Q2 2026 nLIGHT Inc Earnings Call

August 6, 2026

Speaker #1: Everyone, thank you for joining us, and welcome to NLIGHT's second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session.

Operator: Everyone. Thank you for joining us, and welcome to nLIGHT's Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to John Marchetti. John, please go ahead.

Operator: Everyone. Thank you for joining us, and welcome to nLIGHT's Q2 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to John Marchetti. John, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to John Marchetti.

Speaker #1: John, please go ahead.

Speaker #2: Good afternoon, everyone. Thank you for joining us today to discuss nLIGHT's second quarter 2026 earnings results. I'm John Marchetti, nLIGHT's VP of Corporate Development and the Head of Investor Relations, and with me on the call today are Scott Keeney, nLIGHT's Chairman and CEO, and Joe Corso, nLIGHT's CFO.

John Marchetti: Good afternoon, everyone. Thank you for joining us today to discuss nLIGHT's Q2 2026 earnings results. I'm John Marchetti, nLIGHT's VP of Corporate Development and the Head of Investor Relations, and with me on the call today are Scott Keeney, nLIGHT's Chairman and CEO, and Joseph Corso, nLIGHT's CFO. Today's discussion will contain forward-looking statements, including statements related to our financial projections and plans for our business, our growth opportunities and demand for our products, the impact of export controls and related supply chain challenges on our product manufacturing and delivery, and our mitigation strategies to address such supply chain challenges.

Speaker #2: Today's discussion will contain forward-looking statements, including statements related to our financial projections and plans for our business, our growth opportunities and demand for our products, the impact of export controls and related supply chain challenges on our product manufacturing and delivery, and our mitigation strategies to address such supply chain challenges.

Speaker #2: These forward-looking statements are subject to risks, uncertainties, and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in today's earnings release, as well as other risks and uncertainties described from time to time in our SEC filings, including, without limitation, our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q.

John Marchetti: These forward-looking statements are subject to risks, uncertainties, and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in today's earnings release, as well as other risks and uncertainties described from time to time in our SEC filings, including, without limitation, our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q. We undertake no obligation to update any forward-looking statement except as required by law. During the call, we will also be discussing certain non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings press release and in our earnings presentation, both of which can be found on the investor relations section of our website. I will now turn the call over to nLIGHT's Chairman and CEO, Scott Keeney.

Speaker #2: We undertake no obligation to update any forward-looking statement except as required by law. During the call, we will also be discussing certain non-GAAP financial measures.

Speaker #2: We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings press release and in our earnings presentation, both of which can be found on the Investor Relations section of our website.

Speaker #2: I will now turn the call over to NLIGHT's Chairman and CEO, Scott Keeney.

Speaker #3: Thank you, John. Q2 represented another strong quarter of execution for NLIGHT, with revenue gross margin and adjusted EBITDA at or above our expectations. Our second quarter revenue was a record $83 million and grew 34% year over year, driven by record products revenue of $59 million, which grew 45% year over year.

Scott Keeney: Thank you, John. Q2 represented another strong quarter of execution for nLIGHT, with revenue, gross margin, and adjusted EBITDA at or above our expectations. Our Q2 revenue was a record $83 million and grew 34% year over year, driven by record products revenue of $59 million, which grew 45% year over year. Adjusted EBITDA in the quarter was a solid $11 million, and we generated a record $21 million in cash from operations. During the Q2, we saw increased demand for our solutions across both defense and advanced manufacturing markets. Our pipeline of new opportunities in directed energy significantly expanded with the recent award of Department of War's Joint Laser Weapon System contract.

Speaker #3: Adjusted EBITDA in the quarter was a solid $11 million and we generated a record $21 million in cash from operations. During the second quarter, we saw increased demand for our solutions across both defense and advanced manufacturing markets.

Speaker #3: Our pipeline of new opportunities in direct energy significantly expanded with the recent award of the Department of War's Joint Laser Weapon System contract. Our laser sensing and advanced manufacturing opportunities also continued to grow, providing us with a broad base of new and existing programs and customers that we expect will continue to provide long-term growth opportunities for NLIGHT.

Scott Keeney: Our laser sensing and advanced manufacturing opportunities also continue to grow, providing us with a broad base of new and existing programs and customers that we expect will continue to provide long-term growth opportunities for nLIGHT. Directed energy is an increasingly important priority for the US and our allies, driven by the need for highly scalable, low cost per shot solutions to counter a rapidly evolving threat environment. Our focus remains on supporting customers across a broad range of power levels and mission profiles, and we are increasingly engaged not only as a laser supplier, but also as a system-level partner. nLIGHT's high energy lasers are differentiated across three key dimensions, power, brightness, and atmospheric correction. We believe all are essential to the successful deployment of directed energy laser weapons. It's across all three dimensions where we believe our HADES family of directed energy products outperforms competing solutions.

Speaker #3: Directed energy is an increasingly important priority for the U.S. and our allies, driven by the need for highly scalable, low-cost-per-shot solutions to counter a rapidly evolving threat environment.

Speaker #3: Our focus remains on supporting customers across a broad range of power levels and mission profiles. And we are increasingly engaged not only as a laser supplier, but also as a system-level partner.

Speaker #3: NLIGHT's high-energy lasers are differentiated across three key dimensions: power, brightness, and atmospheric correction. We believe all are essential to the successful deployment of directed energy laser weapons.

Speaker #3: And it's across all three dimensions where we believe our Hades family of directed energy products outperforms competing solutions. Hades can scale from tens of kilowatts to a megawatt of power, while maintaining exceptional beam quality.

Scott Keeney: HADES can scale from tens of kilowatts to a megawatt of power while maintaining exceptional beam quality. When combined with our proprietary atmospheric correction technology, HADES provides defense customers with an operational solution capable of neutralizing a wide range of threats. Designed to be low SWaP, HADES can be delivered in a variety of form factors, enabling rapid deployment across a broad range of military platforms and battlefield environments. HADES was instrumental in helping us win the recent Joint Laser Weapon System, or JLWS Award, a new multi-year DoW agreement with a contract ceiling of over $600 million. Under JLWS, nLIGHT will develop, integrate, and deliver multiple high energy laser weapon systems that build on the successful delivery of our 300 kilowatt high energy HELSI-1 laser and our 50 kilowatt high energy DE M-SHORAD laser.

Speaker #3: When combined with our proprietary atmospheric correction technology, Hades provides defense customers with an operational solution capable of neutralizing a wide range of threats. Designed to be low-swap, Hades can be delivered in a variety of form factors, enabling rapid deployment across a broad range of military platforms and battlefield environments.

Speaker #3: Hades was instrumental in helping us win the recent Joint Laser Weapon System, or JLWS, award, a new multi-year DOW $600 million. Under JLWS, NLIGHT will develop, integrate, and deliver multiple high-energy laser weapon systems, that build on the successful delivery of our 300-kilowatt high-energy HELSA-1 laser and our 50-kilowatt high-energy DEM Shored laser.

Speaker #3: NLIGHT will leverage its proprietary coherent beam combination and atmospheric correction technology, and its vertically integrated manufacturing, to deliver modular containerized systems that can be integrated across a variety of platforms and rapidly deployed in theater.

Scott Keeney: nLIGHT will leverage its proprietary coherent beam combination and atmospheric correction technology and its vertically integrated manufacturing to deliver modular containerized systems that can be integrated across a variety of platforms and rapidly deployed in theater. With increasing US defense prioritization of directed energy lasers and planned demonstrations of operational systems expected as early as 2028, JLWS represents a critical step forward fielding production-ready laser weapon systems at scale. We also continue to make progress with existing directed energy programs in Q2. Our work on the production of our 1 megawatt CBCI energy laser as part of HELSI-2 continues to go well, and we remain on track for this program. Importantly, this laser is based on the same architecture that we use across our HADES portfolio of CBC lasers, demonstrating the scalability of the platform to deliver solutions that address a wide range of mission scenarios.

Scott Keeney: nLIGHT will leverage its proprietary coherent beam combination and atmospheric correction technology and its vertically integrated manufacturing to deliver modular containerized systems that can be integrated across a variety of platforms and rapidly deployed in theater. With increasing US defense prioritization of directed energy lasers and planned demonstrations of operational systems expected as early as 2028, JLWS represents a critical step forward fielding production-ready laser weapon systems at scale. We also continue to make progress with existing directed energy programs in Q2. Our work on the production of our one megawatt CBCI energy laser as part of HELSI-2 continues to go well, and we remain on track for this program. Importantly, this laser is based on the same architecture that we use across our HADES portfolio of CBC lasers, demonstrating the scalability of the platform to deliver solutions that address a wide range of mission scenarios.

Speaker #3: With increasing U.S. defense prioritization of direct energy lasers and planned demonstrations of operational systems expected as early as 2028, JLWS represents a critical step forward, fielding production-ready laser weapon systems at scale.

Speaker #3: We also continue to make progress with existing directed energy programs in the second quarter. Our work on the production of our 1-megawatt CBC high-energy laser, as part of HELSA-2, continues to go well, and we remain on track for this program.

Speaker #3: Importantly, this laser is based on the same architecture that we use across our Hades portfolio of CBC lasers, demonstrating the scalability of the platform to deliver solutions that address a wide range of mission scenarios.

Speaker #3: We are making steady progress on the U.S. Navy's HELCAP program for anti-ship cruise missile defense, where we are integrating our 300-kilowatt CBC laser that we delivered under the HELSA-1 program with a proprietary advanced beam control system that incorporates our adaptive optics for atmospheric correction.

Scott Keeney: We are making steady progress on the US Navy's HELCAP program for anti-ship cruise missile defense, where we are integrating our 300 kilowatt CBC laser that we delivered under the HELSI-1 program, with a proprietary advanced beam control system that incorporates our adaptive optics for atmospheric correction. We believe this work will continue to accelerate the development and deployment of future multi-hundred kilowatt systems over the coming years. We also continue to see increased interest in our defense products outside of directed energy. In Q2, we delivered strong growth in our products for kinetic weapons, which remains an important growth driver within our defense markets. These products are delivered into longstanding programs of record, and are in high demand due to global restocking efforts, as well as new mission applications where the use case for weapons is expanding.

Speaker #3: We believe this work will continue to accelerate the development and deployment of future multi-hundred-kilowatt systems over the coming years. We also continue to see increased interest in our defense products outside of directed energy.

Speaker #3: In the second quarter, we delivered strong growth in our products for kinetic weapons, which remains an important growth driver within our defense markets. These products are delivered into long-standing programs of record and are in high demand due to global restocking efforts, as well as new mission applications where the use case for weapons is expanding.

Speaker #3: Within the space domain, we see accelerating need for both our laser sensing and advanced manufacturing products. Our high-energy pulsed lasers are being designed into several new programs that are in the early stages of adoption across the commercial and defense markets.

Scott Keeney: Within the space domain, we see accelerating need for both our laser sensing and advanced manufacturing products. Our high energy pulse lasers are being designed into several new programs that are in the early stages of adoption across the commercial and defense markets. We have a growing pipeline of customers using our commercial fiber lasers with our proprietary dynamic beam shaping technology in the launch ammunition markets as well. In summary, I'm extremely encouraged by the growing pipeline of opportunities across our entire portfolio of defense and advanced manufacturing solutions. Demand for our products remains strong. Our strategy remains consistent. Leverage our vertically integrated technology platform, execute with discipline on existing programs, and invest to accelerate and support long-term growth and value creation. We believe this approach positions nLIGHT to succeed across the multi-year opportunities that remain ahead of us.

Speaker #3: And we have a growing pipeline of customers using our commercial fiber lasers with our proprietary dynamic beam shaping technology in the launch and munition markets as well.

Speaker #3: In summary, I'm extremely encouraged by the growing pipeline of opportunities across our entire portfolio of defense and advanced manufacturing solutions. And demand for our products remains strong.

Scott Keeney: Demand for our products remains strong. Our strategy remains consistent. Leverage our vertically integrated technology platform, execute with discipline on existing programs, and invest to accelerate and support long-term growth and value creation. We believe this approach positions nLIGHT to succeed across the multi-year opportunities that remain ahead of us. Let me now turn the call over to Joe to discuss our Q2 financial results.

Speaker #3: Our strategy remains consistent. Leverage our vertically integrated technology platform, execute with discipline, on existing programs, and invest to accelerate and support long-term growth and value creation.

Speaker #3: We believe this approach positions NLIGHT to succeed across the multi-year opportunities that remain ahead of us. Let me now turn the call over to Joe to discuss our second quarter financial results.

Scott Keeney: Let me now turn the call over to Joe to discuss our Q2 financial results.

Speaker #2: Thank you, Scott. We had a strong second quarter with record product revenue and solid execution. Demand for our products across both our space and defense and our advanced manufacturing markets continue to accelerate.

Joseph Corso: Thank you, Scott. We had a strong Q2 with record product revenue and solid execution. Demand for our products across both our space and defense and our advanced manufacturing markets continue to accelerate. Our pipeline of new opportunities continues to build. Further, our focus on working capital management and targeted CapEx enabled us to generate record operating cash flow in the quarter while positioning ourselves for long-term growth. Turning to the results. Total revenue in the Q2 was $82.6 million, an increase of 34% compared to $61.7 million in the Q2 of 2025. Up 3% compared to the prior quarter. Aerospace and Defense revenue was a record $57.3 million in the quarter, up 41% year over year. A&D growth was driven by record A&D product revenue, which grew 72% year over year and 3% sequentially.

Speaker #2: And our pipeline of new opportunities continues to build. Further, our focus on working capital management and targeted capex enabled us to generate record operating cash flow in the quarter while positioning ourselves for long-term growth.

Speaker #2: Turning to the results, total revenue in the second quarter was $82.6 million, an increase of 34 percent compared to $61.7 million in the second quarter of 2025, and up 3 percent compared to the prior quarter.

Speaker #2: Aerospace and defense revenue was a record $57.3 million in the quarter, up 41 percent year over year. A&D growth was driven by record A&D product revenue, which grew 72 percent year over year and 3 percent sequentially.

Speaker #2: Development revenue of $23.2 million grew 11 percent year over year, and 5 percent compared to the prior quarter. The year-over-year and sequential growth in our revenue from the aerospace and defense market was primarily driven by continued progress in our HELSA-2 program, growth in our munitions program, and execution across multiple other directed energy and laser sensing programs.

Joseph Corso: Development revenue of $23.2 million grew 11% year over year. 5% compared to the prior quarter. The year over year and sequential growth in our revenue from the aerospace and defense market was primarily driven by continued progress in our HELSI-2 program, growth in our munitions program. Execution across multiple other directed energy and laser sensing programs. Q2 revenue from our commercial markets, which include industrial and microfabrication, was $25.3 million, an increase of 20% year over year. 1% compared to the prior quarter. Revenue from our microfabrication markets was $13.3 million. Revenue of $12 million from our industrial markets benefited from increased demand for our additive manufacturing products. An increase in sales associated with last-time buys of our cutting and welding products.

Speaker #2: Second quarter revenue from our commercial markets which include industrial and micro-fabrication was $25.3 million. An increase of 20 percent year over year and 1 percent compared to the prior quarter.

Speaker #2: Revenue from our micro-fabrication markets was $13.3 million. Revenue of $12 million from our industrial markets benefited from increased demand for additive manufacturing products, and an increase in sales associated with last-time buys of our cutting and welding products.

Speaker #2: As we previously announced, we are exiting our legacy cutting and welding markets and we do not expect to generate material revenue from these markets in the second half of the year.

Joseph Corso: As we previously announced, we are exiting our legacy cutting and welding markets, and we do not expect to generate material revenue from these markets in H2 of the year. Total gross margin in Q2 was 31.1%, compared to 29.9% in Q2 of 2025 and 33.1% last quarter. On a non-GAAP basis, which excludes stock-based compensation, total gross margin in Q2 was 32.6%, up from 30.9% in the same period last year and 34.4% last quarter. Products gross margin in Q2 was 41.2%, compared to 38.5% in Q2 of 2025 and 43.6% last quarter. The year-over-year increase in products gross margin was primarily driven by sales mix and the positive impact of higher production volumes on fixed manufacturing costs.

Speaker #2: Total gross margin in the second quarter was $31.1 percent compared to $29.9 percent in the second quarter of 2025 and $33.1 percent last quarter.

Speaker #2: On a non-GAAP basis, which excludes stock-based compensation, total gross margin in the second quarter was 32.6%, up from 30.9% in the same period last year and 34.4% last quarter.

Speaker #2: Product gross margin in the second quarter was 41.2 percent, compared to 38.5 percent in the second quarter of 2025 and 43.6 percent last quarter.

Speaker #2: The year-over-year increase in product gross margin was primarily driven by sales mix, and the positive impact of higher production volumes on fixed manufacturing costs.

Speaker #2: Product gross margins were at the high end of our guidance range, but down sequentially on higher manufacturing spend, partially offset by increased volumes. Non-GAAP product gross margin in the quarter was 42.4 percent, compared to 40 percent in the second quarter of 2025 and 44.6 percent last quarter.

Joseph Corso: Products gross margins were at the high end of our guidance range, down sequentially on higher manufacturing spend, partially offset by increased volumes. Non-GAAP products gross margin in the quarter was 42.4%, compared to 40% in Q2 of 2025 and 44.6% last quarter. Development gross margin was 5.6%, compared to 13.1% in the same quarter a year ago and 5.1% last quarter. The variability in development gross margin is primarily the result of contract mix and the timing of program deliverables in any given quarter. Non-GAAP development gross margin in the quarter was 7.5%, compared to 13.1% in the same period a year ago and 7.2% last quarter. Moving down the income statement. GAAP OpEx were $29.3 million in Q2, compared to $22.7 million in Q2 of 2025 and $27.2 million in the prior quarter.

Speaker #2: Development gross margin was $5.6 percent compared to $13.1 percent in the same quarter a year ago, and $5.1 percent last quarter. The variability in development gross margin is primarily the result of contract mix and the timing of program deliverables in any given quarter.

Speaker #2: Non-GAAP development gross margin in the quarter was $7.5 percent compared to $13.1 percent in the same period a year ago, and $7.2 percent last quarter.

Speaker #2: Moving down the income statement. GAAP operating expenses were $29.3 million in the second quarter, compared to $22.7 million in the second quarter of 2025 and $27.2 million in the prior quarter.

Speaker #2: The year-over-year increase in GAAP operating expenses is primarily due to higher stock-based compensation. Non-GAAP operating expenses were $19.5 million in the quarter, up from $16.8 million in the second quarter of 2025 and $17.1 million last quarter.

Joseph Corso: The year-over-year increase in GAAP OpEx is primarily due to higher stock-based compensation. Non-GAAP OpEx were $19.5 million in the quarter, up from $16.8 million in Q2 of 2025 and $17.1 million last quarter. The increase in non-GAAP OpEx was primarily due to higher employee compensation expenses and an increase in R&D material spend. We expect non-GAAP OpEx to remain in the $17 to $19 million per quarter range in H2 of 2026. GAAP net loss in Q2 of 2026 was $1.3 million, or $0.02 per share, compared to a net loss of $3.6 million, or $0.07 per share in the same quarter a year ago, and positive net income of $645,000, or $0.01 per diluted share last quarter.

Speaker #2: The increase in non-GAAP operating expenses was primarily expenses and an increase in R&D material spend. We expect non-GAAP opex to remain in the $17 to $19 million per quarter range in the second half of 2026.

Speaker #2: GAAP net loss in the second quarter of 2026 was $1.3 million or $0.02 per share, compared to a net loss of $3.6 million or $0.07 per share in the same quarter a year ago, and positive net income of $645,000 or $0.01 per diluted share last quarter.

Speaker #2: On a non-GAAP basis, net income for the second quarter was $9.6 million or $0.15 per diluted share, compared to $2.9 million or $0.06 per diluted share in the second quarter of 2025, and $11.8 million or $0.20 per diluted share last quarter.

Joseph Corso: On a non-GAAP basis, net income for Q2 was $9.6 million, or $0.15 per diluted share, compared to $2.9 million, or $0.06 per diluted share in Q2 of 2025, and $11.8 million, or $0.20 per diluted share last quarter. Adjusted EBITDA for Q2 was $10.7 million, compared to $5.6 million in the same quarter last year and $13.8 million in Q1 of 2026. Turning to the balance sheet. We ended Q2 with total cash equivalents, restricted cash, and investments of $330.8 million. During Q2, we repaid the $20 million that we had previously drawn down on our $40 million line of credit, and we generated a record $20.7 million in cash from operations during the quarter. Turning to guidance.

Speaker #2: Adjusted EBITDA for the second quarter was $10.7 million. Compared to $5.6 million in the same quarter last year, and $13.8 million in the first quarter of 2026.

Speaker #2: Turning to the balance sheet. We ended the second quarter with total cash, cash equivalents, restricted cash, and investments of $330.8 million. During the second quarter, we repaid the $20 million that we had previously drawn down on our $40 million line of credit, and we generated a record $20.7 million in cash from operations during the quarter.

Speaker #2: Turning to guidance. Based on the information available today, we expect revenue for the third quarter of 2026 to be in the range of $63 to $73 million.

Joseph Corso: Based on the information available today, we expect revenue for Q3 2026 to be in the range of $63 to $73 million. The midpoint of $68 million includes approximately $43 million of product revenue and $25 million of development revenue. Please note that our revenue guidance for Q3 excludes approximately $17 million of product revenue that we would have expected to ship in Q3, but is now expected to be delivered in future quarters. We are currently experiencing challenges in getting some parts and materials from certain Chinese suppliers. While these materials do not represent a large portion of the overall bill of material of our products, delays in sourcing these materials, which primarily affect our commercial products, will not allow us to fully satisfy our customer demand in Q3.

Speaker #2: The midpoint of $68 million includes approximately $43 million of product revenue, and $25 million of development revenue. Please note that our revenue guidance for the third quarter excludes approximately $17 million of product revenue that we would have expected to ship in the third quarter, but is now expected to be delivered in future quarters.

Speaker #2: We are currently experiencing challenges in getting some parts and materials from certain Chinese suppliers. While these materials do not represent a large portion of the overall bill of material of our products, the lays-and-sourcing these materials, which primarily affect our commercial products, will not allow us to fully satisfy our customer demand in the third quarter.

Speaker #2: Overall gross margin in the third quarter is expected to be in the range of $24 percent to $30 percent, with product gross margin in the range of $34 percent to $40 percent.

Joseph Corso: Overall gross margin in Q3 is expected to be in the range of 24% to 30%, with product gross margin in the range of 34% to 40%, and development gross margin of approximately 8%. The expected sequential decline in product gross margin is largely driven by the lower expected product volumes. As we've mentioned previously, as a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs. We expect adjusted EBITDA for Q3 2026 to be in the range of $1 to $7 million. With that, I will turn the call over to the operator for questions.

Speaker #2: And development gross margin of approximately 8 percent. The expected sequential decline in product gross margin is largely driven by the lower expected product volumes, as we've mentioned previously, as a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs.

Speaker #2: We expect adjusted EBITDA for the third quarter of 2026 to be in the range of $1 to $7 million. With that, I will turn the call over to the operator for questions.

Speaker #1: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Siegmann with Stifel. Jonathan, your line is open. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Seigman with Stiefel.

Speaker #1: Jonathan, your line is open. Please go ahead.

Jonathan Siegmann: Good evening. Thank you so much for the time. Congratulations on the strong results. Could you maybe talk a little bit about how the JLWS award rolls into 2026 and 2027? I realize you may not give exact numbers on that, but maybe you can square that with the headwind that you might see from HELSI-2. Thank you very much.

Speaker #3: Good evening. Thank you so much for the time and congratulations on the strong results. Could you maybe talk a little bit about how the JOWS Award rolls into 2026 and 2027?

Speaker #3: I realize you may not be able to give exact numbers on that, but maybe you can square that with the headwind that you might see for Halsey, too.

Speaker #3: Thank you very much.

Speaker #4: Hi, John. The JOWS Award will start to contribute revenue in the current quarter, will run into the fourth quarter, and then really start to ramp up in 2027.

Joseph Corso: Hi, John. The JLWS award will start to contribute revenue in the current quarter. We'll run into Q4 and then really start to ramp up in 2027. The H2 of the year will be just really the initial stages of the program.

Speaker #4: But the second half of the year will be just really the initial stages of the program.

Jonathan Siegmann: Its contribution in 2027, how should we think about how much of that helps relative to the headwind you might see with HELSI-2?

Speaker #3: And its contribution in 2027—how should we think about how much of that helps, relative to the headwind you might see with Halsey, too?

Joseph Corso: Actually, I'll characterize it as it will be a nice replacement and then some relative to the HELSI-2 program. Two quarters ago, there was some concern that the HELSI-2 program was going to fall off, and we knew it would trail off. With the award, the win with JLWS will more than make up for that as we get into 2027.

Speaker #4: Actually, I'll characterize it as—it will be a nice replacement, and then some, relative to the Halsey 2 program. So, a couple of quarters ago, there was some concern that the Halsey 2 program was going to fall off, and we knew it would trail off, but with the award, the win with JOWS will more than make up for that as we get into 2027.

Speaker #3: Thank you.

Jonathan Siegmann: Thank you.

Speaker #1: Your next question comes from the line of Louie DePalma with William Blair. Louie, your line is open. Please go ahead.

Operator: Your next question comes from the line of Louie DiPalma with William Blair. Louie, your line is open. Please go ahead.

Louie DiPalma: Pat, Joe, and John, good afternoon.

Speaker #5: At Joan and John, good afternoon.

Speaker #4: Hi, Louie.

Joseph Corso: Hi, Louie.

Speaker #5: From a technology standpoint, how is the prototype for the joint laser weapon system that you're developing different from the Halsey 2 prototype and your HADES platform?

Louie DiPalma: From a technology standpoint, how is the prototype for the Joint Laser Weapon System that you're developing different from the HELSI-2 prototype and your HADES platform?

Speaker #4: Hey Louie, this is Scott. Thanks for the question. The program that we just won, JOWS, is, as Joe just mentioned, a continuation, extension—transition, if you will—for the work we've done on Halsey to demonstrate the technology.

Scott Keeney: Hey, Louie, this is Scott. Thanks for the question. The program that we just won, JLWS, as Joe just mentioned, is a continuation extension transition, if you will, for the work we’ve done on HELSI to demonstrate the technology. JLWS is a program that’s focused on transitioning that into products at, again, the high power levels. It builds on what we’ve done with HELSI, it builds on the HADES product family, and continues to both expand our product line and at various power levels.

Speaker #4: JOWS is a program that's focused on transitioning that into products at, again, the high-power levels. So it builds on what we've done with Halsey.

Speaker #4: It builds on the HADES product family and continues to both expand our product line and at various power levels.

Louie DiPalma: Okay. I guess from a high level related to HELSI-2 and JLWS and HADES, what would you estimate is the projected timeline on when some of the laser systems will be fielded at scale?

Speaker #5: Okay. And I guess from a high-level related to Halsey 2 and JOWS, and HADES, what would you estimate is the projected timeline on when some of the laser systems will be fielded at scale?

Speaker #4: Yeah, that will depend on how the U.S. budgets in particular progress. And we're seeing continued expansion and interest in those programs. But we don't anticipate that there will be a program of record over the next year.

Scott Keeney: Yeah, that will depend on how the US budgets in particular progress, we’re seeing continued expansion and interest in those programs. We don’t anticipate that there will be a program of record over the next year. We do anticipate that we will see increasing interest and increasing demand. We will transition to initial prototypes for the higher power levels in the coming couple of years. From there, it goes to a low rate production set of opportunities, and it will scale from there.

Speaker #4: We do anticipate that we will see increasing interest and increasing demand. And we will transition to initial prototypes for the higher power levels in the coming couple of years.

Speaker #4: And from there, it goes to a low-rate production set of opportunities. And it will scale from there.

Louie DiPalma: Great. One final question. As you know, the missile industry is in the midst of a dynamic period with multi-year agreements established for many of the top 15 programs. Should this have a positive impact on your sensing business? Is there the potential for you to be incorporated as a second supplier on some of these missile programs that you aren’t involved in today?

Speaker #5: Great. And one final question, as you know, the missile industry is in the midst of a dynamic period with multi-year agreements established for many of the top 15 programs.

Speaker #5: Should this have a positive impact on your sensing business? And is there the potential for you to be incorporated as a second supplier on some of these missile programs that you aren't involved in today?

Speaker #4: Yeah, good question, Louie. The short answer is yes. I think the restocking that we are seeing of traditional kinetic munitions, particularly on the missile side, will be a benefit to nLIGHT.

Joseph Corso: Yeah, good question, Louie. The short answer is yes. I think the restocking that we are seeing of traditional kinetic munitions, particularly on the missile side, will be a benefit to nLIGHT. If you go back over the last 18 months, for example, we announced a $25 million award, just roughly 18 months ago. We followed up at the end of last year with a $50 million award for Both of those awards were for roughly the same period of performance. We are seeing in certain programs, our, just the number of units continue to grow and our content continue to grow. We expect that to continue here in the coming years. The second part of your question is, it is part of our plan from a sensing perspective to expand the number of opportunities that we have with missiles in particular.

Speaker #4: If you go back over the last 18 months, for example, we announced a 25 million dollar award just roughly 18 months ago. We followed up at the end of last year, with a 50 million dollar award for both of those awards were for roughly the same period of performance.

Speaker #4: So we are seeing in certain programs our just the number of units continue to grow and our content continue to grow. We expect that to continue here in the coming years.

Speaker #4: And then the second part of your question is, it is part of our plan, from a sensing perspective, to expand the number of opportunities that we have with missiles in particular.

Speaker #4: Now, as you know, that gestation period is and can be long, but it certainly something that is in the plan for us.

Joseph Corso: As you know, that gestation period is, and can be long, it's certainly something that is in the plan for us.

Speaker #5: Very good. Thanks, everyone.

Louie DiPalma: Good. Thanks, everyone.

Speaker #4: Thank you.

Joseph Corso: Thank you.

Speaker #1: Your next question comes from the line of Jim Ricchuti with Needham & Company. Jim, your line is open. Please go ahead.

Operator: Your next question comes from the line of Jim Ricchiuti with Needham & Company. Jim, your line is open. Please go ahead.

Speaker #3: Okay, I was hoping to better understand the supply chain situation. I wonder if you could elaborate on the component or material that is creating that shortfall.

Jim Ricchiuti: Thanks. I was hoping to better understand the supply chain situation. Wonder if you could elaborate on the component or material that is creating that shortfall in the Q3 guide, because otherwise it would sound like your Q3 product guide would be significantly better, and overall revenue much higher. I am trying to get a better sense as to when this could be resolved, what some of the challenges are.

Speaker #3: In the Q3 guide, because otherwise it would sound like your Q3 product guide would be significantly better, and overall revenue much higher. I'm trying to get a better sense as to when this could be resolved, and what some of the challenges are.

Speaker #5: Good, Jim. This is Scott. I appreciate the question, and you're exactly right. Q2 was a record quarter, and we've got very strong demand across the board.

Scott Keeney: Good, Jim. This is Scott. I appreciate the question. You are exactly right. Q2 was a record quarter and we have got very strong demand across the board. We would have guided higher had it not been for the supply chain challenges that we are seeing. Those challenges come from what appears to be China increasing scrutiny on dual use products for defense tech products. The particular commodity that I would highlight would be optics. These are not specialized components. They are materials where China has built out an outsized portion of the overall supply chain over time. We are seeing delays in the ability to get some of those components that is affecting Q3. In terms of the outlook, I will let Joe chime in a little further to expand upon that.

Speaker #5: And we would have guided higher had it not been for these supply chain challenges that we were seeing. And those challenges come from what appears to be China increasing scrutiny on dual-use products for defense tech products.

Speaker #5: And the particular commodity that I would highlight would be optics. These are not specialized components; they're materials where China has built out an outsized portion of the overall supply chain over time.

Speaker #5: And we're seeing delays in the ability to get some of those components that's affecting Q3. In terms of the outlook, I'll let Joe chime in a little further to expand upon that.

Speaker #4: Jim, your observation was absolutely right. We have very strong demand in the third quarter, and we wanted to try to quantify that and give you some direction to give you a sense that we would have expected that.

Joseph Corso: Jim, your observation was absolutely right. We have a very strong demand in the Q3, and we wanted to try to quantify that and give you some direction to Give you a sense that we would have expected that. What we do expect that demand is still there, the forecast is still strong, backlog is strong. Our ability to execute on that backlog in the Q4 is still a little bit of a question mark for us at this point.

Speaker #4: What we do expect that demand is still there. The forecast is still strong. Backlog is strong. Our ability to execute on that backlog in the fourth quarter is still a little bit of a question mark for us at this point.

Speaker #3: Well, again, it's the supply is coming out of China, and do you have it sounds like they control a fair amount of the supply chain for this material.

Jim Ricchiuti: Well, again, if the supply is coming out of China and it sounds like they control a fair amount of the supply chain for this material. What's the risk that this just ends up going on for more than a few quarters? I guess, trying to get a sense as to how. I assume this is affecting more of your defense business, is that right?

Speaker #3: So what's the risk that this just ends up going on for more than a few quarters? I guess that kind of get a sense as to how and I assume this is affecting more of your defense business.

Speaker #3: Is that right?

Speaker #4: Jim, good question. No, the actual impact of it is more on the commercial side of the business and the products that we build as Scott said.

Joseph Corso: Jim, good question. No, the actual impact of it is more on the commercial side of the business and the products that we build. As Scott said, this is largely related to the dual-use nature of our products. As you know, we've spent a lot of time over the last couple of years, de-risking and moving manufacturing out of China. Our revenue base has certainly moved out of China. A good bit of our supply chain has moved out of China. From an overall percentage of the bill of materials, we're not talking about a lot of the BOM, but it doesn't take more than just a couple of components for us to complete the build. We could see that this could resolve itself quite quickly or it will take months to quarters, depending on what the particular mitigation strategy is. Right?

Speaker #4: This is largely related to the dual-use nature of our products. As you know, we've spent a lot of time over the last couple of years de-risking and moving manufacturing out of China.

Speaker #4: Our revenue base has certainly moved out of China. A good bit of our supply chain has moved out of China. So from an overall percentage of the bill of materials, we're not talking about a lot of the BOM, but it doesn't take more than just a couple of components for us to complete the build.

Speaker #4: So we could see that this could resolve itself quite quickly, or it could take months to quarters, depending on what the particular mitigation strategy is, right?

Speaker #3: Okay. I'll jump back in the Q. Thank you.

Jim Ricchiuti: Okay. I'll jump back in the queue. Thank you.

Speaker #1: Your next question comes from the line of Greg Palm with Craig Holum. Greg, your line is open. Please go ahead.

Operator: Your next question comes from the line of Greg Palm with Craig-Hallum. Greg, your line is open. Please go ahead.

Speaker #2: Yeah, thanks. I'm going to, I guess, follow up on that because my very next question was going to be: What is your current mitigation strategy?

Greg Palm: Yeah, thanks. I'm going to, I guess, follow up on that because my very next question was going to be, what is your current mitigation strategy? Can you find these components outside of China? Presumably, you're already trying, just give us some sense on what the availability is at this point.

Speaker #2: I mean, can you find these components outside of China? Presumably, you're already trying, but just give us some sense on what the availability is.

Speaker #2: At this point.

Speaker #4: Yeah, Greg, it's Scott here. Again, we have been de-risking China for some time now. We've shifted our focus to markets outside of China. We've moved our manufacturing out of China.

Scott Keeney: Yeah, Greg, it's Scott here. Again, we have been de-risking China for some time now. We've shifted our focus to markets outside of China. We've moved our manufacturing out of China. It does take time on the supply chain side to re-qualify, redesign some of these complex lasers. We're in the midst, and we've been working on this, on working with our existing supply chain partners. We're evaluating and qualifying new partners. Where we can, we're evaluating redesign of our products to provide more flexibility for the future. Those are some of the themes that we're focused on here. This is something we've talked about, but it's something that has even greater focus now.

Speaker #4: But it does take time on the supply chain side to requalify, redesign some of these complex lasers. And so we're in the midst and we've been working on this on working with our existing supply chain partners.

Speaker #4: We're evaluating and qualifying new partners. And where we can, we're evaluating redesign of our products to provide more flexibility for the future. So those are some of the themes that we're focused on here.

Speaker #4: And this is something we've talked about, but it's something that has even greater focus now.

Speaker #2: Okay. And I just want to be clear. I think you said it mostly impacts commercial. Is there any chance that this could or would impact anything in defense and specifically for instance, the ramp-up or potential contribution of JLWS?

Greg Palm: Okay. I just want to be clear, I think you said it mostly impacts commercial. Is there any chance that this could or would impact anything in defense and specifically, for instance, the ramp-up or potential contribution of JLWS?

Speaker #4: Yeah. As Joe said, this is mostly commercial. It's part of our dual-use strategy. But there's some exposure here, even if it's indirect. To our defense products.

Scott Keeney: Yeah. As Joe said, this is mostly commercial. It's part of our dual-use strategy. There's some exposure here, even if it's indirect, to our defense products. The majority of our defense supply chain is domestic. We do use some of our own commercial items, which do have exposure to some of these Chinese components that go into our defense products. In terms of the implications for JLWS, I think I would just put that in that context, that this is a fairly small number of products. It is something that we're working through.

Speaker #4: The majority of our defense supply chain is domestic. But we do use some of our own commercial items, which do have exposure to some of these Chinese components.

Speaker #4: They go into our defense products. In terms of the implications for JLWS, I think I would just put that in context. This is a fairly small number of products, but it is something that we're working through.

Joseph Corso: Greg, just to be clear, the initial work that we are going to do on JLWS will largely be unaffected by this supply chain issue. For us right now, that program is all systems go.

Speaker #4: And Greg, just to be clear, the initial work that we are going to do on JLWS will largely be unaffected by this supply chain issue.

Joseph Corso: Greg, just to be clear, the initial work that we are going to do on JLWS will largely be unaffected by this supply chain issue. For us right now, that program is all systems go.

Speaker #4: So for us right now, that program is all systems go.

Speaker #2: Yeah. And just to be clear, you're referring to that $44 million? Is that what you call the initial work?

Greg Palm: Yeah. Just to be clear, you're referring to the $44 million. Is that what you call the initial work?

Speaker #4: Well, that's the initial funded work. The initial plan is beyond the 44 million. And I'm also referring to significant work beyond the 44 million in JLWS that will be unaffected by the these issues.

Joseph Corso: Well, that's the initial funded work. The initial plan is beyond the $44 million, and I'm also referring to significant work beyond the $44 million in JLWS that will be unaffected by these issues.

Speaker #2: Okay. All right. Thanks.

Greg Palm: Okay. All right. Thanks.

Speaker #4: Thank you.

Joseph Corso: Thank you.

Speaker #1: Your next question comes from the line of Keith Hussam with North Coast Research. Keith, your line is open. Please go ahead.

Operator: Your next question comes from the line of Keith Husum with Northcoast Research. Keith, your line is open. Please go ahead.

Speaker #3: Thanks, guys. And sorry to belittle the point here, but I just want to make sure this is more of a political football as opposed to a manufacturing delay, correct?

Keith Husum: Thanks, guys. I'm sorry to belittle the point here. I just want to make sure. This is more of a political football as opposed to a manufacturing delay, correct?

Speaker #4: It's not at all related to manufacturing products, no.

Joseph Corso: It's not at all related to manufacturing products, no.

Speaker #3: Okay. Gotcha. And how long has this been going on for? I mean, is there I know you don't have a crystal ball and you can't predict what it might be resolved, but just trying to understand how long it's been going on to give us an idea if there's any chance of this being quick, come and go.

Keith Husum: Okay. Got you. How long has this been going on for? I know you don't have a crystal ball, and you can't predict when it might be resolved, but just trying to understand how long it's been going on to give us an idea if there's any chance of this being quick come and go.

Speaker #4: This has been a very recent development just over the past handful of weeks as this started to crop up.

Joseph Corso: This has been a very recent development, just over the past handful of weeks, as this started to crop up.

Speaker #3: Okay. And I guess finally, any chance that your customers actually will go looking elsewhere at competitors for this, or your lasers are so unique and designed and spiked into their products that they'll be patient and wait?

Keith Husum: Okay. I guess finally, any chance that your customers actually will go looking elsewhere to competitors for this? Or your lasers are so unique and design is baked into their products that they'll be patient and wait?

Speaker #4: Yeah, I think the short answer is we see very strong demand. This is a supply chain delay we're working And that demand remains strong and we're eager to ship those products as soon as possible.

Scott Keeney: Yeah, I think that the short answer is we see very strong demand. This is a supply chain delay. We're working through that, and that demand remains strong, and we're eager to ship those products as soon as possible.

Speaker #3: Okay, I guess we're changing subjects to a little bit more of a happier tone. There's so much going on now with space development in terms of rockets, and perhaps even data centers in the sky.

Keith Husum: Okay. I guess just changing subjects in a little more happier tone. There's so much going on now with the space development in terms of rockets and perhaps data centers in the sky. As you're thinking about your sensing lasers, are you having discussions that are opening up new use cases with some of these various conversations about how to utilize space more effectively here?

Speaker #3: As you're thinking about your sensing lasers, are you having discussions that are opening up new use cases with some of these various conversations about how to utilize space more effectively here?

Speaker #4: The short answer is yes. I mentioned space briefly in my comments, and in subsequent calls I look forward to providing more information about where we're engaged.

Scott Keeney: Short answer is yes. I mentioned space briefly in my comments and in subsequent calls, look forward to providing more information about where we're engaged. It gets complex due to the nature of those programs. Keith, yes. The short answer to your question is, sensing and other applications are important in space also.

Speaker #4: It gets complex due to the nature of those programs. But, Keith, yes, the short answer to your question is sensing and other applications are important in space also.

Speaker #3: All right. So we'll stay tuned for more. Appreciate it. Thank you.

Keith Husum: All right. I will stay tuned for more. Appreciate it. Thank you.

Speaker #1: Your next question comes from the line of Kieran McCabe with Canter Fitzgerald. Kieran, your line is open. Please go ahead.

Operator: Your next question comes from the line of Kieran McCabe with Cantor Fitzgerald. Kieran, your line is open. Please go ahead.

Speaker #5: Hey, thank you for taking my question. I'm on for Troy Jensen. I guess maybe my first question is, and I apologize, we're kind of maybe looking at too close to your splitting hairs, but the 3Q guidance is a little bit of a wider range than normal.

Kieran McCabe: Great. Thank you for taking my question. I'm on for Troy Jensen. I guess maybe my first question, I apologize if I'm kind of maybe looking at too close here, splitting hairs, but the Q3 guidance is a little bit of wider range than normal. Is that kind of driven by the supply chain issue or timing of projects or just kind of more conservatism in your forecast? Maybe, how that may relate to Q4 and going into 2027?

Speaker #5: Is that kind of driven by the supply chain issue or timing of projects or just kind of more conservatism in your forecast? And maybe have you had that relate to 4Q and going into 2027?

Speaker #4: Yeah, though the slightly wider range this quarter is related exclusively to supply chain, Kieran.

Scott Keeney: Yeah. The slightly wider range this quarter is related exclusively to supply chain, Kieran.

Speaker #5: Great. Thanks. And my second question is on you mentioned strong demand and additive manufacturing. I know in our survey work, we're seeing a lot of strong demand for metal printing, and also in the A&D sector, and also I believe one of the companies that reported this this week talked about strengths in demand in rocketry and stuff.

Kieran McCabe: Great, thanks. I guess my second question is on, you mentioned the strong demand in additive manufacturing. I know in our survey work, we're seeing a lot of strong demand for metal printing, and also in the A&D sector. Also, I believe one of the companies that reported this just this week talked about strengths in and demand in rocketry and stuff. I know you kind of answered it partially in the prior question, any kind of color you can provide maybe on what you're seeing in the additive manufacturing space and kind of the trends and demands that you're seeing there?

Speaker #5: I know you kind of answered a portion partially in the prior question, but any kind of colleague can provide maybe on what you're seeing in the additive manufacturing space and kind of the trends and demands that you're seeing there?

Speaker #4: Yeah, Kieran, we're seeing strong demand across really all the segments of our business, including additive. And you highlighted two of the key drivers there.

Scott Keeney: Yeah, Kieran. We're seeing strong demand across really all the segments of our business, including additive, you highlighted two of the key drivers there. Certainly, rock engines is one, a broader range of aerospace and defense components, we're seeing significant demand increases there.

Speaker #4: Certainly, rocket engines is one. But a broader range of aerospace and defense components, we're seeing significant demand increases there.

Speaker #5: Great. Great. Thank you for taking my questions.

Kieran McCabe: Great. Thank you for taking my questions.

Speaker #1: As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Jan Engelbrecht with Baird.

Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Jan Engelbrecht with Baird. Jan, your line is open. Please go ahead.

Speaker #1: Jan, your line is open. Please go ahead.

Jan Engelbrecht: Good afternoon, Scott, Joe, and John. Congrats on another nice set of results. I think I'll stay with JLWS and just wanted to see, that contract structure, should we assume that sort of HELSI-2 rolls into that, or are they two separate things if there's additional work that the government wants to do on HELSI-2? Just a quick cleanup on that sort of announcement. I noticed that the ceiling value for nLIGHT was listed as $607 million, and then I think the Department of War put out a ceiling value for the second vendor and yourself of 847. Should we sort of read into that you're sort of getting basically about 75% of that contract if the ceiling values are reached, or would you caution us against that? Thank you.

Jan-Frans Engelbrecht: Good afternoon, Scott, Joe, and John. Congrats on another nice set of results. I think I'll stay with JLWS and just wanted to see, that contract structure, should we assume that sort of HELSI-2 rolls into that, or are they two separate things if there's additional work that the government wants to do on HELSI-2? Just a quick cleanup on that sort of announcement. I noticed that the ceiling value for nLIGHT was listed as $607 million, and then I think the Department of War put out a ceiling value for the second vendor and yourself of 847. Should we sort of read into that you're sort of getting basically about 75% of that contract if the ceiling values are reached, or would you caution us against that? Thank you.

Speaker #3: Stephanie and Scott, John, congrats on another nice set of results. I think I'll stay with JLWS and just wanted to see that contract structure.

Speaker #3: Should we assume that sort of healthy two rolls into that, or are they two separate things? If there's additional work that the government wants to do on healthy two.

Speaker #3: And then just a quick cleanup on that sort of announcement. I noticed that the ceiling value for NLIGHT was listed as $607 million, and then I think the Department of War put out a ceiling value for the second vendor and yourself of $847.

Speaker #3: Should we sort of read into that that you're sort of getting three basically about 75% of that contract if the ceiling values are reached, or is that would you caution us against that?

Speaker #3: Thank you.

Speaker #4: No, second question first, your math is right on that, Jon. So the $627 is the ceiling for the contract that we were awarded? And then to your first part of your question, healthy two and JLWS are two separate contracts.

Scott Keeney: No. Second question first. Your math is right on that, Jan. The $627 is the ceiling for the contract that we were awarded. To your first part of your question, HELSI-2 and JLWS are two separate contracts. JLWS has a particular scope of work that was defined in our release and in the Department of War's release, and HELSI-2 remains on track for us to deliver the 1-megawatt laser late in 2026.

Speaker #4: JLWS has a particular scope of work that was defined in our release and in the Department of War's release. And healthy two remains on track for us to deliver the one megawatt laser latent 2026.

Speaker #3: Perfect. Thanks, John. If I may, with a quick follow-up—there was some recent announcement on the inventory Squad Vehicle Heavy program. I think they wanted to procure just three prototypes initially, but there's plans for 600 vehicles over the lifetime.

Jan Engelbrecht: Perfect. Thanks, Jan. If I may, with a quick follow-up. There was some recent announcements on the Infantry Squad Vehicle-Heavy program. I think they want to procure just three prototypes initially, but there's plans for 600 vehicles over the lifetime. I think the whole idea that the government wants to do there is to sort of have a hybrid onboard power, sort of a generator and then a battery. I think that directly would benefit nLIGHT, just as we think about sort of mobile platforms that can actually have enough power to house these laser weapon systems. Is that how you guys are seeing it? Are you seeing enough work being done and sort of maybe call it DoD funding or just investments in general that are going to actually solving the power bottleneck?

Jan-Frans Engelbrecht: Perfect. Thanks, Jan. If I may, with a quick follow-up. There was some recent announcements on the Infantry Squad Vehicle-Heavy program. I think they want to procure just three prototypes initially, but there's plans for 600 vehicles over the lifetime. I think the whole idea that the government wants to do there is to sort of have a hybrid onboard power, sort of a generator and then a battery. I think that directly would benefit nLIGHT, just as we think about sort of mobile platforms that can actually have enough power to house these laser weapon systems. Is that how you guys are seeing it? Are you seeing enough work being done and sort of maybe call it DoD funding or just investments in general that are going to actually solving the power bottleneck?

Speaker #3: And I think the whole idea that the government wants to do there is to sort of have a hybrid onboard power, sort of a generator and then a battery.

Speaker #3: And I think that directly would benefit nLIGHT, just as we think about mobile platforms that can actually have enough power to house these laser weapon systems.

Speaker #3: Is that how you guys are seeing it? And are you seeing enough work being done, maybe in terms of VC funding or just investments in general, that are actually going toward solving the power bottleneck?

Speaker #3: Because it does seem like beam quality and lethality are not really the issue here for laser weapon systems. It's power constraints. So I just wanted to get your thoughts on that.

Jan Engelbrecht: Because it does seem like beam quality and lethality is not really the issue here for laser weapon systems, it's power constraints. Just wanted to get your thoughts on that. Thank you.

Jan-Frans Engelbrecht: Because it does seem like beam quality and lethality is not really the issue here for laser weapon systems, it's power constraints. Just wanted to get your thoughts on that. Thank you.

Speaker #3: Thank you.

Speaker #4: Yeah, Jon, I think that program is one example of improvements in the broader set of technology that is important here, and you're exactly right.

Scott Keeney: Yeah, Jan, I think that program is one example of improvements in the broader set of technology that is important here, and you're exactly right that having power supplies continue to improve is important. It's one of many programs that are going on that are addressing those issues, ground, naval, airborne, other platforms. Important work going on there. We're seeing progress there.

Speaker #4: Having power supplies continue to improve is important, but it's one of many programs that are addressing those issues. Ground, naval, airborne, and other platforms—all have important work going on there.

Speaker #4: And we're seeing progress there.

Speaker #3: Perfect. Thanks, Scott. Appreciate it. Thanks for taking my question.

Jan Engelbrecht: Perfect. Thanks, Scott. Appreciate it. Thanks for taking my question.

Jan-Frans Engelbrecht: Perfect. Thanks, Scott. Appreciate it. Thanks for taking my question.

Speaker #4: Thanks, Jon.

Scott Keeney: Thanks, Jan.

Speaker #1: Your next question comes from the line of Greg Palm with Craig Holum. Greg, your line is open. Please go ahead.

Operator: Your next question comes from the line of Greg Palm with Craig-Hallum. Greg, your line is open. Please go ahead.

Speaker #6: Yeah, thanks for taking the follow-up. Just given this $17 million impact, I'm just curious how that is impacting your assumptions by segment. And so, I guess my question is: Can you give us a little bit better sense of how you're thinking about revenue?

Greg Palm: Yeah, thanks for taking the follow-up. Just given this $17 million impact, I'm just curious how that is impacting your assumptions by segment. I guess my question is, can you give us a little bit better sense of how you're thinking about revenue? Was there no change to defense relative to what you were thinking a couple of weeks ago, and this is 100% coming out of industrial and micro fab? Of the two, is there one where it's more impacted versus the other?

Speaker #6: I'm like, was there no change to Defense relative to what you were thinking a couple of weeks ago? And this is coming out of Industrial and Micro Fab.

Speaker #6: And of the two, is there one where it's more impacted versus the other?

Speaker #4: Yeah, so first, Greg, the demand—when we talk about a strong demand environment, as you've seen in the first two quarters of the year—it really has been broad-based.

Scott Keeney: Yeah. First, Greg, the demand, when we talk about a strong demand environment, as you've seen in Q1 and Q2 of the year, it really has been broad-based. When we look at our expected unfulfilled demand in Q3 at the midpoint of our guide, certainly much more of it is coming from the commercial end markets than the defense end markets. As you know, there's some commercial items that we sell that are reported as A&D. It's not 100% of it, but it's largely commercial-oriented in terms of the shortfall.

Speaker #4: And then, when we look at the expected unfulfilled demand in the third quarter at the midpoint of our guide, certainly much more of it is coming from the commercial end markets than the defense end markets.

Speaker #4: But as you know, there's some commercial items that we sell that are reported as A and D. So it's not 100% of it, but it's largely commercial oriented in terms of the short fall.

Speaker #6: I guess what I'm getting at, I mean, should we assume that commercial revenues are down significantly year over year because of this or not necessarily?

Greg Palm: I guess what I'm getting at, should we assume that commercial revenues are down significantly year-over-year because of this, or not necessarily?

Speaker #4: No, I mean, Greg, we don't guide with that level of specificity. I think what we talked about at the end of 2025 was that there was going to be a headwind from the cutting and welding business.

Scott Keeney: No. Greg, we don't guide with that level of specificity. I think what we talked about at the end of 2025 was that there was going to be a headwind from the cutting and welding business. We've done a little bit better than we thought there. The additive manufacturing business has had better demand and better performance than we had anticipated, and as has the microfabrication market, right? We've talked about a kind of through cycle range of $8 to $12 million a quarter. We've been performing this year on the upper end of that range, and we would have expected that to continue in H2, if not for some of these supply chain challenges. The demand is still there. Timing of execution, that's where we're a little bit less certain around Q4 at this point.

Speaker #4: We've done a little bit better than we thought there. The additive manufacturing business has had better demand and better performance than we had anticipated.

Speaker #4: And as has the microfabrication market, right? We've talked about a kind of through-cycle range of $8 to $12 million a quarter.

Speaker #4: We've been performing this year at the upper end of that range, and we would have expected that to continue in the second half of the year, if not for some of these supply chain challenges.

Speaker #4: So the demand is still there. Timing of execution, that's where we're a little bit less certain around Q4 at this point.

Speaker #6: Yeah. Okay. I think you're clear. Thanks.

Greg Palm: Yeah. Okay. I think you're clear. Thanks.

Speaker #4: Thank you.

Scott Keeney: Thank you.

Speaker #1: We have reached the end of the Q&A session. I will now turn the call back to John Marchetti for closing remarks.

Operator: We have reached the end of the Q&A session. I will now turn the call back to John Marchetti for closing remarks.

Speaker #2: Thank you, everyone, for joining us this afternoon and for your continued interest in NLIGHT. We will be participating in several investor conferences over the next several weeks, and we look forward to speaking with you during those events and throughout the quarter.

John Marchetti: Thank you, everyone, for joining us this afternoon and for your continued interest in nLIGHT. We will be participating in several investor conferences over the next several weeks, and we look forward to speaking with you during those events and throughout the quarter. Have a great day.

Speaker #2: Have a great day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 nLIGHT Inc Earnings Call

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