Timothy P.V. Mammen
Chief Financial Officer and Senior Vice President 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 4. Revenue in the fourth quarter was $364 million, up 8% year-over-year, driven by growth in most of our key product lines and geographies, but declined 4% sequentially mainly due to lower revenue in high-power cutting applications in China. Revenue from materials processing applications increased 5% year-over-year and revenue from other applications increased 41%.
Fourth quarter GAAP gross margin was 45.5%, an increase of 190 basis points year-over-year, driven by lower inventory provisions, which reduced gross margin last year, but was partially offset by increased shipping costs and lower fixed cost absorption. Sequentially, gross margin decreased due to slightly higher cost of product sold, inventory provisions, shipping costs and unabsorbed manufacturing expenses. In order to offset some of the inflationary pressures we are experiencing, we have increased the selling price of some products.
GAAP operating income was $85 million and operating margin was 23.3%. Net income was $65 million, or $1.21 per diluted share. The effective tax rate in the quarter was 23%. During the quarter, we recognized a foreign exchange gain of $7 million, primarily related to the appreciation of the U.S. dollar versus the euro and Russian ruble and appreciation of Chinese Yuan. Exchange rates relative to the U.S. dollar had been the same as one year ago, we would have expected revenue to be $3 million higher and gross profit to be $1 million higher.
Moving to Slide 5. Sales of high-power CW lasers decreased 19% and represented approximately 41% of total revenue. Sales of ultra-high power lasers above six kilowatts represented 51% of total high-power CW laser sales. Pulsed lasers sales increased 32% year-over-year, with continued growth driven by high-power pulsed lasers used in EV battery manufacturing, which was partially offset by lower sales of green pulsed lasers used in solar cell applications.
Systems sales increased 28% year-over-year, driven by growth across laser systems and higher sales of LightWELD. Medium-power laser sales increased 28% on growth in 3D manufacturing and semiconductor applications. QCW laser sales were up 30% year over year due to higher demand in welding. Other product sales increased 81% year-over-year, driven by higher sales in medical, telecom, advanced applications, as well as beam delivery and parts.
Looking at our performance by region on Slide 6. Revenue in North America increased 30%, driven by growth in materials processing with strong cutting and welding revenue, driven by higher demand in electric vehicles and traditional automotive industry. We also saw record revenue in medical applications and improved sales in telecom. In Europe, revenue increased 37%, as a result of higher demand across many products and applications, including cutting, welding, marking and semiconductor. The region is becoming a close number two in terms of revenue contribution for IPG.
Revenue in China decreased 20% year over year as we continued to see lower sales in high-power cutting applications, which was only partially offset by growth in welding, high-power pulsed cutting, 3D manufacturing, marking and cleaning applications. We are seeing order activity stabilizing in cutting, but portions of the cutting market that focus on price remain highly competitive. We were pleased to see a solid improvement in demand in Japan this quarter, driven by higher demand in cutting and welding applications.
Moving to a summary of our balance sheet on Slide 7. We ended the quarter with cash, cash equivalents and short-term investments of $1.5 billion and total debt of $34 million. Strong operational execution resulted in cash provided by operations of $85 million during the quarter.
Capital expenditures were $29 million in the fourth quarter. We expect 2022 capital expenditures will be in the range of $130 million to $140 million for the full year. 2022 capex includes facilities and capacity expenditure to support our future growth, as well as redundant capacity for critical components. During the quarter, we repurchased 345,000 shares for a total of $57 million and have approximately $80 million left under the May 2020 authorization. Last week, the Board authorized an additional $200 million in share repurchases. Including this new program, the Board has authorized more than $0.5 billion in stock repurchases over the last three years.
Moving to outlook on Slide 9. Fourth quarter book-to-bill was close to 1, and we are pleased with order flow across most geographies and products outside of China. Macroeconomic indicators have been moderating, but remain strong for the U.S. and Europe, while Japan continues to recover. And China has indicated it will focus on stimulating economic growth in 2022. We are also seeing China high-power cutting demand start to stabilize, albeit at lower levels.
We continue to benefit from growth opportunities in electric vehicle battery manufacturing, roll-out of LightWELD and growth in medical sales. That said, there is still a great uncertainty in the operating environment and price competition in China that make forecasting our business challenging in the medium term. And our first quarter guidance remains subject to significant uncertainties, including the impact on the global business environment from geopolitical events, COVID-19, economic trends, growth from emerging product revenue, competition and the lack of long-term binding order commitments.
We are closely monitoring the situation between Russia and the Ukraine. As we have disclosed before, we supply components between our major manufacturing operations in the U.S., Germany and Russia. At this time, it's unclear if sanctions would be put in place and should they be, if they would cover components bought or sold from our Russian subsidiary. Sanctions could also target Russian banks and the banking system. In response to this uncertainty, we are developing contingency plans to mitigate possible disruptions, including increasing local inventory levels of key imported components and increasing production at other locations.
For the first quarter of 2022, IPG expects revenue of $320 million to $350 million. The company expects the first quarter tax rate to be approximately 26%. An increase in tax rate assumption is due to a decrease in the benefit expected from discrete items such as the excess tax benefit related to equity compensation. IPG anticipates delivering earnings per diluted share in the range of $0.85 to $1.15, with 54 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 company's reports with the SEC.
With that, we will be happy to take your questions.
