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NLIGHT, INC. (LASR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $47.4M, down 8.7% YoY and below the Q3 guide midpoint ($51.5M), driven by continued industrial weakness, microfabrication execution issues, and timing of defense deliveries; gross margin collapsed to 2.4% due to ~$6M non-routine inventory charges, producing Adjusted EBITDA of -$11.3M. Bold miss vs company guidance and margin shock.
  • Aerospace & Defense remained the strategic growth driver: FY24 A&D revenue reached ~$110M (~55–60% of sales) with funded backlog up 55% YoY to $167M and total funded+unfunded contract value at ~$399M, supporting at least 25% A&D growth in 2025.
  • Q1 2025 guide: revenue $45–$51M (Products ~$33M; Advanced Development ~$15M), gross margin 13–17% (Products 16–20%; AD ~8%), Adjusted EBITDA -$6M to -$3M; breakeven EBITDA implied at $55–$60M quarterly revenue.
  • Medium-term catalysts: accelerating directed energy programs (HELSI-2 1MW laser; DE M‑SHORAD 50kW), deepening laser sensing pipeline, and U.S. “Iron Dome for America” executive order emphasizing non-kinetic defenses—potential multi-year tailwinds.

What Went Well and What Went Wrong

What Went Well

  • Record backlog and visibility: funded backlog $167M (+55% YoY) and aggregate funded+unfunded contracts ~$399M; management: “we don’t have very much in terms of go get for 2025…feel really good about the way that the year is starting to look.”
  • Directed energy execution: progress on HELSI‑2 ($171M program) with component shipments commencing and accelerating in 2025; DE M‑SHORAD 50kW laser design finalized with major hardware delivered.
  • Strategic positioning in non‑kinetic missile defense: “Iron Dome for America” EO highlights non‑kinetic capabilities; CEO: “we are uniquely positioned to benefit…there’ll be more information in the coming months.”

What Went Wrong

  • Industrial market weakness and inventory actions: Q4 gross margin 2.4% included ~$6M non-routine charges (industrial inventory reserves), driving product GM to 1% and Adjusted EBITDA to -$11.3M.
  • Microfabrication execution challenges and defense timing: contributed to revenue shortfall vs Q3 guide; company preannounced revenue $46–$48M with margins, EBITDA “materially below” prior ranges.
  • Commercial revenue outlook soft: sequential decline expected in Q1 2025; management does not expect commercial to drive growth in 2025, with Chinese competition and macro caution persisting.

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$50.5 $56.1 $47.4
Gross Margin %24% 22.4% 2.4%
GAAP EPS ($)$(0.25) $(0.21) $(0.51)
Non-GAAP EPS ($)$(0.10) $(0.08) $(0.30)
Adjusted EBITDA ($USD Millions)$(1.6) $(1.0) $(11.3)

Segment revenue

MetricQ2 2024Q3 2024Q4 2024
Products Revenue ($USD Millions)$34.5 $41.132 $31.699
Development Revenue ($USD Millions)$16.1 $14.997 $15.682

Segment margins

MetricQ2 2024Q3 2024Q4 2024
Product Gross Margin %30% 29% 1%
Development Gross Margin %9% 5% 6%

KPIs and balance sheet

MetricQ3 2024Q4 2024
Funded Backlog ($USD Millions)N/A$167
Total Funded+Unfunded Contracts ($USD Millions)N/A$399
Cash, Cash Equivalents, Restricted Cash & Investments ($USD Millions)~$107 $100.9
Inventory ($USD Millions)$48.8 $40.8

Notes:

  • Q4 gross margin included ~$6M non-routine industrial inventory reserves; adjusting for these, total GM would have been ~15% (still below guide low end).
  • FY24 A&D revenue cited as ~$110M (~55–60% of sales); transcript references $109.5M, press release references $110M.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / UpdateActual / LatestChange
RevenueQ4 2024$49–$54M Prelim update: $46–$48M; margins/EBITDA “materially below” ranges $47.4M Lowered; came in near low end; miss vs prior midpoint
Overall Gross Margin %Q4 202417%–21% “Materially below” prior range 2.4% Much lower than guided
Adjusted EBITDA ($M)Q4 2024$(5) to $(2) “Materially below” prior range $(11.3) Worse than guided
RevenueQ1 2025N/A$45–$51M (Products ~$33M; AD ~$15M) N/ANew
Gross Margin %Q1 2025N/A13%–17% (Products 16%–20%; AD ~8%) N/ANew
Adjusted EBITDA ($M)Q1 2025N/A$(6) to $(3) N/ANew
EBITDA breakeven thresholdOngoingN/ABreakeven at $55–$60M quarterly revenue N/AFramework reiterated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current (Q4)Trend
Directed Energy (HELSI‑2; DE M‑SHORAD)HELSI‑2 1MW program progressing; DE M‑SHORAD deliveries targeted 1H25 HELSI‑2 component shipments began; DE M‑SHORAD design finalized with major hardware delivered Accelerating execution and shipments
Laser Sensing & Classified ProgramsFirst EMD units shipped; LRIP expected latter half 2025 Continued progress; LRIP timing reaffirmed; new $25M missile guidance award shipping Pipeline broadening; nearer to LRIP
Manufacturing Transition (China→Thailand/US)Formal cease of Shanghai manufacturing; ramp at CM and U.S. facilities Restructuring charge $4.3M; margins expected to lift with volume as CM stabilizes Transition largely complete; absorption key
Industrial Macro & China CompetitionProgrammable lasers adoption vs Chinese standard lasers; muted demand Industrial revenue soft; no sequential growth expected; tariff talk potentially beneficial but uncertain Persistent headwinds
Additive Manufacturing (Corona AFX)EOS collaboration; AFX speeds up to 3x; productivity focus Longer-term growth potential reiterated; AFX dynamic beam shaping highlighted Strategic; not near-term offset
Backlog/Funding; Iron Beam/Iron Dome EOIRON BEAM engagement; backlog improving Funded backlog $167M; total $399M; “Iron Dome for America” EO emphasizes non‑kinetic defense; deep engagement Strengthening visibility and policy tailwinds

Management Commentary

  • CEO on defense scaling: “2024 was a transformative year…defense business began to scale, with revenue growing 20% YoY to $110 million and representing approximately 55% of our overall sales.”
  • CEO on policy tailwinds: “The President signed an executive order to build the Iron Dome for America…non-kinetic missile defense capabilities were specifically highlighted…we believe we are uniquely positioned to benefit.”
  • CFO on Q4 margin dynamics: “Total gross margin…was negatively impacted by nonroutine charges of approximately $6 million…adjusting for these…~15%…still slightly below the bottom end of guidance due to lower-than-expected product sales and production volumes.”

Q&A Highlights

  • 2025 A&D growth trajectory: management confident A&D up “at least 25%” YoY; quarterly linearity hard to predict, but backlog coverage strong.
  • Backlog and funding clarity: funded backlog $167M for 2025–2026; aggregate contracts ~$399M (with $232M unfunded components expected to be funded).
  • Commercial softness: sequential decline expected in Q1; commercial unlikely to drive growth in 2025 amid China competition; tariffs could help but uncertain.
  • Gross margin outlook: improvement expected as CM ramp stabilizes; volume absorption remains the key driver.
  • OpEx: post-restructuring OpEx levels considered appropriate; no meaningful increase planned near term.

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 and forward quarters was unavailable at time of analysis due to data access limitations; therefore estimate comparisons are anchored to company guidance and preannouncement ranges. The company missed its Q3-issued Q4 revenue and margin guidance midpoints and later preannounced a lower revenue range with materially lower margins/EBITDA, which aligned with the reported results.

Key Takeaways for Investors

  • Near-term: Q4 miss and non-routine inventory charges drove margin compression; expect Q1 margins to normalize without unusual costs but remain volume-sensitive—trading setups may focus on evidence of A&D ramp and margin recovery within the 13–17% GM guide.
  • Medium-term thesis: Backlog and directed energy programs (HELSI‑2, DE M‑SHORAD) plus laser sensing underpin multi-year growth; policy tailwinds (Iron Dome EO) strengthen non-kinetic defense demand visibility.
  • Watch absorption and mix: Product GM can recover toward ~20% absent non-routine charges, but sustained improvement depends on volumes; breakeven EBITDA at $55–$60M quarterly revenue is a critical milestone.
  • Commercial segment risk: Industrial/microfabrication remain pressured; tariffs could be a modest tailwind but not in the base case. Position sizing should reflect ongoing commercial volatility.
  • Balance sheet flexibility: ~$101M cash/investments, no debt, and inventory down to $40.8M provide capacity to execute defense backlog and manage working capital through the ramp.
  • Narrative catalysts: Evidence of HELSI‑2/DE M‑SHORAD deliveries, funded backlog conversions, and any additional non-kinetic defense awards; monitor investor conferences and program updates.
  • Risk management: Execution timing on cutting-edge defense products, manufacturing ramp at CM, and commercial demand visibility remain the key execution risks; consider using dips on defense program milestones.