UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38462

NLIGHT, INC.

(Exact name of Registrant as specified in its charter)

Delaware

91-2066376

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

4637 NW 18th Avenue

Camas, Washington 98607

(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
Common Stock, par value $0.0001 per share	LASR	The Nasdaq Stock Market LLC

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

☒

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 ~~November~~May 2, ~~2021,~~2022, the Registrant had ~~43,920,633~~44,551,190 shares of common stock outstanding.


TABLE OF CONTENTS
			Page

Part I. Financial Information			1
Item 1. Unaudited Interim Financial Statements			1
Consolidated Balance Sheets: ~~September~~March 31, 2022 ~~30, 2021~~ and December 31, ~~2020~~202 1 (unaudited)			1
Consolidated Statements of Operations: Three ~~and~~ ~~Nine~~Months Ended ~~September~~March 31, 2022 and 20 ~~30, 2021 and 2020~~21 (unaudited)			2
Consolidated Statements of Comprehensive Loss: Three ~~and~~ ~~Nine~~Months Ended ~~September~~March 31, 2022 and 2021 ~~30, 2021 and 2020~~ (unaudited)			3
Consolidated Statements of Stockholders' Equity: Three ~~and~~ ~~Nine~~Months Ended ~~September~~March 31, 2022 and 2021 ~~30, 2021 and 2020~~ (unaudited)			4
Consolidated Statements of Cash Flows: ~~Nine~~Three Months Ended ~~September~~March 31, 2022 and 2021 ~~30, 2021 and 2020~~ (unaudited)			65
Notes to Consolidated Financial Statements (unaudited)			76
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1614
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2322
Item 4. Controls and Procedures			2422
Part II. Other Information			2423
Item 1. Legal Proceedings			2423
Item 1A. Risk Factors			2423
Item 6. Exhibits			2524
Signatures			2625

Table of Contents

PART I ~~- FINANCIAL INFORMATION~~

ITEM 1. ~~UNAUDITED INTERIM~~ FINANCIAL STATEMENTS

nLIGHT, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

As of
September 30, 2021 December 31, 2020
Assets
Current assets:
    Cash and cash equivalents $ 165,584 $ 102,282
Accounts receivable, net of allowances of $299 and $367 36,490 31,820
    Inventory 70,683 54,706
    Prepaid expenses and other current assets 17,267 11,767
          Total current assets 290,024 200,575
Restricted cash 250 291
Lease right-of-use assets 17,187 12,302
Property, plant and equipment, net 52,303 44,480
Intangible assets, net 5,580 8,345
Goodwill 12,437 12,484
Other assets, net 4,190 5,167
          Total assets $ 381,971 $ 283,644
Liabilities and Stockholders’ Equity
Current liabilities:
     Accounts payable $ 31,868 $ 21,057
     Accrued liabilities 15,742 15,321
     Deferred revenues 1,607 2,528
     Current portion of lease liabilities 2,858 2,273
     Current portion of long-term debt — 184
          Total current liabilities 52,075 41,363
Non-current income taxes payable 6,988 7,556
Long-term lease liabilities 14,921 10,375
Long-term debt — 215
Other long-term liabilities 3,989 4,221
          Total liabilities 77,973 63,730
Stockholders' equity:
  Common stock - $0.0001 par value; 190,000 shares authorized, 43,876 and 39,793 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively. 15 15
     Additional paid-in capital 464,090 358,544
     Accumulated other comprehensive loss (802) (259)
     Accumulated deficit (159,305) (138,386)
          Total stockholders’ equity 303,998 219,914
          Total liabilities and stockholders’ equity $ 381,971 $ 283,644


	As of
	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	134,949	$	146,534
Accounts receivable, net of allowances of $303 and $303	36,912		41,574
Inventory	77,240		73,746
Prepaid expenses and other current assets	20,398		15,350
Total current assets	269,499		277,204
Restricted cash	250		250
Lease right-of-use assets	17,646		17,048
Property, plant and equipment, net	58,309		56,101
Intangible assets, net	5,996		6,698
Goodwill	12,405		12,420
Other assets, net	3,808		3,897
Total assets	$	367,913	$	373,618

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	23,124	$	26,347
Accrued liabilities	13,384		14,730
Deferred revenues	983		1,629
Current portion of lease liabilities	3,141		3,066

Total current liabilities	40,632		45,772
Non-current income taxes payable	7,320		7,149
Long-term lease liabilities	15,190		14,612

Other long-term liabilities	4,193		3,952
Total liabilities	67,335		71,485
Stockholders' equity:

Common stock - $0.0001 par value; 190,000 shares authorized, 44,538 and 44,248 shares issued and outstanding at March 31, 2022, and December 31, 2021, respectively	15		15
Additional paid-in capital	477,924		470,760
Accumulated other comprehensive loss	(683)		(587)
Accumulated deficit	(176,678)		(168,055)
Total stockholders’ equity	300,578		302,133
Total liabilities and stockholders’ equity	$	367,913	$	373,618

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Revenue:	Revenue:									Revenue:
Products	Products	$	54,393	$	51,117	$	155,289	$	133,151	Products		$	51,061	$	47,335
Development	Development	17,842		10,615		47,404		23,934		Development		13,398		14,010
Total revenue	Total revenue	72,235		61,732		202,693		157,085		Total revenue		64,459		61,345
Cost of revenue:	Cost of revenue:									Cost of revenue:
Products	Products	34,193		34,645		98,828		95,142		Products		35,768		30,395
Development	Development	16,647		9,927		44,500		22,226		Development		12,514		13,305
Total cost of revenue	Total cost of revenue	50,840		44,572		143,328		117,368		Total cost of revenue		48,282		43,700
Gross profit	Gross profit	21,395		17,160		59,365		39,717		Gross profit		16,177		17,645
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	14,838		11,126		40,830		29,136		Research and development		13,711		11,710
Sales, general, and administrative	Sales, general, and administrative	13,316		10,010		40,087		27,343		Sales, general, and administrative		10,775		11,714
Total operating expenses	Total operating expenses	28,154		21,136		80,917		56,479		Total operating expenses		24,486		23,424
Loss from operations	Loss from operations	(6,759)		(3,976)		(21,552)		(16,762)		Loss from operations		(8,309)		(5,779)
Other income (expense):	Other income (expense):									Other income (expense):
Interest income (expense), net		(20)		(96)		(126)		122
Interest expense, net										Interest expense, net		—		(74)
Other income, net	Other income, net	102		477		246		63		Other income, net		29		26
Loss before income taxes	Loss before income taxes	(6,677)		(3,595)		(21,432)		(16,577)		Loss before income taxes		(8,280)		(5,827)
Income tax expense (benefit)		203		(1,485)		(513)		(162)
Income tax expense										Income tax expense		343		322
Net loss	Net loss	$	(6,880)	$	(2,110)	$	(20,919)	$	(16,415)	Net loss		$	(8,623)	$	(6,149)

Net loss per share, basic and diluted	Net loss per share, basic and diluted	$	(0.16)	$	(0.05)	$	(0.50)	$	(0.43)	Net loss per share, basic and diluted		$	(0.20)	$	(0.15)

Shares used in per share calculations, basic and diluted	Shares used in per share calculations, basic and diluted	42,884		38,558		41,759		38,195		Shares used in per share calculations, basic and diluted		43,655		40,048

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net loss $ (6,880) $ (2,110) $ (20,919) $ (16,415)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax (378) 1,091 (543) 928
Comprehensive loss $ (7,258) $ (1,019) $ (21,462) $ (15,487)


	Three Months Ended March 31,
		2022		2021
Net loss		$	(8,623)	$	(6,149)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax		(96)		(662)
Comprehensive loss		$	(8,719)	$	(6,811)

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands)

(Unaudited)


			Three Months Ended September 30, 2021																		Three Months Ended March 31, 2022
		Common stock	Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit			Total stockholders' equity							Common stock	Additional paid-in capital	Accumulated other comprehensive loss		Accumulated deficit	Total stockholders' equity
				Shares					Amount											Shares				Accumulated deficit	Amount		Total stockholders' equity

Balance, June 30, 2021			43,181		$	15	$	457,480		$	(424)	$	(152,425)	$	304,646
Balance, December 31, 2021																Balance, December 31, 2021					44,248	$	15					$	470,760	$	(587)	$	(168,055)	$	302,133
Net loss	Net loss		—		—		—			—		(6,880)		(6,880)		Net loss					—	—			—			—		(8,623)		(8,623)

Issuance of common stock pursuant to exercise of stock options	Issuance of common stock pursuant to exercise of stock options		193		—		205			—		—		205		Issuance of common stock pursuant to exercise of stock options					423	—			689			—		—		689
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax		502		—		(3,667)			—		—		(3,667)		Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax					7	—			(78)			—		—		(78)
Restricted stock forfeited in connection with transition agreement																Restricted stock forfeited in connection with transition agreement					(140)	—			—			—		—		—

Stock-based compensation	Stock-based compensation		—		—		10,072			—		—		10,072		Stock-based compensation					—	—			6,553			—		—		6,553
Cumulative translation adjustment, net of tax	Cumulative translation adjustment, net of tax		—		—		—			(378)		—		(378)		Cumulative translation adjustment, net of tax					—	—			—			(96)		—		(96)
Balance, September 30, 2021			43,876		$	15	$	464,090		$	(802)	$	(159,305)	$	303,998
Balance, March 31, 2022																Balance, March 31, 2022					44,538	$	15		$	477,924		$	(683)	$	(176,678)	$	300,578


			Nine Months Ended September 30, 2021														Three Months Ended March 31, 2021
		Common stock		Additional paid-in capital			Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity					Common stock	Additional paid-in capital	Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
			Shares			Amount																		Total stockholders' equity
Balance, December 31, 2020	Balance, December 31, 2020		39,793	$	15		$	358,544	$	(259)	$	(138,386)	$	219,914	Balance, December 31, 2020		39,793	$	15	$	358,544	$	(259)			$	219,914
Net loss	Net loss		—	—			—		—		(20,919)		(20,919)		Net loss		—	—		—		—		(6,149)		(6,149)
Proceeds from follow-on offering, net of offering costs	Proceeds from follow-on offering, net of offering costs		2,537	—			82,354		—		—		82,354		Proceeds from follow-on offering, net of offering costs		2,537	—		82,355		—		—		82,355
Issuance of common stock pursuant to exercise of stock options	Issuance of common stock pursuant to exercise of stock options		746	—			975		—		—		975		Issuance of common stock pursuant to exercise of stock options		452	—		574		—		—		574
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax		767	—			(8,265)		—		—		(8,265)		Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax		1	—		(31)		—		—		(31)
Issuance of common stock under the Employee Stock Purchase Plan			33	—			750		—		—		750

Stock-based compensation	Stock-based compensation		—	—			29,732		—		—		29,732		Stock-based compensation		—	—		8,054		—		—		8,054
Cumulative translation adjustment, net of tax	Cumulative translation adjustment, net of tax		—	—			—		(543)		—		(543)		Cumulative translation adjustment, net of tax		—	—		—		(662)		—		(662)
Balance, September 30, 2021			43,876	$	15		$	464,090	$	(802)	$	(159,305)	$	303,998
Balance, March 31, 2021															Balance, March 31, 2021		42,783	$	15	$	449,496	$	(921)	$	(144,535)	$	304,055

See accompanying notes to consolidated financial statements.

Table of Contents

Three Months Ended September 30, 2020
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, June 30, 2020 38,850 $ 15 $ 345,917 $ (2,848) $ (131,759) $ 211,325
Net loss — — — — (2,110) (2,110)
Issuance of common stock pursuant to exercise of stock options 115 — 260 — — 260
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 370 — (1,157) — — (1,157)
Stock-based compensation — — 6,683 — — 6,683
Cumulative translation adjustment, net of tax — — — 1,091 — 1,091
Balance, September 30, 2020 39,335 $ 15 $ 351,703 $ (1,757) $ (133,869) $ 216,092
nLIGHT, Inc.

Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended September 30, 2020
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, December 31, 2019 38,084 $ 15 $ 336,732 $ (2,685) $ (117,454) $ 216,608
Net loss — — — — (16,415) (16,415)
Issuance of common stock pursuant to exercise of stock options 633 — 1,117 — — 1,117
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 579 — (3,314) — — (3,314)
Issuance of common stock under the Employee Stock Purchase Plan 39 — 685 — — 685
Stock-based compensation — — 16,483 — — 16,483
Cumulative translation adjustment, net of tax — — — 928 — 928
Balance, September 30, 2020 39,335 $ 15 $ 351,703 $ (1,757) $ (133,869) $ 216,092
(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(8,623)	$	(6,149)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	2,556		2,157
Amortization	1,182		1,560
Reduction in carrying amount of right-of-use assets	867		808
Recoveries of losses on accounts receivable	—		(71)
Stock-based compensation	6,553		8,054
Deferred income taxes	(4)		(11)


Changes in operating assets and liabilities:
Accounts receivable, net	4,690		121
Inventory	(3,433)		(4,405)
Prepaid expenses and other current assets	(5,061)		2,183
Other assets, net	(317)		(428)
Accounts payable	(3,019)		1,437
Accrued and other long-term liabilities	(1,088)		(736)
Deferred revenues	(647)		64
Lease liabilities	(813)		(690)
Non-current income taxes payable	153		221
Net cash provided by (used in) operating activities	(7,004)		4,115
Cash flows from investing activities:
Acquisition of business, net of cash acquired	—		(291)
Purchases of property, plant and equipment	(5,019)		(3,134)
Acquisition of intangible assets and capitalization of patents	(114)		(80)

Net cash used in investing activities	(5,133)		(3,505)
Cash flows from financing activities:
Proceeds from public offerings, net of offering costs	—		82,761

Principal payments on term loan, debt and financing leases	—		(372)




Proceeds from stock option exercises	689		574
Tax payments related to stock award issuances	(78)		(31)
Net cash provided by financing activities	611		82,932
Effect of exchange rate changes on cash	(59)		(227)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(11,585)		83,315
Cash, cash equivalents, and restricted cash, beginning of period	146,784		102,573
Cash, cash equivalents, and restricted cash, end of period	$	135,199	$	185,888
Supplemental disclosures:
Cash paid for interest, net	$	—	$	66
Cash paid for income taxes	79		241
Operating cash outflows from operating leases	1,097		702
Right-of-use assets obtained in exchange for lease liabilities	1,470		6,699
Accrued purchases of property, equipment and patents	2,268		1,698

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

~~Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~

Nine Months Ended September 30,
2021 2020
Cash flows from operating activities:
Net loss $ (20,919) $ (16,415)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 6,670 5,614
Amortization 4,641 4,319
Reduction in carrying amount of right-of-use assets 2,435 2,162
Provision for (recoveries of) losses on accounts receivable (70) 84
Stock-based compensation 29,732 16,483
Deferred income taxes (11) —
Loss on disposal of assets 3 —
Changes in operating assets and liabilities:
Accounts receivable, net (4,580) 4,094
Inventory (16,169) (6,411)
Prepaid expenses and other current assets (5,542) (4,753)
Other assets (437) (2,418)
Accounts payable 9,699 10,565
Accrued and other long-term liabilities 907 1,494
Deferred revenues (925) 1,405
Lease liabilities (2,156) (2,120)
Non-current income taxes payable (591) 591
Net cash provided by operating activities 2,687 14,694
Cash flows from investing activities:
Acquisition of business, net of cash acquired (291) (168)
Purchases of property, plant and equipment (13,636) (19,395)
Capitalization of patents (303) (717)
Net cash used in investing activities (14,230) (20,280)
Cash flows from financing activities:
Proceeds from public offerings, net of offering costs 82,354 —
Proceeds from term loan — 15,000
Principal payments on debt and financing leases (428) (15,126)
Payment of contingent consideration related to acquisition (326) —
Proceeds from employee stock plan purchases 750 685
Proceeds from stock option exercises 975 1,117
Tax payments related to stock award issuances (8,265) (3,314)
Net cash provided by (used in) financing activities 75,060 (1,638)
Effect of exchange rate changes on cash (256) 373
Net increase (decrease) in cash, cash equivalents, and restricted cash 63,261 (6,851)
Cash, cash equivalents, and restricted cash, beginning of period 102,573 117,294
Cash, cash equivalents, and restricted cash, end of period $ 165,834 $ 110,443
Supplemental disclosures:
Cash paid (received) for interest, net $ 116 $ (312)
Cash paid for income taxes 434 1,015
Right-of-use assets obtained in exchange for lease liabilities 7,348 13,470
Accrued purchases of property, equipment and patents 2,287 1,294

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~nLIGHT, Inc.~~

Notes to Consolidated Financial Statements

~~(Unaudited)~~

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 ~~2020~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2021.

Critical Accounting Policies

Our critical accounting policies have not materially changed during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

~~New Accounting Pronouncements~~

~~ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-03~~

~~The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, in June 2016. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For assets measured at amortized cost, the new standard requires that the income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 was amended in November 2018, April 2019 and March 2020. We adopted ASU 2016-13, as amended, on January 1, 2021 on a prospective basis. The adoption did not have a material impact on our financial position, results of operations or cash flows.

~~ASU 2019-12~~

~~The FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~, in December 2019. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We adopted ASU 2019-12 on January 1, 2021 on a prospective basis. The adoption did not have a material impact on our financial position, results of operations or cash flows.2021.

Note 2 - ~~Acquisitions~~

~~nLIGHT Europe Srl (formerly known as OPI Photonics Srl)~~Acquisition

On July 30, 2020, we acquired the outstanding shares of OPI Photonics S.r.l. (OPI), an Italian limited liability company, for cash consideration of ~~approximately~~ $1.6 million, $0.2 million of which ~~$0.2 million~~ was paid at closing with the remaining $1.4 million to be paid over the next 24 months. The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values, and the excess of purchase price over the fair value amounts representing goodwill. The fair values assigned to assets acquired and liabilities assumed were based on management’s best estimates and assumptions as of the reporting date and are considered preliminary. Changes to amounts recorded as assets or liabilities may result in corresponding adjustments to goodwill. Pro forma financial information has not been provided for the purchase as it was not material to our overall financial position.

~~During~~As of March 31, 2022, we owed OPI $0.8 million, which was included on our Consolidated Balance Sheets as a component of accrued liabilities.

Note 3 - Revenue

We recognize revenue upon transferring control of products and services, and the ~~nine months ended September 30, 2021, accrued acquisition~~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 ~~$0.6 million,~~the contract, we evaluate certain factors, including ~~contingent consideration~~the customer's ability to pay (or credit risk). For each contract, we consider the promise to transfer products, each of ~~$0.3 million, was paid~~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, assuming transfer of control has occurred. Rights of return generally are not included in customer contracts. Accordingly, product revenue is recognized upon shipment or delivery, as applicable, and transfer of control. 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. Because control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the ~~sellers of OPI.~~customer. Billing under these arrangements generally occurs within one month after the work is completed.

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~~Note 3 - Revenue~~

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Industrial	Industrial	$	26,737	$	21,880	$	73,044	$	60,500	Industrial		$	23,996	$	21,400
Microfabrication	Microfabrication	17,695		14,052		53,184		38,771		Microfabrication		17,319		15,215
Aerospace and Defense	Aerospace and Defense	27,803		25,800		76,465		57,814		Aerospace and Defense		23,144		24,730
		$	72,235	$	61,732	$	202,693	$	157,085			$	64,459	$	61,345

Sales by Geography

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
North America $ 37,430 $ 31,384 $ 101,659 $ 72,924
China 13,709 19,186 48,045 52,723
Rest of World 21,096 11,162 52,989 31,438
$ 72,235 $ 61,732 $ 202,693 $ 157,085


	Three Months Ended March 31,
		2022		2021
North America		$	35,144	$	31,134
China		7,139		15,577
Rest of World		22,176		14,634
		$	64,459	$	61,345

Sales by Timing of Revenue

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Point in time $ 53,070 $ 51,101 $ 150,187 $ 133,304
Over time 19,165 10,631 52,506 23,781
$ 72,235 $ 61,732 $ 202,693 $ 157,085


	Three Months Ended March 31,
		2022		2021
Point in time		$	48,215	$	46,994
Over time		16,244		14,351
		$	64,459	$	61,345

Our contract assets and liabilities are as follows (in thousands):


		Balance Sheet Classification	As of					Balance Sheet Classification	As of
			September 30, 2021		December 31, 2020				March 31, 2022		December 31, 2021
Contract assets	Contract assets	Prepaid expenses and other current assets	$	11,771	$	5,680	Contract assets	Prepaid expenses and other current assets	$	14,122	$	9,657
Contract liabilities	Contract liabilities	Deferred revenues and other long-term liabilities	2,420		2,985		Contract liabilities	Deferred revenues and other long-term liabilities	1,732		2,358

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021,we recognized revenue of ~~$0.3~~$1.4 million and ~~$2.1~~$1.3 million, respectively, that was included in the deferred revenue balances at the beginning of the period as the performance obligations under the associated agreements were satisfied.

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Note 4 - Concentrations of Credit and Other Risks

The following customers accounted for 10% or more of our revenues for the periods presented:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020			2022	2021

Raytheon Technologies						Raytheon Technologies		10%	(1)
U.S. Government	U.S. Government	23%	16%	21%	13%	U.S. Government		17%	20%
Quick Laser Technology Co., Ltd.		(1)	13%	(1)	13%
Raytheon Technologies		(1)	12%	(1)	13%

(1) Represents less than 10% of total revenues

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Financial instruments that potentially expose us to concentrations of credit risk consist principally of accounts receivable. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, one customer accounted for approximately 21% and two customers accounted for approximately 33% ~~and 43%~~, respectively, of net accounts receivable. No other customers accounted for 10% or more of net accounts receivable at either date.

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.

We do not have any other significant financial assets or liabilities that are measured at fair value.

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. Our fair value hierarchy for our financial instruments consists of cash equivalents as follows (in thousands):


		September 30, 2021									March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Money market securities	Money market securities	$	136,894	$	—	$	—	$	136,894	Money market securities	$	116,903	$	—	$	—	$	116,903
Commercial paper	Commercial paper	3,885		—		—		3,885		Commercial paper	643		—		—		643
Total	Total	$	140,779	$	—	$	—	$	140,779	Total	$	117,546	$	—	$	—	$	117,546


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Money market securities	$	126,900	$	—	$	—	$	126,900
Commercial paper	236		—		—		236
Total	$	127,136	$	—	$	—	$	127,136

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December 31, 2020
Level 1 Level 2 Level 3 Total
Money market securities $ 74,084 $ — $ — $ 74,084
Commercial paper 1,584 — — 1,584
Total $ 75,668 $ — $ — $ 75,668

Note 6 - Inventory

Inventory is stated at the lower of average cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) and net realizable value. Inventory includes raw materials and components that may be specialized in nature and subject to obsolescence. On a quarterly basis, we review inventory quantities on hand in comparison to our past consumption, recent purchases, and other factors to determine what inventory quantities, if any, may not be sellable. Based on this analysis, we write down the affected inventory value for estimated excess and obsolescence charges. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Inventory consisted of the following (in thousands):


		As of					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	29,725	$	21,410	Raw materials	$	32,493	$	32,185
Work in process and semi-finished goods	Work in process and semi-finished goods	24,085		21,320		Work in process and semi-finished goods	26,645		24,642
Finished goods	Finished goods	16,873		11,976		Finished goods	18,102		16,919
		$	70,683	$	54,706		$	77,240	$	73,746

Note 7 - Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):


			As of						As of
		Useful life (years)	September 30, 2021		December 31, 2020			Useful life (years)	March 31, 2022		December 31, 2021
Automobile	Automobile	3	$	113	$	34	Automobile	3	$	114	$	114
Computer hardware and software	Computer hardware and software	3 - 5	6,046		4,840		Computer hardware and software	3 - 5	7,081		6,594
Manufacturing and lab equipment	Manufacturing and lab equipment	2 - 7	76,652		69,849		Manufacturing and lab equipment	2 - 7	84,554		81,130
Office equipment and furniture	Office equipment and furniture	5 - 7	2,168		1,605		Office equipment and furniture	5 - 7	2,415		2,361
Leasehold and building improvements	Leasehold and building improvements	2 - 12	26,956		21,934		Leasehold and building improvements	2 - 12	28,823		28,125
Buildings	Buildings	30	9,392		9,081		Buildings	30	9,392		9,392
Land	Land	N/A	3,399		3,399		Land	N/A	3,399		3,399
			124,726		110,742				135,778		131,115
Accumulated depreciation	Accumulated depreciation		(72,423)		(66,262)		Accumulated depreciation		(77,469)		(75,014)
			$	52,303	$	44,480			$	58,309	$	56,101

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Note 8 - Intangible Assets and Goodwill

Intangibles

The details of amortizing intangible assets are as follows (in thousands):


		Estimated useful life (in years)	As of					Estimated useful life (in years)	As of
			September 30, 2021		December 31, 2020				March 31, 2022		December 31, 2021
Patents	Patents	3 - 5	$	5,965	$	6,199	Patents	3 - 5	$	6,092	$	5,986
Development programs	Development programs	2 - 4	7,200		7,200		Development programs	2 - 4	7,200		7,200
Developed technology	Developed technology	5	1,125		1,226		Developed technology	5	3,000		3,038
			14,290		14,625				16,292		16,224
Accumulated amortization	Accumulated amortization		(8,710)		(6,280)		Accumulated amortization		(10,296)		(9,526)
			$	5,580	$	8,345			$	5,996	$	6,698

Amortization related to intangible assets was as follows (in thousands):


	Three Months Ended March 31,
		2022		2021
Amortization expense		$	776	$	1,016

Estimated amortization expense for future years is as follows (in thousands):


Remainder of 2021		$	868
2022		2,431
Remainder of 2022				Remainder of 2022	$	2,131
2023	2023	1,749		2023	2,171
2024	2024	396		2024	863
2025	2025	136		2025	519
2026				2026	312

		$	5,580		$	5,996

Goodwill

The carrying amount of goodwill by segment is as follows (in thousands):

Laser Products Advanced Development Totals
Balance, December 31, 2020 $ 2,236 $ 10,248 $ 12,484
Currency exchange rate adjustment (47) — (47)
Balance, September 30, 2021 $ 2,189 $ 10,248 $ 12,437


	Laser Products		Advanced Development		Totals




Balance, December 31, 2021	2,172		10,248		12,420
Currency exchange rate adjustment	(15)		—		(15)
Balance, March 31, 2022	$	2,157	$	10,248	$	12,405

Note 9 - Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


		As of					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accrued payroll and benefits	Accrued payroll and benefits	$	11,568	$	10,770	Accrued payroll and benefits	$	9,549	$	10,915
Product warranty, current	Product warranty, current	2,251		2,122		Product warranty, current	2,339		2,286

Other accrued expenses	Other accrued expenses	1,923		2,429		Other accrued expenses	1,496		1,529
		$	15,742	$	15,321		$	13,384	$	14,730

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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 included in the ~~Accrued~~accrued liabilities and the long-term portion is included in ~~Other~~other long-term liabilities onin our Consolidated Balance Sheets.

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Product warranty liability activity was as follows for the periods presented (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Product warranty liability, beginning	Product warranty liability, beginning	$	4,711	$	2,984	Product warranty liability, beginning	$	5,371	$	4,711
Warranty charges incurred, net	Warranty charges incurred, net	(1,699)		(2,259)		Warranty charges incurred, net	(298)		(701)
Provision for warranty charges, net of adjustments	Provision for warranty charges, net of adjustments	2,431		3,425		Provision for warranty charges, net of adjustments	216		1,285
Acquired warranty		—		100

Product warranty liability, ending	Product warranty liability, ending	5,443		4,250		Product warranty liability, ending	5,289		5,295
Less: current portion of product warranty liability	Less: current portion of product warranty liability	(2,251)		(1,982)		Less: current portion of product warranty liability	(2,339)		(2,441)
Non-current portion of product warranty liability	Non-current portion of product warranty liability	$	3,192	$	2,268	Non-current portion of product warranty liability	$	2,950	$	2,854

~~Note 11 - Line of Credit Facility~~

~~We have a $40.0 million revolving line of credit (LOC) with Pacific Western Bank dated September 24, 2018, which is secured by our assets.~~

~~On September 24, 2021, we amended the LOC to extend the maturity date to September 24, 2024, remove LIBOR references and update the financial covenants.~~

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 September 30, 2021 and we were in compliance with all covenants.

Note 1211 - Commitments and Contingencies

Leases

See Note ~~13.~~12.

Legal Matters

On March 25, 2022, Lumentum Operations LLC 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 intend to vigorously defend against Lumentum’s allegations.

From time to time, we may be subject to various other legal proceedings and claims in the ordinary course of business. AsWe do not believe the ultimate resolution of ~~September 30, 2021, and as~~these matters will have a material adverse effect on our consolidated financial position, results of ~~the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.~~operations, or cash flows.

Note 1312 - 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 ~~0.2~~0.1 to ~~13.7~~13.2 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 ~~0.8~~0.3 to ~~4.7~~4.2 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 reasonably certain we will exercise the options at this time. The weighted-average remaining lease term for the lease obligations was 98 years at ~~September 30, 2021,~~March 31, 2022, and the weighted-average discount rate was ~~3.6%~~3.5%.

The components of lease expense related to operating leases were as follows (in thousands):


		Three Months Ended March 31,
			2022		2021
Lease expense:
	Operating lease expense		$	1,031	$	874
	Short-term lease expense		121		73
	Variable and other lease expense		194		122
			$	1,346	$	1,069

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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Lease expense:
Operating lease expense $ 968 $ 758 $ 2,933 $ 2,178
Short-term lease expense 172 35 456 153
Variable and other lease expense 192 128 549 381
$ 1,332 $ 921 $ 3,938 $ 2,712

Future minimum payments under our non-cancelable lease obligations were as follows as of ~~September 30, 2021~~March 31, 2022 (in thousands):


Remainder of 2021		$	914
2022		3,333
Remainder of 2022				Remainder of 2022	$	2,895
2023	2023	2,508		2023	3,129
2024	2024	2,361		2024	2,754
2025	2025	1,913		2025	2,135
2026				2026	1,802
Thereafter	Thereafter	10,041		Thereafter	8,739
Total minimum lease payments	Total minimum lease payments	21,070		Total minimum lease payments	21,454
Less: interest	Less: interest	(3,291)		Less: interest	(3,123)
Present value of net minimum lease payments	Present value of net minimum lease payments	17,779		Present value of net minimum lease payments	18,331
Less: current portion of lease liabilities	Less: current portion of lease liabilities	(2,858)		Less: current portion of lease liabilities	(3,141)
Total long-term lease liabilities	Total long-term lease liabilities	$	14,921	Total long-term lease liabilities	$	15,190

Note 1413 - Stockholders' Equity and Stock-Based Compensation

~~Public Offering~~

In March 2021, we closed a follow-on public offering in which we issued and sold approximately 2.5 million shares of common stock (including approximately 0.3 million shares sold pursuant to the full exercise of the underwriters option to purchase additional shares) at an offering price of $34.00 per share, resulting in aggregate net proceeds to us of approximately $82.4 million after deducting underwriting discounts, commissions and offering costs.

Restricted Stock Awards and Units

Restricted stock award (RSA) and restricted stock unit (RSU) activity under our equity incentive plan was as follows (in thousands, except weighted-average grant date fair values):

Number of Restricted Stock Awards Weighted-Average Grant Date Fair Value
RSAs at December 31, 2020 653 $ 21.30
Awards granted 358 33.12
Awards vested (258) 25.08
RSAs at September 30, 2021 753 $ 25.63


		Number of Restricted Stock Awards	Weighted-Average Grant Date Fair Value
RSAs at December 31, 2021		753	$	25.63


	Awards forfeited	(140)	25.21
RSAs at March 31, 2022		613	$	25.72

Number of Restricted Stock Units Weighted-Average Grant Date Fair Value
RSUs at December 31, 2020 2,800 $ 20.54
Awards granted 1,143 33.39
Awards vested (707) 24.74
Awards forfeited (94) 33.94
RSUs at September 30, 2021 3,142 $ 23.86
RSAs forfeited were in connection with our former chief financial officer's transition agreement dated January 18, 2022.


		Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value
RSUs at December 31, 2021		2,799	$	24.41
	Awards granted	31	18.82
	Awards vested	(10)	30.78
	Awards forfeited	(22)	28.56
RSUs at March 31, 2022		2,798	$	24.29

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The total fair value of RSAs and RSUs vested during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$6.5 million and $17.5 million, respectively.~~$0.3 million. Awards outstanding as of ~~September 30, 2021~~March 31, 2022 include ~~0.8~~0.7 million performance-based awards that will vest upon meeting certain performance criteria.

Stock Options

The following table summarizes our stock option activity during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 (in thousands, except weighted-average exercise prices):

Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Outstanding, December 31, 2020 3,358 $1.53 5.3 $104,510
Options exercised (746) $1.31
Options canceled (3) $3.74
Outstanding, September 30, 2021 2,609 $1.59 4.6 $69,408
Options exercisable at September 30, 2021 2,319 $1.26 4.5 $62,450
Options vested as of September 30, 2021 and expected to vest after September 30, 2021 2,609 $1.59 4.6 $69,408

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	Number of Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding, December 31, 2021	2,454	$1.61	4.4	$54,815

Options exercised	(423)	$1.63
Options canceled	(39)	$9.67
Outstanding, March 31, 2022	1,992	$1.45	4.2	$31,651
Options exercisable at March 31, 2022	1,892	$1.34	4.1	$30,283
Options vested as of March 31, 2022 and expected to vest after March 31, 2022	1,992	$1.45	4.2	$31,651

Total intrinsic value of options exercised for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$23.3~~$6.4 million and ~~$11.2~~$15.0 million, respectively. We received proceeds of ~~$1.0~~$0.7 million and ~~$1.1~~$0.6 million from the exercise of options for ~~each of~~ the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~Employee Stock Purchase Plan~~

~~Information related to activity under our Employee Stock Purchase Plan was as follows (in thousands, except weighted average per share prices):~~






	~~Nine Months Ended September 30, 2021~~
~~Shares issued~~	33
~~Weighted-average per share purchase price~~	$	~~22.41~~
~~Weighted-average per share discount from the fair value of our common stock on date of issuance~~	$	~~3.95~~

Stock-Based Compensation

Total stock-based compensation expense was included in our consolidated statements of operations as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Cost of revenues	Cost of revenues	$	740	$	505	$	1,780	$	1,189		Cost of revenues	$	709	$	491
Research and development	Research and development	3,782		2,545		10,408		6,602			Research and development	3,122		2,918
Sales, general and administrative	Sales, general and administrative	5,550		3,633		17,544		8,692			Sales, general and administrative	2,722		4,645
		$	10,072	$	6,683	$	29,732	$	16,483			$	6,553	$	8,054

Unrecognized Compensation Costs

As of ~~September 30, 2021,~~March 31, 2022, total unrecognized stock-based compensation was ~~$79.2~~$55.8 million, which will be recognized over an average expected recognition period of ~~2.8~~2.5 years.

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Common Stock Repurchase Plan

On November 14, 2019, our Board of Directors authorized the repurchase of up to $10.0 million of our outstanding shares of common stock. As of ~~September 30, 2021,~~March 31, 2022, no repurchases had been executed under the program.

Note 1514 - Segment Information

We operate in 2 reportable segments consisting of the Laser Products segment and the Advanced Development segment. The following table summarizes the operating results by reportable segment for the periods presented (dollars in thousands):

Three Months Ended September 30, 2021
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 54,393 $ 17,842 $ — $ 72,235
Gross profit $ 20,940 $ 1,195 $ (740) $ 21,395
Gross margin 38.5 % 6.7 % NM 29.6 %

Nine Months Ended September 30, 2021
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 155,289 $ 47,404 $ — $ 202,693
Gross profit $ 58,241 $ 2,904 $ (1,780) $ 59,365
Gross margin 37.5 % 6.1 % NM 29.3 %

Three Months Ended September 30, 2020
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 51,117 $ 10,615 $ — $ 61,732
Gross profit $ 16,977 $ 688 $ (505) $ 17,160
Gross margin 33.2 % 6.5 % NM 27.8 %


		Nine Months Ended September 30, 2020												Three Months Ended March 31, 2022
		Laser Products			Advanced Development			Corporate and Other		Totals				Laser Products			Advanced Development			Corporate and Other		Totals
Revenue	Revenue	$	133,151		$	23,934		$	—	$	157,085		Revenue	$	51,061		$	13,398		$	—	$	64,459
Gross profit	Gross profit	$	39,198		$	1,708		$	(1,189)	$	39,717		Gross profit	$	16,002		$	884		$	(709)	$	16,177
Gross margin	Gross margin	29.4		%	7.1		%	NM		25.3		%	Gross margin	31.3		%	6.6		%	NM		25.1		%

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	Three Months Ended March 31, 2021
	Laser Products			Advanced Development			Corporate and Other		Totals
Revenue	$	47,335		$	14,010		$	—	$	61,345
Gross profit	$	17,431		$	705		$	(491)	$	17,645
Gross margin	36.8		%	5.0		%	NM		28.8		%

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, ~~2020.~~2021.

Note 1615 - 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 ~~period~~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,
		2022	2021


Restricted stock units and awards		1,313	2,433
Employee stock purchase plan		—	7
Common stock options		2,090	2,904
		3,403	5,344

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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Restricted stock units and awards 2,195 3,498 2,547 2,129
Employee stock purchase plan — 39 — —
Common stock options 2,544 3,593 2,717 3,593
4,739 7,130 5,264 5,722

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 ability to develop innovative products;~~ the ~~implementation of~~impact on our business ~~model~~from the COVID-19 pandemic and ~~strategic plans, including estimates regarding expenses and capital requirements;~~the related lockdown in Shanghai; the impact of inflation; ~~our future financial performance; our utilization of vertical integration; our ability to adequately protect our intellectual property rights;~~ 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 ~~and those risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020~~ 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

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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 and directed energy products are included in the Laser Products segment, while revenue earned from research and development contracts are included in the Advanced Development segment.

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Revenues increased to ~~$202.7~~$64.5 million in the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$157.1~~$61.3 million in the same period of ~~2020~~2021 as a result of higher revenue ~~across all end~~in the Industrial and Microfabrication markets. We generated a net loss of ~~$20.9~~$8.6 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to a net loss of ~~$16.4~~$6.1 million for the same period of ~~2020.~~2021.

Factors Affecting Our Performance

~~For factors affecting~~Impact of the COVID-19 Pandemic

The COVID-19 pandemic and related global liquidity concerns and significant macro-economic volatility continues to adversely impact our ~~performance, reference is made~~end-markets, including reduced economic activity and demand for our products, delays in new capital expenditure decisions and implementations, and restrictions on individual and business activities and travel. While our manufacturing operations have generally remained open throughout the pandemic, including our manufacturing facilities in the United States, which are considered essential businesses, the recent COVID-related lockdown of Shanghai by the Chinese government forced us to ~~Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained~~halt operations in ~~Part II~~our Shanghai manufacturing facility on March 28, 2022. Our Shanghai facility manufactures products that are sold directly to end customers as well as components that are shipped to our facilities in the United States to be integrated into finished products. Although we are increasing our manufacturing capabilities in the United States, our Shanghai manufacturing facility remains an important part of our ~~Annual Report~~global operations.

The closure of our Shanghai facility did not have a material adverse impact on ~~Form 10-K~~our financial results for the ~~year ended December 31, 2020. There~~first quarter of 2022, but may adversely affect our financial results for the second quarter of 2022, and a prolonged closure, or partial closure, of our Shanghai facility could have an adverse impact on future periods. In addition to the impact of the lockdown in Shanghai, some of our non-manufacturing personnel have been ~~no material~~partially working from home since March 2020. In recent periods, labor issues have become more pronounced as a result of the COVID-19 pandemic and we have experienced higher than expected increases in wages and other compensation costs as well as increased competition for qualified employees.

There are ongoing related risks to our business depending on the progression of the COVID-19 pandemic, including from the potential returns to limited or closed government functions, business activities and person-to-person interactions. Global trade conditions may further adversely impact us and our industry. For example, pandemic-related issues have exacerbated port congestion and caused intermittent supplier shutdowns and delays, resulting in additional expenses and challenges to obtaining critical parts. The full impact of the COVID-19 pandemic on our financial condition and results of operations will depend on future events and developments, such as the duration and magnitude of the pandemic and the conditions and timing under which restrictions will be lifted or re-imposed, impacts on our supply and distribution chains as well as our customers, the demand for our products and whether the pandemic leads to recessionary conditions in any of our key markets.

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Demand for our Semiconductor and Fiber Laser Solutions

In order to continue to grow our revenues, we must continue to achieve 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 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 and directed energy 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 power and performance requirements of our products can provide the most benefit. 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, 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. 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, and progress on projects during the period. Most of our Development contracts are structured as cost plus fixed fee due to the ~~factors affecting~~technical complexity of the research and development services.

Seasonality

Our quarterly revenues can fluctuate with general economic trends, holidays in foreign countries such as Chinese New Year in the first quarter of our ~~performance since December 31, 2020.~~fiscal year, the timing of capital expenditures by our customers, 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.

Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods ~~indicated:~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Revenue:
Products 75.3 % 82.8 % 76.6 % 84.8 %
Development 24.7 17.2 23.4 15.2
Total revenue 100.0 100.0 100.0 100.0
Cost of revenue:
Products 47.3 56.1 48.8 60.6
Development 23.1 16.2 21.9 14.1
Total cost of revenue 70.4 72.2 70.7 74.7
Gross profit 29.6 27.8 29.3 25.3
Operating expenses:
Research and development 20.5 18.0 20.1 18.6
Sales, general, and administrative 18.4 16.2 19.8 17.4
Total operating expenses 38.9 34.2 39.9 36.0
Loss from operations (9.3) (6.4) (10.6) (10.7)
Other income (expense):
Interest income (expense), net — (0.2) (0.1) 0.1
Other income, net 0.1 0.8 0.1 —
Loss before income taxes (9.2) (5.8) (10.6) (10.6)
Income tax expense (benefit) 0.3 (2.4) (0.3) (0.2)
Net loss (9.5) % (3.4) % (10.3) % (10.4) %

~~Revenues by Segment~~

~~Our revenues by segment were as follows for the periods presented (dollars in thousands)~~indicated (which may not add up due to rounding):

Three Months Ended September 30, Change
2021 % of Revenue 2020 % of Revenue $ %
Laser Products $ 54,393 75.3 % $ 51,117 82.8 % $ 3,276 6.4 %
Advanced Development 17,842 24.7 10,615 17.2 7,227 68.1
$ 72,235 100.0 % $ 61,732 100.0 % $ 10,503 17.0 %

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Nine Months Ended September 30, Change
2021 % of Revenue 2020 % of Revenue $ %
Laser Products $ 155,289 76.6 % $ 133,151 84.8 % $ 22,138 16.6 %
Advanced Development 47,404 23.4 23,934 15.2 23,470 98.1
$ 202,693 100.0 % $ 157,085 100.0 % $ 45,608 29.0 %

The increases in Laser Products revenue for the three and nine months ended September 30, 2021, compared to the same periods of 2020, were driven by increased sales to the Industrial and Microfabrication markets as discussed below, offset partially by a decrease in product sales to the Aerospace and Defense market. The increases in Advanced Development revenue were primarily due to increased activity on existing research and development contracts.


	Three Months Ended March 31,
	2022		2021
Revenue:
Products	79.2	%	77.2	%
Development	20.8		22.8
Total revenue	100.0		100.0
Cost of revenue:
Products	55.5		49.5
Development	19.4		21.7
Total cost of revenue	74.9		71.2
Gross profit	25.1		28.8
Operating expenses:
Research and development	21.3		19.1
Sales, general, and administrative	16.7		19.1
Total operating expenses	38.0		38.2
Loss from operations	(12.9)		(9.4)
Other income (expense):
Interest expense, net	—		(0.1)

Loss before income taxes	(12.9)		(9.5)
Income tax expense	0.5		0.5
Net loss	(13.4)	%	(10.0)	%

Revenues by End Market

Our revenues by end market were as follows for the periods presented (dollars in thousands):

Three Months Ended September 30, Change
2021 % of Revenue 2020 % of Revenue $ %
Industrial $ 26,737 37.0 % $ 21,880 35.4 % $ 4,857 22.2 %
Microfabrication 17,695 24.5 14,052 22.8 3,643 25.9
Aerospace and Defense 27,803 38.5 25,800 41.8 2,003 7.8
$ 72,235 100.0 % $ 61,732 100.0 % $ 10,503 17.0 %


		Nine Months Ended September 30,								Change					Three Months Ended March 31,								Change
		2021		% of Revenue		2020		% of Revenue		$		%			2022		% of Revenue		2021		% of Revenue		$		%
Industrial	Industrial	$	73,044	36.0	%	$	60,500	38.5	%	$	12,544	20.7	%	Industrial	$	23,996	37.3	%	$	21,400	34.9	%	$	2,596	12.1	%
Microfabrication	Microfabrication	53,184		26.2		38,771		24.7		14,413		37.2		Microfabrication	17,319		26.8		15,215		24.8		2,104		13.8
Aerospace and Defense	Aerospace and Defense	76,465		37.8		57,814		36.8		18,651		32.3		Aerospace and Defense	23,144		35.9		24,730		40.3		(1,586)		(6.4)
		$	202,693	100.0	%	$	157,085	100.0	%	$	45,608	29.0	%		$	64,459	100.0	%	$	61,345	100.0	%	$	3,114	5.1	%

The increases in revenue from the Industrial market for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were~~2021, was driven by ~~increases~~an increase in unit sales outside of China, partially offset by lower unit sales in China and lower average selling prices due to changes in product ~~mix and lower unit sales in China.~~mix. The ~~increases~~increase in revenue from the Microfabrication market for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were~~2021, was driven by increases in demand and unit sales of semiconductor ~~lasers.~~lasers outside of China, offset partially by lower unit sales inside China. The ~~increases~~decrease in revenue from the Aerospace and Defense market for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were~~2021, was primarily due to ~~increased~~a decrease in product sales and decreased activity on ~~existing~~ research and development ~~contracts,~~contracts.

Revenues by Segment

Our revenues by segment were as follows for the periods presented (dollars in thousands):


	Three Months Ended March 31,								Change
	2022		% of Revenue		2021		% of Revenue		$		%
Laser Products	$	51,061	79.2	%	$	47,335	77.2	%	$	3,726	7.9	%
Advanced Development	13,398		20.8		14,010		22.8		(612)		(4.4)
	$	64,459	100.0	%	$	61,345	100.0	%	$	3,114	5.1	%

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The increase in Laser Products revenue for the three months ended March 31, 2022, compared to the same period of 2021, was driven by increased sales to the Industrial and Microfabrication markets as discussed above, offset partially by a decrease in product ~~sales.~~sales to the Aerospace and Defense market. The decrease in Advanced Development revenue was primarily due to decreased activity on research and development contracts. Most of our Advanced Development revenue is generated from cost plus fixed fee research and development contracts.

Revenues by Geographic Region

Our revenues by geographic region were as follows for the periods presented (dollars in thousands):

Three Months Ended September 30, Change
2021 % of Revenue 2020 % of Revenue $ %
North America $ 37,430 51.8 % $ 31,384 50.8 % $ 6,046 19.3 %
China 13,709 19.0 19,186 31.1 (5,477) (28.5)
Rest of World 21,096 29.2 11,162 18.1 9,934 89.0
$ 72,235 100.0 % $ 61,732 100.0 % $ 10,503 17.0 %

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		Nine Months Ended September 30,								Change					Three Months Ended March 31,								Change
		2021		% of Revenue		2020		% of Revenue		$		%			2022		% of Revenue		2021		% of Revenue		$		%
North America	North America	$	101,659	50.2	%	$	72,924	46.4	%	$	28,735	39.4	%	North America	$	35,144	54.5	%	$	31,134	50.7	%	$	4,010	12.9	%
China	China	48,045		23.7		52,723		33.6		(4,678)		(8.9)		China	7,139		11.1		15,577		25.4		(8,438)		(54.2)
Rest of World	Rest of World	52,989		26.1		31,438		20.0		21,551		68.6		Rest of World	22,176		34.4		14,634		23.9		7,542		51.5
		$	202,693	100.0	%	$	157,085	100.0	%	$	45,608	29.0	%		$	64,459	100.0	%	$	61,345	100.0	%	$	3,114	5.1	%

Geographic revenue information is based on the location to which we ship our products. The increases in both North America and Rest of World revenue for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020,~~2021, were primarily driven by increased revenue from the Industrial and Microfabrication markets, offset partially by a decrease in revenue from the Aerospace and Defense ~~and Industrials markets.~~market for North America. The ~~decreases~~decrease in China revenue for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were primarily~~2021, was due to decreased sales in the Industrial ~~market. The increases in Rest~~and Microfabrication markets, primarily as a result of ~~World revenue for the three and nine months ended September 30, 2021, compared to the same periods of 2020, were primarily due to increased sales~~deteriorating market conditions in the ~~Microfabrication and~~ Industrial ~~markets.~~market.

Cost of Revenues and Gross Margin

Cost of Laser Products revenue consists primarily of manufacturing materials, ~~payroll,~~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 September 30, 2021												Three Months Ended March 31, 2022
		Laser Products			Advanced Development			Corporate and Other		Total				Laser Products			Advanced Development			Corporate and Other		Total
Gross profit	Gross profit	$	20,940		$	1,195		$	(740)	$	21,395		Gross profit	$	16,002		$	884		$	(709)	$	16,177
Gross margin	Gross margin	38.5		%	6.7		%	NM		29.6		%	Gross margin	31.3		%	6.6		%	NM		25.1		%

Nine Months Ended September 30, 2021
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 58,241 $ 2,904 $ (1,780) $ 59,365
Gross margin 37.5 % 6.1 % NM 29.3 %

Three Months Ended September 30, 2020
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 16,977 $ 688 $ (505) $ 17,160
Gross margin 33.2 % 6.5 % NM 27.8 %


		Nine Months Ended September 30, 2020												Three Months Ended March 31, 2021
		Laser Products			Advanced Development			Corporate and Other		Total				Laser Products			Advanced Development			Corporate and Other		Total
Gross profit	Gross profit	$	39,198		$	1,708		$	(1,189)	$	39,717		Gross profit	$	17,431		$	705		$	(491)	$	17,645
Gross margin	Gross margin	29.4		%	7.1		%	NM		25.3		%	Gross margin	36.8		%	5.0		%	NM		28.8		%

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The ~~increases~~decrease in Laser Products gross margin for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were~~2021, was driven ~~primarily~~ by sales mix, ~~product cost improvements, and improved~~decreased factory utilization ~~from higher~~of our Shanghai manufacturing facility due to lower sales in China, increased investments in U.S. based manufacturing, and increased production ~~volume.~~and freight costs. The ~~fluctuations~~increase in Advanced Development gross margin for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period of ~~2020, were~~2021, was primarily due to changes in the composition of research and development contracts.

Operating Expenses

Our operating expenses were as follows for the periods presented (dollars in thousands):

Research and Development

Three Months Ended September 30, Change
2021 2020 $ %
Research and development $ 14,838 $ 11,126 $ 3,712 33.4 %

Nine Months Ended September 30, Change
2021 2020 $ %
Research and development $ 40,830 $ 29,136 $ 11,694 40.1 %


	Three Months Ended March 31,				Change
	2022		2021		$		%
Research and development	$	13,711	$	11,710	$	2,001	17.1	%

The ~~increases~~increase in research and development expense for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period in ~~2020, were~~2021, was primarily due to ~~increases in stock-based compensation of $1.2 million and $3.8 million, respectively, and~~ increased employee headcount and related costs and project-related expenses to support our development ~~efforts.~~efforts, and an increase in stock-based compensation of $0.2 million. These increases in costs were partially offset by a decrease in intangible amortization expense.

Sales, General and Administrative

Three Months Ended September 30, Change
2021 2020 $ %
Sales, general, and administrative $ 13,316 $ 10,010 $ 3,306 33.0 %

Nine Months Ended September 30, Change
2021 2020 $ %
Sales, general, and administrative $ 40,087 $ 27,343 $ 12,744 46.6 %


	Three Months Ended March 31,				Change
	2022		2021		$		%
Sales, general, and administrative	$	10,775	$	11,714	$	(939)	(8.0)	%

The ~~increases~~decrease in sales, general and administrative expense for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the same ~~periods~~period in ~~2020 were~~2021 was primarily due to ~~increases~~a decrease in stock-based compensation of $1.9 million, partially offset by an increase in facility expenses and ~~$8.9 million, respectively, and increased employee costs and professional service fees~~a decrease in administrative cost allocated to ~~support~~development projects. The decrease in stock-based compensation was driven by forfeitures in connection with the retirement of our ~~continued growth.~~chief financial officer during the first quarter of 2022.

Interest ~~Income (Expense),~~Expense, net

Three Months Ended September 30, Change
2021 2020 $ %
Interest income (expense), net $ (20) $ (96) $ 76 79.2%


	Three Months Ended March 31,				Change
	2022		2021		$		%
Interest expense, net	$	—	$	(74)	$	74	(100.0)%

Nine Months Ended September 30, Change
2021 2020 $ %
Interest income (expense), net $ (126) $ 122 $ (248) (203.3)%

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~~The change~~Changes in interest ~~income (expense),~~expense, net, ~~for the nine months ended September 30, 2021, compared to the same period in 2020 were primarily attributable to increase in~~are driven by bank charges and changes in the market rates on money market ~~funds, offset partially by the March 2021 cash infusion from our public offering of stock.~~funds. There was no significant change in interest ~~income (expense),~~expense, net, for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020.~~2021.

Other Income, ~~(Expense),~~ net

Three Months Ended September 30, Change
2021 2020 $ %
Other income (expense), net $ 102 $ 477 $ (375) 78.6%


	Three Months Ended March 31,				Change
	2022		2021		$		%
Other income, net	$	29	$	26	$	3	11.5%

Nine Months Ended September 30, Change
2021 2020 $ %
Other income (expense), net $ 246 $ 63 $ 183 290.5%

~~The fluctuations in~~Changes on other income, ~~(expense),~~ net, ~~for the three and nine months ended September 30, 2021, compared to the same periods in 2020 were~~are primarily attributable to changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations. There was no significant change other income, net, for the three months ended March 31, 2022, compared to the same period in 2021.

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Income Tax Expense ~~(Benefit)~~

Three Months Ended September 30, Change
2021 2020 $ %
Income tax expense (benefit) $ 203 $ (1,485) $ 1,688 (113.7) %


	Three Months Ended March 31,				Change
	2022		2021		$		%
Income tax expense	$	343	$	322	$	21	6.5	%

Nine Months Ended September 30, Change
2021 2020 $ %
Income tax expense (benefit) $ (513) $ (162) $ (351) 216.7 %

We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy and Korea. WeWhile 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 ~~U.S.~~United States, Austria and China, we continue to maintain a full valuation allowance in ~~both~~these jurisdictions as of ~~September 30, 2021.~~March 31, 2022.

~~The increase~~There was no significant change in income tax expense for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period in 2020 was driven by a discrete tax benefit related to return to provision true ups in the third quarter of 2020.The increase in income tax benefit for the nine months ended September 30, 2021, compared to the same period in 2020 was driven by a decrease in income from our Finland operations and a discrete tax benefit related to return to provision true ups and an expiring statute of limitations on unrecognized tax positions. Our tax expense is dependent on the geographic mix of earnings and primarily related to our foreign operations.2021.

Liquidity and Capital Resources

We had cash and cash equivalents of ~~$165.6~~$134.9 million and ~~$102.3~~$146.5 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our principal uses of liquidity were to fund our working capital needs and purchase property, plant and ~~equipment, and make withholding tax payments related to the vesting of stock awards. Our principal source of liquidity for the nine months ended September 30, 2021 was from our equity offering.~~

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equipment. 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. However, we may need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. 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):


		Nine Months Ended September 30,				Three Months Ended March 31,
		2021		2020				2022		2021
Net cash provided by operating activities		$	2,687	$	14,694
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	$	(7,004)	$	4,115
Net cash used in investing activities	Net cash used in investing activities	(14,230)		(20,280)			Net cash used in investing activities	(5,133)		(3,505)
Net cash provided by (used in) financing activities		75,060		(1,638)
Net cash provided by financing activities							Net cash provided by financing activities	611		82,932
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(256)		373			Effect of exchange rate changes on cash	(59)		(227)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	$	63,261	$	(6,851)		Net increase (decrease) in cash, cash equivalents and restricted cash	$	(11,585)	$	83,315

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Net Cash Provided by (Used in) Operating Activities

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, net cash used in operating activities was $7.0 million, which was the results of a $8.6 million net loss and use of cash for working capital of $9.6 million, offset partially by non‑cash expenses totaling $11.2 million related primarily to depreciation, amortization, and stock-based compensation. Changes in working capital were driven by a $5.1 million increase in prepaid expenses and other current assets, a $3.4 million increase in inventory, and a $3.0 million decrease in accounts payable, offset partially by $4.7 million decrease in accounts receivable. The increase in prepaid expense and other current assets was attributable to an increase in contract assets, and the increase in inventory was driven primarily by an increase in safety stock to address risks related to the supply chain and manufacturing disruptions. The decrease in accounts payable is due to timing of vendor payments, and the decrease in accounts receivable is attributable to the decrease in revenue for the three months ended March 31, 2022 compared to the preceding quarter.

During the three months ended March 31, 2021, net cash provided by operating activities was ~~$2.7~~$4.1 million, which was primarily driven by non‑cash expenses totaling $43.4 million related to depreciation and amortization, stock-based compensation, and other items, a $9.7 million increase in accounts payable and a $0.9 million increase in accrued and other long-term liabilities. These items were partially offset by our net loss of $20.9 million and increases of $16.2 million in inventory and $4.6 million in accounts receivable. The increase in inventory was driven primarily by an expected increase in future period sales. The increase in accounts receivable was attributable to the increase in revenue and timing of shipments during the quarter. The increase in accounts payable was attributable to the increase in inventory and the timing of vendor payments.

~~During the nine months ended September 30, 2020, net cash provided by operating activities was $14.7 million, which was primarily driven by $16.4~~$6.1 million of net loss reported for the period, and ~~non-cash~~non‑cash adjustments of ~~$28.7~~$12.5 million related to depreciation and amortization, stock-based compensation, and other items. These items were partially offset by increases of ~~$6.4~~$4.4 million in inventory and ~~$10.6~~$1.4 million in accounts ~~payable.~~payable, and a decrease in prepaid expenses and other current assets of $2.2 million. The increase in inventory ~~supported new product introductions, decreased customer lead times~~was driven by an expected increase in future period sales, and ~~increased safety stock. The~~the increase in accounts payable was ~~primarily~~ driven by an increase in inventory purchases and timing of vendor payments. The decrease in prepaid expenses and other current assets was primarily due to reduction in our contract assets and collection of import duty reclaims.

Net Cash Used in Investing Activities

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, net cash used in investing activities was ~~$14.2~~$5.1 million, primarily resulting from ~~$13.6~~$5.0 million of capital expenditures related to investments in manufacturing equipment and improvements to our corporate facility.

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used in investing activities was ~~$20.3~~$3.5 million, primarily resulting from ~~$19.4~~$3.1 million of capital expenditures related to ~~the acquisition of commercial property and other~~ investments in manufacturing equipment ~~for~~and improvements to our ~~worldwide operations.~~corporate facility.

Net Cash Provided by Financing Activities

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, net cash provided by financing activities was ~~$75.1~~$0.6 million, which was primarily driven by ~~our follow-on public offering of $82.4 million, net of offering costs, and $1.7~~$0.7 million of proceeds from stock options exercises, ~~and employee stock program purchases,~~ partially offset by ~~$8.3~~$0.1 million of withholding tax payments related to the vesting of stock awards.

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During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash ~~used in~~provided by financing activities was ~~$1.6~~$82.9 million, which was primarily driven by ~~$3.3~~our follow-on public offering of $82.8 million, net of withholding tax payments related to vesting of restricted stock awards, offset by $1.8 million of proceeds from stock options exercises and employee stock program purchases. In addition, the $15.0 million in proceeds from our revolving line of credit drawn in the first quarter of 2020 was paid in full during the third quarter of 2020.

offering costs.

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.~~

Onassets and matures September 24, ~~2021, we amended the LOC to extend the maturity date to September 24, 2024, remove LIBOR references and update the financial covenants.~~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 ~~September 30, 2021~~March 31, 2022 and we were in compliance with all covenants.

Contractual Obligations

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our operating lease obligations increased by approximately ~~$5.1~~$0.7 million. There have been no other material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Off-Balance Sheet Arrangements~~

Since inception, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose

Table of ~~facilitating off-balance sheet arrangements or for another contractually narrow or limited purpose.~~Contents

Inflation

While we do not believe that inflation had a material effect on our business, financial condition or results of operations through ~~September 30, 2021,~~March 31, 2022, we have experienced higher than expected increases in wages and other compensation costs, and shipping costs ~~during~~over the ~~six months ended September 30, 2021.~~past year. We expect those increases will continue to impact our cost structure. 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.

~~Recent Accounting Pronouncements~~

~~See Note 1 of Notes to Consolidated Financial Statements.~~

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, ~~2020.~~2021. Our exposure to market risk has not changed materially since December 31, ~~2020.~~2021.

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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

Our chief executive officer and our chief financial officer did not identify any changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the three months ended ~~September 30, 2021~~March 31, 2022 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.

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PART II ~~- OTHER INFORMATION~~

ITEM 1. LEGAL PROCEEDINGS

~~We may, from time to time, be party to litigation and subject to claims incident to the ordinary course~~For a description of ~~business. As~~ our company matures, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially adversely affect our business, financial condition, results of operations and growth prospects.

~~There have been no~~ material ~~changes to the~~pending legal proceedings, ~~disclosed~~see Note 11, Commitments and Contingencies, to our consolidated financial statements included elsewhere in ~~our Annual Report on Form 10-K for the year ended December 31, 2020.~~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, ~~2020.~~2021. 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, ~~2020.~~2021, except as described below:

The COVID-19 pandemic has disrupted our operations, manufacturing and supply chain and likely will continue to adversely affect our business, financial condition and operating results.

The COVID-19 pandemic and related global liquidity concerns and significant macro-economic volatility continues to adversely impact our end-markets, including reduced economic activity and demand for our products, delays in new capital expenditure decisions and implementations, and restrictions on individual and business activities and travel. Government imposed restrictions may limit our ability to manufacture our products in a timely manner or not at all, and some of our non-manufacturing personnel have been partially working from home since March 2020. The COVID-related lockdown of Shanghai by the Chinese government has forced us to halt operations in our Shanghai manufacturing facility since March 28, 2022. The Shanghai facility manufactures products that are sold directly to end customers as well as components that are shipped to our facilities in the United States to be integrated into finished products. Although we are increasing our manufacturing capabilities in the United States, the Shanghai manufacturing facility remains an important part of our global operations. The closure of our Shanghai facility may adversely affect our financial results for the second quarter of 2022, and a prolonged closure, or partial closure, of our Shanghai facility could have an adverse impact on future periods.

In addition, travel has been severely limited during the COVID-19 pandemic due to government restrictions and other precautionary measures. Limitations on travel have, for example, impacted our management’s ability to visit our employees and facilities, particularly in China, as well as our vendors and potential and existing customers. Such limitations have adversely impacted and could continue to adversely impact oversight of our employees and facilities, our sales and marketing efforts and our manufacturing and supply arrangements, potentially disrupting our business operations and adversely impacting our financial condition and operating results. In recent periods, labor issues have also become more pronounced as a result of the COVID-19 pandemic and we have experienced higher than expected increases in wages and other compensation costs as well as increased competition for qualified employees.

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ITEM 6. EXHIBITS

(a) Exhibits

Exhibit
Number

Incorporated by Reference

Filed
Herewith

Exhibit
Number

Incorporated by Reference

Filed
Herewith

Description

Form

File No.

Exhibit

Filing Date

Description

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant

10-Q

001-38462

3.1

May 25, 2018

3.1

Amended and Restated Certificate of Incorporation of the Registrant

10-Q

001-38462

3.1

May 25, 2018

3.2

Amended and Restated Bylaws of the Registrant

8-K

001-38462

3.1

April 21, 2020

3.2

Amended and Restated Bylaws of the Registrant

8-K

001-38462

3.1

April 21, 2020

4.1

Specimen Common Stock Certificate of the Registrant

S-1/A

333-224055

4.1

April 16, 2018

4.1

Specimen Common Stock Certificate of the Registrant

S-1/A

333-224055

4.1

April 16, 2018

10.1

Second Amendment, dated May 27, 2021, to the Second Amended and Restated Loan and Security Agreement, dated September 24, 2018, by and between nLIGHT, Inc. and Pacific Western Bank

10.2

Third Amendment, dated September 24, 2021, to the Second Amended and Restated Loan and Security Agreement dated September 24, 2018, by and between nLIGHT, Inc. and Pacific Western Bank

8-K

001-38462

10.1

September 28, 2021

10.1+

Transition Agreement and Release, dated January 18, 2022, by and between the registrant and Ran Bareket

10-K

001-38462

10.12

February 28, 2022

31.1

Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1

Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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)

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)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


+			Indicates a management contract or compensatory plan or arrangement.
*			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.

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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)


~~November 5, 2021~~May 6, 2022	By:	/s/ SCOTT KEENEY
Date		Scott Keeney
		President and Chief Executive Officer (Principal Executive Officer)

~~November 5, 2021~~May 6, 2022	By:	/s/ ~~RAN BAREKET~~JOSEPH CORSO
Date		~~Ran Bareket~~Joseph Corso
		Chief Financial Officer (Principal Financial Officer)

May 6, 2022	By:	/s/ JAMES NIAS
Date		James Nias
		Chief Accounting ~~and Financial~~Officer (Principal Accounting Officer)

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		Three Months Ended September 30, 2020
	Common stock	Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit			Total stockholders' equity
			Shares					Amount
Balance, June 30, 2020		38,850		$	15	$	345,917		$	(2,848)	$	(131,759)	$	211,325

Net loss		—		—		—			—		(2,110)		(2,110)
Issuance of common stock pursuant to exercise of stock options		115		—		260			—		—		260
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax		370		—		(1,157)			—		—		(1,157)


Stock-based compensation		—		—		6,683			—		—		6,683
Cumulative translation adjustment, net of tax		—		—		—			1,091		—		1,091
Balance, September 30, 2020		39,335		$	15	$	351,703		$	(1,757)	$	(133,869)	$	216,092


		Number of Restricted Stock Awards	Weighted-Average Grant Date Fair Value
RSAs at December 31, 2020		653	$	21.30
	Awards granted	358	33.12
	Awards vested	(258)	25.08

RSAs at September 30, 2021		753	$	25.63


		Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value
RSUs at December 31, 2020		2,800	$	20.54
	Awards granted	1,143	33.39
	Awards vested	(707)	24.74
	Awards forfeited	(94)	33.94
RSUs at September 30, 2021		3,142	$	23.86