Good afternoon, and welcome to the twenty-second annual CL King Best Ideas Conference. I'm Thomas Hayes, senior industrial analyst here at CL King. We're very pleased to have the management team of nLIGHT and Joseph Corso, CFO, with us this afternoon. For those of you in the audience, if you wish to ask a question, you can type that question into the Ask a Question box at the bottom of your webcast screen. All questions will be sent to me, and I'll try to integrate those into today's discussion. As I mentioned, we have Joseph Corso, CFO, with us. He's gonna start off with a presentation, and then we'll jump into some questions. So Joseph, thanks for coming. Yeah, great. Thanks, Thomas, and thanks for having us at the conference again this year. So I'll just start with a very brief overview of who nLIGHT is. nLIGHT is a publicly traded high-power semiconductor and fiber laser business. We were founded about 25 years ago. Scott Keeney is the current CEO, and he was also a founder of the company. We think of ourselves very much as a dual-use, vertically integrated technology company with specialization in both semiconductor and fiber laser technology. We address three key end markets and applications: the industrial, microfabrication, and aerospace and defense. I'll touch on all of them here in a few minutes. We are a global business. We have several facilities in the U.S., in Europe, and in Asia. Today, our run rate is about $210 million of revenue. We've got over $100 million of cash and no debt. So talking about vertical integration, our vertical integration really starts with what we call the semiconductor device, and extends through delivering a high-power laser to a target. So, on the semiconductor device side, we have a gallium arsenide wafer fabrication facility in southwest Washington. We create our own laser diodes. The next picture over is what we package those diodes together. So we take now up to over 30 diodes and put them into a single package that can produce many hundred watts of output power. We also draw our own fiber. We have a fiber facility in Lohja, Finland. We then take all of that technology together, and we can integrate it into a continuous wave fiber laser, and as you'll see further on in the presentation, these fiber lasers are really what are used in our industrial markets and in our defense markets, and then finally, we are able to very precisely control and combine those laser beams and deliver them with an extraordinary level of precision either to an industrial work piece or, in our defense business, you know, many kilometers away and identify and process targets, if you will. One of our key end markets that I talked about before is what we call the microfabrication end market. This is a very broad set of applications. We are selling a laser that is often the energy source for other pulse lasers, and these lasers serve applications in the semiconductor capital equipment, laser marking, medical, and underneath those end markets that are really a wide range of applications. So the company, frankly, was founded twenty-five years ago with the thought that lasers would continue to find end markets and applications to displace legacy technologies, and indeed, what we've seen is that happen over the last couple of decades. So we're finding new and interesting use cases for our lasers very consistently. And then thinking about the go-to-market in microfabrication is important because it's different than some of our other applications and end markets. As we talked about on the prior slide, we sell at what is called the semiconductor laser level, so where you see this element package. That product is sold to solid-state laser companies, who then integrate that laser into an overall laser system that is used for a wide range of applications, as I've said on the prior page, whether we're drilling holes in a printed circuit board or processing an OLED display or using it to mark an electronic part. This is all housed in what we describe as our microfabrication end market. Our next end market, also commercial end market, is the industrial end market, and really there are three key applications that we serve in industrial. It's metal cutting, welding, and then additive manufacturing, which some people call metal 3D printing. Thinking about our technology and what makes us unique in the cutting market, is that nLIGHT has developed a proprietary means through which to shape the laser beam that comes out of the end of the laser. So for example, we are able to, using software inside of our fiber, create very distinctive beams that each have a comparative advantage. So for example, if you want to cut very thin sheet metal, you would use what's called a flat top beam on the top portion of the page, and the metal that is processed looks something like what's on the top right-hand side of the page. Alternatively, if you need to cut very thick metal, you want a different beam profile. And so you'll hear this described as a ring or a donut mode beam, because the laser beam itself looks sort of like a donut. That is used if you wanna move very quickly to process very thick metal. So if you can imagine buying a machine tool, you have the ability to process very different types of metal, you know, inside of the same tool, which offers obvious flexibility benefits to end users. A second area that we are focused on in the industrial market is welding, right? And we use the same programmable beam technology to create laser welds that are both very productive and reduce deleterious effects like, you know, spatter and, you know, smoke and things like that. So, another key end market for us is welding. The third and fastest growing end market in the nLIGHT industrial business is additive manufacturing. And again, thematically, we are also using the same core programmable beam technology to shape the beam, and we can switch from one beam to another in, you know, just a matter of tens of milliseconds. So if you can imagine a part that looks something like what is on the right-hand side of this page, there are certain areas of this part that are best produced and processed with, you know, that small flat top beam. You know, you can think of it almost as if you were painting with a very fine paintbrush. On the other hand, you may wanna process very coarse geometries inside of a part, in which it was much more advantageous to use this large donut mode beam, and the impacts of being able to use programmable beam technology inside of metal additive manufacturing tools is quite significant. What the industry has seen in metal 3D printing over the years is an increasing number of lasers being integrated into a tool and having pretty big impacts on the improvement in productivity or, you know, translated effectively lower cost per part, and that's represented here on the gray line. What we believe that our laser, which we call Corona AFX offers, is even further productivity gains. You can see there are some pretty significant advantages to using a programmable nLIGHT laser in a metal 3D printing tool, because it ultimately results in better potential productivity out of the tool itself. Moving away from the commercial markets into the aerospace and defense markets, aerospace and defense is a critical opportunity for growth for our business. We've been in the A&D market almost since the company's inception, and we serve a very wide range of applications with our A&D lasers. They range from we have lasers in space, we have lasers on helicopters providing countermeasures, we have lasers that are providing guidance of missile guidance system. And then, you know, more recently, now we've expanded into something called directed energy, where we are using extremely high power lasers in the, you know, tens and hundreds of kilowatts to defend a wide range of vehicles, whether they are ships or military bases or, you know, vehicles that are on the move. And so we leverage the same fundamental vertical integration as we do for our commercial business. Much of the technology that we've developed, we can leverage into the defense market. Really, the big difference between what's happening on the commercial side of our business and the defense side of our business from a technology perspective, is that we take it one step further, and we are able to precisely control very high energy lasers, to enable them to propagate through the atmosphere and deal with turbulence and other atmospheric effects that would otherwise have a significant impact on laser beam performance. And so, Thomas, with that, I will turn it back over to you. Joseph, that was a great update. Appreciate it, as always. I guess maybe big picture, stepping back a little bit, certainly, I think you had a slide up there, but, you know, over the last, call four or five years, there's been, you know, the lasers, if you will, the power sources have become much more, A, powerful, and B, energy efficient. Just wanna get your thoughts on the possibility of an upgrade cycle. You know, you've had certainly not the proliferation of industrial lasers. It's not huge, but, I mean, you and others have, in the industry, have been selling industrial lasers for, you know, four, five, 10 years. Is there the opportunity to start replacing some of that installed base? Yeah, it's a great question, Thomas. I think that really what is going to drive, you know, the upgrade cycle, frankly, is that, fiber laser technology, you know, is maturing, but it's not yet fully mature. And frankly, there are a lot of lasers in the field today that were built with, much lower power, less precisely controlled technology that is available in the market today. So as we think about end customers are more likely to, you know, frankly, replace a machine tool than they are to simply upgrade the laser inside of the machine tool. But what we're seeing is that, you know, with new use cases and, you know, the much higher productivity that is afforded by lasers like ours with that level of programmability, you know, makes it a good economic trade-off for a customer, right, to upgrade its machine tool that has nLIGHT's programmable laser in it. I mean, frankly, we are seeing some of our customers develop platforms exclusively around our beam shaping capability, and those are the type of things that are really driving the upgrade cycle for us. Now, would that extend, and this may be a little far afield, to, to... We've seen, at least in the, in the welding space, you know, a number of factors where you're starting to see different players kinda come together on, on some solutions, like thinking cobot solutions, where it's- Mm-hmm ... it's welding. Are you guys participating in any of that these days? Yeah, I mean, for us, welding is a really interesting, it's an interesting opportunity. I mean, I think that, it has frankly been a bit of a crowded field. I mean, there are a number of good fiber laser companies out there that make quite good lasers for, welding applications, whether it's traditional welding or it's EV battery welding. And so, you know, nLIGHT has recognized this, that this is an interesting market, but, you know, for us to compete, we've really started to focus- or not started, we have been focusing on areas of our, technologies and capabilities that are distinctive from what else is out there in the market today and offer us a real competitive advantage. So, you know, for example, a few years ago, we, acquired a business out of Europe called, Plasmo. Plasmo provided a very unique process monitoring capability. So, you know, you can imagine as a weld is being performed, monitoring and measuring the integrity of that weld, particularly as, you know, it goes into, you know, high cost of failure applications, automotive, you know, being one, right? There was a desire to integrate more of that technology into lines. Now, Plasmo as a standalone business is interesting for us, but I think what's more interesting is the way that we are starting to strategically integrate the capabilities that we acquired via Plasmo into the core nLIGHT laser technology. So there are some elements of our laser technology that we are finding with work with customers, you know, in our apps labs, in their apps labs, and then integrating Plasmo, that are starting to, you know, enable us to offer a, you know, compelling solution to the marketplace. So obviously, the broader EV battery industry today, right, is in a little bit of an overcapacity situation, but it's giving companies like nLIGHT an opportunity to do more work with companies that when they're not struggling simply to meet demand or put together, you know, the next factory, it gives us an opportunity to demonstrate our capabilities. So certainly, that's an area of our business, Thomas, that we are optimistic for growth, but admittedly today, it's a relatively small part of our business. No, fair point. Kind of before we get too far afield in the industrial markets, I wanna make sure we talk about the A&D market, 'cause I think it's certainly different than the core industrial markets, whether it's how you interface with your customers, you know, how the development cycle is probably longer. Maybe just, you know, for those new to the story, just kinda give a little bit of color on how you guys, you know, participate and win in the A&D market. Yeah, great. So our A&D business, we really can think about in two distinct parts. There is the directed energy laser business, and then there is what we are referring to as laser sensing. So let me just spend a little bit of time on what each of them mean. Like I said earlier in my presentation, directed energy is really focused on building very high-power lasers that are used to defend against drones or rockets and missiles and mortars, and things like that. And so, nLIGHT has been in that market for quite a long time. We are addressing that market at virtually every level of our vertical integration, meaning we are selling our semiconductor lasers into that market. We're selling our fiber amplifiers into that market. We are selling beam combination or beam combined lasers into that market. So, you know, that's one that today the U.S. government is spending, you know, somewhere on the order of $500 million-$1 billion every year. You know, just this year alone, we sent about $1 billion, or earmarked about $1 billion of funding to Israel. Our allies internationally are also interested in bolstering their directed energy laser capabilities. And so being a company that is able to address all areas of that market with the range of our products has really given us great opportunities for growth there. Now, historically, we've won some really significant contracts. About five years ago, we won a just under a $50 million contract to build a 300 kilowatt laser. Just last year, we won the second phase of that contract, $171 million to build a one megawatt laser. And so, you know, we believe that we are a you know, important part of this overall directed energy laser value chain, and, you know, we're competing with, you know, with primes and other laser companies, but we feel like our we are a defense company. Defense isn't just, like, a piece of our pie, right? We wanna leverage our vertical integration, and defense is gonna be a key driver of our business, particularly on the directed energy side. Particularly on the directed energy side, excuse me. On the other side of our business is also quite compelling. So this is what we call laser sensing. So rather than, you know, propagate a laser beam through the atmosphere to, you know, to knock down a drone, our laser sensing products are using lasers to sense, objects or detect objects or target objects. And so, you know, this is a business that we've been in for quite some time. Last quarter, we announced a, you know, a new $25 million contract for a long running program that is laser sensing. We expect that program to grow and get bigger over the next several years. And then we've leveraged our, you know, ability to sort of design and build highly ruggedized lasers to, you know, a range of other programs that we expect, you know, could be as big or bigger than our directed energy business, you know, over the next handful of years. No, that was great. Maybe two follow-up questions along those lines. One, 'cause I believe on your industrial side, you kind of go through distribution for a number of your sales. On the A&D side, is it more a direct to the, you know, customer model? And then just maybe talk about the margin profile outlook for A&D over the next period. Yeah, great question, Tom. So absolutely, the industrial or our commercial business, I would say most of our sales are direct, but we absolutely use a traditional- Right ... you know, distributor model, and in some areas we use, you know, we use a rep model. But in the defense business, it's much more of a direct to the customer model. But that being said, there are sort of two areas in which we sit. Oftentimes, particularly as we've won some of these larger contracts, the HELSI-2, that one megawatt, $171 million contract, we are effectively acting as a prime, right? Where our contract is direct with the U.S. government. There's another directed energy laser contract that we have, which is about a $35 million contract, where we are a sub-prime. So our customer in that case is a prime contractor. So, we are certainly always direct to a customer in the defense side. It just depends on who the customer is. The customer could be. We could act either as a prime or a sub-prime. Maybe just to kind of, along those lines, maybe discuss, and I think this was partly done because of your opportunity on A&D side, was to outsource some of your manufacturing of your industrial products. Maybe just talk about how that's going, and then, you know, what opportunity that gives you. Yeah. So, you know, maybe just to step back a bit, Tom. When nLIGHT went public in 2018, and we had that same vertical integration strategy, but at that point in time, north of 50% of our business, the quarter in which we went public was in China. And so if you fast-forward to today, plus or minus 5% of our business is in China. And so therefore, right, I mean, the risks associated with operating in China and selling into, you know, Chinese customers is pretty well known at this point in time. We made a decision as a company to not exit China, but really, onshore our manufacturing. And as part of onshoring that manufacturing, much of which today is earmarked for the defense business, where there are, you know, clearly benefits to being a domestic laser supplier, and then in certain instances, right, there are regulations that require you to be a domestic manufacturer. We also outsource some of our fixed costs to a third-party contract manufacturer in Thailand that was able to, you know, very quickly get up to speed and help us with our, you know, higher volume commercial-oriented businesses, which effectively, you know, variabilized a portion of our manufacturing spending. And so, you know, as we look at the different levers we have for growth and profitability, having the ability to certainly manufacture our own components here in Southwest Washington, as well as, you know, flex and meet incremental demand when high capacity is required, but also, you know, flex down when there are, you know, less robust demand times, you know, is an important component of how we wanted to set up the overall cost structure of the business. No, that's great. Maybe kind of going back to the industrial markets, you know, kind of looking out over the next, you know, three to five years, how do you see or what do you see as some of the larger demand drivers, you know, for cutting, welding, and additive, because I think cutting's been a little bit stagnant. That's probably reflective of the industrial activity. But, you know- Yeah ... is there anything out there that you guys see as far as, you know, moving the needle broadly for the market? Not, maybe not specifically for you, but just looking at the market. Yeah, I mean, I think there are. I mean, I think it really does. You have to kind of get into each of the markets, because they're each sort of nuanced and specific. But I think what I'd like to, you know, first hit is the metal 3D printing market, because that's an area that we believe we are still in the very, very early innings. And we think it has the ability to be a pretty significant. I don't want to use the word disruptor, but, you know, has the ability to sort of move out of what are today really interesting, but sort of niche-y markets, to markets that require much more serious production, right? So, and we think the key to driving that is, you know, just lowering the overall cost per part. Now, you know, today's multi-laser, you know, metal additive manufacturing tools can do some really incredible things. The challenge is, when you look at the overall, you know, total cost of ownership, and then the cost of the part that is coming out the other side, those economics just need to improve. But we're convinced that when those economics improve, you're really going to see a lot of growth in that area. And so for nLIGHT, right, we are, if not the, a critical component, selling the laser into those metal 3D printing tools, and we believe that we can, you know, really help our customers, you know, drive productivity improvements in their, in their tools, thereby, you know, driving a higher and higher adoption. So I'd say, Thomas, that's probably the, you know, the biggest one for me or for us in the industrial space today. You know, certainly we'll see, we do believe that the EV market is going to rebound, and, you know, the amount of, you know, capacity, while potentially in an overcapacity situation today, we think that's gonna rebound. Some of our, you know, new products will be well situated there. And then, you know, cutting is probably the largest, but the slowest growth of the market today. Some of that is simply because from a global competitive perspective, you've got, you know, the domestic Chinese laser vendors that are offering, you know, reasonably good lasers at low cost that just, you know, the decline in ASP is probably more than offsetting the increase in unit sales of those lasers in that market. A couple kind of follow-up questions along those lines. One, you mentioned EVs. I think you and I spoke here before. That's not a big direct market for you, is it, EVs? No, not today, because we address the EV battery market primarily through our welding applications, which is, you know, frankly, just not that significant a part of our revenue today. On your comment on ASPs, maybe just kind of discuss what the environment is like, you know, these days on pricing? Yeah, I mean, I think we've seen different periods of ASP pressure. I mean, certainly in the 2019 timeframe, we probably saw the most significant amount of ASP pressure. And I think what we're seeing in more recent times is, you know, certain areas of the globe are beginning to purchase machine tools that have lasers from domestic Chinese vendors integrated in, and so we're seeing pricing pressure there. You know, for us, we've, you know, we're really focusing on our programmable lasers, right? Which are, you know, distinctive and offer us a competitive advantage. But, you know, more generally, I would say, Thomas, that we're seeing price pressures in those two areas. Okay. Maybe shifting to a couple financial questions. One, you know, with a debt-free balance sheet, how are you guys thinking about capital deployment? Yeah, I mean, we are, I mean, first and foremost, we are a growth company, and so we want to allocate our capital. We think there's plenty of organic growth ahead of us, so we wanna make sure that we have enough capital and a healthy enough balance sheet to make investments where we need. You know, today we are slightly below our Adjusted EBITDA breakeven number, and therefore our cash flow breakeven number. So, you know, we wanna make sure that we've got, you know, certainly more than enough cushion, right, to withstand any downturns, and also, you know, invest in areas where we need to invest. And then I would tell you that M&A is probably the next area that we, you know, are seeking. We have a very high bar for what we are looking at, but we've had a handful of very successful acquisitions in the past. Neutronics, for example, which we acquired in late 2019, added the beam combination technology in the directed energy market, and now we are making, you know, system-level decisions, and that goes all the way back into, you know- Mm-hmm ... how we design our laser diodes. So, you know, we are constantly looking for opportunities, opportunities like that. Maybe kind of not quite along those lines, but you've talked historically about achieving a certain run rate of revenue to, you know, leverage your fixed cost base and kind of get you to that breakeven and profitability. Can you just remind me where that, that range kind of exists? Yeah, we've said and we maintain that $50 million-$55 million of overall revenue is the level that we need for Adjusted EBITDA breakeven. And so that really is unchanged. Now, that can move a little bit, you know, quarter over quarter, depending on the mix of development revenue and product revenue, and then the mix of business within those, but generally that's a good number for us. Okay. Did have one question come in from online, and I'm not sure if you can answer, but I'll throw it out there. The question was: Was nLIGHT involved in the recent SpaceX laser communication trials completed the last manned flight? No, I mean, we can't talk about that specific customer there. I'm sorry. Just passing it along. Yeah. No, I appreciate it. Maybe just get back, 'cause I think it is a pretty unique part of your solution base, the adjustable beam. And you touched on it, you know, numerous times. But from a customer point of view, does that just open up more opportunities for the customers? You know, it certainly depends on the application. I mean, if you think about a customer, for example, right, where the laser is integrated into a machine tool that's going to cut metal, if you are somebody who owns or is seeking to purchase a machine tool, and you want to be able to, you know, process very thin sheet metal one day and, you know, thicker steel the next day, I mean, having the ability to shape the beam and then change the cutting profile inside of the tool, I think is beneficial, right? I think that, you know, those beam programmability results in, you know, less post-processing and better edge quality, et cetera, so there are clearly customer benefits there. I think today, though, where the most benefits are coming from beam shaping is really in metal 3D printing. Oh, okay. I mean, one of the biggest challenges that the industry has in, you know, improving productivity is that, you know, you've got lots and lots of bespoke and unique geometries that need to be shaped layer by layer. Having the flexibility to use, you know, a small spot size on one hand and a, you know, donut mode or ring mode on the other hand, and a handful of indexes in between, we think is going to have pretty significant benefits on our customers' ability to build tools that are much more productive than what is, you know, in the market today. Okay. Joseph, I think we're about out of time. Again, it's always great to talk to you, learn more about the company, and appreciate you guys participating in our conference today. Yeah, Thomas, thank you very much for supporting us, and appreciate everybody tuning in. Have a great day. Thank you.