nLIGHT, Inc.

Good day and welcome to the NLITE Inc. Third Quarter 2024 earnings call. At this time, all participants are in a listen-only mode. Following the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Please note today's call will be recorded. Lastly, if you should require operator assistance during today's call, please press star zero. I will now turn the call over to John Marchetti. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm John Marchetti, Enlight's VP of Corporate Development and Head of Investor Relations. With me on the call today are Scott Keeney, Enlight's Chairman and CEO, and Joe Corso, Enlight's CFO. 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 filings. 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 to these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found on the investor relations sections of our website. I will now turn the call over to Enlight's chairman and CEO, Scott Keeney. Scott.

Thank you, John. Third quarter revenue of $56.1 million was above the midpoint of our guidance range and grew 11% both sequentially and year over year. Our aerospace and defense business grew 59% year over year, driven by record A&D product revenue. Our commercial business, which includes our industrial and microfabrication end markets, increased 12% sequentially. Products gross margin of 28.8% and overall gross margins of 22.4% were both within our guidance range. Our balance sheet remains strong, and we entered the third quarter with cash and investments of $107 million and no debt. Let me start with the review of our aerospace and defense business. which delivered another strong quarter of results and remains a key growth driver for our overall business. In directed energy, interest in our components and full solutions continues to grow. Ongoing military operations in the Middle East and Ukraine highlight the increasing need for advanced, cost-effective defensive weapon technology. To update you on our programs we have discussed in the past, We continue to make good progress in our HealthEQ program, which is a multi-year DOD-funded $171 million program to develop a one megawatt laser, with the completion date still expected sometime in 2026. Another critical program for Enlight is the Army's DEM shorehead effort, which is to develop a 50 kilowatt high energy laser for short range air defense. On this program, Enlight is responsible for delivering a 50 kilowatt high energy laser to a prime contractor, And during the third quarter, we finalized the design and began delivering some of the most critical hardware components of this beam combined laser. The successful delivery of these components, once again, highlights the importance of our vertical integration strategy in the directed energy market, where these enabling components have been specifically designed to optimize the performance of the high energy laser. And it's not just the U.S. military which sees the potential benefits of directed energy systems. Just last week, Israel's Ministry of Defense announced that it would spend over $500 million towards Iron Beam, an Israeli ground-based laser system for defense against aerial threats, including rockets, mortars, drones, and missiles, with a target delivery date during 2025. Israel's announcement is another example of how directed energy is increasingly being viewed as a critical part of a layered defense strategy. Directed energy lasers offer a significant operating cost advantage compared to traditional kinetic weapons, and a deep magazine. Enlight continues to leverage its vertical integration from semiconductor chips through beam combined lasers to address customers in the U.S. and overseas. We have generated revenue at nearly every level of vertical integration in the directed energy market, which makes us an ideal supplier to the U.S. government, other prime contractors, and foreign allies. Our laser sensing business was also a strong contributor to a record revenue quarter in A&D. As a reminder, laser sensing products use lasers to detect and measure objects and are used in a wide range of land, sea, air, and space applications. Our laser sensing products include missile guidance, proximity detection, range finding, and capture measures, and have been incorporated into several significant and long-running defense programs. Last quarter, we announced a new $25 million contract for an existing long-running missile program, and we began shipping against this award in the third quarter. 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 building, testing, and qualifying the solution to ensure it meets all operational requirements. Our customers forecast suggests that the low rate initial production should start for this program in the latter half of 2025. Before turning to a review of our commercial markets, I'd like to provide an update on our manufacturing activities in China. Several years ago, we embarked upon a process to reduce our overall reliance on our Shanghai manufacturing facility. While we continue to maintain a presence in China, by the beginning of the fourth quarter, we formally ceased all manufacturing operations in Shanghai. Manufacturing that has been performed in this region is now being performed at a contract manufacturer in Thailand or at our automated facility in the U.S. While it will still take a few quarters to ramp back to normalized production levels, we are pleased with the transition to date, and we believe this represents the last significant operational transition from China. Let me now spend a few minutes on our commercial markets. In microfabrication, we provide high-brightness, high-power semiconductor lasers to many of the world's leading diode pulse cell-to-state laser vendors, which are used across a wide range of applications. Third quarter microfabrication revenue group 40% sequentially to $14 million. While we are pleased with our revenue in the quarter, we expect volatility in this business to continue as overall demand remains choppy. In industrial, growth challenges remain. In cutting, which remains the largest portion of our industrial business, overall demand remains weak, and we expect this to remain the case through the end of the calendar year and into 2025. Our cutting revenue is now driven almost exclusively by our proprietary high-power programmable lasers. And while Chinese laser suppliers continue to gain market share in standard lasers, we continue to innovate to meet our customers' most demanding needs. For example, in the third quarter, we introduced our new Infinity product, which is optimized for complex, precision, thick metal cutting applications. Demand for welding solutions remains muted, as much of the advanced battery and fuel cell manufacturing capacity that is expected to be installed over the coming years continues to be delayed on softer overall EV demand. We are receiving positive feedback from existing and potential customers on the new welding products released last quarter, namely APT, WeldForm, and ProcessGuard. In additive manufacturing, we're committed to working with many strategic customers and partners that are focused on driving broad adoption of metal 3D printing technologies across multiple end markets. We believe one of the most critical challenges facing the additive manufacturing industry is to reduce the overall build time and overall cost per part To address this industry-wide pain point, Enlight continues to introduce new products that increase the printing speed and flexibility of additive manufacturing tools. Our AFX dynamic beam shaping technology allows for high-resolution printing, refined detail features, while also offering faster build rates utilizing stable ring mode power, making it the most versatile and efficient laser available for the additive manufacturing market. Higher power lasers drive more productivity in laser powder bed fusion. However, the lasers available for additive manufacturing today do not allow for powers higher than one kilowatt without introducing untenable amounts of instability in the melt pool. Our Corona AFX family of lasers distribute the energy into a ring shape, making it possible to move to higher power processes with the stability required to produce high quality parts. Earlier this week, we announced the launch of our new Corona AFX 2000, a specialized two kilowatt laser proven to boost productivity in laser powder bed fusion for metal additive manufacturing. The AF-X2000 has undergone successful commercial validation with a leading customer servicing aerospace and defense and automotive markets. Using aluminum alloys, this customer is now achieving print speeds up to three times faster when compared to today's leading large format printers. In summary, in the industrial market, we remain enthusiastic about our long-term opportunities in metal 3D printing. However, we continue to experience significant headwinds in our commercial markets which we expect to persist well into 2025. In aerospace and defense, we expect the excellent progress we made in the third quarter to continue, and it positions us well for both near and long-term growth in this strategic market. With that, I'll turn the call over to Joe to discuss third quarter financial results.