Mark M. Gitin
Chief Executive Officer at IPG Photonics
Thanks, Eugene, and good morning, everyone. For today's call, I'll provide a high-level overview of the quarter and share progress we've made on our strategy to drive long-term sustainable and profitable growth. After that, I will turn it over to Tim to provide more of the financial details, and then we will open the call for questions. Starting with our 4th-quarter, revenue came in at the high-end of our guidance, up slightly from our 3rd-quarter and consistent with the business environment that continues to bounce along the bottom. Gross margin improved in the quarter, helped by our efforts to reduce inventories. Our operating expenses were also better-than-expected and down both year-over-year and sequentially. Our progress on expenses reflects the hard work the team has already undertaken to reduce our cost structure and we will be deploying the savings towards strategic investments in the business. Our free-cash flow remains strong, reflecting higher profits and the positive working capital impact, and we maintained a very strong balance sheet. Although our results do not yet reflect our full potential. I'm proud of the progress we've made in navigating a challenging business environment that is impacting us on two-levels. One, the tough macro conditions in general industrial and automotive markets, including EV; and two, a more competitive environment in cutting. Over the last few months, we've undertook a comprehensive review of our strategy, markets, technologies and competition. We then developed a plan to strengthen our current products, penetrate new applications and markets, introduce novel solutions and set the foundation for a return to growth and better profitability in 2026 and 2027. Our leadership team and Board are aligned around our strategic plan and we are hitting the ground running. We are addressing the challenging near-term demand environment and increased competition by reducing product costs, accelerating product development and strengthening relationships and support for our OEM customers. A prime example of our efforts to reduce product cost is our recent introduction of a new high-power fiber laser platform. This platform features next-generation high-power pump diodes that enable a more compact design at a lower manufacturing cost to help our cutting OEM customers defend against low-cost Chinese-made systems. We also remain well-positioned for opportunities in applications such as welding and cleaning as industrial and e-mobility demand recovers. In order to win in the long-term, we are making investments in our business to drive differentiation in attractive markets where we can earn the greatest returns on our capital. Since I joined, we've taken a deep-dive into every R&D program. Entering 2025, we are accelerating investment in several dedicated programs with strong market potential. Examples include urology applications, key opportunities and other areas where we have strong expertise and important relationships with market-leading customers. In aggregate, these programs target markets exceeding $5 billion in TAM and offer IPG multiple hundreds of millions of dollars in revenue opportunities over the next several years. It's important to note that these roadmaps will develop over-time and have multiple milestones to hit on the path-to-market, but we are engaged with key customers today and have booked initial orders for a number of products in development. For competitive reasons, we prefer to keep many of these initiatives out-of-the spotlight, but one area that I can highlight is urology. Urology is a multi-billion dollar TAM where we already have a solid position and where our applications and laser expertise can be utilized to create novel treatment solutions and outperformance on the market today. We expect to introduce the next product on our urology roadmap later this year, our new-generation of fluid and laser systems for the treatment of kidney stones, and we are making good progress in our other targeted R&D program. We expect to generate initial revenue from some of these programs in 2025 with more meaningful returns on our investments beginning in 2026 and beyond as new products gain traction. We're also actively seeking opportunities to expand product offerings and market reach in key application areas throughout targeted acquisitions. We are integrating our December acquisition of Clean Laser, a maker of laser-based cleaning systems. Clean Laser is an example of our plan to complement focused R&D with strategic tuck-in acquisitions that accelerate our penetration of important markets. By leveraging Clean Laser's unique technological expertise and European presence and combining it with our strength in other markets, we aim to accelerate growth of our laser-based cleaning systems. Cleaning is a promising market, particularly for laser systems for the long-term, and it's a market where we bring differentiated solutions. Furthermore, to support our strategy, we are strengthening discipline and execution across the organization. We are increasing intimacy with our customers so that we can focus product development on their foremost needs. We are enhancing our go-to-market by optimizing our sales team structure to drive targeted business development opportunities and improve account and product management. And finally, we're enhancing our service strategy and our offerings to better support our customers, build trust and create recurring revenue opportunities. In summary, from innovation and cost-savings to strategic acquisitions and tailored solutions, our initiatives showcase the depth of work underway to strengthen IPG for the long-term. While some of our initiatives, including our product development programs will take time to be reflected in our results, our work today to strengthen our organization and execution will put us in a position to mitigate the near-term environment while positioning IPG for a stronger 2026 and beyond. Moving to our near-term outlook, we continue to believe we are bouncing along the bottom with 4th-quarter book-to-bill close to 1%. As I've discussed, we are investing in the growth of our business, which will have an impact on our profitability in the near-term, but we are committed to these investments as they will drive shareholder value in the long-term. When revenue growth returns, we expect to show strong operating leverage that highlights the value of our platform. Before turning the call over to Tim, I wanted to touch on a few other items. The first is how we are thinking about capital allocation as we invest for the future. First, IPG has exciting opportunities ahead. We also have one of the strongest balance sheets in the industry with over $900 million of cash and no debt. This financial strength provides flexibility and a significant competitive advantage. We've talked today about our strategic investments in differentiation and growth, both organic and via tuck-in acquisitions. As we prioritize investing in our business, you should expect us to be less aggressive on share repurchases in the near-term. We are excited about the initiatives we're driving as we position the company for long-term value-creation. The second item relates to the founders trust that are significant long-term shareholders of IPG. The Trusts have always operated with IPG's long-term interest in mind and have historically sold modest amounts in the open-market under Rule 144A to cover their expenses. Since Trust 1 and 3's remaining shares are not currently eligible to be sold under Rule 144, we plan to file a resale registration statement following our 10-K to facilitate an orderly distribution of shares over the next three years to cover expenses and diversify trust assets. The total amount of shares to be registered represents approximately 5% of IPG's total outstanding shares today. The trusts have indicated that they intend to remain significant long-term shareholders and support our strategy. In closing, IPG is a great company with enormous potential. I am confident that with our continued focus on innovation and execution, we are well-positioned to leverage our strengths to drive sustained growth. With that, I will now turn the call over to Tim.
