nLIGHT - Q3 2022

Transcript

Operator (participant)

Good afternoon, and welcome to the nLIGHT third quarter 2022 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.

Joseph Corso (CFO)

Thank you and good afternoon, everyone. I'm Joe Corso, nLIGHT's Chief Financial Officer. With me today is Scott Keeney, nLIGHT's Chairman and CEO. Today's discussion will contain forward-looking statements, including financial projections and plans for our business. Forward-looking statements are subject to risks and uncertainties, many 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 of 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 section of our website. I will now turn the call over to Scott.

Scott Keeney (Chairman and CEO)

Thank you everyone for joining us this afternoon. Starting on slide three. nLIGHT's third quarter revenue was within the range of guidance provided in August. Products revenue was slightly below the midpoint, but lower than expected project-based development revenue resulted in overall revenue at the low end of the range. Both products and overall gross margins were within the guidance range, but adjusted EBITDA was below the bottom end. Operationally, we continue to increase the level of automation in the U.S. We've added incremental capacity to each of the lines we established earlier this year, and we're in the process of adding one additional line to our facility in Camas, Washington. With the installation of this equipment, we will have installed enough capacity to support our anticipated growth over the next several years.

Beyond capacity, we are focused on further improving our yields and the overall efficiency of our newly installed capacity. We expect to have installed the majority of our automated capacity in the U.S. sometime in the first half of 2023. Before discussing the performance of our business in the third quarter, I'd like to comment on the trends we are seeing in the semiconductor and fiber laser market and the impact that we expect it to have on our business. We are projecting near-term growth from many of our strategic customers, primarily due to new product introductions and market share gains. However, we are seeing signs of a weakening near-term demand environment. We don't believe that softening demand reflects fundamental changes in the markets or customers we serve, but rather responds to changes in the global business environment.

While these global changes are significant, they continue to reinforce two fundamental opportunities for nLIGHT. First, rapidly evolving global supply chains are driving continued improvements in advanced manufacturing. Industrial automation, robotics, metal 3D printing, and battery manufacturing are just a few examples of advanced manufacturing processes that require an increased number of lasers. Second, we are seeing a much greater interest in laser technology from the defense industry. Lasers are a critical component of next-generation defense technologies with applications such as directed energy, intelligence, surveillance, and reconnaissance driving long-term growth. We continue to believe that our strategy to focus on these two key themes position us well for long-term success. Turning to slide four, nLIGHT reported $60.1 million of revenue in Q3. The geographic mix of our revenue again reflected the ongoing strategic transformation of our business.

Third quarter revenue from customers outside of China represented approximately 91% of revenue, compared to 81% in Q3 2021. In order to better align our Shanghai cost structure with reduced demand levels for fiber laser sales in China, we initiated a restructuring plan in our Shanghai facility in October. Outside of China, we generated approximately $54.9 million revenue versus $58.5 million in the third quarter in the prior year. The year-over-year decline in revenue outside of China was driven by a reduction in project-based development revenue of $5.8 million. Excluding development revenues, non-China product revenue for the third quarter of 2022 was $42.8 million, an increase of $2.1 million or 5% compared to the third quarter of the prior year.

Turning to slide five, where I'll discuss revenue by end market. In microfabrication, we generated $17.7 million of revenue, which represented approximately 29% of total revenue and was approximately flat year-over-year. Q3 revenue was driven by record quarterly revenue outside of China, offset by a decline in revenue from sales to customers in China. In China, economic softness and lower government stimulus have continued to impact sales. We continue to believe that we maintain our leadership position with Chinese microfabrication customers, but we aren't predicting a swift recovery in the region. We are also seeing softening demand signals from customers outside of China, particularly the consumer electronics and semiconductor manufacturing applications. Despite this softening demand, we remain deeply engaged with customers to support their next-generation products, and we have strong design and activity with both existing and new customers.

In the medical market, we have seen excellent adoption of our newly released 2-micron wavelength laser, which is initially targeting neurological applications. We expect to begin to increase revenue in the fourth quarter, and we anticipate strong growth contribution from this product into 2023 and beyond. In aerospace and defense, third quarter revenue declined approximately $7.6 million or 27% year-over-year to $20.2 million, representing 34% of sales. Of this decline, approximately $5.8 million was related to project-related development work. As we've mentioned in the past, the timing of project-related development work could result in significant development revenue swings quarter-over-quarter. We continue to make progress in our high-energy lasers for the directed energy market.

We are pleased to report exciting progress in support of our OUSD-funded high-energy laser scaling initiative to develop a 300-kilowatt high-energy laser prototype. We have demonstrated power exceeding program objectives, and we are working toward formal government evaluation, acceptance, testing, and delivery. Testing to date has demonstrated the scalability of our coherent beam combining architecture, which, combined with internal investment, is establishing a modular product line over a broad range of high-energy laser power levels. We sincerely appreciate the support of the OUSD program, and we look forward to sharing more information in the future. In addition, we continue to expand our customer base in directed energy. During the quarter, we delivered multiple new products to several new customers.

We delivered initial volumes of a laser to a U.S. prime defense customer and completed the development of a new lightweight laser for another U.S. prime customer. We continue to see the U.S. directed energy transition from the science and technology phase and into the prototyping phase with multiple new programs and requests for proposals across the U.S. services. Finally, turning to the industrial end market. Third quarter revenue declined 17% year-over-year to $22.2 million, representing 37% of total sales. Revenue from industrial customers outside of China was $19.8 million, which is approximately flat compared to the third quarter of 2021. Revenues from customers in China was down approximately 68% compared to the third quarter of the prior year. In cutting, our business continues to be driven by our customer base outside of China.

We remain focused on delivering innovative fiber laser solutions that enable our customers to design systems that are differentiated in the market. Today, we believe we are the only company that provides all fiber beam shaping solutions that allows for all the power to shift from the core to the ring, enabling our customers design flexible, highly productive systems with superior edge quality in both thin and thick metal cutting. As an example, we released a new 20-kilowatt programmable laser at EuroBLECH last week, further reinforcing the versatility and stability of our programmable solution. In welding, we are expanding our presence in the growing e-mobility market where we see long-term growth opportunities. We built upon our existing all-fiber programmable lasers to introduce a new product that has been optimized for battery welding applications.

This product, called Corona CFX, has a beam shape that works well for copper and aluminum welding by reducing spatter and other deleterious effects that are common with standard flat top beam shapes. It also includes proprietary hardware-based back reflection protection to enable uninterrupted processing of highly reflective materials and finishes and unique serviceability features that maximize uptime. This laser is currently being evaluated by welding integrators in the U.S., Europe, and Asia. Finally, in additive manufacturing, we've increased our engagement with Metal Powder Bed Fusion OEMs by continuing to demonstrate the unique capabilities of our Corona AFX programmable lasers.

The AFX fiber laser, which has a tunable beam shape from a small single mode spot to larger ring beams that have three times the diameter, has consistently been shown to show increased build rates in Laser Powder Bed Fusion machines by up to eight times by maintaining and often enhancing material quality. The optimized beam shapes from the AFX laser are uniquely capable of reducing spatter from the melt pool to allow for higher build rates and generous process windows. Later this month at Formnext, the key additive manufacturing trade show in Frankfurt, several customers will announce new products and will highlight the benefits of the Corona AFX technology.

One customer, Econ-3D, will be presenting a case study illustrating how Corona AFX laser technology was applied to the printing of turbomachinery components, reducing build times by 80%, therefore reducing cost per part by more than 75%. Along with these cost reductions, the ring beam profiles from AFX distinctly enables control over the physical properties of the printed material, including yield strength, ductility, and fatigue strength. We believe this intersection of high-speed 3D printing at low cost is likely to change the way we think about manufacturing, and the investments we're making in new lasers for additive manufacturing reflect this view. Building upon the success of AFX 1000, we will launch this month the new AFX 1500, which increases the power over the current AFX 1000 by 25%.

I will now turn the call over to Joe to discuss nLIGHT's third quarter financial results.

Joseph Corso (CFO)

Thank you, Scott. Beginning on slide seven. Total revenue for the third quarter of 2022 was $60.1 million, a decrease of $12.1 million or 17% compared to the third quarter of the prior year, and near the bottom end of our guidance range. Products revenue for the third quarter of 2022 was $48 million, a decrease of $6.4 million or 12% compared to the third quarter of the prior year. The decrease in products revenue year-over-year was driven primarily by a decrease in sales to customers in China, partially offset by increases to sales to both industrial and microfabrication customers outside of China.

Development revenue for the third quarter of 2022 was $12.1 million, a decrease of $5.8 million or 32% compared to the third quarter of the prior year. The decrease in development revenue is attributable to the timing of project-based work we perform in the defense market. Turning to Slide 8. Overall gross margin for the third quarter of 2022 was 22.4% compared to 29.6% for the third quarter of the prior year, and on the lower end of our guidance range. Product gross margin for the third quarter of 2022 was 26.4% compared to 37.1% for the third quarter of the prior year.

The year-over-year decrease in product gross margin was driven by sales mix and, as discussed last quarter, decreased capacity utilization, increased investments in U.S.-based manufacturing, and continued increases in production and freight costs. Turning to slide 9. Non-GAAP operating expenses for the third quarter of 2022 were $19.4 million or 32% of revenue, compared to $18.1 million or 25% of revenue for the third quarter of the prior year. The majority of the year-over-year increase was related to increases in salary costs, professional service fees, facility expenses, and a decrease in administrative costs allocated to development projects, offset partially by lower project spending. Turning to slide 10.

Non-GAAP net loss for the third quarter of 2022 was $5.1 million or $0.11 per share, compared to non-GAAP net income of $3.9 million or $0.08 per diluted share for the third quarter of the prior year. The year-over-year decrease in non-GAAP profitability was driven by a combination of the decrease in products gross profit and an increase in operating expenses. On a GAAP basis, net loss for the third quarter of 2022 was $13 million or $0.29 per share, compared to $6.9 million or $0.16 per share for the third quarter of the prior year. Adjusted EBITDA for the third quarter of 2022 was a negative $1.4 million compared with $7.2 million for the third quarter of the prior year.

Net cash used by operating activity was $2.8 million for the third quarter of 2022 compared to net cash provided by operating activities of $400,000 for the third quarter of 2021. The decrease in cash from operations is a result of increased operating losses and continued use of cash for working capital. Our capital expenditures for the third quarter of 2022 were $3.5 million compared to $5.7 million for the third quarter of the prior year. We continue to invest in directed energy for the defense market and automation of our U.S. facilities to serve our customers outside of China. Turning to slide 11. We ended the third quarter with cash equivalents, and marketable securities of approximately $113 million and no debt.

DSO for the third quarter of 2022 was 67 days, and we had 155 days in inventory. Turning to slide 12. As Scott mentioned earlier, we continue to believe that the long-term growth drivers of our business are firmly intact. Although we are seeing weaker demand for the next several quarters. In light of this weaker demand, during the fourth quarter, we will evaluate our cost structure and seek to streamline our business to increase operational effectiveness, such that by the first quarter of 2023, we expect to achieve break-even or better adjusted EBITDA at approximately $55-$60 million of revenue. Turning to our outlook on Q4. Based on the information available today, we expect Q4 revenue to be in the range of $53-$59 million.

At the midpoint of $56 million, this includes approximately $45 million of product sales and approximately $11 million of development sales. Turning to gross margin. Q4 products gross margin is expected to be in the range of 23%-27%, and development gross margin to be approximately 4%, resulting in an overall gross margin range of 20%-23%. For the fourth quarter, we expect adjusted EBITDA to be between -$4 million to -$1 million. We expect Q4 average basic and diluted shares to be approximately 45.8 million. With that, I will turn the call over to the operator for questions.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. Our first question will come from Greg Palm of Craig-Hallum Capital Group. Please go ahead.

Greg Palm (Analyst)

Yeah, thanks. Good afternoon, everyone. I wanted to start with just the commentary on the demand outlook, and I'm curious if you can maybe characterize it a little bit differently, whether, you know, you see this as, you know, cancellations, as push-outs. You know, what's your kind of visibility into the next couple quarters? You know, Joe, specifically, you mentioned, you know, Q1, you know, the restructuring and the impacts. Did you sort of, you know, mean to imply or direct that that's what Q1 could look like or were you just sorta setting a bar so we'd know what the impact of the restructuring actually was?

Scott Keeney (Chairman and CEO)

Thanks, Greg. Scott here. I'll start, and then I'll hand it over to Joe for the second part of your question. You know, we have limited visibility beyond Q4. Certainly there's some particular areas where we have specific items of push-outs. We don't think they reflect fundamental demand issues for us, but there are particular issues in all of our sectors. In addition to that, we do think based upon our read of, not only our customers, but as we talk to our customer's customers, you know, people are cautious and pulling back and certainly, you know, changes in the global environment are being discussed. That gives us pause for our outlook from a more macro standpoint. No, otherwise I think if there are particular issues with respect to specific customers, specific contracts where there are some push-outs. With respect to Q1, I'll let Joe cover that.

Joseph Corso (CFO)

Yeah, Greg, thanks for the question. We were really trying to allude to the fact that the operational changes that we will make in the business, most of those will happen in Q4. I wasn't trying to imply that we are guiding to a $55 or $60 million quarter in Q1. I think what we wanted to get across was that after we get through the changes that we'll make here, assuming the current mix of business, if we're able to achieve $55-$60 million of revenue, we should be able to have EBITDA of breakeven or hopefully better than that.

Greg Palm (Analyst)

Okay. Fair enough. One segment that maybe strikes me as a little surprising given the commentary is aerospace and defense. You know, because, you know, that seems to be a space that you're seeing good spending overall and, you know, directed or advanced development revenues, you know, down. Even outside of that, you know, on a year-over-year basis, we're down as well. Maybe if you can just spend a minute and just sort of parse through what you're seeing in that area as well.

Scott Keeney (Chairman and CEO)

Yeah, absolutely. Greg, it's a good question. First, let me respond by saying, yeah, the decline in A&D reflects, again, to build on what I said previously, particular issues, primarily two. One is really delays in supply chain issues. While the programs that we're referring to here, the end demand is strong, and indeed the outlook is even stronger, there have been delays with, you know, the specific components that we source in these complex systems, and that's led to part of the delay. And then second, in the development programs, there have been some delays there, both in terms of, you know, the current programs and in new programs that we're working on.

Again, that doesn't reflect, you know, any fundamental change in what we're doing or our position. Indeed, you know, the progress we've reported out on HELSI and other matters remain positive. I think, as you said, I think the broader context here is one in which, you know, deepening global discord is leading to interest in lasers for a number of applications. I think we're very well positioned for that, those opportunities. So again, it's particular issues that are driving the near term revenue.

Greg Palm (Analyst)

Are you able to quantify what that sort of supply chain impact has been? I guess, do you have any visibility on when that might free up?

Scott Keeney (Chairman and CEO)

Let's see. I'll let Joe try to make sure we're clear about quantifying. In terms of freeing up, there are a set of issues. The root cause issues have been largely resolved. It still takes time for those to work their way through over the coming quarters for you know one or two of the key programs I'm referring to. Yeah, I don't see fundamental issues there. We've been able to address the root cause issues. We don't see those issues of gaps in supply chain, those particular ones we faced persisting.

Joseph Corso (CFO)

Yeah, Greg, in terms of quantification, if you look at Q3, we were down, you know, $3-$4 million in revenue from one of a couple of those kinda core A&D programs because of supply chain. I think that, you know, gives you hopefully a sense for the quantification of that.

Greg Palm (Analyst)

Yeah. Okay. That's helpful. All right. I will hop back in the queue. Thanks and good luck.

Scott Keeney (Chairman and CEO)

Thanks, Greg.

Joseph Corso (CFO)

Thanks.

Operator (participant)

The next question comes from Mark Miller of The Benchmark Company. Please go ahead.

Mark Miller (Analyst)

You mentioned you had some share gains. I was just wondering in what areas?

Scott Keeney (Chairman and CEO)

We've seen share gains in really all of our end markets. In microfabrication, we continue to make progress in new areas. In aerospace and defense, we continue to win new design slots. In industrial, we're continuing to you know get new design wins across our applications there. Across the board, we've released new products and seen you know continued expansion of our customer base.

Mark Miller (Analyst)

Spread across the power spectrum, high power, low power? Or it's more concentrated in one power area?

Scott Keeney (Chairman and CEO)

Really across the board, Mark. You know, we've just released a 20-kilowatt Corona laser as an example of, you know, higher power work that we're doing. Similarly, you know, lower power for welding additive manufacturing. You know, there it's more about the sophistication of the beam, the Corona products. You know, similarly in aerospace and defense, we are making great progress there too.

Mark Miller (Analyst)

Thank you.

Scott Keeney (Chairman and CEO)

Sure.

Operator (participant)

The next question comes from Hans Chung of D.A. Davidson. Please go ahead.

Hans Chung (Analyst)

Thank you for taking my question. First, I was wondering what's your drivers in microfabrication outside China? How big is China typically in this segment?

Scott Keeney (Chairman and CEO)

Let's see, Hans. If you can repeat the last part of that question again, I didn't quite hear it.

Hans Chung (Analyst)

First part is just what's the key driver for the microfabrication outside China in the quarter, and then follow up on that is how big is China versus non-China in this segment?

Scott Keeney (Chairman and CEO)

Good. First, part of your question, outside of China, you know, we continue to get design wins in broad set of different markets in the broader electronics segment, but also continue to make good progress in medical applications. We continue to see, as we've mentioned, you know, strong outlook there. With respect to China, I'll let Joe cover that.

Joseph Corso (CFO)

Yeah. Thanks, Hans. In non-China was the bulk of the microfabrication revenue this quarter. We've seen our China micro fab business right in the $2 million-$3 million of revenue range over the last few quarters. At the same time, we've actually seen the outside of China micro fab grow into sort of the mid-teens, to give you a sense of the breakdown between China versus non-China.

Hans Chung (Analyst)

Got it. That's helpful. In terms of gross margin, it seems like in Q4, the gross margins in the development revenue is gonna be 4%. I think it has been, like, steady around 6%-7%, right? I was wondering, is that just one-time event or is it a new base? What's the reason for that?

Joseph Corso (CFO)

Yeah, great question, Hans. No, this is primarily a one-time event as there are certain programs that we are closing out and sort of truing up to actuals. The margin is gonna be we think about 4% this year. Every program carries a little bit of a different margin, but when we look at the balance of the programs, they're about 6.5%. I think outside of, you know, towards the end of life of a program, I expect that we would still be in that, you know, kind of 6%-7% range going forward. Nothing structural has really changed about the way that we're prosecuting that development business.

Hans Chung (Analyst)

Got it. As we look into 2023 and I mean the whole end demand environment being soft, I'm just wondering, like, what's the kind of highlights or bright spots would you expect for next year?

Scott Keeney (Chairman and CEO)

Yes. I think as we look out in time, you know, we share your point of view that I think, there are some challenging times ahead, that are a result of, you know, continuing friction in economic ties around the world and other discord around the world. As we noted, both of those factors also represent opportunities for us. First, in the industrial markets, we continue to see expansion of more advanced technology in manufacturing areas like additive manufacturing. We see very strong progress there, and we're launching new products this month at the big trade show Formnext in Frankfurt.

Second, we do see the defense sector as a strong area where we're very well positioned, and we see, you know, continued opportunities to expand, you know, over the medium term there.

Hans Chung (Analyst)

Great. Got it. Lastly, just want to touch base on the lidar application. I think you mentioned this last quarter or before. Just curious what's your plans here. What kind of product are you going to provide? What's your competitive advantage?

Scott Keeney (Chairman and CEO)

For us, where we participate in the lidar market is at the higher performance side of that market. There are programs in aerospace and defense, and there are some other programs that are earlier stage in other more advanced markets. We do see opportunities there. They're not near-term opportunities, but we will look forward to providing more detail as those opportunities develop.

Joseph Corso (CFO)

Got it. Great. Thank you.

Operator (participant)

Once again, if you would like to ask a question, please press star then one. Our next question will come from Ruben Roy of Stifel. Please go ahead.

Ruben Roy (Analyst)

Yeah. Hi, thank you for taking my question. Joe, I wanted to follow up on the gross margin quickly. You cited a number of factors, you know, for the margin dynamics, including mix and, you know, some of the costs, you know, related with the business. Just wondering, you know, as the mix has shifted out of China, you know, I would think the margins would be, you know, a little bit better outside of China. Maybe you could just help us with, you know, kind of some of the dynamics around that. Then, you know, as you look into 2023, you know, maybe you could give us some puts and takes on how you're thinking about those different factors and, you know, how we should think about margins over the next several quarters.

That'd be helpful. Thank you.

Joseph Corso (CFO)

Yeah. Sure, Ruben. Thanks. When you think about margin as we are going from Q3 and even to where we're guiding in Q4, right? We've got revenue that's down by, you know, call it $4 million at the midpoint. There are obviously a lot of puts and takes. You know, some of it is mix, right? As we look at the you know, the diodes business we're selling in both China and non-China. You know, we expect to get slightly better absorption as we go into Q4 because of you know, mostly lower expected spending. Frankly, the revenue shift has been faster than the manufacturing shift. As we are ramping our business here in. Excuse me.

When we're ramping our automated capacity here in the U.S., that's not big enough yet to satisfy our demand for both our micro fab and our fiber laser customers. We're still in a position where we've got effectively redundant capacity when you look at China and the U.S. That continues to be a headwind. Looking forward, I think there are a couple of things that will drive the gross margins to that 40% plus range that we've said are our long-term target. Right? The first is revenue. I think you can, you know, pretty clearly see even over the last, you know, couple of quarters as the leverage that we have in the model, right?

It's easier to scale, you know, from a people perspective, but we've got some pretty significant, you know, fixed costs that enable us to grow revenue far in excess of where we are today. That's one piece. The second piece is, right, it's that redundant capacity, right? We've got to do a better job of optimizing our capacity. Then third, as the mix of business changes, as we continue to push further into the directed energy market, and we've got a little bit better recovery on the non-directed energy A&D side of the business, right? That's what will help drive our margins higher, you know, hopefully in 2023, right? I just wanna be, you know, cautious because of the, you know, the demand that we're seeing here over the next couple of quarters isn't robust.

I don't think that changes where we think we're gonna be long term from a gross margin perspective.

Ruben Roy (Analyst)

That's great. Thanks for that detail, Joe. Very helpful. Just as a follow-up, I guess, Scott, you know, as you take a step back, you know, over the last quarter or two, and you look at the macro, and then, you know, sort of on the other side, you see, you know, a lot of interesting things going on, the U.S. fiber budget, you know, and some of the programs and, you know, even, you know, seeing a lot of interest from, your customers here for these various markets that you talked about, medical, micro fab, industrial. I'm just wondering if you have any updates on the way you're thinking about the longer term TAM. You know, kind of on the one side, we've got the, you know, near term macro dynamics.

You know, from a longer term perspective, has anything improved or declined in the way you're thinking about the overall TAM for your fiber lasers?

Scott Keeney (Chairman and CEO)

Yeah, I think that's. I appreciate that question very much. I just building on what I said previously, I think the near term is, there's a challenging environment out there. There's no question about that. For even the medium term, I think that those same trends that we're seeing that affect the near term create even stronger opportunities for us. I think in the advanced technology and industrial, you know, we're making progress across the board. But as we noted, particularly excited about the upcoming trade show in a couple of weeks in Frankfurt in additive manufacturing.

I think that's a space that, you know, we have been in for some time, but it's quite rewarding to see the progress in adoption of lasers and the cost-effective, you know, production few parts from the use of our lasers. I think that's one theme that I think is even, you know, stronger than what we've seen in the past. Then, similarly on the defense side, while there's, as I noted, near term choppiness due to the particular factors, the longer term remains, you know, very important. In fact, the U.S. defense strategy, which was published yesterday or this week and, you know, again reinforced directed energy lasers is one of the top priorities.

With the progress that I noted on, you know, our HELSI program, yeah, we're seeing continued, you know, strong interest in adopting really new technology in a set of new applications in directed energy. I think those are two of the themes that are, you know, even stronger than, you know, what we would have seen a year ago.

Ruben Roy (Analyst)

Appreciate the detail, Scott.

Operator (participant)

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

Joseph Corso (CFO)

Thank you everyone for joining this afternoon and your continued interest in nLIGHT. We look forward to speaking with you during the quarter. Have a great evening. Thanks.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.