nLIGHT, Inc.

But as you know, you know, the budget process takes time to work its way through Congress, and we hope to have, you know, more insights in the coming quarters there. And certainly you can read the comments from Secretary Hegseth and others with respect to direct energy. Got it.

And just as a quick follow-up, the product there, or the Hays scalable kind of high-energy lasers family that you launched, I guess, today, and Can you talk a little bit about, you know, just kind of the positioning there versus kind of some of your other products, just, you know, how you're thinking of that? Thanks.

Yeah, thanks for asking that. It's something that we've been working on and very excited about this product family. It's our platform for scaling to higher power. And so we're starting with the greater than 50 kilowatt class, but it will continue to scale. And that's one of the key benefits to coherent beam combining. It also provides for a brighter beam, a laser beam that can be focused you know, more effectively. And then finally, it provides for the ability to correct for the atmosphere. So all three of those features we believe are very important. And it also is in a form factor that is smaller than, than other products. And one that we're, you know, we have integrated into the strikers we've talked about and can be integrated in other platforms. So it's an exciting announcement and we will be making further announcements as we continue to, you know, migrate that product family. Appreciate the call. I'll jump back in the queue. Thanks. Thanks.

Your next question comes from the line of Louis De Palma with Blair. Your line is open. Please go ahead.

Thanks for taking my question. As a follow-up to the question on Hades, can the Hades platform be integrated into aircraft as well? There was a defense contractor in Israel that recently discussed the incorporation of high energy lasers into aircraft and helicopters, and it would seem to be a large addressable market. So you mentioned how Hades can be incorporated into the striker and other platforms. So I was wondering if you could provide some potential color on those other platforms. Thanks.

Yeah, absolutely. You know, the platforms that we've talked about in more detail are, you know, the army striker. And by the way, that that's just one platform, what would ultimately be the right platform is to be determined. But I think it's a challenging platform to integrate. It's very small space. Certainly the Navy has a number of opportunities for integration. And so the small size of Hades is important for those. But as you noted, it becomes even more important as you look at, you know, airborne applications. And one of the topics that, you know, we've talked a bit about is our leadership with respect to swap size, weight and power. And so we have leading performance in that area. And that makes it makes us well, it provides a very good foundation for airborne platforms. Also, obviously, you'd engineer the product to be different in those platforms. But we do have leadership with respect to swap also.

Thanks and. There also there seems to have been progress with the the army, the 30 kilowatt enduring high energy laser program. Is there the opportunity for you to serve as a supplier for that program or other programs that are like below the. the 70 kilowatt threshold that you've established with Hades? And related to this, how do you view competition, if there is competition between the 70 kilowatt and above class versus the class of lasers below 70 kilowatts?

That's a very good question. And the short answer is yes, we are excited about the work that we're doing with partners in the lower power space, like the 30 kilowatt, where we provide key components that go into that. And it is indeed different from Hades. It doesn't require the same level of sophistication with respect to the coherently combined sources for higher power. So we are partnered with others to provide those components at the lower power level. And as the requirements go up to higher power, that's where Haiti comes in. And I think we're uniquely positioned there to provide not only the higher power, but also the higher beam quality and the atmospheric correction for those threats that require a more sophisticated laser source.

Great. Thanks for the color. Thanks, Scott, Joe, and John.

Your next question comes from the line of Jonathan Sigman with Stifel. Your line is open. Please go ahead.

Hey, good afternoon, Scott, Joe, and John. Thanks for taking my question. The sales and margins were fantastic. It sounds like within products, both sensing and directed energy were increasing. Just hoping you can get a sense on kind of which which horses leading the pack and the quarter and then thinking about how margins demonstrated 500 basis points of upside relative to your own high end of your guidance range for products. Should we think of that as just being the operating leverage of the higher sales or how much was it that maybe a mix contributing it? Thank you.

Yeah, great. Thanks for the question, John. We had a good quarter across the board. All of our products fared well during the quarter from directed energy to laser sensing. Even if you look at the end markets, our industrial and microfabrication markets performed well. as you think about the upside relative to the guidance, about half of it was just volume related, just leveraging overhead and selling more through the factory and keeping the factory more occupied. And then the other half was a combination of slightly higher margin, there can be a pretty big mix within any given quarter. And so this quarter we saw very nice, very nice mix as we continue to control the cost. So I think, again, it was a good quarter that we were firing on all cylinders.

Thank you. And maybe I'll flip one on Haiti, too, which has to be one of the best franchise names in defense right now. But you've talked a lot about how coherent is differentiated and scalable for high, but you introduced the 30 and the 10 kilowatt systems and talked about having proprietary beam quality that wouldn't be coherent. So maybe can you talk a little bit about what's differentiated in that class power and what is your company's right to win in those areas? Thank you.

Good, Jonathan. Thanks for the question. Yeah, just to replay, there's only two ways to combine lasers to preserve a very bright, coherent laser source, spectral beam combining and coherent beam combining. We have a very strong position that as you go up in power, coherent beam combining is the best way to scale to higher power to provide a brighter source and to also then more effectively allow for atmospheric correction. For lower power, we do provide spectral beam combined sources. And again, we work with other partners to provide components and combined laser sources there. But we don't integrate it into the full, what was known as typically the effector with the beam director in that space. So we have, again, as I mentioned, leading swap size, weight, and power. We have high reliability. We have lasers that are serviceable. There's a whole host of differentiation that we have that's a result of 25 years of building lasers for a broad range of industrial and defense applications that allows us to to serve that market well. But we don't integrate as far forward in the lower power space. Does that help, Jonathan, answer your question?

Thank you. I think I misunderstood the website. I thought the 10 were new products. Appreciate the clarification.

Good.

Your next question comes from the line of Greg Palm with Craig Hallam. Your line is open. Please go ahead.

Yeah, good afternoon. Thanks for taking the questions. Going back to segment results, uh, you know, what drove, I think most of the upside was, was actually on in the industrial segment. So can you just maybe talk about, you know, what surprised you? I think Joe, you talked about some last time buys, uh, presumably maybe that continues in the, in the Q2, but what, uh, what are we now expecting for the full year hole relative to that 25 to 30 million number you gave last quarter?

Yeah, thanks, Greg. The industrial upside in industrial was a little bit better than we expected around producing revenue and taking orders for last time buys in our cutting and welding business. But the brighter upside spot really was additive manufacturing. We had a nice quarter in additive manufacturing and we're seeing that business continue to show better growth than we had anticipated going into the quarter and into the you know, balance of the year. As you know, it's difficult to predict. We don't guide for a full year basis because we don't have the amount of visibility that we, you know, do in the defense business. But I think relative to what we said during our last earnings call, things have gotten better. And so we're starting to, you know, chip away at that hole that we talked about. But there's still a lot of work that we need to do as we go through the year to really close that.

yep okay and then Scott going back to you know some of the budget items and I want to go back to some of the comments in the last call as well talking about you know a number of new real prototypes that that you're going after different power levels You know, can you give us maybe an update on, you know, I know timing's tough, but when would you expect or when should we hear to expect more on some of those programs that you alluded to last quarter?

Well, I'd like to predict how Congress will work this year, but I've got enough experience to know that there are error bars around that. The budget numbers that we provided were the president's budget requests, and that'll work its way through the appropriations process in the coming quarters. We should have more insights this fall, but that can be delayed. I think more specifically, there are opportunities for specific programs in the current budget that we certainly will announce when we're able to do so. The higher level budgets, though, it will take time for that process to work itself out.

Okay, but just to be clear, the... prototypes that you alluded to last quarter was that not current fiscal year budget or was that for 27 that was for 27 that was um okay yeah okay all right thanks for the call you bet

As a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your next question comes from the line of Troy Jensen with Cantor Fitzgerald. Your line is open. Please go ahead.

Hey, gentlemen. Congrats on the stellar numbers here. Maybe just, I guess, a question for anybody. I'm just curious if there's any capacity constraints. And what I'm getting to is 81 million revenues in December, 80 million in March. The honey in the guide here is 81 for June. What needs to happen for you guys to break through that level?

A short answer, Troy, is we are not capacity constrained today. We've really done a great job of improving both the capacity on the lasers that we're building, as well as the efficiency with which we are building those lasers. We talked about what we were adding in long months. So today, capacity really is not an issue. What we need to continue to break through that $80 million threshold is demand signals from our customers, U.S. government, et cetera, which we're starting to get. But we've got no concerns at all today on capacity. Gotcha.

So new wins will be easily to kind of fulfill as they come in. Okay. And just, Joe, for you too, just on the gross margin guidance, I mean, you guys kind of started the conference call here with, you know, highlighting 44% of product gross margins, and it just seems like it should stay around this level. But, you know, what's really going to get it down to kind of the lower end of those, you know, kind of the guidance range? Or do you think it starts to creep higher here?

Yeah, I think there's the – primary factor of our margin is really volume, both the volume that we are putting through the factory and what we are selling through to the customer in any given quarter. And then beyond that, it's really just the mix of the products as we go through the quarter. On average, as we've gotten out of China, as we've narrowed our focus, particularly with the last time buys with customers in cutting and welding, the overall product margins or the bond margins on the products that we are selling are becoming less variable, but there is still some variability as we go quarter to quarter. And so that will also have an impact. But again, we're not talking about huge numbers here, Troy. So the margins can swing a couple of hundred basis points, and there's really not all that much to read into it. But we're happy that we've been able to you know, get to a point today where we've, you know, consistently at 40% or above products gross margins.

Great. Okay. I'd like to sell last one here for Scott. If I remember correctly, I think the delivery date for the one megawatt laser was sometime in 26. So just correct me if I'm wrong. And what was the highest power you guys have shown to date? And just kind of thoughts on kind of hitting the deadline here.

Yeah, good. Yeah, so that's – thanks, Dre. It's referring to the Healthy2 program that is targeting megawatt-class laser. In Healthy1, we exceeded over 300 kilowatts in that program. That led to the award for Healthy2. And, you know, we're tracking to that program. However, it's not a delivery of a product. It's a demonstration of that technology. And, you know, as soon as we're able to provide more insights into that, we'll certainly do so. I am comfortable saying that we're on track and there's progress. We're learning a lot from what it takes to scale to much higher power levels. And, you know, things are on track and going well.

All right. We'll keep up the good work, John.

Thanks, Troy.

There are no further questions at this time. I will now turn the call back to John Marchetti for closing remarks.

Thanks, everyone, for joining us this afternoon and for your continued interest in Enlight. We will be participating in several investor conferences over the next several weeks. We look forward to speaking with you during those events and throughout the remainder of the quarter. Have a great afternoon.

This concludes today's call. Thank you for attending. You may now disconnect.