IPG PHOTONICS CORP Q1 FY2025 earnings call

• Solid start to the year with business stabilization and modest demand upticks across some markets. - Progress on long-term strategy, including traction in medical, micromachining, and advanced applications. Added a new urology customer in medical and launched a new product in micromachining. - Adapting to global trade dynamics and leveraging global manufacturing flexibility. - Strong balance sheet with over $900 million in cash and no debt, allowing flexibility to pursue acquisitions. - Partnership with AkzoNobel to apply laser technology to cure powder coatings, providing energy efficiency and process speed advantages. - Acquisition of cleanLASER contributing to growth.

Revenue for the first quarter was $228 million, which is above the midpoint of guidance and a roughly consistent level for the third consecutive quarter. Revenue was down 10% year-over-year. Revenue from materials processing decreased 14% year-over-year, primarily due to lower sales in cutting and welding, partially offset by higher revenue in additive manufacturing and micromachining. Revenue from other applications increased 25%, driven by higher sales in medical and advanced applications and the contribution from the cleanLASER acquisition. Foreign currency reduced revenue by approximately $5 million or 2% this quarter. GAAP gross margin was 39.4%, an increase of 70 basis points year-over-year. Adjusted gross margin was 40%, above the top end of the guidance range.

• Second quarter revenue guidance: $210 million to $240 million, affected by tariff-related shipment delays. - Adjusted gross margin expected to be between 36% and 38% with approximately 150 to 200 basis points impact from tariffs. - Operating expenses expected to be between $86 million to $88 million in the second quarter. - Adjusted earnings per diluted share expected in the range of minus $0.05 to $0.25 with approximately 43 million diluted common shares outstanding. - Adjusted EBITDA expected to be between $16 million and $31 million. - Tariffs impact expected to be reduced in Q3 and eliminated by Q4 as supply chain is reconfigured.

• Tariff-related uncertainties affecting shipments and margins. - Global trade dynamics posing challenges to supply chain and cost structures. - Impact of changing tariff rates on manufacturing and pricing.

Q: Ruben Roy asked about signs of stabilization in bookings, end markets with strength, and growth in China.

A: Mark Gitin mentioned strong bookings growth with book-to-bill above 1, strength in e-mobility in China, normalization of inventories in Japan, and strength in medical and advanced applications in North America.

Q: Ruben Roy followed up on near-term order delays and margin impact.

A: Mark Gitin said delays are due to shifting manufacturing across footprint, expected to ship most in Q3; Tim Mammen said tariff impact mitigation expected to reduce in Q3 and eliminated by Q4.

Q: Jim Ricchiuti asked about partnership with AkzoNobel and emerging applications.

A: Mark Gitin discussed the partnership's potential to replace large industrial curing ovens and growth in medical and micromachining applications.

Q: Michael Feniger asked about tariff impact on COGS and competitive dynamics.

A: Tim Mammen explained tariff impact on current rates and efforts to reconfigure supply chain; Mark Gitin noted strong competitive positions in key areas and ability to adjust pricing if needed.

Q: Scott Graham asked about manufacturing optimization and margin impact.

A: Tim Mammen explained reconfiguring supply chain and moving manufacturing to mitigate tariffs, with margin impact expected to decline from Q3; Mark Gitin discussed vertical capability and ongoing manufacturing shifts.

Q: Keith Housum asked about book-to-bill and cycle of emerging products.

A: Mark Gitin provided context on book-to-bill strength in various regions and Tim Mammen noted short turn for most products with medical having slower turn but good visibility.

Q: Mark Miller asked about EV share and North America uncertainty.

A: Mark Gitin said strength in EV in China but uncertainty in North America due to EV market dynamics.