Business Wire | Aug 5, 2020 04:06PM EDT

nLIGHT, Inc. Announces Second Quarter 2020 Results

Aug. 05, 2020

VANCOUVER, Wash.--(BUSINESS WIRE)--Aug. 05, 2020--nLIGHT, Inc. (Nasdaq: LASR), a leading provider of high-power semiconductor and fiber lasers used in the industrial, microfabrication, and aerospace and defense markets, today reported financial results for the second quarter of 2020.

"Our strong second quarter financial performance demonstrates growing customer demand for our differentiated product offerings across each of our end markets," commented Scott Keeney, nLIGHT's President and Chief Executive Officer. "Business activity in China was robust throughout the quarter in both the industrial and microfabrication end markets, driving overall revenues above the high-end of our outlook. Adoption of our higher power fiber lasers continues to grow, both inside and outside of China, and we are encouraged by the early customer response to our fiber laser welding solutions and the long-term potential in this application space.

"With the improved revenue performance and continued cost controls we expanded our already strong net cash position to over $105 million at the end of the second quarter," continued Keeney. "As we look at the third quarter, we currently see strong demand trends across each of our end markets and geographies. This is particularly true for our industrial business outside of China."

Second Quarter 2020 Financial Highlights

Three Months Ended June 30,

(In thousands, except percentages) 2020 2019 % Change

Revenues $ 52,138 $ 48,048 8.5 %

Gross margin 25.0 % 33.0 %

Income (loss) from operations $ (6,049 ) $ 805 (851.4 )%

Operating margin (11.6 )% 1.7 %

Net loss $ (6,830 ) $ (155 ) (4,306.5 )%

Adjusted EBITDA^(1) $ 3,256 $ 5,455 (40.3 )%

Adjusted EBITDA, as percentage of 6.2 % 11.4 % revenues

^(1) A reconciliation of the non-GAAP information provided here to the mostdirectly comparable GAAP metric has been provided in the financial statementtables included in this release.

Revenues of $52.1 million for the second quarter of 2020 were up 8.5% compared to $48.0 million for the second quarter of 2019. Gross margin was 25.0% for the second quarter of 2020 compared to 33.0% for the second quarter of 2019. GAAP net loss for the second quarter of 2020 was $(6.8) million, or net loss of $(0.18) per diluted share, compared to net loss of $(0.2) million, or net loss of $0.00 per diluted share, for the second quarter of 2019. Non-GAAP net loss for the second quarter of 2020 was $(0.1) million, or non-GAAP net loss of $0.00 per diluted share, compared to non-GAAP net income of $2.2 million, or non-GAAP net income of $0.05 per diluted share, for the second quarter of 2019. Reconciliations of the non-GAAP information provided here to the most directly comparable GAAP metric have been provided in the financial statement tables included in this release.

Outlook

For the third quarter of 2020, nLIGHT expects revenues to be in the range of $54.0 million to $60.0 million, gross margin to be in the range of 22.0% to 26.0%, and Adjusted EBITDA to be in the range of $1.0 million to $5.0 million.

Investor Conference Call at 2:00 p.m. Pacific Time, Wednesday, August 5, 2020

Parties interested in listening to nLIGHT's quarterly conference call may do so by dialing 1-833-535-2198 (U.S., toll-free) or +1-412-902-6775 (international and toll), with the conference title: nLIGHT Second Quarter 2020 Earnings. The call can also be accessed via the web by going to nLIGHT's Investor Relations page at http://investors.nlight.net.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release contains non-GAAP financial results, including Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net income (loss) per share, basic and diluted. We use Adjusted EBITDA to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA is a meaningful measure of performance as it is commonly utilized by us and the investment community to analyze operating performance in our industry. Similarly, we believe that providing non-GAAP net income (loss) and non-GAAP net income (loss) per share, basic and diluted, is useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of stock-based compensation expense and other non-recurring items. However, the non-GAAP financial measures presented herein are specific to us and may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating them.

We define Adjusted EBITDA as net income adjusted for income tax expense, other non-operating expense or income, interest expense or income, depreciation and amortization, stock-based compensation, acquisition and integration-related costs and other special items as determined by management, as applicable. We define non-GAAP net income (loss) as GAAP net income (loss) adjusted for stock-based compensation, acquisition and integration-related costs, and other special items as determined by management, as applicable. We define non-GAAP net income (loss) per share, basic and diluted, as non-GAAP net income (loss) divided by common weighted-average shares outstanding during the respective period plus the dilutive effect of any common stock equivalents during the period, if applicable.

Tables presenting the reconciliation of Adjusted EBITDA to net income (loss), as well as the reconciliation of non-GAAP net income (loss) and non-GAAP net income (loss) per share, basic and diluted, to net income (loss) and net income (loss) per share, basic and diluted, respectively, the two most directly comparable GAAP financial metrics, are included at the end of this press release.

We have not reconciled our outlook for Adjusted EBITDA because unrealized and realized foreign exchange gains and losses cannot be reasonably calculated or predicted nor can the probable significance be determined at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Safe Harbor Statement

Certain statements in this release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Words such as "outlook," "guidance," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions may identify these forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding expected revenues, gross margin, and Adjusted EBITDA and our expectations regarding customer demand for our products, operating results, and financial position, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including but not limited to: (1) the impact on our sales and operations of public health crises in China, the United States or internationally, including the current COVID-19 pandemic, (2) our ability to generate sufficient revenues to achieve or maintain profitability in the future, (3) fluctuations in our quarterly results of operations and other operating measures, (4) downturns in the markets we serve could materially adversely affect our revenues and profitability, (5) our high levels of fixed costs and inventory levels may harm our gross profits and results of operations in the event that demand for our products declines or we maintain excess inventory levels, (6) the competitiveness of the markets for our products, (7) our substantial sales and operations in China, which expose us to risks inherent in doing business there, (8) the effect of current and potential tariffs and global trade policies on the cost of our products, (9) our manufacturing capacity and operations may not be appropriate for future levels of demand, (10) our reliance on a small number of customers for a significant portion of our revenues, and (11) the risk that we may be unable to protect our proprietary technology and intellectual property rights. Additional information concerning these and other factors can be found in nLIGHT's filings with the Securities and Exchange Commission (the "SEC"), including other risks, relevant factors and uncertainties identified in the "Risk Factors" section of nLIGHT's Annual Report on Form 10-K or subsequent filings with the SEC. nLIGHT undertakes no obligation to update publicly or revise any forward-looking statements contained herein to reflect future events or developments, except as required by law.

The nLIGHT logo and "nLIGHT" are registered trademarks or trademarks of nLIGHT, Inc. in various jurisdictions.

About nLIGHT

nLIGHT, Inc. is a leading provider of high-power semiconductor and fiber lasers for industrial, microfabrication, aerospace and defense applications. Our lasers are changing not only the way things are made but also the things that can be made. Headquartered in Vancouver, Washington, nLIGHT employs over 1,200 people with operations in the U.S., China and Finland. For more information, please visit www.nlight.net.

nLIGHT, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Revenue:

Products $ 45,104 $ 48,048 $ 82,034 $ 89,909

Development 7,034 - 13,319 -

Total revenue 52,138 48,048 95,353 89,909

Cost of revenue:

Products 32,597 32,177 60,497 60,524

Development 6,485 - 12,299 -

Total cost of 39,082 32,177 72,796 60,524 revenue^(1)

Gross profit 13,056 15,871 22,557 29,385

Operating expenses:

Research and 9,472 6,494 18,010 12,916 development^(1)

Sales, general,and administrative 9,633 8,572 17,333 16,716 ^(1)

Total operating 19,105 15,066 35,343 29,632 expenses

Income (loss) from (6,049 ) 805 (12,786 ) (247 ) operations

Other income (expense):

Interest income (65 ) 740 218 1,490 (expense), net

Other income (298 ) (907 ) (414 ) (87 ) (expense), net

Income (loss)before income (6,412 ) 638 (12,982 ) 1,156 taxes

Income tax expense 418 793 1,323 2,546

Net loss $ (6,830 ) $ (155 ) $ (14,305 ) $ (1,390 )

Net loss per $ (0.18 ) $ 0.00 $ (0.38 ) $ (0.04 ) share, basic

Net loss per $ (0.18 ) $ 0.00 $ (0.38 ) $ (0.04 ) share, diluted

Shares used in pershare calculations:

Basic 38,177 37,065 38,003 36,880

Diluted 38,177 37,065 38,003 36,880

^(1)Includesstock-based compensation asfollows:

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Cost of revenues $ 339 $ 267 $ 684 $ 476

Research and 2,275 711 4,057 1,269 development

Sales, general, 3,423 1,403 5,059 2,545 and administrative

$ 6,037 $ 2,381 $ 9,800 $ 4,290

nLIGHT, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



As of

June 30, 2020 December 31, 2019

Assets

Current assets:

Cash and cash equivalents $ 120,899 $ 117,252

Accounts receivable, net 23,891 27,126

Inventory 50,611 46,131

Prepaid expenses and other current assets 9,883 8,084

Total current assets 205,284 198,593

Property and equipment, net 41,349 27,747

Lease right-of-use assets 11,080 -

Intangible assets, net 8,849 10,006

Goodwill 9,972 9,872

Other assets, net 4,840 3,748

Total assets $ 281,374 $ 249,966



Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 20,343 $ 12,700

Accrued liabilities 12,179 11,605

Deferred revenue 2,191 679

Lease liabilities 2,480 -

Current portion of long-term debt 5 51

Total current liabilities 37,198 25,035

Non-current income taxes payable 6,656 6,429

Long-term lease liabilities 8,896 -

Long-term debt 15,000 -

Other long-term liabilities 2,299 1,894

Total liabilities 70,049 33,358

Stockholders' equity:

Common stock - par value 15 15

Additional paid-in capital 345,917 336,732

Accumulated other comprehensive loss (2,848 ) (2,685 )

Accumulated deficit (131,759 ) (117,454 )

Total stockholders' equity 211,325 216,608

Total liabilities and stockholders' equity $ 281,374 $ 249,966

nLIGHT, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Six Months Ended June 30,

2020 2019

Cash flows from operating activities:

Net loss $ (14,305 ) $ (1,390 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation 3,614 3,205

Amortization 2,815 1,276

Reduction in carrying amount of right-of-use 1,425 - assets

Provision for losses on accounts receivable 62 33

Stock-based compensation 9,800 4,290

Loss on disposal of assets - 5

Changes in operating assets and liabilities:

Accounts receivable, net 3,012 (4,334 )

Inventory (4,457 ) (6,987 )

Prepaid expenses and other current assets (1,801 ) 3,192

Other assets (2,131 ) (1,800 )

Accounts payable 7,400 1,111

Accrued and other long-term liabilities 1,243 (25 )

Deferred revenues 1,519 (141 )

Lease liabilities (1,428 ) -

Non-current income taxes payable 234 382

Net cash provided by (used in) operating 7,002 (1,183 ) activities

Cash flows from investing activities:

Purchases of property, plant and equipment (17,040 ) (6,110 )

Capitalization of patents (628 ) (806 )

Net cash used in investing activities (17,668 ) (6,916 )

Cash flows from investing activities:

Proceeds from debt financing 15,000 -

Principal payments on debt and capital leases (45 ) (50 )

Proceeds from employee stock plan purchases 685 762

Proceeds from stock option exercises 857 915

Tax payments related to stock award issuances (2,157 ) (480 )

Net cash provided by financing activities 14,340 1,147

Effect of exchange rate changes on cash (27 ) 135

Net increase (decrease) in cash and cash 3,647 (6,817 ) equivalents

Cash and cash equivalents, beginning of period 117,252 149,478

Cash and cash equivalents, end of period $ 120,899 $ 142,661

Supplemental disclosures:

Cash received for interest $ 316 $ 1,552

Cash paid for income taxes 1,015 1,393

Accrued purchases of property, equipment and 993 952 patents

Supplemental disclosure of noncash investing and financing activities:

Right-of-use assets obtained in exchange for $ 12,408 $ - lease liabilities

nLIGHT, Inc.

Reconciliation of GAAP Financial Metrics to Non-GAAP

(In thousands, except per share data)

(Unaudited)

Reconciliation of NetLoss to Adjusted EBITDA

Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

Net loss $ (6,830 ) $ (155 ) $ (14,305 ) $ (1,390 )

Income tax expense 418 793 1,323 2,546

Other (income) 298 907 414 87 expense, net

Interest income 65 (740 ) (218 ) (1,490 ) (expense), net

Depreciation and 3,268 2,269 6,429 4,481 amortization

Stock-based 6,037 2,381 9,800 4,290 compensation

Acquisition andintegration-related - - 50 - costs

Adjusted EBITDA $ 3,256 $ 5,455 $ 3,493 $ 8,524

Reconciliation of GAAP to Non-GAAP Net Income (Loss), and GAAP to Non-GAAP Net Income (Loss) per Share, Basic and Diluted

Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

Net loss $ (6,830) $ (155) $ (14,305) $ (1,390)

Add back:

Stock-based compensation^ 6,037 2,381 9,800 4,290 (1)

Amortization of purchased 656 - 1,312 - intangibles

Acquisition and - - 50 - integration-related costs

Non-GAAP net income (loss) (137) 2,226 (3,143) 2,900



GAAP weighted average 38,177 37,065 38,003 36,880 shares outstanding

Non-GAAP weighted average 38,177 37,065 38,003 36,880 number of shares, basic

Dilutive effect of common - 4,391 - 4,487 stock equivalents

Non-GAAP weighted average 38,177 41,456 38,003 41,367 number of shares, diluted



Non-GAAP net income (loss) $ 0.00 $ 0.06 $ (0.08) $ 0.08 per share, basic

Non-GAAP net income (loss) $ 0.00 $ 0.05 $ (0.08) $ 0.07 per share, diluted

(1) There is no income tax effect related to the stock-based compensation adjustment due to the full valuation allowance in the U.S.

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CONTACT: Jason Willey Investor Relations and Corporate Development nLIGHT, Inc. (360) 567-4890 jason.willey@nlight.net