NLIGHT INC

Previous wording

Revenues decreased to $95.0 million in the six months ended June 30, 2024 compared to $107.4 million in the same period of 2023 due primarily to decreased sales in the Laser Products segment. We generated a net loss of $25.5 million for the six months ended June 30, 2024 compared to a net loss of $16.6 million for the same period of 2023.

Current wording

Revenues decreased to $151.2 million in the nine months ended September 30, 2024 compared to $158.0 million in the same period of 2023 due primarily to decreased sales in the Laser Products segment. We generated a net loss of $35.8 million for the nine months ended September 30, 2024 compared to a net loss of $28.4 million for the same period of 2023.

Previous wording

We invest heavily in the development of our semiconductor, fiber laser, directed energy, and laser-sensing technologies to provide solutions to our current and future customers. We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap. Our product development is targeted to specific sectors of the market where we believe the performance of our products provide a significant benefit to our customers. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.

Current wording

We invest heavily in the development of our semiconductor, fiber laser, directed energy, and laser-sensing technologies to provide solutions to our current and future customers. We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap. Our product development is targeted to specific sectors of the market where we believe the performance of our products provides a significant benefit to our customers. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.

Previous wording

Our Development gross profit varies with the type and terms of contracts, contract volume, project mix, changes in the estimated cost of projects at completion, and successful execution on projects during the period. Most of our Development contracts have historically been structured as cost plus fixed fee due to the technical complexity of the research and development services, but we also perform work under fixed price contracts where gross margin can change from period to period based on the estimated cost of the project at completion.

Current wording

Our Advanced Development gross profit varies with the type and terms of contracts, contract volume, project mix, changes in the estimated cost of projects at completion, and successful execution on projects during the period. Most of our Advanced Development contracts have historically been structured as cost plus fixed fee due to the technical complexity of the research and development services, but we also perform work under fixed price contracts where gross margin can change from period to period based on the estimated cost of the project at completion.

Previous wording

The decreases in revenue from the Industrial and Microfabrication markets for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by decreases in unit sales due to lower customer demand and deteriorating market conditions. The increases in revenue from the Aerospace and Defense market for the three and six months ended June 30, 2024, compared to the same periods in 2023, were the result of increased product unit sales and ASPs, and increased development revenue from new development contracts.

Current wording

The increases in revenue from the Aerospace and Defense market for the three and nine months ended September 30, 2024, compared to the same periods in 2023, were the result of increased unit sales of products due to higher market demand, an increase in ASPs, and increased development revenue from development contracts awarded primarily in the second half of 2023.

Previous wording

The increases in Advanced Development revenue for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by new development contracts. All Advanced Development revenue is included in the Aerospace and Defense market.

Current wording

The increases in Advanced Development revenue for the three and nine months ended September 30, 2024, compared to the same periods in 2023, were driven by development contracts awarded primarily in the second half of 2023. All Advanced Development revenue is included in the Aerospace and Defense market.

Previous wording

Geographic revenue information is based on the location to which we ship our products. The increases in North America revenue for the three and six months ended June 30, 2024 compared to the same periods in 2023, were driven by increased revenue from the Aerospace and Defense market as previously discussed, offset partially by decreased revenue from the Industrial and Microfabrication markets.

Current wording

Geographic revenue information is based on the location to which we ship our products. The increases in North America revenue for the three and nine months ended September 30, 2024 compared to the same periods in 2023, were primarily attributable to increased revenue from the Aerospace and Defense market as previously discussed, offset partially by decreased revenue from the Industrial market.

Previous wording

The increase in China revenue for the three months ended June 30, 2024, compared to the same period in 2023, was the result of increased revenue from the Microfabrication market. There was no significant change in China revenue for the six months ended June 30, 2024 compared to the same period of 2023.

Current wording

The decrease in China revenue for the three months ended September 30, 2024 compared to the same period in 2023 was the result of decreased revenue from the Microfabrication and Industrial markets. The decrease in China revenue for the nine months ended September 30, 2024 compared to the same period in 2023 was driven by a decreased in revenue from the Industrial market offset partially by an increase in revenue from the Microfabrication market.

Previous wording

The increase in Laser Products gross margin for the three months ended June 30, 2024, compared to the same period of 2023, was driven primarily by positive changes in sales mix, offset partially by the impact of lower production volumes on fixed manufacturing costs due to the overall decrease in customer demand. The decrease in Laser Products gross margin for the six months ended June 30, 2024, compared to same period of 2023, was driven by the impact of lower production volumes on fixed manufacturing costs due to the decrease in overall customer demand, partially offset by positive changes in sales mix for the second quarter of 2024.

Current wording

The increase in Laser Products gross margin for the three months ended September 30, 2024 compared to the same period of 2023 was driven primarily by positive changes in sales mix and increases in ASPs in the Aerospace and Defense market. Our average gross margins on sales for the Industrial market have been lower than those for the Microfabrication and Aerospace and Defense markets. The decrease in Laser Products gross margin for the nine months ended September 30, 2024 compared to same period of 2023, was driven by the impact of lower production volumes on fixed manufacturing costs due to the decrease in overall customer demand, partially offset by positive changes in sales mix.

Previous wording

The increases in Advanced Development gross margin for the three and six months ended June 30, 2024, compared to the same periods in 2023, were primarily the result of changes in the composition of research and development contracts. The three and six month periods ended June 30, 2024 included more revenue from fixed priced contracts that carried higher average gross margins than cost-plus fixed fee contracts during the period.

Current wording

The decrease in Advanced Development gross margin for the three months ended September 30, 2024 compared to the same period in 2023 was driven by changes in the composition of research and development contracts and a increase in the estimated cost at completion on a significant fixed priced contract in the third quarter of 2024. The increase in Advanced Development gross margin for the nine months ended September 30, 2024 compared to the same periods in 2023 was primarily the result of changes in the composition of research and development contracts. The nine month period ended September 30, 2024 included more revenue from fixed priced contracts that carried higher average gross margins than cost-plus fixed fee contracts during the period.

Previous wording

The increases in sales, general and administrative expense for the three and six months ended June 30, 2024, compared to the same periods in 2023, were primarily due to increases in incentive compensation, bad debt expense, and stock-based compensation of $0.1 million and $0.7 million for the three and six months ended June 30, 2024, respectively.

Current wording

The increases in sales, general and administrative expense for the three and nine months ended September 30, 2024, compared to the same periods in 2023, were primarily due to increases in bad debt expense and stock-based compensation of $0.3 million and $1.1 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

The increases in interest income, net, for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by increases in interest rates and increased investment in marketable securities.

Current wording

The increases in interest income, net, for the three and nine months ended September 30, 2024, compared to the same periods in 2023, were driven by increases in interest rates and increased investment in marketable securities.

Previous wording

Changes in other income (expense), net, are primarily attributable to realized gains on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations.

Current wording

Changes in other income, net, are primarily attributable to realized gains on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations.

Previous wording

The increase in income tax expense for the three and six months ended June 30, 2024 compared to the same period in 2023 was driven by expiring statutes of limitations on unrecognized tax positions in the second quarter of 2023.

Current wording

The increase in income tax expense for the nine months ended September 30, 2024 compared to the same period in 2023 is primarily due to a benefit for expiring statutes of limitations on unrecognized tax positions in the second quarter of 2023 and accrued interest on unrecognized tax positions. The increase in income tax expense for the three months ended September 30, 2024 compared to the same period in 2023 was mainly driven by an increase in income in foreign jurisdictions.

Previous wording

We had cash and cash equivalents of $49.6 million and $53.5 million as of June 30, 2024 and December 31, 2023, respectively. In addition, we had marketable securities of $65.2 million and $59.7 million at June 30, 2024 and December 31, 2023, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities increased by $1.7 million from December 31, 2023 to June 30, 2024.

Current wording

We had cash and cash equivalents and restricted cash of $41.7 million and $53.5 million as of September 30, 2024 and December 31, 2023, respectively. In addition, we had marketable securities of $65.2 million and $59.7 million at September 30, 2024 and December 31, 2023, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities decreased by $6.2 million from December 31, 2023 to September 30, 2024.

Previous wording

For the six months ended June 30, 2024, our principal source of liquidity was cash collected from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

Current wording

For the nine months ended September 30, 2024, our principal source of liquidity was cash collected from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

Previous wording

During the six months ended June 30, 2024, net cash provided by operating activities was $7.1 million, which was the result of a $25.5 million net loss, offset by increases in working capital of $10.5 million and non-cash expenses totaling $22.1 million related primarily to depreciation, amortization, and stock-based compensation. The increase in working capital in the six months ended June 30, 2024 was driven by an $6.9 million decrease in accounts receivable, net, a $1.4 million increase in accounts payable, and a $2.5 million decrease in prepaid expenses and other current assets.

Current wording

During the nine months ended September 30, 2024, net cash provided by operating activities was $1.5 million, which was the result of a $35.8 million net loss, offset by a decrease in net working capital of $2.7 million and non-cash expenses totaling $34.7 million related primarily to depreciation, amortization, and stock-based compensation. The decrease in net working capital in the nine months ended September 30, 2024 was driven by a $3.3 million decrease in inventory, a $1.0 million decrease in prepaid expenses and other current assets, a $4.6 million increase in accounts payable and a $2.5 million increase in accrued and other long-term liabilities. These increases were offset by a $2.1 million increase in accounts receivable, a $3.4 million increase in other assets, net, a $1.9 million decrease in deferred revenues and a $1.5 million decrease in lease liabilities.

Previous wording

During the six months ended June 30, 2024, net cash used in investing activities was $8.9 million, which was driven by the net purchase of marketable securities of $5.2 million and capital expenditures of $3.7 million.

Current wording

During the nine months ended September 30, 2024, net cash used in investing activities was $10.9 million, which was driven by the net purchase of marketable securities of $5.6 million and capital expenditures of $5.3 million.

Previous wording

During the six months ended June 30, 2024, net cash used in financing activities was $1.8 million, which consisted of taxes paid on the net settlement of stock awards of $3.3 million, partially offset by proceeds from stock option exercises and employee stock plan purchases of $1.5 million.

Current wording

During the nine months ended September 30, 2024, net cash used in financing activities was $2.4 million, which consisted of taxes paid on the net settlement of stock awards of $3.9 million, partially offset by proceeds from stock option exercises and employee stock plan purchases of $1.6 million.

Previous wording

We have a $40.0 million revolving line of credit, or LOC, with Banc of California dated September 24, 2018, which is secured by our assets and expires September 24, 2024.

Current wording

We have a $40.0 million revolving line of credit, or LOC, with Banc of California dated September 24, 2018, which is secured by our assets.

Previous wording

The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20% on an annualized basis. The interest rate on the LOC is based on the Prime Rate, minus a margin based on our liquidity levels. No amounts were outstanding under the LOC at June 30, 2024 and we were in compliance with all covenants.

Current wording

The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.25% on an annualized basis. The interest rate on the LOC is based on the Prime Rate, minus a margin based on our liquidity levels. No amounts were outstanding under the LOC at September 30, 2024 and we were in compliance with all covenants.

Previous wording

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three and six months ended June 30, 2024, If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.

Current wording

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three and nine months ended September 30, 2024, If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.