Hello, and welcome to the nLIGHT fourth quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Chief Financial Officer, Joe Corso. Joe, please go ahead. Thank you. Good afternoon, everyone. I'm Joe Corso, nLIGHT's Chief Financial Officer. With me today is Scott Keeney, nLIGHT's Chairman and CEO. Today's discussion will contain forward-looking statements, including financial projections and plans for our business. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call, and we undertake no obligation to update publicly any forward-looking statement except as required by law. During the call, we will 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 release, which can be found on the investor relations section of our website. I will now turn the call over to Scott. Thank you, Joe. Our revenue performance in 2022 reflects the continuing evolution of our business model. Revenue declined 10% to $242 million, driven by a 62% decline in revenue to customers in China, which now represents less than 10% of our business. We also experienced a 23% decline in our government-funded research programs due to timing of key programs. During 2022, we saw continued growth in our product revenue outside of China that grew 14% to a record $171 million. In particular, strong execution of our strategic growth initiatives enabled us to achieve 21% growth in industrial and microfabrication revenue outside of China this year, which grew to a record $133 million, more than double the revenues achieved in these markets in 2020. There are two fundamental themes I would like to highlight and describe further on our call today: our focus on markets outside of China and our progress on key operations initiatives. I will begin with our focus on key growth markets outside of China. In Q2 of 2018, the quarter of our IPO, revenue from customers in China represented over 45% of our total revenue, while in Q4 of 2022, China represented just 9% of our revenue. As our exposure to markets in China has decreased, we have increased our products revenue from customers outside of China by more than 50% since 2020. In the microfabrication end market, full year 2022 revenue declined approximately 11% to approximately $62.8 million due to a 51% year-over-year decline in China that began in the middle of the year and remained soft through Q4. COVID-related lockdowns and macroeconomic softness in China had a significant impact on our revenue during the year. Unlike the industrial cutting market in China, the Chinese microfabrication market remains an attractive market for nLIGHT. We continue to supply a wide range of high power, high brightness semiconductor lasers to a diverse set of customers in China, and we continue to see strong design and activity in China. We expect revenue to increase as lingering COVID effects dissipate, customer inventories decline, and the China macro environment improves. Outside of China, 2022 revenue grew approximately 11% year-over-year. We saw strong growth throughout the year that culminated in record quarterly revenue in the third quarter. We continue to believe that nLIGHT's microfabrication business will benefit as lasers continue to be adopted in a wider range of manufacturing processes in the auto, consumer, communications, electronics, display, medical, and semiconductor end markets. We are particularly encouraged by the adoption of our laser products for medical applications, which continue to gain traction with customers, and we expect to be more significant contributor to nLIGHT revenue during the course of 2023. As we anticipated in Q4, the demand environment in microfabrication was soft during the quarter. Total microfabrication revenue decreased by 34% year-over-year to $11.4 million or 20% of total revenue, which on a percentage of revenue basis is a record low. Turning to the industrial end market, industrial revenue declined 4% year-over-year in 2022 to approximately $91.1 million, representing 38% of sales. Outside of China, however, industrial revenue increased 27% year-over-year to a record $81.9 million and more than doubled versus the full year 2020. On a percentage basis, industrial revenue from customers outside of China increased from 45% in 2020 to nearly 90% in 2022. In the fourth quarter, industrial revenue increased 6% year-over-year to $23 million. More importantly, industrial revenue from customers outside of China increased 13% to approximately $21.2 million, a record high. nLIGHT's industrial business transformed significantly over the last several years. When we went public in 2018, our revenue was driven by delivering increasingly more powerful lasers to China-based customers, primarily in the metal cutting market. Over an 18-month period, the proportion of sales that we categorize as high power more than doubled from 24% to 58%. At the same time, we continue to invest in our programmable laser technology and engage deeply with our non-China strategic customers as they sought to leverage our reliable, programmable, and field serviceable lasers to further differentiate their products in the marketplace. We prioritize technology and product development in 2022, release products for each of these end markets we serve in cutting, welding, and additive manufacturing. In cutting, we continue to leverage our programmable beam shaping technology to enable our customers to offer machine tools that are optimized for a wide range of metal applications. For example, in 2022, we introduced a new 20 kilowatt programmable beam shaping fiber laser that offers significant improvements in power, performance, and flexibility. In welding, we continue to focus on delivering solutions tailored for the rapidly growing e-mobility battery market. New product introductions that incorporate proprietary sensor-based process monitoring solutions have expanded our market opportunity and are currently being used or evaluated by customers globally. In additive manufacturing, we added several important new strategic customers during the year and continued to add new products to our portfolio. Specifically, we released a 1.5 kilowatt version of our single mode programmable laser. The 25% plus increase in power that our 1.5 kilowatt Corona CFX laser offers has been well received by multiple customers and will further increase the product-productivity of their tools. As the market continues to shift towards multi-laser tools, we believe we are uniquely positioned to enable our customers to drive productivity improvements that will enable additive manufacturing to gain share on traditional, subtracted, and other legacy manufacturing technologies. Finally, in aerospace and defense, our revenue declined 16% year-over-year in 2022 to approximately $88.2 million, representing 36% of total sales. The primary driver of lower revenue in 2022 was a 23% year-over-year decline in project-based revenue. As we've mentioned in the past, our project-based revenue can fluctuate with the timing and execution of programs. We continue to believe that directed energy will be a long-term growth driver for nLIGHT. Last quarter, we reported excellent progress in our key 300 kilowatt high energy laser program, HELSI, which we expect to formally conclude in early Q2. We believe that our track record and vertically integrated business model, which enables us to develop products from chip to beam control, positions us very well for additional directed energy work with the U.S. government. Our vertical integration offers us opportunity to capitalize on directed energy activity at multiple levels of vertical integration. We are a supplier of diodes, fiber amplifiers, and beam combined lasers. In the fourth quarter, Congress approved a 50% increase in the U.S. directed energy budget from approximately $1 billion last year to approximately $1.5 billion this year. The significant increase in budget further solidifies our perspective that directed energy is a key part of the U.S. DoD's modernization effort and offers us significant long-term opportunities for growth. Our core defense business, which was down approximately 4% year-over-year in 2022, includes products related to proximity detection, range finding, countermeasures, and guidance systems. These products are typically sold through long-term contracts and can run for years or even decades, but can fluctuate quarter-over-quarter. In the fourth quarter, our defense revenue declined approximately 22% year-over-year to approximately $22.3 million, representing 39% of total revenue. Development revenue, nearly all of which is related to the directed energy projects, decreased approximately 32% year-over-year, due primarily to the timing of projects. Our core defense business declined approximately 8% year-over-year, but increased by approximately 36% versus the third quarter of 2022. Today, nLIGHT is a critical supplier to several defense customers, and we are well positioned to continue our work on existing programs. We are also under contract on several new classified programs that leverage our broad semiconductor and fiber laser technology and manufacturing capabilities. While revenue from each of these programs is relatively small today, each of these funded programs are expected to transfer to production in 2024 and could present significant long-term recurring revenue opportunities for us. We believe our core laser design, process engineering know-how, and secure U.S. manufacturing capabilities positions us well to continue to pursue and support additional opportunities in the defense market. While we continue to transition to growth markets outside of China, we have also made significant changes to operations in the last 12 months. First, we made significant investments in automating our manufacturing capabilities outside of China during 2022. We believe that these investments will strengthen our position as a trusted domestic laser provider for the defense market, particularly the directed energy market, better align our manufacturing and strategic customers in key regions of our commercial growth, and better control our manufacturing output. Although this transition has not been easy, we made great progress during the fourth quarter as we completed the installation and qualified the critical equipment required for our automation. As we grow, we will have a manufacturing footprint and strategy that will be able to mitigate supply chain shocks, better serve our customers, and enhance long-term profitability as we execute our growth strategy. Moreover, we significantly improved our processes and manufacturing flow so that our equipment is much more flexible and can be better utilized to manufacture a wider range of our semiconductor lasers across each of our end markets. On January first, 2023, the scale and diversity of our business has changed significantly over the last several years. In order to support our long-term growth objectives, we decided that we needed to implement an ERP system that was better suited to our business needs today and could support the future needs of our business. Enhanced functionality across operations, sales, engineering, and finance will enable us to better manage our business going forward. Although new ERP implementations are never easy, our initial implementation went as well as could be expected. Third, in the fourth quarter, we also embarked on a plan to better align all areas of our business with our most critical, near and long-term strategic objectives. As a result, we made several important strategic decisions. First, we implemented a targeted reduction in force that resulted in a headcount reduction of approximately 5% of total employees. Combined with natural attrition, more targeted hiring and load balancing our facilities, our total number of employees decreased from approximately 1,350 as of June 2022 to approximately 1,150 at the end of December. We also performed a rigorous review of each of our end markets and projects in order to focus on opportunities that we believe will have the biggest impact on driving long-term growth and profitability. While we elected not to pursue certain projects, we elected to invest in others. What didn't change is our strategic focus. We continue to believe that advancements in manufacturing and aerospace and defense will continue to require a greater number of lasers. Before turning the call over to Joe to discuss our full year and fourth quarter financial results, I'd like to comment on what we are seeing as we enter 2023. While overall demand trends seem to be consistent with what we saw in the fourth quarter, our long-term growth strategies are firmly in place. We continue to see strong design activity with our customers in microfabrication and industrial end markets. Although our business is not immune from global macro conditions, we are well positioned for growth as we progress through the year. We continue to expect lasers to proliferate across each of our end markets, and we remain particularly optimistic about our positioning in aerospace and defense, which is rapidly transitioning. I will now turn the call over to Joe Corso. Thank you, Scott. Total revenue for the fourth quarter of 2022 was approximately $56.7 million, slightly above the midpoint of guidance compared to $67.4 million for the fourth quarter of 2021. Product revenue was approximately $45.4 million, slightly above the midpoint of guidance compared to $50.9 million in Q4 of 2021. Consistent with annual trends, there was a decrease in product revenue to customers in China and in development revenue for our defense customers. That was partially offset by an increase in revenue to industrial customers outside of China. For the full year, total revenue declined by 10% to $242 million. It's important to emphasize that revenues for industrial and microfabrication products outside of China increased 21% year-over-year to a new record of $133 million. Offsetting this strong growth was the 16% decline in aerospace and defense, primarily due to the timing of project-based spending and a 62% decline in revenues from China. Gross margin was 10.2% for the fourth quarter of 2022, compared to 26.6% for the fourth quarter of 2021. Gross margins in the fourth quarter included approximately $6 million or 13 percentage points of products gross margin in non-routine inventory charges, primarily related to business restructuring, including automation and elevated scrap and reserve charges. We don't expect to incur further inventory charges of this magnitude in the near future. Total gross margin was 21% for 2022, compared with 28.6% for 2021. Products gross margin was 24.6% for 2022, compared to 35.6% for 2021. Products gross margin in 2022 was negatively impacted by product sales mix, increases in labor and material costs, decreased manufacturing efficiency due to excess capacity, which included the government-imposed shutdown of our Shanghai facility in the second quarter, and an increase in non-routine inventory charges, as previously discussed. Non-GAAP operating expenses were $19.5 million for the fourth quarter of 2022, compared with $19.3 million in the prior quarter and $18.8 million in Q4 of 2021. The year-over-year increase in operating expenses were driven primarily by higher overall investment in R&D to support our product roadmap and long-term growth activities. As our strategic focus has shifted to markets outside of China, we have continually reviewed the appropriate level of operating expenses for our business. In the fourth quarter, we executed a targeted reduction in force, which, combined with a broader review of non-headcount related spending, is expected to reduce our non-GAAP OpEx by approximately $2 million per quarter beginning in the first quarter of 2023. We believe that our current level of OpEx are sufficient to support our long-term growth objectives. On a GAAP basis, the fourth quarter of 2022 included restructuring charges of approximately $3.9 million. These restructuring charges include employee severance and the write-off of investments of certain in-process capital projects related to manufacturing capacity. non-GAAP loss for the fourth quarter of 2022 was $12.3 million or $0.27 per diluted share, compared with a non-GAAP net loss for the fourth quarter of 2021 of $200,000 or $0.01 per diluted share. GAAP net loss for the fourth quarter of 2022 was $22.7 million or $0.50 per diluted share, compared to a net loss for the fourth quarter of 2021 of $8.8 million or $0.20 per diluted share. Adjusted EBITDA for the fourth quarter of 2022 was -$9.5 million, compared to $3.1 million for the fourth quarter of 2021. Without the impact of the non-routine inventory charges previously discussed, adjusted EBITDA for the fourth quarter of 2022 would have been within our guidance. Turning to cash flow. In the fourth quarter of 2022, cash flow from operations was breakeven versus a $10.1 million use of cash from operations in Q4 2021. The use of cash from operations steadily decreased through 2022, and the changes we've made to our expense structure better positions us for both near and long-term cash flow generation. Capital expenditures in the fourth quarter were approximately $4.9 million versus $7.6 million in the fourth quarter of 2021. Over the last several years, we have invested heavily in CapEx, primarily related to the automation of our facilities in the US. Much of our significant CapEx are behind us, and we expect a significant decrease in CapEx in 2023. We ended Q4 with cash equivalents, and investments of approximately $108 million and no debt. DSO for the quarter was 65 days. Inventory at the end of the quarter was $67.6 million, representing 131 days. Our inventory declined by approximately $13 million versus the third quarter. Approximately $6 million of the decline was related to the non-routine inventory charges discussed earlier, while the balance was related to improved working capital management. Turning to guidance for the first quarter. Based on the information available today, we expect Q1 revenue to be in the range of $50 million-$56 million. The midpoint of $53 million includes approximately $41 million of product sales and approximately $12 million of development sales. Turning to gross margin. Q1 products gross margin is expected to be in the range of 20%-24%. Development gross margin to be approximately 7%, resulting in an overall gross margin range of 17%-20%. For the first quarter, we expect adjusted EBITDA to be approximately negative $4 million to negative $1 million. With that, I will turn the call over to the operator for questions. Thank you very much. We will now begin the question-and-answer session. To ask a question, you may press star one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Greg Palm with Craig-Hallum Capital Group. Please go ahead. Hey, good afternoon. Thanks for taking the questions here. I wanted to start out, Scott, I think you made a comment about demand trends being consistent with last quarter. I'm curious, has anything changed, you know, either by segment, by geography? Has your visibility gotten any better versus, you know, last quarter? Yeah. Thanks, Greg. Yeah, I wouldn't say there's anything substantially different in the near term. I think we are seeing strength in the, you know, the process we're working through on design wins and longer-term programs. In terms of the near-term outlook and certainly the macro environment, no substantial change. I think everybody's asking a question about what's going on in China after, you know, relaxing COVID restrictions in our micro business. You know, just coming off of Chinese New Year there, just limited visibility there right now. In the industrial markets broadly, you know, we are seeing the stimulus in the US and elsewhere lead to CapEx, there's no dramatic changes that we're seeing relative to Q4. If we think about, you know, results in fiscal 22, what do you see as the primary growth drivers for the company this year versus last? Yeah, the primary growth drivers that we see going forward are, you know, largely in, you know, the industrial markets. Notably, we're certainly highlighting where we're seeing strong traction in additive manufacturing in particular, and then aerospace and defense. It's not only directed energy, it's other applications there. Those are the kinda two primary themes that will be driving our growth going forward. Okay. I know welding hasn't been a huge focus area for you in the past. Seems to be a little bit more interest activity there recently. Does that change how you're, you know, looking at that space or not necessarily? Yeah. Yeah, certainly there's a lot going on there. We've had some good success, but it's, you know, relatively smaller. And certainly, in additive, we think that, you know, our position with the products we have there are quite distinctive, and we are enabling next generation tools. We're highlighting relatively more of the growth we see there. Yeah. Okay. I will leave it there. Best of luck. Thanks. Thanks, Greg. The next question is from Jim Ricchiuti with Needham. Please go ahead. Hi. good afternoon. This is Chris Rangone for Jim. it would given the, in the gross margin guidance that excluding the charge that there's a sequential step-down from this quarter to Q1, I was just wondering if you could talk about what's embedded in that margin guidance and sort of the puts and takes there. Thank you. Yeah, sure. Chris, this is Joe. I think the biggest driver between the Q4 and the Q1 margin guide, volume is the first, right? We're at a lower revenue projection for Q1. As you know, we've got a vertically integrated model, so we can You know, leverage our fixed costs, but the same thing happens when you go the other way. I think that's point 1. The second point is really on the mix side. As Scott talked about before, we've seen now several quarters of weakness in our microfabrication business in China. If you look at where we're in Q4 for micro, it was a relatively low revenue as a proportion of our total revenue. As we see that trend, at least through the first quarter, sort of continuing, it's the primary driver of why you've seen a little bit of degradation in the, in the products gross margin in the first quarter guide. Great. Thank you. For the new products that you've highlighted as in the industrial segment, could you talk about what percentage of industrial sales they represent and whether they were meaningful contributors to growth in Q4 and how you expect those products to ramp going forward? Thank you. Sure, Chris, this is Joe again. In terms of the new products in the fourth quarter that we talked about, they were not big revenue contributors in the industrial market. That being said, they are critical to the growth going forward. If you look back at our history, driving further performance, let's just use the cutting market, for example, right? We've really increased the amount of revenue that we're driving from our programmable products, we've now taken those programmable products, and we are continuing to support our customers' roadmaps for higher power. Scott talked a little bit about the welding market. We've got products in the welding market today, the products that we released over the last couple of quarters are much more optimized to address that market. Furthermore, being integrated with some of our, we acquired Plasmo about a year or so ago in the process monitoring space. We're, we're able to do more, you know, more of a solution sale there. Then, finally, in additive, we released our first single mode laser for the additive market back in sort of early 2021, late 2020. We've increasingly increased the power of that product. If you think about the customers and what they're really looking for is further, you know, further productivity of their tools. So, as we move forward, we think these products will contribute a much greater share of the industrial revenue. Today, not, not enormous contributors. Got it. Thanks very much for taking the questions. Sure. The next question comes from Ruben Roy with Stifel. Please go ahead. Hi. Thank you. Scott, the first question I had was just to see if we can get a little more detail around the strategic review, which sounds like it's largely complete now. I wanted to dig in a little bit on sort of the projects that you've decided that are potentially not, I guess, to use the term additive to sort of the near to or medium to longer term strategic direction of the company. If you can give us a little bit of color around, you know, how you were thinking about those projects? I don't know if I missed this on the call, but whether or not some of those investments are going into other areas that you do think are going to be, you know, instead of medium to longer term, maybe more near to medium term growth areas. Any other detail you can provide on, you know, how you came to sort of the new direction there. The quick follow-up on that point is, you know, just to talk a little bit more about the manufacturing as well. It sounds like you're close or the qualifications on the equipment are done. Customer qualifications required next? You know, kind of what's the next process to get, you know, manufacturing up and running from this point forward? Thank you. Yeah. Great. Appreciate the question, Ruben. The first on the strategic review, yeah, there are certainly some opportunities. We see many opportunities for our high-power lasers across all the markets we serve. You know, some are a little bit further out, and as we went through a review process, some of those we decided to, you know, shift resources from things that are a little further out to areas where we've got, you know, stronger traction today and frankly, you know, nearer term growth markets. For example, you know, there's some areas of, say, the cutting market that, you know, are interesting but, you know, a little bit further out and not as rapidly growing as, say, the additive market where we have a very strong position. We also have, you know, further integration of not only the laser, but also, you know, the software that we have. We're doing more in that area. We're seeing, you know, good progress in the engagement with key customers in that space, that, you know, leads to nearer term revenue. That's an example of what we're talking about there. We did that across, you know, a whole host of things, and we have, you know, There's a long list of opportunities that we assess all the time, we'll continue to do that. That was the nature of what we went through there. Then switching to the operations Yeah, I think, we have, you know, we've invested significantly in this, you know, strategic shift in our manufacturing footprint. Certainly what we highlighted is, the fact that we have qualified the processes up and running, the ramping. In terms of customer qualification, there's nothing substantial there. You know, the products are no different than our previous products. The processes we use to make them are different, and it's not typical that we have customers that require a qualification of those processes. Yeah, we are ramping up and, you know, we are adjusting, you know, the exposure we have. Certainly as we progress this year, you know, the volume that, we rely on operations in China, will go down significantly and, as we ramp up elsewhere. Okay. Thanks for all that detail, Scott. I just had a quick follow-up then for Joe. That question would be, you know, sort of with the operational changes now largely behind you and, you know, some of the costs taken out of the system and the strategic roadmap updated, if you can give us an update if there's any changes to the way you're thinking about break even run rate of revenue at EBITDA and, you know, if anything's changed with the way, you know, you're thinking about the mix of business in terms of, you know, longer term margin structure for the overall company, you know, either higher or lower, you know, based on kind of the roadmap from here. Thanks, Joe. Yeah, no, absolutely, Ruben. Good question. No real change to the way that we're thinking about the adjusted break-even level. You know, last quarter we talked about $55 million-$60 million as the break-even level. The range that we gave there really is predicated upon the mix of business that we see in any given quarter from an end market perspective. Also, within each end market, the mix can be quite different depending on product variant and customer and region and the like. I think as we gave that break-even EBITDA guidance, Ruben, it was, you know, with the thought of where we are today. It also assumed that we were going to look at the overall operating expenses at the company, the overall manufacturing expenses at the company. As I think about the business going forward, you know, remember we're vertically integrated, and so we do have a fixed cost infrastructure that as revenue grows, right? The biggest driver of driving profitability really is first higher volume and being able to, you know, better absorb our fixed costs, right? You've seen that even if you go back historically in our financials, the ability to do that. The second piece is the flow-through, right? I mean, if we're able to control our OpEx, which I think we're doing a good job of, and if we're able to, you know, maintain the overhead that we have today, and as we make further shifts from a manufacturing perspective, we should drive better fall through margins that go to the bottom line. You know, sort of the third piece, which is related a little bit to what I said about overhead, is just, you know, trying to reduce our manufacturing costs, whether that's by, you know, true product cost itself or just looking at the overall manufacturing, infrastructure at the company. There's still obviously more to do there. In terms of near term, no, I wouldn't, nothing has really changed in terms of break-even and EBITDA, Ruben. Got it. Thanks for all that detail. Thank you, Scott and Joe. Thank you. Thank you. The next question comes from Mark Miller with The Benchmark Company. Please go ahead. Thank you for the question. For 2023, are you seeing, in terms of aerospace, any new programs or opportunities out there, and are they major programs? And when do you think these opportunities would be realized? Short answer, Mark, is yes. We are seeing large and a broad range of opportunities both in the U.S. and with allies. Those new programs will, you know, lead to design win, you know, achievements in 2023. In terms of revenue, more material in the following years. micro was soft. Is that just the general cutting in wafer fab equipment spending? Is that what's impacting micro and you expect that to be soft for the next couple quarters? Yes, Mark. I would say that generally our micro fab business is probably tied more to broader electronics production, drilling, you know, holes in circuit boards and, you know, scribing, you know, flat panel displays. There is certainly a bit of semiconductor capital equipment, but, you know, we're probably more correlated to broader electronics production than we are to the ups and downs of the WFE market. Yeah, as we look at, as we look at demand there, right? Demand, you know, certainly for the first quarter, it's part of the reason for our guide is that, you know, micro, demand remains muted. Just a couple, housekeeping things. What should we think about in terms of tax rate for this year? Also a breakout of fiber laser sales above 6 kilowatts, below 2 kilowatts? Yeah. On, on tax rate, we still have a pretty significant NOL position, we pay, you know, taxes in some of our foreign jurisdictions. Yeah, you can think about that as maybe $200,000 per quarter. You know, in terms of the power level, Mark, we would expect that, you know, the... You know, you have to look at it by market, but in the cutting market, right, I mean, today, most of our sales are six kilowatts and above. We're selling, you know, very little below six. I mean, a little bit, but very little of sort of what we call medium power. That was about 20% of our revenue in Q4. Really, the sub 2 kilowatt power level is mostly focused around the additive manufacturing space. The proportion just really depends on how, you know, on how those 2 applications grow. Without sort of talking specifically about the year, we do expect over, you know, over time that the additive business is faster growing for us, and a smaller base than the cutting business is. I think over time you'll continue to see that sub 2 kilowatt power level represent a greater proportion of total industrial laser sales. Can you provide the actual% in the December quarter for 6 kW and under 2 kW? Yeah, sure. 6 kilowatt was 49%, 2 to 5 kilowatt was 21%, and sub 2 kilowatt was 30%, Mark. Thank you. No problem. The next question is a follow-up from Greg Palm. Please go ahead. Yeah, thanks. I'll be quick. Joe, you mentioned some of the operating cost reductions. I think you said $2 million a quarter. Was that off of the Q4 run rate, or was some of that $2 million already baked into what you reported in Q4? No, really the way to think about that is probably off of the Q4 run rate, Greg. Okay. Yeah, I think that's the way, the right way to think about it. Got it. Then just in terms of, you know, gross margins, you know, for the year, other than volume, how should we be thinking about the trajectory given the, you know, facility consolidations as we progress throughout the year? Yeah, Greg, so I think that, as I mentioned earlier, right, really the three drivers, right? Volume, mix, and manufacturing. As we look at where we are today, we only have enough visibility to provide a quarter out of guidance. That being said, our expectations is that, you know, the second half, depending on how the macro shapes up, could be, you know, very nice for us, right? I mean, a lot of that is related to, as Scott was talking about, defense, and there's some design wins there. You know, to the extent that we are able to achieve those higher revenue levels as we move out through the year, you know, we would expect the flow through gross margin, really have nice flow through on the gross margin side. Yep. Volume's still pretty important. Probably the most important. Ab-ab-absolutely. Yeah. Volume is still pretty important. Certainly as we optimize, you know, manufacturing and we remove, you know, redundant overhead, that will certainly help. The first order is we just need to drive revenue growth. Yep. Okay, I'll leave it there. Thanks. You're welcome. At this time, there are no more lines in the queue. This concludes our question and answer session. I would like to turn the conference back over to Joe Corso for closing remarks. Yeah. Thank you, everybody, for joining today, and we look forward to speaking with you during the quarter. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.