UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One)
For the quarterly period ended March 31, 2024
or
For the transition period from to
Commission File Number 001-38462
________________________________________________________
(Exact name of Registrant as specified in its charter)
________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||||||||
(Address of principal executive office, including zip code)
(360 ) 566-4460
(Registrant's telephone number, including area code)
__________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Exchange on which Registered | ||||||
$0.0001 per share | ||||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | ☒ | Non-Accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||||||||
| Emerging Growth Company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2024, the Registrant had 47,565,204 shares of common stock outstanding.
| TABLE OF CONTENTS | |||||
| Page | |||||
Part II. Other Information | |||||
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
nLIGHT, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
| As of | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Restricted cash | |||||||||||
| Lease right-of-use assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Deferred revenues | |||||||||||
| Current portion of lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Non-current income taxes payable | |||||||||||
| Long-term lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock - $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
1
nLIGHT, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenue: | |||||||||||
| Products | $ | $ | |||||||||
| Development | |||||||||||
| Total revenue | |||||||||||
| Cost of revenue: | |||||||||||
| Products | |||||||||||
| Development | |||||||||||
| Total cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Research and development | |||||||||||
| Sales, general, and administrative | |||||||||||
| Total operating expenses | |||||||||||
| Loss from operations | ( | ( | |||||||||
| Other income: | |||||||||||
| Interest income, net | |||||||||||
| Other income, net | |||||||||||
| Loss before income taxes | ( | ( | |||||||||
| Income tax expense | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | |||||||
| Shares used in per share calculations, basic and diluted | |||||||||||
See accompanying notes to consolidated financial statements.
2
nLIGHT, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Unrealized gains on available-for-sale securities | |||||||||||
| Comprehensive loss | $ | ( | $ | ( | |||||||
See accompanying notes to consolidated financial statements.
3
nLIGHT, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands)
(Unaudited)
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Issuance of common stock pursuant to exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized gains on available-for-sale securities | — | — | — | — | |||||||||||||||||||||||||||||||
| Cumulative translation adjustment, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Issuance of common stock pursuant to exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized gains on available-for-sale securities | — | — | — | — | |||||||||||||||||||||||||||||||
| Cumulative translation adjustment, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
4
nLIGHT, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||
| Depreciation | ||||||||||||||
| Amortization | ||||||||||||||
| (Increase) reduction in carrying amount of right-of-use assets | ( | |||||||||||||
| Provision for losses on (recoveries of) accounts receivable | ( | |||||||||||||
| Stock-based compensation | ||||||||||||||
| Loss on disposal of property, plant and equipment | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Inventory | ( | |||||||||||||
| Prepaid expenses and other current assets | ( | ( | ||||||||||||
| Other assets, net | ( | ( | ||||||||||||
| Accounts payable | ( | |||||||||||||
| Accrued and other long-term liabilities | ||||||||||||||
| Deferred revenues | ( | |||||||||||||
| Lease liabilities | ( | |||||||||||||
| Non-current income taxes payable | ||||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchases of property, plant and equipment | ( | ( | ||||||||||||
| Purchase of marketable securities | ( | ( | ||||||||||||
| Proceeds from maturities and sales of marketable securities | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from stock option exercises | ||||||||||||||
| Tax payments related to stock award issuances | ( | ( | ||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Effect of exchange rate changes on cash | ( | |||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | |||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | ||||||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosures: | ||||||||||||||
| Cash paid for income taxes | $ | $ | ||||||||||||
| Operating cash outflows from operating leases | ||||||||||||||
| Right-of-use assets obtained in exchange for lease liabilities | ||||||||||||||
| Accrued purchases of property, equipment and patents | ||||||||||||||
See accompanying notes to consolidated financial statements.
5
nLIGHT, Inc.
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation and New Accounting Pronouncements
Basis of Presentation
The accompanying unaudited consolidated financial statements of nLIGHT, Inc. and our wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The unaudited financial information reflects, in the opinion of management, all adjustments necessary for a fair presentation of financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Critical Accounting Policies
Our critical accounting policies have not materially changed during the three months ended March 31, 2024, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
New Accounting Pronouncements
ASU 2023-07
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We will adopt ASU 2023-07 in the fourth quarter of 2024 using a retrospective transition method. We are
currently evaluating the impact of this guidance on our consolidated financial statements.
ASU 2023-09
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid and is effective for fiscal years beginning after December 15, 2024. This ASU requires additional disclosures and, accordingly, we do not expect the adoption of ASU 2023-09 to have a material effect on our financial position, results of operations or cash flows.
Note 2 - Revenue
We recognize revenue upon transferring control of products and services and the amounts recognized reflect the consideration we expect to be entitled to receive in exchange for these products and services. We consider customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of our consideration of the contract, we evaluate certain factors, including the customer's ability to pay (or credit risk). For each contract, we consider the promise to transfer products, each of which is distinct, as the identified performance obligations.
We allocate the transaction price to each distinct product based on its relative standalone selling price. Master sales agreements or purchase orders from customers could include a single product or multiple products. Regardless, the contracted price with the customer is agreed to at the individual product level outlined in the customer contract or purchase order. We do not bundle prices; however, we do negotiate with customers on pricing for the same products based on a variety of factors (e.g., level of contractual volume). We have concluded that the prices negotiated with each individual customer are representative of the stand-alone selling price of the product.
We often receive orders with multiple delivery dates that may extend across several reporting periods. We allocate the transaction price of the contract to each delivery based on the product standalone selling price and invoice for each scheduled delivery upon shipment or delivery and recognize revenues for such delivery at that point, when transfer of control has occurred. As scheduled delivery dates are generally within one year, under the optional exemption provided by ASC 606-10-50-14a, revenues allocated to future shipments of partially completed contracts are not disclosed as performance obligations for point in time revenue. Further, we recognize, over time, revenue as per ASC 606-10-55-18 (invoice practical expedient) for our cost plus contracts and, accordingly, elect not to disclose
6
information related to those performance obligations under ASC 606-10-50-14b. As of March 31, 2024, we had $25 million of performance obligations relating to firm fixed price contracts that did not qualify for the aforementioned disclosure exemptions. We expect to recognize 75 % of these performance obligations by the end of 2024 and the remainder by the end of 2025.
Rights of return generally are not included in customer contracts. Accordingly, product revenue is recognized upon transfer of control at shipment or delivery, as applicable. Rights of return are evaluated as they occur.
Revenues recognized at a point in time consist of sales of semiconductor lasers, fiber lasers and other related products. Revenues recognized over time generally consist of development arrangements that are structured based on our costs incurred. For long-term contracts, we estimate the total expected costs to complete the contract and recognize revenue based on the percentage of costs incurred at period end. Typically, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials, subcontractors costs, other direct costs, and indirect costs applicable on government and commercial contracts.
Contract estimates are based on various assumptions to project the outcome of future events that may span several
years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer. Billing under these arrangements generally occurs within one month of the costs being incurred or as milestones are reached.
The following tables represent a disaggregation of revenue from contracts with customers for the periods presented (in thousands):
Sales by End Market
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Industrial | $ | $ | ||||||||||||
| Microfabrication | ||||||||||||||
| Aerospace and Defense | ||||||||||||||
| $ | $ | |||||||||||||
Sales by Geography
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| North America | $ | $ | ||||||||||||
| China | ||||||||||||||
| Rest of World | ||||||||||||||
| $ | $ | |||||||||||||
Sales by Timing of Revenue
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Point in time | $ | $ | ||||||||||||
| Over time | ||||||||||||||
| $ | $ | |||||||||||||
7
Our contract assets and liabilities were as follows (in thousands):
| Balance Sheet Classification | As of | ||||||||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||||||||
| Contract assets | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
| Contract liabilities | Deferred revenues and other long-term liabilities | ||||||||||||||||
Contract assets generally consist of revenue recognized on an over-time basis where revenue recognition has been met, but the amounts are subsequently billed and collected in a subsequent period. In our services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities recorded in deferred revenues on the Consolidated Balance Sheets. Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. For our product revenue, we generally receive cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable. For our contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.
During the three months ended March 31, 2024, we recognized revenue of $0.5 million that was included in the deferred revenues balance at the beginning of the period as the performance obligations under the associated agreements were satisfied.
Note 3 - Concentrations of Credit and Other Risks
The following customers accounted for 10% or more of our revenues for the periods presented:
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| U.S. Government* | ||||||||||||||
| Raytheon Technologies | (1) | |||||||||||||
| KORD Technologies | (1) | |||||||||||||
*Excludes sales to customers who sell our products and services exclusively to the U.S. Government
(1) Represents less than 10% of total revenues.
Note 4 - Marketable Securities
Marketable securities consist primarily of highly liquid investments with original maturities of greater than 90 days when purchased. Our marketable securities are considered available-for-sale as they represent investments that are available to be sold for current operations. As such, they are included as current assets on our Consolidated Balance Sheets at fair value with unrealized gains and losses included in accumulated other comprehensive loss. Any unrealized gains and losses that are considered to be other-than-temporary are recorded in other income, net on our Consolidated Statements of Operations. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in other income, net on our Consolidated Statements of Operations.
Realized gains were $0.7 million and unrealized gains were $0.1 million for the three months ended March 31, 2024. Realized gains were $0.4 million and unrealized gains were $0.2 million for the three months ended March
8
31, 2023. These unrealized gains are considered temporary and are reflected in the Consolidated Statements of Comprehensive Loss.
See Note 5 for additional information.
Note 5 - Fair Value of Financial Instruments
The carrying amounts of certain of our financial instruments, including cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities are shown at cost which approximates fair value due to the short-term nature of these instruments. The fair value of our term and revolving loans approximates the carrying value due to the variable market rate used to calculate interest payments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
•Level 1 Inputs: Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.
•Level 2 Inputs: Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 Inputs: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our financial instruments that are carried at fair value consist of Level 1 assets which include highly liquid investments and bank drafts classified as cash equivalents and marketable securities.
Our fair value hierarchy for our financial instruments was as follows (in thousands):
| March 31, 2024 | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Cash Equivalents: | ||||||||||||||
| Money market securities | $ | $ | $ | $ | ||||||||||
| Commercial paper | ||||||||||||||
| Marketable Securities: | ||||||||||||||
| U.S. treasuries | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
| December 31, 2023 | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Cash Equivalents: | ||||||||||||||
| Money market securities | $ | $ | $ | $ | ||||||||||
| Commercial paper | ||||||||||||||
| Marketable Securities: | ||||||||||||||
| U.S. treasuries | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
Cash Equivalents
9
The fair value of cash equivalents is determined based on quoted market prices for similar or identical securities.
Marketable Securities
We classify our marketable securities as available-for-sale and value them utilizing a market approach that uses observable inputs without applying significant judgment.
Note 6 - Inventory
Inventory consisted of the following (in thousands):
| As of | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process and semi-finished goods | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
Note 7 - Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
| Useful life | As of | ||||||||||||||||
| (years) | March 31, 2024 | December 31, 2023 | |||||||||||||||
| Automobiles | $ | $ | |||||||||||||||
| Computer hardware and software | |||||||||||||||||
| Manufacturing and lab equipment | |||||||||||||||||
| Office equipment and furniture | |||||||||||||||||
| Leasehold and building improvements | |||||||||||||||||
| Buildings | |||||||||||||||||
| Land | N/A | ||||||||||||||||
| Accumulated depreciation | ( | ( | |||||||||||||||
| $ | $ | ||||||||||||||||
10
Note 8 - Intangible Assets and Goodwill
Intangible Assets
The details of definite lived intangible assets were as follows (in thousands):
| Estimated useful life (in years) | As of | ||||||||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||||||||
| Patents | $ | $ | |||||||||||||||
| Development programs | |||||||||||||||||
| Developed technology | |||||||||||||||||
| Accumulated amortization | ( | ( | |||||||||||||||
| $ | $ | ||||||||||||||||
Amortization related to intangible assets was as follows (in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Amortization expense | $ | $ | ||||||||||||
Estimated amortization expense for future years is as follows (in thousands):
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| $ | |||||
Goodwill
The carrying amount of goodwill by segment was as follows (in thousands):
| Laser Products | Advanced Development | Totals | |||||||||||||||
| Balance, December 31, 2023 | |||||||||||||||||
| Currency exchange rate adjustment | ( | ( | |||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ||||||||||||||
Note 9 - Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
| As of | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| Accrued payroll and benefits | $ | $ | |||||||||
| Product warranty, current | |||||||||||
| Other accrued expenses | |||||||||||
| $ | $ | ||||||||||
Note 10 - Product Warranties
We provide warranties on certain products and record a liability for the estimated future costs associated with warranty claims at the time revenue is recognized. The warranty liability is based on historical experience, any specifically identified failures, and our estimate of future costs. The current portion of our product warranty liability is
11
included in the accrued liabilities and the long-term portion is included in Other long-term liabilities in our Consolidated Balance Sheets.
Product warranty liability activity was as follows for the periods presented (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Product warranty liability, beginning | $ | $ | |||||||||
| Warranty charges incurred, net | ( | ( | |||||||||
| Provision for warranty charges, net of adjustments | |||||||||||
| Product warranty liability, ending | |||||||||||
| Less: current portion of product warranty liability | ( | ( | |||||||||
| Non-current portion of product warranty liability | $ | $ | |||||||||
Note 11 - Stockholders' Equity and Stock-Based Compensation
Restricted Stock Awards and Units
Restricted stock unit ("RSU") and restricted stock awards ("RSA") activity under our equity incentive plan was as follows:
| Number of Restricted Stock Units (Thousands) | Weighted-Average Grant Date Fair Value | ||||||||||||||||
| Balance, December 31, 2023 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Balance, March 31, 2024 | |||||||||||||||||
| Number of Restricted Stock Awards (Thousands) | Weighted-Average Grant Date Fair Value | ||||||||||||||||
| Balance, December 31, 2023 and March 31, 2024 | $ | ||||||||||||||||
The total fair value of RSUs vested during the three months ended March 31, 2024, was $4.1 million. Awards outstanding as of March 31, 2024 include 0.8 million performance-based awards that will vest upon meeting certain performance criteria. No performance-based awards were granted during the three months ended March 31, 2024.
12
Stock Options
The following table summarizes our stock option activity during the three months ended March 31, 2024:
| Number of Options (Thousands) | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (Thousands) | ||||||||||||||||||||
| Outstanding, December 31, 2023 | $ | $ | |||||||||||||||||||||
| Options exercised | ( | ||||||||||||||||||||||
| Outstanding, March 31, 2024 | |||||||||||||||||||||||
| Options exercisable at March 31, 2024 | |||||||||||||||||||||||
| Options vested as of March 31, 2024, and expected to vest after March 31, 2024 | |||||||||||||||||||||||
Total intrinsic value of options exercised for the three months ended March 31, 2024 and 2023, was $0.1 million and $1.1 million, respectively. We received proceeds of $10,000 and $0.1 million from the exercise of options for the three months ended March 31, 2024 and 2023, respectively.
Stock-Based Compensation
Total stock-based compensation expense was included in our Consolidated Statements of Operations as follows (in thousands):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cost of revenues | $ | $ | ||||||
| Research and development | ||||||||
| Sales, general and administrative | ||||||||
| $ | $ | |||||||
Unrecognized Compensation Costs
As of March 31, 2024, total unrecognized stock-based compensation was $25.5 million, which will be recognized over an average expected recognition period of 1.7
Note 12 - Commitments and Contingencies
Leases
See Note 13.
Legal Matters
On March 25, 2022, Lumentum Operations LLC (Lumentum) filed a complaint against nLIGHT, Inc. and certain of its employees in the U.S. District Court for the Western District of Washington. The complaint alleges that Lumentum is the partial or full owner of certain of our patents and requests corresponding relief from the court. We are vigorously defending against Lumentum’s allegations. Loss in this matter is not probable or reasonably estimable and, as such, no loss contingency has been recorded.
From time to time, we may be subject to various other legal proceedings and claims in the ordinary course of business. As of March 31, 2024, we believe these matters will not have a material adverse effect on our consolidated financial statements.
Note 13 - Leases
We lease real estate space under non-cancelable operating lease agreements for commercial and industrial space. Facilities-related operating leases have remaining terms of 0.4 to 11.2 years, and some leases include options to extend up to 15 years. Other leases for automobiles, manufacturing and office and computer equipment have remaining lease terms of 0.4 to 4.6 years. These leases are primarily operating leases; financing leases are not material. We did not include any renewal options in our lease terms for calculating the lease liabilities as we are not
13
reasonably certain we will exercise the options at this time. The weighted-average remaining lease term for the lease obligations was 7 years as of March 31, 2024, and the weighted-average discount rate was 3.9 %.
The components of lease expense related to operating leases were as follows (in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Lease expense: | ||||||||||||||
| Operating lease expense | $ | $ | ||||||||||||
| Short-term lease expense | ||||||||||||||
| Variable and other lease expense | ||||||||||||||
| $ | $ | |||||||||||||
Future minimum payments under our non-cancelable lease obligations were as follows as of March 31, 2024 (in thousands):
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total minimum lease payments | |||||
| Less: interest | ( | ||||
| Present value of net minimum lease payments | |||||
| Less: current portion of lease liabilities | ( | ||||
| Total long-term lease liabilities | $ | ||||
Note 14 - Segment Information
We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. The following table summarizes the operating results by reportable segment (dollars in thousands):
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| Laser Products | Advanced Development | Corporate and Other | Totals | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Gross profit | $ | $ | $ | ( | $ | ||||||||||||||||||
| Gross margin | % | % | NM* | % | |||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Laser Products | Advanced Development | Corporate and Other | Totals | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Gross profit | $ | $ | $ | ( | $ | ||||||||||||||||||
| Gross margin | % | % | NM* | % | |||||||||||||||||||
Corporate and Other is unallocated expenses related to stock-based compensation.
There have been no material changes to the geographic locations of our long-lived assets, net, based on the location of the assets, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
14
Note 15 - Net Loss per Share
Basic and diluted net loss and the number of shares used for basic and diluted net loss calculations were the same for all periods presented because we were in a loss position.
The following potentially dilutive securities were not included in the calculation of diluted shares as the effect would have been anti‑dilutive (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Restricted stock units and awards | |||||||||||
| Common stock options | |||||||||||
15
PART II
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains 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. In some cases, you can identify forward-looking statements by the following words: "ability," "anticipate," "attempt," "believe," "can be," "continue," "could," "depend," "enable," "estimate," "expect," "extend," "grow," "if," "intend," "likely," "may," "objective," "ongoing," "plan," "possible," "potential," "predict," "project," "propose," "rely," "should," "target," "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements include, but are not limited to, statements about: our business model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the introduction of new products; our technology and new product research and development activities; the impact of inflation; the impact of seasonality; the effect on our business of litigation to which we are or may become a party; and the sufficiency of our existing liquidity sources to meet our cash needs.
You should refer to the "Risk Factors" section of this report for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, which although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
nLIGHT, Inc. is a leading provider of high‑power semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. Headquartered in Camas, Washington, we design, develop, and manufacture the critical elements of our lasers, and believe our vertically integrated business model enables us to rapidly introduce innovative products, control our costs and protect our intellectual property.
We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. Sales of our semiconductor lasers, fiber lasers, fiber amplifiers, and other directed energy laser products are included in the Laser Products segment, while revenue earned from research and development contracts are included in the Advanced Development segment.
Revenues decreased to $44.5 million in the three months ended March 31, 2024 compared to $54.1 million in the same period of 2023 due primarily to decreased sales in the Laser Products segment. We generated a net loss of $13.8 million for the three months ended March 31, 2024 compared to a net loss of $7.7 million for the same period of 2023.
16
Factors Affecting Our Performance
Demand for our Semiconductor and Fiber Laser Solutions
Our revenue growth depends on market demand and achievement of design wins for our semiconductor and fiber lasers. We consider a design win to occur when a customer notifies us that it has selected one of our products to be incorporated into a product or system under development by such customer. For the foreseeable future, our operations will continue to depend upon capital expenditures by customers in the Industrial and Microfabrication markets, which, in turn, depend upon the demand for these customers’ products or services. In addition, in the Aerospace and Defense market, our business depends in large part on continued investment in laser technology by the U.S. government and its allies, and our ability to continue to successfully develop leading technology in this area and commercialize that technology in the future.
Demand for our products also fluctuates based on market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of our end-markets. Erosion of average selling prices, or ASPs, of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature. We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications. Historically, we have been able to offset decreasing ASPs by introducing new and higher value products, increasing the sales of our existing products, expanding into new applications and reducing our product and manufacturing costs. Although we anticipate further increases in product volumes and the continued introduction of new and higher value products, ASP reduction may cause our revenues to decline or grow at a slower rate.
Technology and New Product Development
We invest heavily in the development of our semiconductor, fiber laser, directed energy, and laser-sensing technologies to provide solutions to our current and future customers. We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap. Our product development is targeted to specific sectors of the market where we believe the performance of our products provide a significant benefit to our customers. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.
Manufacturing Costs and Gross Margins
Our product gross profit, in absolute dollars and as a percentage of revenues, is impacted by our product sales mix, sales volumes, changes in ASPs, production volumes, the corresponding absorption of manufacturing overhead expenses, the cost of purchased materials, production costs and manufacturing yields. Our product sales mix can affect gross profits due to variations in profitability related to product configurations and cost profiles, customer volume pricing, availability of competitive products in various markets, and new product introductions, among other factors. We have invested heavily in U.S.-based manufacturing capabilities in the last several years. Capacity utilization affects our gross margin because we have a high fixed cost base due to our vertically integrated business model. Increases in sales and production volumes drive favorable absorption of fixed costs, improved manufacturing efficiencies and lower production costs. Gross margins may fluctuate from period to period depending on product mix and the level of capacity utilization.
Our Development gross profit varies with the type and terms of contracts, contract volume, project mix, changes in the estimated cost of projects at completion, and successful execution on projects during the period. Most of our Development contracts have historically been structured as cost plus fixed fee due to the technical complexity of the research and development services, but we also perform work under fixed price contracts where gross margin can change from period to period based on the estimated cost of the project at completion.
Seasonality
Our quarterly revenues can fluctuate with general economic trends, the timing of capital expenditures by our customers, holidays, and general economic trends. In addition, as is typical in our industry, we tend to recognize a larger percentage of our quarterly revenues in the last month of the quarter, which may impact our working capital trends.
17
Results of Operations
The following table sets forth our operating results as a percentage of revenues for the periods indicated (which may not add up due to rounding):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenue: | |||||||||||
| Products | 66.0 | % | 76.0 | % | |||||||
| Development | 34.0 | 24.0 | |||||||||
| Total revenue | 100.0 | 100.0 | |||||||||
| Cost of revenue: | |||||||||||
| Products | 52.2 | 50.9 | |||||||||
| Development | 31.0 | 22.7 | |||||||||
| Total cost of revenue | 83.2 | 73.6 | |||||||||
| Gross profit | 16.8 | 26.4 | |||||||||
| Operating expenses: | |||||||||||
| Research and development | 23.9 | 20.9 | |||||||||
| Sales, general, and administrative | 26.0 | 20.6 | |||||||||
| Total operating expenses | 49.9 | 41.5 | |||||||||
| Loss from operations | (33.1) | (15.2) | |||||||||
| Other income: | |||||||||||
| Interest income, net | 1.0 | 0.6 | |||||||||
| Other income, net | 1.4 | 0.7 | |||||||||
| Loss before income taxes | (30.7) | (13.8) | |||||||||
| Income tax expense | 0.3 | 0.5 | |||||||||
| Net loss | (31.0) | % | (14.3) | % | |||||||
Revenues by End Market
Our revenues by end market were as follows for the periods presented (dollars in thousands):
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||
| 2024 | % of Revenue | 2023 | % of Revenue | $ | % | ||||||||||||||||||||||||
| Industrial | $ | 11,985 | 26.9 | % | $ | 19,902 | 36.8 | % | $ | (7,917) | (39.8) | % | |||||||||||||||||
| Microfabrication | 10,797 | 24.2 | 13,058 | 24.1 | (2,261) | (17.3) | |||||||||||||||||||||||
| Aerospace and Defense | 21,745 | 48.9 | 21,131 | 39.1 | 614 | 2.9 | |||||||||||||||||||||||
| $ | 44,527 | 100.0 | % | $ | 54,091 | 100.0 | % | $ | (9,564) | (17.7) | % | ||||||||||||||||||
The decreases in revenue from the Industrial and Microfabrication markets for the three months ended March 31, 2024 compared to the same period of 2023 were a result of decreased unit sales due to lower customer demand and deteriorating market conditions. The increase in revenue from the Aerospace and Defense market for the three months ended March 31, 2024 compared to the same period of 2023 was driven by new research and development contracts, offset partially by a decrease in unit sales of laser products.
18
Revenues by Segment
Our revenues by segment were as follows for the periods presented (dollars in thousands):
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||
| 2024 | % of Revenue | 2023 | % of Revenue | $ | % | ||||||||||||||||||||||||
| Laser Products | $ | 29,370 | 66.0 | % | $ | 41,107 | 76.0 | % | $ | (11,737) | (28.6) | % | |||||||||||||||||
| Advanced Development | 15,157 | 34.0 | 12,984 | 24.0 | 2,173 | 16.7 | |||||||||||||||||||||||
| $ | 44,527 | 100.0 | % | $ | 54,091 | 100.0 | % | $ | (9,564) | (17.7) | % | ||||||||||||||||||
The decrease in Laser Products revenue for the three months ended March 31, 2024 compared to the same period of 2023 was the result of decreased units sales across each end market as discussed above. The increase in Advanced Development revenue for the three months ended March 31, 2024 compared to the same period of 2023 was driven by new research and development contracts. All Advanced Development revenue is included in the Aerospace and Defense market.
Revenues by Geographic Region
Our revenues by geographic region were as follows for the periods presented (dollars in thousands):
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||
| 2024 | % of Revenue | 2023 | % of Revenue | $ | % | ||||||||||||||||||||||||
| North America | $ | 28,724 | 64.5 | % | $ | 29,103 | 53.8 | % | $ | (379) | (1.3) | % | |||||||||||||||||
| China | 3,411 | 7.7 | 3,646 | 6.7 | (235) | (6.4) | |||||||||||||||||||||||
| Rest of World | 12,392 | 27.8 | 21,342 | 39.5 | (8,950) | (41.9) | |||||||||||||||||||||||
| $ | 44,527 | 100.0 | % | $ | 54,091 | 100.0 | % | $ | (9,564) | (17.7) | % | ||||||||||||||||||
Geographic revenue information is based on the location to which we ship our products. There was no significant change in North America revenue for the three months ended March 31, 2024 compared to the same period of 2023 as decreased revenue from Laser Products was offset by increased revenue from Advanced Development. The decrease in China revenue for the three months ended March 31, 2024 compared to the same period of 2023 was the result of decreased sales to the Industrial market, partially offset by increased sales to the Microfabrication market. The decrease in Rest of World revenue for the three months ended March 31, 2024 compared to the same period of 2023 was due to decreased sales to both the Industrial and Microfabrication markets.
Cost of Revenues and Gross Margin
Cost of Laser Products revenue consists primarily of manufacturing materials, labor, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted customer orders. We expense all warranty costs and inventory provisions as cost of revenues.
Cost of Advanced Development revenue consists of materials, labor, subcontracting costs, and an allocation of indirect costs including overhead and general and administrative.
Our gross profit and gross margin were as follows for the periods presented (dollars in thousands):
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||
| Laser Products | Advanced Development | Corporate and Other | Total | |||||||||||||||||||||||
| Gross profit | $ | 6,680 | $ | 1,349 | $ | (541) | $ | 7,488 | ||||||||||||||||||
| Gross margin | 22.7 | % | 8.9 | % | NM* | 16.8 | % | |||||||||||||||||||
19
| Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||
| Laser Products | Advanced Development | Corporate and Other | Total | |||||||||||||||||||||||
| Gross profit | $ | 14,281 | $ | 682 | $ | (700) | $ | 14,263 | ||||||||||||||||||
| Gross margin | 34.7 | % | 5.3 | % | NM* | 26.4 | % | |||||||||||||||||||
*NM = not meaningful
The decrease in Laser Products gross margin for the three months ended March 31, 2024 compared to the same period of 2023 was driven primarily by the impact of lower production volumes on fixed manufacturing costs due to the decrease in sales and customer demand. The increase in Advanced Development gross margin for the three months ended March 31, 2024 compared to the same period of 2023 was primarily the result of changes in the composition of research and development contracts. The first quarter of 2024 includes more revenue from fixed priced contracts that have higher average gross margins than cost-plus fixed fee contracts.
Operating Expenses
Our operating expenses were as follows for the periods presented (dollars in thousands):
Research and Development
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Research and development | $ | 10,659 | $ | 11,301 | $ | (642) | (5.7) | % | |||||||||||||||
The decrease in research and development expense for the three months ended March 31, 2024 compared to the same period in 2023 was driven by a decrease in stock-based compensation of $0.5 million.
Sales, General and Administrative
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Sales, general, and administrative | $ | 11,547 | $ | 11,169 | $ | 378 | 3.4 | % | |||||||||||||||
The increase in sales, general and administrative expense for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to an increase in stock-based compensation of $0.6 million, partially offset by a decrease professional service fees and information technology related costs.
Interest Income, net
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Interest income, net | $ | 455 | $ | 337 | $ | 118 | 35.0% | ||||||||||||||||
The increase in interest income, net, for the three months ended March 31, 2024 compared to the same period in 2023 was driven by an increase in interest rates.
Other Income, net
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Other income, net | $ | 641 | $ | 404 | $ | 237 | NM* | ||||||||||||||||
Changes in other income, net are primarily attributable to realized gains and losses on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate
20
fluctuations. The increase in other income, net for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to realized gains on the sale of marketable securities.
Income Tax Expense
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Income tax expense | $ | 144 | $ | 264 | $ | (120) | (45.5) | % | |||||||||||||||
We record income tax expense for taxes in our foreign jurisdictions including Austria, Finland, Italy, and South Korea. While our tax expense is largely dependent on the geographic mix of earnings related to our foreign operations, we also record tax expense for uncertain tax positions taken and associated penalties and interest. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Due to the uncertainty with respect to their ultimate realizability in the United States and China, we continue to maintain a full valuation allowance in these jurisdictions as of March 31, 2024.
The decrease in income tax expense for the three months ended March 31, 2024 compared to the same period in 2023 was driven by a decrease in return to provision adjustments and accrued interest on unrecognized tax positions.
Liquidity and Capital Resources
We had cash and cash equivalents of $61.6 million and $53.5 million as of March 31, 2024 and December 31, 2023, respectively. In addition, we had marketable securities of $59.8 million and $59.7 million at March 31, 2024 and December 31, 2023, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities increased by $8.2 million from December 31, 2023 to March 31, 2024.
For the three months ended March 31, 2024, our principal source of liquidity was cash collected from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.
The following table summarizes our cash flows for the periods presented (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net cash provided by operating activities | $ | 11,375 | $ | 644 | |||||||
| Net cash used in investing activities | (1,548) | (10,045) | |||||||||
| Net cash used in financing activities | (1,615) | (39) | |||||||||
| Effect of exchange rate changes on cash | (115) | 17 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 8,097 | $ | (9,423) | |||||||
21
Net Cash Provided by Operating Activities
During the three months ended March 31, 2024, net cash provided by operating activities was $11.4 million, which was the result of a $13.8 million net loss, offset by increases in working capital of $15.3 million and non-cash expenses totaling $9.9 million related primarily to depreciation, amortization, and stock-based compensation. The increase in working capital in the three months ended March 31, 2024 was driven by an $11.9 million decrease in accounts receivable, net, a $2.1 million increase in accounts payable, a $1.6 million increase in accrued and other long-term liabilities and a $2.7 million increase in deferred revenues, partially offset by a $1.6 million increase in prepaid expenses and other current assets.
Net Cash Used in Investing Activities
During the three months ended March 31, 2024, net cash used in investing activities was $1.5 million, which was primarily for the purchase of property, plant and equipment.
Net Cash Used in Financing Activities
During the three months ended March 31, 2024, net cash used in financing activities was $1.6 million, which primarily consisted of taxes paid on the net settlement of stock awards.
Credit Facilities
We have a $40.0 million revolving line of credit, or LOC, with Pacific Western Bank dated September 24, 2018, which is secured by our assets and expires September 24, 2024.
The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20% on an annualized basis. The interest rate on the LOC is based on the Prime Rate, minus a margin based on our liquidity levels. No amounts were outstanding under the LOC at March 31, 2024 and we were in compliance with all covenants.
Contractual Obligations
There have been no material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Inflation
We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2024, If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.
22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposure to market risk has not changed materially since December 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and our chief financial officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and our chief financial officer have concluded that, as of such date, our disclosure controls and procedures were, in design and operation, effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Control
Control systems, including ours, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any control systems must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
23
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, see Note 12, Commitments and Contingencies to our consolidated financial statements included elsewhere in this report.
ITEM 1A. RISK FACTORS
For risk factors related to our business, reference is made to Item 1A, "Risk Factors," contained in Part I of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2024, no director or officer, as defined in Rule 16a-1(f), adopted terminated
24
ITEM 6. EXHIBITS
(a) Exhibits
| Exhibit Number | Incorporated by Reference | Filed Herewith | ||||||||||||||||||
| Description | Form | File No. | Exhibit | Filing Date | ||||||||||||||||
| 31.1 | X | |||||||||||||||||||
| 31.2 | X | |||||||||||||||||||
| 32.1* | X | |||||||||||||||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | X | ||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||
| * | The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. | ||||
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NLIGHT, INC. | ||||||||
| (Registrant) | ||||||||
| May 3, 2024 | By: | /s/ SCOTT KEENEY | ||||||
| Date | Scott Keeney | |||||||
| President and Chief Executive Officer (Principal Executive Officer) | ||||||||
| May 3, 2024 | By: | /s/ JOSEPH CORSO | ||||||
| Date | Joseph Corso | |||||||
| Chief Financial Officer (Principal Financial Officer) | ||||||||
| May 3, 2024 | By: | /s/ JAMES NIAS | ||||||
| Date | James Nias | |||||||
| Chief Accounting Officer (Principal Accounting Officer) | ||||||||
26