NLIGHT, INC. (LASR)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue of $51.7M beat S&P Global consensus by ~$4.4M and topped the high-end of guidance; gross margin expanded to 26.7% (vs 16.8% YoY) on record Aerospace & Defense (A&D) product shipments and a ~$1.9M duty reclaim benefit .
• Non-GAAP EPS of -$0.04 was well above consensus (-$0.19*) and improved from -$0.17 YoY; Adjusted EBITDA turned positive at ~$0.1M vs -$4.9M YoY, reflecting mix and volume leverage in A&D products .
• Management guided Q2 2025 revenue to $53–$59M (midpoint $56M) with Products ~$$38M and Advanced Development ~$18M; gross margin 19–25%; Adjusted EBITDA -$4M to +$1M, citing continued A&D ramp and tariff-related uncertainty on margins .
• Narrative catalyst: accelerating directed energy programs (HELSI‑2 1MW laser) and laser sensing pipeline underpin “at least 25%” A&D revenue growth in 2025; short-term tariff dynamics and commercial demand weakness are the key watch items .

What Went Well and What Went Wrong

• What Went Well

  • Record A&D revenue drove outperformance; A&D comprised “more than 63%” of sales, with defense product revenue up >150% YoY on HELSI‑2 component shipments .
  • Gross margin expanded to 26.7% (vs 16.8% YoY) and Products GM reached 33.5%, aided by higher volumes, favorable mix, and ~$1.9M duty reclaim; Adjusted EBITDA turned positive .
  • Management expressed increased confidence in delivering “at least 25%” A&D revenue growth in 2025, citing traction in U.S. and international directed energy and sensing programs .

• What Went Wrong

  • Commercial markets (industrial + microfabrication) remained weak; commercial revenue was $19M, down 16.8% YoY even though sequentially improved as Thai manufacturing stabilized .
  • Tariffs pose margin variability risk (especially via input costs tied to China and indirect demand effects); margin range widened and pressure could rise in H2 if the tariff structure persists .
  • The company drew $20M on its $40M credit line to bolster working capital and buffer uncertainty, highlighting capital needs to support A&D ramp despite $100M+ cash/investments .

Financial Results

Segment and mix detail

• Product vs Development revenue and margins

• Market exposure (A&D vs Commercial)

Balance sheet and cash flow highlights (selected)

• Cash & cash equivalents: $82.2M; marketable securities: $34.5M; total current assets: $215.8M .
• Inventory: $43.8M (to support directed energy ramp) .
• Line of credit: $20.0M drawn in Q1 2025 .
• Operating cash flow: $(0.02)M; duty reclaim benefited margins but normalized GM ≈23% excluding ~$1.9M reclaim .

Guidance Changes

Reference: Q1 2025 guidance (issued at Q4 2024) was $45–$51M revenue with GM 13–17%; actual Q1 beat both revenue and margin ranges .

Earnings Call Themes & Trends

Management Commentary

• “Our first quarter results represent a strong start to 2025, with revenue, gross margin and adjusted EBITDA all above the high end of our guidance range. The outperformance was primarily driven by another quarter of record defense revenue… defense product sales grew more than 150% year-over-year.” — Scott Keeney, CEO .
• “We continue to make progress on our HELSI‑2 program… a $171 million DoD program to develop a 1‑megawatt high‑energy laser… shipment of critical components… a significant driver of our record defense product revenue.” — Scott Keeney .
• “First quarter gross margin included approximately a $1.9 million benefit related to duty reclaim. Excluding… total gross margin… approximately 23%… above the high end of our guidance range.” — Joe Corso, CFO .
• “We expect A&D revenue… to grow sequentially in the second quarter… we feel increasingly confident that full year revenue from our A&D market should grow at least 25% year‑over‑year.” — Joe Corso .

Q&A Highlights

• Visibility and drivers: HELSI‑2 and a growing funnel underpin defense product visibility post‑Q2; defense product revenue up 150% YoY in Q1 .
• Tariffs: Greatest direct impact on industrial fiber laser inputs sourced from China; near‑term limited impact (Q2), potential 100–200bps margin pressure in H2; indirect demand risks acknowledged .
• Liquidity: $20M credit line draw supports working capital for A&D ramp; internal comfort with ~$100M+ capitalization level; no government customer requirement for higher cash .
• Microfabrication/commercial: Full‑year commercial outlook broadly unchanged (down ~15–20%); Q1 saw catch‑up shipments as Thai operations stabilized .
• Margin normalization: Duty reclaim contributed ~500bps to Q1 GM; continued margin expansion expected at Q2 midpoint with Products GM ~30% .

Estimates Context

• Revenue: Q1 2025 actual $51.7M vs consensus $47.3M* — clear beat (helped by A&D mix and duty reclaim) .
• EPS: Q1 2025 non‑GAAP EPS -$0.04 vs Primary EPS consensus -$0.19* — strong beat; GAAP EPS -$0.16 .
• EBITDA: Q1 2025 Adjusted EBITDA ~$0.1M vs consensus -$5.1M* — beat on mix/volume .
  Values retrieved from S&P Global.*

Key Takeaways for Investors

• A&D is the growth engine: HELSI‑2 shipments and sensing pipeline support ≥25% A&D growth in 2025; watch sequential ramp through Q2/Q3 .
• Mix and scale are improving margins: Product GM at 33.5% and normalized total GM ≈23% suggest trajectory toward breakeven Adjusted EBITDA at $55–$60M quarterly revenue .
• Tariff risk is manageable but non‑trivial: near‑term impact modest; potential H2 margin pressure and indirect demand effects warrant monitoring, particularly in industrial fiber lasers .
• Liquidity posture supports ramp: $117M cash/investments and $20M LOC draw to fund working capital provide flexibility amid uncertainty .
• Commercial markets remain a drag: microfabrication ops stabilized, but demand stays weak; full‑year commercial down ~15–20% likely persists .
• Near‑term trading setup: Strong Q1 beat and confident Q2 guide should be supportive; sensitivity to tariff headlines and defense program timing could drive volatility .
• Medium‑term thesis: Unique vertical integration across the directed energy stack positions LASR to capture US and allied defense spend; margin normalization as volumes rise is the key to re‑rating .

Additional Data and Context

Other Q1‑period press releases: nLIGHT announced the timing of Q1 2025 results on April 14, 2025, and appointed Mark Hartman to the Board on June 13, 2025 (governance, non‑operational) .
Prior-quarter context: Q4 2024 margin compression reflected ~$6.0M industrial inventory reserves; Q1’s recovery highlights improved mix and operational execution in A&D despite ongoing commercial softness .