IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' second quarter 2023 conference call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to your host, Mr. Eugene Fedorov, IPG's Senior Director, Investor Relations, for introductions. Please go ahead, sir.

Thank you, Rob, and good morning, everyone. With me today is IPG Photonics CEO, Dr. Eugene Shcherbakov, and Senior Vice President, CFO, Tim Mahmoud. Let me remind you that 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. This form of looking statements are subject to risks and certainties that would cause the company's actual result to differ materially from those projected in such forward-looking statements. These risks and certainties are detailed in IPG's photonics Form 10-K for the period end of December 31st, 2022, and other reports on file with the Securities and Exchange Commission. Copies of these filings may be updated 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, August 1st, 2023, and 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 financial data workbook posted on the Investor Relations site. 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.

I am pleased with our performance this quarter. Second quarter revenue came and it is the point of our guidance reach. Despite of increased microeconomic uncertainty, which resulted in project delays and impacted sales and outlook in industrial markets across many geographies. We reported another quarter of solid revenue growth and welding and cleaning applications that were driven by strong sales and immobility and handheld welding solutions. Additionally, revenue improved in 3D printing and solar cell manufacturing applications, as investment in this market increased. Sales in flat sheet cutting applications declined year-over-year, mostly due to economic uncertainty and increased competition in China, and continued to negatively impact on our results. However, Cutting sales were up sequentially in China, North America, and Japan. Emerging growth product accounting for 41% of our total sales in the second quarter. We saw continuing growth in A and B lasers, light weld, green, and ultrafast lasers, as well as beam delivery. But sales declined in medical and advanced applications, as well as in laser based system and high power pulse lasers. We have shipped our first 50 kilowatt AMB laser during the quarter and continue to invest in the international sales platforms for light weld. As we said on our first quarter conference call, our medical business was impacted by a large customer working through the inventory. We reduced sales on the second quarter. We expect medical sales to return to a more normal level in the third quarter and continue to focus on additional growth opportunities in the medical market. Despite our challenging operating environment, the positive results were given by our progress in diversifying revenue and reducing our exposure to low margin and high competitive business. We have been focusing on products and applications which benefits from global investment in e-mobility and renewable energy, and this strategy is yielding the good results. IPG had another quarter with strong sales in e-mobility applications, driven by an increase in sales to geographies outside China, primarily in North America, Europe, and South Korea. EV-related investment in China slowed during the quarter, particularly into traditional prismatic cells, batteries. But we are seeing the increased investment into new technologies such as large cylindrical cells and also more investment in batteries for storage applications. Our team is working on new business opportunities in foil cutting applications and electrical motor assembly. With continued adoption of on electric vehicles and growth in energy storage globally, demand for batteries should quickly catch up with recent capacity additions and we expect investment in battery manufacturing in China to be stronger next year. Meanwhile, we are seeing the increased investment in EV battery capacity outside of China and expect immobility orders to remain strong in the third quarter. Our weld itself benefiting from growth and applications where our complete solution, which includes AMB lasers and welding heads, combined with our real-time weld monitoring and measuring technology, which has become the industrial standard. The real-time measurement can significantly reduce testing time, scrap costs, and failed parts for the customer. making a very strong value proposition and exceptional return on investment, giving the yield and cost benefits. LDD is also getting great acceptance in applications outside of batteries, where the final cost of defect can be very high and lead to significant recalls. We are proud to deliver multiple solutions, which can significantly reduce the environmental impact customers, including our high-efficiency eco-lasers with industrial-leading wall-plug efficiency over the 50%, environment-friendly cleaning solutions, and high-efficiency laser dye drying and heating system. During the quarter, we continue to see strong results in our laser cleaning solutions in e-mobility and other automotive and non-automotive applications. Laser cleaning provides substantial benefits to reducing the use of abrasives, chemicals, and dry ice cleaning. Unlike chemicals, abrasives, and heat treatment cleaning process, laser cleaning doesn't impact the material that has been cleaned, does not leave toxic waste, and also creates a safer and cleaner environment for employers. It can also significantly reduce water consumption, and we are seeing the increase in interest in our laser cleaning solution for a number of different processes and applications, including the paint and corrosion removal. Another recently introduced laser solution, which is replacing the less efficient infrared bubbles for the drying and heating, is gaining interest, and we have booked our first order for EV battery applications, which will be shipped in the third quarter. The drying solutions are well received by customers and are gaining market acceptance because they significantly cut down energy consumption and reduce the environmental impact on legacy processes. And today, I am happy to announce that the Board of Directors has elected Colin Kennedy as the new director of the company. I am looking forward to working with Colin and believe She will be a great contributor to IPG's strategy, particularly with our growth in medical applications, giving her 25 years of experience in the medical system manufacturing industry. I would like to thank our employers for their strong contribution in the quarter, and we will now turn the call over to Tim to discuss financial highlights.