IPG Photonics Corporation

Greetings, and welcome to IPG Photonics' fourth quarter 2020 conference call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to Eugene Fedotov, IPG's Director of Investor Relations, for introductions. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. This is today's IPG Photonics Chairman and CEO, Dr. Valentin Kapolintsov, Chief Operating Officer, Dr. Eugene Shcherbakov. and Senior Vice President and CFO at the moment. Statements made during the course of this call that discuss management or the company's intentions, expectations, or 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. These risks and uncertainties include the impact of the COVID-19 pandemic on our business and those detailed in IPG Photonics Form 10-K for the period end of December 31, 2019, and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investor 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 of prediction as of today, February 16th, 2021 only. The company assumes no obligation to public entities any updates or revisions to any such statements. For additional details on our reported results, please refer to the earnings press release and the Excel-based financial data for a book posted on our investor relations website. We will post these prepared remarks on our industry relations website following the completion of this call. With that, I'll now turn the call over to Valentin.

Good morning, everyone. We are pleased with our first quarter results as we delivered a revenue that was 10% higher than the first quarter of 2019 and above our guidance range. In addition, Book-to-bill was above 1 in the fourth quarter, as we saw the traction in order flow that started in the third quarter continue during the fourth quarter and into 2021. We're continuing to benefit from the advantages of our leading-edge products, technology differentiation, low-cost production capabilities, and the global footprint. We continue to see strong revenue in China, which was significantly higher on a year-over-year basis as volume growth more than offset lower selling prices in the region. We are also pleased to see a sequential improvement in revenue in Europe and strong sequential revenue growth in North America in the fourth quarter. Our system sales also improved modestly, but continue to be below last year, primarily due to the impact of the economy from COVID-19. We're demonstrating good progress in our core markets thanks to our technology differentiation and low-cost production capability. In high-power wages, we deliver strong year-on-year growth in both our rack-mounted 1-4 kilowatt wages for the high-volume market and our ultra-high-power wages for leading-edge catching systems. as sales of lasers above 6 kilowatts increased 34% compared to the fourth quarter in 2019, and were 56% of total high-power sales. At high end of the market, we're benefiting from an increase in order volumes for our 20 and 30 30 kilowatt ultra high power lasers and optical heads. These lasers not only enable 50 to 100 percent after cutting speed than our 15 kilowatt devices, but are capable of processing materials with 20 to 50 millimeter thickness or even greater. This improvement in productivity and flexibility, coupled with super beam parameters, superior beam parameters, record wall plug efficiency and reliability is driving the replacement of plasma cutting machines, other non-weather solutions and low-power weather solutions. We booked the first orders for the new, unique, ultra-compact rack-mounted U-series of lasers for a low-cost cutting system, and we expect to start sweeping them shortly in volume. Not only do these lasers provide extended optical performance, record power-to-volume ratio, and full protection against humidity, they are also significantly evolving cost to manufacturers. As a result, we expect this new design to improve growth margin for this product. We continue to focus on growing sales in other applications set outside of our traditional cutting and welding markets. Last quarter, we launched our Revolutionally innovative handheld laser welding system and the initial customer response has been extremely positive. We believe this system has a great potential for IPG as it replaces traditional hand welding products used in metal fabrication like TIG, or MIG. The product offers orders of magnitude higher welding quality and speed with much greater precision, flexibility, and ease of use to our customers around the world. In addition, for the first time, the product will simultaneously provide the highest quality pre-cleaning and after cleaning of the well touches and well itself, respectively. We have already sold a number of units in the last few weeks only and believe that there are many thousands of customers in the U.S. alone and many tens of thousands worldwide that could be interested in this unique product. During the fourth quarter, emerging products and application sales were 28% of total revenue, increasing 22%. We are pleased with the performance of a number of products that are the key to the diversification of our revenue. Examples include high-power second pulse waves are used for foil cutting and cleaning in electric vehicle battery processing, as well as for ablation and cleaning, sales of medical lasers and consumable medical fibers. Our gold standard solution for urology and green wages sales for solar cell processing. With record backlog, we expect sales of green wages to continue to grow fast as our green pulse weather are enabling significant improvements in solar cell efficiency. In additional, high-power weather for defense application perform well year-over-year. Despite the impact of the pandemic, ultraviolet and ultrafast pulse weather into imagined microprocessing applications show strong growth for 2020. Our adjustable mode beam, A and B lasers, continue to gain traction in the welding industry, most notably in electric vehicle battery welding. And as a result, we received significant orders for AMB lasers in Q4. Our AMB products offer superior speed and weld quality. Our competing solution sends the broadest range of beam tunability, which enables sputter-less welding. The multiple QCV laser for high-speed spot welding applications bring significant cost savings due to an increase in welding productivity and decrease in electrical consumption. Beyond material processing, we continue to develop new soft tissue medical treatments, meet infrared laser for molecular level resolution, online spectroscopy, inspection, sensing, and biomedical research applications. In addition, we are continuing development of our new generation of analog and high-tech digital silicon pathology devices for super high-speed and high-volume data processing. For telecom, data telecom, many and many other advanced future applications. Furthermore, we were extremely pleased by the growth we saw in advanced applications and medical applications. Associate development has been a driving force behind IPG's success since the company's inception. We spent our 10% of our total revenue on R&D in 2020 and have over 650 people in research and development, including many scientists and engineers who continue to develop new leading-edge solutions for our customers, helping drive efficiency and productivity in their operations and making our fiber weather technology the tool of choice in mass production. More than 20 years, too, of choice in mass production. Nobody can compare both of these absolutely in quality and other things. I would like to thank our employees for their strong execution during our first quarter despite the continued hell in the operating environment. As a result, the well-being of our employees, their families, our customers, our partners and communities will operate and remain our highest priority. With that, I will turn the call over to Eugene Shcherbakov.