Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to IPG Photonics' Second 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, Mr. Eugene Fedotoff, IPG's Senior Director, Investor Relations, for introductions. Please go ahead, sir.

Eugene Fedotoff

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

company's discuss Let made me forward-looking or statements. that future during statements or the management's the course of remind of this are you the intentions, expectations that predictions call

Photonics' could These detailed materially These projected from Securities are that in risks XX-K risks actual are company's Form such and to statements the period Exchange IPG and reports results XX, statements. and the those in uncertainties and forward-looking XXXX Commission. uncertainties the on forward-looking ended subject cause for to differ with file December our

these IPG's Investors may filings by updated section of website visiting contacting of by the directly. Copies or be company the

SEC's the website. the X, on copies Any call statements XXXX, on of find also expectations only. may company's today, made are predictions this or as August forward-looking You

to or And statements. the any release company updates publicly assumes obligation such any to revisions no

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

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

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

Eugene Scherbakov

with I everyone. this Good morning, our performance am pleased quarter.

the is geographies. and Despite resulted in and industrial many across impacted in came markets of macroeconomic project sales revenue uncertainty, quarter our guidance range. delays point increased Second of which and outlook

of quarter another solid revenue applications. growth reported and We welding in cleaning

e-mobility by and strong and driven Now sales welding were handheld that solutions.

an China, to due on to results. markets improved declined mostly cutting Sales uncertainty sheet cell impact applications and in applications revenue manufacturing as investment Additionally, XD increased. negatively increased in and these printing in our solar in and year-over-year, continued competition economic flat

sequentially America in sales China, cutting North However, Japan. were and up

as saw as as for accounting well system AMB growth in in ultrafast beam and We high-power declined in advanced LightWELD, continued Growth sales applications delivery, well pulse Emerging and quarter. medical lasers sales XX% green of as and the lasers. but the lasers, total second in our product laser-based

and continue platforms have XX-kilowatt We our in sales first shipped invest LightWELD. to during the the quarter international AMB laser for

on in our impacted said our quarter. sales customer by inventory, reduced the we As quarter business conference working second medical through a which was first the large call,

to third We and sales continue normal level growth in market. return additional expect a in focus on to more the medical quarter the to opportunities medical

competitive were Despite in our results diversifying a exposure operating and our positive driven reducing highly challenging progress the business. environment, revenue to low-margin by and

results. this are China and outside e-mobility in which technologies batteries. geographies We Europe in new yielding is have good investment e-mobility also investment another in increase the been we North into more quarter applications batteries and the with sales global strong strategy as such on prismatic from focusing during South IPG benefits seeing investments slowed energy, renewable Korea. But to into applications, storage traditional cell by into products sales had and particularly in America, and applications. primarily cylindrical investment an increased large driven quarter, EV-related China, and and for sales

cutting of China applications with battery strong to in all electrical and should investment continued recent to we next for team orders battery quickly e-mobility vehicles of remain Our increased adoption and storage batteries and investment we third electric and EV demand the up quarter. energy for expect in in China are Meanwhile, the in manufacturing capacity outside seeing new in be year. expect stronger capacity business assembly. a working additions, motor on globally, opportunity catch is With growth

time, very technology, become with LDDs scrap monitoring which industrial where significantly from a getting value final reduce measurement of welding making the batteries, for return strong e-mobility significant are real-time acceptance recalls. outside lasers cost high and our weld as LDD yield great benefits. and parts welding also applications investment Our the our and exceptional solution, can AMD the standard. complete where be and in proposition measuring lead sales growth to has which customer, given testing applications of combined cost and benefiting includes on heads costs failed can real-time and and very an defect

are environment cleaning multiple ECO solution, laser to solutions diode over which efficiency its including high industry-leading and We wall-plug our XX%, lasers, proud drying for heating can deliver and customers, environment-friendly efficiency system. our reduce significantly impact high-efficiency the

cleaning the treatment processes does strong Laser cleaning safer and leave and are see corrosion the use results environment cleaning the applications. in and chemicals and During cleaned, reduced we create that laser material waste process, for benefits of solutions removal. dry other Unlike by doesn't in the provides has abrasives, quarter, also ice water laser cleaning. can for abrasive we different chemicals, of reducing not a our cleaning and paint e-mobility solutions and interest including a It in in impact continued nonautomotive employees. also to cleaner our and and increase cleaning seeing automotive number applications, heat sustainability toxic be significantly been laser an consumption, and

recently quarter. introduced which infrared our in less is order battery EV have drying solution, the heating be we efficient gaining for third interest, laser for Another will first the and applications, booked the which bulbs and is replacing shipped

medical impact Board I'm our I'm years XX industry. system particularly and down are reducing company. the and with consumption growth the The IPG's in forward manufacturing Kennedy believe Kolleen because in working of she significantly they Kolleen to gaining experience that processes. a as energy to the great legacy her market of medical a happy of cut are Director Directors will has well-received given customers be solution announce elected strategy, And drying on environment and new to applications, by acceptance looking with contributor today,

in employees thank to will to financial the like discuss their contribution turn quarter, to would I over call highlights. and now strong our the for Tim

Timothy Mammen

financial is X. available Thank on our review which My the presentation, morning, follow everyone. you, will Eugene, I Slide and website. call generally the Investor on will good Relations start with comments earnings

second X% and decrease decline the approximately million, materials while $XXX a the currency that Revenue accounted partially X% telecom year-over-year, applications quarter divestiture due the by in foreign XX%. was to decreased year-over-year from of revenue X%. of XX% reduced for processing other from revenue headwinds, which applications Revenue decreased approximately

a a an XXX margin well improving costs lower costs was which scrap, year-over-year to charges basis by to percentage manufacturing absorption as costs improve shipping XX.X%, sold for and as gross sequential sales. as on tariffs decrease of gross of due margin partially reducing improvement basis, reduced manufacturing efficiency. points of a On we focused of as in continued offset GAAP and cost higher and products inventory reserves, were

from and costs. provisions We inventory lower benefited also slightly shipping

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

material on to liabilities negative expense share. million, net remeasuring $X transaction on a impact earnings operating with tax currency currency exchange income impact per and related assets had of rates had of period-end to Foreign foreign no a benefit

a primarily loss research categories on declined we and transaction the general development and and restructuring and development in reduced telecom expenses. charge, as tighter cost and Excluding operating spending controls product year-over-year, expenses administrative currency implemented reduced

in increased of XX% applications high-power result of total of in in represented laser approximately X. high-power as to softer China. powers. primarily was sales laser lasers decreased decreased to CW XX% revenue medical printing while cleaning growth Other Medium other of and Slide due total above welding year-over-year Sales flat solar foil power of offset of driven sales year-over-year. cutting marking laser and applications applications. System advanced lower moving sheet in sales as demand in and year-over-year laser Sales in cutting QCW XX% in higher with to demand a offset down and applications. a The X% decline with lower revenue Moving Pulse increased sales represented lower lasers cell outside to ultra China in XX% X% strong product XX% customers in laser decline by due was high-power growth decreased X-kilowatt and by sales declined were and LightWELD, applications, non-laser revenue. systems. and by XD demand demand competition CW sales

despite our driven strong in and the economy. of uncertainty cleaning with medical overall XXXX. laser in cleaning XX% tone Looking markets demand at X. sales sales telecom cleaning China show compared increased business declined applications, region recent Revenue muted year-over-year by divestiture by America Europe, applications by in in the business. and of Slide decreased in with the half slowdown growth lower most XX% and welding with XD applications, North expecting the the X%, most prior welding and growth customers exception applications to as the a cutting the lower advanced was in performance and the revenue year in of and printing. Europe, in across At second of by our offset decreased In Revenue on

We capital a debt of $XX million in capital expect now summary million expenditures repaid cash, We million with X. be $XX sheet the expenditures $X.X the of and and equivalents investments Slide and $XXX quarter. between Cash was provided to the million on billion and of during by flow year. ended this quarter. Moving short-term balance our operations quarter $XXX cash cash and million, were $XX to

the of the we continue during Our slightly, target in inventories and half further year. second inventories reduction decreased to

shares sheet, amount been a to While in We repurchase of maintaining and over not returning last shareholders did in quarter. the balance first a the second the year capital strong we significant quarter. have

place. to May, shares As announced repurchase have repurchase XXb-XX intend a $XXX share opportunistically. in authorization million previously a plan we and We new in Board reported, new the repurchase

outlook to X. Slide our on Moving

below X. Second quarter book-to-bill was

manufacturing see markets, the recovery the We and soft demand major America macroeconomic uncertain orders in continue condition contraction to uncertain. in regions. timing and all indicators Leading in remains China point of industrial North while in Europe to

help overall, However, despite which to the in in we still North in the activity orders should not the was third we're and to business, headwinds as sector in affected the the medical offset business. solid e-mobility normalizing advanced e-mobility see weaker in as of rest expect America, business applications demand and and seeing well quarter. Europe the systems conditions Furthermore, for

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

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

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

Operator

Instructions]. [Operator

Our with first comes question from Roy Stifel. Ruben

Ruben Roy

-- wanted bit towards to sounded weakness of us It meaning than percentage little drill of China. cutting commentary you weighted stat kind was can the a China on softer in demand where Tim, cutting. that the as further into remind well? around did And it was comment in I broader, a But in revenues more as like stands? competition of sort competition EV China encompass in the the

Timothy Mammen

in and No, the cutting the EV the on China around competition was not around comment really market. market

presence very on cleaning globally. welding continue a and cutting, have applications to strong We foil

of QX much It said less Our a but it that total quite certainly cutting XX% to China. the and consolidated quarter at it smaller cutting that level, well. last of had business We it there was perform of than within the sales, pretty remains high-power was sales QX, from below in didn't share well is certainly end stable now. the China

Ruben Roy

we Obviously, little here. that. Good little some appreciate I takes? into a we're Tim, gross can a And margins of talk environment QX. the a follow-up, going in bit about bit puts of as and and a revenue lower quarter

gross of margin So in Hampshire. coming in year? you potentially Poland the the got are factory up of New the improving some playing thinking and of the thinking out through rest rest new through potentially How productivity the sort about year, you've

Timothy Mammen

with very improvement margin actually in sequential pleased sequential the the gross were following improvement QX. We Yes. in

costs level target So QX, getting just up absorption of reasonable a manufacturing really, back will lower. to our longer-term be the lower levels, difference the level, In more on certainly revenue still. is below

next year, will So where tone business up an pick is it year, the to improving see of going really of really remainder ends just depend up gross base. through into with margins the again. expect the cost we'd the But upon on and it the fixed hopefully, outlook,

at at under-absorption in level some see QX. the to start we're You guidance

Operator

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

James Ricchiuti

how So if it broadly sounds the in China. could some talk EV-related like seeing wondering about what to help could EV that outside welding market of you're fared of right size what business seeing it you China. the you -- that battery versus maybe in represents now? how softening in you're more the you in Tim, you've extent seen business, QX, EV just And this business can, QX? I'm much And is

Timothy Mammen

Yes.

-- we built cycle the in related additions the demand seeing really out already softness that the to in been there. So capacity are some have China

and we've battery first applications. Europe. You the also see more America, on the applications. of some the Korea There's strong. are from, driver are that's even a still to in strongest starting some We're North ancillary Japan say, for think systems. body cycle diversifying demand foil EV the that manufacturing We're additional complete some There to sort I'd North applications. still for dominated there in drying capacity that's the been by equipment. orders up. still as of battery utilization and and see of much started by cleaning in It's world, application then I'd well. cutting to a applications America going in out selling the for next rest the pretty motor into as got Again, mainly some main say of demand cylindrical is and -- We it's year South area. very followed still of good coming though, battery-driven In that. We're transition it's big picks be battery in has the actually actually robust a demand investment.

James Ricchiuti

where what [indiscernible] And this is is your roughly -- rough...

Timothy Mammen

Yes.

QX. sales above still in So we're well XX% went of of XX% above

Eugene Scherbakov

in it Europe And production also of to final we'll production, see and of achieve few a our this indefinitely And production you also cars. trend for to United in in Europe customers shift it States. the or see the better

James Ricchiuti

Got bookings trends. the it. And my on follow-up question is

including wondering I'm book-to-bill consumer I provide your market, you below more varying mentioned and any may X, in it you're perhaps You seeing what granularity be And mentioned the prepared electronics could think on that. at and all don't if in text? region you which how by

Timothy Mammen

that major out said U.S. was Yes. actually course, it our be of some that order flow We of geographies softer, Europe, Japan, positive of industrial China. and We would which had all pretty of And sort well on of well. quite seeing also to of up PMI Korea what performed sort up there. holding is data pretty the some you're That's South married too. the -- out

part Sorry, James, your of what question? was the second

James Ricchiuti

mean, like the seasonality legacy just that end didn't Well, look including in I assume slower. some orders. which comments that other is in the of you've on any some the some of does past, the end automotive market seen consumer markets, about markets, of for What I you? electronics, terms I hear

Timothy Mammen

mean the slightly I which Yes. reflected will in year-over-year. that were down mostly be QCW sales,

traction consumer great no there's So in electronics.

was manufacturing in is actually with we've very strong in additive -- there, China lasers. cleaning OEMs with Europe areas of work of and reliability very other quality closely we really the The couple that globally. very was strong okay positive cleaning and the qualified the applications been and then actually there, additive and because was on a of were the manufacturing Additive

Eugene Scherbakov

for And cleaning. laser are kind systems of CW final shipping cleaning because pump for application or laser we applications, is but for not very us the size important only

Operator

Instructions]. [Operator

Our America. next Bank question of comes from Michael Feniger with

Michael Feniger

curious more? in that's guys I'm The to improvements inventories been than low, to some -- quarter-on-quarter. to get thinking But any I position XXXX, with get book-to-bill the to to for the trying Do you PMIs a you're a half? X% Are position kind about take there. yourself that level you make of the and came Xx to know half? to just ways about need certain think to down target back of how to inventories out less just for we back in

Timothy Mammen

chain the issues to couple focused experienced continue we same of last Yes, had And managing the years. supply inventory. some very of seeing not be we're that for we on

definitely take last a to. the want longer year. more that let's the And a to this hand to as term, felt somewhere was So bringing out ultimately inventory are the medium compared during generating significant to down that it's down we're out back take cash a necessary pleased days, to less days second we but continue XXX inventory to change made may But bit target we than looking date normalized be would inventory level, and get say, we've on with that. progress year. half some to of year In we the XXX around which cash to inventory the get additional in investment to and of inventory and get of that certainly,

Michael Feniger

confident And It among other the Are just about things, the and around margin question about following sounds as maybe the gross the with not under-absorption with footprint. change -- base like kind we maybe cost raising or Tim, you Poland U.S. your gross is QX the with Great. QX, talked that term? targets, up that production obviously on for the you volumes. those weighing production longer think margin, just still what's the on of in the

Eugene Scherbakov

to our goal our optimize Definitely, cost.

production components others for in some First fiber Poland, further way. blocks the [indiscernible] dramatically in way, end production will this of situation and for this we our same The And all, By of of will the of increase working course, of lasers. and to increase quarter. like we our Italy.

production But to first the of country. because control fiber every expensive course, we because optimization of of more for exactly nevertheless, finally and the forward margin. Situation these time production. all, final an to looking cost in components gross make United much States, we components our for farther it's our cost are also it's components increased our these And -- influenced Germany. also to it's of our in We under

Michael Feniger

Great. we're weakening other Europe, And flagging from are then industrial just last kind or the month companies in on Germany hearing that so. Europe, Europe, a and of

up pretty bit was even little resilient, a growth Your in Germany.

there some to curious Just like in of that the you're looks kind with your underlying seeing offset ability it demand what areas? versus

Timothy Mammen

the are was other Yes. performing some compared weaker softness Europe and quarter, The ago. I certainly, of guidance reflects year mean, people during pretty that the reasonably a particularly seeing. to

Europe. up things of that's welding and a business quite right? PMIs they've are mean quite us, QX. the also XX%. at some is for of German in the Some performing in well time. industrial of They're quite where have But long I and bit that well I OEM into is some negatives, the positives There a are translating For Europe held the the are economy yes, moment. weak the at weaker, weakest been like think cleaning And applications

how to around. takes that So it for we'll have see long to turn

Operator

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

Mark Miller

that customer was in there large more inventory mentioned You from? was type industry little U.S. the color a give you a adjustment what Could

Timothy Mammen

Yes. in a happen to which second out in the Mark, on worked inventory medical signaled the us the QX, now in we're that sales obviously, quarter, applications, called customers recovery weaker be medical QX would in adjustment through and they've application we'd would their quarter. expecting second

Mark Miller

Any to consumer opportunities UC such or related coming area up? as AI the consumer in electronics

Timothy Mammen

more I world. the mean processes have that that we going the their opportunity additive within -- manufacturing manufacturers out the one the smartphone strength is would be processes. there's of be an That for using there there's major some announcements manufacturing us, given in around additive to

significant that's I about. talked opportunities think that one the been mean I -- of more be would

of now. As you strong lasers investment outside anemic being lasers is not electronics pulse consumer and the cycle QCW relatively overall even right that mentioned, with

Operator

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

Eugene Fedotoff

your continued Thanks morning in interest this for IPG. joining for and

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

Operator

This concludes today's conference.

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

IPG Photonics (IPGP) 1 Aug 232023 Q2 Earnings call transcript