nLIGHT, Inc. (LASR) Earnings

Management highlights

### Core Business Execution & Growth Highlights - Q2 2026 delivered revenue, gross margin, and adjusted EBITDA at or above management expectations, with record product revenue and record operating cash flow of $20.7 million. - The company ended Q2 with $330.8 million in total cash, cash equivalents, restricted cash, and investments, and fully repaid the $20 million drawn on its $40 million line of credit. ### Directed Energy & Defense Program Updates - NLIGHT won the Department of War's multi-year Joint Laser Weapon System (JLWS) contract, with a contract ceiling of over $600 million for the company. The contract will develop, integrate, and deliver modular, containerized high-energy laser systems based on the HADES product platform, building on prior successful 300-kilowatt and 50-kilowatt program deliveries. - The 1-megawatt CBC laser program under Healthy2 remains on track, and the U.S. Navy's HELCAP anti-ship cruise missile defense program is progressing, with integration of a 300-kilowatt CBC laser and advanced atmospheric correction beam control system underway. - Kinetic weapon product growth was strong in Q2, and the company expects continued growth from missile stockpiling programs, with existing multi-year awards driving increasing unit volumes and content. ### Commercial Segment Updates - Demand for additive manufacturing products remains strong, particularly driven by aerospace, defense, and rocket engine component applications. - The company is exiting its legacy cutting and welding business, with no material revenue expected from this segment in H2 2026. ### Operational Focus - Management continues to prioritize working capital management and targeted capital expenditure to support long-term growth while generating strong operating cash flow. - The company has spent multiple years de-risking supply chains by shifting manufacturing out of China, but dual-use component delays from Chinese suppliers have recently created near-term headwinds.

Guidance

• Q3 2026 total revenue guidance is set at $63 million to $73 million, with a midpoint of $68 million comprising ~$43 million in product revenue and ~$25 million in development revenue. The guidance reflects near-term supply chain delays that prevent the company from meeting all existing customer demand in Q3. • Q3 2026 total gross margin is expected to range from 24% to 30%, with product gross margin between 34% and 40%, and development gross margin of approximately 8%. The sequential decline in product gross margin is driven by lower expected production volume and fixed cost absorption dynamics. • Q3 2026 adjusted EBITDA guidance ranges from $1 million to $7 million. • Non-GAAP operating expenses are expected to stay in the $17 million to $19 million per quarter range for H2 2026. • The wider-than-usual Q3 guidance range is exclusively attributable to supply chain uncertainty, and there is remaining uncertainty around the ability to fulfill delayed backlog in Q4 2026.

Segment performance

Total Q2 2026 revenue was $82.6 million, up 34% year-over-year (YoY) and 3% sequentially. 1. Aerospace and Defense (A&D): Revenue hit a record $57.3 million, up 41% YoY, accounting for 69.4% of total Q2 revenue. A&D product revenue grew 72% YoY and 3% sequentially, while development revenue was $23.2 million, up 11% YoY and 5% sequentially. 2. Commercial Markets (industrial + microfabrication): Revenue was $25.3 million, up 20% YoY and 1% sequentially, accounting for 30.6% of total Q2 revenue. Microfabrication revenue was $13.3 million, and industrial revenue was $12 million, with growth driven by higher additive manufacturing demand and last-time buys of legacy cutting and welding products (the company is exiting this legacy market and expects no material revenue from it in H2 2026). Gross margin details: Total GAAP gross margin was 31.1% (32.6% non-GAAP); product gross margin was 41.2% GAAP (42.4% non-GAAP), up 270 bps YoY; development gross margin was 5.6% GAAP (7.5% non-GAAP), down from 13.1% YoY due to contract mix and deliverable timing.

Risks & headwinds

• Recent increased Chinese regulatory scrutiny on dual-use optics and other components has created delivery delays, which are the primary driver of lower Q3 2026 guidance. While these components make up a small share of total bill of materials, missing even a small number of parts prevents product completion. • The majority of the supply chain impact falls on the commercial segment, but there is minor indirect exposure to defense products, as some commercial sub-components are used in defense systems. However, initial work on the JLWS contract is expected to remain fully unaffected. • The duration of the supply chain disruption is uncertain: it could resolve quickly or take months to quarters, depending on the timeline for qualifying new suppliers and redesigning products to use alternative components. • Large-scale fielding of directed energy laser weapons is dependent on future U.S. defense budget allocations, and full-scale production is not expected for multiple years.

Analyst Q&A

• Q: How does the JLWS award contribute to 2026 and 2027 revenue, and how does it offset Healthy2 program headwinds?

  A: JLWS will start contributing revenue in Q3 2026, with initial activity in H2 2026, before ramping up meaningfully in 2027. Management expects JLWS will more than replace the revenue that will be lost as the Healthy2 program wraps up.

• Q: How do JLWS, HADES, and Healthy2 differ technologically, and when will large-scale laser fielding happen?

  A: JLWS builds directly on technology developed under Healthy2 and leverages the existing HADES product platform, transitioning demonstrated technology into production-capable products. Large-scale fielding depends on U.S. defense budget progress: full programs of record are not expected within the next year, with initial higher-power prototypes launching over the next two years, followed by low-rate production and gradual scaling.

• Q: Can you elaborate on the current supply chain challenges, their impact, and mitigation plans?

  A: The challenges stem from new Chinese scrutiny of dual-use optics, a commodity where China holds a large share of global supply. The impact is almost entirely on commercial products, with JLWS and most defense work unaffected. The company has spent years de-risking supply chains by moving manufacturing out of China, and is currently qualifying new non-Chinese suppliers and redesigning products to add supply flexibility, but re-qualification and redesign takes time.

• Q: Will growing missile stockpiling programs benefit NLIGHT, and can the company win second supplier positions on new programs?

  A: Yes, multi-year missile restocking programs will positively benefit NLIGHT's kinetic weapons business. The company has already secured two large awards ($25 million and $50 million) for these programs, and is seeing growing unit volumes and content per program, with plans to pursue additional new supplier positions on ongoing programs.