Vancouver-based laser manufacturer nLIGHT released its second quarter results on Monday and hosted a conference call with investors and analysts. Sales numbers generally showed small year-over-year declines, which CEO Scott Keeney attributed to increased difficulty the company is facing in the Chinese market due in part to the ongoing trade dispute.
“These market headwinds have persisted far beyond what we expected entering 2019,” he said in the investor call, which took place just a few hours after China devalued its currency to a record-low level in the post-recession era, marking a significant escalation in the trade war and sparking a worldwide sell-off in markets. The Dow Jones Industrial Average fell more than 700 points on Monday.
nLIGHT’s revenue for the second quarter was $48 million, a drop of 7.1 percent compared with the second quarter of 2018. Gross margin was 33 percent for the quarter, compared with 34.2 percent the year before.
Looking to the third quarter, nLIGHT projects revenues between $42 million and $46 million, with gross margins of 29-32 percent.
The operating environment has changed substantially in China in the past year, Keeney told investors, and nLIGHT expects the overall Chinese laser market to see a year-over-year decline in 2019, which would be the first time the market has declined since nLIGHT entered it in 2004.
The trade war isn’t the only factor, Keeney added — nLIGHT is also facing aggressive competition in the lower-power end of the Chinese industrial laser market, with unexpectedly large price declines in the past two months.
nLIGHT plans to respond to that challenge by continuing to focus on higher-power devices, Keeney said, where it faces far few competitors both globally and in China.
The company is also continuing to see high demand for its line of programmable Corona lasers in markets outside of China, he said, and expects to eventually find similar demand in the Chinese market. For now the company is holding back on heavily advertising the lasers in China due to the market uncertainty.
Keeney and other nLIGHT executives also noted that, when sales are classified by industrial buyer rather than geography, several of the company’s segments are showing continued growth — most notably aerospace and defense, which saw 30 percent year-over-year revenue growth in the second quarter.
For example, Keeney mentioned that nLIGHT is supplying semiconductor lasers for use in the U.S. Navy’s Helios program, which is developing ship-mounted laser weapons that could be used to target drones, missiles or enemy vessels.
nLIGHT stock, which trades on the NASDAQ under the symbol LASR, dropped 5.75 percent on Monday to close at $14.43 per share.