Timothy P. V. Mammen
Senior Vice President and Chief Financial Officer at IPG Photonics
Thank you, Eugene, and good morning everyone. My comments generally will follow the earnings call presentation which is available on our investor relations website. I will start with the financial review on slide four. Revenue in the first quarter was $347 million, a decline of 6% year-over-year due to foreign currency headwinds, which accounted for approximately 4% of the decline and telecom divestiture that reduced revenue by approximately 1%. Revenue from materials processing applications decreased 8% year-over-year, while revenue from other applications increased 10%. GAAP gross margin was 42.3%, a decrease of 410 basis points year-over-year, due to increased manufacturing costs, higher inventory reserves as well as higher shipping costs and tariffs, which was partially offset by an improvement in absorption as a percentage of sales. On a sequential basis, gross margin did show some improvement. FX also had a negative impact in the quarter.
If exchange rates relative to the U.S. dollar had been the same as one year ago, we would have expected revenue to be $15 million higher and gross profit to be $8 million higher. GAAP operating income was $75 million and operating margin was 21.7%. Net income was $60 million or $1.26 per diluted share. The effective tax rate in the quarter was 28% and was impacted by certain discrete items. Foreign currency transaction gains related to remeasuring foreign currency assets and liabilities to period-end exchange rates, had a positive impact on operating income of $3 million and positively benefited earnings per share by $0.06.
Excluding the currency transaction gain and a small restructuring charge, operating expenses declined year-over-year, primarily in research and development as we reduced spending on telecom product development as well as reduced expenses from the sale of the corporate aircraft last year. Moving to slide five. Sales of high power CW lasers decreased 8% and represented approximately 44% of total revenue. Sales of ultra-high power lasers above six kW represented 42% of total high power CW laser sales.
The decline was primarily due to lower demand in high power cutting applications due to softer demand and competition in China, which was only partially offset by growth in welding. Pulsed lasers sales decreased 16% year-over-year as strong growth in cleaning and solar cell applications was offset by lower demand in cutting and marking applications. Systems sales increased 20% year-over-year driven by growth in laser-based systems and LightWELD. Medium power laser sales decreased 42% while QCW laser sales were down 12% year-over-year, negatively impacted by lower sales to consumer electronics applications.
Other product sales increased driven by strong medical sales and increased revenue in advanced applications. Looking at our performance by region on slide six, revenue in North America decreased by 1%, due to the telecom divestiture. Growth in welding, cleaning, advanced applications and medical applications was strong in the quarter and offset lower cutting revenue.
In Europe, sales decreased 7% as a result of difficult comparisons as some growth in the first quarter of the prior year was attributed to pull forward of demand from the second quarter due to supply chain concerns. However, European revenue increased sequentially despite overall uncertainty in the economy. Revenue in China decreased 22% year-over-year as growth in welding for EV battery applications and cleaning applications was offset by continued softness in the cutting market and lower demand in marking applications. Moving to a summary of our balance sheet on slide seven, we ended the quarter with cash, cash equivalents, and short-term investments of $1.1 billion and total debt of $16 million. Cash provided by operations was $37 million during the quarter and capital expenditures were $33 million in the quarter.
First quarter cash provided by operations is typically low due to bonus and tax payments. Our inventories stabilized in the quarter and we continue target a reduction in inventories during the year. While maintaining a strong balance sheet, we have been returning a significant amount of capital to shareholders over the last year and continued to do so in the first quarter. During the first quarter, we repurchased shares for a total of $113 million completing our existing authorization.
Today, we announced a new $200 million share repurchase program, another commitment in our efforts to enhance shareholder value by returning capital. IPG has returned a significant amount of capital since the beginning of 2022, repurchasing over $600 million in shares outstanding. Moving to outlook on slide nine, first quarter book-to-bill was 1. We continue to see uncertain macroeconomic conditions and soft demand in general industrial markets.
Despite relaxing COVID restrictions in China, demand remains relatively muted. However, we are still seeing solid activity and orders in e-mobility and renewable energy across all geographies. Despite all of the uncertainty, IPG continues to benefit from growth opportunities created by major macrotrends such as electric vehicle battery manufacturing and renewable energy. Furthermore, LightWELD has been gaining traction in the U.S., Europe and Asia. We believe these trends and continuing efforts to diversify our revenues will make IPG more resilient and drive our growth. For the second quarter of 2023, IPG expects revenue of $325 million to $355 million.
The Company expects the second quarter gross margin to be between 41.5% and 43.5%. IPG anticipates delivering earnings per diluted share in the range of $1.05 to $1.35, with approximately 47.5 million diluted common shares outstanding. As discussed in the "Safe Harbor" passage of today's earnings press release, our guidance is based upon current market conditions and expectations, assumes exchange rates referenced in our earnings press release, and is subject to risks outlined in the "Safe Harbor" and the company's reports with the SEC.
With that, we will be happy to take your questions.
