nLIGHT, Inc. Common Stock 2026 Q2 Earnings Call

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. 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.

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.

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. 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. Our pipeline of new opportunities in directed energy significantly expanded with the recent award of the Department of Defense's Joint Laser Weapon System contract.

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 U.S. 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, 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. 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 DoD 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.

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 U.S. 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 the second quarter. Our work on the production of our one megawatt CBC 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.

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 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 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 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.

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, and 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 second quarter financial results.

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, 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. Turning to the results. Total revenue in the second quarter was $82.6 million, an increase of 34% compared to $61.7 million in the second quarter of 2025, and 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.

Development revenue of $23.2 million grew 11% year-over-year and 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, and execution across multiple other directed energy and laser sensing programs. Second quarter revenue from our commercial markets, which include industrial and microfabrication, was $25.3 million, an increase of 20% year-over-year and 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 and an increase in sales associated with last-time buys of our cutting and welding products.

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. Total gross margin in the second quarter was 31.1%, compared to 29.9% in the second quarter of 2025 and 33.1% last quarter. 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. Products gross margin in the second quarter was 41.2%, compared to 38.5% in the second quarter 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.

Products 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 products gross margin in the quarter was 42.4%, compared to 40% in the second quarter 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 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.