NASDAQ:IPGP IPG Photonics Q1 2023 Earnings Report $58.15 +0.21 (+0.36%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$57.36 -0.80 (-1.37%) As of 04/25/2025 05:51 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast IPG Photonics EPS ResultsActual EPS$1.26Consensus EPS $1.00Beat/MissBeat by +$0.26One Year Ago EPS$1.31IPG Photonics Revenue ResultsActual Revenue$347.17 millionExpected Revenue$330.60 millionBeat/MissBeat by +$16.57 millionYoY Revenue Growth-6.20%IPG Photonics Announcement DetailsQuarterQ1 2023Date5/2/2023TimeBefore Market OpensConference Call DateTuesday, May 2, 2023Conference Call Time10:00AM ETUpcoming EarningsIPG Photonics' Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by IPG Photonics Q1 2023 Earnings Call TranscriptProvided by QuartrMay 2, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Morning, and welcome to IPG Photonics First Quarter 2023 Conference Call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to your host, Eugene Fedidov, IPG's Director of Investor Relations for introductions. Please go ahead, sir. Speaker 100:00:18Thank you, Rob, and good morning, everyone. With me today is IPG Photonics' CEO, Doctor. Eugene Scherbakov And Senior Vice President and CFO, Tim Momin. Let me remind you that statements made during the course of this call that discuss management's or the company's Predictions of the future are forward looking statements. These forward looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from those projected in such forward looking statements. Speaker 100:00:54These risks and uncertainties are detailed in IPG Photonics' Form 10 ks for the period ended December 31, 2022, and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investors section of IPG's website or by contacting the company directly. You may also find copies on the SEC's website. Any forward looking statements made on this call are the company's expectations or predictions as of today, May 2, 2023 only. The company assumes no obligation to publicly release any updates or revisions to any such statements. Speaker 100:01:34For additional details on our reported results, please refer to the earnings press release, earnings call presentation or the Excel based Financial data workbook posted on our Investor Relations website. We will post these prepared remarks on our Investor Relations website following the completion of this call. With that, I'll now turn the call over to Eugene Sherbakov. Speaker 200:01:59Good morning, everyone. We are pleased with our results this quarter, which were above our guidance range despite the macroeconomic uncertainty That continue to negatively impact demand in general industrial applications such as cutting and marking. We reported another quarter of solid revenue growth in Welding that was driven by record sales in the applications And all time high revenue for our handheld welder, LightWeld. Additionally, we saw the strong results in cleaning And solar cell manufacturing. Demand for these products is driven by global macro trends And increasing investment in renewable energy and eco friendly solutions. Speaker 200:02:51IPG is developing innovative technology that enable manufacturing of these products and improve Speed and efficiency with benefits to society and environment. Recently, we published our 2023 annual The ability to report on our website, provide information on many of these trends and how IPG delivers on our new mission statement, applying light in ways that improve life. IPG has been making good progress in diversifying our revenue and reducing our exposure to Cyclical and Economically Sensitive Industrial Markets. While these markets and applications are still account for A major portion of IPG revenue, we have been investing on our R and D sales and operating resources to support growth The Q1 Emerging Growth product sales grew both sequentially and year over year and accounting for 45% of Total sales. Many of these products are benefiting from global investment in e mobility and renewable energy. Speaker 200:04:20We saw another quarter of record sales in AMB lasers, driven by growth in the battery welding as global EBITDA capacity build out Continued. We also saw increased demand for our green lasers that are used in solar cell manufacturing applications, improving efficiency of these solar cells. We expect investment in solar cell capacity globally to drive increasing demand for our green lasers in the future. Additionally, our revenue for lasers used in cleaning applications grew significantly in the Q1. Weather cleaning solution provides sustainability benefits by reducing the use of abrasives and harmful chemicals. Speaker 200:05:12For example, the customer is evaluating replacing acid etching with our cleaning lasers. In addition to environment benefits, laser cleaning can significantly reduce cost of storage, transportation and handling toxic Chemicals and eliminatory lines on consumables, which leads to reduced operating expenses. Our recently introduced laser drying and heating solutions are replacing the less efficient infrared bulbs. The solutions are well received by customers and are gaining market acceptance because they cut down on energy consumption And environment impact. We expect orders for this system in the Q2 and anticipate the strong demand for Drilling Systems of the future. Speaker 200:06:08IPZ had another quarter for the 2nd sales of Record sales for inability applications. We are seeing customers accelerating investment in heavy battery capacity in North America, Europe, Japan and Korea, in addition to the investments being made in China. Our eMobility business in the United States It increased substantially in the Q1 as the customers shifted investment into the region to take advantage of garment and sensitive. We offer a broad range of solutions to customers from laser source to complete production line for existing Our real time wealth monitoring solutions and adjustable mode beam lasers Create an industry leading combination and addresses customers' challenges and provides superior weld quality for hundreds of welds in each battery pack. We continue to explore additional opportunity for welding components Electrical Motor Assembly is a strong pipeline of opportunities. Speaker 200:07:20We are expecting our global sales force focused on e mobility applications. We expect the EV investment cycle to continue And e mobility sales remain strong in the next 3 to 5 years. Also demand can fluctuate depending on the pipeline of projects And Regional Capacity Editions. Our Medical business had a good quarter and grew year over year, Driven by continued adoption of our laser system and consumable fibers for urology applications. However, we expect medical sales will be softer in the 2nd quarter as a large customer adjust its buffer inventory. Speaker 200:08:08We are working on multiple new opportunities to broaden our medical portfolio and to further grow the business. So it becomes a more meaningful contributor to FPG sales in the next 2, 3 years. I would like to thank our employers for their dedicated work. We believe that an engaged And diverse workforce is a great strength of our organization. ITZ has always focused on inclusion and employs a large number of women and workers from diverse backgrounds. Speaker 200:08:52To further improve our diversity, for the first time, we announced targets in our recent CSR reports to increase gender diversity and minority representation The global workforce and management roles, we strongly believe that inclusive workplace Create a better future for our company and the community we operate in. I will now turn the call over to the team to discuss Speaker 300:09:28Thank you, Eugene, and good morning, everyone. My comments Generally, we'll follow the earnings call presentation, which is available on our Investor Relations website. I will start with the financial review on Slide 4. Revenue in the Q1 was $347,000,000 a decline of 6% year over year Due to foreign currency headwinds, which accounted for approximately 4% of the decline in the 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%. Speaker 300:10:12GAAP 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. Speaker 300:10:44Dollar had been the same as 1 year ago, We would have expected revenue to be $15,000,000 higher and gross profit to be $8,000,000 higher. GAAP operating income was $75,000,000 and operating margin was 21.7%. Net income was $60,000,000 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 Remeasuring foreign currency assets and liabilities to period end exchange rates had a positive impact on operating income of $3,000,000 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 reduce spending on telecom product development as well as reduced expenses from the sale of the corporate aircraft last year. Speaker 300:11:57Moving to Slide 5. Sales of high power CW lasers decreased 8% and represented approximately 44% of total revenue. Sales of ultra high power lasers above 6 kilowatts Represented 42 percent of total high power CW laser sales. The decline was primarily due to lower demand in high Cutting applications due to softer demand and competition in China, which was only partially offset by growth in Welding. Pulsed laser 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. Speaker 300:12:48Systems sales increased 20% year over year, driven by growth in laser based systems and Lightworld. 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 6, revenue in North America decreased by 1% due to the Telecom divestiture. Growth in welding, cleaning, advanced applications and medical applications We're strong in the quarter and offset lower cutting revenue. Speaker 300:13:41In Europe, sales decreased 7% As a result of difficult comparisons, some growth in the Q1 of the prior year was attributed to pull forward of demand from the Q2 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 7. We ended the quarter with cash, cash equivalents and short term investments $1,100,000,000 and total debt of $16,000,000 Cash provided by operations was $37,000,000 during the quarter and capital expenditures were $33,000,000 in the quarter. Speaker 300:14:461st quarter cash provided by operations is typically low due to bonus and tax payments. Our inventory stabilized in the quarter and we continue to target a reduction in inventories during the year. While maintaining a strong balance sheet, We've been returning a significant amount of capital to shareholders over the last year and continue to do so in the Q1. During the Q1, we repurchased shares for a total of $113,000,000 completing our existing authorization. Today, we announced a new $200,000,000 share repurchase program, another commitment in our efforts to enhance shareholder value by returning capital. Speaker 300:15:32IPG has returned a significant amount of capital since the beginning of 2022, repurchasing over $600,000,000 in shares outstanding. Moving to outlook on Slide 9. 1st 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. Speaker 300:16:05However, we are still seeing solid activity and orders in eMobility and Renewable Energy across all geographies. Despite all of the uncertainty, IPG continues to benefit from growth opportunities created by major macro trends such as Vehicle Battery Manufacturing and Renewable Energy. Furthermore, Lightwell 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. Speaker 300:16:41For the Q2 of 2023, IPG expects revenue of $325,000,000 to $355,000,000 the company expects the 2nd quarter gross margin to be between 41.5% 43.5%. IPG anticipates delivering earnings per diluted share in the range of $1.05 to $1.35 With approximately 47,500,000 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'll be happy to take your questions. Operator00:17:46Thank you. At this time, we'll be conducting a question and answer Our first question comes from Reuben Roy with Stifel. Please proceed with your question. Speaker 400:18:22Hi, thank you. Tim, I was wondering if you could expand a little bit on the commentary around demand in China remaining relatively muted. Recently, you characterized some of those Applications in China that have been weak like cutting as sort of near or at trough level. And just wondering At this point, if you think there might be a further leg down based on what you're seeing from the order environment or With reopening, I know there's been some mixed PMI data recently, but as you think about the second half, do you think that we might see a little bit of improvement off of what Speaker 300:19:03I mean, I think at the moment, demand remains relatively muted as we've said. The Expected traction from a recovery is taking longer to really crystallize. I still think we're running relatively Speaking on some of the older industrial applications like cutting and marking and engraving at that sort of trough level, But continuing to perform very well on EV and some of our precision applications, which now are A dominant part of our overall revenue there. I think our commentary is in line with what other people are seeing, right? You're not just seeing A very strong rebound post COVID restrictions being lifted. Speaker 300:19:48The PMI data It's not particularly strong. But for example, in Q1, relative to our guidance, China did out Perform a little bit, so that was a positive. So there was some evidence of a little bit of strengthening in their Q2 guidance It's reasonable. It doesn't show any material pickup compared to Q1. It's relatively flat, but it does point to stability. Speaker 300:20:15I think it's way too early to say where the second half of the year really ends up at this point in time. Speaker 400:20:21Understood. That's helpful. Thanks, Tim. As a quick follow-up, I wanted to touch on some of the emerging markets, which obviously are doing very well, and specifically around EV And how to think about that marketplace, you doubled revenues 2021 to 2022, order rates continue to remain very strong. Eugene talked about a little bit of a slowdown in medical as one of your large customers adjust against buffer inventory. Speaker 400:20:51I'm wondering how to think about EV and the order book going forward, do you think some of the new applications that you're addressing are going to continue to drive momentum or new customer diversity, Or is there a period that we might see coming up where you have some equipment utilization and pause in spend in that market? Kind of wondering how we should think about that for the rest of this year? Speaker 300:21:16So overall, the EV demand environment remains really quite strong, right? I think the benefit is that where you might See weakness in one area, it's going to be picked up in other areas. So we're seeing a lot of demand coming out of North America at the moment. Some of that's Driven by some of the benefits that came out of the Inflation Reduction Act. You're starting to see increased investments in Europe as well. Speaker 300:21:45China remains quite resilient in that area, but even if there is a bit of a slowdown in one of those geographies, we expect it to be Continue to be strong in some of the other areas. There's demand we're expecting and we're seeing in some other areas in Southeast Asia as well like South Korea and even in Japan. The other benefit is that I think we're going to start to see orders for the drying equipment Materialized during the Q2 and that should continue to diversify that revenue stream. So, I think we have to look at it more on a global basis rather than just specific geographies, and we believe that the puts and takes around that will make this still a very Speaker 200:22:29Also, I would like to add, there are very strong growth for revenue itself for pulsed laser applications, 1st of all, for cleaning. But for us, it's much more important that we are not selling only just lasers, But also final system of cleaning, including our lasers, scanners, in some cases, LED monitor and other options. And selling for such kind of product, it also demonstrates a good opportunity for us to penetrate to many, many different markets per year related to the cleaning applications. Speaker 400:23:05Thank you, Eugene. Thank you, Tim, for all the detail. Speaker 200:23:09No problem. Thank you. Operator00:23:12Our next question is from Jim Ricchiuti with Needham and Company. Please proceed with your question. Speaker 500:23:19Hi, good morning. This is actually Chris Gringa on for Jim. Europe and Germany in particular saw sequential revenue growth. Could you provide some additional color on what you're seeing in that region? Speaker 300:23:33Yes. I think actually Europe was Performed very well in the Q1 given the challenges that that area has faced. I think you started to see Really, the energy issues that were a key headwind in the middle and third And even into the end of last year have started to abate. So the overall demand environment was quite strong. Some of that was EV, but there was also good demand for some of the cutting applications, particularly in Southern Europe, Which helped some of that outperformance. Speaker 300:24:11So yes, I think the economic data is really stabilized. PMIs are still not Very strong there, but at least the underlying demand was certainly stronger than we'd And the overall tone in the business for the Q1 was quite positive and that carries on even in the Q2 with the guidance that we received from Speaker 200:24:34And especially for EV applications, we see such kind of trend that our main Speaker 300:24:42Our next question comes from the Speaker 200:24:42line of Michael Korsch, who is the CEO of the company. And of course, for us, it's much more advanced because we are using all our portfolio for different kind of laser options For such kind of production. Speaker 500:25:03Got it. Great. Thank you. And With respect to the battery application, is there any carryover overlap with Stationary battery storage that would be in use in like a residential or like a utility scale solar application or is it mostly relevant for EV batteries. Speaker 200:25:28Of course, EV battery now is the first place, but Battery for storage also is very important, especially for Europe because its solar applications that might be not so active now. But definitely, it will be growing in the future. This is why the storage battery is very important part of this production. But of course, on the first time now, it's on the first place, of course, definitely it's better for electrical cars. Speaker 300:25:56The application set would be very similar, whether it's on the welding, cleaning, all of that. It's basically pretty standard across those. Speaker 200:26:03Yes. Speaker 500:26:06Got it. Thank you. And just perhaps one more. So with respect to The migration of the production of components that were formerly in Russia, just could you provide a status update on where that Dan's and perhaps any of the large remaining items on that effort? Speaker 200:26:27First of all, it's not migration of production. We're expanding our production in Germany because it's our standard product for many, many years. By the way, we introduced from Germany to Russia this production All technology is we are keeping in Germany. Yes, first of all, we increased our production in Germany, but also we installed the new manufacturing place for in Poland And also in Italy. And from this manufacturing, now we will have possibility to Eliminate any reliance to the Russian production for many different kinds of components, including the fiber block, Fibers and other especially fiber based components. Operator00:27:36Our next question comes from Mark Miller with The Benchmark Company. Please proceed with your question. Speaker 300:27:43Thank you for the question. Could you discuss the automotive market excluding EV? Speaker 200:27:52What do you mean to exclude EE? Now EE is a substantial part of this production. All investment by the way, all investment for example, European car production company mainly are going to EV production, not to standard Speaker 300:28:17Immersion applications, was that roughly 45% of sales last quarter? Yes. Okay. Thank you. Operator00:28:31We have reached the end of the question and answer session. I'd now like to turn the call back over to Eugene Fedorov for closing comments. Speaker 100:28:40Thank you for joining us this morning and your continued interest in IPG. We will be participating in a number of investor events this quarter and are looking forward to speaking with you over the coming weeks. Have a great day everyone. Operator00:28:55This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallIPG Photonics Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) IPG Photonics Earnings HeadlinesIPG Photonics price target lowered to $52 from $64 at BofAApril 22, 2025 | markets.businessinsider.comQ2 EPS Estimates for IPG Photonics Lifted by Zacks ResearchApril 19, 2025 | americanbankingnews.com$2 Trillion Disappears Because of Fed's Secretive New Move$2 trillion has disappeared from the US government's books. The reason why is a new, secretive move being carried out by the Fed that has nothing to do with lowering or raising interest rates... but could soon have an enormous impact on your wealth.April 26, 2025 | Stansberry Research (Ad)Zacks Research Boosts Earnings Estimates for IPG PhotonicsApril 18, 2025 | americanbankingnews.comIPG Photonics price target lowered to $80 from $90 at Raymond JamesApril 8, 2025 | markets.businessinsider.com3 Reasons to Avoid IPGP and 1 Stock to Buy InsteadApril 2, 2025 | msn.comSee More IPG Photonics Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like IPG Photonics? Sign up for Earnings360's daily newsletter to receive timely earnings updates on IPG Photonics and other key companies, straight to your email. Email Address About IPG PhotonicsIPG Photonics (NASDAQ:IPGP) develops, manufactures, and sells various high-performance fiber lasers, fiber amplifiers, and diode lasers used in various applications primarily in materials processing worldwide. Its laser products include hybrid fiber-solid state lasers with green and ultraviolet wavelengths; fiber pigtailed packaged diodes and fiber coupled direct diode laser systems; high-energy pulsed lasers, multi-wavelength and tunable lasers, and single-polarization and single-frequency lasers; and high-power optical fiber delivery cables, fiber couplers, beam switches, chillers, scanners, and other accessories. The company also offers integrated laser systems; LightWELD, a handheld laser welding system; 2D compact flat sheet cutter systems and multi-axis systems for fine welding, cutting, and drilling; welding seam stepper and picker, a fiber laser welding tool; high precision laser systems; specialized fiber laser systems for material processing applications; robotic and multi-axis workstations for welding, cutting and cladding, flatbed cutting systems, and diode markers; and laser and non-laser robotic welding and automation solutions. It serves materials processing, communications, medical procedures, and advanced applications and communications markets. The company markets its products to original equipment manufacturers, system integrators, and end users through direct sales force, as well as through agreements with independent sales representatives and distributors. IPG Photonics Corporation was founded in 1990 and is headquartered in Marlborough, Massachusetts.View IPG Photonics ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Morning, and welcome to IPG Photonics First Quarter 2023 Conference Call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to your host, Eugene Fedidov, IPG's Director of Investor Relations for introductions. Please go ahead, sir. Speaker 100:00:18Thank you, Rob, and good morning, everyone. With me today is IPG Photonics' CEO, Doctor. Eugene Scherbakov And Senior Vice President and CFO, Tim Momin. Let me remind you that statements made during the course of this call that discuss management's or the company's Predictions of the future are forward looking statements. These forward looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from those projected in such forward looking statements. Speaker 100:00:54These risks and uncertainties are detailed in IPG Photonics' Form 10 ks for the period ended December 31, 2022, and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investors section of IPG's website or by contacting the company directly. You may also find copies on the SEC's website. Any forward looking statements made on this call are the company's expectations or predictions as of today, May 2, 2023 only. The company assumes no obligation to publicly release any updates or revisions to any such statements. Speaker 100:01:34For additional details on our reported results, please refer to the earnings press release, earnings call presentation or the Excel based Financial data workbook posted on our Investor Relations website. We will post these prepared remarks on our Investor Relations website following the completion of this call. With that, I'll now turn the call over to Eugene Sherbakov. Speaker 200:01:59Good morning, everyone. We are pleased with our results this quarter, which were above our guidance range despite the macroeconomic uncertainty That continue to negatively impact demand in general industrial applications such as cutting and marking. We reported another quarter of solid revenue growth in Welding that was driven by record sales in the applications And all time high revenue for our handheld welder, LightWeld. Additionally, we saw the strong results in cleaning And solar cell manufacturing. Demand for these products is driven by global macro trends And increasing investment in renewable energy and eco friendly solutions. Speaker 200:02:51IPG is developing innovative technology that enable manufacturing of these products and improve Speed and efficiency with benefits to society and environment. Recently, we published our 2023 annual The ability to report on our website, provide information on many of these trends and how IPG delivers on our new mission statement, applying light in ways that improve life. IPG has been making good progress in diversifying our revenue and reducing our exposure to Cyclical and Economically Sensitive Industrial Markets. While these markets and applications are still account for A major portion of IPG revenue, we have been investing on our R and D sales and operating resources to support growth The Q1 Emerging Growth product sales grew both sequentially and year over year and accounting for 45% of Total sales. Many of these products are benefiting from global investment in e mobility and renewable energy. Speaker 200:04:20We saw another quarter of record sales in AMB lasers, driven by growth in the battery welding as global EBITDA capacity build out Continued. We also saw increased demand for our green lasers that are used in solar cell manufacturing applications, improving efficiency of these solar cells. We expect investment in solar cell capacity globally to drive increasing demand for our green lasers in the future. Additionally, our revenue for lasers used in cleaning applications grew significantly in the Q1. Weather cleaning solution provides sustainability benefits by reducing the use of abrasives and harmful chemicals. Speaker 200:05:12For example, the customer is evaluating replacing acid etching with our cleaning lasers. In addition to environment benefits, laser cleaning can significantly reduce cost of storage, transportation and handling toxic Chemicals and eliminatory lines on consumables, which leads to reduced operating expenses. Our recently introduced laser drying and heating solutions are replacing the less efficient infrared bulbs. The solutions are well received by customers and are gaining market acceptance because they cut down on energy consumption And environment impact. We expect orders for this system in the Q2 and anticipate the strong demand for Drilling Systems of the future. Speaker 200:06:08IPZ had another quarter for the 2nd sales of Record sales for inability applications. We are seeing customers accelerating investment in heavy battery capacity in North America, Europe, Japan and Korea, in addition to the investments being made in China. Our eMobility business in the United States It increased substantially in the Q1 as the customers shifted investment into the region to take advantage of garment and sensitive. We offer a broad range of solutions to customers from laser source to complete production line for existing Our real time wealth monitoring solutions and adjustable mode beam lasers Create an industry leading combination and addresses customers' challenges and provides superior weld quality for hundreds of welds in each battery pack. We continue to explore additional opportunity for welding components Electrical Motor Assembly is a strong pipeline of opportunities. Speaker 200:07:20We are expecting our global sales force focused on e mobility applications. We expect the EV investment cycle to continue And e mobility sales remain strong in the next 3 to 5 years. Also demand can fluctuate depending on the pipeline of projects And Regional Capacity Editions. Our Medical business had a good quarter and grew year over year, Driven by continued adoption of our laser system and consumable fibers for urology applications. However, we expect medical sales will be softer in the 2nd quarter as a large customer adjust its buffer inventory. Speaker 200:08:08We are working on multiple new opportunities to broaden our medical portfolio and to further grow the business. So it becomes a more meaningful contributor to FPG sales in the next 2, 3 years. I would like to thank our employers for their dedicated work. We believe that an engaged And diverse workforce is a great strength of our organization. ITZ has always focused on inclusion and employs a large number of women and workers from diverse backgrounds. Speaker 200:08:52To further improve our diversity, for the first time, we announced targets in our recent CSR reports to increase gender diversity and minority representation The global workforce and management roles, we strongly believe that inclusive workplace Create a better future for our company and the community we operate in. I will now turn the call over to the team to discuss Speaker 300:09:28Thank you, Eugene, and good morning, everyone. My comments Generally, we'll follow the earnings call presentation, which is available on our Investor Relations website. I will start with the financial review on Slide 4. Revenue in the Q1 was $347,000,000 a decline of 6% year over year Due to foreign currency headwinds, which accounted for approximately 4% of the decline in the 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%. Speaker 300:10:12GAAP 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. Speaker 300:10:44Dollar had been the same as 1 year ago, We would have expected revenue to be $15,000,000 higher and gross profit to be $8,000,000 higher. GAAP operating income was $75,000,000 and operating margin was 21.7%. Net income was $60,000,000 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 Remeasuring foreign currency assets and liabilities to period end exchange rates had a positive impact on operating income of $3,000,000 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 reduce spending on telecom product development as well as reduced expenses from the sale of the corporate aircraft last year. Speaker 300:11:57Moving to Slide 5. Sales of high power CW lasers decreased 8% and represented approximately 44% of total revenue. Sales of ultra high power lasers above 6 kilowatts Represented 42 percent of total high power CW laser sales. The decline was primarily due to lower demand in high Cutting applications due to softer demand and competition in China, which was only partially offset by growth in Welding. Pulsed laser 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. Speaker 300:12:48Systems sales increased 20% year over year, driven by growth in laser based systems and Lightworld. 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 6, revenue in North America decreased by 1% due to the Telecom divestiture. Growth in welding, cleaning, advanced applications and medical applications We're strong in the quarter and offset lower cutting revenue. Speaker 300:13:41In Europe, sales decreased 7% As a result of difficult comparisons, some growth in the Q1 of the prior year was attributed to pull forward of demand from the Q2 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 7. We ended the quarter with cash, cash equivalents and short term investments $1,100,000,000 and total debt of $16,000,000 Cash provided by operations was $37,000,000 during the quarter and capital expenditures were $33,000,000 in the quarter. Speaker 300:14:461st quarter cash provided by operations is typically low due to bonus and tax payments. Our inventory stabilized in the quarter and we continue to target a reduction in inventories during the year. While maintaining a strong balance sheet, We've been returning a significant amount of capital to shareholders over the last year and continue to do so in the Q1. During the Q1, we repurchased shares for a total of $113,000,000 completing our existing authorization. Today, we announced a new $200,000,000 share repurchase program, another commitment in our efforts to enhance shareholder value by returning capital. Speaker 300:15:32IPG has returned a significant amount of capital since the beginning of 2022, repurchasing over $600,000,000 in shares outstanding. Moving to outlook on Slide 9. 1st 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. Speaker 300:16:05However, we are still seeing solid activity and orders in eMobility and Renewable Energy across all geographies. Despite all of the uncertainty, IPG continues to benefit from growth opportunities created by major macro trends such as Vehicle Battery Manufacturing and Renewable Energy. Furthermore, Lightwell 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. Speaker 300:16:41For the Q2 of 2023, IPG expects revenue of $325,000,000 to $355,000,000 the company expects the 2nd quarter gross margin to be between 41.5% 43.5%. IPG anticipates delivering earnings per diluted share in the range of $1.05 to $1.35 With approximately 47,500,000 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'll be happy to take your questions. Operator00:17:46Thank you. At this time, we'll be conducting a question and answer Our first question comes from Reuben Roy with Stifel. Please proceed with your question. Speaker 400:18:22Hi, thank you. Tim, I was wondering if you could expand a little bit on the commentary around demand in China remaining relatively muted. Recently, you characterized some of those Applications in China that have been weak like cutting as sort of near or at trough level. And just wondering At this point, if you think there might be a further leg down based on what you're seeing from the order environment or With reopening, I know there's been some mixed PMI data recently, but as you think about the second half, do you think that we might see a little bit of improvement off of what Speaker 300:19:03I mean, I think at the moment, demand remains relatively muted as we've said. The Expected traction from a recovery is taking longer to really crystallize. I still think we're running relatively Speaking on some of the older industrial applications like cutting and marking and engraving at that sort of trough level, But continuing to perform very well on EV and some of our precision applications, which now are A dominant part of our overall revenue there. I think our commentary is in line with what other people are seeing, right? You're not just seeing A very strong rebound post COVID restrictions being lifted. Speaker 300:19:48The PMI data It's not particularly strong. But for example, in Q1, relative to our guidance, China did out Perform a little bit, so that was a positive. So there was some evidence of a little bit of strengthening in their Q2 guidance It's reasonable. It doesn't show any material pickup compared to Q1. It's relatively flat, but it does point to stability. Speaker 300:20:15I think it's way too early to say where the second half of the year really ends up at this point in time. Speaker 400:20:21Understood. That's helpful. Thanks, Tim. As a quick follow-up, I wanted to touch on some of the emerging markets, which obviously are doing very well, and specifically around EV And how to think about that marketplace, you doubled revenues 2021 to 2022, order rates continue to remain very strong. Eugene talked about a little bit of a slowdown in medical as one of your large customers adjust against buffer inventory. Speaker 400:20:51I'm wondering how to think about EV and the order book going forward, do you think some of the new applications that you're addressing are going to continue to drive momentum or new customer diversity, Or is there a period that we might see coming up where you have some equipment utilization and pause in spend in that market? Kind of wondering how we should think about that for the rest of this year? Speaker 300:21:16So overall, the EV demand environment remains really quite strong, right? I think the benefit is that where you might See weakness in one area, it's going to be picked up in other areas. So we're seeing a lot of demand coming out of North America at the moment. Some of that's Driven by some of the benefits that came out of the Inflation Reduction Act. You're starting to see increased investments in Europe as well. Speaker 300:21:45China remains quite resilient in that area, but even if there is a bit of a slowdown in one of those geographies, we expect it to be Continue to be strong in some of the other areas. There's demand we're expecting and we're seeing in some other areas in Southeast Asia as well like South Korea and even in Japan. The other benefit is that I think we're going to start to see orders for the drying equipment Materialized during the Q2 and that should continue to diversify that revenue stream. So, I think we have to look at it more on a global basis rather than just specific geographies, and we believe that the puts and takes around that will make this still a very Speaker 200:22:29Also, I would like to add, there are very strong growth for revenue itself for pulsed laser applications, 1st of all, for cleaning. But for us, it's much more important that we are not selling only just lasers, But also final system of cleaning, including our lasers, scanners, in some cases, LED monitor and other options. And selling for such kind of product, it also demonstrates a good opportunity for us to penetrate to many, many different markets per year related to the cleaning applications. Speaker 400:23:05Thank you, Eugene. Thank you, Tim, for all the detail. Speaker 200:23:09No problem. Thank you. Operator00:23:12Our next question is from Jim Ricchiuti with Needham and Company. Please proceed with your question. Speaker 500:23:19Hi, good morning. This is actually Chris Gringa on for Jim. Europe and Germany in particular saw sequential revenue growth. Could you provide some additional color on what you're seeing in that region? Speaker 300:23:33Yes. I think actually Europe was Performed very well in the Q1 given the challenges that that area has faced. I think you started to see Really, the energy issues that were a key headwind in the middle and third And even into the end of last year have started to abate. So the overall demand environment was quite strong. Some of that was EV, but there was also good demand for some of the cutting applications, particularly in Southern Europe, Which helped some of that outperformance. Speaker 300:24:11So yes, I think the economic data is really stabilized. PMIs are still not Very strong there, but at least the underlying demand was certainly stronger than we'd And the overall tone in the business for the Q1 was quite positive and that carries on even in the Q2 with the guidance that we received from Speaker 200:24:34And especially for EV applications, we see such kind of trend that our main Speaker 300:24:42Our next question comes from the Speaker 200:24:42line of Michael Korsch, who is the CEO of the company. And of course, for us, it's much more advanced because we are using all our portfolio for different kind of laser options For such kind of production. Speaker 500:25:03Got it. Great. Thank you. And With respect to the battery application, is there any carryover overlap with Stationary battery storage that would be in use in like a residential or like a utility scale solar application or is it mostly relevant for EV batteries. Speaker 200:25:28Of course, EV battery now is the first place, but Battery for storage also is very important, especially for Europe because its solar applications that might be not so active now. But definitely, it will be growing in the future. This is why the storage battery is very important part of this production. But of course, on the first time now, it's on the first place, of course, definitely it's better for electrical cars. Speaker 300:25:56The application set would be very similar, whether it's on the welding, cleaning, all of that. It's basically pretty standard across those. Speaker 200:26:03Yes. Speaker 500:26:06Got it. Thank you. And just perhaps one more. So with respect to The migration of the production of components that were formerly in Russia, just could you provide a status update on where that Dan's and perhaps any of the large remaining items on that effort? Speaker 200:26:27First of all, it's not migration of production. We're expanding our production in Germany because it's our standard product for many, many years. By the way, we introduced from Germany to Russia this production All technology is we are keeping in Germany. Yes, first of all, we increased our production in Germany, but also we installed the new manufacturing place for in Poland And also in Italy. And from this manufacturing, now we will have possibility to Eliminate any reliance to the Russian production for many different kinds of components, including the fiber block, Fibers and other especially fiber based components. Operator00:27:36Our next question comes from Mark Miller with The Benchmark Company. Please proceed with your question. Speaker 300:27:43Thank you for the question. Could you discuss the automotive market excluding EV? Speaker 200:27:52What do you mean to exclude EE? Now EE is a substantial part of this production. All investment by the way, all investment for example, European car production company mainly are going to EV production, not to standard Speaker 300:28:17Immersion applications, was that roughly 45% of sales last quarter? Yes. Okay. Thank you. Operator00:28:31We have reached the end of the question and answer session. I'd now like to turn the call back over to Eugene Fedorov for closing comments. Speaker 100:28:40Thank you for joining us this morning and your continued interest in IPG. We will be participating in a number of investor events this quarter and are looking forward to speaking with you over the coming weeks. Have a great day everyone. Operator00:28:55This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.Read morePowered by