LASR - Earnings call transcript Q3 2020

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Operator

Welcome to the nLIGHT Third Quarter 2020 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joseph Corso, Vice President of Corporate Development and Investor Relations. Please go ahead.

Joseph Corso

afternoon good and you everyone. Thank

and said, As speakers Vice Chief on Joe Financial nLIGHT nLIGHT's, today's call. am of the Executive will Corporate the of Keeney, operator President Scott Development Corso, Relations. Chief I and be Bareket, Ran Officer Officer Investor

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

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

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

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

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

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

take to glad then We will questions. be your

Scott Keeney

each us improve inorganic spending, the our both a our record in end and with OpEx of a guidance high sales, revenue disciplined We we growth an profitability. revenue increase markets and QX to organic Joe. business nLIGHT. you, in and enabled combined exceeded year-over-year Thank On achieved mix quarter August. which the favorable of provided end of profitability was basis, and for

While core which our experienced an macroeconomic quarter, third our performance key uncertain the of we we and customers focus monitor continued sales the key on execution strong environment, demand Chinese industrial QX. focused segment has our strong The the continued which continue the the microfabrication is from in on high see market. market. of and was quarter from during into China to customers power same At of time, strategy, driver of A&D outside increasing areas, end and two sustained demand fiber laser the we the

$XX our X, a million slide company. record XX% is In to XX.X year-over-year a million. Turning in of third we generated revenue, quarter, for which China, the revenue grew to

quarter to China $XX.X customers XX% which outside company's is of the history. of our total year-over-year XX% to grew our revenue, sales in representing million, highest Third

opportunities in in growing Aerospace on we and all addition year-over-year revenue slide for end quarter. from in Turning Nutronics additional an basis integration develop third knowhow the to all Defense, we and grew us. million X.X XX% in grew also and to ongoing markets the X, us of geographies, Beginning nLIGHT products XXX% that is with revenues and to Nutronics. contribution has organic The enabled including creating

relatively increased Demand In across applications third second addition energy Within applications quarter. outside directed flat of A&D business our and the the we our seeing Microfabrication, of XXXX. are remains quarter with to Nutronics, strong core sales Nutronics. compared additional multiple X% remained with

that growing encouraged applications are we by processing. of require number However, the laser

by power programmable successful design the strong our power driven been XX% which business for the we solutions. third demand for has In Finally, have power. continue year-over-year by and wins into higher was programmable world, been strength toward trend of Globally, a high high both rest see China, driven revenue, in demand converting fiber our the continued we fiber lasers. quarter Industrial quarter. in the grew In in to laser

to six, geographies, fiber all continue Moving to shift laser sales see our we to power. higher across slide

and sales industrial compared laser During of our XXXX XX% QX, our XX% grew kilowatt of represented fiber six by sales. industrial fiber total QX to lasers approximately

proud increase achievement this as We are a of as particularly scales. power challenges technical

We continue world fiber increasing to customer roadmap class to programmability, lasers in invest heavily product with base. to our power, global serviceability and deliver our

technology opportunity applications. industrial which quarter, was Turning July, we during to a customers, we In serve the to acquired Turin, our business in seven, in growth our slide particular the capabilities Italy. better in third welding expanded footprint geographic for OPI, privately-held in our important

industrial we diode a lasers. laser qualified have into are shipped an our OPI's fiber technology, Post-merger partners. of States, with nLIGHT with we coulometers, already well gone office In used years lasers production technology and packaging in technology fiber includes customers worked has for that several in that and have We Midwestern their we being United opened that couplers, recently deep us to our industrial which integration understanding brings OPI and we integrated closer and and have important environments. Detroit switches, have

a continue of Detroit which includes drive long-term offers welding solutions market. our benefits into to significant an applications we lab adoption as believe center, Our demo facility the and industrial we continued,

a a that systems, for we to bed quality the can demonstrated fusion programmable economics AFX-based of replace tools. size repeatable, is reliable powder powder lasers, build manufacturing. scanner. multiple Turning optics, beam profiles maximize shapes Changing first bed productivity, way high to nLIGHT's power a additive to results. over will laser the use metal beam AFX larger tools and single our use and manufacturing optics. inside across world's fiber of eight, of beam nLIGHT's the specifically laser AFX, free from that the which machine without AFX in Ran parts aims the bed Designed most discuss I series faster the is enable quarter turn a to have other slide metal additive broad and to powder rates, applications. can financial fundamentally yesterday, significantly the range true mode and laser industries new space at for economical, use the now laser a switch production tools introduction of third and between of laser will call announced fiber higher change

Ran Bareket

Scott Beginning organic we you, slide Thank record good on achieved inorganic and XX, and afternoon everyone. revenue.

customers. was from drivers laser in product of outlook, primary of $XX.X business quarter high the development Rest XX% Third demand year-over-year high-power for $XX.X end The North strong the and microfabrication better-than-expected increased on of and the in the nLIGHT China. America of revenue fiber of and our million revenue. from A&D above million $XX.X and basis contribution XX% of includes was up revenue Growth adjusting when demand organic revenue industrial $X.X an million World million Nutronics. revenue Total and of up

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

Our improved on increased laser product quarter customer by third product fiber in of implementation points. XXX China, strategic outside gross sales QX execution core margin in Quarter-over-quarter and investment to strong the focus and of our margin of our strategy the continuing gross our high-power China. basis business reflect A&D

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

XXXX, investment with increased necessary Excluding QX future $X.X third R&D stock-based growth. the which was we compensation as drive make related to quarter and purchase million by continue amortization, operating compared expenses mainly R&D in to

Moving during $X.XX EPS loss to loss our with by of the of the million $X.X non-GAAP loss $X.XX $XXX,XXX was XXXX. QX XXXX. $X.XX the compared $X.XX expense tax third acquisition. QX quarter of EPS XXXX. per loss expenses $X.X GAAP the third The for in related to net benefit mainly the purchase change for accounting was share, XX. QX third a was was million XXXX during quarter for XXXX. in of third income $XXX,XXX for driven Nutronics of compared with basis, was with with compared adjustments slide share compared third the of the GAAP per of On XXXX of loss a in quarter a of Income tax quarter an expense non-GAAP the quarter the

$XXX,XXX cash tax Going both to and approximately have of third quarter. forward, we expect expenses

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

leverage the Our our third EBITDA in demonstrate model. adjusted operating quarter

quarter generated X.X million or for expenditure from QX, X% revenues. the was X.X we of Capital operating activity. of During million cash

with repaid that the the the total every ended to cash equivalents this we of used in of had XX, conjunction quarter, we Moving commerce XXX third our with million year. XX we facilities slide purchase million. In QX

was of XX XXXX, the for days So the of the presenting in days million, we're XX inventory. XXX inventory quarter at quarter was third sales end

midpoint XX of revenue from slide belter for approximately revenues to million XX of the XX available XX the XX, a expect on million. QX be Moving cells, the and millions QX in developments. million of information approximately neutronics. of million is to and to This guidance Based we of QX. range approximately at revenue includes today, million XX Included our XX outlook in

and demand each our on to that and While of business, across geographies. we continue markets global commercial we the impact Marco remain concerned COVID-XX our have concern, could positive end about geopolitical see trends

gross a to of a expectation is for and XX%. Nutanix. XX% years million, the XXX,XXX reflect when which of midpoint an XX% expect of based to full to product compensation. our guidance, excluding approximately be margin for which our expected see of over QX be product XXXX QX in margin of XX%, growth X% current on gross Products XXXX to we Assuming includes approximately our XX% basis mix, organic in stock we on range XXX Based revenue XXXX revenue range

includes XXXX gross development approximately expect in amortization, Operating at are be Nutronics approximately for proximately compensation, acquisition. and of expected We $XXX,XXX $XX.X expenses to stock-based the X.X%. which to intangible million QX related and purchase approximately be million, of OPI margin $X.X the to

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

average share QX call be expect will approximately now We I to the turn to million. basis over Scott. XX.X back

Scott Keeney

Thank you, Ron.

QX generate record revenue XX% our revenue in slide midpoint the expect of our to we rate growth. growth thus of XXXX, to annual compound long-term Turning guidance, at extending XX,

of operate has our improve mix favorable more a a and been has business and in sales which enabled global stronger XXXX challenging margins, environment to us overall a addition, profitability. business. In to

geopolitical faced shortages, chain war, trade and have the pandemic. global supply a We ongoing unrest,

our the persists, have continue our uncertainty to allowed to and we products earlier steps us macro strong remained serve While took XXXX throughout the has demand customers. this for year

have base enabled I'd dedication continue long-term in which acknowledge, a growth performed year employee Our challenging our very safe our and to operate. execute a opportunities. has and who the to us remarkably our to professionalism of been workplace, create to has global customers, in continue employees, what support innovate, like to

Camille would our a page addition personal like the Directors. Finally, Army achievements turning General, experience Camille to who leader to retired brings professional of Major groundbreaking to the I Nichols significant nLIGHT announce is Board XX, of and to proven Board.

perspective, West that the Department operations, at of Defense, career Point, complex Academy Engineering distinguished three-decade States this Team Camille included back for part A&D USA unique years subsequently, operator as U.S. and turn of continue I'm During assignments Military degree Management over degree U.S. U.S. University Camille the across from enlisted and thrilled as and our at of grow currently, spent matriculated the George and team, Camille with key an soldier United operational the With class began Systems the budgets. an an from California, was Master's Washington in XX member Engineering Southern a in a questions. graduated acquisition serves the that, she nLIGHT United Handball. in organizations where Board. Director the Camille Camille women with and also nLIGHT to the Independent as for an XXXX to we and managed to a University. also completed call States in important Camille business, as PhD working significant her Camille and in received to in Army, the the West to at Asia Point. the welcome career of second Army and roles Nichols will Olympic Management I

Operator

you. Thank

Group. [Operator comes first begin the Craig-Hallum session. from We Our will Capital Greg ahead. Instructions] with now question Palm Please go question-and-answer

Greg Palm

right. Hey, really Thanks. All everyone. results – Nice nice Yeah, here.

Scott Keeney

Thank you, Greg.

Greg Palm

I mean, out, activity the energy. out guess, just stood starting us A&D I outside really levels thing was growth certainly, that and of one in to directed

you one-time there So, of curious, was QX? And the was your if – the in anything mix that maybe how segments for that nature? by other core they versus can that or about driven customer non-recurring or specifically

Scott Keeney

to we but new customer in directed continue that expect energy, on it continue question. quarter, don't that focus programs expected a in revenue We than customers In have progress expect revenue customers A&D to Nutronics. – beyond in bigger is their that next customer. Nutronics solely we we develop Good addition expand the but to but make we go QX, Yeah. And is did do QX, it level new a as future customer further. of from that,

Greg Palm

existing kind Okay. for think some some results and own that even maybe curious, then maybe the customers least just are QX, about at some new look of Good. thinking activity? you're products? around share mean, opportunities is versus us for I in share new presumably, at assumptions by your much I for – customer I guidance And that making recent it how mean, in taking I the your driven if you're certainly implies, outlook and A&D how the industrial of taking customer

Scott Keeney

solely focused what industrial you're at? And on now you're getting that

Greg Palm

and there, but outside could micro Andy? in fab Industrial of yeah, you throw

Scott Keeney

Okay, good.

split me it. Let

So I fab, right. micro think it

expect we growth growth And application. future continued in seen the We certainly to new with there. have see

customers XG, respect of range a industrial, that in progress really winning are broad applications With new to in medical and continue with good there. it's launches. noted that applications, we've development applications product our to So space we very our make really end there's

continues industrial, in and an be cutting lasers, of world and into we on progress programmability important So which and high market to there. focused fiber leading sales continue wins, rest with dimension particularly the design to make first is there, power, our to going the the

where to very be Second, continues limited the attractive we an welding space set applications today. of share have

commend launching And our opportunity and to new applications vehicles so the new additive attention for we good us, AFX gave, then for product be that And ability would the electric manufacturing space. finally, applications. to yesterday, presentation your a win continues other the in I just

So to much in programmable additive we laser. programmable are again, enable give more single case, a that the details a as is that. But mode continue it space excited in In improved on manufacturing. application we laser. it's about this refined more presentation will you And efficiency

Greg Palm

Got opportunities But size is it. the market Got and maybe it. today. small the overall do pretty part of that the view of It growth how a opportunity? a business you

Scott Keeney

business are with number on the of very today. we level. good to engaged next different generation a next in with small we're it's it Yes, Indeed. areas And a tools. part of are application customers our able to And that AFX take call working what attitude the I'd

And overall an we and think market important, and that so will area that an attractive an us. is market be it for

Greg Palm

it I'll there. Thanks. Yeah, leave okay. Good.

Scott Keeney

Ed. Thanks,

Operator

Our ahead. next with question Canaccord from go comes Genuity. Jed Please Dorsheimer

Jed Dorsheimer

Hey, thanks.

I for the guess So housekeeping. great quarter quarter. congratulations you on just say next a did for first was, taxes? starting What Ran, provision

Ran Bareket

that accounting, the an accounting came million. So if of majority will. an this benefit a was of from you or quarter transaction, $X.X you a saw income That purchase

see cash $XXX,XXX expense and a for will perspective quarter. a you roughly level forward, Going

Jed Dorsheimer

much increase or in that Got it. function then margin of sub, guess easing of China in Scott, kilowatt sort price of in the sector? over you pressure how QX saw was And the of the I industrial the abatement sub-XX lasers in a

Scott Keeney

the mix segment Ran changes in factor this and of you details But lower more yeah, Jed, Yeah. wasn't factor changes. in big quarter. let big And power give a the that's I'll not margin. and other a

Jed Dorsheimer

it. Got

Ran Bareket

power China, several the AMD lasers. more power as focusing mentioned I talking cutting, outside in in focusing of to of China, terms well about If high manufacturing, opening additive as remark, we're add, high on our in more strategy, as focusing, quarters and may on for welding, industrial Scott

just you was presentation, power laser This quarter, is high XX%, if for our a which worldwide, at the look not China high. in industrial record

the us those trends, higher with record it's of that volume, the help will, forecasts record all to So margin, us, help volume revenue improve coming you a if a margin. obviously,

However, margin mentioned areas, as as as to And in previous for improve we company will that us improve significant in important the will quarter, the long mix it the those grow well. margin. as to the is continue

Jed Dorsheimer

Got because it. sector just we in But last sector, shift or One to mobility the the in general, not, certainly it's two. just or at look limited not as auto maybe the internal electric that the facilities newcomers to autos, both for incumbent. from extensively that don't changes the in move well anything, combustible manufacturing to have obviously as and the have build as

level on was to into quote whether activity you're might but seeing wondering in EV I of in So of seeing maybe that just at activity, to also this terms in is that point comment be you the time? might here the sector? backlog able manufacturing not hitting to this the throw if onshore repatriating What of terms extension you're in an domestically, be that books

Scott Keeney

question, Great Jed.

good on EV host you're long. it's for of That that very which of But broadly, sector as to Traditionally, one a has be a the we're is So is sector seeing the opportunity been we in designing had the autos. right, represents frankly, whole which not automotive that in us. result good one new segment. And prioritized players. process a

So is in fairly our modest. to exposure generally automotive

to processes, batteries broad see, new are improvement but we enable of sector applications. the use we in our number seeing the new indeed As assembly not opportunities we see technology that players to only from in significant EV our those ability to differentiated then

I the think us. it's much in end more So benefits processes that of set And innovative dynamic. and

Jed Dorsheimer

I'll in guys. the jump back Thanks, Great. queue.

Scott Keeney

Thank you.

Operator

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

Jim Ricchiuti

I'm going the into what fiber you of Hi, laser seeing just that to AFX, machines. of these struck of by is good are machines. new go And some we're lasers like afternoon. you've announced, seem the number a does it the back I if is, additive wonder generation

guys be What's -- you market? the and it's understand what moment could assume but rough numbers? that what of differentiating may customers the the you Scott, in to, working at us alluded may with look wondering, you're I'm take a some programmability. I presentation how if also many But help the be at market, you driving we'll and in you so And say the can this

Scott Keeney

we also Well, space. funnel Jim. been it's time for number with with both again, the that regional players and set a increasing we've of that stealth companies. specify space to in players, in known, can't set and some I give working that. yeah, some in but companies of -- summary video this either is some of customers make And And, But or commend current it's it new quite But try exactly from interest to some customers, I'll in get are website quick less on easier this. cases we'll to standby well it a on on cases access the do you the our this up

is for So truly we and believe it is laser, programmable very the mode today laser the fine additive first a single in mode, manufacturing features. programmable single

typically provide do want You to laser to make those small the a centering mode use parts. XX to that, powder micron very a single to that spot of

will to process. quality faster of this one that to And add that move part and either increase you of critical dimension improve go go beam can a maintain process can is to lasers. more to couple part. adjust is, demonstrated the that the throughput or change that do build can of we speed beam, the you that more you effective faster, As to way allow things, a have you is that to But what

And of high the at does for of described level we high that So number video is kind we it do of level, into a on that's, a some applications. But the going that's job profound the I think of this. a details. better improvement a think

Jim Ricchiuti

to of as the laser, perhaps enable fiber have in instance, functionality not lasers this Would use many because the to AFS? system manufacturer of for additive

Scott Keeney

short depends that think yes, I benefit. Jim the that trade Yeah, is is answer, a a on it space we yes, all provide the But particulars. where

Jim Ricchiuti

talk area Okay. again, just guys about a an you with be and we Detroit, normally automotive, able an work you the what don't the on just that's associate additive of that And you office little this there's also lot if it's Can I to lab? opening comments behind that new done with in could bit manufacturing expect to area. automotive, also a not but in about and applications being rationale do

Scott Keeney

that to about industrial customers, not includes Yes. close that the being the And right from certainly, all only It's we're having Good. includes include of that only these customers industrial customers. And, vertical really automotive, it'll sales, service, it talent so our other but comes doing. work to markets. having proximity not applications,

market it's so commitment industrial a the And to broadly.

Jim Ricchiuti

And material there last with any question, OPI? Okay. revenues then are associated

Scott Keeney

products. is, in think, integrated source we it's OPI material think external I very revenue. as our view a been our helpful into we And merchant expanding of no, have answer products. But OPI I don't

Jim Ricchiuti

much. very Thanks

Scott Keeney

Thanks, Great. Jim.

Operator

[Operator Benchmark from The Instructions] Our Miller next ahead. Please, Mark question comes with Company. go

Mark Miller

just quarter. your had a I couple on of questions. Congrats housekeeping

stepped looks quarter. already it that that? up continue to level be going significantly, You behind What's at December to And it's for like sequentially. the

Scott Keeney

again? that Say

Ran Bareket

Just Mark I the R&D is that question up clarified; in Why, it’s a step little the spending? bit hard around guess. right? to hear. But Is

Mark Miller

roughly for Yes. looks to that level like it quarter. Is that going correct? And December stay the it's

Ran Bareket

Yes.

yes, is First of this all, correct.

and you that. look, we If mentioned

look But you invest we If much our spending will I'm without you And stock-based to growth. R&D. will you sorry, general, -- in commonly in see without it's necessary. on It's R&D compensation, see not will mainly roughly growth. continue not year-over-year, OpEx at much as

increase see will are about we etcetera. significant in OPI opportunities You the we industrial, talking the additive, are based new grow, the of a of forward. that talking investment yes, technology going that will R&D in manufacturing, on all welding, the not But, all acquisition, about, etcetera,

of will investment in R&D. additional that require All

Mark Miller

compensation. million indicated there'll based be Is stock in I X.X that correct? believe you for December,

Ran Bareket

This yes. is correct,

Mark Miller

it what Okay. large And due also And a you was other that income. is? to, what have

Ran Bareket

it actually, euro from and -- rate exchange RMB. most the all is It's of

Mark Miller

much. Thank you very

Ran Bareket

Thank you, Mark.

Operator

ahead. question D.A. go next Tom comes Diffely with from Our Please, Davidson.

Tom Diffely

afternoon. I competitive talk wondering the little and pricing could was if about bit morning just Yes. Good a you good environment. or

couple the China, in of Now from industrial guess, you quarters. And, pricing more that probably, we've for China. had flattened an over outside a point last things of out of comeback importantly, view a I basically pricing little bit

Scott Keeney

Yes.

a same certainly, previously. different, time, Tom, time. what access think set substantially And that have about as applications I call. at environment. of come have our prices continue the different markets don't We're And in talked down we about there's lower and what last of We the lasers, So had competitive we discussed to other on our to lot continued so really power costs of outside advantages from expect the certainly continuing different we’re we than we reduce to dramatically over different of see products, markets anything programmable China, where our set fiber talking a nothing particularly and higher we differentiation.

certainly, And that of so, that the was improvement. margin one benefits drove

Tom Diffely

or great. laser today diode about up Two of Six ramping kind really earlier talked your material or without having markets? impact their any you Okay, And capacity on then, semi

Scott Keeney

of speculate not that I'm hard to driving It's decision sure the specific their are that. all ramp. on exactly applications to

So speculate. it's a little hard to

Tom Diffely

at business? does administration, finally, just guess, change your potential your contract the Okay. or outlook of change the for of change And with that then all, part I defense

Scott Keeney

and Short no. delegation, seen energy. aisle. the Oregon had delegation, strong both it's We've answer Washington really very And is, support with certainly respect for sides of the strong we've support. State directed And to the bipartisan

the a under DOD. And Obama, high I directed So, very energy it believe, priority doubled. budget even for remains

Tom Diffely

your Great time to hear and for today. thanks

Scott Keeney

Tom. Thanks,

Operator

Mark Please from Miller a is question up follow go The Benchmark ahead. Company. next with Our

Mark Miller

XXX% organic over it, was, correct? your in a growth and total tell what inorganic? was You it Could believe, was XX% year-over-year growth Is year-over-year that I growth. it but me in you indicated organic aerospace,

Scott Keeney

Yes. it's Once overall, again, XXX% organic. XX%

Mark Miller

you. Thank Okay.

Operator

question-and-answer would any to our session. the Joseph closing conference to back concludes like This turn for remarks. Corso I over

Joseph Corso

Thank in you everyone afternoon for interest joining nLIGHT. continued for this your and

with and this look participating we great Have conferences in soon. Thanks. virtual investor to day. be speaking will We a several quarter, forward you

Operator

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

disconnect. now may You

nLIGHT (LASR) 8 Nov 202020 Q3 Earnings call transcript