nLIGHT, Inc.

Good afternoon and welcome to NLight's second quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Joseph Corso, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon, everyone. I'm Joe Corso, Enlight's Chief Financial Officer. With me today is Scott Keeney, Enlight's Chairman and CEO. Today's discussion will contain forward-looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filing. Our results may differ materially from those projected on today's call, and we undertake no obligation to update publicly any forward-looking statement except as required by law. During the call, we will be discussing certain non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found in the investor relations section of our website. I will now turn the call over to Scott.

Thank you, Joe. Second quarter revenue of $50.5 million was at the upper end of our guidance range and grew 13% compared to our first quarter. We had a strong quarter in aerospace and defense, which grew 26% sequentially. Our commercial business, which includes our industrial and microfabrication end markets, increased approximately 1% from the first quarter. Overall gross margins improved to approximately 24% in the second quarter, and products gross margin expanded to approximately 30%, slightly above the top end of our guidance range, we ended the quarter with cash equivalents and investments of $115 million with no debt. Aerospace and defense remains a significant growth opportunity for our business, and we had a strong quarter in both directed energy and laser sensing. In directed energy, we continue to see strong interest in our solutions. Ongoing military operations in the Middle East and Ukraine highlight the increasing need for advanced cost-effective defensive weapons technology. We believe directed energy lasers will be a critical part of the US and foreign allies layered defense strategy, as they offer a significant operating cost advantage compared to traditional kinetic weapons and a deep magazine. During the quarter, we had strong execution on multiple high visibility, strategically important domestic directed energy programs. We continue to make good progress in our healthy tube program, which is a multi-year DoD funded $171 million program to develop a one megawatt laser. with completion expected sometime in 2026. Another critical program for Enlight is the Army's DEM short effort, which is to develop a 50 kilowatt high energy laser for short range air missile defense. On this program, Enlight is responsible for delivering a 50 kilowatt high energy laser to a prime contractor in the first half of 2025. Enlight's vertical integration from semiconductor chip through beam combined laser is a unique and critical differentiator for us in this market. We design, manufacture, and integrate the most critical components of the high energy lasers we deliver to the direct energy market. Our vertically integrated approach to the direct energy market enables us to design and manufacture decisions at the component and subsystem level that optimizes system level performance at an attractive cost point. Moreover, it allows us to address this market at every level of vertical integration. Today, we have generated revenue at nearly every level of vertical integration which makes us an ideal supplier to the US government, other prime contractors, and foreign allies. In the second half of 2024, we expect to finalize the design and begin to manufacture some of the most critical hardware components of our beam combined lasers. We also have strong quarter in laser sensing. As a reminder, laser sensing products use lasers for object detection, measurement, and inspection, and are used in a wide range of lands, sea, air, and space applications. Our laser sensing products include missile guidance, proximity detection, range finding, and countermeasures. And we've been incorporated into several significant and long running defense programs. In the second quarter, we signed a new $25 million contract for an existing long running missile program that incorporates one of our laser sensing products. Enlight has been a long-term supplier to this program, which our customer expects to continue to expand in the coming years. We've also continued to make excellent progress on a handful of classified programs. In one of these programs, we shipped our first EMD, or Engineering and Manufacturing Development Unit. The EMD phase is focused on developing, building, testing, and evaluating solutions to ensure they meet all the operational requirements, and is a precursor to initial low-rate production, or LREP. Our customer's forecast suggests that LREP will start sometime in the latter half of 2025, And we expect this program, as well as other programs like this one, to contribute significantly to our defense products revenue well into the future. Turning to our commercial markets. In microfabrication, we provide high-brightness, high-power semiconductor lasers to many of the world's leading diode pulse solid-state laser vendors, which are used across a wide range of applications. Over the last several quarters, our overall revenue for microfabrication has been in the $10 to $11 million range. which is below the $14 million average quarterly run rate in the prior several years. In the second quarter, while microfabrication was down 5% sequentially, we begin to see signs of renewed demand. During COVID, our customers built significant inventory to mitigate pervasive supply chain challenges. We believe we are finally at the point at which we are seeing more stable inventory levels and an increase in overall broad-based demand for semiconductor lasers. In industrial, we serve three end markets, cutting, welding, and additive manufacturing markets, each which have their own opportunities and risks. In cutting, which represents the largest portion of our industrial business today, the industry and our business continue to shift towards higher power solutions. Our revenue in cutting is comprised primarily of our innovative high-power programmable lasers, which continue to be adopted by our leading customers. We continue to innovate our product offerings to meet our customers' most critical pain points, As we've discussed in prior quarters, Chinese laser suppliers have increased their market share in standard lasers as machine tool customers are adopting a bifurcated strategy using Chinese suppliers. In welding, we are focused on solving our customers' most critical pain points in the EV and battery markets. In the second quarter, we released several new products at the Battery Show in Europe. The first, we call APT, is an automatic parameter tuning software for the process monitoring market. This product reduces the time it takes to implement process monitoring solutions into a welding line. We also released a product called WeldForm, which combines spatial and temporal controls to optimize the melt pool, reducing deleterious defects such as spatter and porosity. Lastly, we released ProcessGuard, which integrates process monitoring capabilities within the laser itself, further simplifying the integration into a factory line, improving reliability, and significantly lowering cost Process Guard is the first product that we've introduced that fully integrates in-light laser technology and plasma process monitoring technology. Although welding remains a small part of our business today, our new product introductions address many of our customers' key pain points and have been well received to date. In additive manufacturing, we work closely with many strategic customers that are focused on driving broader adoption of metal 3D printing technologies to multiple end markets. One of the most critical challenges facing the additive manufacturing industry is to reduce the overall build time of a part as shorter build times directly translate into a lower cost per part produced by that machine. In the second quarter, we announced a collaboration agreement with one of our customers, EOS, an industry leader in additive manufacturing. Enlight and EOS each possess a complementary set of technologies, and we believe that by working together, we can optimize the additive manufacturing light engine. Inlight's programmable beam shaping laser, Corona AFX, offers seven different beam profiles from a single laser, ranging from an 85 micron spot for printing high precision features and contouring smooth surfaces to a 210 micron ring profile for faster printing of bulk material, improved mechanical properties, and reduced soot and spatter. Inlight Corona AFX lasers deliver printing speeds of up to three times faster for steel and aluminum alloys compared to a standard 400-watt laser process. The flexibility and performance gains of Enlight's beam-shaping laser technology is expected to drive significant productivity gains and thus lower cost per part for EOS's metal 3D printing systems. In summary, we've made good progress in multiple defense and commercial end markets, and we continue to expect strong growth in the second half of the year compared with the first half. Moreover, we remain very well positioned for profitable growth in 2025 and beyond. With that, I'll turn the call over to Joe to discuss our second quarter financial results.