NLIGHT, INC.

Previous wording

These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements include, but are not limited to, statements about: our business model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the introduction of new products; our technology and new product research and development activities; the impact of new import and export controls; the impact of inflation; the impact of seasonality; the effect on our business of litigation to which we are or may become a party; and the sufficiency of our existing liquidity sources to meet our cash needs.

Current wording

These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements include, but are not limited to, statements about: our business model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the introduction of new products; our technology and new product research and development activities; the impact of new import and export controls; the impact of changes in regulations and customs, tariffs and trade barriers, or the perception that any of them could occur; the impact of inflation; the impact of seasonality; the effect on our business of litigation to which we are or may become a party; and the sufficiency of our existing liquidity sources to meet our cash needs.

Previous wording

Revenues decreased to $198.5 million in the year ended December 31, 2024 compared to $209.9 million in 2023 due to a decrease in sales in the Laser Products segment that was partially offset by an increase in sales in the Advanced Development segment. We generated a net loss of $60.8 million for the year ended December 31, 2024 compared to a net loss of $41.7 million in 2023.

Current wording

Revenues increased to $261.3 million in the year ended December 31, 2025 compared to $198.5 million in 2024 due to higher sales volumes in the Laser Products segment and continued growth in the Advanced Development segment. We generated a net loss of $23.5 million for the year ended December 31, 2025 compared to a net loss of $60.8 million in 2024.

Previous wording

Demand for our products also fluctuates based on market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of our end-markets. Erosion of average selling prices, or ASPs, of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature. We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications.

Current wording

Demand for our products also fluctuates based on market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of our end-markets. Erosion of ASPs of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature. We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications.

Previous wording

The decreases in Industrial and Microfabrication market revenue for 2023 compared to 2022 were the result of decreased unit sales across all regions due primarily to lower customer demand and deteriorating market conditions. The increase in Aerospace and Defense market revenue in 2023 compared to 2022 was driven by new development contracts, offset partially by a decrease in product sales.

Current wording

The increase in revenue from the Aerospace and Defense market for 2025 compared to 2024 was driven by increased unit sales of directed energy laser products and progress on existing development contracts. The increase in revenue from the Microfabrication market for 2025 compared to 2024 was primarily attributable to increased unit sales of semiconductor lasers in EMEA and Asia Pacific, partially offset by decreased unit sales in North America. The decrease in revenue from the Industrial market for 2025 compared to 2024 was primarily the result of decreased unit sales of industrial fiber lasers for cutting and welding due to lower customer demand and deteriorating market conditions across all regions.

Previous wording

The decrease in Industrial market revenue for 2024 compared to 2023 was primarily the result of decreased unit sales across all regions due to deteriorating market conditions and lower customer demand in cutting and additive manufacturing. The decrease in Microfabrication market revenue for 2024 compared to 2023 was primarily attributable to decreased unit sales of semiconductor lasers in EMEA(1) and Asia Pacific, offset partially by increased unit sales in North America. The increase in Aerospace and Defense market revenue for 2024 compared to 2023 was the result of increased unit sales of products due to higher demand, an increase in ASPs, and increased development revenue from development contracts awarded primarily in the second half of 2023.

Current wording

The increase in revenue from the Aerospace and Defense market for 2024 compared to 2023 was the result of increased unit sales of products due to higher demand, an increase in ASPs, and increased development revenue from development contracts awarded primarily in the second half of 2023. The decrease in revenue from the Microfabrication market for 2024 compared to 2023 was primarily attributable to decreased unit sales of semiconductor lasers in EMEA and Asia Pacific, offset partially by increased unit sales in North America. The decrease in revenue from the Industrial market for 2024 compared to 2023 was primarily the result of decreased unit sales across all regions due to deteriorating market conditions and lower customer demand in cutting and additive manufacturing.

Previous wording

The decrease in Laser Products revenue for 2024 compared to 2023 was driven by decreased sales to both the Industrial and Microfabrication markets as discussed above, offset partially by increased sales to the Aerospace and Defense market. The increase in Advanced Development revenue for 2024 compared to 2023 was the result of increased activity on development contracts awarded primarily in the second half of 2023. All Advanced Development revenue is included in the Aerospace and Defense market.

Current wording

The decrease in Laser Products revenue for 2024 compared to 2023 was driven by decreased revenue from both the Industrial and Microfabrication markets as discussed above, offset partially by increased revenue from the Aerospace and Defense market. The increase in Advanced Development revenue for 2024 compared to 2023 was the result of increased activity on development contracts awarded primarily in the second half of 2023.

Previous wording

The decrease in North America revenue for 2023 compared to 2022 was the result of decreased revenue from the Industrial and Microfabrication markets, partially offset by an increase in revenue from the Aerospace and Defense market. The decrease in Asia Pacific and EMEA revenue for 2023 compared to 2022 was driven by decreases in revenue from the Industrial and Microfabrication markets as discussed above.

Current wording

The increase in North America revenue for 2025 compared to 2024 was the result of increased revenue from the Aerospace and Defense market, partially offset by decreased revenue from the Microfabrication and Industrial markets. The increases in Asia Pacific and EMEA revenues for 2025 compared to 2024 were the result of increased revenue from the Aerospace and Defense market and Microfabrication market, partially offset by decreased revenue from the Industrial market.

Previous wording

The increase in Laser Products gross margin for 2023 compared to 2022 was driven by a decrease in direct labor and other variable manufacturing costs, and a decrease in manufacturing variances, partially offset by the impact of lower production volumes on fixed manufacturing costs due to the decrease in customer demand. Manufacturing variances in 2022 included inventory charges related to business restructuring and the discontinuation of certain product lines in the fourth quarter of 2022. The decrease in Advanced Development gross margin for 2023 compared to 2022 was not significant and was primarily the result of changes in the composition of research and development contracts.

Current wording

The increase in Laser Products gross margin for 2025 compared to 2024 was driven by primarily by changes in sales mix, which included increased sales of directed energy laser products, the impact of increased production volumes on fixed manufacturing costs due to the overall increase in sales as previously discussed, and an increase in duty reclaim and manufacturing yields. In addition, Laser Products gross margin in 2024 was negatively impacted by inventory charges related to products for the Industrial market in the fourth quarter of 2024. The increase in Advanced Development gross margin for 2025 compared to 2024 was primarily the result of an increase in revenue from fixed priced contracts that carried higher average gross margins than cost-plus fixed fee contracts.

Previous wording

The decrease in Laser Products gross margin for 2024 compared to 2023 was driven by the impact of lower sales and production volumes on fixed manufacturing costs due to the decrease in overall customer demand and inventory charges related to products for the Industrial market in the fourth quarter of 2024, offset partially by positive changes in sales mix. The increase in Advanced Development gross margin for 2024 compared to 2023 was not significant and was primarily the result of changes in the composition of research and development contracts.

Current wording

The decrease in Laser Products gross margin for 2024 compared to 2023 was driven by the impact of lower sales and production volumes on fixed manufacturing costs due to the decrease in overall customer demand and inventory charges related to products for the Industrial market in the fourth quarter of 2024, offset partially by positive changes in sales mix. The increase in Advanced Development gross margin for 2024 compared to 2023 was not significant and was primarily the result of changes in the composition of development contracts.

Previous wording

The decrease in research and development expense for 2023 compared to 2022 was due primarily to decreases in salary costs and project-related expenses, an increase in costs allocated from research and development to development projects, and a decrease in stock-based compensation of $1.8 million.

Current wording

The increase in research and development expense for 2025 compared to 2024 was driven by an increase in stock-based compensation of $1.8 million, and increases in incentive compensation and indirect project-related spending that were partially offset by a decrease in outside services.

Previous wording

The decrease in sales, general and administrative expense for 2023 compared to 2022 was primarily due to a decrease in salary costs and incentive compensation, and an increase in administrative costs allocated from sales, general and administrative to development projects, partially offset by an increase in stock-based compensation of $1.2 million.

Current wording

The increase in sales, general and administrative expense for 2025 compared to 2024 was primarily due to increases in stock-based compensation of $6.6 million and increases in employee and incentive compensation, partially offset by decreases in bad debt expense, increases in bad debt recoveries, and a higher allocation of costs from sales, general and administrative to development projects.

Previous wording

We implemented restructuring plans in the fourth quarters of 2024 and 2023 which resulted in reductions of headcount primarily in China, including the discontinuation of all manufacturing in China during the fourth quarter of 2024. During the fourth quarter of 2022, we implemented a restructuring plan which included headcount reductions in both the U.S. and China, and the write-down of certain in-process capital equipment projects related to production capacity that were never completed or placed into service.

Current wording

During the third and fourth quarters of 2025, we implemented restructuring plans which included headcount reductions in China, Austria, Germany, and Finland, and the write-down of in-process capital equipment projects related to production capacity that had not been placed into service or redundant capital equipment we intend to sell. We implemented restructuring plans in the fourth quarters of 2024 and 2023 which resulted in reductions of headcount primarily in China, including the discontinuation of all manufacturing activities in China during the fourth quarter of 2024.

Previous wording

The increases in interest income, net for 2024 compared to 2023 and 2023 compared to 2022 were driven by increases in interest rates and the average cash and cash equivalents held in interest-bearing accounts.

Current wording

The increase in interest income for 2024 compared to 2023 were driven by an increase in interest rates and the average cash and cash equivalents held in interest-bearing accounts.

Previous wording

The increases in other income, net, in 2024 compared to 2023 and in 2023 compared to 2022 were driven by realized gains on the sale of marketable securities.

Current wording

The decrease in other income, net, in 2025 compared to 2024 was primarily attributable to changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations. The change in classification of income earned from marketable securities referenced above is the primary factor contributing to the year-over-year variance for other income, net from the same period in 2024. The increases in other income, net in 2024 compared to 2023 were driven by realized gains on sale of marketable securities.

Previous wording

We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy, Austria, and South Korea. While our tax expense is largely dependent on the geographic mix of earnings related to our foreign operations, we also record tax expense for uncertain tax positions taken and associated penalties and interest. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Due to the uncertainty with respect to their ultimate realizability, we continue to maintain a full valuation allowance on deferred tax assets in the United States, and a partial valuation allowance in China as of December 31, 2024. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, future expansion into areas with varying country, state, and local income tax rates and deductibility of certain costs and expenses by jurisdiction.

Current wording

We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy, Austria, China and South Korea. While our tax expense is largely dependent on the geographic mix of earnings related to our foreign operations, we also record tax expense for uncertain tax positions taken and associated penalties and interest. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Due to the uncertainty with respect to their ultimate realizability, we continue to maintain a full valuation allowance on deferred tax assets in the United States, and a partial valuation allowance in China as of December 31, 2025. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, future expansion into areas with varying country, state, and local income tax rates and deductibility of certain costs and expenses by jurisdiction.

Previous wording

The income tax benefit in 2024 was the result of a partial valuation allowance release in China during the fourth quarter of 2024, offset partially by income tax expense from other foreign tax jurisdictions. The decrease in overall income tax benefit for 2024 compared to 2023, and decrease in expense for 2023 compared to 2022, was driven by a discrete tax benefit related to expiring statutes of limitations of unrecognized tax positions recorded in the second quarter of 2023.

Current wording

The income tax benefit in 2024 was the result of a partial valuation allowance release in China during the fourth quarter of 2024, offset partially by income tax expense from other foreign tax jurisdictions. The decrease in overall income tax benefit for 2024 compared to 2023, was driven by a discrete tax benefit related to expiring statutes of limitations of unrecognized tax positions recorded in the second quarter of 2023.

Previous wording

Total cash and cash equivalents, restricted cash and marketable securities were $101.0 million and $113.2 million as of December 31, 2024 and 2023, respectively. We had cash and cash equivalents and restricted cash of $66.1 million and $53.5 million as of December 31, 2024 and 2023, respectively, and marketable securities of $34.9 million and $59.7 million as of December 31, 2024 and 2023, respectively.

Current wording

We had cash and cash equivalents and restricted cash of $99.0 million and $66.1 million as of December 31, 2025 and December 31, 2024, respectively. In addition, we had marketable securities of $34.9 million and $34.9 million at December 31, 2025 and December 31, 2024, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities increased by $33.0 million from December 31, 2024 to December 31, 2025.

Previous wording

We believe our existing sources of liquidity, including sales to customers and our line of credit, 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 year ended December 31, 2025, our principal sources of liquidity included the draw of $20 million on our line of credit and 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

Net Cash Provided by (Used in) Investing Activities

Current wording

Net Cash Provided By (Used In) Operating Activities

Previous wording

During the year ended December 31, 2023, net cash provided by operating activities was $10.1 million, which was the result of a $41.7 million net loss, offset by cash provided by working capital of $8.1 million and non‑cash expenses totaling $43.7 million related primarily to depreciation, amortization, and stock-based compensation. Changes in working capital were driven by a $14.9 million decrease in inventory, partially offset by a $4.5 million decrease in accounts payable.

Current wording

During the year ended December 31, 2025, net cash provided by operating activities was $21.3 million, which was the result of a $23.5 million net loss, offset by cash provided by working capital of $1.1 million and non‑cash expenses totaling $43.7 million related primarily to depreciation, amortization, and stock-based compensation. Changes in working capital were driven by a $14.7 million increase in accounts receivable,$4.1 million increase in inventory, offset by a $12 million increase in accounts payable and accrued expenses, $3.9 million increase in lease liabilities, and a $2.1 million decrease in deferred revenue.

Previous wording

Net Cash (Used in) Provided by Operating Activities

Current wording

Net Cash (Used In) Provided By Investing Activities

Previous wording

During the year ended December 31, 2023, net cash used in investing activities was $14.1 million, including the net purchase of $8.8 million of marketable securities and $5.3 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.

Current wording

During the year ended December 31, 2025, net cash used in investing activities was $8.8 million, including the net purchase of $0.3 million of marketable securities and$8.5 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.

Previous wording

During the year ended December 31, 2024, net cash provided by investing activities was $16.7 million, including the net sale of $24.6 million of marketable securities, partially offset by$7.9 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.

Current wording

During theyear ended December 31, 2024, net cash provided by investing activities was $16.7 million, including the net sale of $24.6 million of marketable securities, partially offset by$7.9 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.

Previous wording

During the year ended December 31, 2023, net cash used in financing activities was $0.9 million, which was primarily driven by $4.0 million of withholding tax payments related to the vesting of stock awards, partially offset by $3.1 million of proceeds from stock options exercises and employee stock plan purchases.

Current wording

During the year ended December 31, 2025, net cash provided by financing activities was $20.1 million, which wasprimarily driven by $20 million of proceeds from our line of credit and$3.2 million of proceeds from stock options exercises and employee stock plan purchases, partially offset by$3.1 million of withholding tax payments related to the vesting of stock awards.

Previous wording

During the year ended December 31, 2024, net cash used in financing activities was $1.3 million, which wasprimarily driven by$4.5 million of withholding tax payments related to the vesting of stock awards, partially offset by$3.2 million of proceeds from stock options exercises and employee stock plan purchases.

Current wording

During theyear ended December 31, 2024, net cash used in financing activities was $1.3 million, which wasprimarily driven by$4.5 million of withholding tax payments related to the vesting of stock awards, partially offset by$3.2 million of proceeds from stock options exercises and employee stock plan purchases.

Previous 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 December 31, 2024 or 2023 and we were in compliance with all covenants.

Current wording

We have a $40.0 million revolving line of credit "LOC" with Banc of California dated September 24, 2018, which is secured by our assets and matures on September 24, 2027. The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.25% on an annualized basis. The interest rate of 5.75% on the LOC at December 31, 2025 is based on the Prime Rate, minus a margin based on our liquidity levels.

Previous wording

Revenues recognized at a point in time consist of sales of semiconductor lasers, fiber lasers, and certain defense and other products. Revenues recognized over time generally consist of development arrangements that are structured based on our costs incurred. Because control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer. Billing under these arrangements generally occurs within one month after the work is completed.

Current wording

the customer. Billing under these arrangements generally occurs within one month of the costs being incurred or as