IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' third 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, Eugene Fedorov, IPG Senior Director, Investor Relations, for introductions. Please go ahead with your conference.

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 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 are detailed in IPG Photonics Form 10-K. for the period end of December 31st, 2022, and our reports on file with the Securities Exchange Commission. Copies of these filings may be obtained by visiting the investor section of the IPG's website or the SEC's website. Any forward-looking statements made on this call are the company's expectations or predictions as of today, October 31st, 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 earnings press release, earnings call presentation, and the financial data workbook posted on the Industrial Relations website. We will also post these prepared remarks on the website following the completion of this call. With that, I'll now turn the call over to Eugene Shcherbakov.

Good morning, everyone. Our third quarter revenue was negatively impacted by softer demand in industrial market and further decline in sales in China. Lower demand from industrial customer and reduced demand of immobility applications drove revenue declines in cutting, welding, and marking applications. We also continued to see strong competition in addition to soft demand in the flat street cutting market in China. But even with low revenue, we are pleased with our operating performance this quarter and deliver gross margin improvement and earning per share at the high end of our guidance. While the uncertainty in market economic conditions continue to await on capital equipment spending, customers in Europe, North America, and Japan are increasingly using the high power laser for cutting. We believe that laser adoption in these geographies is significantly behind China. And this market remains the last competitor with IPG, holding a strong market position. We're also seeing the adoption of laser welding technology in automotive and general industrial markets across many geographies. Laser welding provides high speed, precision, and accuracy as well as a low heat input and ability to join dissimilar materials. Our real-time weld measurement system is a great complementary technology to adjustable mode beam in V-lasers and IPG welding head that provides a fast and reliable welding solutions for a broad range of applications across many different industries. Immersion growth product sales accounting for 42% of total revenue in the third quarter. We saw a decline in EMB and high-power power supplies related to low-demand and immobility applications due to decreased investment in EV battery capacity in China. We said in the past that EV battery investment is likely to fluctuate quarter to quarter. a production expansion project can be very large in size and provide some lumpiness in our immobility cells. As a result, some quarter of even years may be better than others. However, we expect EV investment cycle to continue, providing a great opportunity for IPG in the next three to five years. Adoption of electric vehicles still grows in China, Europe, and North America, and battery manufacturers will need to build additional capacity to support higher EV sales. Also, energy storage is growing and may potentially require even more batteries to support the transition to sustainable energy future. Our handheld welder sales continue to grow, driven by rollout in Europe, And LightWeld has up in four times the speed of traditional MIG and TIG welders and does not require extensive training. We are seen as a high interest in the welding community and held five simultaneous live demonstrations of the device at the Fabtech show this year to satisfy this interest. We are also still early on adoption curve and continue to promote light weld in the welding market in the US and other geographies. We're also seeing a significant increase in demand for our lasers and 3D printing applications. Industry reports suggest that technology is being tested for manufacturing of consumer electronic devices. Growth in metal 3D printing technology has been shown that many had anticipated, but it seems Like there is a new catalyst that can potentially drive further adoption. 3D printing is using high quality lasers to melt metal powder to create parts. And APG has a strong position in this market, providing the lasers with high stability beam characteristics. We are recently introducing a new AM laser designed especially for additive manufacturing. This laser has an adjustable mode and can move from single mode to fine structure to multimode output for up to six times higher build-up rates. Finally, sales in our medical business improved as expected after the inventory reduction by a large customer in the prior quarter. Growth in medical continues to be driven by adoption of our laser system. and consumable fibers, which we are considering the gold standard in urology applications. We are also seeing a strong growth in aesthetic applications, which is much larger market. And our fiber laser technology is significantly more advanced compared to the traditional lasers used in medical and aesthetic applications. And our goal is to gain market share by replacing these older technologies. We are working on multiple new opportunities to broaden our medical portfolio and to further grow the business so it becomes a more meaningful contributor to IPG sales. In summary, I am optimistic about the growth driven for our products and continued diversification of IPG revenue in the long term. We have introduced a new product products for laser cleaning and drying applications this year, and promote our high-efficiency ecolasers that help reduce the environmental impact for our customers. I would like to thank our employers for their strong contribution in the quarter, and I will now turn the call over to Tim to discuss financial highlights.