nLIGHT(LASR) - 2021 Q4 - Annual Report

Part I Business nLIGHT provides high-power semiconductor and fiber lasers for industrial, microfabrication, and defense markets - nLIGHT is a leading provider of high-power semiconductor and fiber lasers, operating in two segments: Laser Products and Advanced Development[12][13] - The company serves three primary end markets: Industrial, Microfabrication, and Aerospace and Defense[13][18] - As of December 31, 2021, the company had over 600 worldwide issued and pending patents[28] - The top ten customers accounted for approximately 63% of revenues in 2021, with key customers including the U.S. Government, Raytheon, and Northrop Grumman[34] Backlog Information | Date | Backlog (in millions) | | :--- | :--- | | Dec 31, 2021 | $115.9 | | Dec 31, 2020 | $135.8 | - As of December 31, 2021, the company had over 1,300 full-time employees worldwide, with approximately 750 in the U.S. and 500 in China[47] Risk Factors The company faces risks from competition, customer concentration, supply chain vulnerabilities, and net losses - The laser industry is highly competitive, with risks of declining average selling prices (ASPs) and pressure from larger competitors[52][54] - The company has a history of recurring net losses and expects operating costs to increase, which may prevent it from achieving profitability[57] - The COVID-19 pandemic has disrupted operations, manufacturing, and supply chains, leading to increased costs and labor shortages[61][62] - A small number of customers account for a significant portion of revenues, and the loss of any key customer could materially harm the business[65] - The company relies on internal production and single or limited-source suppliers for key components, creating manufacturing and supply chain risks[71][72][73] - International operations, particularly in China, are subject to regulatory changes, trade barriers, and political instability[84][85] - The company is subject to governmental export and import controls, which could impair its ability to compete in international markets[90][91] Unresolved Staff Comments The company reports no unresolved staff comments Properties The company owns its headquarters in Camas, WA, and leases key facilities in the US, Finland, and China Principal Facilities | Location | Ownership | Approx. Size (sq. ft.) | Primary Functions | | :--- | :--- | :--- | :--- | | Camas, WA | Owned | 164,600 | Corporate HQ, Manufacturing, R&D | | Vancouver, WA | Leased | 122,400 | Manufacturing, R&D, Service | | Hillsboro, OR | Leased | 30,200 | Manufacturing, Product Design | | Longmont, CO | Leased | 46,400 | R&D | | Lohja, Finland | Leased | 31,800 | Manufacturing, R&D | | Shanghai, China | Leased | 82,800 | Manufacturing, Service, Sales | Legal Proceedings The company reports no material legal proceedings as of the report date - The company is not currently involved in any material legal proceedings[118] Mine Safety Disclosures This section is not applicable to the company's operations Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on Nasdaq (LASR), and a $10 million repurchase program remains fully available - The company's common stock trades on the Nasdaq Global Select Market under the ticker symbol "LASR"[121] - A $10 million stock repurchase program was authorized in November 2019, with the full amount remaining available as of 2021[122] [Reserved] This item is intentionally left blank Management's Discussion and Analysis of Financial Condition and Results of Operations Revenues grew in 2021, but net loss widened due to increased stock-based compensation and operating expenses Financial Performance Summary (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $270.1M | $222.8M | | Net Loss | ($29.7M) | ($20.9M) | Revenues by End Market (in thousands) | End Market | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Industrial | $94,795 | $84,478 | 12.2% | | Microfabrication | $70,412 | $51,649 | 36.3% | | Aerospace and Defense | $104,939 | $86,662 | 21.1% | | Total | $270,146 | $222,789 | 21.3% | Revenues by Segment (in thousands) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Laser Products | $206,195 | $184,841 | 11.6% | | Advanced Development | $63,951 | $37,948 | 68.5% | | Total | $270,146 | $222,789 | 21.3% | Revenues by Geographic Region (in thousands) | Region | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | North America | $143,232 | $107,624 | 33.1% | | China | $55,446 | $70,882 | (21.8)% | | Rest of World | $71,468 | $44,283 | 61.4% | | Total | $270,146 | $222,789 | 21.3% | - Gross margin increased to 28.6% in 2021 from 26.6% in 2020, with the Laser Products segment improving to 36.8% due to better factory utilization[152][153] - Research and development expenses increased by 33.2% to $54.8 million in 2021, driven by higher stock-based compensation and headcount[155] - Sales, general, and administrative expenses increased by 34.3% to $52.7 million in 2021, primarily due to a $7.6 million increase in stock-based compensation[157][158] Cash and Cash Equivalents | Date | Amount (in millions) | | :--- | :--- | | Dec 31, 2021 | $146.5 | | Dec 31, 2020 | $102.3 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations and foreign currency exchange rates - The company has a $40.0 million revolving credit facility with no outstanding balance as of December 31, 2021, subject to variable interest rates[184] - Significant portions of revenues and expenses are denominated in Chinese RMB and the Euro, creating foreign currency transaction risk[185] - A hypothetical 10% adverse change in foreign exchange rates would result in a potential loss of approximately $0.6 million related to net investments[186] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and the independent auditor's report Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $146,534 | $102,282 | | Inventory | $73,746 | $54,706 | | Total Assets | $373,618 | $283,644 | | Liabilities & Equity | | | | Total Liabilities | $71,485 | $63,730 | | Total Stockholders' Equity | $302,133 | $219,914 | Consolidated Statement of Operations Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Revenue | $270,146 | $222,789 | $176,619 | | Gross Profit | $77,307 | $59,364 | $52,339 | | Loss from Operations | ($30,217) | ($21,048) | ($9,909) | | Net Loss | ($29,669) | ($20,932) | ($12,884) | | Net Loss per Share | ($0.70) | ($0.55) | ($0.35) | Consolidated Statement of Cash Flows Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($7,443) | $13,041 | ($4,241) | | Net cash used in investing activities | ($21,853) | ($24,539) | ($30,404) | | Net cash provided by (used in) financing activities | $73,742 | ($3,767) | $2,452 | - The independent auditor, KPMG LLP, identified the assessment of excess and obsolete inventory as a critical audit matter due to subjective judgment required[199][200][201] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants Controls and Procedures Management concluded the company's disclosure controls and internal financial reporting controls were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[301] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[306] Other Information The company reports no other information Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company Part III Directors, Executive Officers and Corporate Governance This information is incorporated by reference from the company's upcoming 2022 proxy statement Executive Compensation This information is incorporated by reference from the company's upcoming 2022 proxy statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This information is incorporated by reference from the company's upcoming 2022 proxy statement Certain Relationships and Related Transactions, and Director Independence This information is incorporated by reference from the company's upcoming 2022 proxy statement Principal Accountant Fees and Services This information is incorporated by reference from the company's upcoming 2022 proxy statement Part IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed with the report Form 10-K Summary The company provides no Form 10-K summary