nLIGHT at Raymond James Conference: Strategic Defense Focus

On Tuesday, March 4, 2025, nLIGHT Inc. (NASDAQ: LASR) participated in the Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025. CEO Scott Keeney outlined the company’s strategic focus on high-power lasers, emphasizing growth in defense applications, while addressing supply chain risks and operational advancements.

Key Takeaways

• nLIGHT is focusing on high-power lasers for directed energy, sensing, and additive manufacturing.
• Defense revenue constituted 53% of the annual revenue, growing to 64% in the final quarter.
• The company has a backlog of approximately $400 million, with a funded backlog growing over 55% last year.
• nLIGHT is reducing its dependency on China by relocating manufacturing.
• The company forecasts a 25% growth in defense revenue.

Financial Results

• Defense applications represented 53% of nLIGHT’s revenue for the year and 64% in the final quarter.
• The company forecasts a 25% growth in defense, driven by new and existing programs.
• nLIGHT’s backlog stands at approximately $400 million, with $167 million as funded backlog, reflecting a 55% increase over the past year.

Operational Updates

• nLIGHT is advancing its high-power laser technology for directed energy, sensing, and additive manufacturing.
• The company boasts the highest power laser in the world and emphasizes systems engineering for optimal integration.
• To de-risk its supply chain, nLIGHT is moving manufacturing operations out of China.
• Proprietary technology allows nLIGHT to adjust laser beams in additive manufacturing, enhancing productivity.

Future Outlook

• nLIGHT anticipates continued growth in defense applications, with plans for new sensing programs in the coming years.
• The company is well-positioned to lead in critical defense markets, supported by infrastructure to boost profitability.
• Deployments of laser systems are expected with the Army, Navy, and international clients.

Q&A Highlights

• nLIGHT is experiencing growth in both established and new sensing programs, currently in low-rate initial production.
• The company has secured key directed energy programs in the U.S. and internationally.
• Future deployments of laser systems are anticipated with military branches and international partners.

Readers are encouraged to refer to the full transcript for a detailed understanding of nLIGHT’s strategic insights and financial performance.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025:

Brian: there’s a lot of opportunity for growth there, margin expansion, and really a good story to tell over the next few years. We do have the company’s Chief Executive Officer, Scott Keeney, here to take us through the story. So Scott, thank you for joining us, and I’ll turn it over to you.

Scott Keeney, Chief Executive Officer, nLIGHT: Thanks, Brian. And apologize for the AV problems there. But we make great lasers, so stand by. So I want to just tell you a little bit about who we are. So we focus on high power lasers, and there are three main areas we’ll talk about today: directed energy, sensing and additive manufacturing.

And we lead the world in the core technology we have, and I’ll talk through that. I’ll also talk about each of these application areas in turn. Start with just the first picture here of the product we’re just releasing right now, which is our high power Beam Director. This on the Army Stryker vehicle later this year, and we’re really excited about this. And this is one example of the work we’re doing in high power lasers.

The this laser is about a 50 kilowatt laser. This is the image of what the the guts of the laser looks like. And we go up to 300 kilowatts. We are the leader in the world, have the highest power laser in the world and they’re deployed, they’re being worked on for a number of different applications. The reason we’re able to get that performance is because of the stack of technology that we’ve developed over the last twenty five years.

Starting from the left, the semiconductor laser going all the way through to that laser directed energy system. And I’ll start with just a little bit of history here. The foundation of what we started with twenty five years ago was this semiconductor laser. It remains a critical part of this technology stack. And just so you get a sense of what we do, we start with gallium arsenide wafers, and these produce these high power semiconductor chips.

These are on the order of about five millimeters, and they produce tens of watts of power that get then placed on these sub mounts here. We have proprietary technology in terms of that structure of the chip, the passivation of it, number of other things. And indeed, we’ve modified what we’re doing to optimize it for direct energy in addition to other markets. That chip then gets packaged into this fiber coupled assembly, multiple different chips come together to stuff that light into that fiber. And when we started the company twenty five years ago, that was our vision to cram more photons into that small space.

And we had five data points to extrapolate our vision. I think Gordon Moore had four that he used, so we’re a good company. And the vision was that we’d be able to drive that further. We’re about 10 watts when we started the company, and we’ve driven that to our latest record, which is a kilowatt of power just last month. And so this is the foundational technology which drives everything we do, and we started that twenty five years ago.

In addition to that performance in terms of power, which is applicable to both defense and the industrial markets, we’ve also developed critical technology for defense literally from the foundation of the company. And one way to look at that is with respect to weight. It turns out for an industrial laser, weight and size don’t matter terribly. But for defense applications, they do. And we’ve got the leading technology also that drives that size and weight down too.

And so the priorities that drive us with respect to defense are well documented in the last administration in this 23 technology summary and more recently in the executive order, which is now formally called Golden Dome. These documents describe three areas of priority, and we’re critical for each of them. And so what I want to do today is just talk through what we’re doing in each of these areas. I’ll start with directed energy, and I’ll start with the destroyer here at DDG. So in the Red Sea, there are two key issues that the Navy faces, two gaps or problems that lasers can address.

One is economics. So today, our Navy is using relatively expensive missiles to address drones that cost, say, maybe the drone maybe cost $20,000 The engagement costs for us can be north of $1,000,000 as much as $2,000,000 each time. So the economics, there’s an asymmetry there. Second is logistics of the magazine. So with the Kinetic Weapons System, you only have a certain depth of that magazine.

And lasers address both of those challenges. Lasers are high power lasers will degrade, destroy targets. And as long as you have that energy, you have the lasers, so you have a much deeper magazine and the cost is associated with whatever that energy cost is, so much lower cost. So there’s this pressing need that is very clear here in a Red Sea sort of case study, but in others also. And in addition to that, the reason that direct energy is a very important opportunity for us is one, the need has increased with the proliferation of threats such as drones.

And then second, because the technology has reached a place where it enables this laser directed energy application. So if you look at industrial lasers, typically, you need up to, say, about a few kilowatts of power, single load laser power. For directed energy, though, you need to start really above that and go well above that to be really relevant. And it’s only fairly recently that this is the record power in history. And by the way, we have the leading power today.

We’ve only recently crossed that threshold. And so today, we’ve got increasing threats and technology that has reached a point where it is practical to use. The sort of threats that we’re talking about here are broken into three sort of segments, if you will. Low power, sort of smaller drones, medium power, sort of more proficient drones, sort of what they’re called Group three UAS, and then finally, more advanced threats. And just to give you a feel for what’s going on in each of these three areas, the at the low power level, there’s many systems out there.

I’d highlight one from a customer in France that deployed their lasers to defend crowds at the Paris Olympics. So there are examples today of lasers that are being used for low power sort of applications. Second, for medium power, the army in ’twenty four deployed their first prototype units to the field. And it was a key milestone. We’ll be delivering the next generation later this year at the medium power level.

And then finally, at the higher power level, probably you’ve all read about Iron Beam in Israel. And again, 2024 was a milestone year with a number of announcements there. So we’re seeing applications in all of these areas, and I think ’twenty four was a really important year. And just to conclude in Direct Energy, to come back to some specifics in this technology stack, we have leading technology at each of these stages of this stack. So I showed you the chip, the fiber coupling.

At the next level, those fiber coupled semiconductor lasers get coupled into this fiber amplifier. Then those boxes, if you will, get coupled into that next big box, the beam combination, and that gets assembled into the Directed Energy laser weapon. And we have key differentiators across this. But I think in addition to that, it’s important to note that it’s actually the integration across the stack of technology, which is really important, the sort of systems engineering that goes into optimizing what we’re doing. So coming to the next area in sensing.

This is in Direct to Energy, we use lasers to transfer energy to degrade, damage, destroy something. In sensing, we’re using lasers, usually pulsed lasers, to detect, to provide information about something. And there’s a wide range of applications here. This is a market that application area that we’ve been in for decades, in some case. We have long standing programs record and we have new development programs here.

It is a very important application area. It is a little broader than directed energy. And so I’ll just give you a few examples of what’s going on in this space. First, LiDAR is an example where lasers can supplement radar systems, provide higher precision images that are very important for ISR, a wide range of applications here to just provide that awareness and understanding of what’s going on. Next is an example of target detection.

And again, we’re using lasers to provide much higher precision here. And a lot of these, just so you know, I can’t talk a whole lot about this, so I’m giving you illustrative examples here. Next is in navigation. We provide lasers that provide inertial navigation systems, really important for a wide range of different programs. And then we also provide lasers for something called countermeasures.

So this is a laser that, on this Chinook helicopter will confuse the guidance system of a heat seeking missile that is a threat, and it has been successfully deployed now for better part of twenty years. And then in space, a couple examples. One example of range finding, there’s a wide range of range finding examples, this NASA satellite, is one of our lasers that was space qualified and has been very successful. And then finally, space communications is another area that we see growing opportunities. So there’s a wide range of different applications that we put in the sensing category and many are mission critical.

Final area is in hypersonics. And here, the application for lasers is notably in additive manufacturing. And this scramjet example here is one example. You simply can’t make these devices. You can’t optimize them without the use of laser additive manufacturing, three d printing metal parts.

Another good example is the SpaceX rocket engines. Incredible progress made here, both reducing weight, improving performance, cost, huge benefits here that have been instrumental in helping drive down the cost, the launch cost. And it’s just extraordinary to see that the dramatic improvements here due to this and other technologies. Indeed, if you overlay the improvements we’ve made in additive manufacturing here, this is one of the reasons we’re driving it is the cost of building these additive manufactured parts has come down. And we see that as one of the markets that is poised to grow as we continue to drive this down.

And just to give you a feel here what we’re doing, we have proprietary technology that allows us to adjust our beam when you’re making these parts. So the very fine lattice part on the left, you want to use this very fine single mode beam to make that part. On the right, where you don’t have that fine lattice, you can use a bigger beam, you’ll go a lot faster. It turns out most parts are sort of in between and our laser switches and mill tends to go back and forth. And so we can improve the productivity of these tools significantly.

And so there’s a wide range of parts that are being built that you simply can’t make any other way. And it’s one of the applications that we put into our commercial side of the business. And it’s one that we do see growth. There are others, and there are some that we’re looking at in an opportunistic way. But the growth that we see going forward is, as Brian mentioned, is largely in defense.

If you look at where we were when we went in 2018, we’re over 80% commercial, 20% less than 20% defense. As we look ahead, it’s really defense where we see the significant growth going forward. In addition to this, I do want to just describe a little bit of the history since going public. I think one of the big headwinds that we faced was China. And I think nLIGHT is one of the companies that has pursued a de risking strategy.

So we intentionally decided to focus on the rest of the world in defense after we went public. Literally, the month that we went public is the month that Xi Jinping took over Power for Life, and we made a decision that we were going to place our bets elsewhere. You can see what we’ve done in terms of revenue. We’ve defocused there. We’ve grown in defense, and we’ve replaced much of that business.

In addition to that, we’ve derisked the supply chain. So we have moved our manufacturing out of China and we’ve moved other supply chains out of China. So it’s been a very challenge. Derisking, people talk about it, somehow it’s straightforward. It’s not.

It’s a very, very difficult thing to do. But proud that we have done that and it sets the stage for us, especially with our focus on defense applications. And that’s where we see the growth going forward, the defense applications. And in the last earnings call, I did note that we are forecasting 25% growth in defense. It’s roughly for the year, it was 53% of our revenue.

In the final quarter, it was about 64%. So we’re seeing that grow, and we do see continued growth there. And that growth is supported by our backlog. We have on the order of $400,000,000 of backlog today. $167,000,000 is funded backlog, and that grew over 55% over the last year.

So we’re seeing increasing backlog that’s funded, and that’s over the next couple of years. Unfunded are programs we’re working on that are very solid opportunities. And on top of that, we have a funnel that goes beyond this to further support our growth. And so in sum, we are positioned to lead in this market for these critical defense applications. And as we grow, we have put in place the infrastructure that we can leverage and support increasing profitability as we continue to grow.

So with that, Brian? Yes. Hand it over.

Brian: That sounds great. Scott, maybe just a couple of questions while we’re here. Yes. And then we’re going to adjourn to the breakout room. Could you maybe just give us a little bit of a sense of how you expect the timing of these various markets in your defense ecosystem that you laid out?

How you expect them to kind of evolve over the next few years?

Scott Keeney, Chief Executive Officer, nLIGHT: Good. So in defense, there are these two fundamental categories, direct energy and sensing. In sensing, we have long standing programs that will continue and we’re seeing growth in those programs. But there also, we see new programs that were going through the low rate initial production today. And so we see those in the coming quarters.

We see improvement, but certainly over the next few years, we see new programs in sensing. Similarly, in directed energy, we have won many of the key programs, not only in The U. S, but also internationally. And as I said, I think 2024 was a really important milestone year where we saw really some of the first real deployments of lasers. It will take time for all the con ops to be developed, all of the details to be developed and implemented by whether it be the Army or the Navy or internationally, but we see that occurring today.

Brian: That’s great. I think you’ve given us a lot of really good information to kind of noodle on here. I think we’ll take the rest of the questions in the breakout session downstairs and we’ll move from there. Good. Great.

Thank you so much, Scott. Thank you everyone for your time.

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