Q3 2024 nLIGHT Inc Earnings Call
Speaker Change: Good day and welcome to the InLight, Inc. 3rd Quarter 2024 Earnings Call.
Speaker Change: At this time, all participants are in a listen-only mode. Following the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2.
Please note, today's call will be recorded.
Speaker Change: Lastly, if you should require operator assistance during today's call, please press star zero.
Speaker Change: I will now turn the call over to John Marchetti. Please go ahead sir.
Thank you and good afternoon everyone.
Speaker Change: I'm John Marchetti, Enlight's VP of Corporate Development and the Head of Investor Relations. With me on the call today are Scott Keeney, Enlight's Chairman and CEO, and Joe Corso, Enlight's CFO.
Speaker Change: Today's discussion will contain forward-looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings.
Speaker Change: 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.
Speaker Change: During the call, we will be discussing certain non-GAAP financial measures. We have provided reconciliations to 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 sections of our website.
Speaker Change: I will now turn the call over to MLites Chairman and CEO Scott Keene. Scott.
Scott Keene: Thank you, John. Third quarter revenue of $56.1 million was above the midpoint of our guidance range and grew 11% both sequentially and year over year. Our aerospace and defense business grew 59% year over year, driven by record A&D product revenue.
Scott Keene: Our commercial business, which includes our industrial and microfabrication end markets, increased 12% sequentially.
Products gross margin of 28.8% and
Scott Keene: Our balance sheet remained strong and we ended the third quarter with cash and investments of 107 million dollars and no debt.
Scott Keene: Let me start with a review of our aerospace and defense business, which delivered another strong quarter of results and remains a key growth driver for our overall business.
Scott Keene: In Directed Energy, interest in our components and full solutions continues to grow.
Scott Keene: Ongoing military operations in the Middle East and Ukraine highlight the increasing need for advanced cost-effective defensive weapon technology.
Scott Keene: To update you on our programs we have discussed in the past, we continue to make good progress in our Healthy2 program, which is a multi-year DOD funded 171 million dollar program to develop a one megawatt laser with a completion date still expected sometime in 2026.
Scott Keene: Another critical program for ENLIGHT is the Army's DEM Shorehead effort, which is to develop a 50 kilowatt high-energy laser for short-range air defense.
Scott Keene: On this program, NLAI is responsible for delivering a 50 kilowatt high-energy laser to a prime contractor, and during the third quarter, we finalized the design and began delivering some of the most critical hardware components of this beam combined laser.
Scott Keene: The successful delivery of these components once again highlights the importance of our vertical integration strategy in the directed energy market, where these enabling components have been specifically designed to optimize the performance of the high-energy laser.
Scott Keene: And it's not just the U.S. military which sees the potential benefits of directed energy systems.
Scott Keene: Just last week, Israel's Ministry of Defense announced that it would spend over $500 million towards Iron Beam, an Israeli ground-based laser system for defense against aerial threats including rockets, mortars, drones, and missiles.
with the target delivery date during 2025.
Scott Keene: Israel's announcement is another example of how directed energy is increasingly being viewed as a critical part of a layered defense strategy.
Scott Keene: Directed energy lasers offer a significant operating cost advantage compared to traditional kinetic weapons and a deep magazine.
Speaker Change: ENLiTE continues to leverage its vertical integration from semiconductor chips through beam combined lasers to address customers in the U.S. and overseas.
Speaker Change: We have generated revenue at nearly every level of vertical integration in the directed energy market, which makes us an ideal supplier to the U.S. government, other prime contractors, and foreign allies.
Speaker Change: Our laser sensing business was also a strong contributor to a record revenue quarter in A&E.
Speaker Change: As a reminder, laser sensing products use lasers to detect and measure objects and are used in a wide range of land, sea, air, and space applications.
Speaker Change: Our laser sensing products include missile guidance, proximity detection, range finding, and countermeasures.
Speaker Change: and have been incorporated into several significant and long-running defense programs.
Speaker Change: Last quarter we announced a new 25 million dollar contract for an existing long-running missile program and we began shipping against this award in the third quarter. We've also continued to make excellent progress on a handful of classified programs.
Speaker Change: In one of these programs, we shipped our first EMD, or Engineering and Manufacturing Development Unit.
Speaker Change: The MD phase is focused on building, testing, and qualifying the solution to ensure it meets all operational requirements.
Speaker Change: Our customer's forecast suggests that the low-rate initial production should start for this program in the latter half of 2025.
Speaker Change: Before turning to a review of our commercial markets, I'd like to provide an update on our manufacturing activities in China.
Speaker Change: Several years ago, we embarked upon a process to reduce our overall reliance on our Shanghai manufacturing facility.
Speaker Change: While we continue to maintain a presence in China, by the beginning of the fourth quarter, we formally ceased all manufacturing operations in Shanghai.
Speaker Change: Manufacturing that has been performed in this region is now being performed at a contract manufacturer in Thailand or at our automated facility in the US.
Speaker Change: While it will still take a few quarters to ramp back to normalized production levels, we are pleased with the transition to date and we believe this represents the last significant operational transition from China.
Speaker Change: Let me now spend a few minutes on our commercial markets.
Speaker Change: In microfabrication, we provide high-brightness, high-power semiconductor lasers to many of the world's leading diode posts to solve the same laser vendors.
which are used across a wide range of applications.
Third quarter microfabrication revenue grew 40% sequentially to $14 million.
Speaker Change: While we are pleased with our revenue in the quarter, we expect volatility in this business to continue as overall demand remains choppy.
Speaker Change: In industrial growth, challenges remain. In cutting, which remains the largest portion of our industrial business, overall demand remains weak and we expect this to remain the case through the end of the calendar year and into 2025.
Speaker Change: Our cutting revenue is now driven almost exclusively by our proprietary, high-power, programmable lasers. And while Chinese laser suppliers continue to gain market share in standard lasers, we continue to innovate to meet our customers' most demanding needs.
Speaker Change: For example, in the third quarter we introduced our new Infinity product, which is optimized for complex, precision, thick metal cutting applications.
Speaker Change: Demand for welding solutions remains muted as much of the advanced battery and fuel cell manufacturing capacity that is expected to be installed over the coming years continues to be delayed on softer overall EV demand.
Speaker Change: We are receiving positive feedback from existing and potential customers on the new welding products released last quarter, namely APT, Weldform, and Process Guard.
Speaker Change: We believe that one of the most critical challenges facing the additive manufacturing industry is to reduce the overall build time and overall cost per part.
to address this industry-wide pain point.
Speaker Change: InLite continues to introduce new products that increase the printing speed and flexibility of additive manufacturing tools.
Speaker Change: Our AFX Dynamic Beam Shaping technology allows for high-resolution printing for fine detail features, while also offering faster build rates, utilizing stable ring-mode power, making it the most versatile and efficient laser available for the additive manufacturing market.
Higher-power lasers drive more productivity in laser powder bed fusion.
Speaker Change: However, the lasers available for additive manufacturing today do not allow for powers higher than 1 kilowatt without introducing untenable amounts of instability in the melt pool.
Speaker Change: Our Corona AFX family of lasers distribute the energy into a ring shape, making it possible to move to higher power processes with the stability required to produce high-quality parts.
Speaker Change: Earlier this week we announced the launch of our new Corona FX 2000.
Speaker Change: a specialized two kilowatt laser proven to boost productivity in laser powder bed fusion for metal additive manufacturing.
Speaker Change: The AFX-2000 has undergone successful commercial validation with a leading customer servicing the aerospace and defense and automotive markets.
Speaker Change: Using aluminum alloys, this customer is now achieving print speeds up to three times faster when compared to today's medium-large format printers.
Speaker Change: In summary, in the industrial market, we remain enthusiastic about our long-term opportunities in metal 3D printing. However, we continue to experience significant headwinds in our commercial markets, which we expect to persist well into 2025.
Speaker Change: In aerospace and defense, we expect the excellent progress we made in the third quarter to continue, and it positions us well for both near and long-term growth in this strategic market.
Speaker Change: With that, I'll turn the call over to Joe to discuss third quarter financial results.
Thank you, Scott. Turning to the third quarter results.
Joe Corso: Total revenue in the third quarter was $56.1 million, an increase of 11% compared to the $50.6 million for the third quarter of 2023, and above the midpoint of guidance.
Joe Corso: Products revenue was 41.1 million dollars, an increase of 8% compared to the 38.1 million dollars for the third quarter of 2023.
Joe Corso: Development revenue is $15 million, an increase of 20% compared to the $12.5 million in the third quarter of 2033.
Joe Corso: Aerospace and defense revenue for the third quarter was a record thirty point three million dollars. Fifty-four percent of total revenue and an increase of fifty-nine percent compared to the third quarter of 2023.
Joe Corso: A&E product revenue in the third quarter was also a record high at $15.3 million, growing 135% year-over-year and 35% sequentially.
Joe Corso: Our strong performance in A&E was driven by an initial ramp of product sales into a key directed energy program and the continued execution of a long running laser sensing program.
Joe Corso: Microfabrication revenue for the third quarter was $14.3 million, 25% of total revenue and an increase of 19% compared to the same quarter a year ago.
Joe Corso: Although Q3 was a more typical quarter for us, most of our revenue in microfabrication is very short lead times and visibility beyond a quarter remains limited.
Joe Corso: Industrial revenue for the third quarter was $11.6 million, 21% of total revenue and a decrease of 41% compared to the third quarter of 2023. While we continue to serve several key strategic customers with our differentiated programmable lasers,
Joe Corso: Overall market demand in each of our three segments is muted.
Joe Corso: Moreover, in the cutting market, continued competition from domestic Chinese laser manufacturers has had and is expected to continue to have a significant impact on our sales of standard fiber lasers.
Joe Corso: Turning to gross margin. Total gross margin in the third quarter was 22% within our guidance range and up two percentage points compared to 20% in the same period a year ago.
Joe Corso: Products gross margin for the third quarter increased to 29% compared to 24% in the third quarter of 2023. The increase in products gross margin was driven by a favorable sales mix, pricing, and an overall increase in product volumes, which resulted in better absorption of fixed costs.
Joe Corso: These improvements were partially offset by an inventory write-off of approximately $900,000 or 200 basis points for a specific customer in our industrial market.
Joe Corso: Development gross margin in the third to 7% in the same period a year ago.
Joe Corso: The lower development gross margin was driven by an increase in the estimated cost of completion on a significant fixed price contract in the third quarter of 2024.
Joe Corso: Despite the lower-than-expected development gross margin in the quarter, we continue to expect our development margin to remain in the high single-digit range over the intermediate terms.
turning to OpEx.
Joe Corso: Non-GAAP operating expenses were $18.3 million, an increase of $2.3 million compared to the third quarter of 2023.
Joe Corso: The increase in operating expenses were driven by an increase in employee costs and project-related spending in research and development, as well as a bad debt charge in the quarter of approximately $1 million related to a specific customer in our industrial market.
Joe Corso: On a gap basis, operating expenses were $24.3 million, an increase of $1.9 million compared to the third quarter of 2023.
Joe Corso: Net loss on a non-gap basis was 3.7 million dollars or 8 cents per share compared with a net loss of 4.9 million dollars or 10 cents per share for the third quarter of 2023.
Joe Corso: Net loss on a gap basis was $10.3 million or 21 cents per share.
Joe Corso: compared to a net loss of $11.9 million or 26 cents per share for the third quarter of 2023.
Joe Corso: Adjusted EBITDA was a negative 1 million dollars compared to a negative 1.9 million dollars for the third quarter of 2023.
Joe Corso: Adjusted EBITDA for the third quarter of 2024 includes the bad debt charge and inventory write-off related to a specific customer as previously discussed.
Turning now to the balance sheet.
Joe Corso: We ended the third quarter with total cash, cash equivalents, restricted cash and investments of approximately $107 million and no debt.
Joe Corso: We continue to improve our management of working capital during the quarter.
Joe Corso: Average DSO improved to 58 days compared to 65 days at the end of 2023, and inventory at the end of the third quarter was $48.8 million, representing 104 days of inventory compared to 122 days at the end of 2023.
Joe Corso: Cash used in operations was 5.6 million dollars for the third quarter. Year-to-date cash flow provided by operations is a positive 1.5 million dollars.
Joe Corso: CapEx was 1.6 million dollars in the quarter compared to 2.7 million dollars in the third quarter of 2023.
Joe Corso: As noted in prior quarters, maintaining a strong balance sheet remains a key focus of the company.
Joe Corso: Tight spending controls coupled with working capital management and sound CapEx investment has enabled us to maintain a balance sheet that we believe will enable us to achieve our long-term growth objectives.
Turning now to guidance.
Joe Corso: Based on the information available today, we expect revenue for the fourth quarter to be in the range of $49 million to $54 million.
Joe Corso: The midpoint of approximately $51.5 million includes approximately $36.5 million of product revenue and $15 million of development revenue.
Joe Corso: Included in our fourth quarter guidance is our expectation for continued sequential growth in our AMD products.
Joe Corso: It's important to keep in mind that 100% of our fourth quarter A&D revenue is already in backlog, but the timing of the delivery of that backlog can be uncertain, particularly as we are dealing with new and innovative directed energy related products.
Joe Corso: Fourth quarter products gross margin is expected to be in the range of 21% to 25%.
and development gross margin is expected to be approximately 8%.
Joe Corso: resulting in an overall gross margin range of 17% to 21%.
Joe Corso: Finally, we expect adjusted EBITDA for the fourth quarter of 2024 to be in the range of negative 5 to negative 2 million dollars. We continue to estimate break-even adjusted EBITDA with quarterly revenue in the 55 million to 60 million dollar range.
With that, I will turn the call over to
Speaker Change: Thank you. The floor is now open for your questions. If you have a question or comment at this time, please press star 1 on your telephone keypad.
Speaker Change: You may remove yourself at any time by pressing star 2.
Speaker Change: Once again, if you would like to ask a question, please press star 1 at this time.
Speaker Change: Our first question will come from Jim Ricciuti with Needham and Company. Please go ahead.
All right, thank you
Speaker Change: I was wondering if you could talk to us about your line of sight to product revenue in the A&E business looking beyond Q4. Scott, you highlighted
in
Speaker Change: to give us a better understanding as we look out beyond Q4 how some of that product revenue could begin to develop.
Speaker Change: Yeah, absolutely, Jim. Thanks for your question. I think you're getting at a key topic, I think.
Speaker Change: You know, certainly one of the highlights in Q3 was the record revenue that we saw in defense overall, but in particular in the products for defense and the growth there is, you know, a key driver for our business.
Speaker Change: As Joe mentioned, we do have a very strong backlog, and so we've got good visibility into continued growth in the products for defense.
Speaker Change: And they are in, you know, all of our key segments in both directed energy and in sensing. And in terms of, you know, our guidance, as Joe mentioned,
Speaker Change: We certainly have the backlog. The deliveries are related to, you know, important programs where it's new technology, so the timing of that revenue can be an issue, but we have very strong visibility into continued growth there.
Joe Corso: And maybe I'll hand it to Joe. Anything you want to add to that, Joe, with particular topics for Jim? No, I think you captured that well, Scott. Thank you.
Joe Corso: Scott, because it's been in the news so much, are you able to talk to us a little bit about the level of engagement you have with some of the defense crimes in Israel, including those that are working on the Iron Dean project?
Joe Corso: Yeah, I think it's fair to say that our engagement is very deep. I think we've talked about that a bit in the past.
Joe Corso: Beyond that, it gets a little bit more difficult. Certainly there's the news about the $500 million award.
Joe Corso: You will recall, in addition to that, there's a $1.2 billion supplemental bill that was passed.
Joe Corso: So the funding for Iron Beam is very solid and yes, we are deeply engaged with the key players supporting that new technology.
Speaker Change: And I had one final quick question just on the commercial business. You highlighted some improvement in the microfabrication market and I know it's going to be uneven, but I'm just curious where was that coming from?
Speaker Change: Yeah, that was coming from an existing customer, an existing long-term customer was probably the biggest source of that.
But, yeah, as we said in the prepared remarks,
Speaker Change: that is not a signal that we want to overly highlight that was orders in the quarter for that long term customer.
Okay, thank you.
Good.
Speaker Change: Thank you. Our next question will come from Greg Palm with Craig Hallam Capital Group. Please go ahead.
Greg Palm: Yeah, good afternoon. Thanks for taking the questions. You know, starting with the commercial business...
Greg Palm: I think the implied guide suggests a pretty significant, both sequential and year-over-year decline in revenue. I know, Joe, last quarter you sort of directionally guided towards $210 million for the year. So the Q4 guide puts you well below that. So I guess the question is...
Greg Palm: What's happened in such a short amount of time where you're seeing such a shortfall relative to you know, not that guide per se, but that sort of target that you had out there?
the lack of visibility that we have.
Greg Palm: defense. So there was a little bit less than what we had hoped for, but we're pretty happy with our trajectory. And then really, as we've talked about in the past, right, we have one quarter of guidance and lack of visibility beyond that in the commercial business.
Product Portfolio.
Speaker Change: you know, in the near term throughout, you know, into fiscal 25. Does that mean expect it to get worse compared to Q4 levels? Or is your thought just, you know, staying at these sort of low levels that the guide implies for Q4?
Speaker Change: You know, as we've talked about, one of the underlying headwinds here is just massive excess capacity in China across every sector I can see beyond just lasers. That's a bit of a headwind.
Speaker Change: You know, on the opposite side, there were a number of customers in the industrial market that were waiting for the election results, and who knows what that means in terms of, you know, the orders that may flow from that.
But I think, you know, we are certainly not...
Speaker Change: guiding to, you know, that being the growth driver for us. The growth driver is A&D, and I just want to be clear about that.
Greg Palm: Yeah, Greg, let me just let me just add a little bit of color to the to what Scott just said. So
Greg Palm: Our commercial business, as is implied by the Q4 guide, will be down.
Greg Palm: and we really don't expect any significant rebound from those levels.
in 2025. Now, keep in mind.
Greg Palm: we don't have great visibility into a full-year basis is why we don't provide any formal annual guidance. And then we are still seeing good progress in the additive business, but that's not going to be enough to offset our expected decline in some of the other areas of our commercial business.
Thank you very much.
Speaker Change: You know, how impactful or competitive are they here in the U.S. at this point? And I ask in light of potential tariffs that could be put on and whether you think that could impact that business or not.
Speaker Change: Yeah, I guess the way I look at it, Greg, is it's broader than just...
Speaker Change: our visibility into specific customers, say, in the U.S. because our customers are affected by competition in, you know, in capacity that, you know, there's excess capacity that's going into other markets.
Speaker Change: you know, and their customers shifting from, say, the U.S. to Mexico or elsewhere, right?
Speaker Change: So the dynamics are quite complex. I think the underlying theme is one that is ultimately driven by, you know, massive excess capacity in China.
Speaker Change: And certainly on the margin, you know, higher tariffs certainly could help with some of our customers in the U.S., but I think it's more complex than just that.
Speaker Change: OK, fair enough. Last one, you know, aerospace and defense, you know, really nice bright spot again.
Speaker Change: Based on your backlog levels, knowing you've got a lot better visibility in this business but also cognizant of the timing, the guy that assumes at least 20% growth in that segment for the year, on a year-over-year basis,
Is that repeatable in 2025?
Speaker Change: Let me take that one. So Greg, the short answer is our aerospace and defense business as we go into 2025 is either covered by backlog or in our build plan that we fully expect to be building.
What is not as certain is [inaudible]
Speaker Change: that we are building, particularly on the product side, are really pushing, you know, the edge of technology, right? And it's really difficult, you know, to pinpoint exactly what quarter they are going to come in. And then the other piece, even though, you know, we have, I'll just call them the design wins.
Speaker Change: You know, when that's actually going, the customer is going to take it or when exactly we are going to build it. That's what creates the level of uncertainty in being able to give you, you know, a direct answer of whether it's 20% up in 2025.
Speaker Change: That all being said, we do expect growth to continue throughout the 2025 period and beyond. And as we think about how we've outlined the, you know, I'll call them the long-term bets of the company, right, the A&D piece of our business is going quite well.
Speaker Change: Yeah, it seems to be. Okay, I will leave it there, thanks.
Thank you.
Speaker Change: Thank you. Our next question will come from Reuben Roy with Stiefel. Please go ahead.
Speaker Change: Thanks, Scott and Joe. Scott, I was wondering if we can go back to the backlog a little bit and if you could just maybe talk about directionally, you know, kind of how backlog has progressed and especially in light of, you know, sort of
Speaker Change: You know what you said, you know with You know some of the some of the data points coming out now. Are you seeing that show up in backlog yet? I know you started off the year very strong with some backlog growth and just kind of wondering how that's progressed. I guess
Speaker Change: Yeah, I mean, in summary, it's progressing, and I think to specifically answer the question, are we seeing, you know, some of the news we're talking about manifest in our backlog? The short answer there is yes. And so we are seeing expansion in orders, expansion in the design wins.
Speaker Change: for critical programs both in directed energy and in the sensing business.
in both those sectors.
Yeah, and Ruben, the way that we think about
Speaker Change: backlog really is sort of broken down into a couple of different components, right?
We've got, when you think about the contract vehicles...
Speaker Change: a lot of ceiling and we have a lot of opportunity to deliver value against those contracts. That's sort of one piece of it. Then inside those contract vehicles, we do have fully funded firm backlog that we are executing against.
Speaker Change: and RFQ, right, that we believe we've got really good chances of winning and, you know, we've been executing on and it's a follow-on to what we've been doing, so when we measure our business and our progress along those dimensions, things are progressing quite nicely.
Speaker Change: That's very helpful. Yeah, that's what I was getting at. Thank you for that. And just a quick follow-up on the commercial business.
Thank you.
Speaker Change: You know, just thinking through the guidance for Q4 again, and perhaps a step down after, you know, sort of the customer-specific revenue you saw in September. You know, is that kind of the way to think about it? Is that back down to sort of that?
Speaker Change: Let's call it 10 million dollar level or so, you know as a normalized run rate And that's what we're thinking through and I'm asking that because I'm just trying to
Speaker Change: figure out Joe on you know sort of the comments about next year and sort of you know potentially flatlining is you know are we back to that type of normalized level for both industrial and microfiber or
Speaker Change: are you seeing other types of weakness we should think about, and maybe a different sort of baseline run rate for next year?
Speaker Change: pressure in that business, right? And so in light of an uncertain macroeconomic environment, many of our customers, and frankly, our competitors' customers, right, are also suffering. And so, you know, we do see continued pressure on that business in Q4 and, you know, as we move into 2025.
Speaker Change: Okay, yeah, thanks Joe. Yeah, I have one last one on the manufacturing comments.
Speaker Change: You guys had talked about Fabrinet a while back. Is this just part of that, or did something accelerate to now formally cease everything over in Shanghai and move to the U.S. and then Thailand?
That was all part of the plan.
Thanks guys
Thank you. Sure.
Speaker Change: Thank you. Our next question will come from Troy Jensen with Cantor Fitzgerald. Please go ahead.
Hey, gentlemen, congrats on the nice results.
Thanks Ray.
Speaker Change: Hey, so a couple quick questions back on this directed energy. Is there any way Scott you could size the opportunity for us? and I guess what I'm looking for hoping to get out of you guys is
Speaker Change: You know, at the low end, you know, if you just win a couple of components in a directed energy platform to, you know, the high end, you know, you win as much as you can. Can you give us like a range of the dollar content in a system or any help would be great.
Speaker Change: Yeah, I'll try my best. You know, look, the biggest markets for direct energy are obviously the U.S. has been number one, but Israel has grown dramatically and is supported by the U.S.
Speaker Change: And now with Israel coming online with, you know, funding from Israel and supplemental funding from the U.S.
Speaker Change: And then our, you know, ability to participate in that depends on what level.
Speaker Change: So at the lowest level, you know, it's the single-digit percent of that at the component level, and we participate across the board really at that level. We have the leading components that go into directed energy systems.
Speaker Change: But we have a stack of technology that goes all the way up to a very high level of integration.
effectively the full amount of whatever the program is.
Speaker Change: So, there's a range there, and there's quite a broad range, but certainly, you know, it's more than single digit.
Speaker Change: low single-digit percents, and you get into, you know, double-digit percents depending on the adoption of the technology. So as we move forward, Troy, we will be putting out more information to disclose specific programs.
Speaker Change: because the programs are still in the development phase. I think Israel will be the first out with an implemented system, as they've said, in 2025. And so there will be more information as it is available.
Speaker Change: Okay, perfect. Can you let us know what is the maximum power laser you guys currently produce for directed energy?
Speaker Change: Absolutely yeah we're very proud of the fact that we have the highest power laser in the world.
Healthy Program.
Speaker Change: and then we won the contract to scale that to a megawatt power.
and as we noted, we're on track on that program.
Speaker Change: You know, the typical programs are going to be, you know, a fraction of that, but those programs allow us to develop the technology which enhances even the lower power applications.
Speaker Change: Okay last question, was there a 10% customer in the quarter and do you expect to have any next year?
Troy Jensen: U.S. government, right, or prime contractors that are effectively serving the U.S. government have typically been the ones that are in the 10% range, Troy, and we do expect that to continue as we move forward.
Okay, gotcha. All right, guys, keep up the good work.
Thank you.
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star 1 at this time. Our next question will come from Mark Miller with Benchmark. Please go ahead.
Mark Miller: Your low power as a percent of total sales, that's been fairly soft for several quarters. What is driving the weakness of low power?
Speaker Change: Yeah, the low power is largely related to the additive manufacturing lasers, Mark. Most of the, you know, most of the market for additive manufacturing is really at a kilowatt or below. You know, if you go all the way back to, you know, the 2016-2017 timeframe, a lot of those low power lasers were used for cutting. You can see that as that really tailed off to 2019. It's because most of the revenue was cutting-related and it was moving up the power curve for cutting. And then as you saw, the low power, the percentage of the industrial revenue that was low power is a pretty good read-through to the additive manufacturing business.
Thank you.
Speaker Change: I'm just wondering about the margin profile, your backlog, is that better or the same or less than what you've been recently reporting?
Speaker Change: It's a great question, Mark. When we look at the margin profile of the revenue that we've got in backlog or in forecast or we are expecting to generate, it's better than what we've generated in the past.
The challenge for us right now is...
Speaker Change: sold to either the same customers or different customers year over year. The margins are doing well and the new products that we're introducing...
Speaker Change: in whether it's in defense or in the commercial portion of our business tend to be higher margin products. It's just about absorption at this point for us until we start to see that gross margin profit dollar fall through.
Speaker Change: Just a last question from me, is the backlog front-end, back-end loaded, is it going to be linear, how it comes out of backlog in the revenues?
Speaker Change: No, it really depends. It's hard to say. It's certainly not linear, Mark, because if you think about, let's just talk about what the biggest contributors are to backlog.
We announced a $171 million contract for the Healthy2 program.
Speaker Change: the way that we expect them to roll off does give us confidence that the defense business should grow sequentially but just a little bit difficult to you know pin it to the linearity of any particular program if you will.
Thank you.
Thank you.
Speaker Change: Thank you. At this time, I'm showing no further questions in queue. I would now like to turn the call back to Joe Corso for any additional or closing remarks.
Joe Corso: Yeah, thanks everybody for joining us today and we look forward to speaking to you over the coming quarter. Have a great afternoon.
Speaker Change: Thank you. This does conclude the InLight, Inc. 3rd quarter 2024 earnings call. You may disconnect your line at this time and have a wonderful day.
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