marchetti, Treasurer and corporate development, nLIGHT: Yeah, it’s I mean, the cost that we’ve seen is over that period was about a $2,000,000,000 cost for Israel to defend against a millions of dollars to attack.

Unidentified speaker: Crazy. So it’s a tenfold

John Marchetti, Treasurer and corporate development, nLIGHT: sort of mismatch there. And that’s driving, I think, a lot of interest in this globally. As Joe was mentioning, at the low end of the directed energy market, that 10 kilowatt and below, I mean, you’re defending against quadcopters, things like that, very small threats, but that can be launched for $1,000 if that. Exactly. Right?

And as you scale up, that gives you that opportunity to try to match that defense against that appropriate target. The other element to think about is, you know, what’s called the magazine, right? I mean, at this point, right,

Joe Corso, CFO, nLIGHT: I mean, if you’re Israel or you’re anyone and you have a limited number of these kinetic weapons and they’re not built, right, you can’t build these counter rockets in a matter of days, right? So with lasers, one of the things you get is effectively an unlimited magazine, right? As long as you have power, you have the ability to disable something. And so the idea is that as you integrate this lower cost, right, very deep magazine into the layered defense strategy, you can be both more effective, right, in terms of neutralizing threats and do it at a far lower cost than if it were kinetic only. Lasers will never replace all of the air defense kinetic weapons out there.

They will be a complement to them and used quite strategically. Okay. So Joe, I just want to

Unidentified speaker: go back to some comments you made about just kind of the opportunity kind of sizing it. I think you said low single digits or maybe high single digits if it’s just a component or two, up to 40% if you kind of fully integrated. What would be a full like a a system cost? Are they $2,000,000 Are they $5,000,000 So if I just kind of say 40% of what number?

Joe Corso, CFO, nLIGHT: Yes, sure. So maybe what I’ll do is I’ll just use a real world example. I’ll use the DEM ShoreAd program that we are on right now. That’s a $35,000,000 program that nLIGHT is going to develop a 50 kilowatt laser for $35,000,000 right? Certainly as programs like that go into production, it’s not going to be $35,000,000 a copy for the laser, but it’s not going to be $1,000,000 or $2,000,000 or $3,000,000 either, right?

So you’re talking about lasers that are in the measured in the tens of million dollars most likely. When you think about just now that’s just the high energy laser, that’s not the overall weapon system. That high energy laser is a piece of what gets integrated into an overall laser weapon system. There are a few other sort of critical components. One of the components is called a beam director.

So now you have this laser beam and there’s an optical chain that it needs to go through and then it needs to be directed on target. We don’t talk a lot about that, but that is another capability that nLIGHT has. So we have the ability not only to do the components, right, that go into the high energy laser, we can do the high energy laser itself and then we can extend even further and do the Beam Director, the Beam Directors as well. Okay.

Unidentified speaker: So can you just go over all the components that you’d sell? It’s amplifiers, it’s beam directors, it’s combiners, it’s

Joe Corso, CFO, nLIGHT: lasers? It actually starts one level before that, right? So we can sell what we call, I’ll call them semiconductor lasers, right? So the semiconductor lasers, we can sell at that level. Semiconductor lasers, for lack of a better word, you gang them up and you can put them into a fiber amplifier, right?

In addition, we have our own fiber, right, that we can that we use as well. Then you take those fiber amplifiers, right, and you combine them and we have a proprietary technique to combine those fiber amplifiers into that high energy laser. We then can take that high energy laser and integrate it into a BeamDirector. And we have some software that we can wrap around the whole thing that helps with target identification. And we do something called adaptive optics, which enables us to measure the impact that the atmosphere will have when the laser is fired.

So we are really trying to surround this market and go to market at all levels of that vertical integration, right? And all of that is built upon the same fundamental technologies that the business was started with many years ago. Okay, perfect.

Unidentified speaker: All right. So just I want to talk about margin profile, Directed Energy Lasers in the government versus government development revenues. Sure. I mean, to my knowledge, I think government development revenues have 8% to 9% gross margins, but there’s no OpEx. So it’s 8% to 9% operating margins.

Joe Corso, CFO, nLIGHT: But what is No, that’s absolutely the way to think about it, Troy. So we report our business in two segments. We report laser products and we provide and we report, advanced development. Just almost all of actually all of the advanced development work is, is A and D. And so in that work, you’ve got it exactly right.

Right? The gross margin that we report is effectively our EBIT margin, right? And anything else that would be what would look like OpEx on a P and L would just be costs that are just unallowable by the government, some T and E things and things like that. On the product side, that’s no different when we’re selling a defense product. That’s no different than when we sell a product into the commercial market.

We are selling that and we are recognizing the gross margin and all of the OpEx that was required to sort of support that. Awesome. Justin, I think you had a question.

John Marchetti, Treasurer and corporate development, nLIGHT: I I mean, I think the question in terms of The US, I think, is where it’s fallen down a bit in this is I don’t think they’ve adequately really identified where they want these weapons and what they want these weapons for. Well, Israeli has a very clear, you know, sort of use case, if you will, for these weapon systems, right? We’re going to put them out on the edge of the border and they’re going to be used to complement the Iron Dome. I think in The US, you take the DEM SHORAD example that Joe was referencing, you know, a 50 kilowatt laser. The US army decided to immediately put that on a mobile platform that caused earlier iterations of it to run into a whole host of issues that have nothing to do with the laser itself.

Right? And so I think that The US is a little bit further behind in really identifying where they want these weapons and what they want these weapons to do. Navy’s got a very clear use case. They’re looking at some of the most high powered systems to be able to do defense for battle groups and things along those lines. But whether we ultimately want stationary systems, mobile systems, things along those lines, I think are still being evaluated.

So to your point, could we turn these into weapon systems relatively quickly? I think we could. But I think that, you know, we need a clear mandate as to where those weapon systems are going to be and what they want them for.

Joe Corso, CFO, nLIGHT: Right. I want to make sure that I clarify an earlier comment that I made in John’s as well. From a technology perspective and the stack, The US is not behind. Right. Right?

What where where, you know, the term behind would simply be how and where do we integrate this technology for the threats that The US is facing or that our allies are facing that The US is, The US is supporting. And that’s where, when I said Israel was sort of furthest ahead, it’s they’ve defined a very clear use case for where they want to use direct energy. There’s a good point. Yes. Jonathan, go ahead.

Could

Unidentified speaker: you flesh out your DM Charette program because the press reports basically had an incumbent, the folks at AirVironment spending

Joe Corso, CFO, nLIGHT: There’s all sort. They haven’t said specifically, but there’s there’s there’s a lot of different potentials for how many how many they want and how they actually want to integrate that laser, whether it should be on a striker or should it be palletized where so it’s not clear yet on the last part of your question. First part of your question though in terms of the history of it, so the the the DM SHORAD program, Raytheon, has built four of these. Raytheon is using a different way to combine the beams and n light. Raytheon, does their beam combination in this particular and light.

Raytheon, does their beam combination in

John Marchetti, Treasurer and corporate development, nLIGHT: this particular laser with something called a

Joe Corso, CFO, nLIGHT: spectral beam combination. Those I think there are some press reports out there that talk about, you know, those being in, you know, in the field. And there have been, you know, responses by the the the user community. They probably have not all been, you know, glowing. That being said, these are these are really new, new defensive weapons that, there’s a reason that they’re run out of Ricto, right?

Because it’s the first time any of these things have really been put in the field. One of the big distinctions around what Raytheon’s laser and the nLIGHT laser is nLIGHT uses a different way to combine the beam. So our version of the DM SHORAD laser is using what we call coherent beam combination, where we effectively can drop more channels of laser power and combine it slightly differently. The way that I think about it is, you know, spectral beam combining your, if you think about a prism or a reverse prism, you’ve got many different you know, colors of light that are coming in and they’re combined into a single color out versus the way that n lite is combining their beams where you have, you know, individual lasers that are going through a complex set of optics and are being focused on a on a spot at some at some, you know, distance away. And and the theory is and and we’ve proven in modeling and we did it with our 300 kilowatt HELSI one program is that we can add more channels into that optical head and we can scale up the power, scale up the power further.

I think you also asked about what’s going to happen with that program. So what we need to deliver is, we’re not the prime on that contract. So we are delivering a high energy laser to the prime that is going to do the integration of that laser into the weapon system and into the Stryker vehicle. And from there, the idea is that that is going to be moved out to the test range at some point in 2025.

Unidentified speaker: How about, so U. S. Defense is likely going to want U. S. Supply chain, right?

So to my knowledge, industrial lasers or high energy lasers are either Russian or Chinese made. So who else did you guys compete against that are kind of U. S. Based?

Joe Corso, CFO, nLIGHT: Yeah. I mean, we compete against all of the primes in some form or fashion. There are some folks, Blue Halo, which was just acquired by AeroVironment, has a low power laser. We compete against some of the other laser vendors on the component level is kind of the competitive set. I mean, mean, I think one of the unique characteristics of nLIGHT is that we are vertically integrated.

We are not aware of another company that goes from building their own laser diodes and then can integrate through every key component up and through the high energy laser and Beam Director. And part of the development of our technology stack and the success that we’ve had in this space is due to that vertically integrated strategy simply because of the learning cycles. Right? I mean, it takes the cycle of building a semiconductor laser and and and getting it integrated into an amp and understanding how that is tested and performing so that we can make, you know, design changes on the packaging or on the chip. And then, starting design on the system level is a reason that we are bullish about our approach to this market.

Right. Okay.

Unidentified speaker: All right. Just changing topics here. You had mentioned our backlog, dollars $330,000,000. I think the funded backlog was 167,000,000. It was up 50% year over year.

How much of that is shippable in the next twelve months?

Joe Corso, CFO, nLIGHT: Yes. I mean, all that 167,000,000 is shippable in the next two years. A good bit of that is going to come out in the next twelve months. It’s one of the reasons that we felt that we had enough visibility to at the end of our last earnings call say that our A and D business is going to be up 25%. All right.

Perfect. What that does not include that I think is important is it does not include any of the business that we are bidding on today. So that top of the funnel, if you will. There are a lot of programs out there that are in the, I’ll just call it $10,000,000 20 million dollars 50 million dollars 1 hundred million dollars opportunities for us that are not included in that $399,000,000 number. And so we’re excited about both on the Directed Energy side and as John talked a little bit about our laser sensing side.

Okay. So I know

Unidentified speaker: you guys can’t talk about specific like RFPs and RFQs that you guys are working on because it’s government business. Can you just quantify the number that you’re in?

Joe Corso, CFO, nLIGHT: Yes. I mean, it’s you start adding up those numbers that I just gave you and that’s the that’s really the way that we are thinking about the opportunity side. It’s they’re big numbers, right? I don’t want to be hyperbolic and say that we’ve got dollars 2,000,000,000 of pipeline that we’re working on. But when we think about our revenue base today, last year we did $100,000,000 plus or minus of A and D revenue.

The work that we are doing today, the things that are in backlog and that we think can get extended as they move into programs of record and things like that, as well as what we’re seeing in terms of the funnel is we’re starting to measure our defense business in terms of how many multiples of 100 can it be over the next three to five years. That is the thrust of nLIGHT right now. Okay. So last couple of minutes, let’s

Unidentified speaker: just talk about the less sexy side of nLIGHT here, maybe the industrial side.

Joe Corso, CFO, nLIGHT: Commercial business, we add two of our reported end markets, microfabrication and industrial fiber lasers. Both of those businesses are important for us today. Not because they carry the same level of, growth as growth opportunities as the defense side do, but the incremental dollar of revenue in each of those segments is accretive to our margins. The delta between the margins that we get on the in those markets versus the defense markets is actually not all that significant. And it’s important to remember that for us to be successful in the defense market, we are leveraging the vertical integration all the way back to the chip.

And so those commercial businesses use the exact same infrastructure. So as we look at it, we say, look, if we can generate you know, more revenue on the commercial side and it’s contributing positive contribution margin, it’s a good business to be in for us. You know, what we’ve done over the last couple of years is we’ve been much more thoughtful about our, I’ll just call it discretionary spend on OpEx in terms of R and D and sales and marketing to make sure that we’ve matched that OpEx level investment with where we think the commercial business, what it requires and where and where it can grow. But today, you know, we used to talk about ourselves as a a dual use technology company. I don’t think that’s the perfect term for us.

But I think it’s important to say, look, we’ve got this defense business. We’ve got this fixed infrastructure. If we can sell another dollar’s worth of industrial fiber lasers, that is margin accretive to nLIGHT’s bottom line.

Unidentified speaker: That makes sense.

John Marchetti, Treasurer and corporate development, nLIGHT: And it is, it’s important to the defense business. I mean, part of the reason I think we’ve been very successful in directed energy is because we know how to make lasers that work in real world environments. Joe mentioned some of the competition that we see, particularly with respect to the primes. They’re not laser manufacturers, right? They don’t have hundreds of thousands of systems deployed and they don’t know how to deploy them in real world working environments where you’re dealing with sand and it’s easy to make a laser that fires in a clean room, right?

It’s hard

Unidentified speaker: to make it fire. How about just the last minute on just tariffs, implications for you guys?

Joe Corso, CFO, nLIGHT: I think tariffs, I mean, will have an impact. It’s not going to be first order for us. I mean, what we’re seeing in some of our markets is the particularly our markets that are most exposed to China is that the impact of a level of a tariff that we’re talking about is not going to have a meaningful impact on our ability to sort of grow the business or be more profitable. I mean, there are puts and takes kind of each way, right? We do still source some things from China and we still source some things from Mexico and Canada.

So but it’s not first order. We don’t think about tariffs as first order impact on our business. Awesome. With that, we’re

Unidentified speaker: out of time. So I want to thank you for the time guys. Yeah. Good. Thanks Troy.

Joe Corso, CFO, nLIGHT: Appreciate it.

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