LASR - Earnings call transcript Q3 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the nLIGHT Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joseph Corso, Vice President, Corporate Development and Investor Relations. Please go ahead.

Joseph Corso

Thank you, and good afternoon, everyone. Scott Financial Chairman Officer. are Ran CEO; today Chief Bareket, us Keeney, and nLIGHT's and With Today's financial for projections will and discussion contain plans our forward-looking business. statements, including

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

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

measures. be will discussing we call, financial non-GAAP the During certain

have these financial the in can We of website. most now the directly Investor our which I to reconciliations financial measures our turn the call provided non-GAAP release, section on comparable measures be over of will Relations to GAAP found earnings Scott.

Scott Keeney

X. nLIGHT. which end quarter a driven million quarter business model. Slide QX by increase record a $XX this in Thank was We our diversity revenue, a Overall, each you, for markets, which was in year-over-year. was our highlights growth of the XX% Starting strong generated growth Joe. revenue on of

total of to achieved in record quarter, and diverse was revenue multiple a from with laser attractive of customers continue of focus outside we of customers high-powered geographies XX% our In than outside from portfolio the industrial on more China, solutions. third and markets We revenue serving quarter another China.

range manufacturing vehicles. high-brightness electronics in manufacture As products XX% laser high-power, electric of of gross world's wide continue pulse as lasers history our highest to which our source public manufacturers, lead are many for a products a this generated serve a consumer In to the the market, we our used to industries from semiconductor result, energy margin, industry. to company. the microfabrication, products as In the semiconductor in leading

lasers on business a to industries their market, enable China of strong outside competitive our We focus systems. where In our for that design customers they meet enable the semiconductor demand innovative our our that sharpen advantage industrial we create next-generation continue our to continue the secular products to will address. and develop to the end of customers

on customer to focus welding lasers deeper have increase Our lasers and have engagement enabled to market-specific developing like multiple cutting new for for our and and additive design led wins strategic us single-mode programmable with secure manufacturing share customers. and programmable solutions

lasers production to we For new and where applications. defense, directed additive series suited high-speed output example, next and stable of nLIGHT core critical deliver extremely are the both manufacturing energy programs to defense generation equipment uniquely critical. control lasers are long-term our for In continue

significant laser the direct mentioned foreign we've and in chain, In growth the exciting a As to U.S. of continue of have primes is armed programs each and energy government engage services, nLIGHT. with this we defense the value the on capabilities wide developed across entire past, a range we and allies opportunity market, for projects.

opportunities that energy, are to continue Moreover, for the of improve direct pace. X aerospace amplifiers, was revenue increase revenue. new business. performance activities quarterly at year-over-year beam rapid Slide the third we U.S. DE for the market. create government. discuss direct beam can control energy revenues represented total in additional by end to combination In driven to Turning our semiconductor capability we and Year-over-year solutions, X% by development in our revenue and performing the energy-related direct defense multiple and of work a lasers, are and growth an engaged increased by from XX% In quarter, long-term

had come previous financial long-term contracts quality Nutronics, achieved first mission-critical In approximately direct our it defense China. has lower revenue. and Furthermore, of market third from the defense outside quarter revenue to grew business XX% material revenue revenue where the than company's composition have quarter, in shift we customers. significant outside to of we QX development in A&D In acquisition was our came record, and from deliver of year post were full which last on for outside third industrial, $X.X customers of year-over-year our XXXX, of record quarter. XX% of experienced generated million. As in to just the impact more This to third in focus when certain products on history profound a was highest vendor a customers industrial of outside The our China our comparable increased than to customers. industrial versus our to in two-third temporary from that which $XX.X customers revenue revenue industrial our related the our ago In the both the the industrial core strategy Put result, in by our year-over-year ago of business our a shortages to context, energy, is higher million we and several was XX% sell results. as we products of in quarter $XX.X quarter a two-third a we China. was China shift typical to core in of we the the model for than million, business. issues our this quarter Revenue years some is the quarter our more primarily new business

we China. increased new of from OEM. million. a secured the leading primary our growth customers. of outside design XXXX growth from another win with sales continues quarter wide customers the lasers them serviceable quarter sixth enable laser manufacturing, highlights their Revenue In the lasers $XX.X a work in in that opportunities from desire compared driver and additional high-performance, market. create strong sales and the our new experienced QX, microfabrication, to In a products reliable revenue customers' additive quarter of to In our our existing was for portfolio third with both third and of to distinguish and XX% growth to to the offers turn Our consecutive programmable that innovative, in of partner quarter grew a

As and a across semiconductor a high-power our wide to our applications design be range lasers, of driven leader products long-term revenue continues next-generation by in and customers' geographies. wins in market current

to We demand range manufacturing cell ranging favorable EV solar of consumer applications, wide and displays, electronics, see trends a production. from continue from

to Turning to the third to quarter, In discuss China revenue. geography. by outside Slide million, XX% approximately represented sales revenue $XX.X which of customers of X to total grew year-over-year XX%

absolute from revenue revenues to China, percentage quarter revenue. an $XX.X China declined and for record million. QX a approximately total nLIGHT XX% both Third In outside was another of on of basis year-over-year

in customers. by of by Our year-over-year in to sales lower fiber end year-over-year the into sales revenue microfabrication increases China driven industrial was lasers market, decline offset

competitors technically recall, and and markets customers. Each we primarily providing markets set serves require microfabrication the we nLIGHT and may semiconductor in you both products different most primarily As sell China. the lasers demanding microfabrication, solid-state have on market. manufacturers focus for different a industrial this nLIGHT In lasers, of challenging to diode-pumped of and of in products high-powered these applications

face cutting we a advantage. here like multi-decade sell we development which that do us primarily we in reliable for and competitive industrial, believe brightest, lasers and our compete, in market we offers lasers history While semiconductor most significant we competition, sustainable applications. continued of In welding the fiber of

market China, industrial fiber As in the continued laser deteriorate. has cutting, the particularly to past, we've in discussed in

market. pursuing even business laser selective summary, we prices with more respect believe pleased the reflect to As in continue of the are we are results, execution industrial quarterly being our to I'm fiber In our business which China erode, strategy. I the with

across us near our thesis and enabled and optimistic increase conviction firmly our to our drive and remains adoption of core strategy and revenue global defense environment, products. of growth each our markets we market the in the has demand supply profitability. secular our industrial end chain to Our trends to long-term continue a aerospace of in ability and lasers the business our to organically our serve positive and customers both long challenging to are both Despite in term. continue intact, grow our the in Multiple

QX rate over I revenue quarter in than results. Assuming term. to is the again year-over-year now by our we a Ran believe sustainable nLIGHT's will guidance, increase call of our will over the discuss third the that longer growth to more we turn XX% XXXX, financial midpoint

Ran Bareket

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

the was quarter up of Third XX% $XX.X million revenue and our was year-over-year. range midpoint guidance above record of

Third million, quarter of X% revenue the an XXXX. $XX.X increase was of products above third quarter

by was China. revenue to to our sales growth fiber higher customers semiconductor outside both by products decline World in Our to was product a This China. Rest of in driven growth in mainly offset customers laser and revenue of the revenue

the U.S. direct quarter revenue mainly increase XXXX revenue The in related above million, driven that of of energy revenue third Third XX% work development $XX.X the was development QX to an for quarter development performed XXXX. we project in higher increase by government. was

Slide in detail gross XXXX. versus margin XX.X% the margin third an points. Overall XXX XX.X% third quarter the Product to in of quarter of improvement in margins. was basis our gross third period approximately provide XX.X% to Turning in of the more XX.X% X quarter to gross was compared the XXXX, comparable into

leverage manufacturing of improvement customers, industrial on margin cost result strategy fixed was and year-over-year world of Our sales additional of the our to to A&D a cost efforts. direct and our reduction further implementation the increase rest the

map investment increase Non-GAAP Slide higher quarter and growth long-term in the our was The majority opportunity. expenses million during with product million were X. QX XXXX. support Turning to to operating road year-over-year to the compared R&D $XX.X $XX.X third of related

As total non-GAAP prior QX QX a and percentage XXXX. revenue, the quarter with OpEx was with consistent of our XX%,

was in QX a to the Non-GAAP for Turning per per diluted of million diluted mainly EPS million by quarter compared compared of in related million with XXXX. per in for decrease to third XXXX XXXX. $X.XX to or share the foreign net share third with third third prior-year quarter and $X.XX was The $X.X share. XX. $X.X credit quarter of EPS was taxes the $X.XX income net compared Slide driven non-GAAP Non-GAAP quarter diluted approximately tax non-cash $X.X the the income in

a XXXX. third EPS per discussed. the expect $X.XX forward, to On in credit Going to of an and increase we The by was a stock-based in for compensation a basis, approximately cost period tax compared GAAP of driven quarter previously per of prior-year share was expense loss increase $XXX,XXX $XXX,XXX third loss loss $X.XX the with the quarter. comparable the to tax compared be quarter during in

million $X.X $X.X Third in with compared QX quarter million was EBITDA XXXX. adjusted

Our seeing cash in an disruption profit, quarter, In QX in chain usage million third from of supply adjusted our of able operating EBITDA quarter and gross we the Cash investment the quarter are in investment operation to in during partially was a related of flow are increase QX $XXX,XXX used result the was We from continued offset $X.X XXXX. approximately year-over-year ensure in by capital. versus mitigate improvement in the R&D. to mainly in higher made we potential customers. to working demand during inventory to further satisfy order we that cash

third Our expenditure million in million the QX capital $X.X $X.X XXXX quarter XXXX. of versus were in

of continue to of U.S. accelerate to China. customer automation We our serve the facility outside our

$XXX ended Turning debt. to We cash Slide equivalents QX and million XX. and no cash of with approximately

capital, as days was the XX days. our during revenue, carefully of DSO for manage positive million, quarter trends representing the purchases. of inventory the to result the continue Inventory net strategic at We XXX of higher a working which and quarter $XX end quarter was inventory. grew demand third

outlook XX Slide to Turning for QX. for our

are chain operating supply environment. we highly in earlier, mentioned Scott dynamic a As

we in current expect and million takes be Based guidance million, product capacity material approximately QX $XX At Our of availability. of consideration cost million constraints, development on sales of sales. today, and on $XX includes of approximately midpoint freight our $XX to $XX million million. cost, the range information the this QX the to view available $XX into

of from remains see outside demand our China strong, further in trends While weakness customer China. we

to X.X%. the approximately margin. to and gross to Turning margin expected XX% is gross be to we development margin expect QX of range gross product XX%, in be

range a of see the revenue higher fourth expected quarter, XX% result for in overall QX development in gross margin we of As a XX%. to

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

approximately $X Our assumes and QX is slightly and EBITDA OpEx million. range depreciation increase adjusted non-GAAP amortization

shares shares be million, to With call approximately be to over expect XX.X questions. will the I average QX approximately to the We diluted operator that, turn and million. non-GAAP basic for XX.X

Operator

Thank you.

presentation slide section today's on of Investor the nLIGHT's website. Relations copy a reminder, found a be can of As

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

Greg Palm

challenges, chains. Yes, If taking the guess, starting the you about demand good as in supply well, right, that's had specifically to whether here, supply mentioned we constraints supply that if off cetera? is and QX, some fulfill think I your in questions for guidance lines something afternoon inherent curious was added capacity-constrained heard Thanks along of think QX? impact you inhibited chain on there everybody. And just challenges, I some or et I I ability the as also

Scott Keeney

numerous a Certainly, see It's to to chain good business. our also logistics we like manage everybody, Greg. impact customers question. different We've and Yes, been Certainly, those with issues. are supply issues able facing that. minimal our

of terms And cost, is material highlight, terms think we manage continue we impact customer but so the manage that in we'd an a our customers of that We and and I in have the look chain, to ahead. for demand our to But we don't certainly ongoing in of quarter wasn't hope it continuing those see challenge continuing chain issues affected. material been some we're that want as QX, it see anything too. to that supply and supply terms them, of our in is in to

are that those that topics all key are managing. factors we're So

Greg Palm

And enough. not Fair a year-over-year but at from geographic of looking it a stood standpoint, specifically basis, on quite just really Okay. world a QX bit sequentially. was Rest up out,

of What are the Or board? regions is seeing it you seeing exactly? segment type it industrial? And growth? what new in you is the specific are like across most contained So

Scott Keeney

Yes.

industrial We board, growth are but QX. seeing across in the XX% grew quarter-over-quarter

So the right. a want topics to the and doing exactly the in reinforces our growth very to Certainly, world. certainly what of growth strong And QX rest of we're one we highlight you're is -- on of that part focus as strategy, some there.

Greg Palm

to want you specific? don't you to or specific want out region that call get Any

Scott Keeney

out. there's U.S., also. Europe Japan, don't merits believe certainly growth see good We Korea any I calling region strength specific that in some and in

Greg Palm

Okay, good. Thanks. All right, I'll there. leave it

Scott Keeney

Greg. Thanks,

Operator

Patrick with from go comes ahead. question Please Ho next Stifel. The

Patrick Ho

the much. Thank where the remarks, challenging at. and nature your nice very looking about a new regions in things diversification your that you environment. And power talked Scott, into you congrats prepared are quarter only on criteria of in customers isn't a

performance. mentioned reliability You and service,

could more I more China, some of what What in outside more that color the of differentiating you characteristics are the of If attributes important performance performance give you terms customers commoditized. become and a are more little have that offer? for are which believe

Scott Keeney

is the dimensions point, believe even more be to manufacturing will performance good important. And for a trade that Yes. that past, In Patrick, next, more easier there to releasing specific will power very increases the about verticals. many and is manufacturing And be increases be to that themes we of in that things we that of will like Very those I additive lasers lasers see. are of are the some in continue the of important, are products be in a programmable our as But I products number those stability theme new we'll while continue performance there was describe will theme, Welding important think think key in even continue our and talking the the even lasers release to them. different And in we'll after important I be from there. that still week of standard an show, as of more topics be it Formnext, and may unique these used, to different cutting, that additive the in of be use programmability market. of to market. a more continues lasers

Patrick Ho

maybe how opportunity guys. always aerospace in things my timing a depending I years? a in that energy? see as obviously that Is But more And the is the helpful. be Great. growth all the pipeline and the potentially traditional something really going the lumpy defense also is of that nature. is and guess on Or market, growing? defense directed few for and projects energy it's That's over you some Directed you in next that's do area to follow-up bit coming projects, long-term aerospace of just question, little from

Scott Keeney

glad question. that I'm Yes, you asked

we're proud than direct opportunities certainly quarters, week and in qualified on we new three outside think energy energy this I markets beyond other space seeing area meetings of we is growth more lasers. seen where perhaps directed of very have in one what our space are interesting previous

the lifetime is our In exceeding in that's and the fact, new and reached trillion other just on for both that satellite ICESat-X goals changes in in applications work its learned NASA and see we and there, and proud very providing we environment today just of laser data shops a of number the opportunities defense. aerospace

beyond yes, those But directed they goes So as I be about talking energy. it to public. hope more become

Patrick Ho

you thank much. Great, very

Operator

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

Tom Diffely

first and Scott, thanks question. good China. the afternoon Yes, a on question for

weak. fiber laser semiconductor But for there, market the the how is for So pricing lasers, and components the diodes? weakness pretty obviously, the there's is

Scott Keeney

Yes, question, Tom. very good

industrial semiconductor and to be While that market And strong. our for is notably that lasers that a market less a leading industry. market have require differentiated, lasers we That's the performance. we that that history go XX-year attractive, the does of one pulse more continues are high-performance into higher it's

attractive of is part So the that an the market. of part market

Tom Diffely

haven't you Is the good And That's in are those that Okay. to heard or tariffs much thing ongoing? hear. we lately. the past mention

Scott Keeney

We haven't, to anticipate us it's have first-order an for No, and present we? don't the tariffs issue time issue. direct at be a not

there's certainly, a don't we barriers out see But tariffs wide of are there. first-order think as a no, non-tariff that issue. range I

Tom Diffely

look least Good of with bit. percentage the range as at that to hear. of margin at guidance, China I the end little have that have Okay. And high gross again, a would a down been you Ran, coming then, business when would thought margin up but

Ran Bareket

to go not down. guidance, mention about least mind, there our predict on are other different the can based to between products at different the we talking revenue, that when in markets, keep are margin, so mix Sure, impact quarter-over-quarter, that product

QX. see But -- well. improvement, year that as last margin, you next would All would which a in few anticipate trends significant over to good the if product can margin again, will of quarters on impact the influence see you our continue we

Tom Diffely

thank well both you for great, Okay, today. your time

Ran Bareket

Sure, thank you.

Operator

Paretosh question next with from The Berenberg ahead. Misra Capital Please comes go Markets.

Paretosh Misra

-- industry be be vertical so other Thanks, industry inflation due more because long-term, they some you to guys, you competitors actually, insulated that that are faster given can better in the could and trying the maybe could could widespread Scott, the to high-cost structure evolving? many placed a at is get inflation, seeing I'm maybe discuss across industries the pricing? integration, the good be whereas is What you're afternoon, -- than good cost for how of there

Scott Keeney

interesting. Yes,

Let me think.

vertically are We integrated.

So is there. some insulation there

inflationary seeing electronic are relatively We But our buy. that that's small to part BOM. your pressures the components especially electrical of from components, point, a we relatively,

So through But those insulation right going is yes, I concerns there concerns business every are think is some there. that inflationary now.

Paretosh Misra

but And the maybe is maybe just industry? any far how gone it like to could provide for grades? has you pricing know as commodity I year, it last versus sense the it. is dollar a don't you how care where in watt if price, per could down Got

Scott Keeney

this. reported type standard for to That the remains have continues market, set that China certain specific China pricing and China that is is pricing difficult say with and one specifications. be Even just commoditized for I'll companies declining. laser in Look this. more others that a of the in and in of market reported have a very of Well, kind lasers,

we that performance years thesis in price elsewhere, those drive now XX and really other not that the other pressure technologies. different core for you're technology, our markets. kind certainly in going China, can to different and continue even displace go down is in to performance, very you We but expect that about legacy so bring price we're As we talking lasers, we're improve markets of started to the other seeing ago company,

But of So to for long-term basis, technologies. general from the we there's dramatic kind change, certainly but don't unattractive China, secular those a displace trend a quarter-over-quarter see we commodity a in in most certainly markets. of believe other markets,

Paretosh Misra

in the queue. Thanks Scott, I'll back get

Scott Keeney

you. Thank

Operator

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

Mark Miller

revenues. your record on Congratulations

additive wins, design you was color was give and if some more mentioned can one You wondering in manufacturing? little I just a

Scott Keeney

in additive. Indeed, yes. we've Mark, we've made Yes, great -- made progress

the over And we've think lasers. enabled out at And the innovations newer to that is our and the in coming interesting interesting seen trade players But public -- to more I economics the two from announcements we're which in the with information of new are weeks change and a should there I these be space of coming products that thing show. space. see think number as next-generation fiber that some by systems. big be time is it is next-generation Formnext, doing will in that series for this who's really players very seeing next-generation the production

So it's information, standby, there will be publicly. more released

Mark Miller

the power? like break Can out the medium in six over laser power kilowatts sales by you

Scott Keeney

I those can, yes, we continue data. to disclose

power a performance is as However, it's meaningful dimension, one dimension. I earlier, mentioned less little is as another

two So three XX% actually boy, laser performance the was kilowatt mix was six and kilowatt that than at that XX% additive and welding higher and XX% the which below oh of QX, in for But highest been, that enabling like two less were power sales XX%. our markets. higher reflects it's is power years, kilowatt overall above segment low the remainder

Mark Miller

it finally, do malaise you the the or Chinese And cutting Is in overcompetition market conditions? what macro to? contribute

Scott Keeney

attractive. factors read It's But playbook publicly And shortages going A very on prices that to you've kinds even of bit are both, to all in they SOEs macro levels the macroeconomic are I hard of to saying the certainly, companies econ there are that that little about, are then less effects. are a think. from driving tell. power China aggressive of always that everything

we've time, So But said seen focused it's we're growth that long on other in as a markets. other in sectors. a for we've playbook

Mark Miller

Thank you.

Operator

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

Joseph Corso

for a today's portion continued technical this webcast. you, nLIGHT. everyone, some experienced and interest during for your We in of afternoon joining Thank difficulties

and at free portions accessing you So call, please any forward evening. the a have joe.corso@nlight.net. quarter, me, if speaking during reach out challenges with Joe any our Corso feel slides to the We for great anyone has of to to look

Operator

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

You now disconnect. may

nLIGHT (LASR) 7 Nov 212021 Q3 Earnings call transcript