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nLight invests in automation as it cuts workforce

01 Mar 2023

Company headcount down 15% but laser firm expects solid growth in weapons applications following US Congress budget boost.

High-power diode and fiber laser maker nLight has posted annual sales of $242 million for 2022 - down 10 per cent on the prior year but reflecting its continued shift away from cutting applications in China.

The Camas, Washington, company pointed out that it has now installed key automated manufacturing equipment at its headquarters, and has also cut its workforce significantly as it reduced operations in China.

nLight is looking to target higher-value industrial applications outside of what was once its dominant market, as well as directed energy weapons programs that are expected to ramp up in 2024.

But in the near term those strategic changes have seen the firm’s losses nearly double from 2021 to 2022. nLight posted an operating loss of $23.5 million on sales of $56.7 million in the closing quarter of 2022, including restructuring costs totaling $4 million.

Headcount reduction
CEO Scott Keeney told an investor conference call discussing the latest results that nLight employed 1150 people as of December 31, a 15 per cent reduction in six months from both targeted cuts and natural attrition.

“We also performed a rigorous review of each of our end markets and projects in order to focus on opportunities that we believe will have the biggest impact on driving long-term growth and profitability,” Keeney added.

“While we elected not to pursue certain projects, we elected to invest in others. What didn’t change is our strategic focus.”

The CEO believes that directed energy weapons and other defense applications will demand a much greater number of lasers in the future, and pointed to recent funding decisions that support that thesis.

“In the fourth quarter, Congress approved a 50 per cent increase in the US directed energy budget, from approximately $1 billion last year to approximately $1.5 billion this year,” he told investors.

“The significant increase in budget further solidifies our perspective that directed energy is a key part of the US Department of Defense’s (DoD) modernization effort and offers us significant long-term opportunities for growth.”

Megawatt power targeted
According to a Congressional Research Service report from November 2022, the current DoD plan is to produce weapons with output powers of 300 kW this year. The target rises to 500 kW in 2025 and 1 MW in 2026 - while simultaneously reducing the size and weight of the systems.

Although the report points out that there is currently no consensus regarding the precise power level that would be needed to neutralize different target sets, it says some analysts believe that lasers of around 100 kW can engage UAVs, small boats, rockets, artillery, and mortars.

At 300 kW, lasers could also engage cruise missiles flying across the beam's path, while at 1 MW output they could potentially neutralize ballistic missiles and hypersonic weapons. Last September Lockheed said it had delivered a 300 kW laser to the US Army for demonstration efforts.

In nLight's latest financial quarter, sales for defense applications declined sharply, although that is attributed to the typically stop-start nature of shipments destined for the US development projects.

“These products are typically sold through long-term contracts and can run for years or even decades, but can fluctuate quarter-over-quarter,” explained Keeney.

2024 production shift
But the CEO indicated that he is expecting that cadence to change somewhat next year as the technology matures. “nLight is a critical supplier to several defense customers, and we are well positioned to continue our work on existing programs,” he told investors.

“We are also under contract on several new classified programs that leverage our broad semiconductor and fiber laser technology and manufacturing capabilities.

“While revenue from each of these programs is relatively small today, each of these funded programs are expected to transfer to production in 2024, and could present significant long-term recurring revenue opportunities for us.”

Looking ahead, Keeney said that sales would come in at somewhere between $50 million and $56 million for the opening quarter of this year, which would compare with $64.5 million in the same period of 2022.

• Investors reacted to that outlook by sending nLight’s Nasdaq-listed stock down around 15 per cent. Currently trading at just over $11, the stock is close to record lows since it listed nearly five years ago, and equivalent to a market capitalization in the region of $500 million.

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