LASR - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the nLIGHT Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jason Willey. Please go ahead.

Jason Willey

Thank you, and good afternoon everyone.

I and Willey, Corporate said, of Senior operator Relations Investor Development. the am nLIGHT's Jason Director As Scott Keeney, today's Chief Bareket, Chief Executive Officer of Officer be nLIGHT will speakers on call. Financial and Ran

investors.nlight.net. after Investor If you me jason.willey@nlight.net. our Relations presentation and section copy A are call, release at direct today's press earnings them of at earnings the of the have to please available questions any slide on website the

In today's In the can website. call an our from forward-looking version contain archived expanding focus potential the ongoing about today's our objectives. addition, COVID-XX projections, of call, statements, and and trends strategic and pandemic, and prospects you access related growth, of statements for will the discussion penetrating financial markets, our including business factors, future impact addressable

to are filings. Forward-looking and risks in described many and risks control, our statements including our uncertainties, are time beyond to the of subject SEC from time uncertainties which

those Our We from results by today's obligation as except forward-looking law. may no update required call. undertake differ publicly statement, any materially projected on to

financial Additionally, call. on this be discussed non-GAAP measures will certain

of then I through provide Relations reconciliations over website. current provided which measures be will outlook. will we our to now release, the to turn financials financial the the will update go our an non-GAAP markets Ran call serve. comparable our GAAP have We on financial the most in Scott, who on found can section earnings measures of environment Investor directly the and these and

will questions. then take be your We to glad

Scott Keeney

X% provided driver financial was challenging strong quarterly due generated even better operating COVID-XX. end above in QX for remains May. elevated to Jason. year-over-year, in expected revenues grew results as market, a end nLIGHT of the the or performance the where economic record another global remained key sales we uncertainty was outlook high our Industrial execution We of than The at of you, Thank and delivered quarter environment. what

enabled presentation July. in long our believe the sales, net for past to cash rebound will in invest term business with environment quarter in in I to stronger flowed while throughout Slide strong we the R&D necessary experienced China we overall us than two The continued and continuing controls, the growth. combined in business strong the April better product that relative at quarter, cost to and in generated X profitability. quarters demand through as end-markets. was to during look current Our The the revenues grow and the expected sustainable margin, drive position quarter start segment our improvements three roadmap is earnings of with our to the

in defense serving of supplier the applications history and semiconductor countermeasures business the energy nLIGHT programs guidance laser of the related opportunity long see directed customers Defense term of with stages and we of and and and long have to market. including, we Aerospace for measurement. core of a to with a key a customers as demand and from even XX% As including foundation sit Beginning contribution continues macro related industrial in This to we and and performance the on solid challenges $X.X organic the revenues grew remain the COVID-XX Nutronics. Defense, demonstrates here we X% year-over-year persist. end uncertainties sustainable globally, particularly million today, operational and an markets, has number technology is early our Aerospace resilient basis ongoing

to the within next both is out energy serving primary solutions several and our years, drive products focus see development Aerospace having energy. directed potential look the we market and in growth the over segments. our As directed Defense We

from our QX Within activity but integration since several a directed limited Nutronics positioned believe semiconductor at the Compared XXXX, and first vertical leader last enabling with beam grew down key Microfabrication, contracts. quarter, lasers make second to key the consumer end with through as market for with government time in technologies year. we we our sequentially were continued across on to During Within several we progress including energy, control. good work of the of more constrained are compared of market by quarter electronics applications, XX% second XXXX, automotive. the sales sales remained key

investment However, product we driver networks record and customers. customers to the are encouraged handsets. several support primary manufacturing end believe China Chinese XG, signs we we key for manufacturing from strength saw our in and We had from the by global in is ramping of including this contribution

globally market Strength interest Our Industrial in strong end of progress ramping support. where programmability, design as business second wins the we fiber coming revenue of success the of by in enhanced within technologies see differentiated revenues our XXXX. over since enhanced We demand to X% customer was grew solutions year-over-year continuing from of applications, to customer level quarters. by powered position be in China quarter and good our high more we in made in offer accounts and the globally to for a number recent in expect such lasers. this quarter, providing even this growing evident highest our QX continue the strong the driven welding introduction key We've by

shift to Slide Moving power. laser all to continue geographies, Across higher our X. sales fiber to

sales above comparable our compares this to which XX% fiber than our category fiber year-over-year. in and in QX, total in period of more sales, doubled laser During XXXX. approximately accounted X XX% for kilowatt Sales laser the

roadmap to customers continue and solutions. power to higher differentiated with provide product support levels our drive reliable highly We

markets well-positioned are our their benefit diversifying increasing the We within to focus chains. on from industrial customers' supply

and location and industrial integration examine to production. the opportunity of we automation the for operations lasers and manufacturing more of With into the chains, supply see growing diversify movement

companies, interest movements of nLIGHT. we decisions laser this not happen overnight believe the clear of and are types most We a types for these do term globally. While initiatives can tailwind these of long industry increased be seeing signs for in and

up in X. XX% Slide compared were with quarter, to second XX% China, period. sales Turning the of In year-earlier the our

end was activity saw Microfabrication post customer Outside the but the we sales China, stronger experienced our we key headwinds. saw Microfabrication, market amplified of QX demand rebound we a Industrial of enhance customers Customer late across by as XXXX. activity resilient at both sequentially, During seen handful XXXX grew markets. COVID-XX demand robust we continue reflects in QX, we end in this positive signs China a typical positioning below that at activity and global Industrial believe market in seasonal and customers. to early across our levels Within end remains and

to As and in third our in energy. term we of quarter are beyond, progress make growth the business outside by directed China in drivers the and long we encouraged to we continue look the Industrial

applications. will that to our tools of critical today in forward. and QX. a results history. in same financial celebrated have improve the progress XXth founded adoption to continue markets. new by new nLIGHT XXXX a power this anniversary that applications industry, of in XX in drive and have has be guided rapidly about years, even in markets our nLIGHT the like with to laser deeply us seemed expect company's in more the solutions. that, be XX over note all been further which and the upon June I in the our high years also with and at evident to more innovate lasers we, We take rapidly excited our technology moment any with we Even high-power We principles would to become ago QX laser was open moving performance the embedded end impossible vision front will accomplished continues point technology opportunity multiple I I'm What semiconductor past founded company than and across reality

to to customers past like our and quarter. support and end our two our Ran more over over employees financial today, as provide long-term that partners, nLIGHT base quarters. these all innovation and by to did word and we turn ability extending last employee outlook their detail extraordinary drive QX for times I now gratitude a The continued dedication to for the around through operations ensure helped to challenging will our to call performance I'd sustain prepared Finally, has growth. third sustainable quarter, remarks my efforts of of the but our global deliver I our enhance the have only not

Ran Bareket

and Beginning nine. good you, afternoon, everyone. Thank on Slide Scott,

of $XX.X $XX.X of and revenue was down strong markets. our $X for includes Nutronics. end development primary revenue on driver across basis product up X.X% an when million year-over-year microfabrication contribution of organic The of better-than-expected and high the end X.X% above Total adjusting revenues outlook, was quarter Second the from industrial China the million and revenue. $X.X demand million million revenue of in

XX% margin and compared second Slide the period in the Product X.X%. gross to XX% in Gross gross XXXX. XX. the margin with Moving was comparable margin was XX.X%, was of development quarter

compared ongoing mix reductions gross product basis sales offsetting from reduction proportion improved by and China. This was with lower XXXX. a XXX points. revenues gross impacted cost lower-than-expected unfavorable margin microfabrication included On higher margin these QX QX and headwinds sequentially by costs. were margin basis, tariff of price Partially and Our

Turning purchased Nutronics increase $X.X results amortization $XX.X no to of intangible acquisition, $XXX,XXX in of with included XXXX. million compared expenses in intangible during in second Operating the compared purchased QX Slide related expenses million QX Operating year-over-year. an to $XX.X million XX. quarter compensation, Also QX million were the amortization were included XXXX. with of stock-based $X.X

compared with operating essentially and compensation flat amortization, stock-based Excluding purchase expenses were QX XXXX.

necessary controlling on research ensuring we development OpEx investment future quarter to making demonstrates second costs, growth. and Our are the focus drive while continued

for to XX. loss compared loss GAAP in per quarter of during of EPS compared XXXX second Moving second GAAP was was of Slide QX with the a XXXX loss XXXX. a $X.X with $X.XX of share of for per quarter $XXX,XXX the million net quarter of a XXXX. second the loss $X.XX share

revenues. adjusted million X.X% XX.X% QX $X.X of EBITDA quarter was to This or the revenues compares in $X.X XXXX. second of or million for Our

adjusted revenues cost quarter better the outlook year-over-year, by EBITDA than driven were our expected second the controls. range While above results declined and

operating During or million of quarter million $X.X generated Capital we cash the X.X% for expenditures from revenues. activities. $X.X of were QX,

$XXX in quarter Moving in $XX debt. at DSO was the for XX QX Inventory inventory. to equivalents days XXXX $XX XXX million million, representing ended second total million Slide cash with of and and of was days. of cash quarter the end the We XX.

balance sheet Our ample strategy. long remains execute provides flexibility and term our to strong

to be for $XX.X the approximately we range million. on of of midpoint $XX XX of available Based expect product of sales. XXXX. Slide million million the and to development approximately includes outlook $XX.X QX $XX XX the to million sales the information Turning QX this million, At revenues in and today,

XX%, of be be in development of XX% to margin $XXX,XXX expected $XXX,XXX demand margin Operating to stock-based end for purchase approximately of million is expected geographies. expectation $XX.X expected QX product are we in to approximately in XXXX Camas, compensation million, range with includes Nutronics trends approximately related our Sarbanes-Oxley, to stock-based X%. additional current expenses of Included mix, approximately SG&A We outlook continue of and spending see intangible the and expenses the QX range and costs amortization positive a see is of our to commercial which our XX% which for XXXX includes Based related $X move be acquisition. associated facility. additional gross for across this $X.X million gross Product an in compensation. XX% margin is gross primarily on for to to new each Washington markets and to

third million to million. the range EBITDA $X adjusted in quarter, For of we a expect $X

structure $XX be average of revenue million from delays contribution programs, work disruption. no The expect associated full employees updated share Nutronics We nature with funding $XX to new reflects there but progress approximately to of in million. We contracts. chain in year's We expect change short-term has hiring continued and the basic $XX to as and be and view a been for supply on in some the the on-boarding delay Nutronics million. now range outlook this key to QX key

questions. for We now call the will open Operator?

Operator

[Operator Instructions].

from will Greg with Please Group. Capital Our first ahead. Palm go come Craig-Hallum question

Greg Palm

order the rates order wanted Yes. month Scott, first, results. I rates something July. strong or the Thanks questions quarter. in and demand mentioned in to think, the the add continue cadence go guess, the to here or taking demand I about activity maybe, of And you just congrats for of on how I through,

just to correctly. that sure So wanted be heard I'd

Scott Keeney

continued strong Hi, Yeah, saw you July. we in did that Greg. correctly. did hear We demand note that

Greg Palm

driver, you're that And think sort maybe mean, growth? July. market a all a be detail your of bit but in result like in share I optimism, and would specifically a of helpful. Is it segments? sounded that's in do Is Industrial across Any large what gains? more on little more QX it color was you it seeing

Scott Keeney

Yeah, no problem.

in QX our of is and we listed across all we see So what we're growth. and seeing growth end really strong those markets continued

in I so those to about given strong to continue continued QX, different talk for ongoing continued the optimistic on and related displacement QX, not focus all certainly see the but that's to position want execution to noted remain continue longer end very in applications. And across uncertainty and, we July. we seeing we COVID, why a we're to we much what that, beyond demand term, say we're do

Greg Palm

a product margin maybe Okay, very the that's helpful. like Gross is looks you're bit at And revenue QX. from just guiding it slightly midpoint. up sequentially up

So I can I in weighted plus it of going what's it? absorption alone, sort worse saw or you or XX to as that more Is it right get get consistent that implies a gross guess there toward to look And cost larger that margin is QX stays percent? by think touch. about relatively what just if a QX way see mix forward, Is mix gets the in maybe we take to in even product guess, -- recovery volume? business up it you from you the of into the back with

Ran Bareket

sure. Yeah,

it. the X%. development. I'm about talking on the So product, QX saw let obviously, will where secondly power. improvement QX. segment, be to And first to That from of to volume, came on between QX, me all a this area around on and XXX That from -- growth have basis product you QX cost product roughly points in XXX and not we take lower improvement saw higher the from and margin X% But you

talking margins. remind you’re better the is you, where about you coming me a when we better the I from where will growth have And area coming mix, a tell margin. with is Let mix

mainly the on from of So definitely end kilowatt obviously, six XX and end China the on six -- of revenue and market, in kilowatt, above market. market rest defense industrial revenue kilowatt and everything revenue from end the XX high-power, above, world outside the from and incremental China microfabrication industrial

where we that would to improvement continue an example. we where So than are in the the for QX, you better margin. growing area margin as see you is saw in the in forward, And incremental do going

Greg Palm

best appreciate luck going Make of Okay. sense, the forward. color

Ran Bareket

you. Thank

Operator

Diffely D.A. Davidson. Our from go question will with come next Tom Please ahead.

Tom Diffely

Yes. Good afternoon.

COVID the you are first an the Or of typically of kind up question curious, of this microfabrication wipe the year? time So market. Scott, point maybe on a pick when year out It's things the activity growth bit. from I'm what view? did seeing

Scott Keeney

seeing by to respect Yes, microfabrication, we're end growth Tom. And levels year-over-year, in of set seeing XG one we're the the driven but same a applications. not broad saw while With is we past, growth. -- really driver, certainly we seeing are it's

and So for was QX the X manufacturing demand application there and obvious was marking saw of masks, in spike the in we there. a

end back seeing in past continued we really that various are to but applications. seeing there's was segment. it cycles, of there are the growth broad So due a it's gets And harder Whether range where growth it to now. we say, in to

Tom Diffely

Okay.

on has industrial if market strong a applications? industrial years, consumer as couple by been -- as you at view still so is your electronics of it smaller that and look driven And

Scott Keeney

there, Well, that more is for indeed, in and put end example, lot different there all really, lot than for -- too. us. there's there. mean, applications I there's of a We a in medical,

of one, microfabrication. lasers. call to range But historically think what see will it enabled to will be continue a set be and an of end continue I do broad that to that of been applications continue we And yes, we in So applications has by electronics see part a really we rich will consumer that. important

Tom Diffely

there milestones ultimate just your a facility and on then maybe follow-up Great. And margin in your Okay. Camas are that what as an to update the protecting does quickly, and profile? what capacity the just

Scott Keeney

Good. Yes.

space are out. moving running Camas. back every Camas So benefits we office already in. more line day the production we're of up to and And there. have yes, in we spread We of one have in one is the And

COVID need. were previous enhanced in So with We crisis, respect much in pretty provides our jammed offices. to managing the it a

right are we're that and out doing So going to lines, good. manufacturing build that's we been now. And continue to

and crisis. given on it we're has unforeseen So track, been very benefit COVID the a nice certainly

Operator

go from will next Needham Our Ricchiuti Please with ahead. question come Jim & Company.

Jim Ricchiuti

good Hi, afternoon.

questions. of couple Just

your and about in one, they case talked of of progressed deceleration [indiscernible] about maybe have any the see gains. continues in competitors of [indiscernible] [indiscernible] Some the activity severe strength earlier share demand In quarter China. an to talked as to market question the

Scott Keeney

question? slightly the cutting commenting somebody out China? Yes, repeat Jim, was fundamental you was, just on correct? was was it Can deceleration, that It In there.

Jim Ricchiuti

can me. Scott, hear Yeah. you hope I that

Scott Keeney

Yes.

Jim Ricchiuti

that the in those One of for additionally began dynamics China of any as to seen and the and of decline. you... competitors some if in China end I'm saw the about wondering the in quarter market just activities your progressed you've talked quarter or decelerate

Scott Keeney

Yes.

Jim Ricchiuti

market ...for share.

Scott Keeney

you, good. Jim. Very Yes. Got

very New and then typically, that typically QX, Chinese off after So QX. months just strong China a summer we going Year tapering is into the in see quarter in

a numbers China. we demand can QX than So and continue. a said, July, QX in now. the for in ongoing in we we're demand is in in as strong typically see demand in we that are -- you QX But as seeing always right seeing see bit stronger fall-off But a of is typical saw we that

Jim Ricchiuti

like it. early there that of see next side, of And on has the that. little slippage, in business little [indiscernible] the year? their narrowing some revenue it you Got been Nutronics range, [indiscernible] seems Do bit a coming a

Scott Keeney

But replay, I what want to it's respect that this Yes, cutting Nutronics. bit. just you're... to a out Is think, with I is

Jim Ricchiuti

Yes.

Scott Keeney

so... Yeah, Yes.

Jim Ricchiuti

you're and So additional in, [indiscernible] comes the range narrowing revenue [indiscernible]. about that of talking in

Scott Keeney

what bookings The also, integration issues just doing delays has fundamentally had standpoint, the Nutronics recognize been delays from from then acquisition there. good recognition. recognition when revenue and on is question wanted on impact we are also on technologies and personnel we to to We're exactly, some we're But, all there that but revenue nothing of validating doing certainly -- integrate that's and fundamental. revenue COVID been what on track, for seeing supply thesis Good, a Yes. and why this now, we're the refine truly progress there a optimize about now. and what the It's well.

Jim Ricchiuti

Industrial, been where question, so resilient? we ago, few business where today just months that at been versus have the respect the look and you if a were are businesses, where final surprised with Okay, the to we has I perhaps more Microfabrication

Scott Keeney

surprise the word use, hit, potential continued to about very -- board. we first a what reasonable thoughtful good scenarios think to. I We is And were that the Jim. Yes, to manage we certainly, and we've across demand is when crisis cautious were seen needed

So, say crisis or I it's hit. worried it's we -- it's but wouldn't first shock, when surprise about outcome not had better a the than a a

But think in we will I we've as on than seeing we really for much more are outer remain our noted. all that end markets at continued concerned of typical least quarters strength QX.

Jim Ricchiuti

lot. Okay, thanks a

Scott Keeney

Jim. Thanks,

Operator

Canaccord [Operator Instructions] next Please from will Our question Dorsheimer ahead. go Genuity. with Jed come

Jed Dorsheimer

good Maybe and seeing margins. other but the little on lack a opex. questions, on just structure surprised, on that quarter. of a the the two the guess with little on and late, thanks, bit I cost travel, lower just I opex, not and one Hi, we're -- first joined I'm

wondering, is we a grow a this in or function was point here, off is the greater I future low that kind reductions acquisition of of of? the until we that so expect cost And

Ran Bareket

No, no, no.

pretty without last, we and $XX.X compensation the around of amortization intangibles Nutronics eight or between the related opex, so, millions. or acquisition $XX all, million quarters anywhere you in of give take are look flat at much to if stock-based to whatever, first the So,

travel for way, big the us, not by it's a Now, expense.

we -- travel are not We have first class. travel

it like Let's that. put

R&D. increase it's a in reduction However, an and what see, can SG&A, you in

R&D one we again, We travel, because more in those hand, like good on significant. was another are have investing in from more a you it that went and which control opex and SG&A not just and hand in reason mentioned just down our

see $XX.X going than and well a $X.X to we of million, without move Going should increase take, compensation slight range again, to a facility again as to forward, new in more give Sarbanes-Oxley, or and costs the the opex, but the Camas. quarter, of amortization that million stock-based in as not million, $XX for intangible, due roughly the

Jed Dorsheimer

It Got does. it. wanted sure... make to I Thank you. just

Ran Bareket

sure. Sure,

Jed Dorsheimer

...I was at looking correctly. it

and or, potential of terms the largely gross margin playing Just mix guess, basis, shift fixed here? spread we a to in is ramp in how cost the of therefore as much look a that go-forward profit on the tied at I is volumes that on

Ran Bareket

depends mainly improve to ability Our the on three things. margin

First obviously increase top-line, goes of the all, saying. without it's

for we And we ASP our in a or cost product control significant most think market will the coming higher that of the last cost in line and we of market. ability saw China and industrial reduction revenue. meaning outside and industrial mixed end increase reduce mentioned to top are microfabrication the the a -- outside the it's Secondly, end those, world, I that to aerospace that the And a the with demonstrated few revenue margin. offset i.e., that markets China the in that in years the market, it's defense I mix, and of reduction our mix in we high-power ability China, lastly,

Jed Dorsheimer

Scott. Got it. question then And last for

do of from to the that of going budget, whether you Just see Or just you tied trying curious, be you defense forward? if how -- or look do -- much fairly agnostic, to, politically spending program, gauge speaking, Republican? that will energy perspective at domestically a a of see risk I'm as directed or versus we speaking, investment at not Democrat insulated look that is sort

Scott Keeney

Jon. question, Good Yes.

group. bipartisan if look very Caucus funding directed would the say that budget I been The has strongly bipartisan. strongly effectively under is doubled we DE Obama the a historically, and So energy

a D.C. say pressure. energy think typical first one partisanship budgets, as in will influence the Obviously, order, I priorities highest that the much But of directed in all budgets that defense So be is more DoD. I strong don't there's there'll for

concern order through. that we're not So first yes, it's thinking a

Jed Dorsheimer

Got queue. in it. the guys. I’ll Thanks back jump

Unidentified Company Representative

you. Thank

Operator

no time. showing are at this further We questions

the to our session. turn I'd for back remarks. closing over question-and-answer Willey like any conclude Jason will to conference this So

Jason Willey

today. over safe. I'd [Indiscernible] look weeks. And participation for thank with speaking many their coming everyone like to you we forward the of to everyone, stay

Operator

for The now conference concluded. presentation. you today's attending Thank has

You disconnect. may now

nLIGHT (LASR) 9 Aug 202020 Q2 Earnings call transcript