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What changed in NLIGHT, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NLIGHT, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+172 added−182 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-26)

Top changes in NLIGHT, INC.'s 2024 10-K

172 paragraphs added · 182 removed · 148 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe selected these independent representatives and distributors based on their ability to provide effective field sales, marketing communications and technical support for select products and markets in target geographies. Our sales and marketing efforts are conducted through an integrated process that involves our direct sales and marketing teams, engineering teams, customer service representatives and our senior management team.
Biggest changeTo supplement our direct sales team, we also sell through independent sales representatives and distributors in Asia, Australia, Europe, the Middle East, and South America. We selected these independent representatives and distributors based on their ability to provide effective field sales, marketing communications and technical support for select products and markets in target geographies.
Products Overview We design, manufacture, and sell a range of high-power semiconductor lasers and fiber lasers that are typically integrated into laser systems or manufacturing tools built by our customers.
Laser Products Overview We design, manufacture, and sell a range of high-power semiconductor lasers and fiber lasers that are typically integrated into laser systems or manufacturing tools built by our customers.
Our semiconductor lasers are typically used as an integrated energy source for our OEM customers’ solid-state lasers, which are used primarily in a wide range of microfabrication, and aerospace and defense applications. The core building block of our products is a compound semiconductor laser chip manufactured from a gallium arsenide wafer.
Our semiconductor lasers are typically used as an integrated energy source for our OEM customers’ solid-state lasers, which are primarily used in a wide range of aerospace and defense and microfabrication applications. The core building block of our products is a compound semiconductor laser chip manufactured from a gallium arsenide wafer.
We use our patented multiplexed single-chip architecture to combine and package multiple semiconductor laser chips into what we believe are the most brilliant semiconductor lasers commercially available. Fiber Lasers We offer programmable and serviceable high-power fiber lasers primarily for use in industrial and aerospace and defense applications.
We use our patented multiplexed single-chip architecture to combine and package multiple semiconductor laser chips into what we believe are the most brilliant semiconductor lasers commercially available. Fiber Lasers We offer programmable and serviceable high-power fiber lasers primarily for use in aerospace and defense and industrial applications.
In the Aerospace and Defense market, we sell our products and services directly to end customers, including the U.S. Government, prime defense contractors, and defense subcontractors, through our dedicated sales, marketing and engineering teams located in the United States.
Sales and Marketing In the Aerospace and Defense market, we sell our products and services directly to end customers, including the U.S. Government, prime defense contractors, and defense subcontractors, through our dedicated sales, marketing and engineering teams located in the United States.
We purchase raw materials used to manufacture our products and other components, such as semiconductor wafer substrates, fiber laser chip packages, optics, and other materials, from single or limited-source suppliers. We typically purchase our materials through purchase orders or agreed-upon terms and conditions, and we do not have guaranteed supply arrangements with many of these suppliers.
We purchase certain raw materials and components used to manufacture our products and other components, such as semiconductor wafer substrates, fiber laser chip packages, optics, and other materials, from single or limited-source suppliers. We typically purchase our materials through purchase orders or agreed-upon terms and conditions, and we do not have guaranteed supply arrangements with many of these suppliers.
Microfabrication Microfabrication refers to the process of creating three-dimensional microscale structures, typically by ablating, annealing, etching, drilling, and precision marking. Many of the microscale features incorporated into products in the automotive, electronics, medical, semiconductor and other markets are made commercially viable by laser-based precision manufacturing techniques.
Microfabrication Microfabrication refers to the process of creating three-dimensional microscale structures, typically by ablating, annealing, etching, drilling, or precision marking. Many of the microscale features incorporated into products in the automotive, electronics, medical, semiconductor and other markets are made commercially viable by laser-based precision manufacturing techniques.
Our fiber lasers offer many features, including all-fiber programmable beam sizes and shapes, programmable waveforms, high-speed waveform modulation capabilities, hardware back-reflection suppression, operability in harsh environments, quick and easy serviceability, and exceptional power stability. The programmability and wide operating range of our fiber lasers make them easy for our customers to use and expands their applicability.
Our fiber lasers offer many features, including all-fiber programmable beam sizes and shapes, programmable waveforms, high-speed waveform modulation capabilities, pulsed operation, hardware back-reflection suppression, operability in harsh environments, quick and easy serviceability, and exceptional power stability. The programmability and wide operating range of our fiber lasers make them easy for our customers to use and expands their applicability.
All of the backlog as of December 31, 2023 is expected to be filled within the next 24 months. Our backlog is not necessarily indicative of revenues for any specific future period due to possible order cancellations or deferrals, and shipping or acceptance delays.
All of the backlog as of December 31, 2024 is expected to be filled within the next 24 months. Our backlog is not necessarily indicative of revenues for any specific future period due to possible order cancellations or deferrals, and shipping or acceptance delays.
Research and Development Our research and development activities include innovation of improvements to existing products that enhance performance at reduced cost, and the design of new products that address select market opportunities. While we seek to improve our products on all operating characteristics, we believe we lead the market in terms of semiconductor laser chip brilliance.
Research and Development 2 Table of Contents Our research and development activities include innovation of improvements to existing products that enhance performance at reduced cost, and the design of new products that address select market opportunities. While we seek to improve our products on all operating characteristics, we believe we lead the market in terms of semiconductor laser chip brilliance.
We maintain our fiber operations and manufacture fiber in Finland. Regulation We are subject to significant regulation by local, state, federal and international laws in all jurisdictions in which we operate. Compliance with these requirements can be costly and time consuming. We believe that our operations, products, services, and actions substantially comply with applicable regulations in all jurisdictions.
Regulation We are subject to significant regulation by local, state, federal and international laws in all jurisdictions in which we operate. Compliance with these requirements can be costly and time consuming. We believe that our operations, products, services, and actions substantially comply with applicable regulations in all jurisdictions.
Government, and Velo3D. 3 Table of Contents Information concerning revenue by end-market, geographic region based upon ship-to location, and segment appears under Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes 2 and 18 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Information concerning revenue by end-market, geographic region based upon ship-to location, and segment appears under Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes 2 and 18 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
We also make fiber amplifiers and beam combination and control systems for use in high-energy laser (HEL) systems in directed energy applications, and laser sensing products used in a wide range of defense applications.
We also make high energy pulsed fiber lasers, fiber amplifiers, and beam combination and control systems for use in high-energy laser (HEL) systems for directed energy, and laser sensing systems used in a wide range of defense applications.
Backlog Backlog represents firm orders that have been received for products, the remaining funded value of research and development contracts, and other services for which a contractual agreement is in place and delivery or performance is expected to occur. Backlog totaled $108.4 million and $80.4 million as of December 31, 2023 and 2022, respectively.
Backlog Backlog represents firm orders that have been received for products, the remaining funded value of research and development contracts, and other services for which a contractual agreement is in place and delivery or performance is expected to occur. Backlog totaled $167.0 million and $108.4 million as of December 31, 2024 and 2023, respectively.
At nLIGHT we both recruit and review people based on three criteria we categorize in terms of Skill, Will , and Fit . We encourage collaboration, critical thinking, and respect and foster a workplace where each employee is contributing to the long-term success of the company. As of December 31, 2023 we had over 930 full-time employees worldwide.
At nLIGHT we both recruit and review people based on three criteria we categorize in terms of Skill, Will , and Fit . We encourage collaboration, critical thinking, and respect and foster a workplace where each employee is contributing to the long-term success of the company. As of December 31, 2024 we had nearly 800 full-time employees worldwide.
As of December 31, 2023, the unfunded value of our government contracts totaled $219.3 million. Seasonality Our quarterly revenues can fluctuate with general economic trends, holidays in foreign countries such as Chinese New Year in the first quarter of our fiscal year, the U.S. government fiscal year end, the timing of capital expenditures by our customers, and general economic trends.
As of December 31, 2024, the unfunded value of our government contracts totaled $231.5 million. Seasonality Our quarterly revenues can fluctuate with general economic trends, holidays in foreign countries such as Chinese New Year in the first quarter of our fiscal year, the U.S. government fiscal year end, the timing of capital expenditures by our customers, and general economic trends.
We were incorporated under the name nLight Corporation in Washington in June 2000. We reincorporated in Delaware under the name nLight Photonics Corporation in August 2000 and changed our name to nLIGHT, Inc. in January 2016.
We were incorporated under the name nLight Corporation in Washington in June 2000. We reincorporated in Delaware under the name nLight Photonics Corporation in August 2000 and changed our name to nLIGHT, Inc. in January 2016. 5 Table of Contents
To mitigate raw material supply risks, we take a variety of actions such as second source qualification, accumulation of safety stock and vendor surveillance. Our primary manufacturing facilities are located in Vancouver, Washington; Camas, Washington; Hillsboro, Oregon; Lohja, Finland and Shanghai, China. We manufacture certain electrical-optical components in our Vancouver, Washington; Camas, Washington; Shanghai, China and Hillsboro, Oregon facilities.
To mitigate raw material supply risks, we take a variety of actions such as second source qualification, accumulation of safety stock and vendor surveillance. Our primary manufacturing facilities are located in Vancouver, Washington; Camas, Washington; Hillsboro, Oregon and Lohja, Finland.
In the aggregate, our top ten customers accounted for approximately 66%, 63% and 63% of our revenues in 2023, 2022 and 2021, respectively. Our global customers include Ball Aerospace, Keyence, Mazak, MKS Instruments, Northrop Grumman, Raytheon Technologies, the U.S.
In the aggregate, our top ten customers accounted for approximately 72%, 66% and 63% of our revenues in 2024, 2023 and 2022, respectively. Our global customers include BAE Systems, KORD Technologies, Mazak, MKS Instruments, Northrop Grumman, Raytheon Technologies, and the U.S. Government.
There are no labor unions to which our employees belong in any other location. We have not experienced any employee-led work stoppages at any of our facilities. We consider our relationship with our employees to be good. Corporate Information We maintain a website at https://www.nlight.net.
We have not experienced any employee-led work stoppages at any of our facilities. We consider our relationship with our employees to be good. Corporate Information We maintain a website at https://www.nlight.net.
We outsource manufacturing, components and materials when we feel that a manufacturing process, or specific component to be manufactured, by itself, does not provide enough competitive advantage to warrant investment in the capital and human resources necessary for the process implementation or the component's manufacture.
We outsource manufacturing, components and materials when we believe that a manufacturing process, or specific component to be manufactured, by itself, does not provide enough competitive advantage to warrant investment in the capital and human resources necessary for the process implementation or the component's manufacture. We work with our suppliers in these situations to ensure consistent quality and delivery performance.
Programmable fiber lasers continue to replace CO2 lasers and other non-laser techniques for cutting, due to their significantly faster speed, higher quality and lower cost when used across a wide range of metals. Programmable fiber lasers are also expanding into other applications such as cutting metal tubes and other three-dimensional parts.
Programmable fiber lasers continue to replace CO2 lasers and other non-laser techniques for sheet metal cutting, due to their significantly faster speed, higher quality and lower cost when used across a wide range of metals.
Of our total full-time employees, approximately 650 were based in the United States and over 200 were based in China, with the remaining in the rest of the world. In Austria, employees have the legal capacity to make collective agreements, and in Finland, certain employees belong to labor unions for their specialty.
Of our total full-time employees, approximately 650 were based in the United States. In Austria, employees have the legal capacity to make collective agreements, and in Finland, certain employees belong to labor unions for their specialty. There are no labor unions to which our employees belong in any other location.
Aerospace and Defense Lasers are used today in a variety of aerospace and defense applications, such as range finding, imaging, communications, and directed energy defense systems. LiDAR technologies are also increasingly being used for a wide range of ISR applications.
Aerospace and Defense Lasers are used today in a variety of aerospace and defense applications, such as range finding, imaging, communications, and directed energy defense systems. Pulsed laser technologies are also increasingly being used for a wide range of sensing applications including long range precision targeting, remote sensing, counter-sensor, communications, and intelligence, surveillance and reconnaissance (ISR) applications.
Our programmable fiber lasers use a proprietary solution that allows our 2 Table of Contents customers to program laser beam strength and shape and real-time pulse timing to optimize the performance of their solution for specific commercial and defense applications.
Our programmable fiber lasers use a proprietary solution that allows our customers to program laser beam strength and shape and real-time pulse timing to optimize the performance of their solution for specific commercial and defense applications. We work closely with customers to develop products to meet customer application and performance needs, making our research and development efforts more efficient.
ITEM 1. BUSINESS Overview nLIGHT, Inc., is a leading provider of high‑power semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications.
ITEM 1. BUSINESS Overview nLIGHT, Inc., headquartered in Camas, Washington, is a leading provider of high‑power semiconductor and fiber lasers for aerospace and defense, industrial, and microfabrication applications. We operate in two reportable segments, consisting of the Laser Products segment and the Advanced Development segment.
We work closely with customers to develop products to meet customer application and performance needs, making our research and development efforts more efficient. We also benefit from our vertically integrated business model, as we can conduct design cycles more rapidly through control of the full production process.
We also benefit from our vertically integrated business model, as we can conduct design cycles more rapidly through control of the full production process. We intend to continue our commitment to research and development and to introduce new products, solutions, and complementary products to maintain and strengthen our competitive position.
Due to the stringent demands of our Aerospace and Defense customers, our sales and marketing organization includes engineering, manufacturing, service and support professionals who engage with our customers throughout their products' lifecycles. Customers We sell to and support over 300 customers worldwide. A few customers drive a significant portion of our revenues.
Due to the stringent demands of our Aerospace and Defense customers, our sales and marketing organization includes engineering, manufacturing, service and support professionals who engage with our customers throughout their products' lifecycles. In the Industrial and Microfabrication markets, we sell our products through our direct sales force located in the United States, China, South Korea and various European countries.
We maintain customer support and field service staff in our major markets around the world. In addition, many of our independent representatives and distributors have service teams who have been certified by us to provide regional field service and support.
In addition, many of our independent representatives and distributors have service teams who have been certified by us to provide regional field service and support. We work closely with customers to service equipment and train customers to use and repair our products and explore additional applications for our technologies.
We also use a third party contract manufacturer, located in Thailand, to package certain of our semiconductor lasers used in commercial applications.
We’ve invested in highly automated semiconductor packaging lines in our Camas, WA facility, which we believe is critical to serve the Directed Energy market. 4 Table of Contents We also use a third-party contract manufacturer, located in Thailand, to package certain of our semiconductor lasers used in commercial applications.
We work closely with customers to service equipment and train customers to use and repair our products and explore additional applications for our technologies. Over time we expect to expand our support and field service footprint, particularly in locations where business volume requires local service capabilities.
Over time we expect to expand our support and field service footprint, particularly in locations where business volume requires local service capabilities. Customers 3 Table of Contents We sell to and support over 300 customers worldwide. A few customers drive a significant portion of our revenues.
Over the past decade, directed energy technologies have improved steadily, culminating in a series of successful demonstrations of significantly higher power, multi-kilowatt systems. Systems using high-power fiber lasers have shown the highest degree of operational viability.
Over the past decade, directed energy technologies have improved steadily, culminating in a series of successful demonstrations of significantly higher power, multi-kilowatt systems. We announced several Department of Defense sponsored programs and awards which have been tasked with delivering proprietary components, high-power lasers and advanced optics to various entities in support of next-generation defense systems.
Our vertically integrated business model enables us to control and protect our proprietary technologies and manufacturing processes. We’ve invested in highly automated semiconductor packaging lines in our Camas, WA facility, which we believe is critical to serve the Directed Energy market.
Our vertically integrated business model enables us to control and protect our proprietary technologies and manufacturing processes.
The factors driving the adoption of fiber lasers in metal welding applications include increased speed, higher quality, and lower cost. Fiber laser welding can achieve deeper penetration with fewer heat affected zones than traditional methods like arc welding.
Programmable fiber lasers have also expanded into other applications such as cutting metal tubes and other three-dimensional parts, and are beginning to displace plasma for thick metal cutting. Fiber lasers are also increasingly being used in welding applications, where they can achieve deeper penetration with fewer heat affected zones than traditional methods like arc welding.
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Headquartered in Camas, 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 segments, Laser Products and Advanced Development, and we address three primary end markets: Industrial, Microfabrication, and Aerospace and Defense.
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Fiber Amplifiers We design, manufacture and sell high-performance fiber amplifiers, offering high efficiency, compact design, and superior beam quality for a wide range of aerospace and defense, and industrial applications. These components amplify optical signals directly within optical fibers, eliminating the need for bulky free-space optics.
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Laser Sensing Products We offer a range of laser sensors, including light detection and ranging (LiDAR) technologies, that are critical enablers of laser-based systems that are used for intelligence, surveillance and reconnaissance (ISR) applications. We leverage our design and manufacturing capabilities to offer high-efficiency, high-reliability, cost-effective and ruggedized solutions to a wide range of applications including communication, guidance, and imaging.
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By leveraging doped fiber cores, our fiber amplifiers deliver high power outputs with excellent thermal management, making them ideal for demanding aerospace and defense markets. We believe our latest generation of fiber lasers are best-in-class in delivering the highest power while minimizing size and weight, which are critical decision criteria for our laser sensing and directed energy applications.
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Directed Energy Products We sell standalone fiber amplifiers and we are developing beam combination and control products for directed energy applications within aerospace and defense. We believe that our proprietary fiber amplifiers and beam combination and control technology will enable the development of scalable, high-performance and cost-effective HEL systems.
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Our fiber amplifier technology remains central to our commitment to delivering cutting-edge laser solutions for our diverse set of customers. Advanced Development Overview Our Advanced Development segment is dedicated to driving innovation and expanding our technological leadership in the field of directed energy and laser sensing.
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Markets We sell our products into three primary end markets: Industrial, Microfabrication, and Aerospace and Defense. 1 Table of Contents Semiconductor and fiber lasers are displacing legacy lasers and non-laser energy sources across a wide range of applications in the Industrial, Microfabrication, and Aerospace and Defense markets.
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Our advanced development programs focus on research, design, and prototyping of next-generation laser technologies, leveraging our expertise in high-power laser technology 1 Table of Contents development, beam control, and advanced optics. Structured to foster collaboration between engineering, research, and product development teams, our advanced development programs combine dedicated resources and facilities with deep technical expertise to deliver cutting edge solutions.
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In the Industrial market, high-power semiconductor and fiber lasers have enabled the creation of next-generation industrial systems to perform manufacturing processes such as cutting, welding, and drilling, as well as advanced manufacturing techniques such as additive manufacturing.
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Centered around providing governmental agencies with next-generation laser technologies and solutions, our capabilities include the development of custom high-power fiber lasers and advanced beam combining technologies.
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In the Microfabrication market, many of the critical microscale features incorporated into products in the automotive, electronics, medical, semiconductor and other markets are made commercially viable by the precise power delivery of lasers.
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By aligning our innovation efforts with strategic growth and defense initiatives – directed energy and laser sensing, in particular – our Advanced Development segment plays a critical role in maintaining our competitive edge and driving long-term value creation. Markets We sell our products into three primary end markets: Aerospace and Defense, Industrial, and Microfabrication.
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In the Aerospace and Defense market, high-power semiconductor and fiber lasers are currently used across a wide range of mission critical applications, such as defending aircraft against missiles, and are enabling next-generation defense systems.
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Our sales and marketing efforts are conducted through an integrated process that involves our direct sales and marketing teams, engineering teams, customer service representatives and our senior management team. We maintain customer support and field service staff in our major markets around the world.
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We intend to continue our commitment to research and development and to introduce new products, solutions, and complementary products to maintain and strengthen our competitive position.
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In many cases, components are custom manufactured for us based on our proprietary specifications. During 2024, we ceased all manufacturing activities in China and transferred those products and capabilities either to our contract manufacturer in Thailand or to our automated production line in Camas, WA.
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Sales and Marketing In the Industrial and Microfabrication markets, we sell our products through our direct sales force located in the United States, China, South Korea and various European countries. To supplement our direct sales team, we also sell through independent sales representatives and distributors in Asia, Australia, Europe, the Middle East, and South America.
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We work with our suppliers in these situations to ensure consistent quality and 4 Table of Contents delivery performance. In many cases, components are custom manufactured for us based on our proprietary specifications.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we have policies and procedures to address compliance with these laws, we cannot assure you that our employees, representatives, contractors, business partners and agents will not take actions that violate our policies or applicable law, for which we can be held liable. 14 Table of Contents If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition, results of operations and growth prospects could be materially adversely affected.
Biggest changeWhile we have policies and procedures to address compliance with these laws, we cannot assure you that our employees, agents, representatives, business partners and third-parties intermediaries will not take actions that violate our policies or applicable law, for which we may ultimately be held liable. 14 Table of Contents Any allegations or violation of the FCPA or other applicable anti-bribery and anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, fines, damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from government contracts, all of which may have an adverse effect on our business, reputation, financial condition, results of operations and growth prospects.
The semiconductor equipment market has historically been characterized by sudden and severe cyclical variations in product supply and demand, which have often severely affected the demand for manufacturing equipment, including laser-based tools and systems, and which limits our ability to predict our business prospects and financial results in this market.
The semiconductor equipment market has historically been characterized by sudden and severe cyclical variations in product supply and demand, which have often severely affected the demand for manufacturing equipment, including laser-based tools and systems, which limits our ability to predict our business prospects and financial results in this market.
We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation. We are subject to anti-corruption, anti-bribery and similar laws.
We are subject to anti-corruption and anti-bribery laws and anti-money laundering laws and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
Some of the NOLs and U.S. federal research and development credit carryforwards began expiring in 2022. Insufficient future taxable income 17 Table of Contents and income taxes payable will adversely affect our ability to use these NOLs and credit carryforwards to reduce future taxable income or income taxes due.
Some of the NOLs and U.S. 17 Table of Contents federal research and development credit carryforwards began expiring in 2022. Insufficient future taxable income and income taxes payable will adversely affect our ability to use these NOLs and credit carryforwards to reduce future taxable income or income taxes due.
Many countries, and organizations such as the Organization for Economic Cooperation and Development, have proposed changes to existing tax laws, including a proposed 15% global minimum tax. Any of these developments or changes in U.S. federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
Many countries, and organizations such as the Organization for Economic Cooperation and Development, have enacted or proposed changes to existing tax laws, including a proposed 15% global minimum tax. Any of these developments or changes in U.S. federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
There can be no assurance that our expectations will prove correct, and even if such matters are resolved in our favor or without significant cash settlements, such matters, and the time and resources necessary to litigate or resolve them, could harm our business, financial condition, results of operations and growth prospects.
There can be no assurance that our expectations will prove correct, and even if such matters are resolved in our favor or without significant cash settlements, such matters, and the time and resources necessary to litigate or resolve them, could harm our reputation, business, financial condition, results of operations and growth prospects.
In addition, the U.S. government routinely retains rights to intellectual property developed in connection with a government contract. The U.S. government could exercise these rights in certain circumstances in the future, which could have the effect of decreasing the benefit we are able to realize commercially from such intellectual property.
In addition, the U.S. government retains rights to intellectual property developed in connection with a government contract. The U.S. government could exercise these rights in certain circumstances in the future, which could have the effect of decreasing the benefit we are able to realize commercially from such intellectual property.
Factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance, stock market valuations and volatility in the market prices of other technology companies generally, or those in our industry in particular; • actual or anticipated quarterly variations in our results of operations or those of our competitors; • actual or anticipated changes in our growth rate relative to our competitors; • announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; • manufacturing, labor or supply interruptions; • developments with respect to intellectual property rights; • our ability to develop and market new and enhanced products on a timely basis; • commencement of, or our involvement in, litigation; • major changes in our Board of Directors or management; • changes in governmental regulations or in the status of our regulatory approvals; • actual or perceived privacy, data protection or cybersecurity breaches or incidents; • the trading volume of our stock; • any future sales or repurchases of our common stock or other securities, or the perception that these sales or repurchases could occur; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company or our failure to meet these estimates or the expectations of investors; • spending on defense-related projects by the U.S. government; • the impact of public health crises, including on macroeconomic conditions and our business, results of operations and financial condition; • fluctuations in the values of companies perceived by investors to be comparable to us; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; and • general economic conditions and slow or negative growth of related markets. 18 Table of Contents The stock market in general, and market prices for the securities of technology companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies.
Factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance, stock market valuations and volatility in the market prices of other technology companies generally, or those in our industry in particular; • actual or anticipated quarterly variations in our results of operations or those of our competitors; • actual or anticipated changes in our growth rate relative to our competitors; • announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; • manufacturing, labor or supply interruptions; • developments with respect to intellectual property rights; • our ability to develop and market new and enhanced products on a timely basis; • commencement of, or our involvement in, litigation; • major changes in our Board of Directors, management or key personnel; • changes in governmental regulations or in the status of our regulatory approvals; • actual or perceived privacy, data protection or cybersecurity breaches or incidents; • the trading volume of our stock; • any future sales or repurchases of our common stock or other securities, or the perception that these sales or repurchases could occur; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company or our failure to meet these estimates or the expectations of investors; • spending on defense-related projects by the U.S. government; • the impact of public health crises, geopolitical events and macroeconomic conditions on our business, results of operations and financial condition; • fluctuations in the values of companies perceived by investors to be comparable to us; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; and • general economic conditions and slow or negative growth of related markets. 18 Table of Contents The stock market in general, and market prices for the securities of technology companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies.
Factors which have had or may in the future have an influence on our results of operations in a particular quarter include: • the increase, decrease, cancellation or rescheduling of significant customer orders; • declines in selling prices for our products; • delays in our product-shipment timing, obtaining licenses or other import/export approvals, customer or end user sales or deployment cycles, or work performed under development contracts; • seasonality attributable to different purchasing patterns and levels of activity throughout the year in the areas where we operate; • the impact of new acquisitions and the success of our integration efforts; • the timing of revenue recognition based on the installation or acceptance of certain products shipped to our customers; • the timing and execution of government development projects; • timing variability in product introductions, enhancements, services and technologies by us and our competitors and market acceptance of these new or enhanced products, services and technologies; • different capital expenditure and budget cycles for our customers, which affect the timing of their spending; • our ability to obtain export licenses for our products on a timely basis or at all; • changes in tariffs imposed by the U.S., China and other foreign governments; • the rate at which our present and future customers and end users adopt our technologies; • the gain or loss of a key customer; • product or customer mix; • competitive pricing pressures and new market entrants; • our ability to manage our inventory levels and any write-downs for excess or obsolete inventory; • our ability to collect outstanding accounts receivable balances; • changes in the amount and timing of our operating costs; • impairment of values for goodwill, intangibles and other long-lived assets; • foreign currency fluctuations; • the impact of public health crises, including on macroeconomic conditions and our business, results of operations and financial condition; • changes in jurisdictional income mix and tax rules and regulations in countries where we operate; and • economic and market conditions in a particular geography or country.
Factors which have had or may in the future have an influence on our results of operations in a particular quarter include: • the increase, decrease, cancellation or rescheduling of significant customer orders; • declines in selling prices for our products; • delays in our product-shipment timing, obtaining licenses or other import/export approvals, customer or end user sales or deployment cycles, or work performed under development contracts; • seasonality attributable to different purchasing patterns and levels of activity throughout the year in the areas where we operate; • the impact of new acquisitions and the success of our integration efforts; 11 Table of Contents • the timing of revenue recognition based on the installation or acceptance of certain products shipped to our customers; • the timing and execution of government development projects; • timing variability in product introductions, enhancements, services and technologies by us and our competitors and market acceptance of these new or enhanced products, services and technologies; • different capital expenditure and budget cycles for our customers, which affect the timing of their spending; • our ability to obtain export licenses for our products on a timely basis or at all; • changes in tariffs imposed by the U.S., China and other foreign governments; • the rate at which our present and future customers and end users adopt our technologies; • the gain or loss of a key customer; • product or customer mix; • competitive pricing pressures and new market entrants; • our ability to manage our inventory levels and any write-downs for excess or obsolete inventory; • our ability to collect outstanding accounts receivable balances; • changes in the amount and timing of our operating costs; • impairment of values for goodwill, intangibles and other long-lived assets; • foreign currency fluctuations; • the impact of public health crises, geopolitical events and macroeconomic conditions on our business, results of operations and financial condition; • changes in jurisdictional income mix and tax rules and regulations in countries where we operate; and • economic and market conditions in a particular geography or country.
If any of our principal customers discontinues its relationship with us, develops its own products instead of using ours, replaces us as a vendor for certain products or suffers downturns in its business resulting in a 7 Table of Contents cancellation of orders or an inability to place new orders from us, then our business, financial condition, results of operations and growth prospects could be materially adversely affected.
If any of our principal customers discontinues its relationship with us, develops its own products instead of using ours, replaces us as a vendor for certain products or suffers downturns in its business resulting in a cancellation of orders or an inability to place new orders from us, then our business, financial condition, results of operations and growth prospects could be materially adversely affected.
Competition for qualified resources is intense and other companies may have greater resources available to provide substantial inducements to lure key personnel away from us or to offer more competitive compensation packages to individuals we are trying to hire. 11 Table of Contents Fluctuations in our quarterly results of operations may be difficult to predict.
Competition for qualified resources is intense and other companies may have greater resources available to provide substantial inducements to lure key personnel away from us or to offer more competitive compensation packages to individuals we are trying to hire. Fluctuations in our quarterly results of operations may be difficult to predict.
ITEM 1A. RISK FACTORS 5 Table of Contents You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. This report also contains forward-looking statements that involve risks and uncertainties.
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. This report also contains forward-looking statements that involve risks and uncertainties.
To the extent customers defer or cancel orders for existing products due to a slowdown in 6 Table of Contents demand or in the expectation of a new product release, or if there is any delay in development or introduction of our new products or enhancements of our products, our business, financial condition, results of operations and growth prospects would be materially adversely affected.
To the extent customers defer or cancel orders for existing products due to a slowdown in demand or in the expectation of a new product release, or if there is any delay in development or introduction of our new products or enhancements of our products, our business, financial condition, results of operations and growth prospects would be materially adversely affected.
Privacy and data security concerns, and data collection and transfer restrictions and related domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business. Personal privacy, information security and data protection are significant issues in the United States, Europe, and many other jurisdictions where we have operations or offer our products.
Privacy and data security concerns, and data collection and transfer restrictions and related domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business. 15 Table of Contents Personal privacy, information security and data protection are significant issues in the United States, Europe, and many other jurisdictions where we have operations or offer our products.
Our failure to manage the foregoing risks associated with our existing and potential future international business operations could materially adversely affect our business, financial condition, results of operations and growth prospects. 13 Table of Contents We are exposed to foreign currency risk, which may materially adversely affect our revenues, cost of revenues and operating margins and could result in exchange losses.
Our failure to manage the foregoing risks associated with our existing and potential future international business operations could materially adversely affect our business, financial condition, results of operations and growth prospects. We are exposed to foreign currency risk, which may materially adversely affect our revenues, cost of revenues and operating margins and could result in exchange losses.
In addition, responding to any action will likely result in a materially significant diversion of management's attention and resources and significant defense and compliance costs and other professional fees. We could be subject to additional income tax liabilities. We are subject to income taxes in the United States and certain foreign jurisdictions.
In addition, responding to any investigation or action will likely result in a significant diversion of management's attention and resources and significant defense and compliance costs and other professional fees. We could be subject to additional income tax liabilities. We are subject to income taxes in the United States and certain foreign jurisdictions.
The United States federal and various 15 Table of Contents state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personal data and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use and dissemination of data.
The United States federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personal data and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use and dissemination of data.
The occurrence of any one or more of these events could adversely affect our business, reputation and operating results. In addition, a product liability claim brought against us, even if unsuccessful, could be time-consuming and costly to defend, and could harm our reputation.
The occurrence of any one or more of these events could adversely affect our business, reputation and operating results. In addition, a product liability claim brought against us, even if unsuccessful, could be time-consuming and costly to defend, divert management’s attention and could harm our reputation.
As part of this process, we review information including, but not limited to, key contract terms and conditions, project schedule, progress towards completion and identified risks and opportunities. The risks and opportunities include judgments about the ability and cost to achieve the contract milestones and other technical 12 Table of Contents contract requirements.
As part of this process, we review information including, but not limited to, key contract terms and conditions, project schedule, progress towards completion and identified risks and opportunities. The risks and opportunities include judgments about the ability and cost to achieve the contract milestones and other technical contract requirements.
Furthermore, any 16 Table of Contents changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may materially adversely affect our ability to enforce our trade secret and intellectual property positions. In the past, certain of our employees have been hired by our competitors.
Furthermore, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may materially adversely affect our ability to enforce our trade secret and intellectual property positions. In the past, certain of our employees have been hired by our competitors.
Our manufacturing capacity and operations may not be appropriate for future levels of demand and may materially adversely affect our gross margins. 8 Table of Contents When there are changes in market demand we must be able to rapidly and effectively increase or decrease our manufacturing capacity in the appropriate locations.
Our manufacturing capacity and operations may not be appropriate for future levels of demand and may materially adversely affect our gross margins. When there are changes in market demand, we must be able to rapidly and effectively increase or decrease our manufacturing capacity in the appropriate locations.
We have experienced, and expect to continue to experience, fluctuations in our quarterly results of operations including restructuring charges in the fourth quarter of 2022 and 2023.
We have experienced, and expect to continue to experience, fluctuations in our quarterly results of operations including restructuring charges in the fourth quarter of 2023 and 2024.
Products in the laser industry generally, and our products specifically, have experienced and may in the future experience a significant decline in average selling prices (ASPs) on maturing products due to increased competition and price pressures from customers.
Products in the laser industry generally, and our products specifically, have experienced and may in the future experience a significant decline in average selling prices (ASPs) on maturing products due to increased competition and price pressures from customers, particularly in the Industrial market.
We can be held liable for the corrupt or other illegal activities of our employees, representatives, contractors, business partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
We can be held liable for the corrupt or other illegal activities of our employees, agents, representatives, business partners and third-party intermediaries, even if we do not explicitly authorize or have actual knowledge of such activities.
If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with the U.S. government.
If an audit or investigation uncovers improper or illegal activities or if we fail to comply with government contracting laws, regulations and contract requirements, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with the U.S. government.
Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions in which we operate, such as China, relative to those protections available in the United States.
Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions in 16 Table of Contents which we operate, such as China, relative to those protections available in the United States.
The U.S. government contracting party may require us to increase or decrease production of certain solutions sold to the U.S. government due to changes in U.S. national security strategy and/or priorities or other reasons, which could impact production of other products or sales to other customers to meet the requirements of the U.S. government.
The U.S. government contracting party may require us to increase or decrease production of certain solutions sold to the U.S. government, or to prioritize deliveries to the U.S. government due to changes in U.S. national security strategy and/or priorities or other reasons, which could adversely impact production and delivery of other products or sales to other customers.
We rely on third parties to manufacture certain of our products and product components, which could expose us to a number of risks that could negatively impact our results of operations. We outsource the manufacturing of certain of our products and product components to third-parties located in both the United States and internationally.
We rely on third parties to manufacture certain of our products and product components, which could expose us to a number of risks that could negatively impact our results of operations. We outsource the manufacturing of certain of our products and product components to third-parties.
These companies will likely be able to expand into broader products, geographies, and end markets, which may result in additional competitive pressures on us. Certain competitors also have higher sales volume than we do, which can enable them to lower the prices of their products. Moreover, our OEM customers' internal production of laser technologies presents additional competitive pressure.
These companies will likely be able to expand into broader products, geographies, and end markets, which may result in additional competitive pressures on us. Certain competitors also have higher sales volume than we do, which can enable them to lower the prices of their products.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, offering, soliciting or accepting improper payments or other benefits to or from government officials and others in the public and private sectors.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees, agents, representatives, business partners and third-party intermediaries from promising, authorizing, making, offering, soliciting or accepting improper payments or other benefits to or from persons in the public and private sectors.
As of December 31, 2023, we had estimated U.S. federal and state net operating loss carryforwards (NOLs) of $161.0 million and $43.2 million, respectively, and federal research and development credit carryforwards of $9.3 million, which we may use to reduce future taxable income or income taxes due.
As of December 31, 2024, we had estimated U.S. federal and state net operating loss carryforwards (NOLs) of $169.6 million and $52.9 million, respectively, and federal research and development credit carryforwards of $9.9 million, which we may use to reduce future taxable income or income taxes due.
Our agreements with the U.S. government and suppliers to the U.S. government subject us to particular risks. We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts. Awards received from the U.S. government may be cancelled or lose funding.
Our agreements with the U.S. government and suppliers to the U.S. government subject us to particular risks. We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts.
We rely on a small number of customers for a significant portion of our revenues, and if we lose any of these customers or they significantly curtail their purchases of our products, our results of operations could be materially adversely affected. We rely on a small number of customers for a significant portion of our revenues.
We rely on a small number of customers for a significant portion of our revenues, and if we lose any of these customers or they significantly curtail their purchases of our products, our results of operations could be materially adversely affected. 7 Table of Contents We rely on a small number of customers for a significant portion of our revenues, and we expect this customer concentration will continue in the future.
These markets often require long testing and qualification periods or lengthy government approval processes before admitting new suppliers or adopting new technologies. Introduction of new products and product enhancements will require that we effectively transfer production processes from research and development to manufacturing and coordinate our efforts with those of our suppliers to achieve increased production volume rapidly.
Introduction of new products and product enhancements will require that we effectively transfer production processes from research and development to manufacturing and coordinate our efforts with those of our suppliers to rapidly achieve increased production volume.
Because we generally do not enter into long-term purchase commitments with our customers, our revenues can be difficult to predict, which could lead to excess or obsolete inventory and materially adversely affect our results of operations. Our business is characterized by short-term purchase orders and shipment schedules and, in some cases, orders may be canceled or delayed without penalty.
Because we generally do not enter into long-term purchase commitments with our customers, our product revenues can be difficult to predict, which could lead to excess or obsolete inventory and materially adversely affect our results of operations.
Risks Related to Litigation, Taxation and Regulatory Compliance We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete and otherwise adversely affect our business, financial condition, results of operations and growth prospects.
Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings. 13 Table of Contents Risks Related to Litigation, Taxation and Regulatory Compliance We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete and otherwise adversely affect our business, financial condition, results of operations and growth prospects.
In addition, because we design and manufacture our key components, insufficient demand for our products subjects us to the risks of high inventory carrying costs and increased inventory obsolescence. For example, discontinued product lines contributed to increased inventory reserves in the fourth quarter of 2022, and we may experience similar increases in the future.
In addition, because we design and manufacture our key components, insufficient demand for our products subjects us to the risks of high inventory carrying costs and increased inventory obsolescence.
For our products sold to the Industrial market, we believe demand is largely based on general economic conditions and we cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets. For the Microfabrication market, a portion of our revenues depends on the demand for our products from semiconductor equipment companies.
Such delays could result in decreased revenues and could materially adversely affect our results of operations in any given period. For our products sold to the Industrial market, we believe demand is largely based on general economic conditions and we cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets.
It is also possible that the Chinese government will retaliate in ways that could impact our business. For example, China has announced export license requirements on certain materials used in, among other things, the production of semiconductors, optical components, and other electronic devices including germanium and gallium.
For example, China has announced export license requirements on certain materials used in, among other things, the production of semiconductors, optical components, and other electronic devices including germanium and gallium. China also has announced a new export control regime.
In addition, if quality issues arise with these outsourced materials and go undetected by us, the use of such defective materials in our products could compromise their quality and harm our reputation.
Furthermore, other than our current suppliers, there may be a limited number of entities from which we could obtain these supplies. In addition, if quality issues arise with these outsourced materials and go undetected by us, the use of such defective materials in our products could compromise their quality and harm our reputation.
As a result, it is difficult to forecast our revenues and to determine the appropriate levels of inventory required to meet future demand. This could lead to increased inventory levels and increased carrying costs and risk of excess or obsolete inventory due to unanticipated reductions in purchases by our customers.
This could lead to increased inventory levels and increased carrying costs and risk of excess or obsolete inventory due to unanticipated reductions in purchases by our customers.
Also, we purchase certain raw materials and components, which are key elements to manufacture our products, from single- or limited-source suppliers. We generally do not have guaranteed supply arrangements with our suppliers. Our key suppliers may not have the ability to increase their production in line with our customers' demands.
Also, we purchase certain raw materials and components, which are key elements to manufacture our products and other components, such as semiconductor wafer substrates, fiber laser chip packages, optics, and other materials, from single- or limited-source suppliers. We generally do not have guaranteed supply arrangements with our suppliers.
Customers may be reluctant to change from incumbent suppliers or cease using their own solutions, or we may miss the design and procurement cycles of our customers. Many of our target markets have historically been slow to adopt new technologies.
Our current and potential customers may have substantial investment in, and know-how related to, their existing laser and non-laser technologies, and they may be reluctant to change from incumbent suppliers or cease using their own solutions, or we may miss the design and procurement cycles of our customers.
This can become acute during times of high growth in our customers' businesses. As a result, we have experienced, and may in the future experience, longer lead times or delays in fulfillment of our orders. Furthermore, other than our current suppliers, there may be a limited number of entities from which we could obtain these supplies.
Our key suppliers may not have the ability to increase their production in line with our customers' demands. This can become acute during times of high growth in our customers' businesses. As a result, we have experienced, and may in the future experience, longer lead times or delays in fulfillment of our orders.
These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.
Our operations and sales in China, India, Brazil, and the Middle East in particular, as well as other countries, increases our risks under these laws. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.
In addition, any newly developed or enhanced products may not achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies.
In addition, any newly developed or enhanced products may not achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies. If we fail to effectively manage our growth or, alternatively, our spending during downturns, our business could be disrupted, which could materially adversely affect our results of operations.
If we are unable to develop new products, applications and end-markets and increase our market share in existing applications, our business, financial condition, results of operations and growth prospects may be materially adversely affected.
If we are unable to develop new products, applications and end-markets and increase our market share in existing applications, our business, financial condition, results of operations and growth prospects may be materially adversely affected. 8 Table of Contents Our future success will depend in part on our ability to continue to generate sales in new and developing markets and applications for lasers such as additive manufacturing within the industrial market, and directed energy within the aerospace and defense market.
The markets for our products are characterized by rapid technological change, frequent product introductions, substantial capital investment, volatility of product supply and demand, changing customer requirements and evolving industry standards. Our future performance depends in part on our successful development, introduction and market acceptance of new and enhanced products that address these changes and current and potential customer requirements.
We participate in markets that are subject to rapid technological change and require significant research and development expenses to develop and maintain products that can achieve market acceptance. 6 Table of Contents The markets for our products are characterized by rapid technological change, frequent product introductions, substantial capital investment, volatility of product supply and demand, changing customer requirements and evolving industry standards.
The U.S. government also continues to add additional entities in China and elsewhere to restricted party lists impacting the ability of U.S. companies to provide products and technology to these entities. These controls may impact our ability to export certain products and technology to China and other destinations and restrict our ability to use certain ICs in our products.
Proposed regulations would impose a worldwide licensing requirement on certain ICs and computing resources that are used for training of AI models. In addition, the U.S. government also continues to add additional entities in China and elsewhere to restricted party lists impacting the ability of U.S. companies to provide products and technology to these entities.
Risks Related to Our International Sales and Operations Our inability to manage risks associated with our international customers and operations could materially adversely affect our business.
Responding to any investigation or action relating to government contracts could result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Our inability to manage risks associated with our international customers and operations could materially adversely affect our business.
Removed
Such delays could result in decreased revenues and could materially adversely affect our results of operations in any given period. We participate in markets that are subject to rapid technological change and require significant research and development expenses to develop and maintain products that can achieve market acceptance.
Added
Additionally, the merger or consolidation of significant competitors would result in competitors with greater resources, which may enable them to offer a different market approach, or a lower cost structure through economies of scale or other efficiencies that we may be unable to match and which may intensify competition.
Removed
Our future success will depend in part on our ability to continue to generate sales of semiconductor lasers and fiber lasers in applications where legacy lasers have been used, or in new and developing markets and applications for lasers such as additive manufacturing within the industrial market, and directed energy within the aerospace and defense market.
Added
Further, our competitors may seek to vertically integrate by buying suppliers that also supply products or components to us, which could enable them to further reduce prices, or could increase our costs. Moreover, our OEM customers' internal production of laser technologies presents additional competitive pressure.
Removed
As semiconductor and fiber lasers reach higher levels of penetration in core materials processing applications, the development of new applications, end-markets and products outside our core applications becomes more important to our growth. Our current and potential customers may have substantial investment in, and know-how related to, their existing laser and non-laser technologies.
Added
For the Microfabrication market, a portion of our revenues depends on the demand for our products from semiconductor equipment companies.
Removed
If we fail to effectively manage our growth or, alternatively, our spending during downturns, our business could be disrupted, which could materially adversely affect our results of operations.
Added
Our future performance depends in part on our successful development, introduction and market acceptance of new and enhanced products that address these changes and current and potential customer requirements.
Removed
We may experience increased costs, disruptions or other difficulties with the implementation, operation and functionality of our new enterprise resource planning system. We have recently implemented a new enterprise resource planning (ERP) system, which replaces or enhances certain internal financial and operating systems that are critical to our business operations.
Added
Many of our target markets have historically been slow to adopt new technologies and these markets often require long testing and qualification periods or lengthy government approval processes before admitting new suppliers or adopting new technologies.
Removed
Although we have invested, and continue to invest, significant resources in planning, project management, consulting and training, it is possible that significant operational and functionality issues may arise during the course of using our new ERP system, including difficulties paying suppliers, invoicing customers and tracking inventory.
Added
Our Laser Products business is characterized by short-term purchase orders and shipment schedules and, in some cases, orders may be canceled or delayed without penalty. As a result, it is difficult to forecast our revenues and to determine the appropriate levels of inventory required to meet future demand.
Removed
It is also possible that we may experience significant delays, increased costs and other difficulties that are not presently contemplated.
Added
These laws and regulations impose terms or rights that are often more favorable to the government than those typically available to commercial parties in negotiated transactions. For example, the U.S. government may terminate any of our government contracts and, in general, subcontracts, at their convenience, as well as for default.
Removed
Any significant disruptions, delays, deficiencies or errors in the design, implementation and utilization of our new ERP system could adversely affect our operations, prevent us from accurately and timely reporting our financial results and negatively impact our business, financial condition and results of operations.
Added
Additionally, changes in government spending could have adverse 12 Table of Contents consequences on our financial position, results of operations and business. The funding of our contracts is subject to the overall U.S. government budget and appropriation decisions and processes, which are driven by numerous factors, including geopolitical events and macroeconomic conditions.
Removed
Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings.
Added
These controls may impact our ability to export certain products and technology to China and other destinations and restrict our ability to use certain ICs in our products. It is also possible that the Chinese government will retaliate in ways that could impact our business.
Removed
Our operations and sales in China, India, Brazil, the Middle East and other countries create the risk of unauthorized payments or offers of payments by our employees, consultants, sales agents or distributors, even though they may not always be subject to our control.
Added
We are subject to U.S. and foreign anti-corruption and anti-bribery laws, such as the Foreign Corrupt Practices Act of 1977 (FCPA), and anti-money laundering laws and similar laws.
Added
We sometimes leverage third parties to sell our products and conduct our business abroad. We, our employees, agents, representatives, business partners and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeITEM 1C. CYBERSECURITY We are committed to maintaining robust governance and oversight of our information technology and security systems to maintain our facilities’ physical security and to protect proprietary and confidential information, including that of our customers, suppliers and employees.
Biggest changeITEM 1C. CYBERSECURITY We are committed to maintaining robust governance and oversight of our information technology and security systems to maintain our facilities’ physical security and to protect the security of proprietary and confidential information, including that of our customers, suppliers and employees.
Our cybersecurity risks and associated mitigations are evaluated by senior leadership and subject to oversight by the Information Technology and Security Committee of our Board of Directors. Our cybersecurity program is managed by our Vice President of IT & Information Security, who is a Certified Information Systems Security professional (CISSP) and reports to our Chief Operating Officer.
Our cybersecurity risks and associated mitigations are evaluated by senior leadership and subject to oversight by the Information Technology and Security Committee of our Board of Directors. Our cybersecurity program is managed by our Senior Director of IT & Information Security, who is a Certified Information Systems Security professional (CISSP) and reports to our Chief Operating Officer.
Our Chief Operating Officer and Vice President of 20 Table of Contents IT and Information Security provide periodic briefings about our cybersecurity risk management to the Information Technology and Security Committee.
Our Chief Operating Officer and Senior Director of 20 Table of Contents IT and Information Security provide periodic briefings about our cybersecurity risk management to the Information Technology and Security Committee.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Our principal facilities are owned or leased and include the following: Location Lease Expiration Approximate Size (sq. ft.) Primary Functions Segment(s) Camas, Washington Owned 164,600 Corporate headquarters, manufacturing and distribution, product design, research and development, sales, marketing and administration Laser Products, Advanced Development Vancouver, Washington November 30, 2024 - May 31, 2035 122,400 Manufacturing and distribution, product design, research and development, service and repair, and administration Laser Products, Advanced Development Hillsboro, Oregon January 31, 2033 30,200 Manufacturing and distribution, and product design Laser Products Longmont, Colorado July 31, 2028 46,400 Research and development Advanced Development Lohja, Finland March 31, 2025 31,800 Manufacturing and distribution, product design, research and development and administration Laser Products Shanghai, China January 31, 2025 ‑ November 30, 2025 66,500 Manufacturing and distribution, service and repair, product design, research and development, sales and administration Laser Products
Biggest changePROPERTIES Our principal facilities are owned or leased and include the following: Location Lease Expiration Approximate Size (sq. ft.) Primary Functions Segment(s) Camas, Washington Owned 164,600 Corporate headquarters, manufacturing and distribution, product design, research and development, sales, marketing and administration Laser Products, Advanced Development Vancouver, Washington November 30, 2024 - May 31, 2035 92,400 Manufacturing and distribution, product design, research and development, service and repair, and administration Laser Products, Advanced Development Hillsboro, Oregon January 31, 2033 30,200 Manufacturing and distribution, and product design Laser Products Longmont, Colorado July 31, 2028 - February 28, 2029 62,600 Research and development Advanced Development Lohja, Finland March 31, 2025 31,800 Manufacturing and distribution, product design, research and development and administration Laser Products Shanghai, China January 31, 2025 ‑ November 30, 2025 66,500 Sales and administration, service and repair, product design, research and development Laser Products

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the year ended December 31, 2023, we did not repurchase any shares and, as of December 31, 2023, $10 million remained available for future repurchases. 21 Table of Contents Stock Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the Nasdaq Composite Index, the Russell 2000 Index, and the S&P 600 Technology Hardware & Equipment Industry Group Index.
Biggest changeDuring the year ended December 31, 2024, we did not repurchase any shares and, as of December 31, 2024, $10 million remained available for future repurchases. 22 Table of Contents Stock Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the Nasdaq Composite Index, the Russell 2000 Index, and the S&P 600 Technology Hardware & Equipment Industry Group Index.
The graph covers the period from December 31, 2018 through December 31, 2023. No cash dividends have been declared on shares of our common stock. This graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2018.
The graph covers the period from December 31, 2019 through December 31, 2024. No cash dividends have been declared on shares of our common stock. This graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2019.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Information About Our Common Stock Our common stock is listed on the Nasdaq Global Select Market under the symbol "LASR." As of February 21, 2024, there were 112 registered holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Information About Our Common Stock Our common stock is listed on the Nasdaq Global Select Market under the symbol "LASR." As of February 26, 2025, there were 87 registered holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

52 edited+5 added−14 removed33 unchanged
Biggest changeRestructuring Restructuring included the following (in thousands): Year Ended December 31, Change 2023 2022 Amount % Employee termination costs $ 737 $ 1,271 $ (534) (42.0) % Write-off of long-lived assets — 2,566 (2,566) (100.0) Other 79 55 24 43.6 $ 817 $ 3,892 $ (3,075) (79.0) % We implemented a restructuring plan in the fourth quarter of 2023 which resulted in a reduction of headcount in China.
Biggest changeThe decrease in sales, general and administrative expense for 2023 compared to 2022 was primarily due to a decrease in salary costs and incentive compensation, and an increase in administrative costs allocated from sales, general and administrative to development projects, partially offset by an increase in stock-based compensation of $1.2 million. 29 Table of Contents Restructuring Restructuring included the following (in thousands): Year Ended December 31, Change 2024 2023 Amount % Employee termination costs $ 4,228 $ 737 $ 3,491 473.7 Other 63 79 (16) (20) % $ 4,291 $ 817 $ 3,474 425.2 % Year Ended December 31, Change 2023 2022 Amount % Employee termination costs $ 737 $ 1,271 $ (534) (42.0) % Write-off of long-lived assets — 2,566 (2,566) (100.0) Other 79 55 24 43.6 $ 817 $ 3,892 $ (3,075) (79.0) % We implemented restructuring plans in the fourth quarters of 2024 and 2023 which resulted in reductions of headcount primarily in China, including the discontinuation of all manufacturing in China during the fourth quarter of 2024.
Net Cash Used in Investing Activities During the year ended December 31, 2023, net cash used in investing activities was $14.1 million, including the net purchase of $8.8 million of marketable securities and $5.3 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.
During the year ended December 31, 2023, net cash used in investing activities was $14.1 million, including the net purchase of $8.8 million of marketable securities and $5.3 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.
Net Cash (Used in) Provided by Financing Activities During the year ended December 31, 2023, net cash used in financing activities was $0.9 million, which was primarily driven by $4.0 million of withholding tax payments related to the vesting of stock awards, partially offset by $3.1 million of proceeds from stock options exercises and employee stock plan purchases.
During the year ended December 31, 2023, net cash used in financing activities was $0.9 million, which was primarily driven by $4.0 million of withholding tax payments related to the vesting of stock awards, partially offset by $3.1 million of proceeds from stock options exercises and employee stock plan purchases.
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," 22 Table of Contents "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.
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," 23 Table of Contents "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.
Forward-looking statements include, but are not limited to, statements about: our business model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the introduction of new products; our technology and new product research and development activities; the impact of the implementation of our new ERP system; the impact of new import and export controls; the impact of inflation; the impact of seasonality; 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.
Forward-looking statements include, but are not limited to, statements about: our business model and strategic plans; our expectations regarding manufacturing; our future financial performance; demand for our semiconductor and fiber laser solutions; our ability to develop innovative products; our expectations regarding product volumes and the introduction of new products; our technology and new product research and development activities; the impact of new import and export controls; the impact of inflation; the impact of seasonality; 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.
Inflation We do not believe that inflation had a material effect on our business, financial condition or results of operations during the year ended December 31, 2023. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
Inflation We do not believe that inflation had a material effect on our business, financial condition or results of operations during the year ended December 31, 2024. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
In addition, in the Aerospace and Defense market, our business depends in large part on continued investment in laser technology by the U.S. government and its allies, and our ability to continue to successfully develop leading technology in this area and commercialize that technology in the future.
In the Aerospace and Defense market, our business also depends in large part on continued investment in laser technology by the U.S. government and its allies, and our ability to continue to successfully develop leading technology in this area and commercialize that technology in the future.
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.
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 33 Table of Contents any, may not be sellable. Based on this analysis, we write down the affected inventory value for estimated excess and obsolescence charges.
Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations. 32 Table of Contents Recent Accounting Pronouncements See Note 1 of Notes to Consolidated Financial Statements.
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.
During the year ended December 31, 2022, net cash used in financing activities was $1.3 million, which was primarily driven by $4.9 million of withholding tax payments related to the vesting of stock awards, partially offset by $3.6 million of proceeds from stock options exercises and employee stock plan purchases.
Net Cash Used in Financing Activities During the year ended December 31, 2024, net cash used in financing activities was $1.3 million, which was primarily driven by $4.5 million of withholding tax payments related to the vesting of stock awards, partially offset by $3.2 million of proceeds from stock options exercises and employee stock plan purchases.
The income tax benefit for 2023 compared to the income tax expense for 2022 was driven by a discrete tax benefit related to expiring statutes of limitations of unrecognized tax positions recorded in the second quarter of 2023.
The decrease in overall income tax benefit for 2024 compared to 2023, and decrease in expense for 2023 compared to 2022, was driven by a discrete tax benefit related to expiring statutes of limitations of unrecognized tax positions recorded in the second quarter of 2023.
The increase in Advanced Development revenue was driven by new development contracts. Most of our Advanced Development revenue in 2023 was generated from cost plus fixed fee development contracts, and all Advanced Development revenue is included in the Aerospace and Defense market.
Most of our Advanced Development revenue in 2023 was generated from cost plus fixed fee development contracts, and all Advanced Development revenue is included in the Aerospace and Defense market.
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.
We believe our existing sources of liquidity, including sales to customers and our line of credit, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.
In addition, as is typical in our industry, we tend to recognize a larger percentage of our quarterly revenues in the last month of the quarter, which may impact our working capital trends. 24 Table of Contents Results of Operations The following table sets forth our operating results as a percentage of revenues for the periods indicated (which may not add up due to rounding): Year Ended December 31, 2023 2022 2021 Revenue: Products 74.6 % 79.6 % 76.3 % Development 25.4 20.4 23.7 Total revenue 100.0 100.0 100.0 Cost of revenue: Products 54.4 60.0 49.2 Development 23.6 19.0 22.2 Total cost of revenue 78.0 79.0 71.4 Gross profit 22.0 21.0 28.6 Operating expenses: Research and development 22.0 22.2 20.3 Sales, general and administrative 21.8 19.9 19.5 Restructuring 0.4 1.6 — Total operating expenses 44.2 43.8 39.8 Loss from operations (22.2) (22.8) (11.2) Other income (expense): Interest income (expense), net 0.5 0.2 (0.1) Other income, net 1.3 0.1 0.1 Loss before income taxes (20.4) (22.4) (11.2) Income tax expense (benefit) (0.5) 0.1 (0.1) Net loss (19.9) % (22.5) % (11.1) % Revenues by End Market Our revenues by end market were as follows (dollars in thousands): Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % Industrial $ 71,044 33.8 % $ 91,098 37.6 % $ (20,054) (22.0) % Microfabrication 47,483 22.6 62,769 25.9 (15,286) (24.4) Aerospace and Defense 91,394 43.6 88,191 36.4 3,203 3.6 $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % Year Ended December 31, Change 2022 % of Revenue 2021 % of Revenue Amount % Industrial $ 91,098 37.6 % $ 94,795 35.1 % $ (3,697) (3.9) % Microfabrication 62,769 25.9 70,412 26.1 (7,643) (10.9) Aerospace and Defense 88,191 36.4 104,939 38.8 (16,748) (16.0) $ 242,058 100.0 % $ 270,146 100.0 % $ (28,088) (10.4) % The decrease in Industrial and Microfabrication market revenue for 2023 compared to 2022 was the result of decreased unit sales across all regions due primarily to lower customer demand and deteriorating market 25 Table of Contents conditions.
In addition, as is typical in our industry, we tend to recognize a larger percentage of our quarterly revenues in the last month of the quarter, which may impact our working capital trends. 25 Table of Contents Results of Operations The following table sets forth our operating results as a percentage of revenues for the periods indicated (which may not add up due to rounding): Year Ended December 31, 2024 2023 2022 Revenue: Products 68.8 % 74.6 % 79.6 % Development 31.2 25.4 20.4 Total revenue 100.0 100.0 100.0 Cost of revenue: Products 54.4 54.4 60.0 Development 29.0 23.6 19.0 Total cost of revenue 83.4 78.0 79.0 Gross profit 16.6 22.0 21.0 Operating expenses: Research and development 22.7 22.0 22.2 Sales, general and administrative 24.8 21.8 19.9 Restructuring 2.2 0.4 1.6 Total operating expenses 49.7 44.2 43.8 Loss from operations (33.1) (22.2) (22.8) Other income (expense): Interest income, net 0.9 0.5 0.2 Other income, net 1.6 1.3 0.1 Loss before income taxes (30.6) (20.4) (22.4) Income tax (benefit) expense — (0.5) 0.1 Net loss (30.6) % (19.9) % (22.5) % Revenues by End Market Our revenues by end market were as follows (dollars in thousands): Year Ended December 31, Change 2024 % of Revenue 2023 % of Revenue Amount % Industrial $ 45,615 23.0 % $ 71,044 33.8 % $ (25,429) (35.8) % Microfabrication 43,393 21.8 47,483 22.6 (4,090) (8.6) Aerospace and Defense 109,540 55.2 91,394 43.6 18,146 19.9 $ 198,548 100.0 % $ 209,921 100.0 % $ (11,373) (5.4) % Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % Industrial $ 71,044 33.8 % $ 91,098 37.6 % $ (20,054) (22.0) % Microfabrication 47,483 22.6 62,769 25.9 (15,286) (24.4) Aerospace and Defense 91,394 43.6 88,191 36.4 3,203 3.6 $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % The decrease in Industrial market revenue for 2024 compared to 2023 was primarily the result of decreased unit sales across all regions due to deteriorating market conditions and lower customer demand in cutting and additive 26 Table of Contents manufacturing.
The increase in Advanced Development gross margin for 2022 compared to 2021 was not significant and was primarily the result of changes in the mix of research and development contracts.
The increase in Advanced Development gross margin for 2024 compared to 2023 was not significant and was primarily the result of changes in the composition of research and development contracts.
For the year ended December 31, 2023, our principal uses of liquidity were to fund operating activities, acquire plant and equipment and tax payments related to stock award issuances. The primary source of cash was collections from customers.
For the year ended December 31, 2024, our principal uses of liquidity were to fund operating activities, acquire plant and equipment and make tax payments related to stock award issuances. The primary sources of cash were collections from customers and net proceeds from the sale of marketable securities.
Due to the uncertainty with respect to their ultimate realizability in the United States and China, we continue to maintain a full valuation allowance in these jurisdictions as of December 31, 2023.
Due to the uncertainty with respect to their ultimate realizability, we continue to maintain a full valuation allowance on deferred tax assets in the United States, and a partial valuation allowance in China as of December 31, 2024.
Our product sales mix can affect gross profits due to variations in profitability related to product configurations and cost profiles, customer volume pricing, availability of competitive products in various markets, and new product introductions, among other factors. We have invested heavily in U.S.-based manufacturing capabilities in the last several years.
Product sales mix can affect gross profits due to variations in profitability related to product configurations and cost profiles, customer volume pricing, availability of competitive products in various markets, and new product introductions, among other factors.
Demand for our products also fluctuates based on market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of our end-markets.
Demand for our products also fluctuates based on market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of our end-markets. Erosion of average selling prices, or ASPs, of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature.
Revenues decreased to $209.9 million in the year ended December 31, 2023 compared to $242.1 million in 2022 due to a decrease in sales in the Laser Products segment that was partially offset by an increase in sales in the Advanced Development segment.
We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. Revenues decreased to $198.5 million in the year ended December 31, 2024 compared to $209.9 million in 2023 due to a decrease in sales in the Laser Products segment that was partially offset by an increase in sales in the Advanced Development segment.
We had cash and cash equivalents of $53.5 million and $58.1 million as of December 31, 2023 and 2022, respectively, and marketable securities of $59.7 million and $50.4 million as of December 31, 2023 and 2022, respectively.
We had cash and cash equivalents and restricted cash of $66.1 million and $53.5 million as of December 31, 2024 and 2023, respectively, and marketable securities of $34.9 million and $59.7 million as of December 31, 2024 and 2023, respectively.
We generated a net loss of $41.7 million for the year ended December 31, 2023 compared to a net loss of $54.6 million in 2022. Factors Affecting Our Performance Demand for our Semiconductor and Fiber Laser Solutions Our revenue growth depends on market demand and achievement of design wins for our semiconductor and fiber lasers.
We generated a net loss of $60.8 million for the year ended December 31, 2024 compared to a net loss of $41.7 million in 2023. Factors Affecting Our Performance Demand for our Products and Solutions Our revenue depends largely on market conditions, competitive pressure, and achievement of design wins.
Our gross profit and gross margin were as follows (dollars in thousands): Year Ended December 31, 2023 Laser Products Advanced Development Corporate and Other Total Gross profit $ 44,891 $ 3,628 $ (2,406) $ 46,113 Gross margin 28.7 % 6.8 % NM* 22.0 % Year Ended December 31, 2022 Laser Products Advanced Development Corporate and Other Total Gross profit $ 50,063 $ 3,435 $ (2,677) $ 50,821 Gross margin 26.0 % 7.0 % NM* 21.0 % Year Ended December 31, 2021 Laser Products Advanced Development Corporate and Other Total Gross profit $ 75,833 $ 3,979 $ (2,505) $ 77,307 Gross margin 36.8 % 6.2 % NM* 28.6 % *NM - Not meaningful. 27 Table of Contents The increase in Laser Products gross margin for 2023 compared to 2022 was driven by a decrease in direct labor and other variable manufacturing costs, and a decrease in manufacturing variances, partially offset by the impact of lower production volumes on fixed manufacturing costs due to the decrease in customer demand.
Our gross profit and gross margin were as follows (dollars in thousands): Year Ended December 31, 2024 Laser Products Advanced Development Corporate and Other Total Gross profit $ 31,094 $ 4,363 $ (2,438) $ 33,019 Gross margin 22.8 % 7.0 % NM* 16.6 % Year Ended December 31, 2023 Laser Products Advanced Development Corporate and Other Total Gross profit $ 44,891 $ 3,628 $ (2,406) $ 46,113 Gross margin 28.7 % 6.8 % NM* 22.0 % Year Ended December 31, 2022 Laser Products Advanced Development Corporate and Other Total Gross profit $ 50,063 $ 3,435 $ (2,677) $ 50,821 Gross margin 26.0 % 7.0 % NM* 21.0 % *NM - Not meaningful . 28 Table of Contents The decrease in Laser Products gross margin for 2024 compared to 2023 was driven by the impact of lower sales and production volumes on fixed manufacturing costs due to the decrease in overall customer demand and inventory charges related to products for the Industrial market in the fourth quarter of 2024, offset partially by positive changes in sales mix.
Liquidity and Capital Resources Total cash, cash equivalents and marketable securities were $113.1 million and $108.5 million as of December 31, 2023 and 2022, respectively.
Liquidity and Capital Resources Total cash and cash equivalents, restricted cash and marketable securities were $101.0 million and $113.2 million as of December 31, 2024 and 2023, respectively.
The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 10,091 $ (14,542) $ (7,443) Net cash used in investing activities (14,100) (72,381) (21,853) Net cash (used in) provided by financing activities (859) (1,306) 73,742 Effect of exchange rate changes on cash 256 (477) (235) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (4,612) $ (88,706) $ 44,211 30 Table of Contents Net Cash Provided by (Used in) Operating Activities During the year ended December 31, 2023, net cash provided by operating activities was $10.1 million, which was the result of a $41.7 million net loss, offset by cash provided by working capital of $8.1 million and non‑cash expenses totaling $43.7 million related primarily to depreciation, amortization, and stock-based compensation.
From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements. 31 Table of Contents The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2024 2023 2022 Net cash (used in) provided by operating activities $ (2,359) $ 10,091 $ (14,542) Net cash provided by (used in) investing activities 16,690 (14,100) (72,381) Net cash used in financing activities (1,303) (859) (1,306) Effect of exchange rate changes on cash (406) 256 (477) Net increase (decrease) in cash and cash equivalents and restricted cash $ 12,622 $ (4,612) $ (88,706) Net Cash (Used in) Provided by Operating Activities During the year ended December 31, 2024, net cash used in operating activities was $2.4 million, which was the result of a $60.8 million net loss, offset by cash provided by working capital of $11.9 million and non‑cash expenses totaling $46.5 million related primarily to depreciation, amortization, and stock-based compensation.
Other Income, net Year Ended December 31, Change 2023 2022 Amount % Other income, net $ 2,776 $ 338 $ 2,438 721.3 Year Ended December 31, Change 2022 2021 Amount % Other income, net $ 338 $ 336 $ 2 0.6 The increase in other income, net, in 2023 compared to 2022, was driven by realized gains on the sale of marketable securities.
Other Income, net Year Ended December 31, Change 2024 2023 Amount % Other income, net $ 3,100 $ 2,776 $ 324 11.7 30 Table of Contents Year Ended December 31, Change 2023 2022 Amount % Other income, net $ 2,776 $ 338 $ 2,438 721.3 The increases in other income, net, in 2024 compared to 2023 and in 2023 compared to 2022 were driven by realized gains on the sale of marketable securities.
The decrease in Laser Products revenue for 2022 compared to 2021 was driven by decreased units sales across each end market as discussed above. The decrease in Advanced Development revenue for 2022 compared to 2021 was primarily due to decreased activity on development contracts.
The decrease in Laser Products revenue for 2023 compared to 2022 was primarily due to decreased units sales to the Industrial and Microfabrication markets as discussed above. The increase in Advanced Development revenue was driven by new development contracts.
During the year ended December 31, 2022, net cash used in operating activities was $14.5 million, which was the result of a $54.6 million net loss and use of cash for working capital of $8.2 million, offset partially by non‑cash expenses totaling $48.3 million related primarily to depreciation, amortization, and stock-based compensation.
During the year ended December 31, 2023, net cash provided by operating activities was $10.1 million, which was the result of a $41.7 million net loss, offset by cash provided by working capital of $8.1 million and non‑cash expenses totaling $43.7 million related primarily to depreciation, amortization, and stock-based compensation.
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.
We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights.
Manufacturing Costs and Gross Margins Our product gross profit, in absolute dollars and as a percentage of revenues, is impacted by our product sales mix, sales volumes, changes in ASPs, production volumes, the corresponding absorption of manufacturing overhead expenses, the cost of purchased materials, production costs and manufacturing yields.
Manufacturing Costs and Gross Margins Product gross profit, in absolute dollars and gross margin, may fluctuate from period to period based on product sales mix, sales volumes, changes in ASPs, production volumes, the corresponding absorption of manufacturing overhead expenses, the cost of purchased materials, production costs and manufacturing yields.
During the year ended December 31, 2022, net cash used in investing activities was $72.4 million, including the net purchase of $50.0 million of marketable securities and $21.4 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.
Net Cash Provided by (Used in) Investing Activities During the year ended December 31, 2024, net cash provided by investing activities was $16.7 million, including the net sale of $24.6 million of marketable securities, partially offset by $7.9 million of capital expenditures related to investments in directed energy, manufacturing equipment and facilities.
Revenues by Segment Our revenues by segment were as follows (dollars in thousands): Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % Laser Products $ 156,666 74.6 % $ 192,658 79.6 % $ (35,992) (18.7) % Advanced Development 53,255 25.4 49,400 20.4 3,855 7.8 $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % Year Ended December 31, Change 2022 % of Revenue 2021 % of Revenue Amount % Laser Products $ 192,658 79.6 % $ 206,195 76.3 % $ (13,537) (6.6) % Advanced Development 49,400 20.4 63,951 23.7 (14,551) (22.8) $ 242,058 100.0 % $ 270,146 100.0 % $ (28,088) (10.4) % The decrease in Laser Products revenue for 2023 compared to 2022 was primarily due to decreased units sales to the Industrial and Microfabrication markets as discussed above.
Revenues by Segment Our revenues by segment were as follows (dollars in thousands): Year Ended December 31, Change 2024 % of Revenue 2023 % of Revenue Amount % Laser Products $ 136,659 68.8 % $ 156,666 74.6 % $ (20,007) (12.8) % Advanced Development 61,889 31.2 53,255 25.4 8,634 16.2 $ 198,548 100.0 % $ 209,921 100.0 % $ (11,373) (5.4) % Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % Laser Products $ 156,666 74.6 % $ 192,658 79.6 % $ (35,992) (18.7) % Advanced Development 53,255 25.4 49,400 20.4 3,855 7.8 $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % The decrease in Laser Products revenue for 2024 compared to 2023 was driven by decreased sales to both the Industrial and Microfabrication markets as discussed above, offset partially by increased sales to the Aerospace and Defense market.
Operating Expenses Our operating expenses were as follows (dollars in thousands): Research and Development Year Ended December 31, Change 2023 2022 Amount % Research and development $ 46,163 $ 53,773 $ (7,610) (14.2) Year Ended December 31, Change 2022 2021 Amount % Research and development $ 53,773 $ 54,814 $ (1,041) (1.9) The decrease in research and development expense for 2023 compared to 2022 was due primarily to decreases in salary costs and project-related expenses, an increase in costs allocated from research and development to development projects, and a decrease in stock-based compensation of $1.8 million.
Operating Expenses Our operating expenses were as follows (dollars in thousands): Research and Development Year Ended December 31, Change 2024 2023 Amount % Research and development $ 45,107 $ 46,163 $ (1,056) (2.3) Year Ended December 31, Change 2023 2022 Amount % Research and development $ 46,163 $ 53,773 $ (7,610) (14.2) The decrease in research and development expense for 2024 compared to 2023 was driven by a decrease in stock-based compensation of $2.4 million, offset partially by increases in other employee compensation costs and project-related spending.
Our product development is targeted to specific sectors of the market where we believe the performance of our products provide a significant benefit to our customers. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.
We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.
Contractual Obligations The following table sets forth a summary of our significant contractual obligations to make future payments in cash as of December 31, 2023 (in thousands): Payments Due by Year 2024 2025 2026 2027 2028 Thereafter Total Purchase commitments $ 33,979 $ — $ — $ — $ — $ — $ 33,979 Lease obligations 3,687 2,408 1,741 1,688 1,413 5,410 16,347 Total $ 37,666 $ 2,408 $ 1,741 $ 1,688 $ 1,413 $ 5,410 $ 50,326 Critical Accounting Policies and Significant Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the 31 Table of Contents United States of America (GAAP).
No amounts were outstanding under the LOC at December 31, 2024 or 2023 and we were in compliance with all covenants. 32 Table of Contents Contractual Obligations The following table sets forth a summary of our significant contractual obligations to make future payments in cash as of December 31, 2024 (in thousands): Payments Due by Year 2025 2026 2027 2028 2029 Thereafter Total Purchase commitments $ 64,628 $ — $ — $ — $ — $ — $ 64,628 Lease obligations 2,786 2,087 2,005 1,699 1,028 4,417 14,022 Total $ 67,414 $ 2,087 $ 2,005 $ 1,699 $ 1,028 $ 4,417 $ 78,650 Critical Accounting Policies and Significant Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP).
The decrease in North America revenue for 2022 compared to 2021 was primarily due to decreased revenue from the Aerospace and Defense market, partially offset by increased revenue from the Industrial market.
The decrease in EMEA revenue for 2024 compared to 2023 was the result of decreased revenue from the Industrial and Microfabrication markets, offset partially by increased revenue from the Aerospace and Defense market.
Cost of Revenues and Gross Margin Cost of Laser Products revenue consists primarily of manufacturing materials, labor, 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.
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, and an allocation of indirect costs including overhead and general and administrative.
The decrease in research and development expense for 2022 compared to 2021 was driven by a decrease in stock-based compensation of $1.8 million and a decrease in purchased intangible amortization of $1.2 million, partially offset by increases in salary costs and project-related expenses.
The decrease in research and development expense for 2023 compared to 2022 was due primarily to decreases in salary costs and project-related expenses, an increase in costs allocated from research and development to development projects, and a decrease in stock-based compensation of $1.8 million.
Interest Income (Expense), net Interest income (expense), net was as follows (in thousands): Year Ended December 31, Change 2023 2022 Amount % Interest income, net $ 1,342 $ 529 $ 813 153.7 Year Ended December 31, Change 2022 2021 Amount % Interest income (expense), net $ 529 $ (163) $ 692 424.5 The increase in net interest income for 2023 compared to 2022 was driven by an increase in marketable securities and interest rates.
Interest Income, net Interest income, net was as follows (in thousands): Year Ended December 31, Change 2024 2023 Amount % Interest income, net $ 1,668 $ 1,342 $ 326 24.3 Year Ended December 31, Change 2023 2022 Amount % Interest income, net $ 1,342 $ 529 $ 813 153.7 The increases in interest income, net for 2024 compared to 2023 and 2023 compared to 2022 were driven by increases in interest rates and the average cash and cash equivalents held in interest-bearing accounts.
Sales, General and Administrative Year Ended December 31, Change 2023 2022 Amount % Sales, general, and administrative $ 45,899 $ 48,258 $ (2,359) (4.9) Year Ended December 31, Change 2022 2021 Amount % Sales, general, and administrative $ 48,258 $ 52,710 $ (4,452) (8.4) The decrease in sales, general and administrative expense for 2023 compared to 2022 was primarily due to a decrease in salary costs and incentive compensation, and an increase in administrative costs allocated from sales, general and administrative to development projects, partially offset by an increase in stock-based compensation of $1.2 million.
Sales, General and Administrative Year Ended December 31, Change 2024 2023 Amount % Sales, general, and administrative $ 49,257 $ 45,899 $ 3,358 7.3 Year Ended December 31, Change 2023 2022 Amount % Sales, general, and administrative $ 45,899 $ 48,258 $ (2,359) (4.9) The increase in sales, general and administrative expense for 2024 compared to 2023 was primarily due to increases in bad debt expense of $2.3 million and stock-based compensation of $1.5 million.
Credit Facilities We have a $40.0 million revolving line of credit, or LOC, with Pacific Western Bank dated September 24, 2018, which is secured by our assets and expires September 24, 2024. The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.20% on an annualized basis.
Credit Facilities We have a $40.0 million revolving line of credit, or LOC, with Banc of California dated September 24, 2018, which is secured by our assets. On September 24, 2024, we amended the LOC to extend the maturity date to September 24, 2027, updated financial covenants, and amended the unused line fee and interest rate applicable to revolving loans.
The increase in Aerospace and Defense market revenue in 2023 compared to 2022 was driven by new development contracts, offset partially by a decrease in product sales.
The decreases in Industrial and Microfabrication market revenue for 2023 compared to 2022 were the result of decreased unit sales across all regions due primarily to lower customer demand and deteriorating market conditions. The increase in Aerospace and Defense market revenue in 2023 compared to 2022 was driven by new development contracts, offset partially by a decrease in product sales.
Revenues by Geographic Region Our revenues by geographic region were as follows (dollars in thousands): Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % North America $ 129,311 61.6 % $ 137,454 56.8 % $ (8,143) (5.9) % China 11,890 5.7 21,287 8.8 (9,397) (44.1) Rest of World 68,720 32.7 83,317 34.4 (14,597) (17.5) $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % 26 Table of Contents Year Ended December 31, Change 2022 % of Revenue 2021 % of Revenue Amount % North America $ 137,454 56.8 % $ 143,232 53.0 % $ (5,778) (4.0) % China 21,287 8.8 55,446 20.5 (34,159) (61.6) Rest of World 83,317 34.4 71,468 26.5 11,849 16.6 $ 242,058 100.0 % $ 270,146 100.0 % $ (28,088) (10.4) % Geographic revenue information is based on the location to which we deliver our products and services.
Revenues by Geographic Region Our revenues by geographic region were as follows (dollars in thousands): Year Ended December 31, Change 2024 % of Revenue 2023 % of Revenue Amount % North America $ 132,812 66.9 % $ 129,311 61.6 % $ 3,501 2.7 % Asia Pacific 38,137 19.2 45,765 21.8 (7,628) (16.7) EMEA (1) 27,599 13.9 34,845 16.6 (7,246) (20.8) $ 198,548 100.0 % $ 209,921 100.0 % $ (11,373) (5.4) % (1) EMEA consists of Europe, the Middle East, and Africa. 27 Table of Contents Year Ended December 31, Change 2023 % of Revenue 2022 % of Revenue Amount % North America $ 129,311 61.6 % $ 137,454 56.8 % $ (8,143) (5.9) % Asia Pacific 45,765 21.8 67,315 27.8 (21,550) (32.0) EMEA 34,845 16.6 37,289 15.4 (2,444) (6.6) $ 209,921 100.0 % $ 242,058 100.0 % $ (32,137) (13.3) % Geographic revenue information is based on the location to which we deliver our products and services.
Technology and New Product Development We invest heavily in the development of our semiconductor, fiber laser, directed energy, and laser-sensing technologies to provide solutions to our current and future customers. We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap.
We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications. 24 Table of Contents Technology and New Product Development We invest heavily in the development of our semiconductor, fiber laser, directed energy, and laser-sensing technologies to provide solutions to our current and future customers.
The change in other income, net, in 2022 compared to 2021 was not significant and consisted primarily of net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations. 29 Table of Contents Income Tax Expense (Benefit) Year Ended December 31, Change 2023 2022 Amount % Income tax expense (benefit) $ (978) $ 344 $ (1,322) (384.3) Year Ended December 31, Change 2022 2021 Amount % Income tax expense (benefit) $ 344 $ (375) $ 719 191.7 We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy, Austria, and South Korea.
Income Tax Expense (Benefit) Year Ended December 31, Change 2024 2023 Amount % Income tax benefit $ (76) $ (978) $ 902 92.2 Year Ended December 31, Change 2023 2022 Amount % Income tax expense (benefit) $ (978) $ 344 $ (1,322) (384.3) We record income tax expense for taxes in our foreign jurisdictions including Finland, Italy, Austria, and South Korea.
The decrease in China and Rest of World revenue for 2023 compared to 2022 was driven by decreases in revenue from the Industrial and Microfabrication markets as discussed above.
The decrease in Asia Pacific and EMEA revenue for 2023 compared to 2022 was driven by decreases in revenue from the Industrial and Microfabrication markets as discussed above. Cost of Revenues and Gross Margin Cost of Laser Products revenue consists primarily of manufacturing materials, labor, shipping and handling costs, tariffs and manufacturing-related overhead.
Changes in working capital were driven by a $5.9 million decrease in accounts payable and a $4.6 million decrease in inventory due to a decrease in inventory purchasing.
Changes in working capital were driven by an $11.0 million decrease in inventory and a $2.8 million decrease in accounts receivable.
The decrease in revenue from the Aerospace and Defense market for 2022 compared to 2021 was due to decreased activity on development contracts, and a decrease in product sales in the second half of 2022 due primarily to supply chain disruptions.
The increase in Aerospace and Defense market revenue for 2024 compared to 2023 was the result of increased unit sales of products due to higher demand, an increase in ASPs, and increased development revenue from development contracts awarded primarily in the second half of 2023.
The decrease in Industrial and Microfabrication market revenue for 2022 compared to 2021 was driven by a decrease in unit sales in China, partially offset by an increase in unit sales outside of China.
The decrease in Microfabrication market revenue for 2024 compared to 2023 was primarily attributable to decreased unit sales of semiconductor lasers in EMEA (1) and Asia Pacific, offset partially by increased unit sales in North America.
The decrease in Laser Products gross margin for 2022 compared to 2021 was driven by sales mix, decreased factory utilization, increased labor and material costs, and increased freight costs, partially offset by an increase in duty reclaim.
The increase in Laser Products gross margin for 2023 compared to 2022 was driven by a decrease in direct labor and other variable manufacturing costs, and a decrease in manufacturing variances, partially offset by the impact of lower production volumes on fixed manufacturing costs due to the decrease in customer demand.
The decrease in China revenue for 2022 compared to 2021 was the result of decreased sales in the Industrial and Microfabrication markets, primarily as a result of deteriorating market conditions.
The increase in North America revenue for 2024 compared to 2023 was the result of increased revenue from the Aerospace and Defense market and Microfabrication market, partially offset by decreased revenue from the Industrial market. The decrease in Asia Pacific revenue for 2024 compared to 2023 was the result of decreased revenue from all end markets.
The interest rate on the LOC is based on the Prime rate, minus a margin of 0.50% to 1.40% based on our liquidity levels. No amounts were outstanding under the LOC at December 31, 2023 and 2022 and we were in compliance with all covenants.
The LOC agreement contains restrictive and financial covenants and bears an unused credit fee of 0.25% on an annualized basis. The interest rate on the LOC is based on the Prime Rate, minus a margin based on our liquidity levels.
Removed
We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. Sales of our semiconductor lasers, fiber lasers, fiber amplifiers, 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.
Added
We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap. Our product development is targeted to specific sectors of the market where we believe the performance of our products provides a significant benefit to our customers.
Removed
For the foreseeable future, our operations will continue to depend upon capital expenditures by customers in the Industrial and Microfabrication markets, which, in turn, depend upon the demand for these customers’ products or services.
Added
Even though certain of our products are built offshore by contract manufacturers, capacity utilization affects gross margin because of the fixed cost associated with our U.S.-based manufacturing capabilities. Change in sales and production volumes impact absorption of fixed costs, manufacturing efficiencies and production costs.
Removed
Erosion of average 23 Table of Contents selling prices, or ASPs, of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature. We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications.
Added
The increase in Advanced Development revenue for 2024 compared to 2023 was the result of increased activity on development contracts awarded primarily in the second half of 2023. All Advanced Development revenue is included in the Aerospace and Defense market.
Removed
Historically, we have been able to offset decreasing ASPs by introducing new and higher value products, increasing the sales of our existing products, expanding into new applications and reducing our product and manufacturing costs.
Added
A higher allocation of costs from sales, general and administrative to development projects partially offset the overall increase in sales, general and administrative expense.
Removed
Although we anticipate further increases in product volumes and the continued introduction of new and higher value products, ASP reduction may cause our revenues to decline or grow at a slower rate.
Added
The income tax benefit in 2024 was the result of a partial valuation allowance release in China during the fourth quarter of 2024, offset partially by income tax expense from other foreign tax jurisdictions.
Removed
Capacity utilization affects our gross margin because we have a high fixed cost base due to our vertically integrated business model. Increases in sales and production volumes drive favorable absorption of fixed costs, improved manufacturing efficiencies and lower production costs. Gross margins may fluctuate from period to period depending on product mix and the level of capacity utilization.
Removed
The closure of our Shanghai facility for approximately two months during the second quarter of 2022 due to the COVID-19 pandemic had a negative impact on unit sales in China.
Removed
The closure of our Shanghai facility for approximately two months during the second quarter of 2022 due to the COVID-19 pandemic also had a negative impact on 2022 sales in China. The increase in Rest of World revenue for 2022 compared to 2021 was due to increased revenue from the Microfabrication and Industrial markets.
Removed
Cost of Advanced Development revenue consists of materials, labor, subcontracting costs, an allocation of indirect costs including overhead and general and administrative.
Removed
In addition, Laser Products gross margin in 2022 was negatively impacted by inventory charges related to business restructuring and the discontinuation of certain product lines in the fourth quarter of 2022.
Removed
The decrease in sales, general and administrative expense for 2022 compared to 2021 was primarily due to a decrease in stock-based compensation of $9.4 million, partially offset by increases in salary costs, professional service fees and facility expenses, and a decrease in administrative costs allocated from sales, general and 28 Table of Contents administrative to development projects.
Removed
The decrease in stock-based compensation was the result of forfeitures and decreases in expected achievement related to performance-based stock awards.
Removed
The increase in net interest income for 2022 compared to 2021 was driven by increases in interest rates and the investment in marketable securities during the second quarter of 2022, as well as the payoff of our long-term debt in the third quarter of 2021.
Removed
The increase in income tax expense for 2022 compared to 2021 was driven by a discrete tax benefit related to return to provision true ups and expiring statutes of limitations of unrecognized tax positions recorded in the second quarter of 2021.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed4 unchanged
Biggest changeBorrowings under the Revolving Credit Facility bear interest at a per annum rate, depending on certain liquidity thresholds, ranging from the Prime rate minus 0.50% to 1.40%.
Biggest changeBorrowings under the Revolving Credit Facility bear interest at a per annum rate, depending on certain liquidity thresholds, ranging from the Prime Rate to the Prime Rate minus 1.00%.
We are subject to interest rate risk in connection with the borrowings under our loan facility. We have a $40.0 million revolving credit facility. As of December 31, 2023, we had no outstanding principal amount under the revolving loan facility.
We are subject to interest rate risk in connection with the borrowings under our loan facility. We have a $40.0 million revolving credit facility. As of December 31, 2024, we had no outstanding principal amount under the revolving loan facility.
At December 31, 2023, our foreign currency exposure was related to our net investment in our foreign subsidiaries. The potential loss in fair value resulting from a hypothetical 10% adverse change in foreign exchange rates would be approximately $0.5 million.
At December 31, 2024, our foreign currency exposure was related to our net investment in our foreign subsidiaries. The potential loss in fair value resulting from a hypothetical 10% adverse change in foreign exchange rates would be approximately $0.6 million.
Foreign exchange rate gains or losses on foreign investments as of December 31, 2023 are reflected as a cumulative translation adjustment, net of tax, and do not affect our results of operations. 33 Table of Contents
Foreign exchange rate gains or losses on foreign investments as of December 31, 2024 are reflected as a cumulative translation adjustment, net of tax, and do not affect our results of operations. 34 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of December 31, 2023, we had cash and cash equivalents of $53.2 million and investments in marketable securities of $59.7 million with maturities of less than one year. The goals of our investment policy are liquidity and capital preservation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of December 31, 2024, we had cash and cash equivalents of $65.8 million and investments in marketable securities of $34.9 million with maturities of less than one year. The goals of our investment policy are liquidity and capital preservation.

Other LASR 10-K year-over-year comparisons