IPG Photonics (IPGP) 2 May 232023 Q1 Earnings call transcript

Good morning, and welcome to IPG Photonics' First 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 Fedotoff, IPG's, Director of Investor Relations for introductions. Please go ahead, sir.

Thank you, Rob and good morning, everyone. IPG Dr. is today me Photonics' CEO, With Eugene Mammen. Senior Vice CFO, Tim President and Scherbakov; and

remind Photonics' that and reports be the to uncertainties Copies for actual me are statements. and the the forward-looking Form call statements. projected section predictions directly. Let IPG XX, uncertainties you those other the differ These XX-K filings obtained that of period the in of such and cause subject Securities in These Investors discuss materially this contacting the on company forward-looking of December ended course may that statements from risks visiting of management's to are could these results or future Commission. company's are the or website statements expectations detailed IPG's forward-looking by with made by risks during and XXXX, Exchange file company's or the

find copies website. on SEC's You may also the

or the made statements assumes to forward-looking Any updates only. publicly The any statements. release X, or no expectations on of company obligation such any call are today May to XXXX revisions company's predictions this as

financial our earnings reported additional earnings workbook release, For refer the call data Investor on Excel-based to presentation our please posted Relations press website. or the details results, on

We the will Investor completion our post following these prepared Relations of website remarks on this call.

now With over Scherbakov. the that, Eugene turn I'll to call

everyone. morning, Good

record handheld growth our EV macroeconomic with quarter, in revenue and driven our applications impact applications high which another We cutting this an quarter LightWELD. pleased industrial results continued in a uncertainty for in all-time was that that of revenue marking. and the are to range our as We by such were general welder, despite welding sales demand above guidance solid reported negatively

eco-friendly products saw strong and global driven in by is and these manufacturing. and we for renewable increasing cell energy results solutions. investment macrotrends Additionally, Demand solar cleaning in

information and to efficiency speed new delivers and innovative IPG these IPG these environment. on our XXXX ways improve products of mission on improve providing benefits is that technologies developing published with and applying Recently, annual trends report society many our statement that and in light we website, life of on sustainability manufacturing enable how our

making to and and in our economically revenue has sensitive cyclical diversifying been exposure our industrial reducing progress good markets. IPG

While further markets are a to and major sales and of on products for R&D have applications revenue, diversification portion been revenues. these our we support account still of emerging to growth our drive resources and operating of IPG investing

XX% of emerging global energy. In e-mobility product sales for these both total sales. the accounted are grew quarter Many benefiting products and first and of growth from renewable year-over-year sequentially in investments

We growth saw in AMB quarter battery welding, capacity as build in global by record driven of lasers, a EV battery continued. sales EV out another

solar are in cell also lasers We applications, for cells. these green efficiency our increased that used of demand manufacturing solar improving saw

We expect green investment future. demand capacity the in drive cell our for lasers solar globally increasing to in

sustainability use revenue Additionally, the the and used in quarter. cleaning significantly grew by Laser applications our lasers reducing chemicals. harmful abrasives cleaning provides solution of in for benefits first

with etching lasers. acid our For replacing example, customer cleaning is evaluating

costs transportation expenses. operating In to benefits, addition reliance toxic storage, significantly and environmental can to the leads reduced consumables, on reduce cleaning laser which handling and eliminate chemicals of

bulbs. on market acceptance The recently energy gaining they less-efficient are drying by solutions laser replacing well down impact. Our heating environmental introduced consumption are received and and and infrared are customers because solutions cut

quarter for systems orders second expect for the demand in the a We and future. in strong systems these drying anticipate

applications. e-mobility record IPG had another our sales for quarter with

in investment North to China. accelerating seeing capacity EV Japan Europe, are battery being We America, customers investments the and addition Korea, in made in in

customers quarter, first take and the has States, advantage government region increased shifted in e-mobility the to the of investments Our substantially United business incentives. in as into

complete production existing to of range broad and laser battery technologies. emerging solutions customers lines a offer for We to sources from

time provide an create for challenges weld industry-leading real and combinations hundreds monitoring quality and addresses and Our customer's pack. lasers each solutions superior battery beam mode of adjustable weld welds in

in welding explore electrical assembly. motor to opportunities components continue We additional for

With pipeline force opportunities, applications. e-mobility our the focused expanding global sales we're on of strong

We expect and to over investment to the capacity continue the years, three EV demand e-mobility cycle fluctuate five sales projects and next depending regional on the additions. to strong remain although of can pipeline

quarter driven business year-over-year our and adoption consumable applications. medical Our system had a for laser and of continued grew by urology fibers good

quarter, be a will inventory. customers second large we its softer in However, expect buffer adjusts as sales medical the

it to grow on working three further a are sales opportunities portfolio contributor business, years. more the new so becomes meaningful multiple two, in broaden the IPG to and to We our medical next

would and workers diverse employees number engaged on always believe organization. strength We great to an and our IPG their thank for workforce employs the from work. has that focused large our like and I of a inclusion backgrounds. of a women is dedicated diverse

recent CSR representation a our report minority in. and and To company the operate believe global gender targets increase we future announced and inclusive further diversity, creates we improve We in place for our to our what first for better workforce management and roles. diversity communities strongly time, the that the

I over quarter. to in the Tim, highlights the call turn to the financial now will discuss

Thank and morning, you, good everyone. Eugene

the Relations a review accounted processing telecom X%. presentation, available My which year-over-year the approximately due revenue while to X% approximately Revenue will $XXX XX%. on revenue first reduced the foreign from by comments with currency financial Slide start decreased the quarter divestiture generally X% materials decline million, applications decline the in from that of year-over-year, I headwinds, X. other will Revenue applications X% in for which on increased Investor follow was website. is call of earnings our

manufacturing was absorption gross of year-over-year sequential shipping of as inventory a higher basis an GAAP costs, some higher well margin as which sales. improvement improvement. percentage by XXX as points margin decrease reserves due did a On in a and XX.X%, basis, offset to costs tariffs, was gross show increased partially

per would relative same to U.S. the have higher and had higher. $XX was was million, certain revenue by exchange million impacted million operating FX and If GAAP or was gross Net profit expected $XX the The XX% $XX been was to rates be quarter we XX.X%. also a one discrete impact income million negative quarter. to tax-rate was be $X.XX year-ago, in diluted the had $X effective items. operating dollar share. the in income and as margin

$X.XX. Foreign benefited currency impact positively to gains of foreign currency assets per $X a exchange operating had million share transaction period-end related positive to income and remeasuring rates and liabilities by earnings on

on Excluding the last well the research year. and as aircraft reduced currency small corporate development product year-over-year operating charge, reduced declined of a in the restructuring and as we expenses gain transaction telecom as spending from sale expenses primarily development

of by Slide demand competition offset CW represented high-power Pulsed decreased sales. revenue. ultra-high-power year-over-year, to high-power partially was cell which total and X, of cleaning kilowatts was applications X% sales and Sales X of in in growth offset Moving growth decline softer and sales The to and China, laser by marking decreased primarily laser represented lower XX% high-power of demand was solar only cutting to XX% in lasers approximately due above cutting applications welding. a strong in lower applications. due in CW total lasers demand XX%

sales down sales in strong System in power sales and impacted sales decreased Other product were by XX% growth Medium sales increased systems laser year-over-year, advanced increased by and sales consumer increased laser-based year-over-year, driven XX%, medical negatively electronics applications. lower laser by to revenue XX% while QCW driven applications. LightWELD.

lower by revenue. quarter offset concerns. In at Europe, Revenue sales the was result decreased a to the second Slide of attributed the in first of in Looking prior America year supply-chain the from cleaning, X% and X. cutting strong performance the as our pull to of by comparisons, a telecom decreased was difficult to Growth in region and due advanced quarter X% as North forward growth on applications quarter applications, in divestiture. due some demand welding, medical

XX% the marking European However, despite applications demand offset for uncertainty year-over-year, and battery in overall in increased Revenue in the as cleaning in applications. EV in sequentially and was economy. welding lower by continued cutting market decreased growth revenue softness applications China

and the capital were billion $XX investments our of total cash, $XX on Cash X. quarter. to short-term a in of quarter, million and $X.X ended at during Moving summary $XX We the with was and operations by sheet cash the balance quarter provided expenditures equivalents million Slide million. debt

cash typically quarter and to tax payments. due by provided bonus low operations First is

in the we the continue Our quarter, inventories and target stabilized to year. during inventories a in reduction

we've quarter. balance strong sheet, to amount a year of returning last in continued been a capital the shareholders maintaining do to and While significant over the so first

million, During a of completing our repurchased shares total $XXX existing authorization. quarter, the first we for

significant repurchasing announced million a to enhance shareholder new commitment returned repurchase by Today, $XXX has IPG since $XXX the share amount we outstanding. capital. beginning program, in in shares of capital over another XXXX, value efforts returning our a of million

X. Slide Moving to on outlook

one. was book-to-bill First-quarter

macroeconomic industrial China, to muted. Despite COVID in continue remains demand demand markets. We relaxing in soft see and uncertain general relatively restrictions conditions

renewable e-mobility geographies. still However, we seeing and energy in are in across solid all activity orders

Despite Asia. IPG vehicle growth all has macro renewable gaining traction been of created as continues manufacturing the to benefit the Furthermore, electric in Europe uncertainty, by battery energy. opportunities LightWELD such trends major and U.S., from and

these diversify our continuing resilient We will and revenues and trends believe efforts make to growth. our drive IPG more

shares to delivering quarter approximately gross of share XXXX, between the of XX.X% with to range to outstanding. IPG earnings $XXX of margin XX.X%. diluted $X.XX IPG revenue For the second million per $XXX the the common diluted anticipates company million expects and quarter second expects $XX.X be in million, $X.XX

the the earnings outlined exchange our and As assumes to discussed reports and earnings release, upon Safe-Harbor of risks expectations, company's Safe-Harbor referenced passage with current in guidance rates press and release is the in market press SEC. subject is today's the conditions in based our

take be we'll that, With questions. your happy to

Stifel. [Operator your comes from with Instructions] Our Roy with question proceed Ruben question. first Please

the Tim, order as recently, that if I improvement mixed Recently, seeing the know commentary if weak we little trough at second-half, with like of Thank you further level. might that about could or off applications wondering characterized down point, relatively just Thank muted. of think I environment bit based might little trough some you reopening, have see level expand a but of potentially you data as a wondering some in you. be a been the you there's been what on a think or you be at cutting you're could think demand Hi. do those bit was leg from you. what and around PMI in there this China, remaining near China sort on

that like dominant of part applications of our precision marking level. well and continuing to running think as taking recovery some I the still think longer we're mean crystallize. industrial muted from traction of I really we've I applications, demand on of engraving on are revenue to remains some perform overall older EV trough expected and moment a very our sort said, at and the speaking a at the relatively now cutting is But relatively which there.

commentary people think other in-line I is with seeing, our what right. are

not PMI strong. seeing very post just restrictions rebound a lifted being COVID not strong particularly You're is the data

bit, But example, guidance, in outperform little a QX for did our relative so positive. was that China to a

some of of QX flat, relatively was the reason, a stability. guidance but to compared So little does to there any evidence it's the strengthening bit material it pickup point is it QX, doesn't show in

I early at really second where say up think the in to way this the of year ends it's point too half time.

Tim. Understood, that's Thanks helpful.

addressing to think in so is large about inventory, continue market, order you're period XXXX that going a quick you and remain we do where customers As we think to or about the rest of doubled that to that buffer touch in that about and talked diversity bit forward, 'XX, EV to follow-up, this slowdown drive on then to you order revenues some kind how specifically, of wondering some just are think that pause very strong. year. medical, wanted your well. a have new utilization rates cetera doing or how see a a of are Eugene emerging of which to about little some wondering new you've customer might going and around of one the I the for markets, as the up, EV should And equipment marketplace, adjust think the coming in I'm obviously against book to et momentum very spend how there of continue applications

EV overall, environment remains really So the quite right. demand strong,

weakness see picked I it's think going to might areas. in other be one the you area, benefit is that where up in

Act by North the the driven lot benefits that America out to some So Reduction see that's came Europe is well. coming moment, in of investments of the out being a as we're seeing of at some starting of of Inflation demand increased

some expect well China even remains expecting it in of slowdown continue be if in areas quite This of we some area, Southeast bit other even in in Korea, resilient like we're we're a South other there strong Asia to that the as of but in geographies, is demand, in Japan. those one and seeing areas. a and

see during is think going for to should other that The orders the diversify drying I continue benefit stream, quarter start revenue second to that the we're to and so. equipment materialized

a this I driver think that and revenue the company. that geographies is it still more we and global just takes have to basis the specific rather on will make look at for puts around we than sustainable very believe

Very Also, would I for strong applications. pulsed to like for add. growth laser revenue

many the to matter First different we just applications. good final such options. is scanners including lasers other of are for more for a cleaning to of in many, And related markets, penetrate cleaning, but us much and monitor some selling but for to all, system of opportunity cases, us, it's that it's the product, kind also not only for our also selling cleaning important laser

Eugene. Tim, you, detail. the Thank all for you, Thank

No problem.

Our your Please Jim Ricchiuti with Company. proceed and question. from is Needham next question with

good is some Germany Hi, region? on you're Europe additional on in color Grenga This what for Chris morning. Jim. saw actually in you Could that provide revenue and growth. seeing sequential particular

the very actually well quarter, has first faced. that Europe performed area think that the challenges I in given

think key quite into environment even started last that to the so you has energy end were and demand was the year really see abate, of overall the third and in middle the I issues strong. to started quarters headwind

outperformance. helped Some cutting of was of in that some but EV, which of Europe, for particularly good also there some was the Southern that applications, demand

the individual economic least for quarter received So we second the at quite business really expected was yes, stronger on data certainly and that the overall and think strong stabilized, from positive, entities. tone than the still very there, the not underlying with has PMI's demand even but in the was in first that are quarter the the I carries guidance we'd

customer see this because EV of laser especially production. such battery manufacturer kind to for much more for kind our they're options it's manufacturing, And real portfolio applications different advanced potential of production, for course, that trend for of for of shifting kind using close car we the and our main production such us, we're

like carryover with to the that Thank any use or with application, it a utility-scale Got you. battery respect like or application for EV it, is great. be And battery residential would solar mostly storage, is overlap in or stationary in there a relevant batteries?

why important, now is for its Of definitely storage growing also for solar course, but so especially been EV very Europe applications it because battery will battery But but is not firstly, electrical have be active that's now, the important time, now future, on it's the in course place of production. definitely, battery battery storage is cars. of this part first first for it's the very the on

cleaning that basically across applications all would It's similar, The the it's that. very welding, of whether pretty be on standard those.

perhaps one it. you. Got Thank just And more.

stands on components So that Russia, production with where a of remaining update of provide that status of those the effort. large respect the items were that you perhaps and could on just in to migration formal any

migration Italy. in components. especially now eliminate fibrous, place and production to also Russian installed all, many, Germany By standard in to production but many components, the introduced Germany, of production alliance Russia it's technology new are our in have blocks. also visibility increased And some our of it's of for simple in in including this from kind we years. product production, we're Yes, block, Poland expanding other all, for not for for First will we many production Germany, manufacturing, to this our fiber-based the All way, the of we a because first manufacturer final and different in keeping Germany. from we any

much. very you Thank

next Company. Our The comes Benchmark Miller Please with [Operator from Instructions] proceed Mark question. with your question

for automotive question. you discuss Could Thank the the excluding you market, EV?

car the Well, excluding to substantial are way for production. EV standard car not company, investment, this by example, EV, all is production. battery production of EV now to part going -- and EV -- All investment production mainly

And -- excuse me.

ahead. Go

that roughly XX% applications, last sales Emerging quarter? was of

Yes.

you. Thank Okay.

session. the call-back Fedotoff reached comments. to the like question-and-answer now to end-of-the closing have I'd Eugene turn We over for

continued IPG. joining and for in morning us your you for interest this Thank

participating with weeks. forward number investor the We be are you over Have quarter great a day, will coming events and looking speaking everyone. to this in a of

conference. today's concludes This

your may participation. for your you You at time, thank disconnect lines we this and