IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' third quarter 2021 conference call. Today's call is being recorded in webcast. At this time, I'd like to turn the call over to your host, Eugene Federoff, IPG's Director of Investor Relations, for introductions. Please go ahead, sir.

Thank you, Robin. Good morning, everyone. With us today is IPG Photonics' Chief Executive Officer, Dr. Eugene Sherbakov, and Senior Vice President and CFO at Team 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 assurances that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and assurances include the impact of COVID-19 pandemic on our business and those detailed in IPG photonics Form 10-K for the period ended December 31st, 2020, 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 or predictions as of today, November 2nd, 2021 only. The company assumes no obligation to publicly release any updates or revisions to any such statements. For additional details on the reported results, please refer to the earnings press release, earnings call presentation, and 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.

Thank you, Eugene, and good morning, everyone. We are deeply saddened by the passing of the founder and executive chairman of IPG. This is a tremendous loss for our company and the broader photonics community, which benefited greatly from his technical innovations and strategic vision. Because of his vision and relentless work Fiber laser has become cost-effective, reliable, and effective tools that have mass applications in global industrial production, enabling automation, efficiency, and development of new products. He was recognized as a father of the fiber laser industry and a great entrepreneur. Following his footsteps, we will continue to focus on innovation and invest internally in manufacturing and research and development capabilities to make the highest quality components and the most reliable products. At IPG, we are also exploring new markers and applications where fiber lasers can replace existing laser and non-laser technologies by improving efficiency, productivity, or enabling technological breakthrough for our customers. Our technologies are playing well into the major micro trends and include investments in electrical vehicles and renewable energy, as well as focus on energy efficiency, industrial automation, and miniaturization, which are transforming the way products are created. As a part of our strategy, have been diversified away from the high competitive and more cyclical cutting market in China and our results this quarter demonstrate a successful execution of this strategy. We are pleased to deliver the third quarter revenue and EPS at the top end of our guidance. Results were driven by strong growth and welding marking 3D printing and as well as the cleaning, semiconductors, and a number of other products and applications. Demand for IPG laser continues to improve in North America and Europe, with both welding and cutting applications showing solid growth. We also see increased orders and business activity in Japan. These geographies continue to recover from the pandemic and so increased investment in new factories and automation. We are benefiting from widespread investment in electric vehicles production globally. Our lasers are used in relative welding, foil cutting, and cleaning applications for EV battery manufacturing. We are also seeing opportunity for laser welding in EV motor assembly and body and white applications. These investments are likely to continue for the next three, five years as automotive manufacturers address the need for EV batteries and new technologies in order to meet aggressive global carbon emission standards. We are excited about increased demand. We are seeing it in emerging products. and applications, which contributed just under 30% of our total revenue this quarter, with record sales in AMB lasers and medical, and strong growth in high-power pulse lasers. Both AMB and high-power pulse lasers are benefiting from increased investment in EV battery capacity worldwide. Our medical products are rapidly gaining adoption and both our thulium laser and IPG disposable fibers are considered as a new gold standard in the industry. We believe that our medical business will continue to grow significantly, potentially doubling in size over the next two or three years. One of our newest products is handheld laser. which had launched earlier this year, is winning widespread interest and gaining significant traction in welding community. We launched our new and approved version of LightWeld in September. It also has cleaning capability in addition to many preset welding parameters. Some customers may choose LightWeld just for cleaning future. as it can save time, money, and reduce cost considerably. LightWheel was the highlight of our presentation at FAPTEC this year, and we have signed agreements with nationwide distributors that operate hundreds of welding retail stores in the United States. We currently expect to sell tens of thousands of LightWheel systems in the next three to five years. As expected, we saw softer demand condition in China cotton market during the third quarter. The combination of moderated demand environment driven by widespread supply chain issues, high shipping cost and power shortage, as well as a more aggressive price competition from local manufacturers, negatively impacted demand for cotton applications in China during this quarter. At the same time, we are seeing record demand in welding in China as a result of strong sales and EV battery applications and increased revenue from marketing and 3D printing. In several cases, we saw customers coming back to IPG after low-cost local suppliers didn't meet customer quality and technical support expectations. We continue to benefit from our vertically integrated product model which enabled technological advantage while minimizing the supply chain disruptions. However, we have been seeing some impact on our and our customer operations from ongoing supply chain issues worldwide, which we are able to successfully overcome this quarter. As we announced earlier, the Board selected John Pillar as a non-executive chair. John has served as lead and independent director since 2017, and his appointment provides continuous stability as we have worked together well over the years. This appointment continues to separate CEO and chair roles that started in May 2021, and I look forward to working with John and his new positions. With that, I will turn the call to Tim to discuss financial highlights in the quarter and fourth quarter outlook.