LASR earnings call transcript, November 5, 2026

Thank you for joining us today to discuss Enlight's third quarter 2026 earnings results. I'm John Marchetti, Enlight's VP of Corporate Development. And the head of Investor Relations. With me on the call today are Scott Keeney, Enlight's chairman and CEO, and Joe Corso, Enlight's CFO. Today's discussion will contain forward-looking statements, including statements related to our financial projections. and plans for our business, our growth opportunities and demand for our products, the impact of export controls and related supply chain challenges on our product manufacturing and delivery, and our mitigation strategies to address such supply chain challenges. These forward-looking statements are subject to risks, uncertainties, and assumptions. That could cause our actual results to differ materially from these statements, including the risks mentioned in today's earnings release, as well as other risks and uncertainties described from time to time in our SEC filings, including, without limitation, our most recent annual report on form 10 K and our subsequent quarterly reports on form 10 Q. We undertake no obligation to update any forward looking statement, except as required by law. During the call, we will also be discussing certain non gap financial measures. We have provided reconcile. of these non gap financial measures to the most directly comparable gap financial measures in our earnings press release, and in our earnings presentation, both of which can be found on the investor relations section of our website. I will now turn the call over to Enlight's chairman and CEO.

towards fielding in 2028, and has emphasized that the next phase of the market will be defined not only by technical performance, but also by producibility, affordability, and deployability of systems in meaningful... quantities. We believe NY is uniquely positioned for the next phase. Our HADES platform combines three capabilities that are essential to effective high-energy laser systems. Scalable power, exceptional beam quality, and atmospheric correction. HADES is based on a common modular... architecture that can scale from tens of kilowatts to a megawatt while maintaining the performance required to address increasingly difficult threats. And our $627 million JLWS award is an important validation of this approach. Under this multi-year agreement, we are developing and integrating complete containerized high-energy laser weapon systems, building on the technology and experience we have gained through prior successful high-energy laser programs, including HEALSI-1, HEALSI-2, and DEM-SHORET. GLWS expands our role from a critical laser supplier to a system-level partner and represents an important bridge from prototype development toward deployable systems and future product opportunities. Outside of direct energy, we continue to see attractive growth opportunities. In laser sensing, kinetic weapons, and space. Our laser sensing products support a growing number of missile, intelligence, and space-related applications. These systems complement our directed energy portfolio because

future layered defense architectures will require the ability to detect, track, identify, and ultimately defeat increasingly complex threats. Demand also remains strong for our products using kinetic weapons. The demand for these products, which support established programs of record, is being driven by global inventory. Applenishment, increased production rates, and broader mission requirements. Across the defense technology sector, our U.S. government and armed services customers are increasingly focused on the capabilities required to deliver next generation weapon platforms at scale. And this has also been a key priority for Enlight. We are investing in our manufacturing capacity, building appropriate long lead inventory, and strengthening critical portions of our supply chain. Our balance sheet with more than $300 million in cash and investments gives us the flexibility to make these strategic investments and continue to fund product development and evaluate strategic opportunities that could accelerate our growth or improve control over critical technologies and supply. International demand is another important long-term opportunity. Allied governments are increasingly seeking locally supported rapidly deployable counter UAS and directed energy capabilities. We are pursuing a disciplined approach to these opportunities, working with customers and partners to determine where local assembly, integration, or support can improve our competitive position while protecting our core intellectual property.

Before I turn the call over to Joe for a review of our financial performance, I want to provide an update to the supply chain challenges we outlined last quarter. We have been reducing our exposure to China for a number of years, including reassuring manufacturing to the U.S.

While taking decisive action to strengthen our supply chain and manufacturing capacity, our strategy remains consistent. Leverage our vertically integrated technology platform, execute with discipline on existing programs, invest. The head of demand and position the company to support customers as defense technologies move from development into fielding and production. We believe this combination of differentiated technology, system level capability, manufacturing investment, and balance sheet strength positions and light to create substantial long-term value. Let me now turn the call over to Joe to discuss our third quarter financial results and the outlook for the remainder of the year.

Thank you, Scott.

We had a strong operational quarter in 3Q, particularly in light of the significant supply chain challenges we faced. Despite it. Sequential decline in revenue, we delivered record product gross margins and healthy adjusted EBITDA. Demand for our products across both our defense and space and advanced manufacturing markets accelerated and our pipeline of new opportunities continued to build. We remain focused on making. Deliberate working capital and targeted CapEx investments to ensure we are expanding our manufacturing capacity and acquiring the critical inventory required to meet expected future demand. Turning to the results. Total revenue in the third quarter was $73.8 million. An increase of 11% compared to $66.7 million in the third quarter of 2025 and down 11% compared to the prior quarter. Third quarter revenue excludes approximately $15 million of product revenue that we were unable to. to ship due to supply chain constraints. And while the supply chain situation continues to improve, we do not expect to ship most of this pent up demand until the first half of 2027. Defense and space revenue was $52.5 million in the quarter, up 15% year over year. The year over year growth in defense and space was driven by both products and development revenue. The sequential decline in defense and space products revenue is primarily the result of the change in the composition of revenue associated with our healthy to program where we are now largely finished with shipping amplifier power and have shifted our efforts to the assembly of.

one megawatt laser during the quarter we continued to serve multiple international customers across our entire stack of products including semiconductor lasers amplifiers and beam combined lasers and continue to execute on both our long running and newly ramping laser sensing programs as a result. In the fourth quarter, we expect product revenue or defense and space market to increase sequentially. Development revenue of $25.7 million grew 34% year over year and 11% compared to the prior quarter. The year over year and sequential growth in our development revenue was primarily driven by continued progress in our Health C2 program and the initial ramp of our JLWS contract. As a result of our decision to exit the cutting and welding markets, we have combined our legacy micro fabrication and industrial end markets into a new end market we are calling advanced manufacturing. Third quarter revenue from our advanced manufacturing market, which includes sales of semiconductor and fiber lasers used in semiconductor manufacturing, electronics production, additive manufacturing, and other applications. was $21.3 million, essentially flat year over year and down 16% compared to the prior quarter. The sequential decline in advanced manufacturing revenue was the result of supply chain constraints, which limited our ability to satisfy all of our customers. had we not had these constraints, third quarter advanced manufacturing revenue would have grown on both an annual and sequential basis, even after factoring in the revenue headwind caused by our exit of the legacy.

Cutting and welding markets. Demand in our advanced manufacturing market continued to strengthen in the third quarter, and we expect fourth quarter revenue to grow sequentially. Total gross margin in the third quarter was 33.1%. Compared to 31.1% in the third quarter of 2025 and 31.1% last quarter. On a non-gap basis, which excludes stock-based compensation, total gross margin in the third quarter was 34.7%. Up from 32% in the same period last year and 32.6% last quarter. Product gross margin in the third quarter was a record 47.4% compared to 41% in the third quarter of 2025 and 41. 2% last quarter. The sequential increase in product gross margin was primarily driven by a favorable mix, strong factory absorption, lower reserves, and a decrease in tariff spending. Non-GAAP products gross margin in the quarter was a record of 48.8% compared to 42.3% in the third quarter of 2025 and 42.4% last quarter. Development gross margin was 6.5% compared to 6.4% in the same quarter a year ago and 5.6% last quarter. The variability in the development gross margin is primarily the result of contract mix and the timing of program deliverables in any given quarter. Non-GAAP development gross margin was 8.3%. compared to 6.4% in the same period a year ago and 7.5% last quarter. Moving down the income statement. GAP operating expenses were $33.7 million in the third quarter. compared to 28.1 million dollars in the third quarter of 2025 and 29.3 million dollars in the prior quarter. Third quarter operating expenses included approximately 7.5 million dollars in non-recurring restructuring charges primarily associated with the completion of our efforts.

to cease all operations in China. Excluding these restructuring charges, gap operating expenses were lower on both a year-over-year and sequential basis. Non-gap operating expenses were 17.4 million dollars. in the quarter, down from 17.5 million dollars in the third quarter of 2025 and 19.5 million dollars last quarter. The sequential decrease in non-gap operating expenses was primarily due to lower employee compensation expenses, including taxes on RSUs and a decrease in depreciation. We expect non-gap OPEX to increase sequentially but remain in the 17 to 19 million dollar range in the fourth quarter of 2026. Gap net loss in the third quarter of 2026 was 7.2 million dollars or a loss of 12 cents per share compared to a net loss of 6.9 million dollars. Or a loss of 14 cents per share in the same quarter a year ago and a net loss of 1.3 million dollars or a loss of 2 cents per share last quarter. On a non-gap basis, net income for the third quarter was 10.2 million dollars or 16 cents per diluted share. Compared to 4.3 million dollars or 8 cents per diluted share in the third quarter of 2025 and 9.6 million dollars or 15 cents per diluted share last quarter. Adjusted EBITDA for the third quarter was 11.1 million dollars compared to 7.1. million dollars in the same quarter last year and 10.7 million dollars last quarter. Turning to the balance sheet, we ended the third quarter with total cash, cash equivalents, restricted cash and investments of 314.5 million.

dollars, providing us with ample capital to continue our targeted investments in working capital and production capacity expansion, while also giving us the flexibility to evaluate opportunities to accelerate our long-term growth. Let me now turn to guidance. Based on the information available today, we expect revenue for the fourth quarter of 2026 to be in the range of $84 to $90 million. The midpoint of $87 million includes approximately $63 million of product revenue and $24 million. of development revenue. Please note that due to ongoing supply chain constraints, Enlight's fourth quarter revenue guidance excludes approximately $15 million of product revenue. When we provided Q3 guidance on our last earnings call, we noted that the midpoint of our revenue guidance range excluded approximately $17 million of product revenue due to supply chain constraints. And that is largely what occurred. Today, while our supply chain has improved to the point where we can meet current customer demand. We do not yet have enough supply to also catch up on the $15 million of pent up demand created last quarter. We expect to be able to ship this revenue in the first half of 2027. Overall gross margin in the fourth quarter is expected to be in the range of 30% to 36%. gross margin in the range of 40% to 46% and development gross margin of approximately 8%. We expect adjusted EBITDA for the fourth quarter to be in the range of 12 to $18 million. With that, I will turn the call over to the operator for questions.

Your first question comes from the line of Jonathan Siegman with Stiefel. Jonathan, your line is open. Please go ahead.

comes from the line of Jan Engelbrecht with Baird. Jen, your line is open. Please go ahead.