nLIGHT Inc (LASR) 2018 Q1 法說會逐字稿

Good afternoon and welcome to the nLIGHT first-quarter 2018 earnings conference call. (Operator Instructions). And please note that today's event is being recorded.

I would now like to turn the conference over to Jason Willey, Senior Director of Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. As William said, I am Jason Willey, nLIGHT's Senior Director of Investor Relations and Corporate Development. Scott Keeney, Chief Executive Officer of nLIGHT; and Ran Bareket, Chief Financial Officer, will be the speakers on today's call. If you have any questions after the call, please direct them to me at 360-567-4890 or Jason.Willey@nLIGHT.net. A copy of today's earnings press release is available on our website at www.nLIGHT.net. In addition, you can access an archived version of today's call from our website.

In today's call, our discussion will contain forward-looking statements, including statements about financial projections, future business growth, trends and related factors, prospects for expanding and penetrating addressable markets, and our strategic focus and objectives. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call. We undertake no obligation to update publicly any forward-looking statement.

Additionally, certain non-GAAP financial measures will be discussed on this call. We've provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings release, which can be found on the Investor Relations section of our website.

I would also like to note that members of nLIGHT's senior management will present at the Stifel 2018 Cross Sector Insight Conference in Boston on June 12. A webcast of the presentation will be accessible from our Investor Relations website.

I will now turn the call over to Ran to go through the financials and outlook. Scott will then discuss our business and provide additional color on the first quarter. We will then be glad to take your questions.

Thank you, Jason, and good afternoon, everyone. We began 2018 with strong financial performance, delivering record quarterly revenue, gross profit, and income from operations. Revenues for the first quarter were $42.5 million, up 42% year-over-year. The strength during the quarter was broad-based across end markets and geographies.

Sales to industrial end markets were $19 million in Q1 2018, representing 45% of total revenue, and up 70% year-over-year. Sales to microfabrication end markets were $16 million or 37% of total revenues and up 18% year-over-year. Aerospace and defense sales were $8 million or 18% of total revenues, and grew 43% compared with the first quarter of 2017.

On a geographic basis, sales of China were $15 million in the first quarter of 2018, or 36% of total revenues, up 26% compared with Q1 2017. Sales in North America were $16 million, representing 38% of total revenues and growing 65% year-over-year. Rest of the world sales were $11 million, up 39% compared with the first quarter of 2017, and 26% of total revenues.

Gross margin reached 34.7% in the first quarter, an improvement of approximately 470 basis points year-over-year. The improvement was driven by more favorable product mix, higher volumes, and ongoing cost reduction efforts.

Operating expenses were $10.5 million during the first quarter compared with $8.4 million in the first quarter of 2017. The year-over-year increase include approximately $600,000 of additional R&D expenses as we continue to invest in new product development. The remaining year-over-year increase is mainly related to expenses associated with the progression of our IPO. Headcount at the end of Q1 was approximately 1,070, up slightly from Q4 2017.

First-quarter operating income of $4.2 million was 9.9% of revenue and compared with $0.6 million or 2% revenues in the first quarter of 2017. GAAP net income for the first quarter of 2018 was $2.9 million compared with a loss of $1.2 million during Q1 2017. On a non-GAAP basis, which exclude impact of stock-based compensation, net income in the first quarter was $3.1 million compared with a loss of $1.1 million in the first quarter of 2017.

GAAP EPS for the first quarter of 2018 was zero compared with a loss of $0.47 in the first quarter of 2017. Our Q1 2018 GAAP EPS reflects the allocation of $2.9 million, or all of the net income, to preferred shareholder. Non-GAAP EPS, which exclude the impact of stock-based compensation and assume the conversion of all outstanding preferred stock in the period to common stock, was $0.10 per diluted share in Q1 2018 compared with a loss of $0.05 per share in Q1 2017.

On adjusted EBITDA, for the first quarter was $6.3 million or 14.9% of revenues. This compared with -- to $2.6 million or 8.8% of revenues in Q1 2017. Adjusted EBITDA exclude item related to stock-based compensation.

Turning to the balance sheet, we ended Q1 with total cash and cash equivalents of $28.6 million, and $17.4 million of total debt. Following the closing of the quarter, we completed our initial public offering in late April. We raised approximately $100 million, net of estimated offering costs, with the sales of 6.9 million share of common stocks.

DSO at the end of Q1 2018 were 33 days. Inventory at the end of the quarter was $35.4 million, representing 105 days in inventory. During Q1, we used $4.2 million of cash in operating activity, reflecting expansion in working capital to support growth in the business. Capital expenditure for the quarter was $3.4 million or 8% from revenue.

Turning to the guidance for the second quarter of 2018, we expect revenue to be in a range of $48 million to $52 million. At the midpoint of the range, this implies year-over-year growth of approximately 44%. Our outlook for the second quarter reflects the positive seasonal impact from Chinese New Year, which typically cause additional activity in the second quarter.

Based on our current expectation for product mix, we see gross margin for Q2 2018 in a range of 33% to 36%. Income from operation is expected to be in a range of $5 million to $7 million. We expect to exit Q2 with approximately 35 million basic share outstanding, and approximately 40 million fully diluted share. On a weighted average basis for calculation, non-GAAP EPS for Q2, we expect that the share count will be slightly lower.

I will now turn the call over to Scott.

Thank you, Ran, and good afternoon, everyone. We are pleased with our performance in the first quarter of 2018. As Ran described, we saw broad-based strength across our end markets and geographies as we continue to see growing customer interest in our high-powered semiconductor and fiber lasers.

On today's call I'd like to cover three topics. First, I will make a few comments about the overall market and the significant long-term opportunity in semiconductor and fiber lasers. Second, I'll talk about why we believe nLIGHT is particularly well positioned to address this expanding market opportunity. And finally, I'll conclude with some comments on our results from Q1.

We started nLIGHT 18 years ago with a vision that high-power semiconductor lasers would improve at a rapid rate and open up large markets as this small, efficient, cost-effective technology continued to improve. Semiconductor lasers were first demonstrated in 1962 by the physicist Robert Hall at GE, who recently passed away at the age of 96. Since then, we have seen dramatic improvements in this core technology. In the 1980s, a semiconductor laser coupled less than 1 watt into a 100 micron fiber.

Today, nLIGHT leads the industry with over 250 watts coupled into this same 100 micron fiber. These are not incremental improvements, and we believe this exponential advancement is comparable to Moore's Law from the microprocessor industry.

The significant improvement in cost per brilliant watt has opened up new markets that were not addressable just a few years ago. Products incorporating high-power semiconductor and fiber laser technology evolved from addressing primarily scientific and niche applications to relevance across a broad set of commercial applications. We believe the market for high-power semiconductor and fiber lasers will continue to grow rapidly. We expect semiconductor and fiber laser market to grow to over $4 billion by 2020 from less than $1 billion at the beginning of the decade.

A prime example of this expanding opportunity is in the industrial market, where high-power semiconductor and fiber lasers are increasingly replacing traditional non-laser and non-fiber-laser tools for material processing applications such as cutting, welding, and drilling. Even with an increase in penetration in recent years, lasers still make up less than 20% of the spend in the $80 billion global machine tool market.

Advancements in high-power laser technology are also opening up new applications and market opportunities. An example of this is in laser additive manufacturing, where high-power semiconductor and fiber lasers enable the precise power needed to fuse metal powders into intricate 3-D printed parts. Parts manufactured with high-power lasers have shown significant advantages over legacy processes, including weight reduction, part reduction, and performance improvements.

We believe that nLIGHT is particularly well positioned to take advantage of this growing market opportunity. Our vertical integration is a key strategic advantage, allowing us to better to control key technology, manage costs, and drive innovation. This begins with our high power semiconductor laser chips, which are the foundation of our fiber-coupled semiconductor lasers. Here we believe we lead the market in terms of cost per brilliant watt. This vertical integration continues with our own optical fiber, which is then integrated into our own fiber lasers.

From a go-to-market perspective, we have focused on establishing strong relationships with select strategic accounts across our global footprint. Core to our strategic account focus is a commitment to customer support and service. We believe a key part of our success in the industrial end market is our product reliability and strong customer support. We are focused on meeting the needs of customers across the globe.

Now I would like to turn to Q1 results. Our sole focus on semiconductor and fiber laser markets has helped us develop strong technological differentiation, and has been the key enabler of the over 30% revenue CAGR we have delivered from 2014 through 2017. This strong growth continued in the first quarter of 2018 where we grew 42% year-over-year and saw increases in revenue in all three of her end markets: industrial, microfabrication, and aerospace and defense.

In the industrial market, we grew 70% year-over-year during the first quarter of 2018. Here we increasingly see high-power fiber lasers replacing legacy CO2 lasers and non-laser machine tools. Fiber lasers offer meaningful performance and cost efficiency advantages over legacy laser and non-laser technology. While cutting remains the leading application for fiber lasers in the industrial market, we are seeing growing interest from areas such as welding, electric vehicle battery processing, and additive manufacturing.

In the microfabrication market, we grew 18% year-over-year during the first quarter of 2018. We have a broad set of customers spanning electronics manufacturing, medical, display, and semiconductor end markets. In microfabrication, our technology is incorporated into tools for creating complex microscale structures, typically by ablating, annealing, etching, and drilling. During the first quarter, the trends across the microfabrication market remained strong and we benefited from the breadth of our customer exposure.

In the aerospace and defense market, we continued growing in Q1 with our core defense customers, and we also saw higher contribution from several new US government-funded R&D projects.

Geographically, we had meaningful year-over-year growth in each of our three regions: North America, China, and the rest of the world. In both North America and the rest of world, we are benefiting from our success qualifying new customers for our fiber lasers and strong demand from our diverse set of microfabrication customers.

In China, the first quarter of the year is typically a slower quarter due to Chinese New Year. Exiting this seasonally slower period, we are seeing strong demand trends in China driven by applications for fiber lasers in the industrial end market. We are focused in China on developing relationships with a strong set of customers, and we are seeing the benefit of these efforts from ramping volumes in this geography.

The team at nLIGHT remains focused on executing our three key strategic initiatives of increasing sales, reducing cost, and enabling new applications. We remain committed to the core vision upon which we found the Company over 18 years ago, and that continues to tie our product platforms together today. This is the notion of brilliance, which is the ability to focus photons into a small spot. When this happens, you can do amazing things with light; and in many cases, with better economics, faster processes, and better results than any other tool. nLIGHT lasers are not only changing the way things are made, but also changing the things that can be made.

In closing, I'd like to thank the entire nLIGHT team for their efforts during the first quarter. And with that, we will now hand it over for Q&A.

(Operator Instructions). Jim Ricchiuti, Needham & Company.

I wonder if you could talk a little bit about the visibility into Q3. Since we're only about five weeks from the start of the quarter, I'm just wondering how you might characterize the tone of demand.

Hi, Jim. Thank you for calling in. It's Ran. As we said in the past, listen, we are not going to give a guidance beyond the next quarter. However, we just want to clarify one thing: that there is a high guidance for Q2, and it is mainly due to the fact that we are growing the business significantly. But also there is definitely seasonality due to the Chinese New Year in Q2. So if there is one thing that we don't want all of you to conclude, that that growth like we saw between Q1 to Q2 will be in Q3 as well. (multiple speakers)

However, if we want to talk a little bit about the second half, and this is not guidance by any means, we see the second half continue growth. And if you look at the second half compared to the first half, it's probably going to be slightly higher, second half versus the first half. And again, this is what we are seeing right now and definitely not a guidance.

That's helpful. One other question, and I'll jump back in the queue. The microfabrication portion of the business is fairly diverse, and I'm just wondering if you could talk a little bit about where you saw strength; the tone of demand that you're seeing in the market. And again, this is in light of the weakness that we've heard from some other players in the smartphone supply chain. It sounds like the diversity of your business helps to offset some of that, but I wonder if you could just talk about that.

Hi, Jim. It's Scott here. Yes, thanks for your question. Yes, in our business in microfabrication it is very broad-based, as I'd noted. And so, we can't tie our demand directly to end product demand. We understand a broad range of different end products, but it's difficult to tie it to specific segments and specific smartphones in particular. So we're seeing a very broad-based demand and strong growth in Q1.

Thanks a lot.

Bobby Burleson, Canaccord.

So maybe we could touch on the trends you're seeing by end market or vertical market in Q2. It's nice Q2 guidance. Just wondering if it's similar pattern to what you saw in Q1, or if you've seen a nice pickup, post- Chinese New Year, in some of your consumer electronics exposure.

Yes. Hi, Bobby, it's Scott. So in Q2, post- Chinese New Year, we'll see stronger demand from a geographical perspective in China. And highly correlated to that is stronger pickup in the industrial segment in Q2.

Okay, great. So -- and then in terms of some of the second-half seasonality, just to think about normal seasonality for you guys, what is a normal kind of transition that you would expect for your business, Q2 to Q3? And is this really -- this year the peak quarter, probably Q2, in terms of revenue?

Again -- this is Ran, Bobby -- we will not give a guidance to Q3. The only thing that we wanted to do is give some direction just to explain that Q2 -- yes, it is definitely -- will impact by the seasonality that is causing by the Chinese New Year. So definitely some of the pickup that you see between Q1 to Q2 is due to that. And this is very typical, in our business, to see Q2 high due to the Chinese New Year.

Okay. Sorry about pressing on the Q3 guidance; wasn't trying to force your hand there. In terms of the 470 basis point expansion for gross margin you saw in Q1 year-over-year, it sounds like product mix, sounds like higher volumes, and then also cost reductions. Can you help us understand the order of magnitude across those three categories?

If you recall, during the road show, we talk about what is impact our gross margin, or more importantly, how we managed to improve the gross margin in the last few years. And it's coming from three areas, if you recall. We talked about the cost reduction effort that we have in the Company, specifically on investing in automation and other cost reductions activity within the company. We talked about introducing new products to the market that coming with a better technology and higher ASPs. And we talked about, obviously, the volume. As we grow the Company, specifically for fiber laser, but it's right for the rest of the business as well, we have a better utilization on our fixed costs.

Those three factors help us to improve the margin between Q4 to Q1, or between Q1 last year to Q1 this year, by the 470 basis points. And that will be the case going forward, where we are aiming to achieve the midterm target that we have to the 45%.

However, we also talked about the mix. If you recall, what we said that, on an average, the industrial end markets is coming with a lower margin, where the aerospace defense coming with a little bit higher margin than the corporate average. So there is a mix impact. And if we will talk about the Q2 guidance, you will see some of that mix coming to effect where as Scott mentioned the majority of the growth will come from China as well as the industrial end market.

So in one hand, we will continue to enjoy from cost reduction activity. We will continue to enjoy from the fact that we continue to grow the Company at better utilization on our fixed cost. However, in Q2, you will see some impact on the margin as a result of that mix.

Okay, great. Thanks, and congratulations on the strong results.

Brian Gesuale, Raymond James.

Congratulations on your first quarter and a strong print here. I think you beat my metrics on just about every measure. Wanted to ask if you are noticing any settling into a sweet spot across the power spectrum in the industrial business. Are we talking a lot of 6 and 8 kilowatts, or how should we think about the mix across the entire spectrum?

Yes. Thanks, Brian. So we do serve a broad spectrum, and we're not providing detail on exactly that mix, but I will say it ranges from 500 watts up to 8 kilowatts. And we are seeing growth in higher power, and the average power is moving up. We expect that will continue. And so for us, sweet spot is a little hard to be too precise there. But certainly 2 to 3 kilowatts is still a really nice place; see a lot of demand in that region. But we do see that average power moving up, over time. And we will be launching higher-power products in the second half of the year.

Great. That's helpful. Wondering if you could elaborate a little bit on the defense business. It seemed to have kind of a step up here, kind of running around a little over $5 million for most of last year; stepped up to $8 million. Were there specific programs? Or should we think of this as a new level for that business as you ramp through some of these longer-term R&D programs?

Yes. Now, I think in that, I do want to clarify a little bit further there. I think the overarching point we want to make is we do see significant long-term opportunity in this business area. We see the importance of high power, both semiconductor and fiber lasers in the space, growing. The most recent quarter is certainly solid growth. But there were a couple of R&D contracts that weren't in Q1 which drive a big portion of that year-over-year growth.

They are important contracts. There is a very important DARPA contract that is leading to next-generation technology. But that shouldn't be a signal for the step-up in terms of revenue. But we are bullish longer-term on this space. It takes time in defense; it doesn't happen overnight, but we are seeing increasing opportunities in that space.

Great. And then just one housekeeping item for me. Were there any 10% customers in the quarter?

Yes, there was one 10% customer in the quarter. Same as 2017, a customer from China from the industrial end market.

Great. Thanks a lot, guys, and congratulations.

Patrick Ho, Stifel.

Congratulations, guys, on a really nice quarter. Scott, maybe first off, you talked about the industrial (technical difficulty) power (technical difficulty) from non-legacy laser solutions to high-power fiber lasers. Can you give a little bit of color of potentially the migration of low range for fiber lasers to these higher power (technical difficulty) look out into the next few years?

Sorry, Patrick. Your phone was cutting out a little bit there. I got part of it. Maybe you could replay, actually, because I think some important parts of your question cut out.

Yes, I apologize. In terms of -- you've talked about the industrial landscape and where you're seeing the replacement cycle of non-legacy laser solutions. Can you also talk about the migration from low- and mid-range power laser solutions to high-power fiber lasers? And how you see that migration both near term and whether you are seeing that today? Or is that something over the next few years?

Good, I got you. Yes, so -- and follow on if there's something I missed here. But we're seeing the migration into higher power, and we're seeing it across different end applications. I mean, cutting is the biggest single end application for fiber lasers in industrial. And we're seeing continued expansion of higher-power fiber lasers, and the average power going up in cutting. Welding already began with a relatively higher power set of applications, and we see that continuing up. And even in additive manufacturing we're seeing increase in power there, too.

So across all end markets, we're seeing increase in power. And to first order, if you can provide more power in the same laser, your throughput, everything else being equal, will go up. There's other benefits, but that's certainly one that we're seeing drive the market.

Great. That's really helpful, Scott. And maybe, Ran, as a follow-up in terms of some of your comments about gross margins. At least in the near term, is utilization or product mix the bigger influence in terms of gross margin, say, over the next couple of quarters?

No. As a matter of fact, a utilization and product mix can affect the margin. However, as Scott mentioned, we are planning to introduce to the market new fiber lasers. Those fiber lasers will impact the margin the most, significantly to -- favorably, obviously.

Great. Thank you again.

Tom Hayes, Northcoast Research.

Just a quick housekeeping question. I was wondering maybe could you repeat what the China contribution was for the quarter. I think I may have written it down incorrectly.

Yes, no problem.

The China contribution: China represented $15 million from the total revenue to China, or 36% from the total revenue.

Great, thank you. And then maybe just -- Scott, maybe just a little bit more detail if you can about -- obviously the industrial is driving a lot of your growth in China. But is there anything else you can kind of maybe provide a little bit more granularity that maybe you saw this quarter, and expectations for the year?

Sorry, Tom, with respect to China or broadly?

China, I guess, specifically.

Okay. Well, what we're seeing in China is continued growth in -- mostly in the industrial segment. We certainly see a good bit in microfabrication also, but industrial is certainly the biggest. And in industrial, the biggest end application by far is in the cutting market. And we're seeing -- metal cutting. And we're seeing continued growth in that end application as fiber lasers replace legacy CO2 lasers and replace non-laser technology. Welding continues to be of interest.

We mentioned briefly electric vehicle battery applications is one. We're seeing substantial investments in China in new technology, and that's driving demand for lasers. And even in additive manufacturing, other more advanced applications, we are seeing continued growth in China there. So really across the spectrum; industrial applications are growing, and adoption of lasers in China continues to expand.

Great. Appreciate the color, and congratulations on the start.

Tom Diffely, D.A. Davidson.

Another seasonality question: do you see a meaningful difference in seasonality between the semiconductor laser and the fiber laser business? Or do they follow pretty much the same trends?

Well, to the extent that China, with Chinese New Year, and with industrial being the biggest application [it with] and fiber laser being the biggest application there, there's a bit more with respect to fiber lasers. But otherwise, no meaningful difference there.

And then the trends you're seeing this year, the post- Chinese New Year ramp, would you expect those trends to continue in the subsequent years?

Well, we've been doing this for a while; and, yes, we've lived through a lot of Chinese New Years. And Q1 is a slower quarter due to just things shutting down and then things ramp back up in Q2. So yes, I would expect that that general seasonal trend will continue.

Okay. Just seemed like it was a little bit more pronounced this year. I was wondering if there was anything behind that versus what your business was a year or two years ago.

Well, it's a very good question. I think from a market perspective, I think it's pretty consistent this year with previous years. Last year, for us, we were constrained with capacity and we could have grown faster. So from a market perspective, we're not seeing dramatic (multiple speakers). Our business is seeing a stronger uptick.

Okay. That's very helpful. Then just more of a general question on fiber lasers. In the past we've seen obviously a pretty quick uptake from the cutting side, and the welding has been a little bit slower to be adopted. What's enabled the welding to pick up steam over the last several quarters versus where it was a couple years ago?

Yes. I think -- and that's going to be a general theme that we'll come back to in subsequent discussions, that with new applications, it takes some time for adoption to occur. As different companies and different applications start adopting, that accelerates. And certainly we've seen that over time. Cutting has been around a little bit longer, the adoption; and welding we certainly see as a -- it's not as big as cutting, but we see a lot of growth opportunities there.

Great. Thanks for your time today.

Jim Ricchiuti, Needham & Company.

Scott, I'm wondering with the traction you are seeing in the fiber laser market, are you in a position where you might be expanding the engagement with new potential customers? Your strategy so far I think has been to work closely with customers you think are well suited for you. I'm just wondering, is there any change as you begin to broaden out, not only the product suite; sounds like you have some new products coming in the second half. Or should we assume that you're going to continue with this kind of strategy?

Yes, good. The strategy will remain similar. We're very excited about the new products that we'll be announcing. Largely -- there's a number of trade shows in Q4 when we'll be announcing some exciting new products. And as we continue to grow and expand the product offering, the size of the customers is likely to increase. So, while we certainly -- we won't -- we'll pick off new customers that I think will be interesting customers that we'll disclose in coming quarters. And they're likely to be a bit larger than the customers from the past.

Okay, that's helpful. Congrats on a nice start.

David Nierenberg, Nierenberg Investment Management Company.

Guys, congratulations on a nice quarter right out of the box. Scott, you mentioned in your introductory comments that during this decade, you believe that your served market will roughly quadruple from about $1 billion to $4 billion, if I remembered correctly what you said.

Correct.

That implies, across the decade, and average annual growth rate in your market between 15% and 16%. But in the last three years, however, your company has grown at about 30%. And in the -- 30% per year. And in the first half of this year, it sounds like the midpoint of second-quarter guidance, the growth rate could be in the range of about 43%. So, you have been growing, if I'm right, at about 2 to 3 times the average annual growth rate of your served market.

So, three questions. Does that mean that you are gaining market share? Second, if so, what are the reasons why your customers tell you that you are? And third, tell us why, please, you think that will continue?

Very good. Great question, David. So, your facts are exactly -- are precise. We see the market growing at certainly north of 15% a year. And recently it's been growing at about 20% a year. We're growing faster than that. Over the last four years we've grown at 30% a year; and you're correct, we're growing it faster than that right now. So, yes, we are growing faster than the market.

We are winning. We are taking share because of a number of advantages that we have. We are vertically integrated with the core technology, and that's requisite just to play in this space. We have a number of advantages in the technology. Reliability, serviceability, programmability are three specific areas of why we're doing very well in fiber laser specifically.

And I think one of the fundamental points for us is we are solely focused on this space. All we do is semiconductor and fiber lasers. And the entire team here is solely focused on that space. This is a market that is growing at a nice clip. And that focus is leading to wins both in terms of technology advantage and our ability to serve customers very well. So there are a number of very specific reasons why we're winning, but I think those are some of the summary themes.

Thank you. And now that you are a public company, your net cash position, which was a low 8-digit number at the end of 2017, based on what Ran said of net proceeds of $100 million, is now jumped up to a low 9-figure number. Do you think that to some of your current or prospective customers, your ability to win business has been strengthened as a result of your going public?

Indeed, it has. And in some sense we've been, not shocked, but pleasantly surprised by the response we've received around the world after our IPO. Last year, as I mentioned briefly, we could have grown faster. We were capacity constrained. And as we continue to implement new products, launch them, and develop new automation and capacity, I think we're in a much better position to serve larger customers. And we'll be excited to talk more about that in future calls.

Well, thank you to your entire team, and we look forward to continued miracles.

(Operator Instructions). Bobby Burleson, Canaccord.

Just curious on additive manufacturing, if you can talk about some of the trends you're seeing there, and how many customers you're working with. Does this -- do you have a bunch of guys that are looking at your technology right now across the space? Or are there a handful that are launching products with your fiber lasers in the near term? Could you characterize what's happening in that market?

Yes. Thanks, Bobby, it's a good question. I think it's an important market for investors to understand. It's an exciting market. I think there was a public report from Wohlers about that market. And I think something like an 80% growth was highlighted, from about 900 million to 1.7 billion for metal additive manufactured tools. So it's an exciting market. There's a lot of growth, not only in terms of the size of the market, but also the expansion of the number of companies who are producing laser additive manufacturing equipment.

We're not publicly disclosing who we are working with and what our products are in the space. But we are working with a number of customers in that space, and we do have some exciting technology. And we'll be releasing more on that, again, probably in the Q4 time frame.

Okay, great. And then just bigger picture, if we think about robotics and automation and the advantages of fiber lasers on automation-intensive production lines, can you help us understand how programmability is being utilized by some of your customers? Maybe a use case or two of where your programmability is really an advantage?

Yes. Again, that is something we'll be talking about in a lot more detail, likely in the Q4 time frame. But if you just compare data sheets today, we have a number of advantages where our laser -- we're able to produce a beam that is able to be controlled in a way that is superior to other lasers. And that then enables our customers in cutting, in welding, in additive manufacturing, and other applications, to do things that they simply couldn't do with the current lasers.

And we will provide more detail on that in coming quarters as we release the products more broadly. But we do have advantages where the laser has better performance, and we add on top of that software that enables some of these applications. So stay tuned for more information there.

Okay, great. Thank you.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Jason Willey for any closing remarks.

I'd just like to thank everyone for participating today, and we look forward to speaking with you over the coming weeks and months. Have a good afternoon.

Thanks, everybody.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.