LASR 10-Q Quarterly Report March 31, 2021 | Alphaminr
ALPHAMINR

LASR 10-Q Quarter ended March 31, 2021

Balance Sheet
Cash Flow
Income Statement
NLIGHT, INC.
lasr-20210331
0001124796 12/31 2021 Q1 FALSE 0001124796 2021-01-01 2021-03-31 xbrli:shares 0001124796 2021-05-03 iso4217:USD 0001124796 2021-03-31 0001124796 2020-12-31 iso4217:USD xbrli:shares 0001124796 us-gaap:ProductMember 2021-01-01 2021-03-31 0001124796 us-gaap:ProductMember 2020-01-01 2020-03-31 0001124796 lasr:DevelopmentMember 2021-01-01 2021-03-31 0001124796 lasr:DevelopmentMember 2020-01-01 2020-03-31 0001124796 2020-01-01 2020-03-31 0001124796 us-gaap:CommonStockMember 2020-12-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001124796 us-gaap:RetainedEarningsMember 2020-12-31 0001124796 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001124796 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001124796 us-gaap:CommonStockMember 2021-03-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001124796 us-gaap:RetainedEarningsMember 2021-03-31 0001124796 us-gaap:CommonStockMember 2019-12-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001124796 us-gaap:RetainedEarningsMember 2019-12-31 0001124796 2019-12-31 0001124796 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001124796 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001124796 us-gaap:CommonStockMember 2020-03-31 0001124796 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001124796 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001124796 us-gaap:RetainedEarningsMember 2020-03-31 0001124796 2020-03-31 0001124796 lasr:OPIPhotonicsMember 2020-07-30 2020-07-30 0001124796 lasr:OPIPhotonicsMember 2021-01-01 2021-03-31 0001124796 lasr:IndustrialMember 2021-01-01 2021-03-31 0001124796 lasr:IndustrialMember 2020-01-01 2020-03-31 0001124796 lasr:MicrofabricationMember 2021-01-01 2021-03-31 0001124796 lasr:MicrofabricationMember 2020-01-01 2020-03-31 0001124796 lasr:AerospaceandDefenseMember 2021-01-01 2021-03-31 0001124796 lasr:AerospaceandDefenseMember 2020-01-01 2020-03-31 0001124796 srt:NorthAmericaMember 2021-01-01 2021-03-31 0001124796 srt:NorthAmericaMember 2020-01-01 2020-03-31 0001124796 country:CN 2021-01-01 2021-03-31 0001124796 country:CN 2020-01-01 2020-03-31 0001124796 lasr:RestofWorldExcludingChinaandNorthAmericaMember 2021-01-01 2021-03-31 0001124796 lasr:RestofWorldExcludingChinaandNorthAmericaMember 2020-01-01 2020-03-31 0001124796 us-gaap:TransferredAtPointInTimeMember 2021-01-01 2021-03-31 0001124796 us-gaap:TransferredAtPointInTimeMember 2020-01-01 2020-03-31 0001124796 us-gaap:TransferredOverTimeMember 2021-01-01 2021-03-31 0001124796 us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 xbrli:pure 0001124796 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember lasr:RaytheonCompanyMember 2020-01-01 2020-03-31 0001124796 us-gaap:SalesRevenueNetMember lasr:U.S.GovernmentMember us-gaap:CustomerConcentrationRiskMember 2021-01-01 2021-03-31 0001124796 us-gaap:SalesRevenueNetMember lasr:U.S.GovernmentMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0001124796 us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember lasr:TwoCustomersMember 2021-01-01 2021-03-31 0001124796 us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember lasr:TwoCustomersMember 2020-01-01 2020-12-31 0001124796 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2021-03-31 0001124796 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2021-03-31 0001124796 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2021-03-31 0001124796 us-gaap:MoneyMarketFundsMember 2021-03-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel1Member 2021-03-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel3Member 2021-03-31 0001124796 us-gaap:CommercialPaperMember 2021-03-31 0001124796 us-gaap:FairValueInputsLevel1Member 2021-03-31 0001124796 us-gaap:FairValueInputsLevel2Member 2021-03-31 0001124796 us-gaap:FairValueInputsLevel3Member 2021-03-31 0001124796 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0001124796 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2020-12-31 0001124796 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2020-12-31 0001124796 us-gaap:MoneyMarketFundsMember 2020-12-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001124796 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0001124796 us-gaap:CommercialPaperMember 2020-12-31 0001124796 us-gaap:FairValueInputsLevel1Member 2020-12-31 0001124796 us-gaap:FairValueInputsLevel2Member 2020-12-31 0001124796 us-gaap:FairValueInputsLevel3Member 2020-12-31 0001124796 us-gaap:AutomobilesMember 2021-01-01 2021-03-31 0001124796 us-gaap:AutomobilesMember 2021-03-31 0001124796 us-gaap:AutomobilesMember 2020-12-31 0001124796 lasr:ComputerHardwareAndSoftwareMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 lasr:ComputerHardwareAndSoftwareMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 lasr:ComputerHardwareAndSoftwareMember 2021-03-31 0001124796 lasr:ComputerHardwareAndSoftwareMember 2020-12-31 0001124796 us-gaap:MachineryAndEquipmentMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 us-gaap:MachineryAndEquipmentMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 us-gaap:MachineryAndEquipmentMember 2021-03-31 0001124796 us-gaap:MachineryAndEquipmentMember 2020-12-31 0001124796 lasr:OfficeEquipmentAndFurnitureMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 lasr:OfficeEquipmentAndFurnitureMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 lasr:OfficeEquipmentAndFurnitureMember 2021-03-31 0001124796 lasr:OfficeEquipmentAndFurnitureMember 2020-12-31 0001124796 us-gaap:LeaseholdImprovementsMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 us-gaap:LeaseholdImprovementsMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 us-gaap:LeaseholdImprovementsMember 2021-03-31 0001124796 us-gaap:LeaseholdImprovementsMember 2020-12-31 0001124796 us-gaap:BuildingMember 2021-01-01 2021-03-31 0001124796 us-gaap:BuildingMember 2021-03-31 0001124796 us-gaap:BuildingMember 2020-12-31 0001124796 us-gaap:LandMember 2021-03-31 0001124796 us-gaap:LandMember 2020-12-31 0001124796 us-gaap:PatentsMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 us-gaap:PatentsMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 us-gaap:PatentsMember 2021-03-31 0001124796 us-gaap:PatentsMember 2020-12-31 0001124796 us-gaap:CustomerRelatedIntangibleAssetsMember srt:MinimumMember 2021-01-01 2021-03-31 0001124796 us-gaap:CustomerRelatedIntangibleAssetsMember srt:MaximumMember 2021-01-01 2021-03-31 0001124796 us-gaap:CustomerRelatedIntangibleAssetsMember 2021-03-31 0001124796 us-gaap:CustomerRelatedIntangibleAssetsMember 2020-12-31 0001124796 us-gaap:DevelopedTechnologyRightsMember 2021-01-01 2021-03-31 0001124796 us-gaap:DevelopedTechnologyRightsMember 2021-03-31 0001124796 us-gaap:DevelopedTechnologyRightsMember 2020-12-31 0001124796 lasr:LaserProductsMember 2020-12-31 0001124796 lasr:AdvancedDevelopmentMember 2020-12-31 0001124796 lasr:LaserProductsMember 2021-01-01 2021-03-31 0001124796 lasr:AdvancedDevelopmentMember 2021-01-01 2021-03-31 0001124796 lasr:LaserProductsMember 2021-03-31 0001124796 lasr:AdvancedDevelopmentMember 2021-03-31 0001124796 us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember 2021-03-31 0001124796 us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-03-31 0001124796 lasr:OperatingLeasesExcludingAutomobilesMember srt:MinimumMember 2021-03-31 0001124796 lasr:OperatingLeasesExcludingAutomobilesMember srt:MaximumMember 2021-03-31 0001124796 lasr:OperatingLeasesExcludingAutomobilesMember 2021-03-31 0001124796 lasr:OperatingLeasesAutomobilesMember srt:MinimumMember 2021-03-31 0001124796 lasr:OperatingLeasesAutomobilesMember srt:MaximumMember 2021-03-31 0001124796 lasr:FollowOnPublicOfferingMember 2021-03-01 2021-03-31 0001124796 lasr:FollowOnPublicOfferingPortionFromUnderwritersOptionMember 2021-03-01 2021-03-31 0001124796 lasr:FollowOnPublicOfferingMember 2021-03-31 0001124796 us-gaap:RestrictedStockMember 2020-12-31 0001124796 us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 0001124796 us-gaap:RestrictedStockMember 2021-03-31 0001124796 us-gaap:RestrictedStockUnitsRSUMember 2020-12-31 0001124796 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-03-31 0001124796 us-gaap:RestrictedStockUnitsRSUMember 2021-03-31 0001124796 lasr:RestrictedStockAndRestrictedStockUnitsMember 2021-01-01 2021-03-31 0001124796 lasr:PerformanceRestrictedStockAwardsAndPerformanceRestrictedStockUnitsMember 2021-03-31 0001124796 2020-01-01 2020-12-31 0001124796 us-gaap:CostOfSalesMember 2021-01-01 2021-03-31 0001124796 us-gaap:CostOfSalesMember 2020-01-01 2020-03-31 0001124796 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-03-31 0001124796 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-03-31 0001124796 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-03-31 0001124796 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-03-31 0001124796 2019-11-14 lasr:segment 0001124796 lasr:LaserProductsMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001124796 lasr:AdvancedDevelopmentMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001124796 us-gaap:CorporateNonSegmentMember 2021-01-01 2021-03-31 0001124796 lasr:LaserProductsMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-03-31 0001124796 lasr:AdvancedDevelopmentMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-03-31 0001124796 us-gaap:CorporateNonSegmentMember 2020-01-01 2020-03-31 0001124796 lasr:RestrictedStockAndRestrictedStockUnitsMember 2021-01-01 2021-03-31 0001124796 lasr:RestrictedStockAndRestrictedStockUnitsMember 2020-01-01 2020-03-31 0001124796 us-gaap:EmployeeStockMember 2021-01-01 2021-03-31 0001124796 us-gaap:EmployeeStockMember 2020-01-01 2020-03-31 0001124796 us-gaap:StockOptionMember 2021-01-01 2021-03-31 0001124796 us-gaap:StockOptionMember 2020-01-01 2020-03-31

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 March 31, 2021
or
☐ 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)
5408 NE 88th Street, Building E
Vancouver , Washington 98665
(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 May 3, 2021, the Registrant had 42,807,788 shares of common stock outstanding.


TABLE OF CONTENTS
Page




PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS

nLIGHT, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
As of
March 31, 2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 185,638 $ 102,282
Accounts receivable, net of allowances of $ 295 and $ 367
31,658 31,820
Inventory 58,804 54,706
Prepaid expenses and other current assets 9,548 11,767
Total current assets 285,648 200,575
Restricted cash 250 291
Lease right-of-use assets 18,153 12,302
Property, plant and equipment, net of accumulated depreciation of
$ 67,834 and $ 66,262
46,127 44,480
Intangible assets, net of accumulated amortization of $ 7,278 and $ 6,280
7,409 8,345
Goodwill 12,447 12,484
Other assets, net 5,038 5,167
Total assets $ 375,072 $ 283,644
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 23,644 $ 21,057
Accrued liabilities 13,922 15,321
Deferred revenues 2,589 2,528
Current portion of lease liabilities 2,751 2,273
Current portion of long-term debt — 184
Total current liabilities 42,906 41,363
Non-current income taxes payable 7,730 7,556
Long-term lease liabilities 15,846 10,375
Long-term debt 29 215
Other long-term liabilities 4,506 4,221
Total liabilities 71,017 63,730
Stockholders' equity:
Common stock - $ 0.0001 par value; 190,000 shares authorized, 42,783 shares issued and outstanding at March 31, 2021, and 39,793 shares issued and outstanding at December 31, 2020
15 15
Additional paid-in capital 449,496 358,544
Accumulated other comprehensive loss ( 921 ) ( 259 )
Accumulated deficit ( 144,535 ) ( 138,386 )
Total stockholders’ equity 304,055 219,914
Total liabilities and stockholders’ equity $ 375,072 $ 283,644

See accompanying notes to consolidated financial statements.
1
nLIGHT, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three Months Ended March 31,
2021 2020
Revenue:
Products $ 47,335 $ 36,930
Development 14,010 6,285
Total revenue 61,345 43,215
Cost of revenue:
Products 30,395 27,900
Development 13,305 5,814
Total cost of revenue 43,700 33,714
Gross profit 17,645 9,501
Operating expenses:
Research and development 11,710 8,538
Sales, general, and administrative 11,714 7,700
Total operating expenses 23,424 16,238
Loss from operations ( 5,779 ) ( 6,737 )
Other income (expense):
Interest income (expense), net ( 74 ) 283
Other income (expense), net 26 ( 116 )
Loss before income taxes ( 5,827 ) ( 6,570 )
Income tax expense 322 905
Net loss $ ( 6,149 ) $ ( 7,475 )
Net loss per share, basic $ ( 0.15 ) $ ( 0.20 )
Net loss per share, diluted $ ( 0.15 ) $ ( 0.20 )
Shares used in per share calculations:
Basic 40,048 37,846
Diluted 40,048 37,846

See accompanying notes to consolidated financial statements.

2
nLIGHT, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)

Three Months Ended March 31,
2021 2020
Net loss $ ( 6,149 ) $ ( 7,475 )
Other comprehensive loss:
Foreign currency translation adjustments, net of tax ( 662 ) ( 496 )
Comprehensive loss $ ( 6,811 ) $ ( 7,971 )

See accompanying notes to consolidated financial statements.

3
nLIGHT, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands)
(Unaudited)
Three Months Ended March 31, 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 — — — — ( 6,149 ) ( 6,149 )
Proceeds from follow-on offering, net of offering costs 2,537 — 82,355 — — 82,355
Issuance of common stock pursuant to exercise of stock options 452 — 574 — — 574
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 1 — ( 31 ) — — ( 31 )
Stock-based compensation — — 8,054 — — 8,054
Cumulative translation adjustment — — — ( 662 ) — ( 662 )
Balance, March 31, 2021 42,783 $ 15 $ 449,496 $ ( 921 ) $ ( 144,535 ) $ 304,055

Three Months Ended March 31, 2020
Common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity
Shares Amount
Balance, December 31, 2019 38,084 $ 15 $ 336,732 $ ( 2,685 ) $ ( 117,454 ) $ 216,608
Net loss — — — — ( 7,475 ) ( 7,475 )
Issuance of common stock pursuant to exercise of stock options 373 — 558 — — 558
Issuance of common stock pursuant to vesting of restricted stock awards and units, net of stock withheld for tax 16 — ( 11 ) — — ( 11 )
Stock-based compensation — — 3,763 — — 3,763
Cumulative translation adjustment — — — ( 496 ) — ( 496 )
Balance, March 31, 2020 38,473 $ 15 $ 341,042 $ ( 3,181 ) $ ( 124,929 ) $ 212,947
See accompanying notes to consolidated financial statements.
4
nLIGHT, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31,
2021 2020
Cash flows from operating activities:
Net loss $ ( 6,149 ) $ ( 7,475 )
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 2,157 1,769
Amortization 1,560 1,392
Reduction in carrying amount of right-of-use assets 808 706
Provision for (recoveries of) losses on accounts receivable ( 71 ) 67
Stock-based compensation 8,054 3,763
Deferred income taxes ( 11 ) —
Gain on disposal of assets — ( 1 )
Changes in operating assets and liabilities:
Accounts receivable, net 121 ( 53 )
Inventory ( 4,405 ) ( 3,572 )
Prepaid expenses and other current assets 2,183 923
Other assets ( 428 ) ( 1,488 )
Accounts payable 1,437 4,582
Accrued and other long-term liabilities ( 736 ) ( 2,247 )
Deferred revenues 64 1,312
Lease liabilities ( 690 ) ( 705 )
Non-current income taxes payable 221 ( 52 )
Net cash provided by (used in) operating activities 4,115 ( 1,079 )
Cash flows from investing activities:
Acquisition of business, net of cash acquired ( 291 ) —
Purchases of property, plant and equipment ( 3,134 ) ( 15,185 )
Capitalization of patents ( 80 ) ( 320 )
Proceeds from sale of assets — 41
Net cash used in investing activities ( 3,505 ) ( 15,464 )
Cash flows from financing activities:
Proceeds from public offerings, net of offering costs 82,761 —
Proceeds from term loan — 15,000
Principal payments on debt and financing leases ( 372 ) ( 16 )
Proceeds from stock option exercises 574 558
Tax payments related to stock award issuances ( 31 ) ( 11 )
Net cash provided by financing activities 82,932 15,531
Effect of exchange rate changes on cash ( 227 ) 10
Net increase (decrease) in cash, cash equivalents, and restricted cash 83,315 ( 1,002 )
Cash, cash equivalents, and restricted cash, beginning of period 102,573 117,293
Cash, cash equivalents, and restricted cash, end of period $ 185,888 $ 116,291
Supplemental disclosures:
Cash paid (received) for interest $ 66 $ ( 384 )
Cash paid for income taxes 241 605
Right-of-use assets obtained in exchange for lease liabilities 6,699 7,566
Accrued purchases of property, equipment and patents 1,698 744
Accrued offering costs 406 —

See accompanying notes to consolidated financial statements.
5
nLIGHT, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation and New Accounting Pronouncements
Basis of Presentation
The accompanying consolidated financial statements of nLIGHT, Inc. and its wholly owned subsidiaries (Company) 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 the Company's 2020 Annual Report on Form 10-K.

Critical Accounting Policies
The Company's critical accounting policies have not materially changed during the three months ended March 31, 2021 from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020.

New Accounting Pronouncements

ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-03
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , in June 2016. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For assets measured at amortized cost, the new standard requires that the income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 was amended in November 2018, April 2019 and March 2020. The Company adopted ASU 2016-13, as amended, on January 1, 2021 on a prospective basis. The adoption did not have a material impact on the Company's financial position, results of operations, and cash flows.

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

Note 2 - Acquisitions
OPI
On July 30, 2020, the Company acquired the outstanding shares of OPI Photonics S.r.l. (OPI), an Italian limited liability company, for cash consideration of approximately $ 1.6 million, of which $ 0.2 million was paid at closing with the remaining $ 1.4 million to be paid over the next 24 months. The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values, and the excess of purchase price over the fair value amounts representing goodwill. The fair values assigned to assets acquired and liabilities assumed were based on management’s best estimates and assumptions as of the reporting date and are considered preliminary. Changes to amounts recorded as assets or liabilities may result in corresponding adjustments to goodwill. Pro forma financial information has not been provided for the purchase as it was not material to the Company’s overall financial position.

During the three months ended March 31, 2021, accrued acquisition consideration of $ 0.3 million was paid to the sellers of OPI.
6

Note 3 - Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the periods presented (in thousands):
Sales by End Market
Three Months Ended March 31,
2021 2020
Industrial $ 21,400 $ 15,990
Microfabrication 15,215 10,419
Aerospace and Defense 24,730 16,806
$ 61,345 $ 43,215

Sales by Geography
Three Months Ended March 31,
2021 2020
North America $ 31,134 $ 21,046
China 15,577 12,042
Rest of World 14,634 10,127
$ 61,345 $ 43,215

Sales by Timing of Revenue
Three Months Ended March 31,
2021 2020
Point in time $ 46,994 $ 36,930
Over time 14,351 6,285
$ 61,345 $ 43,215

The Company's contract assets and liabilities are as follows (in thousands):
Balance Sheet Classification As of
March 31, 2021 December 31, 2020
Contract assets Prepaid expenses and
other current assets 		$ 4,329 $ 5,680
Contract liabilities Deferred revenue and Other long-term liabilities 4,203 2,985

During the three months ended March 31, 2021 and 2020, the Company recognized revenue of $ 1.3 million and $ 0.2 million, respectively, that was included in the deferred revenue balances at the beginning of the periods as the performance obligations under the associated agreements were satisfied.

Note 4 - Concentrations of Credit and Other Risks
The following customers accounted for 10% or more of the Company's revenues for the periods presented:
Three Months Ended March 31,
2021 2020
Raytheon Technologies (1) 16 %
U.S. Government 20 % 10 %
(1) Represents less than 10% of total revenues

7
Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of accounts receivable. As of March 31, 2021 and December 31, 2020, two customers accounted for approximately 40 % and 43 %, respectively, of net accounts receivable. No other customers accounted for 10% or more of net accounts receivable in either of these periods.

Note 5 - Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable, restricted cash, and accounts payable are shown at cost which approximates fair value due to the short-term nature of these instruments. The fair value of the Company’s term and revolving loans with Pacific Western Bank, also described in Note 12, approximates the carrying value due to the variable market rate used to calculate interest payments.
The Company does not have any other significant financial assets or liabilities that are measured at fair value.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
• Level 1 Inputs: Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.
• Level 2 Inputs: Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3 Inputs: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s 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. The Company's fair value hierarchy for its financial instruments consists of cash equivalents as follows (in thousands):
March 31, 2021
Level 1 Level 2 Level 3 Total
Money market securities $ 156,887 $ — $ — $ 156,887
Commercial paper 2,643 — — 2,643
Total $ 159,530 $ — $ — $ 159,530
December 31, 2020
Level 1 Level 2 Level 3 Total
Money market securities $ 74,084 $ — $ — $ 74,084
Commercial paper 1,584 — — 1,584
Total $ 75,668 $ — $ — $ 75,668


8
Note 6 - Inventory
Inventory is stated at the lower of average cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) and net realizable value. Inventory includes raw materials and components that may be specialized in nature and subject to obsolescence. On a quarterly basis, we review inventory quantities on hand in comparison to our past consumption, recent purchases, and other factors to determine what inventory quantities, if any, may not be sellable. Based on this analysis, we write down the affected inventory value for estimated excess and obsolescence charges. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
Inventory consisted of the following (in thousands):
As of
March 31, 2021 December 31, 2020
Raw materials $ 22,852 $ 21,410
Work in process and semi-finished goods 23,829 21,320
Finished goods 12,123 11,976
$ 58,804 $ 54,706

Note 7 - Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
As of
Useful life (years) March 31, 2021 December 31, 2020
Automobile 3 $ 64 $ 34
Computer hardware and software
3 - 5
5,046 4,840
Manufacturing and lab equipment
2 - 7
71,663 69,849
Office equipment and furniture
5 - 7
1,769 1,605
Leasehold and building improvements
2 - 12
22,628 21,934
Buildings 30 9,392 9,081
Land N/A 3,399 3,399
113,961 110,742
Accumulated depreciation ( 67,834 ) ( 66,262 )
$ 46,127 $ 44,480

Note 8 - Intangible Assets and Goodwill
Intangibles
The details of amortizing intangible assets are as follows (in thousands, except for estimated useful lives):
Estimated useful life
(in years) 		As of
March 31, 2021 December 31, 2020
Patents
3 - 5
$ 6,261 $ 6,199
Development programs
2 - 4
7,200 7,200
Developed technology 5 1,226 1,226
14,687 14,625
Accumulated amortization ( 7,278 ) ( 6,280 )
$ 7,409 $ 8,345

Estimated amortization expense for future years is as follows (in thousands):
9
Remainder of 2021 $ 2,878
2022 2,357
2023 1,674
2024 364
2025 136
$ 7,409

Goodwill
The carrying amount of goodwill by segment was as follows (in thousands):
Laser Products Advanced Development Totals
Balance, December 31, 2020 $ 2,236 $ 10,248 $ 12,484
Currency exchange rate adjustment ( 37 ) — ( 37 )
Balance, March 31, 2021 $ 2,199 $ 10,248 $ 12,447


Note 9 - Other Assets
Other assets consisted of the following (in thousands):
As of
March 31, 2021 December 31, 2020
Demonstration assets, net $ 2,472 $ 2,598
Deferred tax assets, net 66 69
Other 2,500 2,500
$ 5,038 $ 5,167

Demonstration (demo) assets are equipment that is used for demonstration and other purposes with existing and prospective customers. Demo assets are recorded at cost and amortized over an estimated useful life of approximately two years . Amortization expense was as follows for the periods presented (in thousands):
Three Months Ended March 31,
2021 2020
Amortization expense $ 541 $ 504

Note 10 - Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
As of
March 31, 2021 December 31, 2020
Accrued payroll and benefits $ 9,402 $ 10,770
Product warranty, current 2,441 2,122
Income tax payable 390 401
Other accrued expenses 1,689 2,028
$ 13,922 $ 15,321


Note 11 - Product Warranties
The Company provides warranties on certain products and records 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 its estimate of future costs.
10

Product warranty liability activity was as follows for the periods presented (in thousands):
Three Months Ended March 31,
2021 2020
Product warranty liability, beginning $ 4,711 $ 2,984
Warranty charges incurred, net ( 701 ) ( 766 )
Provision for warranty charges, net of adjustments 1,285 1,033
Acquired warranty — 100
Product warranty liability, ending $ 5,295 $ 3,351
Less: current portion of product warranty liability ( 2,441 ) ( 1,828 )
Non-current portion of product warranty liability $ 2,854 $ 1,523

Note 12 - Commitments and Contingencies

Leases
See Note 13.

Credit Facilities
The Company has a $ 40.0 million revolving line of credit (LOC) with Pacific Western Bank which is secured by its assets and expires in September 2021. Interest on the LOC is based primarily on the London Interbank Offered Rate (LIBOR), or an alternative rate such as the Prime rate, plus or minus, respectively, a margin based on certain liquidity levels. The loan agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20 % on an annualized basis. As of March 31, 2021, no amounts were outstanding under the LOC, and the Company was in compliance with all covenants under the loan agreement.

Contractual Commitments and Purchase Obligations
As of March 31, 2021, the Company's purchase obligations and other contractual obligations have increased by approximately $ 6.5 million for new and modified operating leases, primarily related to U.S. operations. There have been no other material changes to the Company's purchase obligations and other contractual obligations from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020.

Legal Matters
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. As of March 31, 2021, and as of the filing of this Quarterly Report on Form 10-Q, the Company was not involved in any material legal proceedings.

11
Note 13 - Leases

Adoption of ASC 842
The Company adopted ASU 2016-02, Leases (Topic 842) and related amendments, using the modified transition approach with an effective date of January 1, 2020. The modified transition approach permits a company to use its effective date as the date of initial application to apply the standard to its leases, and, therefore, not restate comparative prior period financial information. Consequently, prior period financial information is not updated, and the disclosures required under the new standard will not be provided for dates and periods prior to January 1, 2020. The adoption of the lease standard did not have any effect on our previously reported consolidated financial statements and did not result in a cumulative catch-up adjustment to opening equity.

Transition Practical Expedients and Elections
The standard provides several optional practical expedients in transition. The Company elected the ‘package of practical expedients,’ which permits it to not reassess, under the new standard, the Company's prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to it. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption; for those leases that qualify, the Company will not recognize a right-of-use asset or lease liability, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for all its leases.

Lease Accounting
The Company leases real estate space under non-cancelable operating lease agreements for commercial and industrial space, as well as its corporate headquarters located in Vancouver, Washington. Facilities-related operating leases have remaining terms of 0.2 to 14.2 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 0.2 to 5.2 years. These leases are primarily operating leases; financing leases are not material. The Company did not include any renewal options in its lease terms for calculating the lease liabilities as the Company is not reasonably certain it will exercise the options at this time. The weighted-average remaining lease term for the lease obligations was 9.3 years at March 31, 2021, 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 March 31,
2021 2020
Lease expense:
Operating lease expense $ 874 $ 769
Short-term lease expense 73 87
Variable and other lease expense 122 146
$ 1,069 $ 1,002

Future minimum payments under our non-cancelable lease obligations were as follows as of March 31, 2021 (in thousands):
12
Remainder of 2021 $ 2,566
2022 3,028
2023 2,369
2024 2,325
2025 1,896
Thereafter 10,011
Total minimum lease payments 22,195
Less: interest ( 3,598 )
Present value of net minimum lease payments 18,597
Less: current portion of lease liabilities ( 2,751 )
Total long-term lease liabilities $ 15,846

Note 14 - Income Taxes
Income Tax Provision

To calculate the interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate and applies that to its ordinary quarterly earnings. The effect of changes in the enacted tax laws or rates is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or the tax environment changes.

The Company’s effective tax rate for the three months ended March 31, 2021 and 2020 differs from the U.S. statutory rate due to the U.S. and China valuation allowance, foreign income taxed at local statutory rates, and accrued withholding taxes. For the three months ended March 31, 2021 and 2020, the Company reported U.S. and China pre-tax losses. The Company has not yet been able to establish a sustained level of profitability in the U.S. and China, or other sufficient significant positive evidence, to conclude that its U.S. and China deferred tax assets are more likely than not to be realized. Therefore, the Company continues to maintain a valuation allowance against its U.S. and China deferred tax assets.
Note 15 - Stockholders' Equity and Stock-Based Compensation

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

Restricted Stock Awards and Units
Restricted stock award (RSA) and restricted stock unit (RSU) activity under our equity incentive plan was as follows (in thousands, except weighted-average grant date fair values):
Number of Restricted Stock Awards Weighted-Average Grant Date Fair Value
RSAs at December 31, 2020 653 $ 21.30
Awards granted — —
Awards vested — —
RSAs at March 31, 2021 653 $ 21.30

13
Number of Restricted Stock Units Weighted-Average Grant Date Fair Value
RSUs at December 31, 2020 2,800 $ 20.54
Awards granted 76 38.76
Awards vested ( 3 ) 18.63
Awards forfeited ( 7 ) 24.88
RSUs at March 31, 2021 2,866 $ 21.01

The total fair value of RSAs and RSUs vested during the three months ended March 31, 2021 was less than $ 0.1 million in total. Awards outstanding as of March 31, 2021 include 0.7 million performance-based awards that will vest upon meeting certain performance criteria.

Stock Options
The following table summarizes the Company’s stock option activity during the three months ended March 31, 2021 (in thousands, except weighted-average exercise prices):
Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Outstanding, December 31, 2020 3,358 $ 1.53 5.3 $ 104,510
Options exercised ( 452 ) $ 1.27
Options canceled ( 2 ) $ 4.79
Outstanding, March 31, 2021 2,904 $ 1.56 5.1 $ 89,554
Options exercisable at March 31, 2021 2,408 $ 1.15 4.8 $ 75,265
Options vested as of March 31, 2021 and expected to vest after March 31, 2021 2,904 $ 1.56 5.1 $ 89,554

Total intrinsic value of options exercised for the three months ended March 31, 2021 and 2020 was $ 15.0 million and $ 6.0 million, respectively. The Company received proceeds of $ 0.6 million from the exercise of options for each of the three months ended March 31, 2021 and 2020.

Employee Stock Purchase Plan
There were no purchases under the Company's employee stock purchase plan during the three months ended March 31, 2021.
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,
2021 2020
Cost of revenues $ 491 $ 345
Research and development 2,918 1,782
Sales, general and administrative 4,645 1,636
$ 8,054 $ 3,763

Unrecognized Compensation Costs
As of March 31, 2021, total unrecognized stock-based compensation related to unvested stock awards was $ 58.3 million, which will be recognized over the next five years as follows (in thousands):
14
Remainder of 2021 $ 20,570
2022 21,754
2023 12,899
2024 3,027
2025 35
$ 58,285

Total unrecognized stock-based compensation includes approximately 0.3 million awards that do not have a measurement date and have been valued as of March 31, 2021.

Common Stock Repurchase Plan
On November 14, 2019, the Company's Board of Directors authorized the repurchase of up to $ 10.0 million of its outstanding shares of common stock. As of March 31, 2021, no repurchases had been executed under the program.

Note 16 - Segment Information

The Company operates in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. The following table summarizes the operating results by reportable segment for the periods presented (dollars in thousands):
Three Months Ended March 31, 2021
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 47,335 $ 14,010 $ — $ 61,345
Gross profit $ 17,431 $ 705 $ ( 491 ) $ 17,645
Gross margin 36.8 % 5.0 % NM 28.8 %
Three Months Ended March 31, 2020
Laser Products Advanced Development Corporate and Other Totals
Revenue $ 36,930 $ 6,285 $ — $ 43,215
Gross profit $ 9,375 $ 471 $ ( 345 ) $ 9,501
Gross margin 25.4 % 7.5 % NM 22.0 %

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

There have been no material changes to the geographic locations of the Company’s long‑lived assets, net, based on the location of the assets, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Note 17 - Net Loss per Share

The following table sets forth the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share amounts):
15
Three Months Ended March 31,
2021 2020
Numerator:
Net loss $ ( 6,149 ) $ ( 7,475 )
Denominator:
Weighted-average shares, basic 40,048 37,846
Weighted-average shares, diluted 40,048 37,846
Net loss per share:
Basic $ ( 0.15 ) $ ( 0.20 )
Diluted $ ( 0.15 ) $ ( 0.20 )

The following potentially dilutive shares of restricted stock awards and units, employee stock purchase plan, and stock options were not included in the calculation of diluted shares above as the effect would have been anti‑dilutive (in thousands):
Three Months Ended March 31,
2021 2020
Restricted stock units and awards 2,433 2,460
Employee stock purchase plan 7 —
Common stock options 2,904 3,859
5,344 6,319

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: "ability," "anticipate," "attempt," "believe," "can be," "continue," "could," "depend," "enable," "estimate," "expect," "extend," "grow," "if," "intend," "likely," "may," "objective," "ongoing," "plan," "possible," "potential," "predict," "project," "propose," "rely," "should," "target," "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements include, but are not limited to, statements about: our ability to develop new technology, designs and applications for our lasers; the implementation of our business model and strategic plans, including estimates regarding future sales, revenues, expenses, acquisitions, investments and capital requirements; our future financial performance; our utilization of vertical integration; our ability to adequately protect our intellectual property rights; the effect on our business of litigation to which we are or may become a party; and the sufficiency of our existing liquidity sources to meet our cash needs; and our ability to sustain and manage growth in our business.

You should refer to the "Risk Factors" section of this report and those risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, which although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or
16
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 Vancouver, Washington, we design, develop and manufacture the critical elements of our lasers, and believe our vertically integrated business model enables us to rapidly introduce innovative products, control our costs and protect our intellectual property.

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

Revenues increased to $61.3 million in the three months ended March 31, 2021 compared to $43.2 million in the same period of 2020 as a result of higher revenue across all end markets. We generated a net loss of $6.1 million for the three months ended March 31, 2021 as compared to a net loss of $7.5 million for the same period of 2020.

Factors Affecting Our Performance

For factors affecting our performance, reference is made to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in Part II of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the factors affecting our performance since December 31, 2020.

Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods indicated:
17
Three Months Ended March 31,
2021 2020
Revenue:
Products 77.2 % 85.5 %
Development 22.8 14.5
Total revenue 100.0 100.0
Cost of revenue:
Products 49.5 64.6
Development 21.7 13.5
Total cost of revenue 71.2 78.0
Gross profit 28.8 22.0
Operating expenses:
Research and development 19.1 19.8
Sales, general, and administrative 19.1 17.8
Total operating expenses 38.2 37.6
Loss from operations (9.4) (15.6)
Other income (expense):
Interest income (expense), net (0.1) 0.7
Other income (expense), net — (0.3)
Loss before income taxes (9.5) (15.2)
Income tax expense 0.5 2.1
Net loss (10.0) % (17.3) %

Revenues by Segment

Our revenues by segment were as follows for the periods presented (dollars in thousands):
Three Months Ended March 31, Change
2021 % of Revenue 2020 % of Revenue $ %
Laser Products $ 47,335 77.2 % $ 36,930 85.5 % $ 10,405 28.2 %
Advanced Development 14,010 22.8 6,285 14.5 7,725 122.9
$ 61,345 100.0 % $ 43,215 100.0 % $ 18,130 42.0 %

The increase in Laser Products revenue for the three months ended March 31, 2021, compared to the same period of 2020, was driven by increased sales from the Industrial and Microfabrication markets as discussed below. The increase in Advanced Development revenue was primarily due to increased activity on existing research and development contracts.

Revenues by End Market

Our revenues by end market were as follows for the periods presented (dollars in thousands):
Three Months Ended March 31, Change
2021 % of Revenue 2020 % of Revenue $ %
Industrial $ 21,400 34.9 % $ 15,990 37.0 % $ 5,410 33.8 %
Microfabrication 15,215 24.8 10,419 24.1 4,796 46.0
Aerospace and Defense 24,730 40.3 16,806 38.9 7,924 47.1
$ 61,345 100.0 % $ 43,215 100.0 % $ 18,130 42.0 %

18
The increase in revenue from the Industrial market for the three months ended March 31, 2021, compared to the same period of 2020, was driven by a net increase in unit sales offset partially by lower average selling prices (ASP's). The increase in revenue from the Microfabrication market for the three months ended March 31, 2021, compared to the same period of 2020, was driven by a net increase in unit sales of semiconductor lasers. The increase in revenue from the Aerospace and Defense market for the three months ended March 31, 2021, compared to the same period of 2020, was primarily due to increased activity on existing research and development contracts.

Revenues by Geographic Region

Our revenues by geographic region were as follows for the periods presented (dollars in thousands):
Three Months Ended March 31, Change
2021 % of Revenue 2020 % of Revenue $ %
North America $ 31,134 50.7 % $ 21,046 48.7 % $ 10,088 47.9 %
China 15,577 25.4 12,042 27.9 3,535 29.4
Rest of World 14,634 23.9 10,127 23.4 4,507 44.5
$ 61,345 100.0 % 43,215 100.0 % $ 18,130 42.0 %

Geographic revenue information is based on the location to which we ship our products. The increase in North America revenue for the three months ended March 31, 2021, compared to the same period of 2020, was primarily driven by increased revenue from the Aerospace and Defense market. The increase in China revenue for the three months ended March 31, 2021, compared to the same period of 2020, was primarily due to increased sales in the Industrial market, and the increase in Rest of World revenue for the three months ended March 31, 2021, compared to the same period of 2020, was primarily due to increased sales in the Microfabrication market.

Cost of Revenues and Gross Margin

Cost of Laser Products revenue consists primarily of manufacturing materials, payroll, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted customer orders. We expense all warranty costs and inventory provisions as cost of revenues. Cost of Advanced Development revenue consists of materials, labor, subcontracting costs, an allocation of indirect costs including overhead and general and administrative.

Our gross profit and gross margin were as follows for the periods presented (dollars in thousands):
Three Months Ended March 31, 2021
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 17,431 $ 705 $ (491) $ 17,645
Gross margin 36.8 % 5.0 % NM 28.8 %
Three Months Ended March 31, 2020
Laser Products Advanced Development Corporate and Other Total
Gross profit $ 9,375 $ 471 $ (345) $ 9,501
Gross margin 25.4 % 7.5 % NM 22.0 %
The increase in Laser Products gross margin for the three months ended March 31, 2021, compared to the same period of 2020, was driven primarily by sales mix, product cost improvements, and improved factory utilization from higher production volume, partially offset by lower ASPs in the Industrial market. The decrease in Advanced Development gross margin for the three months ended March 31, 2021, compared to the same period of 2020, was primarily due to mix and timing of research and development contracts.

19
Operating Expenses

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

Research and Development
Three Months Ended March 31, Change
2021 2020 $ %
Research and development $ 11,710 $ 8,538 $ 3,172 37.2 %

The increase in research and development expense for the three months ended March 31, 2021, compared to the same period in 2020, was primarily due to increase in stock-based compensation of $1.1 million, and increased headcount and project-related expenses to support our development efforts.

Sales, General and Administrative
Three Months Ended March 31, Change
2021 2020 $ %
Sales, general, and administrative $ 11,714 $ 7,700 $ 4,014 52.1 %

The increase in sales, general and administrative expense for the three months ended March 31, 2021, compared to the same period in 2020 was primarily due to increase in stock-based compensation of $3.0 million, increased headcount to support our continued growth, and increased professional service fees.

Interest Income (Expense), net
Three Months Ended March 31, Change
2021 2020 $ %
Interest income (expense), net $ (74) $ 283 $ (357) (126.1)%

The decrease in interest income (expense), net, for the three months ended March 31, 2021, compared to the same period in 2020 was primarily attributable to a decrease in the market rates on money market funds. The mid-March 2021 cash infusion from our public offering of stock had minimal impact on our interest income for the quarter.

Other Income (Expense), net
Three Months Ended March 31, Change
2021 2020 $ %
Other income (expense), net $ 26 $ (116) $ 142 122.4%

The increase in other income (expense), net for the three months ended March 31, 2021, compared to the same period in 2020 was primarily attributable to changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations.

Income Tax Expense
Three Months Ended March 31, Change
2021 2020 $ %
Income tax expense $ 322 $ 905 $ (583) (64.4) %

We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy and Korea. We also record tax expense for uncertain tax positions taken and associated penalties and interest. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Due to the uncertainty with respect to their ultimate realizability in the U.S. and China, we continue to maintain a full valuation allowance in both jurisdictions as of March 31, 2021.
20

The decrease in income tax expense for the three months ended March 31, 2021, compared to the same period in 2020 was driven by a decrease in income from our Finland operations. Our tax expense is dependent on the geographic mix of earnings and primarily related to our foreign operations.

Liquidity and Capital Resources

We had cash and cash equivalents of $185.6 million and $102.3 million as of March 31, 2021 and December 31, 2020, respectively.

For the three months ended March 31, 2021, our principal uses of liquidity were to fund our working capital needs. Our principal sources of liquidity for the three months ended March 31, 2021 was from our equity offering and cash flows from operations.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. However, we may need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

The following table summarizes our cash flows for the periods presented (in thousands):
Three Months Ended March 31,
2021 2020
Net cash provided by (used in) operating activities $ 4,115 $ (1,079)
Net cash used in investing activities (3,505) (15,464)
Net cash provided by financing activities 82,932 15,531
Effect of exchange rate changes on cash (227) 10
Net increase (decrease) in cash $ 83,315 $ (1,002)

Net Cash Provided by (Used in) Operating Activities

During the three months ended March 31, 2021, net cash provided by operating activities was $4.1 million, which was primarily driven by $6.1 million of net loss reported for the period, and non‑cash adjustments of $12.5 million related to depreciation and amortization, stock-based compensation, and other items. These items were partially offset by increases of $4.4 million in inventory and $1.4 million in accounts payable, and a decrease in prepaid expenses and other current assets of $2.2 million. The increase in inventory was driven by an expected increase in future period sales, and the increase in accounts payable was driven by an increase in inventory purchases and timing of vendor payments. The decrease in prepaid expenses and other current assets was primarily due to reduction in our contract assets and collection of import duty reclaims.
During the three months ended March 31, 2020, net cash used in operating activities was $1.1 million, which was primarily driven by $7.5 million of net loss reported in the period, and non-cash adjustments of $7.7 million related to depreciation and amortization, stock-based compensation, and other items. These items were partially offset by increases of $3.6 million in inventory and $4.6 million in accounts payable. The increase in inventory supported new product introductions, decreased customer lead times and increased safety stock. The increase in accounts payable was primarily driven by timing of vendor payments.
Net Cash Used in Investing Activities

During the three months ended March 31, 2021, net cash used in investing activities was $3.5 million, primarily resulting from $3.1 million of capital expenditures related to investments in manufacturing equipment and improvements to our corporate facility.

21
During the three months ended March 31, 2020, net cash used in investing activities was $15.5 million, primarily resulting from $15.2 million of capital expenditures related to the acquisition of commercial property and other investments in manufacturing equipment for our worldwide operations.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities was $82.9 million, which was primarily driven by our follow-on public offering of $82.8 million, net of offering costs.

During the three months ended March 31, 2020, net cash provided by financing activities was $15.5 million, which was primarily driven by proceeds from our revolving line of credit of $15.0 million to acquire commercial property, and $0.6 million of proceeds from stock options exercised.

Credit Facilities

We have a $40.0 million revolving line of credit with Pacific Western Bank which is secured by our assets and expires in September 2021. Interest on the line of credit is based primarily on the London Interbank Offered Rate (LIBOR), or an alternative rate such as the Prime rate, plus or minus, respectively, a margin based on certain liquidity levels. The loan agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20% on an annualized basis. As of March 31, 2021, no amounts were outstanding under the line of credit, and we were in compliance with all covenants under the loan agreement.

Contractual Obligations

For the three months ended March 31, 2021, our contractual obligations increased by approximately $5.9 million for operating leases. There have been no other material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

Since inception, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for another contractually narrow or limited purpose.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.

Recent Accounting Pronouncements

See Note 1 of Notes to Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in Part II of our Annual Report on Form 10-K for the year ended December 31, 2020. Our exposure to market risk has not changed materially since December 31, 2020.

22
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and our chief financial officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and our chief financial officer have concluded that, as of such date, our disclosure controls and procedures were, in design and operation, effective.

Changes in Internal Control over Financial Reporting

Our chief executive officer and our chief financial officer did not identify any changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We acquired OPI Photonics S.r.l. (OPI) on July 30, 2020 and have not yet completed the process of integrating the acquired business's internal controls over financial reporting into our overall internal controls over financial reporting processes.

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.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

There have been no material changes to the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 1A. RISK FACTORS

For risk factors related to our business, reference is made to Item 1A, "Risk Factors," contained in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 6. EXHIBITS

(a) Exhibits
23
Exhibit
Number 		Incorporated by Reference Filed
Herewith
Description Form File No. Exhibit Filing Date
3.1 10-Q 001-38462 3.1 May 25, 2018
3.2 8-K 001-38462 3.1 April 21, 2020
4.1 S-1/A 333-224055 4.1 April 16, 2018
31.1 X
31.2 X
32.1* 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
*
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.

24
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)
May 7, 2021 By: /s/ SCOTT KEENEY
Date Scott Keeney
President and Chief Executive Officer
(Principal Executive Officer)
May 7, 2021 By: /s/ RAN BAREKET
Date Ran Bareket
Chief Financial Officer
(Principal Accounting and Financial Officer)

25
TABLE OF CONTENTS
Part I - Financial InformationItem 1. Unaudited Interim Financial StatementsNote 1 - Basis Of Presentation and New Accounting PronouncementsNote 2 - AcquisitionsNote 3 - RevenueNote 4 - Concentrations Of Credit and Other RisksNote 5 - Fair Value Of Financial InstrumentsNote 6 - InventoryNote 7 - Property, Plant and EquipmentNote 8 - Intangible Assets and GoodwillNote 9 - Other AssetsNote 10 - Accrued LiabilitiesNote 11 - Product WarrantiesNote 12 - Commitments and ContingenciesNote 13 - LeasesNote 14 - Income TaxesNote 15 - Stockholders' Equity and Stock-based CompensationNote 16 - Segment InformationNote 17 - Net Loss Per ShareItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 6. Exhibits

Exhibits

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 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