nLIGHT (LASR) 27th Annual Needham Growth Conference summary

Q4 performance and operational updates

• Q4 revenue was approximately $4 million below the midpoint of guidance, split evenly between defense and commercial segments.

• Industrial market softness and the transfer of manufacturing from China to Thailand contributed to commercial shortfall.

• Defense segment shortfall was due to slower internal ramp of high-power laser production, with no fundamental demand issues; shipments expected to recover in future quarters.

• Final exit from Shanghai manufacturing completed, with non-recurring costs impacting Q4 margins and Adjusted EBITDA.

• Gross margin and profitability are expected to scale with revenue, with no structural changes anticipated.

Defense business outlook and strategy

• Defense business focuses on directed energy and laser sensing, with leading technology in high-power lasers.

• Key programs include HELSI (High Energy Laser Scaling Initiative) and Army DE M-SHORAD, with international work supporting Israel and other countries.

• Defense margins are meaningfully above corporate average, with higher dollars per watt than industrial segments.

• Development contracts are transitioning to production, expected to drive growth and margin improvement over the next 1-2 years.

• U.S. defense primes are primarily customers, not competitors, for integration of laser technology.

Commercial and industrial market trends

• Significant reduction in China revenue and manufacturing exposure since 2018, now at low single digits.

• Industrial cutting market faces challenges from excess Chinese capacity and global price competition.

• Additive manufacturing is a growth area, less susceptible to low-cost Chinese competition, with strong technology positioning.

• Microfabrication segment impacted by soft market conditions and execution issues in manufacturing transfer.

• Break-even revenue remains at $55–$60 million, dependent on product and development mix.