IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' fourth quarter 2021 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 Fedorov, IPG's Director of Investor Relations, for introductions. Please go ahead, sir.

Thank you, Rob, and good morning, everyone. With us today is IPG Photonics CEO, Dr. Eugene Shcherbakov, and Senior Vice President and CFO, Tim Mahman. Statements made during the course of this call that discuss management's or the company's intentions, expectations, or predictions of the future are forward-looking statements. These forward-looking statements are subject to risks and shortages that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and shortages include the impact of the COVID-19 pandemic on our business and those details in IPG Photonics Form 10-K for the period ended December 31, 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 SSC's website. Any forward-looking statements made on this call are the company's expectations or predictions as of today, February 15, 2022 only. The company assumes no obligation to publicly release any updates or revisions to any such statements. For additional details on our reported results, please refer to the earnings press release, earnings call presentation, and the Excel-based financial data workbook posted on our investor relations website. We will post these prepared remarks on the Industrial Relations website following the completion of this call. With that, I will now turn the call over to Eugene Shcherbakov. Good morning, everyone.

We are pleased with our fourth quarter performance. We delivered revenue that was 8% higher than a year ago and above the top end of our guidance range. Our full-year revenue was a record, slightly above our pre-recorded revenue reported in 2018. These strong results were driven by solid demand for our lasers in Europe, North America, and improved demand in Japan, which more than offset soft demand in high power cutting applications in China. We saw increased sales in welding, high power cutting outside of China, marking, 3D printing, foil cutting, cleaning, semiconductor, and number of other products and applications that all contributed to our growth this quarter. Overall, sales outside of China grew to 69% of total revenue, a level we have not seen in many years, showing our progress in achieving the better geographic balance in our business. Sales of high power lasers benefited from increase in order volume in cutting applications in Europe, North America, and Japan, as well as a strong welding revenue, which was offset by lower demand in China's high-power cutting market. This was due to general market softness and increased competition in low-cost portions of this market. We continue to successfully protect our market share in areas which focus on reliability, technology, and service. Our high-powered lasers and optical heads can deliver significant productivity improvement, electrical efficiency, flexibility, and ease of use and integration, as well as the lowest total cost of ownership and global support, unmatched by other lasers and non-laser tools. At the same time, we are introducing the ultra-compact rack-mounted U-series lasers, which power up to 6 kilowatts. to be more competitive in low-cost cutting systems. We are also pleased with growth, and we are seeing medium, power, pulse, and QCW lasers this quarter, which are primarily driven by higher demand in emerging applications. I would like also to highlight our exceptional growth in welding this year. Driven by Howard's amount of AIM-B lasers used in EV battery manufacturing and introducing LightWeld, our handheld welder. Both products are examples of IPG focused on innovation and ability to deliver solutions to our customers that expand our total available market. Our AIM-B lasers provide a broad range of beam tunability that enables superior speed, better weld quality, ability to weld, disparate materials and spotless welding, which is extremely important in the EV battery manufacturing process. Another driver behind the strong welding results is light weld. Compared to traditional MIG and TIG welding, light weld is easier to use, faster, more precise, welds in wide range of material better, and incorporates surface cleaning capability. This quality significantly reduced preparation, processing, and post-processing times, resulting in lower total operation costs for our customers. Growth in welding is one of the many examples of successful revenue diversification strategy that IPG has been pursuing. We are also pleased with the performance of our medical business. It is the real record revenue this quarter, as our gold standard ,, and disposable fibers continue to gain acceptance. Additionally, IPGs were positioned to benefit from global macro trends such as automation, miniaturization, as well as a focus on sustainability, renewable energy, and energy efficiency. As you read and heard, Automakers supplied worldwide are investing enormous amount in new air mobility products. We expect this investment to continue in the next three, five years or even longer. Our lasers are widely used in manufacturing of electrical vehicles. We are supplying laser solutions for battery welding and thin-foil cutting applications, cleaning, therapy welding in electrical battery and motor assembly. as well as some body-wide applications. Demand in solar cell market can be cyclical, but strict emission targets are expected to drive significant investment in solar cell production in North America and China in the next three out of five years, resulting in high demand for green lasers. These lasers are used to improve solar cell efficiency and reduce the amount of wiring needed in solar cell design. Demand for our green lasers increased by 50% in 2021. Focus on sustainability and efficiency, as well as some recent energy shortage in China and high energy costs in Europe are driven and increased in interest in our eco lasers that provide worldwide efficiency of greater than 50% and can help to mentally reduce environmental impact and energy costs for medium and large industrial manufacturers. During the first quarter, emerging growth product sales were 38% of total revenue, increasing 57% year over year. We were pleased with the performance of a number of products that were key for our diversification of our revenue, including the EMV, high-power pulse lasers, light weld, medical beam delivery, laser-based system, and multi-channel QCW laser for high-speed spot welding applications. Backlog for this product remains strong as we enter 2022. And we focus on successfully establishing a large market with our innovative solutions. Let me share some of our expectations for 2022. While we continue to have limited visibility and see uncertainty in the operational and geographical environment, we believe that the breadth and depth of our product offering, our innovative solutions, efficient R&D model, strong balance sheet and free cash flow provide us ample flexibility to respond to the business disruption and support growth. We expect continued growth demand in welding and cutting market in North America, Europe, and Japan. Sales and emerging growth products should benefit from continued market trend, such as investment into EV batteries, solar cell automation, and militarization. However, this will be a transition year for IPG with growth in focus areas and continued diversification away from highly competitive portion of high power cutting market in China, leading to more moderate three to six revenue growth in 2022. With that said, we remain optimistic in our long-term growth opportunity for IPG and continue to expect double-digit revenue growth in the mid and long term. I'll turn the call over to Tim to discuss financial highlights in the quarter.