nLIGHT(LASR) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS Presents nLIGHT, Inc.'s unaudited consolidated financial statements and detailed notes for periods ended September 30, 2021, and December 31, 2020 Consolidated Balance Sheets Total assets and stockholders' equity significantly increased as of September 30, 2021, driven by higher cash, inventory, and additional paid-in capital | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $381,971 | $283,644 | $98,327 | 34.7% | | Total Liabilities | $77,973 | $63,730 | $14,243 | 22.3% | | Total Stockholders' Equity | $303,998 | $219,914 | $84,084 | 38.2% | | Cash and cash equivalents | $165,584 | $102,282 | $63,302 | 61.9% | | Inventory | $70,683 | $54,706 | $15,977 | 29.2% | Consolidated Statements of Operations Total revenue increased for both three and nine months ended September 30, 2021, but net loss and loss per share also rose | Metric (in thousands, except per share) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total Revenue | $72,235 | $61,732 | $10,503 | 17.0% | | Gross Profit | $21,395 | $17,160 | $4,235 | 24.7% | | Loss from Operations | $(6,759) | $(3,976) | $(2,783) | 70.0% | | Net Loss | $(6,880) | $(2,110) | $(4,770) | 226.1% | | Net Loss per Share (basic & diluted) | $(0.16) | $(0.05) | $(0.11) | 220.0% | | Metric (in thousands, except per share) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total Revenue | $202,693 | $157,085 | $45,608 | 29.0% | | Gross Profit | $59,365 | $39,717 | $19,648 | 49.5% | | Loss from Operations | $(21,552) | $(16,762) | $(4,790) | 28.6% | | Net Loss | $(20,919) | $(16,415) | $(4,504) | 27.4% | | Net Loss per Share (basic & diluted) | $(0.50) | $(0.43) | $(0.07) | 16.3% | Consolidated Statements of Comprehensive Loss Comprehensive loss increased for both periods ended September 30, 2021, due to higher net losses and negative currency adjustments | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net Loss | $(6,880) | $(2,110) | $(4,770) | 226.1% | | Foreign currency translation adjustments, net of tax | $(378) | $1,091 | $(1,469) | -134.6% | | Comprehensive Loss | $(7,258) | $(1,019) | $(6,239) | 612.3% | | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net Loss | $(20,919) | $(16,415) | $(4,504) | 27.4% | | Foreign currency translation adjustments, net of tax | $(543) | $928 | $(1,471) | -158.5% | | Comprehensive Loss | $(21,462) | $(15,487) | $(5,975) | 38.6% | Consolidated Statements of Stockholders' Equity Stockholders' equity significantly increased due to a public offering and stock-based compensation, despite a net loss | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Total Stockholders' Equity | $303,998 | $219,914 | $84,084 | 38.2% | | Additional Paid-in Capital | $464,090 | $358,544 | $105,546 | 29.4% | | Accumulated Deficit | $(159,305) | $(138,386) | $(20,919) | 15.1% | - Proceeds from follow-on offering, net of offering costs, contributed $82,354 thousand to additional paid-in capital during the nine months ended September 30, 2021[17] - Stock-based compensation added $29,732 thousand to additional paid-in capital during the nine months ended September 30, 2021[17] Consolidated Statements of Cash Flows Net cash significantly increased due to financing activities, primarily a public offering, despite lower operating cash and investing usage | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $2,687 | $14,694 | $(12,007) | -81.7% | | Net cash used in investing activities | $(14,230) | $(20,280) | $6,050 | -29.8% | | Net cash provided by (used in) financing activities | $75,060 | $(1,638) | $76,698 | -4682.4% | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $63,261 | $(6,851) | $70,112 | -1023.4% | - Proceeds from public offerings, net of offering costs, were $82,354 thousand for the nine months ended September 30, 2021[21] Notes to Consolidated Financial Statements Detailed disclosures on accounting policies, financial instruments, assets, liabilities, equity, compensation, segments, and net loss per share Note 1 - Basis of Presentation and New Accounting Pronouncements Financial statements adhere to U.S. GAAP and SEC rules; new accounting pronouncements adopted with no material impact - Adopted ASU 2016-13 (Credit Losses) and ASU 2019-12 (Income Taxes) on January 1, 2021, with no material impact[25][26] Note 2 - Acquisitions Acquired OPI Photonics S.r.l. for approximately $1.6 million cash, with $0.6 million in accrued consideration paid - Acquired OPI Photonics S.r.l. on July 30, 2020, for approximately $1.6 million cash consideration[27] - Paid $0.6 million in accrued acquisition consideration, including $0.3 million contingent consideration, for OPI during the nine months ended September 30, 2021[28] Note 3 - Revenue Total revenue significantly increased across all end markets and regions (except China), with substantial growth in revenue recognized over time Revenue by End Market (in thousands) | End Market | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Industrial | $26,737 | $21,880 | $4,857 | 22.2% | | Microfabrication | $17,695 | $14,052 | $3,643 | 25.9% | | Aerospace and Defense | $27,803 | $25,800 | $2,003 | 7.8% | | Total | $72,235 | $61,732 | $10,503| 17.0% | Revenue by Geography (in thousands) | Geography | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | North America | $101,659 | $72,924 | $28,735 | 39.4% | | China | $48,045 | $52,723 | $(4,678) | -8.9% | | Rest of World | $52,989 | $31,438 | $21,551 | 68.6% | | Total | $202,693 | $157,085 | $45,608| 29.0% | Revenue by Timing (in thousands) | Timing | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Point in time | $150,187 | $133,304 | $16,883 | 12.7% | | Over time | $52,506 | $23,781 | $28,725 | 120.8% | | Total | $202,693 | $157,085 | $45,608| 29.0% | Note 4 - Concentrations of Credit and Other Risks Customer concentration risks exist, with key customers accounting for significant revenue and 33% of net accounts receivable Customer Revenue Concentration | Customer | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. Government | 23% | 16% | 21% | 13% | | Quick Laser Technology Co., Ltd. | (1) | 13% | (1) | 13% | | Raytheon Technologies | (1) | 12% | (1) | 13% | - Two customers accounted for approximately 33% of net accounts receivable as of September 30, 2021, down from 43% at December 31, 2020[30] Note 5 - Fair Value of Financial Instruments Fair value financial instruments, primarily Level 1 money market securities and commercial paper, significantly increased Fair Value of Financial Instruments (Level 1, in thousands) | Instrument | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :------------------ | :----------- | :----------- | :--------- | :--------- | | Money market securities | $136,894 | $74,084 | $62,810 | 84.8% | | Commercial paper | $3,885 | $1,584 | $2,301 | 145.3% | | Total | $140,779 | $75,668 | $65,111| 86.1% | Note 6 - Inventory Total inventory increased by 29.2% to $70.7 million as of September 30, 2021, with growth across all categories Inventory Composition (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :------------------------ | :----------- | :----------- | :--------- | :--------- | | Raw materials | $29,725 | $21,410 | $8,315 | 38.8% | | Work in process and semi-finished goods | $24,085 | $21,320 | $2,765 | 13.0% | | Finished goods | $16,873 | $11,976 | $4,897 | 40.9% | | Total Inventory | $70,683 | $54,706 | $15,977| 29.2% | Note 7 - Property, Plant and Equipment Net property, plant and equipment increased by 17.6% to $52.3 million, driven by equipment and building improvements Property, Plant and Equipment, Net (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :------------------------ | :----------- | :----------- | :--------- | :--------- | | Manufacturing and lab equipment | $76,652 | $69,849 | $6,803 | 9.7% | | Leasehold and building improvements | $26,956 | $21,934 | $5,022 | 22.9% | | Total Property, Plant and Equipment, Net | $52,303 | $44,480 | $7,823 | 17.6% | Note 8 - Intangible Assets and Goodwill Net intangible assets decreased by 33.1% to $5.6 million due to amortization; goodwill remained stable Intangible Assets, Net (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :--------- | :--------- | | Total Intangible Assets | $14,290 | $14,625 | $(335) | -2.3% | | Accumulated Amortization | $(8,710) | $(6,280) | $(2,430) | 38.7% | | Intangible Assets, Net | $5,580 | $8,345 | $(2,765)| -33.1% | | Goodwill | $12,437 | $12,484 | $(47) | -0.4% | Note 9 - Accrued Liabilities Accrued liabilities increased slightly to $15.7 million, driven by payroll and benefits, offset by other expenses Accrued Liabilities (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :------------------------ | :----------- | :----------- | :--------- | :--------- | | Accrued payroll and benefits | $11,568 | $10,770 | $798 | 7.4% | | Product warranty, current | $2,251 | $2,122 | $129 | 6.1% | | Other accrued expenses | $1,923 | $2,429 | $(506) | -20.8% | | Total Accrued Liabilities | $15,742 | $15,321 | $421 | 2.7% | Note 10 - Product Warranties Product warranty liability increased by 28.1% to $5.4 million due to higher provisions for warranty charges Product Warranty Liability Activity (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Product warranty liability, beginning | $4,711 | $2,984 | $1,727 | 57.9% | | Provision for warranty charges, net of adjustments | $2,431 | $3,425 | $(994) | -29.0% | | Product warranty liability, ending | $5,443 | $4,250 | $1,193 | 28.1% | Note 11 - Line of Credit Facility The $40.0 million revolving line of credit was amended, extending maturity; no outstanding amounts and in compliance - Amended $40.0 million revolving line of credit on September 24, 2021, extending maturity to September 24, 2024[44] - No amounts outstanding under the LOC at September 30, 2021, and in compliance with all covenants[45] Note 12 - Commitments and Contingencies No material legal proceedings or claims as of September 30, 2021, or the report filing date - No material legal proceedings as of September 30, 2021, or the filing date of the Quarterly Report on Form 10-Q[47] Note 13 - Leases Leases real estate and equipment with a 9-year average term; lease expense increased for both periods ended September 30, 2021 Lease Expense (in thousands) | Lease Expense Category | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :--------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Operating lease expense | $968 | $758 | $210 | 27.7% | | Short-term lease expense | $172 | $35 | $137 | 391.4% | | Variable and other lease expense | $192 | $128 | $64 | 50.0% | | Total Lease Expense | $1,332 | $921 | $411 | 44.6% | Future Minimum Lease Payments (in thousands) | Period | Amount | | :---------------- | :----- | | Remainder of 2021 | $914 | | 2022 | $3,333 | | 2023 | $2,508 | | 2024 | $2,361 | | 2025 | $1,913 | | Thereafter | $10,041| | Total minimum lease payments | $21,070| Note 14 - Stockholders' Equity and Stock-Based Compensation Public offering generated $82.4 million; stock-based compensation expense significantly increased, with $79.2 million unrecognized - Closed a follow-on public offering in March 2021, issuing approximately 2.5 million shares at $34.00 per share, resulting in $82.4 million in net proceeds[51] Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Cost of revenues | $740 | $505 | $235 | 46.5% | | Research and development | $3,782 | $2,545 | $1,237 | 48.6% | | Sales, general and administrative | $5,550 | $3,633 | $1,917 | 52.8% | | Total Stock-Based Compensation | $10,072 | $6,683 | $3,389 | 50.7% | - Total unrecognized stock-based compensation was $79.2 million as of September 30, 2021, to be recognized over an average of 2.8 years[57] Note 15 - Segment Information Operates in Laser Products and Advanced Development segments, both showing revenue growth, with Laser Products improving gross margin Revenue by Segment (in thousands) | Segment | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Laser Products | $155,289 | $133,151 | $22,138 | 16.6% | | Advanced Development | $47,404 | $23,934 | $23,470 | 98.1% | | Total Revenue | $202,693 | $157,085 | $45,608| 29.0% | Gross Margin by Segment | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (pp) | | :------------------ | :-------------------------- | :-------------------------- | :---------- | | Laser Products | 38.5% | 33.2% | 5.3 | | Advanced Development | 6.7% | 6.5% | 0.2 | | Total Gross Margin | 29.6% | 27.8% | 1.8 | Note 16 - Net Loss per Share Basic and diluted net loss per share were identical due to the company's net loss position; dilutive securities were anti-dilutive - Basic and diluted net loss per share were identical due to the company's net loss position[61] Anti-Dilutive Securities (in thousands) | Security Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Restricted stock units and awards | 2,195 | 3,498 | 2,547 | 2,129 | | Common stock options | 2,544 | 3,593 | 2,717 | 3,593 | | Total Anti-Dilutive Securities | 4,739 | 7,130 | 5,264 | 5,722 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial performance, highlighting increased revenue but higher net loss, segment performance, operating expenses, and liquidity Key Operating Results as % of Revenue | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenue | 100.0% | 100.0% | 100.0% | 100.0% | | Gross Profit | 29.6% | 27.8% | 29.3% | 25.3% | | Total Operating Expenses | 38.9% | 34.2% | 39.9% | 36.0% | | Loss from Operations | (9.3)% | (6.4)% | (10.6)% | (10.7)% | | Net Loss | (9.5)% | (3.4)% | (10.3)% | (10.4)% | SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Cautions that forward-looking statements are subject to risks and uncertainties, and the company does not undertake to update them - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially[64][65] - The company does not undertake to publicly update forward-looking statements, except as required by law[65] Overview nLIGHT is a leading provider of high-power lasers, reporting increased revenue but a higher net loss for the period - nLIGHT is a leading provider of high-power semiconductor and fiber lasers[66] - Operates in two segments: Laser Products (semiconductor/fiber lasers, directed energy) and Advanced Development (R&D contracts)[67] | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total Revenue | $202,700 | $157,100 | $45,600 | 29.0% | | Net Loss | $(20,900) | $(16,400) | $(4,500) | 27.4% | Factors Affecting Our Performance No material changes to performance factors since December 31, 2020, as disclosed in the Annual Report on Form 10-K - No material changes to performance factors since December 31, 2020[69] Results of Operations Revenue increased, and gross margins improved, but significant growth in operating expenses led to higher operating and net losses Revenues by Segment Both Laser Products and Advanced Development segments saw revenue growth, with Advanced Development nearly doubling its revenue Revenue by Segment (in thousands) | Segment | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Laser Products | $155,289 | $133,151 | $22,138 | 16.6% | | Advanced Development | $47,404 | $23,934 | $23,470 | 98.1% | | Total Revenue | $202,693 | $157,085 | $45,608| 29.0% | - Laser Products revenue increase driven by Industrial and Microfabrication markets, partially offset by decreased Aerospace and Defense product sales[72] - Advanced Development revenue increase primarily due to increased activity on existing R&D contracts[72] Revenues by End Market All end markets experienced revenue growth, with Microfabrication showing the highest percentage increase due to semiconductor laser demand Revenue by End Market (in thousands) | End Market | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Industrial | $73,044 | $60,500 | $12,544 | 20.7% | | Microfabrication | $53,184 | $38,771 | $14,413 | 37.2% | | Aerospace and Defense | $76,465 | $57,814 | $18,651 | 32.3% | | Total Revenue | $202,693 | $157,085 | $45,608| 29.0% | - Industrial market revenue growth driven by unit sales outside of China, offset by lower average selling prices and lower unit sales in China[73] - Microfabrication market revenue growth driven by increased demand and unit sales of semiconductor lasers[73] Revenues by Geographic Region North America and Rest of World regions showed strong revenue growth, while China revenue decreased due to lower industrial sales Revenue by Geographic Region (in thousands) | Region | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | North America | $101,659 | $72,924 | $28,735 | 39.4% | | China | $48,045 | $52,723 | $(4,678) | -8.9% | | Rest of World | $52,989 | $31,438 | $21,551 | 68.6% | | Total Revenue | $202,693 | $157,085 | $45,608| 29.0% | - North America revenue increase driven by Aerospace and Defense and Industrials markets[75] - China revenue decrease primarily due to decreased sales in the Industrial market[75] Cost of Revenues and Gross Margin Overall gross margin improved, with Laser Products benefiting from sales mix and factory utilization, while Advanced Development fluctuated Gross Profit and Gross Margin (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (pp) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :---------- | | Gross Profit | $21,395 | $17,160 | $4,235 | | | Gross Margin | 29.6% | 27.8% | | 1.8 | Gross Profit and Gross Margin (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (pp) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :---------- | | Gross Profit | $59,365 | $39,717 | $19,648 | | | Gross Margin | 29.3% | 25.3% | | 4.0 | - Laser Products gross margin increases driven by sales mix, product cost improvements, and improved factory utilization[79] Operating Expenses Operating expenses, including R&D and SG&A, significantly increased due to higher stock-based compensation, headcount, and professional fees Research and Development R&D expense increased significantly due to higher stock-based compensation, increased headcount, and project-related expenses | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and development | $14,838 | $11,126 | $3,712 | 33.4% | | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and development | $40,830 | $29,136 | $11,694 | 40.1% | - Increases in R&D expense were primarily due to $1.2 million (3 months) and $3.8 million (9 months) in stock-based compensation, increased employee headcount, and project-related expenses[80] Sales, General and Administrative SG&A expense increased significantly due to higher stock-based compensation, increased employee costs, and professional service fees | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Sales, general, and administrative | $13,316 | $10,010 | $3,306 | 33.0% | | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Sales, general, and administrative | $40,087 | $27,343 | $12,744 | 46.6% | - Increases in SG&A expense were primarily due to $1.9 million (3 months) and $8.9 million (9 months) in stock-based compensation, increased employee costs, and professional service fees[81] Interest Income (Expense), net Net interest income shifted to expense for the nine months due to increased bank charges and market rates, offset by public offering cash | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Interest income (expense), net | $(126) | $122 | $(248) | -203.3% | - Change in interest income (expense), net, for the nine months was due to increased bank charges and market rate changes, partially offset by cash from public offering[83] Other Income (Expense), net Other income (expense), net, fluctuated significantly due to changes in net realized and unrealized foreign exchange transactions | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Other income (expense), net | $246 | $63 | $183 | 290.5% | - Fluctuations in other income (expense), net, were primarily attributable to changes in net realized and unrealized foreign exchange transactions[84] Income Tax Expense (Benefit) Income tax expense in foreign jurisdictions and a full valuation allowance in the U.S. and China; tax expense increased for three months, benefit for nine months | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $203 | $(1,485) | $1,688 | -113.7% | | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $(513) | $(162) | $(351) | 216.7% | - Maintains a full valuation allowance in the U.S. and China due to uncertainty of ultimate realizability of deferred tax assets[85] Liquidity and Capital Resources Cash and cash equivalents significantly increased to $165.6 million due to $75.1 million from financing activities, primarily a public offering. The company believes existing liquidity is sufficient for the next 12 months | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Cash and cash equivalents | $165,584 | $102,282 | $63,302 | 61.9% | - Principal source of liquidity for the nine months ended September 30, 2021, was an equity offering[87] - Believes existing liquidity will be sufficient for working capital and capital expenditure needs for at least the next 12 months[88] Net Cash Provided by Operating Activities Net cash from operating activities decreased significantly to $2.7 million due to net loss and increases in inventory and accounts receivable, partially offset by non-cash expenses and accounts payable | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $2,687 | $14,694 | $(12,007) | -81.7% | - Driven by non-cash expenses ($43.4 million), increase in accounts payable ($9.7 million), offset by net loss ($20.9 million), and increases in inventory ($16.2 million) and accounts receivable ($4.6 million) in 2021[90] Net Cash Used in Investing Activities Net cash used in investing activities decreased to $14.2 million, primarily due to lower capital expenditures on PPE | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash used in investing activities | $(14,230) | $(20,280) | $6,050 | -29.8% | - Primarily resulted from $13.6 million in capital expenditures for manufacturing equipment and corporate facility improvements in 2021[92] Net Cash Provided by Financing Activities Net cash from financing activities significantly increased to $75.1 million, driven by a public offering, offset by tax payments | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by (used in) financing activities | $75,060 | $(1,638) | $76,698 | -4682.4% | - Primarily driven by $82.4 million from a follow-on public offering, net of costs[94] - Offset by $8.3 million in withholding tax payments related to stock award vesting[94] Credit Facilities The $40.0 million revolving line of credit was amended, extending maturity; no outstanding amounts and in compliance - Amended $40.0 million revolving line of credit, extending maturity to September 24, 2024[96] - No outstanding amounts and in compliance with all covenants as of September 30, 2021[97] Contractual Obligations Operating lease obligations increased by approximately $5.1 million, with no other material changes to contractual obligations - Operating lease obligations increased by approximately $5.1 million for the nine months ended September 30, 2021[98] Off-Balance Sheet Arrangements No off-balance sheet arrangements with unconsolidated entities or financial partnerships since inception - No off-balance sheet arrangements with unconsolidated entities or financial partnerships since inception[99] Inflation Inflation has not materially affected results, but higher wages, compensation, and shipping costs are expected to impact the cost structure - Experienced higher than expected increases in wages, compensation, and shipping costs during the six months ended September 30, 2021[100] - Expects these cost increases to continue impacting its cost structure[100] Recent Accounting Pronouncements Refer to Note 1 for information on recent accounting pronouncements ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material change in exposure to financial market risks (interest rates, foreign currency) since December 31, 2020 - No material change in exposure to market risk (interest rates, foreign currency) since December 31, 2020[102] ITEM 4. CONTROLS AND PROCEDURES Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as of September 30, 2021[103] - No material changes in internal control over financial reporting during the three months ended September 30, 2021[104] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material changes to legal proceedings disclosed in the 2020 Annual Report on Form 10-K - No material changes to legal proceedings disclosed in the 2020 Annual Report on Form 10-K[108] ITEM 1A. RISK FACTORS No material changes to risk factors disclosed in the 2020 Annual Report on Form 10-K - No material changes to risk factors disclosed in the 2020 Annual Report on Form 10-K[109] ITEM 6. EXHIBITS Lists all exhibits filed with the Quarterly Report on Form 10-Q, including governance, loan, and XBRL documents SIGNATURES