IPG Photonics Corporation

Good morning and welcome to IPG Photonics' second quarter 2022 conference call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to 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, CFO, Tim Maugham. Statements made during the course of this call that discuss management or the company's intentions and 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 are detailed in IPG Photonics Form 10-K for the period end of December 31st, 2021, and our reports are filed with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the investor section on our 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, August 2, 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 our investor relations website following the completion of this call. With that, I'll now turn the call over to Eugene Shcherbakov. Good morning, everyone.

We are pleased With our results this quarter, as we continue to diversify, our revenue across the key regions and applications. Second quarter revenue increased 1% year-over-year, but was meaningfully impacted by strengths of U.S. dollars, which reduced revenue and revenue growth by 18 million and 5% respectively. I am proud that we are continuing to make progress on our key strategies. First, we made progress to achieve a better geographic balance in our business. Sales outside China accounted for 64% of our total revenue in GRU, significantly this quarter led by strong revenue growth in North America and Japan. Second, we also made progress in diversifying across the different applications with record revenue in welding and strong growth in medical applications. As a result, the high power cutting business in China contributed less than 10% of IPG's total revenue in the quarter. This was another record quarter for welding revenue that benefited from growth in electric vehicle batteries, general manufacturing, medical device applications, and the adoption of our high count laser for manual welding applications. Laser welding adoption continues as our fiber laser enables faster, more precise welding for a wide range of materials, including sinfoil coils and high reflective materials like copper and aluminum. Our adjustable mode beam lasers provide spotless, high quality, high speed, and uniform welding for a broad range of different materials, used in electric vehicle battery manufacturing and other applications. Our light weld handled welder is a superior tool for small, mid-sized fabricators and brings ease of use to the welding process. Welding was the strongest driver behind our growth this quarter, and the revenue from this application has become as important as our revenue from high power cutting applications. While our cutting business still accounted for a significant portion of IPG revenue, welding revenue has surprised high power cutting revenue in several key geographies. IPG is benefiting from current investment in e-mobility, which may potentially accelerate in the near future as a result of higher energy costs across the many regions. The EV market continues to drive our demand with new model launches and additional battery capacity announcements to support higher EV sales. We have record sales of two EV applications in the quarter, with strong demand for our welding and foil cutting solutions. We are also working on a number of additional opportunities including the cleaning and therapy welding solutions that increase our exposure to this growing market. Emerging growth product sales were 40% of our total revenue in the second quarter. Many of these products are benefiting from global macro trends such as automation and immobility as well as a focus on sustainability. renewable energy and energy efficiency. More specifically, record sales in AMB lasers and high-power pulse lasers were driven by strong growth in electric vehicle applications. We saw continued sequential improvement in demand of our green lasers for solar cell manufacturing applications. This market is expected to grow as a result of increasing investment in renewable energy solutions. We also saw strong performance in cleaning application, which is driven in part by sustainability benefits of our lasers, which help to reduce use of toxic materials. Medical revenue more than doubled year over year as our Thulium laser is considered the new world standard for laser urology market and has been rapidly gaining adoptions. Light weld cells increased significantly, and we have received the market, and we are now selling light weld in several markets in Europe. We are also seeing the growth in laser-based system cells, which are benefiting from complete solutions designed for EV applications and other emerging applications, such as laser clinging. Before I turn the call to the team, let me provide the update of our operations in Russia. As previously announced, IPG stopped all new investments in Russia and prepared plans to increase manufacturing of critical components in the United States and Western Europe in order to reduce our reliance on manufacturing capacity in Russia. We continue to make progress with hiring additional employers Allocating workspace for increased production and running second and even third shifts in certain locations. Our inventories of critical components increased and further lowered our risk of supply chain disruptions. We qualified some third-party suppliers and now placing the orders for some of these components. In the second quarter, we started setting up infrastructure for production increasing in Germany, Italy, and the United States. We expect that most of the manufacturing capacity will be brought online during the course of the rest of the year, enabling us to reduce our regulations on Russian components by year-end. While our facilities are moving toward ramping up production, our ability to hire additional employers remains challenging. We are introducing the new production technologies and automation, which should eliminate some more labor-intensive steps and increase yield and productivity. I will turn the call over to Tim to discuss financial highlights in the quarter.