IPG Photonics Corporation

Good morning, and welcome to IPG Photonics' first quarter 2024 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 Federoff, IPG Senior Director, Investor Relations, for introductions. Please go ahead with your conference.

Thank you, Robin. Good morning, everyone. With me today is IPG Photonics CEO, Dr. Eugene Federoff. and Senior Vice President and CFO Tim Monning. Let me remind you that statements that we make 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 risk and uncertainties that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and surrogates are detailed in IPG Platonics 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 funds may be obtained by visiting the investor section of IPG's website or the SEC's website directly. Any forward-looking statements made on this call are the company's expectations or predictions as of today. April 30, 2024 only, 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 full presentation, and the financial data were posted on the industrial relations website. We will also post these prepared remarks on the website following the completion of this call. I'll now turn the call over to Eugene Sherbrooke.

Eugene Sherbrooke Good morning, everyone. In addition to our earnings release, we announced a leadership transition this morning. Let me start by commenting on the quarterly results first, and then I will speak about the CTO change later in the call. In the first quarter, we continued to generate strong operating cash flow, reduce inventories, manage product costs and return capital to shareholders. We achieved this while facing soft demand in general industrial manufacturing and immobility and markets, which together represent over 60% of total sales and negatively impacted revenue across many applications. Our book to build was about one and we believe that we are seeing a bottom in demand with a potential modest improvement toward the end of this year. At the same time, we remain focused on execution of our long-term strategy to displace other laser or non-laser tools with our fiber lasers and grow revenue in a number of focus applications such as welding, cleaning, heating, and medical. from more competitive applications such as cutting and marking. Revenue in our emerging growth products accounting for 45% of total sales in the first quarter. These laser products and solutions can prove significant improvements in speed and quality of manufacturing processes while reducing energy consumption and other environment impacts. I will cover highlights and comment on revenue by applications first, and Tim will cover our financial results in more detail. Starting with our largest applications, welding revenue declined year over year, primarily due to lower demand from e-mobility customers, significant reduction in new battery investment in China compared to the prior year, and delayed EV battery projects in North America reduced demand for our welding products and solutions. At the same time, we believe that we are able to gain some market share in EV welding, closing new business opportunities both with significant new customers and in new applications. Additionally, we are working with a number of leading automotive manufacturers of new fiber laser applications in batteries and general automotive assembly. We remain optimistic that EV battery investment may increase again towards the end of 2024 into 2025. Resuming a multi-year trend of building our required battery capacity to support the transition from internal combustion vehicles to battery electric cars or plug-in hybrids. Additionally, we are pleased to see a pickup in demand from consumer electronics battery applications as well as growth in welding revenue in general automotive and general industrial applications. Adoption of our real-time welding monitoring system and complete automotive automated welding solutions are also showing good results. Our handheld welder sales slowed in North America in the quarter, with some smaller customers being impacted by uncertainty in demand and higher financial costs. But order pipeline and customer interest remain strong. In addition, are starting to ship these devices to Miller Electric, which will have hand-held welder sales in the second quarter and will have more measurable impact in the second half of the year. Sales in cutting applications declined in the first quarter due to continued soft industrial demand across all major geographies. Large OEM customers were managing their inventories, which negatively impacted our cutting sales in Europe, North America, and Japan. Market conditions remain difficult, but appear to be more stable compared to the last several quarters, and we expect that improvement in general economic conditions and reduced customer inventories should result in more stable demand in the second half of the year. Foil cutting cells also remained soft due to weak demand in immobility, but our system cells showed some improvement year over year. In other material processing applications, cleaning cells were negatively impacted by softer demand in immobility, but we are making progress introducing our cleaning solution across many general manufacturing applications. Cleaning revenue has been increasing and the applications are becoming meaningful contributors to total sales. While still relatively small, heating and drying lasers is another area of future growth for IPG. The application delivered a strong increase in sales this quarter as we shipped a large order for foil drying to an immobility customer. Additionally, we are working with a number of large manufacturers from across a number of application areas to build innovative heating and drying solutions to suit their needs. Finally, a new increase in 3D printing applications as the industry is using a large number of high-quality lasers to melt metal powder to create parts. IPG has a strong position in this market. providing lasers with high stability beam characteristics. Outside of material processing, other applications' revenue declined due to the lower sales in medical and advanced applications. Our medical business was negatively impacted by large customer management inventories in the first quarter. We expect medical revenue to normalize in the second quarter, and we are working on several new opportunities that will launch in 2025 and 2026 and should help this business to grow and become more meaningful contributor to IPG Total Sales. Before I turn the call to team, I will provide a few comments on leadership transition we announced this morning. I would like to welcome Mark Gitti as IPG Next CEO. The board performed an extensive research and selection process and close marketing because he passes a unique combination of relevant scientific expertise and proven ability as a successful operator in our industry. I look forward to helping him to make the transition seamless for our customers, employers and other stakeholders. I also would like to thank the IPG team for its contribution over the last 30 years. I was fortunate enough to be a part of the team that transformed the laser industry and helped IPG to become a global industrial leader. I believe that the best opportunities are still ahead for IPG, and fiber lasers will continue to display other technologies, driving the future growth for the company. I will miss my day-to-day interaction with my IPG colleagues, but I make this transition knowing that we have accomplished great things. This will be my last earning call, but I will remain on the board supporting the next leg of the journey for IPG, and I will also be involved as an advisor to Mark and to the board. With that, I will now turn the call over to Tim to discuss financial results.