Thank you, and good afternoon, everyone. I'm Joe Corso, nLIGHT's Chief Financial Officer.

With me today is Scott Keeney, nLIGHT's Chairman and CEO. Today's discussion will contain forward-looking statements, including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings.

Our results may differ materially from those projected on today's call, and we undertake no obligation to update publicly any forward-looking statement, except as required by law. During the call, we will be discussing certain non-GAAP financial measures.

We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found on the Investor Relations section of our website. I will now turn the call over to Scott.

Thank you, Joe. Fourth quarter revenue of $51.9 million was above the high end of guidance, driven by a strong quarter in aerospace and defense.

We ended the year with approximately $108 million in backlog, an increase of 34%, compared to December 31, 2022. Gross margin and adjusted EBITDA were above the midpoint as we continue to improve our overall global manufacturing capabilities and control spending.

Maintaining a strong balance sheet was a key goal during 2023. We increased cash, cash equivalents and investments by approximately $5 million, ending the year with $113 million.

We have no outstanding debt, and we remain well positioned to execute against our long-term growth plan. I'd like to discuss key highlights from the year.

Operationally, we've significantly transitioned our manufacturing base and have improved our global manufacturing capabilities. Prior to 2023, we relied on our Shanghai facility to assemble the vast majority of our semiconductor lasers in a substantial portion of our fiber lasers.

From a revenue perspective, almost all of our commercial revenue historically has been dependent upon products or components that were assembled in Shanghai. Today, we've reduced this exposure to below 10%.

To accomplish this, we established an automated manufacturing line in Camas, Washington and qualified and ramped a third-party contract manufacturer in Thailand. Our U.S.-based manufacturing enables us to distinctly serve the defense market, while our outsourced manufacturing partnership offers a scalable and flexible capacity for our commercial business.

2023, also marked our first full year of working with our new ERP system. The new ERP system has enabled us to streamline a number of processes more efficiently operate our business and provides a stronger platform to support our long-term growth.

Turning to revenue by market. Aerospace and defense remains a core area of focus for nLIGHT as well as a long-term growth opportunity.

In 2023, we added significantly to our backlog in both directed energy and other areas of defense. In directed energy, we awarded over $200 million of new contracts in 2023.

After the successful demonstration and formal acceptance of our 300-kilowatt beam combined laser, we announced in May an $86 million contract to produce a high-energy laser prototype for the next phase of development in support of the U.S. Department of Defense's High-Energy Laser Scaling Initiative called HELSI.

In November, we announced the expansion of this award $171 million to scale laser source power to the megawatt class with improved being quality, size and weight. We also announced that we were awarded a $34.5 million contract to provide a high-energy laser in support of the U.S.

Army's Directed-Energy Maneuver Short-Range Air Defense or DE M-SHORAD program. DE M-SHORAD is a component of the U.S.

Army's broader modernization strategy for air missile defense. It focuses on integrating a 50-kilowatt class laser weapon into a striker combat vehicle to provide defensive capabilities against unmanned aircraft systems, rockets, artillery, mortar, and rotary and fixed-wing aircraft.

Looking forward, directed energy remains an important and significant growth opportunity for nLIGHT. We are leveraging our deep technical expertise and U.S.-based manufacturing capabilities and capacity to deliver strong execution across critical domestic directed energy programs.

The demand for directed energy lasers continues to grow as the number of geopolitical conflicts is increasing and the type of threats against the U.S. and its allies continues to favor the deployment of directed energy lasers.

We are finally seeing high-energy lasers moving out of the laboratory and into the field. We remain closely aligned with multiple large well-funded domestic programs to date, and our international pipeline of opportunities continues to grow.

Outside of directed energy, we remain engaged across multiple long-running defense platforms that we expect to run for many more years, if not decades. In 2023, we added several new programs that offer significant long-term growth opportunities.

By continuing to invest in our core manufacturing and technology capabilities, we expect to compete for additional programs in the future. For the full-year of 2023, aerospace and defense revenue increased by 4% year-over-year to $91.4 million, representing 44% of total revenue.

Aerospace and defense development revenues increased by 8% to $53.3 million, partially offset by a slight increase in aerospace and defense product revenues. For the fourth quarter, aerospace and defense revenue decreased by 20% year-over-year to $26.7 million, representing 52% of total revenue.

Development revenues increased by 24% to $14 million, and aerospace and defense products revenue increased by 15% to $12.7 million. Improvement in fourth quarter defense revenue reflects an increase in both the contracts for directed energy and in product sales.

Turning to our commercial markets. We've seen a significant transformation in the industrial market over the last several years.

In Q2 2018, the quarter of our IPO, only 30% of our industrial revenue was from customers outside of China. For the full-year of 2023, over 90% of our revenue was from customers outside of China.

This equates to a more than doubling of industrial revenue outside of China over a five-year period. Today, nLIGHT is focused on developing innovative solutions, largely built upon core Corona programmable fiber laser technology, to customers in cutting, welding and additive manufacturing markets.

In cutting, we continue to leverage our core programmable technology as a competitive differentiator in the market. We continue to see a trend towards higher power in the cutting market as many end customers seek flexible solutions that we can address with our programmable lasers that deliver superior edge quality and to be optimized across a wide range of applications.

In 2023, the percentage of our sales of cutting programmable lasers reached a new record as more customers adopt these solutions. At the same time, Growth in these products was offset by declining sales in our nonprogrammable fiber lasers, primarily due to pressure from domestic Chinese suppliers in the lower end of the market.

In welding, we continue to focus on electric vehicle applications for both the lasers and process monitoring solutions. While our overall business in welding today is relatively small, we believe there could be a significant opportunity for our range of laser and process monitoring solutions.

The design-in process for welding solutions can be lengthy and requires significant interaction between laser vendor, OEM and end user. As such, we believe that the current supply-demand imbalance in electric vehicle battery actually offers nLIGHT a better opportunity to work with customers in both our apps lab and theirs to demonstrate the advantageous nLIGHT solutions.

In 2023, we are pleased that several top-tier battery manufacturers purchased nLIGHT process monitoring, core laser solutions or both. Over the next several quarters, we expect to introduce new products that address many of our customers and potential customers' pain points, thereby affording an incremental opportunities for growth in this market.

In additive manufacturing, we continue to see strong long-term growth prospects. In 2023, we continue to demonstrate the capabilities of Corona AFX, our single-mode programmable fiber laser, secured multiple new design wins and introduce new higher power products to the multi-laser tool market.

Our products have helped customers increase productivity and lower cost per part. To further address this growing market, nLIGHT has developed a mutual laser design that incorporates multiple Corona AFX lasers into a single integrated subsystem that offers significant benefits.

Our modular approach reduces cost and complexity for power and thermal management and greatly simplifies integration into OEM machine tools. 2023 industrial revenue declined 22% year-over-year to $71 million, representing 34% of total revenue.

Revenue from cutting increased slightly year-over-year, but was offset primarily by a decline in revenue from additive manufacturing, where a large customer in 2022 did not repeat in 2023. Our engagement in metal additive manufacturing has been broad.

We work with both innovative early-stage companies as well as many of the long-standing market leaders. We are encouraged with the traction that we are getting across the spectrum of customers, but this market is rapidly developing, and as such, our revenue can increase or decline significantly in a given quarter or year as our customers continue to scale and demand for our lasers can be lumpy.

Fourth quarter industrial revenue decreased by 35% year-over-year to $15 million, representing 29% of total revenue. The year-over-year decline was driven by lower sales of nonprogrammable lasers in cutting and lower sales in.

In microfabrication, we believe we remain the market leader for high-power, high-brightness semiconductor lasers where our lasers are critical to manufacturing processes in a diverse range of applications, including auto, consumer, and communications, electronics, display, medical and semiconductor end markets. We are optimistic about continued growth in our medical laser business.

Our medical lasers enable a range of applications, ranging from therapeutic surgical to aesthetic dermatological procedures. During 2023, we saw measurable growth from existing medical customers and we were awarded a design win from another large strategic customer that has the potential to further improve the growth profile of this business over the next several years.

2023 microfabrication revenue declined 24% year-over-year to $47.5 million, representing 23% of total revenue. Fourth quarter microfabrication revenue decreased by 10% year-over-year to $10.2 million, representing 20% of total revenue.

Macroeconomic headwinds contributed to sluggish demand and inventory digestion through 2023 and in the fourth quarter. In summary, 2023 was an important transition year for nLIGHT.

Operationally, we pursued a derisking and global manufacturing strategy that is well positioned to support our focus on two key growth areas, aerospace and defense, and additive manufacturing. As I look forward to 2024, I'm optimistic that we can return to growth this year.

Although we still face an uncertain macroeconomic environment, we remain deeply engaged with our strategic customers and the work we are doing in defense provides good visibility into 2024 and beyond. From a financial perspective, our funded backlog plus contract value exceeded $300 million at the end of the year, the highest in our history.

I'd like to thank all the nLIGHT employees for their hard work and execution over the past year. They continue to deliver great results for our customers and are the critical driver of building an enduring dual-use technology company.

With that, I will turn the call over to Joe to discuss our fourth quarter and full year financial results.

Thank you, Scott. Total revenue in the fourth quarter of 2023 was $51.9 million, above the top end of guidance and up 2% compared to $50.6 million in the third quarter of 2023, but down 8% compared to $56.7 million in the fourth quarter of 2022.

The decrease in revenue from the industrial and microfabrication markets was offset by an increase in revenue from the aerospace and defense market. The primary driver of our Q4 revenues above the high end of guidance was upside defense revenue in the fourth quarter that had originally been forecasted for the first quarter of 2024.

Product revenue for the fourth quarter of 2023 was $37.9 million, compared to $38.1 million in the third quarter and $45.4 million in the fourth quarter of 2022. For the year, total revenue in 2023 was $209.9 million, a decrease of 13% compared to $242.1 million in 2022.

The decrease in total revenue consisted of a $36 million or 19% decrease in product revenue that was partially offset by a $3.9 million or 8% increase in development revenue. The decrease in product revenue for 2023 was driven primarily by lower customer demand in industrial and microfabrication while the increase in development revenue was the result of new contracts in the A&D market.

Revenue from the China market in 2023 decreased $9.4 million or 44% to $11.9 million compared to $21.3 million in 2022. Revenue from the China market represents approximately 6% of total revenue in 2023 compared to 9% of total revenue in '22 and 21% of total revenue in 2021.

Turning to gross margin. Total gross margin in the fourth quarter of 2023 was 19%, above the midpoint of guidance compared to 10% in the fourth quarter of 2022.

Products gross margin in the fourth quarter of '23 was 22%, compared to 11% in the fourth quarter of 2022, which included approximately $3.8 million related to restructuring activities and inventory reserves. Development gross margin was 9% in the fourth quarter of 2023, compared to 7% in the third quarter of 2023 and 8% in the fourth quarter of 2022.

For the year, total gross margin was 22% in 2023 compared with 21% in 2022 and products gross margin was 27% in '23 compared to 25% in 2022. The improvement in gross margins in 2023, compared to 2022 was driven by a reduction in variable manufacturing costs and improved product mix that was partially offset by lower production volumes and lower absorption of fixed manufacturing costs.

Full-year 2023 gross margin benefited from the restructuring we executed in the fourth quarter of 2022 as it enabled us to reduce overall costs and reposition our manufacturing footprint for long-term growth. Turning to OpEx.

Non-GAAP operating expenses were $17.4 million in the fourth quarter compared to $19.5 million in the fourth quarter of 2022. For the year, non-GAAP operating expenses were $67.2 million compared to $76.3 million in 2022.

The year-over-year decrease in operating expenses was the result of planned decreases in headcount and lower project-related spending based on our restructuring activities in the fourth quarter of 2022. We continue to review the appropriate level of operating expenses for our business and we believe our current level of OpEx is sufficient to support our long-term growth objectives.

Adjusted EBITDA for the fourth quarter of 2023 was a loss of $3.3 million near the midpoint of guidance compared to a net loss of $9.5 million in the fourth quarter of 2022. Adjusted EBITDA for 2023 was a loss of $4.1 million compared to a loss of $8.8 million in 2022.

Adjusted EBITDA loss narrowed year-over-year despite lower revenues due to improved gross margins and a decrease in operating expenses. Non-GAAP loss in the fourth quarter of 2023 was $6 million or $0.13 per diluted share, compared with a non-GAAP loss in the fourth quarter of '22 of $12.3 million or $0.27 per diluted share.

Net loss on a GAAP basis in the fourth quarter of 2023 was $13.2 million, $0.28 per diluted share, compared with a GAAP net loss in the fourth quarter of 2022 of $22.7 million or $0.50 per diluted share. Net loss on a GAAP basis in the fourth quarter of 2023 includes restructuring charges of approximately $800,000 compared to restructuring charges in the fourth quarter of 2022 of $3.9 million.

Non-GAAP net loss in 2023 was $13.6 million or $0.30 per diluted share compared to non-GAAP net loss in 2022 of $22.3 million or $0.50 per diluted share. On a GAAP basis, net loss in 2023 was $41.7 million or $0.90 per diluted share compared to a net loss in 2022 of $54.6 million or $1.23 per diluted share.

In addition to higher gross margins and lower operating expenses, net loss and non-GAAP loss were positively impacted by an increase in investment income that we generated from investments. Turning now to the balance sheet.

Our balance sheet remains strong as we ended 2023 with total cash and investments of $113.1 million and no debt. Total cash investments increased by $4.7 million in 2023.

Cash provided by operations in 2023 was $10.1 million, compared to a use of cash in operations of $14.5 million in 2022. Capital expenditures in 2023 was $5.3 million compared to $21.4 million in 2022.

We reduced inventory from $62 million at the end of the third quarter to $53 million as of December 31, 2023, which represents 122 days of inventory. Our DSO for the quarter was 65 days.

Maintaining a strong balance sheet, particularly in light of the macroeconomic headwinds we face in our commercial markets in 2023 remains a key focus of the company. Strong OpEx control, coupled with careful working capital management and CapEx investment, has enabled us to maintain a balance sheet that we believe will enable us to achieve our long-term growth objectives.

Turning now to guidance. Based on the information available today, we expect revenue for the first quarter of 2024 to be in the range of $42 million to $46 million, which is lower than otherwise expected due to the acceleration of some customer demand in the fourth quarter, as I discussed a few moments ago.

The midpoint of approximately $44 million includes approximately $31 million of product revenue and $13 million of development revenue. We are optimistic that our revenue will grow for the full-year in 2024.

As of December 31, we had $108 million of backlog, an increase of 34% versus December 31, 2022. And in addition, we are executing against contracts with more than $200 million of aggregate value.

Although significant execution challenges remain, given the highly technical nature of our defense work, particularly in directed energy, we believe we are aligned with the right programs and customers to drive growth in 2024 and beyond, led primarily by our defense business, we expect to deliver sequential revenue growth in the second quarter, and we expect further growth in the second half of the year. Turning to gross margin.

First quarter 2024 product gross margin is expected to be in the range of 20% to 25%, and development gross margin to be approximately 7%, resulting in an overall gross margin range of 15% to 20%. As we've mentioned previously, as a vertically integrated manufacturing business, gross margin improvement is largely dependent on production volumes and absorption of fixed manufacturing costs.

In Q1, we expect to have poor absorption of our manufacturing costs due to a trough in revenue. However, we expect gross margin to improve later in the year as production volumes and revenues increase.

Finally, we expect adjusted EBITDA for the first quarter of 2024 to be in the range of approximately negative $7 million to negative $5 million. and we continue to expect breakeven adjusted EBITDA at quarterly revenue levels of $55 million to $60 million.

With that, I will turn the call over to the operator for questions.

Hi, thank you. Good afternoon.

Joe, the pull-in that you alluded to in the A&D business, I'm just want to make sure I have that straight. Was that pull-in mainly on the product side or the advanced development side?

You may have given that, I may have just missed it.

A bit of both, Jim. And so just to kind of help with the quantum, if we had not had that pull-in, we would not have been over the top end of the guidance range.

We would have been very comfortably within guidance, but that's what -- we just wanted to be clear that, that was the driver of some of the outperformance in the fourth quarter as well as, as you look at the trajectory of the Q1 guide, that also had an impact on what we thought we were going to deliver in Q1 that ultimately came in Q4.

Got it. And so on the advanced development side of the business, I assume you've got some line of -- better line of sight to that.

Is that Q1 level -- is that indicative of a quarterly run rate as we think about the out-quarters?

Yes, Jim, it's Scott here. No, I think -- the way I think about Q1, there's at least three key factors for the lower level in Q1.

First is what Joe just described, which is a pull-in for customers who wanted more deliveries and there's A&D programs in Q4. Second driver of Q1 is in additive.

And it was disappointing to learn about the issues and the strategic alternatives process that [Indiscernible] having to go through, especially after they grew so dramatically from a small player to one of the key players in additive and really do have a fundamentally strong technology and they're working through those issues, but it's not the plan that we had hoped for Q1 and certainly in the first-half of the year. And then finally, the -- in the industrial cutting market, we're seeing a continued decline in the standard cutting lasers with competition from China and just the size of the market declining.

We are making progress with more advanced lasers and sustaining our key customers there. But those are the three factors that drive the specifics of Q1.

The backlog that we highlighted does give us visibility into our growth plans.

Okay. Scott, last question for me, and I'll jump back in the queue.

As I look at the business, Rest of the World business, lowest level we've seen in some time. I think you'd have to go back to Q1 of 2021.

Is that mainly Europe slowing? Is it both industrial and microfabrication?

Yes. The decline that we've seen are industrial and microfabrication, and different factors going on here.

In microfabrication, we highlighted the opportunity we see in, for example, the display market, and that is something that has pushed out from '23. Certainly, there are plans for '24 that could drive our business there.

I just talked about the industrial cutting market. And then really, with respect to additive, it does have to do more with the particulars of [indiscernible] in our case.

We're making very good progress with releasing new products into additive with new customers. But as you know, it takes time for those to ramp up.

Got it. Thank you.

Thank you. Thanks, guys, for taking my question.

Scott, I want to follow-up on Jim's question. Just around this weakness, rest of the world and your commentary on cutting, given that China has come down materially, as you noted in your prepared remarks, can you just comment on the competitive environment for cutting outside of China?

Yes. It's been a continuation of what we've discussed before.

So I wouldn't highlight anything that is different. But it's a continued trend for the more standard lasers to become more competitive, and with competitors from China who have a much smaller market now in China that are desperate to try to gain share outside of China.

So that part of the market is challenging. Having said that, the Corona technology we have is differentiated.

It is patent protected and it is something that adds a lot of value to our customers, and so it has allowed us to sustain key customers. And as we look ahead, we are looking at launching new products that will continue to enhance what we're doing in that space, certainly not calling out cutting as a key growth area.

But we do see the ability to mitigate that trend in that space.

Appreciate that detail, Scott. And then a little bit of a longer-term question.

I was interesting in the commentary you had on the EV sort of pull-ins we have here, getting some placements with your process technology in leading EV manufacturers and sort of your remarks on new products. But I'm wondering about those new products.

Were they on the road map? You're getting strategic direction from these customers that you've been engaging with?

And has that changed sort of the way you're thinking about R&D investments at all kind of in the medium term?

Yes. There's one thing -- we highlighted this sector.

We've also acknowledged, look, it's small. It's not a big part of our revenue today, and we're not calling it out as a key driver in the near-term.

Having said that, yes, we've made some great progress with new products in that space, both on the lasers and the process control that are exciting with some important customers that are working on new battery technology. And so we wanted to note that, we aren't calling it out as a key driver in the near term, but it is an area where we're seeing good traction.

And we do think that over the longer term, welding will remain an important part of the overall market.

Right. Okay.

And then just a quick one for Joe. On the gross margin, Joe, just thinking through absorption costs and potentially a little bit of a recovery in revenue in Q2, I would imagine that you have some higher fixed cost inventory, though, you have to run through, just maybe give us a little bit of a forward look into how to think about gross margins once you get past Q1?

Absolutely, Ruben. So I think on a high level, right, if you think about the fact that we believe that we will end the year in better shape from a top line perspective.

We think that the margin will follow suit, right? The biggest challenge that we are having today is that we've got a fixed manufacturing base that is sized for a much larger products' revenue base than we are in Q4 or certainly in Q1.

So we're suffering from just the underutilization of that fixed production capacity. We've actually done a pretty good job reducing our inventory.

So obviously, when you think about gross margin, you've got to think about all of the components, right? So the spend, if you look at our spending on manufacturing, right, year-over-year, that has come down, right?

It's enabled us to keep the products gross margin at similar levels or better levels in 2022 at lower revenues, right, that we had in 2023. We don't anticipate having to increase that spending at all during the course of the year.

So as the revenue base goes up, even at today's mix level, we think the mix will improve and then you've got better absorption of those fixed costs, we expect to drive better products gross margin as we go through the year.

Got it. Thanks, Joe.

Thanks, guys.

Thank you, Ruben.

Hey, thanks. I just wanted to dig into the demand outlook a little bit more.

In terms of what you're seeing out there, how much of the -- maybe the softness is driven by whether it's competition, whether it's lower demand versus inventory drawdowns. Any way to quantify sort of those 3 buckets?

Yes, Greg, I think you really have to segment it by our end markets. I think in our microfabrication space, I think that is 1 where you have to look at those both cyclical and secular trends that drive that business.

We're way back in the chain there. So as I mentioned, the display market is one example of a driver in that space.

I think in cutting, you do get some macro trends and you get those competitive trends I've already highlighted. But I think with respect to the key growth drivers for our business, it is about design wins of the road map that we're driving to significantly advance the end applications, whether it be in welding, in additive, and certainly in aerospace and defense.

And so it has more to do with really the design-in process in the commercial space and the programs on the defense space. And those will be the key drivers to drive our growth.

Understood. And if I kind of think back to certainly last couple of quarters throughout 2023, I think you were much more excited about your revenue growth prospects this year.

And I know a lot has changed, but what's your visibility like because I think the characterization you used is we're optimistic, we can return to revenue growth, which I think is implicitly a lot lower than what your expectations were maybe three months ago, but correct me if I'm wrong.

Yes. I think a couple of things.

One, the backlog and contracts that we highlighted are significant, significant growth in the backlog and really quite significant increase in the contracts that give us visibility to growth. And notably, while it's a mix of both industrial and aerospace and defense, the primary drivers there, signal, I guess, is in aerospace and defense.

And then I think with respect to the industrial markets, as I noted, it's disappointing to see the issues that [Indiscernible] having to work through that affect our revenue in the near term, but the design work that we're doing and the advanced new products that we're releasing, yes, we are in additive. We are seeing the benefits of the roadmap that we've discussed.

And I do think that 3D-printed metal parts is a very important market. And it won't play out over the near-term quarters as we'd hoped but it is playing out with key players in the space.

And just clarification in terms of your stated backlog versus your funded backlog.

Yes. Sure, Greg.

So the stated backlog today is $108 million. And the way -- and we'll publish our 10-K, so you'll see all that detail.

But the way that we think about it is the $108 million is firm POs or funded portion of our contracts that will be executed over the next 24 months. There's an incremental 200 -- almost $220 million of contracts that we've been awarded, but for which funding needs to be added.

And so that's how we separate those two. To be clear, we expect that the programs that we are working on under contract that have been awarded will be funded, right?

And so we feel really good about the revenue opportunity over the next 12, 24, 36 months, that those type of contract awards afford us.

Got it. Okay, I will leave it there.

Thanks.

Good afternoon, guys. Thanks.

Appreciate it. Just unpacking -- Joe unpacking the comment regarding the backlog, if you don't mind, maybe because I'm new to the story here.

Can you remind me in terms of, does that include both the industrial as well as the A&D contracts? And then…

Yes, sure. So the short answer is yes.

It includes both industrial and A&D. However, the vast majority of that backlog is A&D related, right?

I mean the firm POs that we have outside of A&D tend to be relatively short lead times. So they're technically included in backlog, but that tends not to be a backlog-driven business.

It's really a read through to what we've been doing in A&D, Keith.

Great, and I appreciate that. I apologize for getting some echo here.

So I guess one more quick question. You guys referenced the supply chain issues that you were having in the A&D segment.

I guess one of those just a lot complete then to what was the impact on revenue in 2023 for that?

Yes. No.

So we are largely through the supply chain issues that we highlighted last quarter. So we're pleased by that.

I think to quantify where the supply chain impact in 2023, really limited primarily to the defense products market, and we will largely be caught up there in the next quarter or two. So it was millions of dollars, but I don't think it significantly would change the trajectory or what the financials look like over the full-year period.

Great, thank you, appreciate it.

Sure.

Scott, maybe a question for you. We've been trying to listen in on where trends may be going on the A&D side.

And it appears that the customer is leaning toward transitioning to programs of record, perhaps sooner. What is your sense as you -- to the extent you can comment on the level of activity as to when we might see some of this transition.

Yes, Jim, happy to comment on that. And in order to answer your question, I'll draw on sort of an integrated experience, we have been doing work in directed energy for 20 years.

So I've seen all aspects of the cycle from areas where it got a little too hyped in areas where there's too much to spare. And I think what I see going on right now, Jim, is a drive to deploy lasers in the relative near term, certainly in the next 18 to 24 months, I would expect to see opportunities for lasers to be deployed.

And whether that is a program of record or not is a sort of budgetary matter. But certainly, with the tensions that we're seeing around the world, whether it be the Red Sea or elsewhere, certainly, we're seeing that desire increase.

And it's a challenging technology. So it's not going to happen overnight, but at least on the margin, certainly over the last quarter, we've saw a stronger desire to deploy lasers in various applications.

I hope that helps.

It does. And maybe the final question for me is just on the level of activity that you're seeing in this area of the business outside the U.S.?

How would you characterize that?

Significant. We've talked in the past about our involvement with Israel, but there's involvement with our allies around the world in this area.

So yes, it's not just a U.S. DoD level of engagement.

There's a fairly broad engagement and fairly advanced in certainly places like Israel.

Thank you.

Thank you for the question. I look at your mix of high-power lasers versus lower-power lasers and that improved or improve richer as 2023 progress compared to prior years.

I'm just wondering if you can comment about the backlog in terms of the margin profile of your backlog. Is that similar to what you're reporting recently?

Or has that improved?

Yes. No.

Thanks, Mark. It's improved, right?

As we've -- as you've seen right from that power mix, I think the takeaway there is two things. One, we are seeing generally that continued evolution of higher power lasers in the cutting market, right, which I think our competitors are seeing as well.

For us in what's probably a bigger driver of the improved standard margin or gross margin is the fact that a greater proportion of our higher power cutting lasers are programmable. And so that's positive for us, right?

And even on the lower power side, right, the single-mode Corona lasers as well that tend to carry better -- it's a better margin profile.

From your EBITDA guidance, it looks like the OpEx for next -- the first quarter is going to be kind of flattish? Or am I off there?

Is it lower or flat?

No, it will be up a little bit, Mark, but not meaningfully, right, not meaningfully.

And just one last one. How should we be modeling taxes in 2024?

Yes, taxes in 2024, I think you can kind of keep it at, call it, $150,000 a quarter, right, still relatively low.

Thank you.

You're welcome.

Thank you, everyone, for joining this afternoon and for your continued interest in nLIGHT. We look forward to speaking to you during the quarter.

Have a good afternoon. Thanks.