IPG Photonics (IPGP) 30 Apr 242024 Q1 Earnings call transcript

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 Fedotoff, IPG's Senior Director, Investor Relations, for introductions. Please go ahead with your conference.

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

this detailed remind that management ended website Commission. me on future subject of intentions, such Copies statements Let reports the you the forward-looking only or are directly. Any or XXXX, this the made expectations forward-looking call the December release course any Form Investors forward-looking revisions obtained during are risks the differ file Exchange April bonds could These statements. that from these Securities for projected or statements of updates the discuss predictions may those that obligation SEC's publicly and materially be forward-looking risks company's website company's statements. and Photonics' or the and to today, and of predictions These XX, to company's of statements statements. call cause uncertainties XXXX, or made in any the by uncertainties the on IPG's with of that as XX, period company no assumes the are in XX-K our and to actual expectations are to IPG such visiting the we results section

on release, the reported Investor website. For earnings additional Relations financial details to will press refer on posted our call results, the the earnings please data presentation and

the call call. completion We will over this following Eugene also turn post you, Scherbakov. of website remarks these that, the to I'll prepared With on now the

everyone. morning, Good

to this leadership release, In transition our announced a earnings addition we morning.

call. In facing in applications. impacted sales together which soft first XX% return generate I to will the quarterly later quarter, industrial while on across represent we and cash mobility achieved first, many speak markets, in ] reduce strong revenue total and start manage flow, our shareholders. operating general then CTO to negatively by [ end manufacturing inventories, product and me commenting Let continued demand about the capital the cost over the this and We of results

believe quarter. medical. Diversified are of a potential of same call the significant number displace I and results more and lasers more sales while modest a of demand will execution competitive manufacturing consumption with impact. we such new solutions revenue our revenue for demand environment will primarily reducing the detail. Starting processes improvements first, total and in [ largest applications from other reduction our comment on delayed and and business year. applications to able in lower year-over-year, EV products such welding remain can emerging EV our projects, X, due or our above revenue and and accounting strategy market focused some that products financial and first gain was of and we ] At in a welding, bottom [indiscernible] to in demand our long-term applications, same significant time, lasers to of our on believe as new in products applications and laser other as speed China declined for with Tim battery in welding e-mobility market. we by customers, Revenue seeing heating book-to-bill to XX% closing year are battery the customers both we we fiber energy applications. highlights cleaning, compared America the this in time, prior welding, that share North new and improvement These new nonlaser end at with environment the reduced solutions. At focused opportunity, prove tools, and Our with in significant cutting growth the in from quality in grow cover

that towards EV internal general Additionally, of required automotive new from battery in and our the remain vehicles may better laser again the fiber into investments to batteries automotive manufacturing electric leading of battery applications optimistic transition to number increase working we capacity end a are XXXX support building assembly. with a We hybrids. resuming combustion of XXXX, trend cars multiyear of or [indiscernible]

were demand welding from as as monitoring [indiscernible] and and see in consumer automotive to real-time results. in also our general applications. well a are showing complete we electronics Additionally, pickup applications industrial of pleased Adoption general revenue in battery good system growth automated welding solutions

impacted sales by higher Our costs. pipeline in customer the and demand some and have customers quarter North in America handheld financial uncertainty But remains slowed welder order with smaller in interest strong. been

reduced showed we we demand negatively cleaning In in sales to our which other will stable result revenue In last have quarter, remained due second the Cleaning to due the electric, the improvement will were and devices in softer mine to cleaning quarter impact compared which continued the become [ in difficult, in system more more year-over-year. has e-mobility, help in declined been making impacted addition, stable and first total many are to inventories general sales. geographies. to sales to expect the soft a North sales manufacturing demand demand introducing across sales industrial in some are solution demand that the year. Sales OEM these e-mobility the in all impacted in inventories half cutting also but were second welder sales applications. applications Europe, improvement in across of major in to be processing and in the cutting measurable weak their of several ship our increasing ] contributor more appear applications, year. [indiscernible] progress [indiscernible] soft economic meaningful ] in customers customer general Large [ negatively second Japan. remain conditions applications Market we managing but our quarters by starting and conditions we material half and the should America but

this quarter heating customer. order drying for as sales a is in area IPG. we another large lasers foil While to The future ship strong relatively small, a a still delivered e-mobility and increase of application drying for growth

with to needs. from working application of and to large manufacturers number of are areas their we drying a build suit a number heating innovative across Additionally, solutions

the in metal printing industry strong providing stability XD as to large high-quality this in Outside to high a number of applications declined advanced increased revenue to the and other position lasers using a with powder has revenue characteristics. in applications. beam sales Finally, IPG of due lower create market, melt applications parts. lasers processing, is materials medical

quarter. by large was business management inventories the medical impacted in first Our a negatively customer

and expect become IPG this We new total opportunities sales. business to to revenue the contributor should and working and quarter in are more in several meaningful second normalize we'll launch we to medical XXXX help XXXX and a grow on that

as team the IPG great are a IPG Mark successful This results. Tim ahead combination to to like involved industrial employers was the marketing will transition over my earnings but global make I as for our a the as opportunity become of a of CEO. also to and passed contribution the I the continue be colleagues, IPG provide for still unique will to but seamless I the best an future IPG, the operator Before With and lasers we my call other that will call, and this my for would forward because thank leader. I XX help to comments next performed that things. to I proven the morning. I few company. I to turn I Board discuss to him other interaction ability The to transition technologies a and be in with industry. accomplished journey I believe knowing customers, growth industry the an IPG I that look enough helping welcome its next the day-to-day over the leg last stakeholders. I adviser ] for to and fortunate miss have a be call financial for years. Tim, search Board. scientific the now this that, team displace transition Board the he laser our will part [ remain transforms will to on last and make also on like turn supporting we will and driving [ would fiber announced to Mark expertise the will extensive gross of and process IPG Gitin], leadership relevant selection I

support the Thank the pleased financial year-over-year. first with resilience ability you, My will and share generally as is quarter of the the Slide of which from presentation, start comments Relations cash on continued morning, and generate decline with a financial call Eugene, earnings I'll the available everyone. good to current revenue, was operations investments future on review well headwinds strong follow I'm website. and $XXX our opportunistic in our X. Despite million, XX% repurchases. Revenue our company's as flow Investor to to model the

and of applications costs, percent had related mix product The in partially lower revenue improved diluted at and a while sequentially, of have basis of and improved $XX to X.X%. Net headwinds invested expenses profit a a XX.X% increase the lower profit GAAP higher X%. approximately to and or by income quarter. Operating to same general and quarter in higher. growth and as million revenue development in and dollar partially inventory offset costs, primarily had expenses. FX to operating a by was margin result offset our tariff margin product been impacts administrative basis, were effective was as expectations $X decreased expressed a controlling a year-over-year inventory XX%. GAAP $X.XX gross an income we also tax processing in as reduced sales the and manufacturing operating in impact the to per exchange drive relative was ago, gross revenue was came revenue absorption provisions. in decrease These shipping If the decreased both XXX costs. On increased X revenue. be on margin negative while unabsorbed year were to end mostly provisions and year-over-year from expected and headwinds lower which was negative U.S. lower marketing million future other XX% million research million, decrease as in share. year-over-year, a would as applications rate due growth $X and and and rates costs we result expenses duty, currency gross high still be Foreign of scrap product resources expenses $XX the of XX%. and revenue and to sequential manufacturing Revenue by gross due materials higher from points and of

period-end transaction remeasuring negative or per impact to a share. and of income currency currency rates had assets operating million losses foreign $X $X.XX Foreign to liabilities related exchange on

to buildings $X by income $X.XX. The million a result, X sale optimize our by continue We on increased during increased and and sold the gain EPS operating assets quarter. of we footprint as these diluted

demand decreased XX%. general to was advanced benefited due cutting in inventories. rollout negatively in America offset revenue saw in in some offset as industrial XX% to also in as in parts applications region welding, and soft China medical, across printing and light applications markets and demand North cutting and welding a increased main more weld America. In We than sales in to Demand e-mobility manage services. Slide purchases XX% on sales environment by sales Europe e-mobility decreased reasons year-over-year cleaning customers and We as in Europe, region. Economic OEMs applications. Uncertainty in the region. remain saw in systems decline cutting and medical inventories by the applications, XD X. Revenue cutting lower impacting in as a cutting e-mobility in decline conditions and the Moving performance and OEM reducing sales were by continued in well customers in was reduced partially general decreased the the sales in Sales revenue managing declined challenging. of revenue large North improvements from behind growth welding growth in

the increased as On to region. is in growing investments industry the seeing printing the hand, applications other sales XD in China,

no investments ended summary X. Moving $X.X flow to debt. of and the equivalents our and with Slide sheet a billion on of cash short-term quarter and cash balance We cash,

Cash XXXX. Our over decrease further are $XX million reductions first we sequentially and was the were to during by expenditures course $XX million operations inventories and capital provided quarter. of continued the targeting

I capital As well the buildings earlier, realizing just in period $X mentioned were million, $XX last X net million the quarter, under same we which below means in expenditures year. sold proceeds,

first have opportunistic a repurchases We balance quarter through shareholders strong on sheet, significant the of been prices view at a we share capital spent amount continue returning million attractive to to share current $XX share repurchases. maintaining current levels. and in While

on Moving to X. our outlook Slide

First quarter above slightly book-to-bill was X.

resulting and major However, all reduced negatively uncertainty demand delays macroeconomic orders. still and markets is across in of impacting project our

capacity side, battery Europe been stable to related and China manufacturing expansion indicators should demand and and delays are and North in improving our bottoming project providing On for leading sales bright Additionally, which our China U.S. have headwinds lead more America. in a Japan, to customers. to in

expect revenue that levels LightWELD more second quarter. to in will also We return the and medical normalized

million the second of of $XXX For million. to quarter expect $XXX revenue XXXX, we

is to million shares The in second XX XX% $X.XX estimate per XX%. $X.XX between diluted quarter delivering gross anticipate common We margin share of diluted outstanding. the range approximately earnings with and

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

team Dr. to Dr. made recognize happy IPG's of during noncore management CEO, and markets applications, With and today. the competitive contributions, to on as his position to to we contributions vast But of look director. on all Before the reorganizing I to too disposing be by We He has past and of R&D your to strategic work in XX many Board, assets. like over for as years, describe questions. should time would employees by foundation we'll take with particularly gratitude questions, his establishing including clear a forward next key plan our IPG. we the phase capacity Scherbakov on behalf express focused that, move continuing strengthening our growth a and laying his Scherbakov to

Instructions]. [Operator

with Company. Ricchiuti Needham Our & comes James from first question

luck. A what's X, Congratulations What on areas, Scherbakov. at including -- accomplishments wish a you I'm get albeit your in the of best year. Dr. The at the later the and book-to-bill market? the and are suggesting back a confidence recovery year. a to of trying EV I you a half the you emerging and seeing probably the IPG, giving to recovery to of many couple And seem some sense in the the questions. First, you just be as -- of of modest welding in the bottoming the

positive the period headwinds. above of So relatively perhaps book-to-bill at first a albeit Jim, for of in serious revenue the fact a year, slight we've the tunnel is through first of that right? was the glimmer time end I the think off X light or macroeconomic a So low gone number

we Europe the well, I bottomed, of in with in in is China our mentioned, Japan, specific think that you the economic America, some has More look ] improvements we I mean in still that bit key to in there's when at, PMI business, certainly as [ as even North The in cutting couple China. seems of some a PMI Europe, the that's Japan. improving in data, data that There's an uptick it's and and quite have strong to ex market weak. not data.

major You seen companies the public. from of the results Europe perhaps have some that are in cutting

point in is I'd business are specific improvement second the So They that this towards year year. probably part half the at in the of latter they're of time, the of say do that expect some this to they've that some turn starting had. but improvement at point. run inventories the a in down seeing more not they

working on On and several where there's projects EV there well, positives with particularly new always out qualified the are of side, that Europe, we -- in customers some as there. are

are one June going from those number of China welding Europe with folks. I business or another the feedback a reasonable. that into. a we're in hoping to in work, the had was visibility Asia the should There's more on way in quite of actually some There projects that with and sales I've get think, crystallize So of lot

So starting we've that in I'd seen. shows say and positive least to the guidance that activity though some improvements. that improvement time direction. that difficult appears there at is still bill that in a QX to be it very modest small a remains only reflects book the Clearly,

a my covered I different answer. I things think lot in of

And at -- what some I look that spot LightWELD thinking that this would here? emerging these days medical, about a year at opportunities think you seasonality, it's Miller little early was it's that but maybe bit and little maybe so. a gives color. that to we meaningful? I gain there plays the I'm with traction you that You be mean, strongly partnership appreciate of confidence I out little further and over thought some out out wondering just you you rough as look with [ at and did, But Tim. opportunities. maybe surprised as Are more more beyond out, or feel I more next the emerging look we about any 'XX about actually, as a could the ]

the I relationship with think, well, [ that's Miller LightWELD, starting you've to ] got accelerate.

start North has Europe underlying that ramp product with seeing improvement the demand up, in America market. in acceptance still You're that. an help tremendous cycle as we've introduced the in in product the The to macro will

we So optistic very about that. remain strategically

market. optimistic remain about still the EV We

battery makers think about I way, grew in The EV specifically. storage in growth, think at demand was the XX% China overall one battery over that globally, by about utilization in largest last year. by China discussed was of their year. last and I the XX% battery XX% XX%

at continues So it to not or XX% whilst is utilization increase. still XX%, like

out to. continue and that perhaps as of added we that to capacity both battery increase EV storage capacity over being and grow about think So terawatts still X.X is to sales built time dramatically needs is

other business medical. going with product the and in of other come is new to back strategic think introductions on the working areas growth, numerous medical partners I major We're QX.

good XXXX business. in and It's but our ultrafast I and bear with on performed we around and well reasonably small, greater actually to strong we'll the ultrafast of start still performance deliveries business performance of of processing growth some product. a had some think quarter traction that micro better

I doing the have we -- we're cleaning strongest think heating remain a then around have quarter on the and very on conviction to and we ultrafast. And applications. continue work strong drying

said, strategically, of with parts of those in So we different a of I there's on there's term these but a developing the very lot for various each longer think strong areas. work around here as with customers the headwinds relationships that foundation business, going

something we main and add especially It's and positive. potential applications. And party lasers. I also the which very advantage customer. we products, the this customer to these [indiscernible], start quarter. for for feedback to first The XD of our shipped was introduce existing already our first new

of more all, much cost always of And more it see us. First ] it's also potential -- course, we for [ and compact, will optimization. a much efficient with reduces that cost be

We will applications. XD the for take additional business

Scherbakov. Dr. Congratulations, it. Got

Our with Ruben comes next Stifel. question from Roy

to And I'd you, like congratulations Scherbakov. best echo and my Dr. wishes to

improving sort question, of inventory a Jim's of push guess, bit where a been customers my time, your like delays, you're recovery. For stand out on of same sort and on at I improving Tim, a But it sounds with et how a thinking seems to bit little the first cetera. which the and is visibility through it's what book-to-bill question, follow-up, thinking little of project there's about like

way modest about the has second conservative being scheduling year what recovery of thinking it? difficulty of the it? EV just in kind recovery were something last that and So right to about on customer to recovery thinking perhaps. Is on Are half a the because in as quarter progression? of timing when or you're we've Or maybe versus pushed assessing out and you the think about seen the recovery end of changed the we

of the of have say the think I second of in I degree half we would expectations pickup year. Yes, the the moderated

confidence. and a think QX, that momentum was a more I that give book-to-bill accelerate, starting being stronger in lot definitively [indiscernible] would us to bit

is in I more think year. the it later

have several said, that a EV projects of waiting to we're I I those side in As sort around a is them. about go, on hear of we're to June think no-go on bit -- that there's gate the working projects

major challenged business, okay was some can of the it some of by think players there. if seen America, from really that the from see you the whilst Europe cutting is in I results you've North

It's of I not think tone modest that our that we're immediate some we're that around QX, to would with into I QX, corner end it. feeling an of end But turning improvement of be So it. the into it's how I say the the year. more going characterize is the ramp

Right.

helpful. et looks a thinking inventory it perhaps margins just as And and I comes But better we've That's you're cap, on bit here, cetera. down sort in just Okay. got gross margins. from gross then of stabilization question a of again on working little a know like through half the revenue-wise. working

you additional about me a expect improves, as Can a have gross you're you little down. as that revenue get bit second bump walk how half thinking So just would your one through inventories of come on margins? the

power think, lasers. QX, revenue additive, to your bill Scherbakov introduce, going laser it up, single I improves. I looked I the on beginning into, detail, the there. actually but also rollout higher-power still -- Yes. There was We're of profile, is was as with this margin starting delivering actually in [indiscernible] and actual on I in single-mode lasers mean we're clearly, product. start pleased gross QX. when the mentioned back ultra-high again, of the end QX material, the mode We absorption product some lower What some introducing of revenue, to at the to the came I had of of that mix in benefit target cost the Dr. with QX,

what's the margin holding of gross the I well, and always benefit revenue product, have is should cost of things. picks the pretty initiatives one start that we If So reduction the and to up, look absorption will that's side. at these with help that things up

QX it ago, QX both product year. in a and that us this shift affected rather was on margin So it's than, say, gross to or structural absorption pricing relative year really a actually

Mark Company. Our next Benchmark The with comes from Miller question

all and the Let Dr. congratulations Scherbakov and contributions I IPG. me my he's to certainly also to enjoyed working add appreciate with made him

sequentially mentioned some insights and you factors, drop-off welding dig that? high-power the maybe was you remains -- laser I in Can weak, any little cutting drop double-digit I deeper about provide into sales. a a just off more there think but wanted to

market, I North had the on product mean a in welding quite last of particularly into also, weakness the Europe. then of we cutting America. EV And number in that's -- at continued year, we we the to programs supply had that be end

demand that large also was of North will QX. A America. in for America welding main couple market QX in the weak in EV So X Those projects in quite be EV things. North

large You mentioned a order.

related. little think Can was I color it more you give full a on that also?

A large order for where, sorry?

you application, said a it wrong. thought I was full maybe I'm

large So received? you a order

high-efficiency of of kind first course, a for with very of order also the Yes. more mean what? such And kind XX% us. of for later big such applications. shipment how And only and that applications, diode enough efficiency, kind than be drying quarter the important you'll We've oil [ to for successful see seen first drying. use You application. It's it's such used our demonstration big customer this a for lasers can this this is ] very opportunity

Okay.

[ application. was drying it So full ]

Instructions]. [Operator

Our comes Northcoast with next Hausman ] question Research. from [ Keith

Great again, Dr. all echo I'll and once that and done. career Scherbakov you've great a congratulations,

of had can the the ask if between price the are of during that real but other? performance change of any quarter. the can right volume, terms Just versus now, I in in impact markets pricing understand the on I quick color you the add terms the versus impact the that -- mix

pricing be in stable market. all volume-related continues basically it's pretty It's to all -- the

poorer primary average maybe haven't is changed we policy. And that a the little the moment. palates an on bit benefit strong the advanced per We because its of average very continued of at basis, some There volume price pricing was sold had selling our driver applications kilowatt. -- ultra-high [ for mix ] results we

I appreciate you. that. Got

In on inventory margins the provisions the that last terms you the quarter the versus us impact took help understand this perhaps quarter gross and of margins, year? you can had in gross reserves or

the Q], haven't hand. total or It got be provision probably [ was points like the to will provision. the The that specific Specific XXX number. in on something higher basis amount, I

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

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

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

today's conference. concludes This

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