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 ~~June 30, 2022~~March 31, 2023

☐ 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 ~~August 1, 2022,~~May 2, 2023, the Registrant had ~~45,095,519~~45,850,661 shares of common stock outstanding.


TABLE OF CONTENTS
			Page

Part I. Financial Information			1
Item 1. Unaudited Interim Financial Statements			1
Consolidated Balance Sheets: ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (unaudited)			1
Consolidated Statements of Operations: Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)			2
Consolidated Statements of Comprehensive Loss: Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)			3
Consolidated Statements of Stockholders' Equity: Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)			4
Consolidated Statements of Cash Flows: ~~Six~~Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)			65
Notes to Consolidated Financial Statements (unaudited)			76
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1615
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2422
Item 4. Controls and Procedures			2422
Part II. Other Information			2622
Item 1. Legal Proceedings			2622
Item 1A. Risk Factors			2622
Item 6. Exhibits			2723
Signatures			2824

~~Table of Contents~~

PART I

ITEM 1. FINANCIAL STATEMENTS

nLIGHT, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)


		As of					As of
		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	70,633	$	146,534	Cash and cash equivalents	$	48,402	$	57,826
Marketable securities	Marketable securities	50,000		—		Marketable securities	59,966		50,391
Accounts receivable, net of allowances of $300 and $303		45,944		41,574
Accounts receivable, net of allowances of $290 and $290						Accounts receivable, net of allowances of $290 and $290	36,140		37,913
Inventory	Inventory	80,189		73,746		Inventory	67,157		67,600
Prepaid expenses and other current assets	Prepaid expenses and other current assets	14,617		15,350		Prepaid expenses and other current assets	21,586		17,026
Total current assets	Total current assets	261,383		277,204		Total current assets	233,251		230,756
Restricted cash	Restricted cash	250		250		Restricted cash	253		252
Lease right-of-use assets	Lease right-of-use assets	15,357		17,048		Lease right-of-use assets	13,900		13,893
Property, plant and equipment, net	Property, plant and equipment, net	62,248		56,101		Property, plant and equipment, net	58,978		60,693
Intangible assets, net	Intangible assets, net	5,297		6,698		Intangible assets, net	3,408		4,041
Goodwill	Goodwill	12,359		12,420		Goodwill	12,388		12,376
Other assets, net	Other assets, net	3,580		3,897		Other assets, net	7,586		7,222
Total assets	Total assets	$	360,474	$	373,618	Total assets	$	329,764	$	329,233

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	23,318	$	26,347	Accounts payable	$	17,759	$	17,507
Accrued liabilities	Accrued liabilities	13,138		14,730		Accrued liabilities	14,708		12,820
Deferred revenues	Deferred revenues	2,034		1,629		Deferred revenues	1,271		1,407
Current portion of lease liabilities	Current portion of lease liabilities	3,032		3,066		Current portion of lease liabilities	3,001		2,758

Total current liabilities	Total current liabilities	41,522		45,772		Total current liabilities	36,739		34,492
Non-current income taxes payable	Non-current income taxes payable	6,991		7,149		Non-current income taxes payable	6,920		6,699
Long-term lease liabilities	Long-term lease liabilities	14,117		14,612		Long-term lease liabilities	12,576		12,852

Other long-term liabilities	Other long-term liabilities	3,990		3,952		Other long-term liabilities	4,367		4,345
Total liabilities	Total liabilities	66,620		71,485		Total liabilities	60,602		58,388
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:

Common stock - $0.0001 par value; 190,000 shares authorized, 45,074 and 44,248 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively		15		15
Common stock - $0.0001 par value; 190,000 shares authorized, 45,785 and 45,629 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock - $0.0001 par value; 190,000 shares authorized, 45,785 and 45,629 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	16		16
Additional paid-in capital	Additional paid-in capital	483,410		470,760		Additional paid-in capital	501,675		496,211
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,551)		(587)		Accumulated other comprehensive loss	(2,165)		(2,748)
Accumulated deficit	Accumulated deficit	(187,020)		(168,055)		Accumulated deficit	(230,364)		(222,634)
Total stockholders’ equity	Total stockholders’ equity	293,854		302,133		Total stockholders’ equity	269,162		270,845
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	360,474	$	373,618	Total liabilities and stockholders’ equity	$	329,764	$	329,233

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 June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Revenue:	Revenue:										Revenue:
Products	Products	$	48,180	$	53,561	$	99,241	$	100,896		Products	$	41,107	$	51,061
Development	Development	12,647		15,552		26,045		29,562			Development	12,984		13,398
Total revenue	Total revenue	60,827		69,113		125,286		130,458			Total revenue	54,091		64,459
Cost of revenue:	Cost of revenue:										Cost of revenue:
Products	Products	33,683		34,240		69,451		64,635			Products	27,526		35,768
Development	Development	11,759		14,548		24,273		27,853			Development	12,302		12,514
Total cost of revenue	Total cost of revenue	45,442		48,788		93,724		92,488			Total cost of revenue	39,828		48,282
Gross profit	Gross profit	15,385		20,325		31,562		37,970			Gross profit	14,263		16,177
Operating expenses:	Operating expenses:										Operating expenses:
Research and development	Research and development	13,788		14,282		27,499		25,992			Research and development	11,301		13,711
Sales, general, and administrative	Sales, general, and administrative	11,914		15,057		22,689		26,771			Sales, general, and administrative	11,169		10,775

Total operating expenses	Total operating expenses	25,702		29,339		50,188		52,763			Total operating expenses	22,470		24,486
Loss from operations	Loss from operations	(10,317)		(9,014)		(18,626)		(14,793)			Loss from operations	(8,207)		(8,309)
Other income (expense):
Interest income (expense), net		71		(32)		71		(106)
Other income (loss), net		(106)		118		(77)		144
Other income:											Other income:
Interest income, net											Interest income, net	337		—
Other income, net											Other income, net	404		29
Loss before income taxes	Loss before income taxes	(10,352)		(8,928)		(18,632)		(14,755)			Loss before income taxes	(7,466)		(8,280)
Income tax expense (benefit)		(10)		(1,038)		333		(716)
Income tax expense											Income tax expense	264		343
Net loss	Net loss	$	(10,342)	$	(7,890)	$	(18,965)	$	(14,039)		Net loss	$	(7,730)	$	(8,623)

Net loss per share, basic and diluted	Net loss per share, basic and diluted	$	(0.23)	$	(0.19)	$	(0.43)	$	(0.34)		Net loss per share, basic and diluted	$	(0.17)	$	(0.20)

Shares used in per share calculations, basic and diluted	Shares used in per share calculations, basic and diluted	44,178		42,313		43,919		41,187			Shares used in per share calculations, basic and diluted	45,706		43,655

See accompanying notes to consolidated financial statements.

~~Table of Contents~~

nLIGHT, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net loss	Net loss	$	(10,342)	$	(7,890)	$	(18,965)	$	(14,039)	Net loss	$	(7,730)	$	(8,623)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax		(1,868)		497		(1,964)		(165)
Other comprehensive loss, net of tax:										Other comprehensive loss, net of tax:
Foreign currency translation adjustments										Foreign currency translation adjustments	369		(96)
Unrealized gains on available-for-sale securities										Unrealized gains on available-for-sale securities	214		—
Comprehensive loss	Comprehensive loss	$	(12,210)	$	(7,393)	$	(20,929)	$	(14,204)	Comprehensive loss	$	(7,147)	$	(8,719)

See accompanying notes to consolidated financial statements.

~~Table of Contents~~

nLIGHT, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands)

(Unaudited)


			Three Months Ended June 30, 2022																			Three Months Ended March 31, 2023
		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, March 31, 2022			$	44,538		$	15	$	477,924		$	(683)	$	(176,678)	$	300,578
Balance, December 31, 2022																	Balance, December 31, 2022					45,629	$	16					$	496,211	$	(2,748)	$	(222,634)	$	270,845
Net loss	Net loss		—			—		—			—		(10,342)		(10,342)		Net loss					—	—			—			—		(7,730)		(7,730)

Issuance of common stock pursuant to exercise of stock options	Issuance of common stock pursuant to exercise of stock options		48			—		73			—		—		73		Issuance of common stock pursuant to exercise of stock options					117	—			143			—		—		143
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		370			—		(2,468)			—		—		(2,468)		Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax					39	—			(182)			—		—		(182)

Issuance of common stock under the Employee Stock Purchase Plan			118			—		1,201			—		—		1,201

Stock-based compensation	Stock-based compensation		—			—		6,680			—		—		6,680		Stock-based compensation					—	—			5,503			—		—		5,503
Unrealized gains on available-for-sale securities																	Unrealized gains on available-for-sale securities					—	—			—			214		—		214
Cumulative translation adjustment, net of tax	Cumulative translation adjustment, net of tax		—			—		—			(1,868)		—		(1,868)		Cumulative translation adjustment, net of tax					—	—			—			369		—		369
Balance, June 30, 2022			$	45,074		$	15	$	483,410		$	(2,551)	$	(187,020)	$	293,854
Balance, March 31, 2023																	Balance, March 31, 2023					45,785	$	16		$	501,675		$	(2,165)	$	(230,364)	$	269,162

Six Months Ended June 30, 2022
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, December 31, 2021 44,248 $ 15 $ 470,760 $ (587) $ (168,055) $ 302,133
Net loss — — — — (18,965) (18,965)
Issuance of common stock pursuant to exercise of stock options 471 — 762 — — 762
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 377 — (2,546) — — (2,546)
Restricted stock awards forfeited in connection with transition agreement (140) — — — — —
Issuance of common stock under the Employee Stock Purchase Plan 118 — 1,201 — — 1,201
Stock-based compensation — — 13,233 — — 13,233
Cumulative translation adjustment, net of tax — — — (1,964) — (1,964)
Balance, June 30, 2022 45,074 $ 15 $ 483,410 $ (2,551) $ (187,020) $ 293,854


		Three Months Ended March 31, 2022
	Common stock		Additional paid-in capital			Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
		Shares			Amount
Balance, December 31, 2021		44,248	$	15		$	470,760	$	(587)	$	(168,055)	$	302,133
Net loss		—	—			—		—		(8,623)		(8,623)

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		7	—			(78)		—		—		(78)
Restricted stock awards forfeited in connection with transition agreement		(140)	—			—		—		—		—


Stock-based compensation		—	—			6,553		—		—		6,553

Cumulative translation adjustment, net of tax		—	—			—		(96)		—		(96)
Balance, March 31, 2022		44,538	$	15		$	477,924	$	(683)	$	(176,678)	$	300,578

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

Consolidated Statements of ~~Stockholders' Equity~~Cash Flows

(In thousands)

(Unaudited)

Three Months Ended June 30, 2021
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, March 31, 2021 42,783 $ 15 $ 449,496 $ (921) $ (144,535) $ 304,055
Net loss — — — — (7,890) (7,890)
Proceeds from follow-on offering, net of offering costs — — (1) — — (1)
Issuance of common stock pursuant to exercise of stock options 101 — 196 — — 196
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 264 — (4,567) — — (4,567)
Issuance of common stock under the Employee Stock Purchase Plan 33 — 750 — — 750
Stock-based compensation — — 11,606 — — 11,606
Cumulative translation adjustment, net of tax — — — 497 — 497
Balance, Balance, June 30, 2021 43,181 $ 15 $ 457,480 $ (424) $ (152,425) $ 304,646


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(7,730)	$	(8,623)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	3,105		2,556
Amortization	872		1,182
Reduction in carrying amount of right-of-use assets	6		867
Recoveries of losses on accounts receivable	(2)		—
Stock-based compensation	5,503		6,553
Deferred income taxes	—		(4)


Changes in operating assets and liabilities:
Accounts receivable, net	1,905		4,690
Inventory	662		(3,433)
Prepaid expenses and other current assets	(4,549)		(5,061)
Other assets, net	(540)		(317)
Accounts payable	(411)		(3,019)
Accrued and other long-term liabilities	1,855		(1,088)
Deferred revenues	(142)		(647)
Lease liabilities	(45)		(813)
Non-current income taxes payable	155		153
Net cash provided by (used in) operating activities	644		(7,004)
Cash flows from investing activities:

Purchases of property, plant and equipment	(684)		(5,019)
Acquisition of intangible assets and capitalization of patents	—		(114)
Purchase of marketable securities	(34,359)		—
Proceeds from maturities and sales of marketable securities	24,998		—
Net cash used in investing activities	(10,045)		(5,133)
Cash flows from financing activities:








Proceeds from stock option exercises	143		689
Tax payments related to stock award issuances	(182)		(78)
Net cash (used in) provided by financing activities	(39)		611
Effect of exchange rate changes on cash	17		(59)
Net decrease in cash, cash equivalents, and restricted cash	(9,423)		(11,585)
Cash, cash equivalents, and restricted cash, beginning of period	58,078		146,784
Cash, cash equivalents, and restricted cash, end of period	$	48,655	$	135,199
Supplemental disclosures:
Cash paid for interest, net	$	—	$	—
Cash paid for income taxes	144		79
Operating cash outflows from operating leases	923		1,097
Right-of-use assets obtained in exchange for lease liabilities	731		1,470
Accrued purchases of property, equipment and patents	697		2,268

Six Months Ended June 30, 2021
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, December 31, 2020 39,793 $ 15 $ 358,544 $ (259) $ (138,386) $ 219,914
Net loss — — — — (14,039) (14,039)
Proceeds from follow-on offering, net of offering costs 2,537 — 82,354 — — 82,354
Issuance of common stock pursuant to exercise of stock options 553 — 770 — — 770
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 265 — (4,598) — — (4,598)
Issuance of common stock under the Employee Stock Purchase Plan 33 — 750 — — 750
Stock-based compensation — — 19,660 — — 19,660
Cumulative translation adjustment, net of tax — — — (165) — (165)
Balance, Balance, June 30, 2021 43,181 $ 15 $ 457,480 $ (424) $ (152,425) $ 304,646

See accompanying notes to consolidated financial statements.

Table of Contents

nLIGHT, Inc.

~~Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~

Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net loss $ (18,965) $ (14,039)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation 5,214 4,290
Amortization 2,329 3,122
Reduction in carrying amount of right-of-use assets 1,571 1,632
Provision for (recoveries of) losses on accounts receivable 6 (72)
Stock-based compensation 13,233 19,660
Deferred income taxes (1) (11)
(Gain) Loss on disposal of assets — 3
Changes in operating assets and liabilities:
Accounts receivable, net (4,975) (4,849)
Inventory (7,383) (8,611)
Prepaid expenses and other current assets 663 175
Other assets, net (656) (905)
Accounts payable (1,726) 3,335
Accrued and other long-term liabilities (1,191) 1,347
Deferred revenues 421 133
Lease liabilities (409) (1,404)
Non-current income taxes payable 104 (721)
Net cash provided by (used in) operating activities (11,765) 3,085
Cash flows from investing activities:
Acquisition of business, net of cash acquired — (291)
Purchases of property, plant and equipment (12,893) (7,962)
Acquisition of intangible assets and capitalization of patents (228) (216)
Purchase of marketable securities (50,000) —
Net cash used in investing activities (63,121) (8,469)
Cash flows from financing activities:
Proceeds from public offerings, net of offering costs — 82,354
Principal payments on term loan, debt and financing leases — (399)
Payment of contingent consideration related to acquisition — (326)
Proceeds from employee stock plan purchases 1,201 750
Proceeds from stock option exercises 762 770
Tax payments related to stock award issuances (2,546) (4,598)
Net cash provided by (used in) financing activities (583) 78,551
Effect of exchange rate changes on cash (432) (126)
Net increase (decrease) in cash, cash equivalents, and restricted cash (75,901) 73,041
Cash, cash equivalents, and restricted cash, beginning of period 146,784 102,573
Cash, cash equivalents, and restricted cash, end of period $ 70,883 $ 175,614
Supplemental disclosures:
Cash paid for interest, net $ — $ 103
Cash paid for income taxes 189 393
Operating cash outflows from operating leases 1,914 1,621
Right-of-use assets obtained in exchange for lease liabilities 1,222 7,224
Accrued purchases of property, equipment and patents 1,650 2,139

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

~~Table of Contents~~

~~nLIGHT, Inc.~~

Notes to Consolidated Financial Statements

Note 1 - Basis of Presentation and New Accounting Pronouncements

Basis of Presentation

The accompanying unaudited consolidated financial statements of nLIGHT, Inc. and our wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The unaudited financial information reflects, in the opinion of management, all adjustments necessary for a fair presentation of financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Critical Accounting Policies

Our critical accounting policies have not materially changed during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

New Accounting Pronouncements

None.

Note 2 ~~- 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 $1.6 million, $0.2 million of which was paid at closing with the remaining $1.4 million to be paid over the next 24 months.

~~As of June 30, 2022, we owed OPI $0.7 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 amounts recognized reflect the consideration we expect to be entitled to receive in exchange for these products and services. We consider customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of our consideration of the contract, we evaluate certain factors, including the customer's ability to pay (or credit risk). For each contract, we consider the promise to transfer products, each of which is distinct, as the identified performance obligations.

We allocate the transaction price to each distinct product based on its relative standalone selling price. Master sales agreements or purchase orders from customers could include a single product or multiple products. Regardless, the contracted price with the customer is agreed to at the individual product level outlined in the customer contract or purchase order. We do not bundle prices; however, we do negotiate with customers on pricing for the same products based on a variety of factors (e.g., level of contractual volume). We have concluded that the prices negotiated with each individual customer are representative of the stand-alone selling price of the product.

We often receive orders with multiple delivery dates that may extend across several reporting periods. We allocate the transaction price of the contract to each delivery based on the product standalone selling price and invoice for each scheduled delivery upon shipment or delivery and recognize revenues for such delivery at that point, ~~assuming~~when transfer of control has occurred. As scheduled delivery dates are generally within one year, under the optional exemption provided by ASC 606-10-50-14a revenues allocated to future shipments of partially completed contracts are not disclosed as performance obligations for point in time revenue. Further, the Company recognizes over time revenue as per ASC 606-10-55-18 (invoice practical expedient) for its cost plus contracts and, accordingly, elects not to disclose information related to those performance obligations under ASC 606-10-50-14b.

Rights of return generally are not included in customer contracts. Accordingly, product revenue is recognized upon transfer of control at shipment or delivery, as ~~applicable, and transfer of control.~~applicable. Rights of return are evaluated as they occur.

Revenues recognized at a point in time consist of sales of semiconductor lasers, fiber lasers and other related products. Revenues recognized over time generally consist of development arrangements that are structured based on our costs incurred. 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 customer. Billing under these arrangements generally occurs within one month after the work is completed.

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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 June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Industrial	Industrial	$	21,899	$	24,907	$	45,895	$	46,307		Industrial	$	19,902	$	23,996
Microfabrication	Microfabrication	16,415		20,274		33,734		35,489			Microfabrication	13,058		17,319
Aerospace and Defense	Aerospace and Defense	22,513		23,932		45,657		48,662			Aerospace and Defense	21,131		23,144
		$	60,827	$	69,113	$	125,286	$	130,458			$	54,091	$	64,459

Sales by Geography


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
North America	North America	$	35,682	$	33,095	$	70,826	$	64,229		North America	$	29,103	$	35,144
China	China	4,672		18,759		11,811		34,336			China	3,646		7,139
Rest of World	Rest of World	20,473		17,259		42,649		31,893			Rest of World	21,342		22,176
		$	60,827	$	69,113	$	125,286	$	130,458			$	54,091	$	64,459

Sales by Timing of Revenue


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Point in time	Point in time	$	45,448	$	50,123	$	93,663	$	97,117		Point in time	$	40,272	$	48,215
Over time	Over time	15,379		18,990		31,623		33,341			Over time	13,819		16,244
		$	60,827	$	69,113	$	125,286	$	130,458			$	54,091	$	64,459

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


		Balance Sheet Classification	As of					Balance Sheet Classification	As of
			June 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Contract assets	Contract assets	Prepaid expenses and other current assets	$	7,620	$	9,657	Contract assets	Prepaid expenses and other current assets	$	16,547	$	10,377
Contract liabilities	Contract liabilities	Deferred revenues and other long-term liabilities	3,343		2,358		Contract liabilities	Deferred revenues and other long-term liabilities	2,511		2,455

Contract assets generally consist of revenue recognized on an over time basis where revenue recognition has been met, but the amounts are subsequently billed and collected in the following period.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, we recognized revenue of ~~$0.1~~$0.8 million and ~~$1.5~~$1.4 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 43 - Concentrations of Credit and Other Risks

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
U.S. Government 16% 20% 16% 20%


	Three Months Ended March 31,
		2023	2022
U.S. Government		16%	17%
Raytheon Technologies		(1)	10%

(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.~~receivables from customers. As of ~~June 30, 2022,~~March 31, 2023, and December 31 ~~2021,~~2022, two customers accounted for ~~approximately 27%~~a total of 33% and ~~two customers accounted for approximately 33%~~29%, respectively, of net ~~accounts receivable.~~customer receivables. No other customers accounted for 10% or more of net ~~accounts receivable~~customer receivables at either date.

Note 54 - Marketable Securities

Marketable securities consist primarily of highly liquid investments with original maturities of greater than 90 days when purchased. Our marketable securities are considered available-for-sale as they represent investments ~~of cash and~~that are available to be sold for current operations. As such, they are included as current assets on our Consolidated Balance Sheets at fair value with unrealized gains and losses included in accumulated other comprehensive loss. Any unrealized gains and losses that are considered to be other-than-temporary are recorded in other income, ~~(loss),~~ net on our Consolidated Statements of Operations. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in other income, ~~(loss),~~ net on our Consolidated Statements of Operations.

Realized gains were $0.4 million for three months ended March 31, 2023. Unrealized gains were $0.2 million for the three months ended March 31, 2023. These unrealized gains are considered temporary and ~~losses were immaterial~~are reflected in the Statements of Comprehensive Loss. There were no realized or unrealized gains or losses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022.

See Note 65 for additional information.

Note 65 - Fair Value of Financial Instruments

The carrying amounts of certain of our financial instruments, including cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities are shown at cost which approximates fair value due to the short-term nature of these instruments. The fair value of our term and revolving loans approximates the carrying value due to the variable market rate used to calculate interest payments.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

•Level 1 Inputs: Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.

•Level 2 Inputs: Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 Inputs: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Our financial instruments that are carried at fair value consist of Level 1 assets which include highly liquid investments and bank drafts classified as cash equivalents and marketable securities.

Our fair value hierarchy for our financial instruments was as follows (in thousands):

June 30, 2022
Level 1 Level 2 Level 3 Total
Cash Equivalents:
  Money market securities $ 46,977 $ — $ — $ 46,977
  Commercial paper 621 — — 621
47,598 — — 47,598
Marketable Securities:
  U.S. treasuries 50,000 — — 50,000
Total $ 97,598 $ — $ — $ 97,598

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	March 31, 2023
	Level 1		Level 2		Level 3		Total
Cash Equivalents:
Money market securities	$	26,000	$	—	$	—	$	26,000
Commercial paper	557		—		—		557
	26,557		—		—		26,557
Marketable Securities:
U.S. treasuries	59,966		—		—		59,966
Total	$	86,523	$	—	$	—	$	86,523


		December 31, 2021									December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Cash Equivalents:	Cash Equivalents:									Cash Equivalents:
Money market securities	Money market securities	$	126,900	$	—	$	—	$	126,900	Money market securities	$	31,658	$	—	$	—	$	31,658
Commercial paper	Commercial paper	236		—		—		236		Commercial paper	656		—		—		656
											$	32,314	$	—	$	—	$	32,314
Marketable Securities:										Marketable Securities:
U.S. treasuries										U.S. treasuries	50,391		—		—		50,391
Total	Total	$	127,136	$	—	$	—	$	127,136	Total	$	82,705	$	—	$	—	$	82,705

Cash Equivalents

The fair value of cash equivalents is determined based on quoted market prices for similar or identical securities.

Marketable Securities

We classify our marketable securities as available-for-sale and value them utilizing a market approach that uses observable inputs without applying significant judgment.

Note 76 - 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
		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	37,681	$	32,185	Raw materials	$	32,665	$	32,515
Work in process and semi-finished goods	Work in process and semi-finished goods	25,454		24,642		Work in process and semi-finished goods	20,137		19,056
Finished goods	Finished goods	17,054		16,919		Finished goods	14,355		16,029
		$	80,189	$	73,746		$	67,157	$	67,600

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Note 87 - Property, Plant and Equipment

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


			As of					Useful life	As of
		Useful life (years)	June 30, 2022		December 31, 2021			(years)	March 31, 2023		December 31, 2022
Automobile		3	$	111	$	114
Automobiles							Automobiles	3	$	114	$	110
Computer hardware and software	Computer hardware and software	3 - 5	8,385		6,594		Computer hardware and software	3 - 5	8,673		8,712
Manufacturing and lab equipment	Manufacturing and lab equipment	2 - 7	87,095		81,130		Manufacturing and lab equipment	2 - 7	90,153		89,230
Office equipment and furniture	Office equipment and furniture	5 - 7	2,347		2,361		Office equipment and furniture	5 - 7	2,482		2,410
Leasehold and building improvements	Leasehold and building improvements	2 - 12	30,471		28,125		Leasehold and building improvements	2 - 12	31,217		30,675
Buildings	Buildings	30	9,392		9,392		Buildings	30	9,392		9,392
Land	Land	N/A	3,399		3,399		Land	N/A	3,399		3,399
			141,200		131,115				145,430		143,928
Accumulated depreciation	Accumulated depreciation		(78,952)		(75,014)		Accumulated depreciation		(86,452)		(83,235)
			$	62,248	$	56,101			$	58,978	$	60,693

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Note 98 - Intangible Assets and Goodwill

~~Intangibles~~Intangible Assets

The details of ~~amortizing~~definite lived intangible assets ~~are~~were as follows (in thousands):


		Estimated useful life (in years)	As of					Estimated useful life (in years)	As of
			June 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Patents	Patents	3 - 5	$	6,185	$	5,986	Patents	3 - 5	$	6,334	$	6,322
Development programs	Development programs	2 - 4	7,200		7,200		Development programs	2 - 4	7,200		7,200
Developed technology	Developed technology	5	2,888		3,038		Developed technology	5	2,960		2,930
			16,273		16,224				16,494		16,452
Accumulated amortization	Accumulated amortization		(10,976)		(9,526)		Accumulated amortization		(13,086)		(12,411)
			$	5,297	$	6,698			$	3,408	$	4,041

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Amortization expense $ 711 $ 1,026 $ 1,487 $ 2,042


	Three Months Ended March 31,
	2023		2022
Amortization expense	$	654	$	776

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


Remainder of 2022		$	1,433
2023	2023	2,187		2023	$	1,581
2024	2024	879		2024	929
2025	2025	505		2025	593
2026	2026	293		2026	305
Thereafter				Thereafter	—
					$	3,408
		$	5,297

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Goodwill

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

Laser Products Advanced Development Totals
Balance, December 31, 2021 2,172 10,248 12,420
Currency exchange rate adjustment (61) — (61)
Balance, June 30, 2022 $ 2,111 $ 10,248 $ 12,359


	Laser Products		Advanced Development		Totals




Balance, December 31, 2022	$	2,128	$	10,248	$	12,376
Currency exchange rate adjustment	12		—		12
Balance, March 31, 2023	$	2,140	$	10,248	$	12,388

Note 109 - Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


							As of
		As of
		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accrued payroll and benefits	Accrued payroll and benefits	$	9,192	$	10,915	Accrued payroll and benefits	$	9,888	$	8,233
Product warranty, current	Product warranty, current	2,325		2,286		Product warranty, current	2,540		2,601

Other accrued expenses	Other accrued expenses	1,621		1,529		Other accrued expenses	2,280		1,986
		$	13,138	$	14,730		$	14,708	$	12,820

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Note 1110 - 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 liabilities and the long-term portion is included in other long-term liabilities in our Consolidated Balance Sheets.

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


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Product warranty liability, beginning	Product warranty liability, beginning	$	5,371	$	4,711	Product warranty liability, beginning	$	5,441	$	5,371
Warranty charges incurred, net	Warranty charges incurred, net	(409)		(1,132)		Warranty charges incurred, net	(782)		(1,490)
Provision for warranty charges, net of adjustments	Provision for warranty charges, net of adjustments	198		1,779		Provision for warranty charges, net of adjustments	572		1,560

Product warranty liability, ending	Product warranty liability, ending	5,160		5,358		Product warranty liability, ending	5,231		5,441
Less: current portion of product warranty liability	Less: current portion of product warranty liability	(2,325)		(2,246)		Less: current portion of product warranty liability	(2,540)		(2,601)
Non-current portion of product warranty liability	Non-current portion of product warranty liability	$	2,835	$	3,112	Non-current portion of product warranty liability	$	2,691	$	2,840

Note 11 - Stockholders' Equity and Stock-Based Compensation

Restricted Stock Awards and Units

There was no restricted stock award activity in the first quarter of 2023. 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 Units	Weighted-Average Grant Date Fair Value
RSUs at December 31, 2022		2,784	$	17.63
	Awards granted	152	11.55
	Awards vested	(57)	18.09
	Awards forfeited	(223)	21.49
RSUs at March 31, 2023		2,656	16.95

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The total fair value of RSUs vested during the three months ended March 31, 2023, was $1.0 million. Awards outstanding as of March 31, 2023 include 0.6 million performance-based awards that will vest upon meeting certain performance criteria.

Stock Options

The following table summarizes our stock option activity during the three months ended March 31, 2023 (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, 2022	1,827	$1.29	3.4	$16,156

Options exercised	(117)	1.22

Outstanding, March 31, 2023	1,710	1.30	3.2	15,181
Options exercisable at March 31, 2023	1,710	1.30	3.2	15,181
Options vested as of March 31, 2023, and expected to vest after March 31, 2023	1,710	1.30	3.2	15,181

Total intrinsic value of options exercised for the three months ended March 31, 2023 and 2022, was $1.1 million and $6.4 million, respectively. We received proceeds of $0.1 million and $0.7 million from the exercise of options for the three months ended March 31, 2023 and 2022, respectively.

Stock-Based Compensation

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


	Three Months Ended March 31,
	2023		2022
Cost of revenues	$	700	$	709
Research and development	2,098		3,122
Sales, general and administrative	2,705		2,722
	$	5,503	$	6,553

Unrecognized Compensation Costs

As of March 31, 2023, total unrecognized stock-based compensation was $34.8 million, which will be recognized over an average expected recognition period of 2.0 years.

Note 12 - Commitments and Contingencies

Leases

See Note 13.

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~~are vigorously ~~defend~~defending against Lumentum’s allegations. Loss in this matter is not probable or reasonably estimable and, as such, no loss contingency has been recorded.

From time to time, we may be subject to various other legal proceedings and claims in the ordinary course of business. ~~We do not~~As of March 31, 2023, we believe ~~the ultimate resolution of~~ these matters will not have a material adverse effect on our consolidated financial ~~position, results of operations, or cash flows.~~statements.

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Note 13 - Leases

We lease real estate space under non-cancelable operating lease agreements for commercial and industrial space. Facilities-related operating leases have remaining terms of ~~0.3~~one month to ~~12.9~~12.2 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 ~~0.6~~0.2 to ~~3.9~~4.3 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 8 years as of ~~June 30,~~March 31, 2023, and the weighted-average discount rate was 3.6%. The weighted-average remaining lease term for the lease obligations was 8 years as of December 31, 2022, and the weighted-average discount rate was 3.6%.

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Lease expense:
Operating lease expense $ 965 $ 1,092 $ 1,996 $ 1,966
Short-term lease expense 131 210 252 283
Variable and other lease expense 241 235 435 357
$ 1,337 $ 1,537 $ 2,683 $ 2,606


		Three Months Ended March 31,
		2023		2022
Lease expense:
	Operating lease expense	$	921	$	1,031
	Short-term lease expense	93		121
	Variable and other lease expense	225		194
		$	1,239	$	1,346

Future minimum payments under our non-cancelable lease obligations were as follows as of ~~June 30, 2022~~March 31, 2023 (in thousands):

~~Table of Contents~~


Remainder of 2022		$	1,956
2023	2023	3,234		2023	$	2,658
2024	2024	2,833		2024	3,232
2025	2025	2,013		2025	2,067
2026	2026	1,631		2026	1,654
2027				2027	1,655
Thereafter	Thereafter	8,451		Thereafter	6,806
Total minimum lease payments	Total minimum lease payments	20,118		Total minimum lease payments	18,072
Less: interest	Less: interest	(2,969)		Less: interest	(2,495)
Present value of net minimum lease payments	Present value of net minimum lease payments	17,149		Present value of net minimum lease payments	15,577
Less: current portion of lease liabilities	Less: current portion of lease liabilities	(3,032)		Less: current portion of lease liabilities	(3,001)
Total long-term lease liabilities	Total long-term lease liabilities	$	14,117	Total long-term lease liabilities	$	12,576

Note 14 - ~~Stockholders' Equity~~Segment Information

We operate in two reportable segments consisting of the Laser Products segment and ~~Stock-Based Compensation~~

~~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, 2021 753 $ 25.63
Awards vested (171) 25.10
Awards forfeited (140) 25.21
RSAs at June 30, 2022 442 25.97

~~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 78 15.61
Awards vested (576) 26.47
Awards forfeited (143) 26.03
RSUs at June 30, 2022 2,158 23.45

~~The total fair value of RSAs and RSUs vested during~~ the six months ended June 30, 2022, was $4.3 million and $15.3 million, respectively. Awards outstanding as of June 30, 2022 include 0.7 million performance-based awards that will vest upon meeting certain performance criteria.

~~Stock Options~~

Advanced Development segment. The following table summarizes ~~our stock option activity during~~ the ~~six months ended June 30, 2022 (in thousands, except weighted-average exercise prices)~~operating results by reportable segment (dollars in thousands):


	Three Months Ended March 31, 2023
	Laser Products			Advanced Development			Corporate and Other		Totals
Revenue	$	41,107		$	12,984		$	—	$	54,091
Gross profit	$	14,281		$	682		$	(700)	$	14,263
Gross margin	34.7		%	5.3		%	NM*		26.4		%

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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 (471) $1.62
Options canceled (41) $9.44
Outstanding, June 30, 2022 1,942 $1.44 3.8 $17,037
Options exercisable at June 30, 2022 1,916 $1.41 3.8 $16,890
Options vested as of June 30, 2022, and expected to vest after June 30, 2022 1,942 $1.44 3.8 $17,037


	Three Months Ended March 31, 2022
	Laser Products			Advanced Development			Corporate and Other		Totals
Revenue	$	51,061		$	13,398		$	—	$	64,459
Gross profit	$	16,002		$	884		$	(709)	$	16,177
Gross margin	31.3		%	6.6		%	NM*		25.1		%

~~Total intrinsic value of options exercised for the six months ended June 30, 2022~~Corporate and 2021, was $6.9 million and $17.8 million, respectively. We received proceeds of $0.8 million and $0.8 million from the exercise of options for the six months ended June 30, 2022 and 2021, respectively.Other is unallocated expenses related to stock-based compensation.

~~Employee Stock Purchase Plan~~

~~Information related~~There have been no material changes to ~~activity under~~the geographic locations of our ~~Employee Stock Purchase Plan was~~long-lived assets, net, based on the location of the assets, as ~~follows (in thousands, except weighted average per share prices):~~disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.






	~~Six Months Ended June 30, 2022~~
~~Shares issued~~	~~118~~
~~Weighted-average per share purchase price~~	$	~~10.15~~
~~Weighted-average per share discount from the fair value of our common stock on date of issuance~~	$	~~1.79~~

~~Stock-Based Compensation~~

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cost of revenues $ 684 $ 549 $ 1,393 $ 1,040
Research and development 3,117 3,708 6,239 6,626
Sales, general and administrative 2,879 7,349 5,601 11,994
$ 6,680 $ 11,606 $ 13,233 $ 19,660

~~Unrecognized Compensation Costs~~

~~As of June 30, 2022, total unrecognized stock-based compensation was $46.1 million, which will be recognized over an average expected recognition period of 2.3 years.~~

~~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 June 30, 2022, no repurchases had been executed under the program.

~~Table of Contents~~

Note 15 - ~~Segment Information~~Net Loss per Share

~~We operate in 2 reportable segments consisting of the Laser Products segment~~Basic and diluted net loss and the ~~Advanced Development segment. The following table summarizes~~number of shares used for basic and diluted net loss calculations were the ~~operating results by reportable segment~~same for ~~the~~all periods presented ~~(dollars~~because we were in ~~thousands):~~

Three Months Ended June 30, 2022
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 48,180 $ 12,647 $ — $ 60,827
Gross profit $ 15,182 $ 888 $ (685) $ 15,385
Gross margin 31.5 % 7.0 % NM 25.3 %

Six Months Ended June 30, 2022
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 99,241 $ 26,045 $ — $ 125,286
Gross profit $ 31,184 $ 1,772 $ (1,394) $ 31,562
Gross margin 31.4 % 6.8 % NM 25.2 %

Three Months Ended June 30, 2021
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 53,561 $ 15,552 $ — $ 69,113
Gross profit $ 19,871 $ 1,004 $ (550) $ 20,325
Gross margin 37.1 % 6.5 % NM 29.4 %

Six Months Ended June 30, 2021
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 100,896 $ 29,562 $ — $ 130,458
Gross profit $ 37,302 $ 1,709 $ (1,041) $ 37,970
Gross margin 37.0 % 5.8 % NM 29.1 %
a loss position.

~~Corporate and Other is unallocated expenses related to stock-based compensation.~~

~~There~~The following potentially dilutive securities were not included in the calculation of diluted shares as the effect would 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, 2021.anti‑dilutive (in thousands):


	Three Months Ended March 31,
	2023	2022


Restricted stock units and awards	845	1,313

Common stock options	1,574	2,090
	2,419	3,403

Note 16 - Subsequent Event

On May 4, 2023, we announced that we had been awarded an $86 million contract to produce a High Energy Laser (HEL) prototype for the next phase of development in support of the U.S. Department of Defense’s (DoD) High Energy Laser Scaling Initiative (HELSI). The award is part of a multi-year development program that is expected to commence in the third quarter of 2023.

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~~Note 16 - Net Loss per Share~~

~~Basic and diluted net loss and the number of shares used for basic and diluted net loss calculations were the same for all periods presented because we were in a loss position.~~

~~The following potentially dilutive securities were not included in the calculation of diluted shares as the effect would have been anti‑dilutive (in thousands):~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Restricted stock units and awards 1,158 2,057 1,241 2,182
Employee stock purchase plan — 3 — 6
Common stock options 1,745 2,803 1,922 2,803
2,903 4,863 3,163 4,991

~~Table of Contents~~

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: ~~the impact on~~ our business ~~from the COVID-19 pandemic~~model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the ~~related lockdown in Shanghai;~~introduction of new products; our technology and new product research and development activities; the impact of inflation; the impact of seasonality; the effect on our business of litigation to which we are or may become a party; and the sufficiency of our existing liquidity sources to meet our cash needs.

You should refer to the "Risk Factors" section of this report for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, which although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

nLIGHT, Inc., is a leading provider of high‑power semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. Headquartered in Camas, Washington, we design, develop, and manufacture the critical elements of our lasers, and believe our vertically integrated business model enables us to rapidly introduce innovative products, control our costs and protect our intellectual property.

We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. Sales of our semiconductor lasers, fiber lasers, fiber amplifiers, and other directed energy laser products are included in the Laser Products segment, while revenue earned from research and development contracts are included in the Advanced Development segment.

Revenues decreased to ~~$125.3~~$54.1 million in the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to ~~$130.5~~$64.5 million in the same period of ~~2021 as a result of a decrease~~2022 due primarily to decreased sales in ~~development revenue and product sales to customers in China, that was partially offset by an increase in product sales to customers outside of China.~~the Laser Products segment. We generated a net loss of ~~$19.0~~$7.7 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to a net loss of ~~$14.0~~$8.6 million for the same period of ~~2021.~~2022.

~~Factors Affecting Our Performance~~

~~Impact of the COVID-19 Pandemic~~

1615

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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. 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 halt operations in our Shanghai manufacturing facility for approximately two months during the second quarter during 2022.Factors Affecting 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 global operations.

The closure of our Shanghai facility during the second quarter of 2022 had a negative impact on our financial results for the second quarter of 2022, and any additional closures 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 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.Performance

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 product and manufacturing costs. Although we anticipate further increases in product volumes and the continued introduction of new and higher value products, ASP reduction may cause our revenues to decline or grow at a slower rate.

Technology and New Product Development

We invest heavily in the development of our semiconductor, fiber laser 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.~~a significant benefit to our customers. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.

Manufacturing Costs and Gross Margins

~~Table of Contents~~

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. We have invested heavily in U.S.-based manufacturing capabilities in the last several years. Capacity utilization affects our gross margin because we have a high fixed cost base due to our vertically integrated business model. Increases in sales and production volumes drive favorable absorption of fixed costs, improved manufacturing efficiencies and lower production costs. Gross margins may fluctuate from period to period depending on product mix and the level of capacity utilization.

Our Development gross profit varies with the type and terms of contracts, contract volume, project mix, ~~and progress~~execution on projects during the ~~period.~~period, and estimated costs to project completion. Most of our Development contracts are structured as cost plus fixed fee due to the 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 fiscal year,~~ the timing of capital expenditures by our customers, holidays, and general economic trends. In addition, as is typical in our industry, we tend to recognize a larger percentage of our quarterly revenues in the last month of the quarter, which may impact our working capital trends.

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Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods indicated (which may not add up due to rounding):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Revenue:	Revenue:									Revenue:
Products	Products	79.2	%	77.5	%	79.2	%	77.3	%	Products	76.0	%	79.2	%
Development	Development	20.8		22.5		20.8		22.7		Development	24.0		20.8
Total revenue	Total revenue	100.0		100.0		100.0		100.0		Total revenue	100.0		100.0
Cost of revenue:	Cost of revenue:									Cost of revenue:
Products	Products	55.4		49.5		55.4		49.5		Products	50.9		55.5
Development	Development	19.3		21.1		19.4		21.4		Development	22.7		19.4
Total cost of revenue	Total cost of revenue	74.7		70.6		74.8		70.9		Total cost of revenue	73.6		74.9
Gross profit	Gross profit	25.3		29.4		25.2		29.1		Gross profit	26.4		25.1
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	22.7		20.7		21.9		19.9		Research and development	20.9		21.3
Sales, general, and administrative	Sales, general, and administrative	19.6		21.8		18.1		20.5		Sales, general, and administrative	20.6		16.7

Total operating expenses	Total operating expenses	42.3		42.5		40.0		40.4		Total operating expenses	41.5		38.0
Loss from operations	Loss from operations	(17.0)		(13.1)		(14.8)		(11.3)		Loss from operations	(15.2)		(12.9)
Other income (expense):
Interest income (expense), net		0.1		—		0.1		(0.1)
Other income (loss), net		(0.2)		0.2		(0.1)		0.1
Other income:										Other income:
Interest income, net										Interest income, net	0.6		—
Other income, net										Other income, net	0.7		—
Loss before income taxes	Loss before income taxes	(17.1)		(12.9)		(14.8)		(11.3)		Loss before income taxes	(13.8)		(12.9)
Income tax expense (benefit)		—		(1.5)		0.3		(0.5)
Income tax expense										Income tax expense	0.5		0.5
Net loss	Net loss	(17.1)	%	(11.4)	%	(15.1)	%	(10.8)	%	Net loss	(14.3)	%	(13.4)	%

Revenues by End Market

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

~~Table of Contents~~

Three Months Ended June 30, Change
2022 % of Revenue 2021 % of Revenue $ %
Industrial $ 21,899 36.0 % $ 24,907 36.1 % $ (3,008) (12.1) %
Microfabrication 16,415 27.0 20,274 29.3 (3,859) (19.0)
Aerospace and Defense 22,513 37.0 23,932 34.6 (1,419) (5.9)
$ 60,827 100.0 % $ 69,113 100.0 % $ (8,286) (12.0) %


		Six Months Ended June 30,								Change					Three Months Ended March 31,								Change
		2022		% of Revenue		2021		% of Revenue		Amount		%			2023		% of Revenue		2022		% of Revenue		$		%
Industrial	Industrial	$	45,895	36.6	%	$	46,307	35.5	%	$	(412)	(0.9)	%	Industrial	$	19,902	36.8	%	$	23,996	37.2	%	$	(4,094)	(17.1)	%
Microfabrication	Microfabrication	33,734		26.9		35,489		27.2		(1,755)		(4.9)		Microfabrication	13,058		24.1		17,319		26.9		(4,261)		(24.6)
Aerospace and Defense	Aerospace and Defense	45,657		36.5		48,662		37.3		(3,005)		(6.2)		Aerospace and Defense	21,131		39.1		23,144		35.9		(2,013)		(8.7)
		$	125,286	100.0	%	$	130,458	100.0	%	$	(5,172)	(4.0)	%		$	54,091	100.0	%	$	64,459	100.0	%	$	(10,368)	(16.1)	%

The decreases in revenue from the Industrial and Microfabrication markets for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021,~~2022 were ~~driven by decreases in~~a result of decreased unit sales ~~in China, partially offset by increases in unit sales outside of China. The closure of our Shanghai facility for approximately two months during the second quarter of 2022~~ due to ~~the COVID-19 pandemic had a negative impact on sales~~lower market demand, particularly in China. The ~~decreases~~decrease in revenue from the Aerospace and Defense market for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021, were~~2022 was driven primarily ~~due to~~by a decrease in unit sales and decreased activity on research and development contracts.

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Revenues by Segment

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

Three Months Ended June 30, Change
2022 % of Revenue 2021 % of Revenue $ %
Laser Products $ 48,180 79.2 % $ 53,561 77.5 % $ (5,381) (10.0) %
Advanced Development 12,647 20.8 15,552 22.5 (2,905) (18.7)
$ 60,827 100.0 % $ 69,113 100.0 % $ (8,286) (12.0) %


		Six Months Ended June 30,								Change					Three Months Ended March 31,								Change
		2022		% of Revenue		2021		% of Revenue		Amount		%			2023		% of Revenue		2022		% of Revenue		$		%
Laser Products	Laser Products	$	99,241	79.2	%	$	100,896	77.3	%	$	(1,655)	(1.6)	%	Laser Products	$	41,107	76.0	%	$	51,061	79.2	%	$	(9,954)	(19.5)	%
Advanced Development	Advanced Development	26,045		20.8		29,562		22.7		(3,517)		(11.9)		Advanced Development	12,984		24.0		13,398		20.8		(414)		(3.1)
		$	125,286	100.0	%	$	130,458	100.0	%	$	(5,172)	(4.0)	%		$	54,091	100.0	%	$	64,459	100.0	%	$	(10,368)	(16.1)	%

The ~~decreases~~decrease in Laser Products revenue for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021, were~~2022 was driven by decreased units sales ~~to the Industrial and Microfabrication markets~~across each end market as discussed above. ~~There was no significant change in Laser Product sales within the Aerospace and Defense market for the three and six months ended June 30, 2022, compared to the same periods of 2021.~~ The ~~decreases~~decrease in Advanced Development revenue for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021 were~~2022 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, and all Advanced Development revenue is included in the Aerospace and Defense market.

Revenues by Geographic Region

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

~~Table of Contents~~

Three Months Ended June 30, Change
2022 % of Revenue 2021 % of Revenue $ %
North America $ 35,682 58.7 % $ 33,095 47.9 % $ 2,587 7.8 %
China 4,672 7.7 18,759 27.1 (14,087) (75.1)
Rest of World 20,473 33.6 17,259 25.0 3,214 18.6
$ 60,827 100.0 % $ 69,113 100.0 % $ (8,286) (12.0) %


		Six Months Ended June 30,								Change					Three Months Ended March 31,								Change
		2022		% of Revenue		2021		% of Revenue		Amount		%			2023		% of Revenue		2022		% of Revenue		$		%
North America	North America	$	70,826	56.5	%	$	64,229	49.2	%	$	6,597	10.3	%	North America	$	29,103	53.8	%	$	35,144	54.5	%	$	(6,041)	(17.2)	%
China	China	11,811		9.4		34,336		26.3		(22,525)		(65.6)		China	3,646		6.7		7,139		11.1		(3,493)		(48.9)
Rest of World	Rest of World	42,649		34.1		31,893		24.4		10,756		33.7		Rest of World	21,342		39.5		22,176		34.4		(834)		(3.8)
		$	125,286	100.0	%	$	130,458	100.0	%	$	(5,172)	(4.0)	%		$	54,091	100.0	%	$	64,459	100.0	%	$	(10,368)	(16.1)	%

Geographic revenue information is based on the location to which we ship our products. The ~~increases~~decrease in ~~both~~ North America revenue for the three months ended March 31, 2023 compared to the same period of 2022 was a result of decreased revenue across each end market as discussed above. The decrease in China revenue for the three months ended March 31, 2023 compared to the same period of 2022 was the result of decreased revenue from the Industrial and Microfabrication markets due to a decline in market conditions and our decision to exit the fiber laser cutting market in China during the fourth quarter of 2022. The decrease in Rest of World revenue for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021, were primarily driven~~2022 was due to decreased revenue from the Microfabrication market, partially offset by increased revenue from the Industrial ~~and Microfabrication markets, partially offset by a decrease in Development revenue from the Aerospace and Defense~~ market. The decreases in China revenue for the three and six months ended June 30, 2022, compared to the same periods of 2021, were due to decreased sales in the Industrial and Microfabrication markets, primarily as a result of deteriorating market conditions in the Industrial market. The closure of our Shanghai facility for approximately two months during the second quarter of 2022 due to the COVID-19 pandemic also had a negative impact on sales in China.

Cost of Revenues and Gross Margin

Cost of Laser Products revenue consists primarily of manufacturing materials, labor, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted demand from our customers. 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.

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Our gross profit and gross margin were as follows for the periods presented (dollars in thousands):

Three Months Ended June 30, 2022
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 15,182 $ 888 $ (685) $ 15,385
Gross margin 31.5 % 7.0 % NM 25.3 %


		Six Months Ended June 30, 2022												Three Months Ended March 31, 2023
		Laser Products			Advanced Development			Corporate and Other		Total				Laser Products			Advanced Development			Corporate and Other		Total
Gross profit	Gross profit	$	31,184		$	1,772		$	(1,394)	$	31,562		Gross profit	$	14,153		$	682		$	(572)	$	14,263
Gross margin	Gross margin	31.4		%	6.8		%	NM		25.2		%	Gross margin	34.4		%	5.3		%	NM*		26.4		%


		Three Months Ended June 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	$	19,871		$	1,004		$	(550)	$	20,325		Gross profit	$	16,002		$	884		$	(709)	$	16,177
Gross margin	Gross margin	37.1		%	6.5		%	NM		29.4		%	Gross margin	31.3		%	6.6		%	NM*		25.1		%

~~Table of Contents~~

Six Months Ended June 30, 2021
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 37,302 $ 1,709 $ (1,041) $ 37,970
Gross margin 37.0 % 5.8 % NM 29.1 %
*NM = not meaningful

The ~~decreases~~increase in Laser Products gross margin for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021, were~~2022 was driven by changes in sales mix, decreased unit sales of products for the Industrial market with low gross margins, and decreased ~~factory utilization of our Shanghai~~ manufacturing facility due to lower sales, and the closure of our Shanghai facility for approximately two months during the second quarter of 2022 due to the COVID-19 pandemic. In addition, Laser Products gross margin was negatively impacted by increased investments in U.S. based manufacturing, and increased production and freight costs, partially offset by an increase in duty reclaim.costs. The ~~increases~~decrease in Advanced Development gross margin for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period of ~~2021, were~~2022 was not significant and was primarily ~~due to~~the result of changes in the ~~composition~~mix 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 June 30, Change
2022 2021 $ %
Research and development $ 13,788 $ 14,282 $ (494) (3.5) %

Six Months Ended June 30, Change
2022 2021 Amount %
Research and development $ 27,499 $ 25,992 $ 1,507 5.8 %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Research and development	$	11,301	$	13,711	$	(2,410)	(17.6)	%

The decrease in research and development expense for the three months ended ~~June 30, 2022,~~March 31, 2023 compared to the same period in ~~2021,~~2022 was ~~primarily due to~~driven by a decrease in salary costs and project-related expenses, a decrease in stock-based compensation of ~~$0.6 million. The increase in research~~$1.0 million and development expense for the six months ended June 30, 2022, compared to the same period in 2021, was primarily due to increases in salary costs, headcount and project-related expenses to support our development efforts, partially offset by a decrease in ~~stock-based compensation~~purchased intangible amortization of ~~$0.4 million, and decrease in intangible amortization.~~$0.1 million.

Sales, General and Administrative

Three Months Ended June 30, Change
2022 2021 $ %
Sales, general, and administrative $ 11,914 $ 15,057 $ (3,143) (20.9) %

Six Months Ended June 30, Change
2022 2021 Amount %
Sales, general, and administrative $ 22,689 $ 26,771 $ (4,082) (15.2) %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Sales, general, and administrative	$	11,169	$	10,775	$	394	3.7	%

The ~~decreases~~increase in sales, general and administrative expense for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period in ~~2021 were~~2022 was primarily due to ~~decreases in stock-based compensation of $4.5 million and $6.4 million, respectively, partially offset by~~ increases in ~~salary costs,~~rep commissions, professional service fees, ~~facility expenses~~ and ~~decreases in administrative cost allocated to development projects. The decreases in stock-based compensation expense were driven by forfeitures and decreases in expected achievement~~trade show related ~~to performance-based stock awards.~~

expenses.

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

Three Months Ended June 30, Change
2022 2021 $ %
Interest income (expense), net $ 71 $ (32) $ 103 (321.9)%

Six Months Ended June 30, Change
2022 2021 Amount %
Interest income (expense), net $ 71 $ (106) $ 177 (167.0) %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Interest income, net	$	337	$	—	$	337	—%

The increase in interest income, ~~(expense),~~ net, for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period in ~~2021~~2022 was driven by ~~increases~~an increase in interest rates and the investment in marketable securities during the second quarter of 2022.

Other Income, ~~(Loss),~~ net

Three Months Ended June 30, Change
2022 2021 $ %
Other income (loss), net $ (106) $ 118 $ (224) (189.8)%

Six Months Ended June 30, Change
2022 2021 Amount %
Other income (loss), net $ (77) $ 144 $ (221) (153.5) %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Other income, net	$	404	$	29	$	375	1,293.1%

Changes in other income, ~~(loss),~~ net are primarily attributable to realized gains and losses on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations. The increase in other income, net for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to realized gains on the sale of marketable securities.

Income Tax Expense ~~(Benefit)~~

Three Months Ended June 30, Change
2022 2021 $ %
Income tax expense (benefit) $ (10) $ (1,038) $ 1,028 (99.0) %

Six Months Ended June 30, Change
2022 2021 Amount %
Income tax expense (benefit) $ 333 $ (716) $ 1,049 (146.5) %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Income tax expense	$	264	$	343	$	(79)	(23.0)	%

We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy, and South Korea. While our tax expense is largely dependent on the geographic mix of earnings related to our foreign operations, we also record tax expense for uncertain tax positions taken and associated penalties and interest. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Due to the uncertainty with respect to their ultimate realizability in the United States, Austria, and China, we continue to maintain a full valuation allowance in these jurisdictions as of ~~June 30, 2022.~~March 31, 2023.

~~The increases~~There was no significant change in income tax expense for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the same ~~periods~~period in ~~2021 were driven by a large discrete tax benefit related to return to provision true ups and expiring statutes of limitations of unrecognized tax positions recorded in Q2 2021.~~2022.

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Liquidity and Capital Resources

We had cash and cash equivalents of ~~$70.6~~$48.4 million and ~~$146.5~~$57.8 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. In addition, we had marketable securities of ~~$50.0~~$60.0 million and $50.4 million at ~~June 30, 2022. Prior to the second quarter of~~March 31, 2023 and December 31, 2022, ~~we had no marketable securities.~~respectively.

For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, our principal uses of liquidity were to fund our working capital ~~needs and purchase property, plant and equipment.~~needs. The primary source of cash was collections from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

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The following table summarizes our cash flows for the periods presented (in thousands):

Six Months Ended June 30,
2022 2021
Net cash provided by (used in) operating activities $ (11,765) $ 3,085
Net cash used in investing activities (63,121) (8,469)
Net cash provided by (used in) financing activities (583) 78,551
Effect of exchange rate changes on cash (432) (126)
Net increase (decrease) in cash, cash equivalents and restricted cash $ (75,901) $ 73,041


	Three Months Ended March 31,
	2023		2022
Net cash provided by (used in) operating activities	$	644	$	(7,004)
Net cash used in investing activities	(10,045)		(5,133)
Net cash (used in) provided by financing activities	(39)		611
Effect of exchange rate changes on cash	17		(59)
Net decrease in cash, cash equivalents and restricted cash	$	(9,423)	$	(11,585)

Net Cash Provided by (Used in) Operating Activities

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net cash ~~used in~~provided by operating activities was ~~$11.8~~$0.6 million, which was the result of ~~a $19.0~~an $7.7 million net loss and use of cash for working capital of ~~$15.2~~$1.1 million, ~~partially~~ offset by ~~non‑cash~~non-cash expenses totaling ~~$22.4~~$9.5 million related primarily to depreciation, amortization, and stock-based compensation.

Changes in working capital were driven by a ~~$5.0~~$4.5 million increase in ~~accounts receivable, net,~~prepaid expenses and other current assets, which was partially offset by a ~~$7.4~~$2.1 million increase in ~~inventory,~~accrued expenses and other long-term liabilities and a ~~$1.7~~$1.9 million decrease in accounts ~~payable.~~receivable, net. The increase in ~~accounts receivable, net was~~prepaid expenses and other current assets related primarily ~~due~~ to ~~the timing of shipments~~contract assets that will be billed in the second quarter of 2022 compared to the fourth quarter of 2021. The increase in inventory was due to an increase in safety stock to mitigate supply chain risks, lower demand primarily from China, and anticipated demand for recently introduced products. The decrease in accounts payable was due to timing of vendor payments.

During the six months ended June 30, 2021, net cash provided by operating activities was $3.1 million, which was primarily driven by non‑cash expenses totaling $28.6 million related to depreciation and amortization, stock-based compensation, and other items, a $3.3 million increase in accounts payable and a $1.3 million increase in accrued and other long-term liabilities. These items were partially offset by our net loss of $14.0 million and increases of $8.6 million in inventory and $4.8 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,2023, and the increase in ~~accounts payable~~accrued expenses and other long-term liabilities was ~~attributable to the increase in inventory and~~driven by the timing of ~~vendor payments.~~payroll related payments and the employee stock purchase plan.

Net Cash Used in Investing Activities

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net cash used in investing activities was ~~$63.1~~$10.0 million, ~~primarily resulting from~~which was driven by the net purchase ~~of $50.0 million~~ of marketable securities ~~and $12.9~~of $9.4 million ofand capital expenditures ~~related to investments in directed energy, manufacturing equipment and facilities.~~of $0.7 million.

During the six months ended June 30, 2021, net cash used in investing activities was $8.5 million, primarily resulting from $8.0 million of capital expenditures related to investments in manufacturing equipment and improvements to our corporate facility.

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Net Cash Provided by (Used in) Financing Activities

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net cash used in financing activities was $0.6 million, which was primarily driven by $2.5 million of withholding tax payments related to the vesting of stock awards, partially offset by $2.0 million of proceeds from stock options exercises and employee stock plan purchases.

During the six months ended June 30, 2021, net cash provided by financing activities was $78.6 million, which was primarily driven by our follow-on public offering of $82.4 million, net of offering costs, and $1.5 million of proceeds from stock options exercises and employee stock program purchases, partially offset by $4.6 million of withholding tax payments related to the vesting of stock awards.less than $0.1 million.

Credit Facilities

We have a $40.0 million revolving line of credit, or LOC, with Pacific Western Bank dated September 24, 2018, which is secured by our assets and matures September 24, 2024.

The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20% on an annualized basis. The interest rate on the LOC is based on the Prime Rate, minus a margin based on our liquidity levels. No amounts were outstanding under the LOC at ~~June 30, 2022~~March 31, 2023 and we were in compliance with all covenants.

Contractual Obligations

~~For the six months ended June 30, 2022, our operating lease obligations decreased by approximately $0.5 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, ~~2021.~~2022.

Inflation

While we do not believe that inflation had a material effect on our business, financial condition or results of operations ~~through June 30, 2022,~~during the three months ended March 31, 2023, we ~~have~~ experienced ~~higher than expected~~ increases in wages and other compensation costs, materials, and shipping costs ~~over the past year.~~in 2022. We expect ~~these increases~~costs will continue to increase in 2023 and 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.

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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, ~~2021. Other than the addition of marketable securities consisting of U.S. Treasuries to our investment portfolio, our~~2022. Our exposure to market risk has not changed materially since December 31, ~~2021.~~2022.

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~~In January 2023, we launched our new enterprise resource planning (“ERP”) system and consequently, modified the design of certain internal controls over activities related to accumulation, recording and reporting of information in our ~~chief~~ financial ~~officer did not identify any~~statements. Other than these ERP system implementation changes, there have been no other changes in our internal ~~control~~controls over financial reporting ~~in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act~~that occurred during the ~~three months ended June 30, 2022,~~first quarter of 2023 that have materially affected or are reasonably likely to materially affect our internal ~~control~~controls over financial reporting.

~~Table of Contents~~

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.

~~Table of Contents~~

PART II

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, see Note ~~12,~~1 2, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this ~~repor~~t.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, ~~2021 and Item 1A, “Risk Factors,” contained in Part II our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2022. 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, ~~2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2022.

~~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 at all, and some of our non-manufacturing personnel have been partially working from home since March 2020. The recent COVID-related lockdown of Shanghai by the Chinese government forced us to halt operations in our Shanghai manufacturing for approximately two months during the second quarter of 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 global operations. Any additional closures, or partial closures, of our Shanghai facility in the future 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, for example, have 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
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
3.2
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
10.1
2018 Equity Incentive Plan—Form of Restricted Stock Unit Agreement (Performance-Based)
8-K 001-38462 10.1 July 8, 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
X
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
X
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
X
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X

Exhibit
Number

Incorporated by Reference

Filed
Herewith

Description

Form

File No.

Exhibit

Filing Date

3.2+

Amended and Restated Bylaws of the Registrant

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

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.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label 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)


+			~~Indicates a management contract or compensatory plan or arrangement.~~This exhibit was originally filed as Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on December 20, 2022. It is being refiled with this Quarterly Report on Form 10-Q solely to correct formatting errors to the section numbering in the original filing as it appears on EDGAR. No changes were made to the actual Amended and Restated Bylaws of the registrant since the original filing.
*			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)


~~August~~May 5, ~~2022~~2023	By:	/s/ SCOTT KEENEY
Date		Scott Keeney
		President and Chief Executive Officer (Principal Executive Officer)

~~August~~May 5, ~~2022~~2023	By:	/s/ JOSEPH CORSO
Date		Joseph Corso
		Chief Financial Officer (Principal Financial Officer)

~~August~~May 5, ~~2022~~2023	By:	/s/ JAMES NIAS
Date		James Nias
		Chief Accounting Officer (Principal Accounting Officer)

2824


		Six Months Ended June 30, 2021
	Common stock		Additional paid-in capital			Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
		Shares			Amount
Balance, December 31, 2020		39,793	$	15		$	358,544	$	(259)	$	(138,386)	$	219,914
Net loss		—	—			—		—		(14,039)		(14,039)
Proceeds from follow-on offering, net of offering costs		2,537	—			82,354		—		—		82,354
Issuance of common stock pursuant to exercise of stock options		553	—			770		—		—		770
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax		265	—			(4,598)		—		—		(4,598)
Issuance of common stock under the Employee Stock Purchase Plan		33	—			750		—		—		750
Stock-based compensation		—	—			19,660		—		—		19,660
Cumulative translation adjustment, net of tax		—	—			—		(165)		—		(165)
Balance, Balance, June 30, 2021		43,181	$	15		$	457,480	$	(424)	$	(152,425)	$	304,646


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

	Awards vested	(171)	25.10
	Awards forfeited	(140)	25.21
RSAs at June 30, 2022		442	25.97


		Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value
RSUs at December 31, 2021		2,799	$	24.41
	Awards granted	78	15.61
	Awards vested	(576)	26.47
	Awards forfeited	(143)	26.03
RSUs at June 30, 2022		2,158	23.45