Q3 2020 nLIGHT Inc Earnings Call
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Are available on the Investor Relations section of our website at investors Dot N dot net.
In addition, you can access an archived version of today's call from our website and.
In today's call our discussion will contain forward looking statements, including statements about the potential impact of the ongoing COVID-19, pandemic financial projections future business growth trends in related factors.
<unk> for expanding and penetrating addressable markets in our strategic focus on objectives.
Sort of a performance in the third quarter with a strong execution of our strategy, which is focused on two core areas increasing sales from key industrial customers outside of China and continued focus on the A&D and market.
At the same time, we see sustained demand and micro fabrication and the high power segment of the Chinese fiber laser market.
Turning to slide four.
In the third quarter, we generated $62 million in revenue, which is a record for a company.
80% compared to Q3, 2019 and represented 58% of our total industrial fiber laser sales.
We are particularly proud of this achievement as the technical challenges increase as power scales.
These are the can switch between a true single mode beam and other larger being profiles without the use of free space optics.
Changing size and beam shapes from inside laser is the most economical repeatable and reliable way to maximize productivity a powder bed machine tools.
And lets FX laser can replace multiple lasers optics and a scanner.
2019.
Product was smaller Jean was 72.2% in the seventh quarter compelled to 29, 6% in the sales quarter of 2019 and developing gross margin was 6.5%.
I will third quarter product gross margin reflect the strong implementation and execution or followed coast strategy to focus on strategic customer outside of China.
The investment in our A&D business and continuing the increased sales of hi, Pablo fiber laser in China.
Quarter over quarter hour Q3 product gross margin improved by 450 basis points.
2019.
On a non-GAAP basis outlook non-GAAP EPS for the sales quota was 12 cents compelled with one <unk> doing Q3 2019.
Income tax expenses for the service quoted was a benefit of 1.5 million compared with an expense of 877000 in the queue suite 2019.
Moving to slide 15, and the outlook for Q4.
Three 9%.
Which includes approximately 600000 of stock based compensation.
In addition, stronger sales and a more favorable mix of business has enabled us to improve our margins and overall profitability.
Our she graduated with an engineering degree as part of the second class that included women at West point.
Camilo also received a master's degree in systems management from the University of Southern California, and a Phd in engineering management from the George Washington University.
Mill was also a member of the 1984 US Olympic team and currently serves as an independent director for USA team handle.
Camille offers and light and important and unique perspective, as we continue to grow our India business and I'm thrilled to welcome Camille to the Enlite Board.
With that I will turn the call back over to the operator for questions.
Thank you.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
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To withdraw your question. Please press Star then too.
Existing customers that are taken chair versus maybe some new customer opportunities for your for your own products.
And your your focus solely an industrial now J does that where you're getting a an industrial and you could throw a micro fab in there, but yeah outside of Andy.
Okay. Good let me split it so I I think it Microfarad right. You know we have seen growth Ah there and we certainly expect to see continued growth in the future with new applications. So our customers that are winning in new applications in that space. We've noted five G theres medical applications.
Really a really broad range of end applications there.
With respect to industrial we continue to make very good progress with our product development and launches.
So we continue to make progress with our industrial Ah high-power fiber lasers going into first the cutting market and Programmability continues to be an important dimension, there, which is leading to design wins.
And particularly focused on on sales and the rest of the world there.
David perspective, a quarter.
Got it and then Scott.
How much of a.
On the margin increase that you saw in Q3 was a function of the.
Abatement in or easing of price pressure in sort of the sub.
I guess sub 10 kilowatt or.
Lasers over in China in the industrial sector, yes.
Yeah that did not not I'm not a big factor in this quarter.
You know and.
Let Ron give more details on the details of the mix and other changes, but yeah that that's lower power segment wasn't a big factor in changes in the margin.
Got here, if I'm, if I might add.
You know we're talking for several quarters about all those throughout a GE as Scott mentioned in the opening remark you know focusing on industrial outside of China cutting will being additive manufacturing.
Focusing on a and D focusing as well as his move more and more to high Pablo in China.
In terms of impairments high power lasers. It this quarter.
If you look at the whole presentation to Highpower worldwide not just in China for industrial laser was 58% which is.
A record high so all of those.
Trends, if you will coming with a higher mileage and obviously the volume help US you know, it's a recovery recalled a volume record revenue for loss that help us to improve the margin. However that mix is significantly important for us to improve the margin and as we mentioned in the previous quarter as long as it will continue to grow.
The company in those areas the model going good we would improve as well.
Got it I'll, one last or maybe too but.
Just [noise].
As we look at the shift in [noise] either.
The auto sector or the mobility sector in general because its not certainly not limited just to to autos in the move from internal combustible to electric.
That sensibly changes the manufacturing facilities for both new comers that don't have anything obviously, you have to build and as well as the incumbent so I was wondering if you might be able to comment on he.
He quote activity that you're seeing whether that died you know maybe to throw into this to the repatriate repatriating men.
Manufacturing onshore here domestically, but also just the.
It is an extension in the E V sector, what you're seeing in terms of level of activity that might not be a hitting the books in terms of backlog at this point in time.
And in additive manufacturing today.
For the very fine features you typically want to use a single mode laser to provide a very small 75 micron spot to do that that sintering of the powder to make those parts.
As you move to go faster you can do a couple of things you can adjust that being you can add more lasers.
But what we have demonstrate is the more effective way to increase the speed.
And either maintain or improve the quality of of that part is to change that being to one that.
Will allow that process to go faster to build that part and throughput is a critical dimension of these.
Of this process so.
So thats I think we've described that at a high level. The video does a better job of going into some of the details, but that's that's kind of the high level on this and we do think it is.
A profound improvement for a number of applications.
So would would this laser for instance, enable a additive.
Manufacture so perhaps not to use as many fiber lasers in the system.
So the functionality of the assets.
Yes, I think the short answer Jim is yes, it depends on all the particulars, but but yes that is a trade space that where we provide a benefit okay.
Okay, and if I could also just on the.
About opening an office in Detroit again, we don't normally associate you guys with with automotive, but but it's also an area. That's not just automotive is a lot of additive.
Manufacturing and the work being done that that Eric can you talk a little bit about the.
The the rationale behind that and what you expect to be able to do with this new applications lab.
Yeah, good it's about being close to really all of our industrial customers and certainly it includes not only automotive, but other industrial customers, so having that proximity to the customers having.
The right talent that comes from these vertical markets and I'll include you know not only sales service.
Includes applications work that we're doing.
And so it's a it's a commitment to the industrial market broadly.
Okay and then last question are there any material revenues associated with OPI.
If you have manufacturing industrial et cetera, et cetera, all of that will require. The addition, an addition on investment in R&D.
I believe you indicated for December there'll be 6.3 million a stock-based compensation is that correct. This is correct, yes [laughter] okay.
And you also have a large other income and.
What was that due to it it sounds it's all it's most of it its exchange rate for me you owe and how it would be.
Thank you very much thank.
Thank you among.
Our next question comes from Tom digitally with D. A Davidson. Please go ahead.
Yeah, good morning, or good afternoon, now I was wondering if you could talk a little bit about just the the pricing and competitive environment and now that we've had a a little bit of an industrial come back in China things basically flattened doubts about pricing point of view over the last couple of quarters and I guess, probably more importantly for you the pricing outside of China.
Yeah. So I I don't think there's anything substantially different Tom than what we had discussed on our last call. You know, we see continued competitive environment and we certainly expect that you know in a lot of the lower power.
Applications prices to continue to come.
Come down over time, we're continuing to reduce our costs at the same time, so nothing dramatically different from what we have talked about previously and certainly as we access the other markets outside of China.
And market, particularly markets, where we have are programmable fiber lasers, we're really talking about a different different set of products different set of advantages and higher differentiation and so certainly.
That was one of the benefits that drove margin improvement.
Okay, Great and then earlier today to six talked about really ramping up their diode or semi laser capacity.
Would that haven't had any kind of material impact on you or your markets.
It's hard to speculate on that.
Not exactly sure if all of the specific applications that are driving their decision to ramp. So it's it's a little hard to speculate.
Okay.
And then finally I guess just with the change your potential change of administration does that change your outlook at all for the defense contract part of your business.
Short answer is no we've seen strong bipartisan support for directed energy and.
With respect to the Washington State delegation and the Oregon delegation, we've had very strong support and it's really.
Certainly both sides of the aisle.
So.
No I believe even though under Obama the directed energy budget doubled.
And it remains a very.
Very high priority for.
Dirty.
Great to hear and thanks for your time today.
Uh-huh.
Our next question is a follow up from Mark Miller with the benchmark company. Please go ahead.
You know women shaded I believe is a 42% organic growth in aerospace, but it was over 100% year over year growth is that correct would you tell me what is the the total your Ruth was we're gonna come in organic.
Yeah the.
And it.
It is.
123% overall, 43% organic.
Okay. Thank you.
[noise]. This concludes our question and answer session I would like to turn the conference back over to Joseph Corso for any closing remarks.
Thank you everyone for joining this afternoon and for your continued interest and enlighten we will be participating in several virtual investor confidence is this quarter and we look forward to speaking with you soon have a great day. Thanks.
The conference's now concluded. Thank you for attending today's presentation you may now disconnect.
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