IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' fourth quarter 2023 conference call. Today's call is being recorded in webcast. At this time, I'd like to turn the call over to Eugene Fedotov, Senior Director of Investor Relations, for introductions. Please go ahead.

Thank you, Kevin, and good morning, everyone. With me today is IPG Photonics CEO, Dr. Eugene Shcherbakov, and Senior Vice President, CFO, Tim Marmon. 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 insurances that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and insurances are detailed in our Form 10-K. for the period end of December 31st, 2023 and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the investor sections of IPG's website or the SSC's website. Any forward looking statements made on this call are the company's expectations or predictions as of today, February 13th, 2024 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 website following the completion of this call. With that, I'll now turn the call over to Eugene Shcherbakov.

Good morning, everyone. and thank you for joining us today. We are pleased to report that fourth quarter revenue came in the top of our guidance. We saw growth in multiple areas, including welding, cleaning, 3D printing and medical applications. That showed success in our strategy to diversify revenue away from cutting and reduce the amount of sales from China. We remain focused on our strategy to displace legacy technology and processes with highly efficient and environmentally beneficial fiber lasers and laser-based technologies. Revenue in our emerging growth products improves sequentially and accounting for 46% of our total sales, driven by growth in handheld welding, beam delivery, and medical products. However, uncertainty in macroeconomic conditions continued to wait on sales in many general industrial applications, and some of our large OEM customers around the world were managing inventories and induced purchasing in the quarter. Also, we saw the soft demand for our lasers and e-mobility in China and solar cell manufacturing applications. Welding cells rebounded strongly in the quarter with growth in North America, more than upsetting the low revenue in China. Laser adoption is growing in general industrial and automotive applications and not just in e-mobility. The increase in welding this quarter was driven by high sales in our handheld laser welder and growing adoption of our real-time weld measuring tool. which has become the industrial standard for automating process, monitoring, and quality control. Customers understand a significant value proposition of real-time welding process monitoring, which can significantly reduce scrap and improve yields. We are also seeing the high sales of integrated laser welding systems and complete solutions for high-speed automating laser welding. which includes laser, scanner, vision, and controllers that are easy to integrate in the manufacturing process. I am happy to report another quarter of strong growth in handheld laser welder. Light weld sales beneficial from rollout of the tool in Europe and increased 50% in 2023. We expect that the adoption will continue this year and are excited about the new partnership with Miller Electric to promote laser welding among the large network of MIG and TIG welders. Miller Electric is the leading worldwide manufacturer of arc welding products. We believe that most welding applications can be addressed by laser, including the handheld market, and there is a tremendous productivity improvement that lasers enable. Welding is a large addressable market for our lasers, and we are in the initial stage of developing it. Indicative of success, we are generating in welding IPG largest customer, larger application increased 13% year-over-year. and accounting for 36% of our total revenue in 2023. IPG remains well positioned in the e-mobility market, providing welding, cleaning, cutting, and now drying solutions for most major EV battery manufacturers around the globe. While our e-mobility sales were negatively impacted by a showdown in new capacity editions in China, We saw an increase in sales in North America, Japan, and Korea during the quarter. Our capacity in battery production in China, after a strong investment cycle in 2021 and 2022, continued to provide a short-term drag on our growth, but we remain optimistic in the future revenue for these important applications as the new electric vehicle sales continue to grow worldwide. We are also looking to increase our exposure by editing more adjacent laser technology around our current offering to the further penetrator and mobility applications. We successfully shipped the first order of laser drying solution for battery foil manufacturing. The solution replaced the less efficient infrared bulbs and environmentally unfriendly gas-fired furnaces and can significantly increase drying speed and reduce energy costs for our customers. For the full year, our EV sales increased modestly to the new record level and counted over 20% of total revenue. Additionally, we are looking at new growth opportunities in the laser cleaning market. Laser cleaning solutions, while still a small contributor in our overall sales, have been growing at a high rate and there is an increased interest in the market to replace traditional cleaning processes, which uses abrasive materials and chemicals. Whether it is paint or rust removal, our laser can do the work quicker, more safely for the operator. and with less harm to the environment. Finally, our medical business delivered strong results in the fourth quarter. Our revenue grew slightly to a new record level despite some desk stocking by large customers in the second quarter. We have benefited from growth in single-use fibers and some additional demand in aesthetic applications. We believe that there is a large installed base of old laser technology that can be replaced with fiber lasers over time. As you can see from our guidance, which will be covered by the team later in this call, we are looking at a slow start to the year as the industrial demand remains weak. However, we are focusing on what we can control to offset these headwinds. We are targeting a number of large addressable markets where fiber laser can replace existing laser or non-laser technology by taking advantage of several novel trends, including automation, increasing efficiency, and reducing the environment impact. We expect that these trends to continue and help diversify our revenue. We also are focused on operational improvement, such as lower cost and reducing the inventories in 2024. We are investing in the future growth and continue to maintain strong balance sheet. Our cash flow generation remains strong and benefited from inventory management. And I would like to thank you, our employers, for their contributions to 2024. we'll turn the call over to Tim to discuss financial highlights in the quarter.