IPGP - Earnings call transcript Q3 2019 | IPG Photonics Corporation

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Operator

Good morning, and welcome to IPG Photonics Third Quarter 2019 Conference Call. Today's call is being recorded and webcast. At this time, I would like to turn the call over to James Hillier, IPG's Vice President of Investor Relations, for introductions. Please go ahead, sir.

James Hillier

Thank you, Doug, and good morning, everyone. IPG and is Dr. today us Photonics' CEO, Chairman With CFO, Vice Valentin Senior and Tim Gapontsev; and President Mammen. expectations the made this management's intentions, call statements that predictions The during discuss and the the statements. are forward-looking future course of or of company's subject differ These to uncertainties that actual from statements. those projected risks could forward-looking to and the cause statements company's forward-looking are materially results in such reports XX-Q on those for uncertainties with risks include detailed XXXX, in and Photonics' XX, and and other quarter the Securities Form file ended the Exchange June These IPG Commission. section obtained Copies the or IPG's filings company may of contacting these by be visiting by the Investors of directly. website,

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

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

results, these our workbook financial to details the post We'll the reported earnings additional the in Investor the completion Excel-based posted please For the of release data website call. Relations press prepared on refer following remarks website. and Relations on the Investor

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

Valentin Gapontsev

Good everyone. morning,

landscape third progress China, accessories were quarter with competitive line expectations. we the laser system. new complete Our and challenging power and backdrop demonstrated in Despite good fiber high with macroeconomic products, ultra our lasers, results in exciting

that In terms declines units in growth outstripped of price prior-year competition greater-than-average in is power. the resulted China cutting a market and

applications products reduce However, substantially we products continue and our to competitive to unique new and cost. in enhance position to invest

HPP cut average piercing unique the parts. deliver peak cleaner scrap increases to and of and This first power lasers closer thicker controlled receive drilling high volume delivers capital a materials order capability reduced speed, these in capability. IPG Along with the wavelength. we improved more power are enabling by of through peak quality, nesting energy twice of pleased lines, products

in and for multiple our range The tunability, have for the for variety regions. lasers AMB of particularly application vehicle in broadest production. with the elimination now external our AMB beneficial Adjustable of differentiated a allows example cut of battery the another of accepted optics. been capability welding permits is In solutions, beam electric our Mode laser welding Beam spatterless simplifies

see example using encouraging our X XX while kilowatt high-power This the solution our cutting differentiated continue evaluating over portfolio. improves power, can performance of be for another metals up That's to processed of from of to the XX-kilowatt feedback thin using customers increasing that materials thickness the IPG We significantly range cutting speed lasers sheet laser centimeters tests. technology.

the do China position series end low market, not in product. that of solution. competitive similar margin so this IPG up fiber. wavelength, In micron offers highest this X-kilowatt higher XX% thin the meters. Competitors diameter microns laser our cost fiber. a productivity versus cutting metals new our in will in we At low cutting the brightness, XXX will than of the competing XX significantly offer for with core That to enhance customers be lengths provides more the be fiber profile and lasers introducing XX

a enable solution, monitoring versus supplement with provides solutions differentiator competitors. patented Our is LDD, unique our ability offering to investing technology optical increase real-time can of us supplier leading capability Brose in heads, this a efficiency. recently, laser measurement that world to with high-power growth Marrying our in major our with key Global production one market, automated are automotive welding environment. welding the manufacturing in greater announced use direct laser-based they

order welding, significant and -- recently received We battery weld lasers with leverages our leading we for this that and monitoring are edge sensing a broad solution scanners.

as well. opportunities other for interest customer strong seeing are We

powerful Research at took fiber levels. European laser a the Organization. laser was order IPG a for several XXX-kilowatt ever we Outside most industry cutting from power sold. products and leading has fiber these leading Chief CW This orders welding, marks the among

also $X another in for represents of research an These application. the fiber revenue two order approximately laser laser CW million We took fourth XXX-kilowatt for quarter.

X In these addition, kilowatt power we and took products orders mode multiple along and with by CW beam represent Collectively, lasers. single XX-kilowatt and XX for levels competition. XX precision laser, unmatched

We product as make to well. continue progress new in areas

laser up solution System doubled Genesis, emerging driven by quarter increased ago. Third year-over-year, sales year-over-year put also, recent products and to X a total growing femtosecond XX% driven new sales believe year-over-year, and and market. thulium wide strong in will across range laser pulsed approval lasers systems laser by microprocessing applications. up picosecond newer growth of sales systems projection of business applications. as and our and our to cube FDA new product year ultrafast project for were that expand introduction cinema IPG nearly multi-axis our grew Sales of laser of We fiber or medical revenue, XXX our presence excluding this manufacturing our forthcoming urologic in help ILT in system, within were Sales continue into watts of XX-plus X% year-over-year, lasers applications pursue for systems. we XX% XX% medical -- of device from

manufacturing. and testament choice in IPG's fiber the downturn strong to to our market market. a execute continue quarter, tool make driving dedicated adoption position, competitive total period third Despite our optical laser the Sales expands areas the our power one XX this product demonstrate confident in technology progress to a long-term in challenge to technology exceeded that technology new ability and the of our in our We laser in core remain emerge megawatts markets, ample in acceptance opportunities to laser of from opportunity. during of environment, in workforce, addressable shipped with we in our in the the

call turn to Tim. that, the With over will I

Timothy Mammen

Revenue other $XXX X% you, in Valentin, from revenue decreased represented in sales. morning, China XX% and year-over-year, XX% the year-over-year decreased good everyone. Revenue quarter materials declined and increased Thank to and of Revenue total X%. from third applications approximately processing year-over-year, applications X% million.

declines. in QX prior by performance growth primarily due the trade and from impacted offset was macroeconomic welding. expected, trends Overall, environment had challenging, manufacturing key greater-than-average by U.S.-China declines weaker the due Europe region. quarter. in decreased In to in we marking, year-over-year, XX% price among demand indicators weakening moderated Europe, revenue and demand As health price conflict very of in to the softness by evidenced remains cutting The partially additive in

North In year-over-year, America, the acquisition of revenue increased XX% driven Genesis. by

in our Excluding America in by in increased growth communications North strong offset year-over-year, Genesis, sales X% with cutting declines surgical business. applications, and Menara welding,

XX% XX% with softness revenue battery and growth strength in revenue. materials welding Turkey Sales QX was laser of in in applications. and Reduced marking. as the strength weaker decreased in XX% were by decreased revenue high-power from increased pressures cutting XX% in offset offset flat, X% cutting cutting. applications. CW and in to given reduced Korea decreased Sales macroeconomic processing lesser welding a partially lasers lasers marking marking lasers represented offset but performance high-power in X% Pulsed year-over-year by sales from other growth CW sequentially, in was approximately by extent, year-over-year, by and, in year-over-year, with pulsed region. year-over-year, offset total in Sales and sales Japan decreased welding, of high-power

welding sales year-over-year, Genesis, declined while softness and driven year-ago sales scale welding to on versus the System including to kilowatt excluding softness Genesis, for period. year-over-year growth year-over-year, additive XX% systems decreased in laser consumer in by and sales lasers power applications. in QCW and XX% the in XX% cutting, Medium manufacturing other electronics due XXX% materials fine processing transition increased for

expenses Compared basis current by and points Other driven XX.X% In pricing reduced macroeconomic year-over-year. foreign points. XXX systems we margin and increasing Gross and XXX product to our margin margin declined sales Higher year-over-year, favorable and and basis to factors XX%. gross manufacturing of gross XXX basis delivery XX% reserves it target moderate basis other appropriate increased gross product margin of XXX points accessories reduced margin challenges, light competitive landscape of XXX ago range is revenue, Genesis to gross inventory in less points. gross year by margin The beam with acquisition XX% basis growth our by period, believe service points. reduced reduced of exchange approximately revenue. lower absorption the by by the

are leading markets. in core launch features cost implementing new We investment a the largest industry as R&D environment measures, to multipronged margin industry-leading reduction, current responding strategy our leveraging company's with conjunction the laser with differentiating edge increase current and business should laser the expectations challenges These the products on products profile fourth in our of for recovery, quarter. with to the modest compared market for product

$XX or was of million XX.X% Third operating sales. income quarter

exchange foreign XX.X%. a $X margin was loss Excluding operating million, of

were $X.XX. percentage was IT and basis increased exchange, sales revenue, due systems. investments million, in foreign year-over-year of expenses income and operating diluted to as points per earnings share Excluding $XX lower engineers, salespeople and a acquisitions Net XXX

had The short-term Foreign debt and by as $X.XX $XX tax higher. million If to to XX%, U.S. gross exchange the been higher losses investments same rate and be in of the $X expected cash profit reduced rates certain equivalents be would've We the tax X of million ago, EPS we discrete which items. was included with quarter $X quarter year exchange effective cash, the billion total and ended million. revenue $X.XX. relative to dollar

in so in Capital quarter. cash were provided far of quarter million expenditures year. Effective execution resulted and this operations million operational the $XXX million by during $XX the $XX

$XXX our than expenditures annual $XXX from our of capital are guidance part of million. As million less million to $XXX we reducing prior operational review, outlook to for

We expenditures of capital also the to moderate year. expect level next

we During $XX the million. XXX,XXX for quarter, repurchased shares

year. company began $XX reduction program macroeconomic, competitive million, The headwinds. to quarter, annualized fourth by continued with expects assessment a in impairment, and expenses fiscal fourth approximately implementing it IPG the operating as geopolitical to is reduce the XXXX. annual of global full each the the cost response During performing impact in quarter occurs IPG quarter which being goodwill fourth achieved of exits its

yet fourth communications and primarily recorded the communications this to be will the is While business. goodwill in total currently The not long-lived approximately million. company assets business the the to impairment that within expects assessment related complete, other the process charges subject for $XX are quarter,

Turning to guidance.

which equipment softness and As seasonality. book-to-bill below for subdued. remains industrial our normal widely under This market X demand impacted quarter third reported, automation ratio, was

including this edge we highly on end focus on we acceptance, When and high-power lower-margin us higher our reductions, investment to capitalize scientific the lasers, we combine believe demand. the strategic leading planned today our the market to differentiated of Furthermore, trained in core to mix to features deployed rebound in and company, to our margin and the while eventual flow cost as enable with forward, they compete resources products strong reducing new the on success market on will manufacture will greater a better strategy products. gain solutions. initiatives long-term optimize to strengths intend workforce Looking new rely of cash critical

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

approximately be $X.XX XX%. anticipate to We delivering to rate per fourth $X.XX. We expect our the in share of earnings range quarter tax diluted

$X.XX charges range EPS EPS Our annual excludes in guidance includes assessment This arise from impacts the approximately that goodwill might restructuring charges from impairment. of our any fourth impact guidance quarter. from

the including conditions. but may factors, As our competition, earnings harbor demand, today's trade press discussed product not impairment limited cancellations and in passage tariffs, of differ policies other guidance and and charges, release, from actual goodwill order to delays, economic results due safe to, general

upon SEC. assumes conditions with in company's based current risks earnings the outlined exchange subject rates is our guidance Our is and referenced in press expectations, and the to release market reports

Valentin questions. and take your happy to that, will With be I

Operator

[Operator Instructions].

the Our of of Joe first from Wittine Edgewater question Research. comes line

Joseph Wittine

new what prices is building on presumably details And could talk specifically, hoping the consider reduction materials compared would different in you provide to think be persistent reductions? I that interesting? initiatives could on lower what focus board, new company's further was on you product I these I if products, approach strategies, with the to cost

Timothy Mammen

question, the products, cost initiative of or development? you Joe, First did product say

Joseph Wittine

The Correct. cost...

Timothy Mammen

Overall, its the execute of really continued around company cost taking continues and excellence products. out pursue to

It lateral electrical result that of also of optical get of and in on in of power bill components, components. thinking materials, this fundamental changes can terms Sometimes design. out amount mechanical redesigning we the product materials, types focus in individual can of

lower transitioning market, Pursuing whether systems looking those stopped set the end to products. technology lasers, products these some we've market, haven't being be introduced sold. even conjunction newer with of the and compactness, the a across of the to its of pursuing initiatives just ultrafast in benefits of kilowatt-scale of the and the end to it we the reduce in enhance that base are and the introduction broad ways cost initiatives of the So the higher value at that some and robustness of those

Joe, conjunction with also your in So attention that delivered conjunction cost initiative, we've the technology to also lasers, just the that's it's we've the different of pricing the scanners the there's not selling reflected and delivered end be processes being been of being the the a reduction that tremendous high-power with that value the in amount can focuses and In it with a where real-time to lasers. in respect, progress capability and monitoring on customer, able obtain. made some to

fundamental what of no good change. it's we It's So a believe at doing. very pursuit we're just continued

Valentin Gapontsev

of application And we introduced devices, now new which them. the each were XX new

All quality much new new [indiscernible] higher the of in market, open the device don't any -- application, have absolutely. and

So forecasted high-power year metal but make we years, here. new still with our X we with new and made we not target only just about of XX% in application, pipe, products a -- business before -- laser build

laser. compensate in our more total Of due course than will our from price This our grow to new XX% model, of thereof application. books revenue now, in business

now product new for further models, offer for detail opportunities growth. the we With new

Joseph Wittine

a struggle what you're There's to see over try change you've do onus up you do you in story power? been then the at course and inch that X-kilowatt-and-above expect and I at to difficulties on are you next think a how the continue wondering to they to And was ultrahigh with pretty even there you of low-price competitors competitively the X-kilowatt-and-above? as some insulated of could Do technological how to certainly going So is core will the that seeing And follow-up, therefore that or IPG if competition the forward? been same? year? expect continue

Valentin Gapontsev

stocks. XX-kilowatt, go the such They're against competitive power. Clearly, They additive. have don't [indiscernible] competition for X-kilowatt, solutions still it's

they're it practical, market compete of -- any kilowatts a X making newest help maybe this only they working X especially extremely where China, in they Sure, have areas, -- with the though kilowatt, if degradation neglected the -- share, reported this area. very We is to the the with the laser X so are earlier. best quality when product our a sells, our well. Probably practical. in times able have They kilowatt, of they have government, X in all not government the did And kilowatt It's is check support -- when even it few lasers. making compete come product to China lasers when don't of many on Chinese every without that time the laser. come months, opportunity it's quality want

noise Creates products, noise. So in only they're time. not real marketing the much

Joseph Wittine

clarification, click of million Is reductions fourth any cost Tim. within $XX one the of EPS the included And quarter guidance?

Timothy Mammen

basis factored the the -- benefit bit on small some Some through really in the on the a the pro some of year. at come through of operating But end rata a benefit will manufacturing, less expenses. little full

Operator

Tom Our next of the line from comes from Diffely question Davidson. D.A.

Thomas Diffely

that the versus earlier It I'm comments driving at strength that you're what's some And you difference? when wondering, cutting? your sounds seeing welding softness in look the in in relative market like today, industrial

Timothy Mammen

enhance it's at can improvements quality, part be processes a improve then their industrial some of want from this weakest, they're output. R&D the development the in focus side can cycles what that area. yes, this way, when often So look It in welding how weakness, been some other driving by is doing, macroeconomic to companies and on side. coming in certainly, time to transitions wins In in productivity there's the demand on happens and they instances, some is significant manufacturing it of and be

different around continue very example, not be battery for countries but we it growth welding, driver of as to just and it's expect applications, China, in in world significant a welding so. So the will

the the outside. called by investments, also weak those out automotive interesting, way, it's to -- Even can be of cycle also are some on appear when the this And previously. we've

investments program the and that automotive welding actually up of into go pick the bit. programs a Some

Thomas Diffely

helpful. of What you That's that pieces healthy. category? biggest also Okay. And were of the some applications now? other How category that fairly mentioned big the right material that processing are is

Timothy Mammen

and quarter additive highlighted So of the good be welding which are the over some the continued main would in cleaning cutting applications, ones in The the ones weaker years. obviously, multiple in, manufacturing, growth we've those side.

power We which particularly definitions, where processes, separating about a strong very lasers, abrasive I driver significant so abrasive think mean, was expect and processing, the advantage. when growth joining, the the we medical higher to Those defense is be material in with you are pulsed revenue, X joining revenue the quarter. processes of we're the Outside a have that materials strong. is strong, it's that stronger on drivers of this revenue outside key processing. side or

Valentin Gapontsev

for can But with you laser things different each repeat, much I Regarding different said can and more but different -- cutting. on. markets. should just practically, little it's in buy than so I each developed so the be welding, that preparation introduce and product, before, welding some metals a Cutting it's with everyday, it's you complicated is lasers technology, to on, trying part and application,

new absolutely business model. an it's So

patch retail, only Before, customer and in for the to themselves trying a small. very efficient and we very growing It was sold develop application, not processes. such welding as lasers were

the Now business we changed model.

with multiyear going the you many development, processes we're -- of of their and all automation various areas, welding, customers' in in preparations. where designing program Now watch change program

to The will It next no way now any more other. benefit advantage. much serious And model. able that complicated applications compete us, aerospace have our and case years, and grow much dramatically. for their the customers them platform. We in mature changes together as same X seems then It technology believe so X way is new with such different it's company in such change more and -- more in process to perspective, we -- complicated develop nobody many the full of industry, in in we the going agricultural automotive we're technology welding industry, welding industry, the areas much welding with

also we prototype or out practical machine make different opportunity and outside in produced transfer in-house companies IPG-patented electronic machines, them types and huge than of customer, terms technology more for to but process. of which this the prototype optical these of markets with process. made solutions machines, where forecast have XX solutions, IPG we supply accessories, throws them We Only you a area, welding

Operator

the question line in comes of Our next with DeGasperi Andrew Berenberg.

Andrew DeGasperi

I could us of has of could X-kilowatt maybe first, X- the in the pricing of high-power terms Maybe up And if revenue? overmix you percent I'm it, tell held you missed how specifically, provide us, in XX-kilowatt? to sorry,

Timothy Mammen

been the levels, But at a it of been on changes levels. the basis those more X-kilowatt has basis, at to does because good was kilowatt So Certainly level, higher levels. approximately Pricing at lower per as sales. it those some advantage, the generally feed total pricing at sequential degree, power resilient through. it's XX% is high-power competitive on better pretty a the basically

Andrew DeGasperi

Got substitution X And speaking, someone because kilowatts as customers? seeing an high a just maybe their generally kilowatts where with is effect, with goes to it. X as wanted are the purchase you who not uptime

Timothy Mammen

No.

change. anything, and of quarter, then X bit that X, X and seeing this X strength kilowatts. was more in higher, the a than of have haven't of the you X a We mix the X, the really If sales and the the were of lower, some bit

Valentin Gapontsev

XX% market in mind, XX% Keep the marketing control to XX% Up to we for change. not we control X us XX% X-kilowatt total. to sales for of X, now, this kilowatts, in us, even situational in

X -- new therefore, practical. level losing market, with they're and compete these ways when the in Chinese introduced will example, was not X practical similar in to We with this the laser, of really kinds kilowatts X adherent, companies twice don't they doesn't also want But The in solution. with now deal only our solution X cost. kilowatt market for competitive potential Russian such the wasn't practically. We see all price now new of supplier Trump any or and dominated not because Our remain Chinese. it able with we to that draw to have market the yes, X competition, unit. market power, kilowatt, which material

also, it in done increase and this X- segment, also the never the with But to you we in softer market. work So works we already again, to with business by of X-kilowatt done offer practical, with here. are our way pricing, share market our with started

XX%, make opportunity to Now our XX% we now we the lived. have drop to XX% this short to

Andrew DeGasperi

point? gross XX And mentioned should going that point. it. in notice to change is, question release, Got with XX margin that Maybe, that term? consolidation you one the some some last Or at your I we your along explain can that you at trajectory? the expect to medium that at stay for Is me this

Valentin Gapontsev

percent income. it target we net XX% Our and always, will XX-plus to promise gross the support by XX% margin

Our return and future targeted prolonged we year, these next everything and numbers. back work, too, to believe and total we results we'll in make

Operator

from next Our of Jim with line the & question Needham comes Ricchiuti Company.

James Ricchiuti

as XX% that you're about impact is I way gross those about, to we well of think just I'm wondering level can at revenues XX%, range at know mix see volume, obviously, margins high gross what need that but to that margin to quarterly margins there to end? as a the the the be talking of kind

Timothy Mammen

back Jim. let's step a bit, So

you all, in higher, if under the look XX, First bit X inventory be out strip to XX%. number just quarter, of close should you absorption, guys If the a you actually actually being last at the being

getting X So range. XX, if recover end XX, those of X the see X the back towards it you you probably above that top amounts,

lasers, those for increased ultrafast, the will mix example, lasers, to flow-through, UV, benefit. pulse be sales benefits see increased power sales higher products, higher of a of power you starting the If newer accessories,

some in of that margin you see growth, though targeted system's we tremendous even systems, If dilution before saw will impact. we obviously, gross improving the

of revenue the In I the you've the as on significant we were maybe million benefit mentioned these coming I did X- a see range, last above you got ultra X-kilowatt into high-power high of lasers previous range. some business. And see, quarter, less think we and still rebound growth despite that still and than under show being the to this fixed in lasers get shipping, mix quarter question, run the the X-kilowatt probably to in had a in in relatively speaking, very cost, related $XXX the as of to the numbers impact well absorption order in back have to $XXX that. million XX%, and bit that quite a total an

very see there's to the capability So with recover the our the where being towards mix conjunction margin positive shift is in some product some stuff, going rebound. of you real able market gross

James Ricchiuti

you pressure the experienced quarter price in in sub-X-kilowatt the quantify that Can Tim. you the category? helpful, That's

Timothy Mammen

price if The of related at in It the anything, that the pressure But wasn't to FX the sequentially was you much. much mix, if lower was it quite of pricing, impact kilowatts, end same look just it weighted was more the an quarter a to the pretty sequentially. less market. than X heavily

at you talked revenue okay. one our held China They've competitors if in biggest relatively fact, are about think share we main in to and we their weak, actually were In picked actually China where quarter, customers we up in one closer look other performance. the revenue to relative in quarter change the our China, clearly, that to down relative some the up, China Han's, being compared down speaking, customers, in XX%, XX% of our was of

So that be in dynamics. competitive of another terms positive will

James Ricchiuti

below by variability Are across Or was around seeing any it you board? the pretty much region? bookings X

Timothy Mammen

on of Europe at Korea, applications, Overall Western diversity you've the stuff challenge. a got It of lot the which was a the Turkey obviously U.S. struggle and to in continues was very bit going of in Then was The in backlog is better. Japan geopolitical is Asia, weak. a across-the-board. be given bit strong, U.S. was weak a strong. moment. tone a

markets -- last weak everybody the a we're of with to over challenges reported locations whole in with the macro they're right was of what a grappling alluded similar couple industrial days, of commentary what mean, we're and it's that I has companies line the their the facing So that's tone couple on else in bunch seeing. different to,

Operator

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

Mark Miller

of any push-outs impact tariffs? you as quarter pull-ins seen the concerns? Any far as in or Have tariff

Timothy Mammen

pulled other a of and the to face. in war capital a manufacturing The countries environment people lot to even starting a Southeast issues and tariff in Building in and right? is happens X talk of have the being situation. macroeconomic by -- being make that's business that to term visibility uncertainty, lack our quarter, a But continued that's talk, X we driver this supply India. at making tariff medium in very factory some no certainly equipment companies decision-making a that Mark, reconfigure isn't chains. outside the the trade about about particular or There's -- their capacity longer biggest as make like investment the months. time which impact issue Vietnam, of trend, There's think, uncertain, in really anything the in was the trade and China investments war like longer-term and I But whole macroeconomic within uncertainty and China something people drives exacerbated, of that what general Asia, people

Mark Miller

that? actually local of Do to salespeople sales sources would with mean, pricing in do agree the Or contest might mix, they you seem that? prefer, which prefer more the number might have couple China in representatives than not rather besides buying that, heard have in that you -- a China, laser from China. Chinese reliability, manufacturers superior We in a I same

Valentin Gapontsev

With China, quality in although have customer, any Chinese, when OEM good new we lasers clearly OEM you big laser. don't one, change old have use and our

a buy manufacturing. Regarding buy Chinese different pass policy, to to government for local the a they're so of create now policy the this all a from to this sales China, which requirement the moment to in market companies, and huge in-house, is brands, they all portion limited so the of

be Full government this immediately. the bankruptcy should strategic -- successful, IPG, this money two the immediately. bankruptcy the [indiscernible] This government one for not price Chinese what's or a by XX huge to is back. that they ago, full not years government steps in policy someone It's support, risked all raises. So -- policy long technology time. but -- included such without

where started thrown with we only But buy But commodity it's to not enter from temporary. so some real recently the And that. in in-house. they support as

started talk for fast. to grow because itself now, we're the small. forecast will China very to a it but market, grow India, example, now market While fast, big very growing

countries, Arab now offset. where America to countries, South market Asian huge a going to Another it's is

So cars up here own BMW. cars, in high-end I with The changed good And to also Chinese even we policy same, say say we'd able the the outside very But in and sales make able they with compete [Indiscernible] market now of China, to the story markets. check with really are now, they to us. to that's not cars position will of our look future, change they're use same nobody quality. from I compete the because use must but in inside. in

Timothy Mammen

And specifically of a on industry. service in people unparalleled, broad sales Mark, just laser based footprint the that have we that, very within probably is and China

shied have geographically within those making from We not the away very company. broadly investments

Valentin Gapontsev

are X Also, market is -- the not Chinese any have the products which in similar China never might year, now years X now, X and we medical introducing is years.

big the now the Nobody others time new contract the really customers, in in we in medical in we application, have world talk are Chinese weight China, of. nobody their world, there way you something worth similar. the products. signed not in have markets for for many example, only West So in There Chinese aren't near

going high but with we're for in end market in, also, commodities. not us. because brought be the low-power high-tech, each has [indiscernible], really it more [indiscernible] new is go It's it's down, it with copies. as We'll because [indiscernible] profit, and It's that's at which start of a lot of where becoming So can high-tech. have it's to time, product an

and new were So It's in successful we very policy, we our solution. introduced there.

compete unique. aligned product quality new stay we've much and really Nobody to new application Now more our changed and, nearby. most new in cases, sophisticated with can

Operator

Research. comes Longbow of of Nick next with Our Todorov line question the

Nikolay Todorov

EPS of guidance $X.XX or spread $X.XX have the typically $X.XX is here. in that than you the wider Tim,

talk you to the Is that underlying tied it drivers included of lack that? charges of is can visibility? not in So it Or said line? were goodwill about the mostly impairment you the

Timothy Mammen

the the reductions, just start a all good time adjust to that company to market. employees the levels, within got these reducing of model made revenue of revenue right? advantages it's going. struggle degree training get accretive We you of the goodwill point that a ability have At impairment a at we're going IPG capability making you these deleveraging, to an and manufacturing entire get No, the have there charges to greater dismantle with the and to this but investment a cost adjustments to made in leader other levels, and expenses, see and is not relative business just and in

days, a that issues. two exactly different XX, particularly to get XX. $X if And need that set earnings, last XX at as the of above their You bottom back quarter, of this you get of companies that last in quarters, announced recovery and you're to that get in the carry have up -- lower model we've range, business issues X with last around to them X where dealing of X they in couple level to And the the pretty there's the you the shown XX X or faced end the levels, right? it's At same even moment. solidly expenses coming

the it where really business just of the that's is. So mechanics model. It's

Nikolay Todorov

All right.

I'm if sheet? plans how buyback, on Okay. guys can the curious to cash us given short-term? you here to And not know kind where of are in And do have about much why And with just given more stock you on have how to And what please can and much you on price medium- you to get talk left? balance the aggressive then update is? that here, your the cash

Timothy Mammen

$XXX The antidilutive buy ahead our part about I is but have the that in approved first So dilution, capital funding. put in the is buyback most place think a that investments probably all, the The April is the buyback R&D, at we going being past back around important forward focus million. of was expenditures, moment we of the allocation. to wide-ranging of specifically have is on we amount capital on lower discussions obviously continue had. would At meeting remaining and at board valuations, and is

capital We periods. way So balance allocation basis maintain were we a policy. X we'll want to refine from enhance our in evaluate sheet, to a come also how continue a things we've long where to X coming on product but newer sales very or that ago. be want grow and continue arise strong regular and pursue to that the we the there to markets we opportunities start that have years think for develop as to We over firepower will there the to

Nikolay Todorov

talk little profile profile me. that? margin is getting the that relatively the we optic about Or the about in orders have or a lasers, that to below for you of talked margin question just as Can in range? XX% -- is relatively bit last gross that And laser profile with the XX% Okay. tractions power some Is China. that

Timothy Mammen

power The higher stuff?

Nikolay Todorov

power? The high peak

Timothy Mammen

those margin optic. XX%. costs. and Oh, -- is period down takes other the product the strong What is expenses of underabsorption the above to XX% on to significantly has yes. margin of profile product you That manufacturing the the very The levels

XXX-kilowatt our well HPP XXX-, these competitive are have the So the high and lasers, lasers, lasers, as of the single-mode margin high-power products because XX-kilowatt pulsed XX-kilowatt different. lasers, very strong the very as profiles, dynamics example, lasers, all for that

Operator

Krish and question next Company. Cowen Sankar Our in comes of the line with

Krish Sankar

Valentin or Tim.

First except like geographies, to next drop? of just would you to seems continue? think it I'm the issues? expect geographic have do based or jump all, either Or kind if you [indiscernible] curious, that you be your look U.S., U.S. the the competition year looks constraint, on of to in the at macro this do most

Timothy Mammen

issues is said We're U.S. still, Korea, area I as strong. robust in in relatively based probably robust, see continued a said There's here, to continued primarily Competitively, order the where of you the in I applications are side. has to be diversity is the tend other which equaled only that which China. flow

that it's macro affect Europe things. and So more Japan in the

same a and have an My next depends moment, proceeds into yours to things. same how even a landing, or the other is better Federal situation. not the host the the not will world year, in points a points, the expected where strongest all to and landing Reserve touchdown data ball is look tends you at yours. and though the and any clearly whether even a than discussion not as or insight [indiscernible] as on that there U.S. happen around is into at -- give it soft of an whole is the achieved in economy what what all good that and I It's it election Now do. crystal going cycle

Krish Sankar

follow-up. And quick just it. another Got

you As lowest had not competition. guys we look and of leadership a lot and cost at the whole over XX-plus technology the years, last

margin So a XX-plus-percent gross makes lot of sense.

Now we have in competition, mix. more the systems

XX curious XX think most low is peers, look better still kind like but margin? XX you markdown XX be way? should do the X Or the at your the the to more for right out, Just of whether are of it if XXs or years I than in gross

Timothy Mammen

applications the technologies, value answered if the we of of in think I market areas -- driven Valentin execute back significant the around that, to to strategy more earlier. and We're question had end customer. leading XX% processes, that is away that from And moving deliver the back really targeting focusing margins to the gross shift on a edge will competitively position we technology leadership to we getting be historically. and real

on strong, in welding required by advantages, we're product be amount within that's very growing to all or extremely very And amount achieve, the really into lot ultrahigh sales. there's introductions those have to product. R&D in are going the more green it that a starting way, ultrafast there's significant of that. products significant the higher of also solutions execution actually power are These power areas sophisticated, of but sales So medical, that year-to-date, execution, integrated that's of there's also the the are momentum levels, the into lasers, different a in get whether lasers technology but

the of As if nonmetal to you applications. succeed a grow dominant that Valentin in is industry. from you very to being to company said, the And the up XX% to revenue target regard, return within leader

Valentin Gapontsev

the the not in and in China. U.S., Europe is application This

we So decrease China will situation, very much. our dependence from

Operator

the it's follow-up a with is final and question, question Joe Edgewater Wittine next from Research. Our

Joseph Wittine

wanted battery sure from on I about down larger year? your And by demand for are line? from any side, are on getting forecast projects One, too you nice next EV if half retooling? then -- a significant cycle The back, the but is within recovery your it's on your outlook that C X years for I'm of to not the run think if there ask forward, large durable? thoughts for I'm was kind going second, QCW and curious we early, midterm more Or potential get you I'm curious XXXX, peak rate a time applications. the on the XG-driven just few past QCW so projects projects

Timothy Mammen

sophisticated a significant European China, it's be based, There's China investment investment probably the it suppliers forefront market a on think us it's are investment it's and decade we in got pretty If just going very drives but the grow vehicles continue going Korea. there's any broad of welding, to or cleaning of to European to puts is total tends output, continues to around compared of the period But amount project-driven, at within to of is investment demand that the vehicle investment as period, electric in The [Indiscernible] actually from but area. capabilities are really Joe, that XX% not processes is That, of some that to being transition in decade-long market. the conjunction with other in and going significant that cycle, that in on, battery required still driver uneven you've LDD, significant. it right? some investment. XX% next the to this the

consumer cycle to end of first first quarter. the the the electronics any XG It's information the side, where something on expect significant have don't know or next during being On the it's feedback or a we towards potentially with just on quarter a year, be growth even bit early will We'd driver. that. demand

Operator

back like I'd to concludes management to our call comments. hand session. closing for question-and-answer That the

Timothy Mammen

and continued great a in everyone. with weeks and our interest us coming in Thanks day, you over morning, joining Have the speaking for IPG. call. forward quarter's We your this for look next to

Operator

and conclude your gentlemen, participation. today's does for Ladies this you Thank teleconference.

day. at disconnect may time, your and this wonderful lines a have You

IPG Photonics (IPGP) 29 Oct 192019 Q3 Earnings call transcript