Q3 2022 IPG Photonics Corp Earnings Call
Good morning, and welcome to IPG Photonics third quarter 2022 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 Fedotov Ipg's director of Investor Relations for introductions. Please go ahead Sir.
Thank you, Rob and good morning, everyone let.
With me today is IPG photonics CEO , Dr. Aegean Chairman.
And senior Vice President and CFO , Tim Mammen.
I remind you that statements made during the course of this fall that discuss management's or the company's intentions expectations or predictions of the future are forward looking statements. These forward looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from those projected in such forward looking.
Statements. These risks and uncertainties detailed in IPG photonics Form 10-K for the period ended December 31st 2021, and our reports on file with the Securities and Exchange Commission copies.
Copies of these filings may be obtained by visiting the investors section of Ipg's website or by contacting the company directly.
You'll also find copies on the SEC's website.
Any forward looking statements made on this call are the company's expectations or predictions as of today November <unk> 2022 on that the company assumes no obligation to publicly release any update.
Or a business to any such statements for additional details on our reported results. Please refer to the earnings press release earnings call presentation, and the Excel based financial data workbook posted on the investors relations website.
We will post these prepared remarks on our Investor Relations website. Following the completion of this call with that I'll now turn the call over to Eugene Shcherbakov.
Good morning, everyone.
We continue to see momentum in our Madison grows in the third quarter.
So the strong results and welding cleaning solar cell manufacturing medical and three D printing applications.
These are offset by several headwinds.
Unfavorable currency translation.
Weaker economic conditions in Europe , and I don't think that Lockdowns in China.
Softness in general Investor demand in Europe , and China negatively impacted sales and high power cutting applications.
At the same time, we saw modest growth in North America.
We're pleased.
It has continued to increase and it might be laser sales.
Even by new investment in electric vehicle battery capacity.
All geographies.
I imagine that at all.
Sales were 46 floats.
30% of our total revenue.
The third quarter.
Many of these products are benefiting from global macro trends such as he might be listening and automation as well as increased focus sustain.
Sustainability renewable energy and energy efficiency.
More specifically the Soviet record sales and AMB lasers.
Midland barrels in EV battery welding.
We also saw strong demand in our.
Green laser for solar cell manufacturing applications. So this market is rebounding driven by increased investments in renewable energy solutions globally.
Additionally, as it is.
Our full laser to use them cleaning applications.
Sustainability benefits.
Using the use of <unk> and chemicals <unk> significant.
Quarter.
In ours.
The sales of our telecom transitional and transformational business momentum.
As this business requires additional investment and it was noncore.
Sure.
This divestiture.
Minor impact on sales, but.
Meaningfully reduce our operating expenses going forward.
I believe the sales of telecom business and this is an <unk> disease, our cinema business Aloha IPG to focus.
And other resources on core growth opportunity.
Inability in welding and medical.
Now I will go or what is that each of these core opportunities in more details.
We had another great quarter, and AI applications as revenue and orders increased across all geographies.
Is that additional investment in the EV battery plants in Europe and.
North America.
And we are seeing increased activity in the U S Utilizations announced government incentives.
So posture estimates suggest that the global lithium ion battery capacity will triple by 2025.
At each six terawatts bi trends et cetera.
A seven fold increase compared to the range of 21 level.
Girls and battery capacity presents as significant as it is.
ESCO market.
Lasers.
To focus on global opportunities as we implemented some organization changes and increased our sales and marketing capabilities.
<unk> has a leading position in welding and foil cutting applications for EV batteries.
We offer a broad range of solutions to customers from a laser sources.
Complete production lines for.
For existing and new medicine.
Knowledges.
So seven of the company's system and production lines for LNG and some experimental battery production as a quarter.
We continue to introduce and as soon as a strong initial demand for our picosecond Alterra and ultra high power pulse lasers.
IPG recently increased its transaction offered in E mobility applications. These new Yoshi Domino, Youre, AMB lasers, which offer excellent performance and displays green and Blue laser solutions is that cost more.
More complicated to integrate.
We continue to explore additional opportunities in foil cutting and electric motor Assembly.
The adoption of IPG beam delivery and real time monitoring software.
<unk> has been very successful in E mobility applications.
The related net revenue accounting for approximately 20% of our total sales in quarter.
Up from 10% in 2021 sales.
With extensive investment cycle, the container and E mobility sales to remain strong over the next three to five years, despite a less favorable outlook, while the global economic and is any of that.
Yeah.
This was another record quarter for Wales, and continue is that benefited from growth in electric vehicle batteries, but also growth in <unk> sales.
Libra is steel.
Part of our growth.
Got it.
The increase in the sales and order globally and is a market dominated by non laser technologies.
The companies have received CE marked and states started to selling <unk>.
And would it be in countries as of third quarter.
We have established distribution partners and continue to see is a high interest in terms of welding community dealings of Tradeshows.
<unk> Congress Eldar is superior to all of our small and mid size fabricators.
<unk> easier to use.
Building passes.
Additionally, <unk> is also working on the automation companies.
What I view as a cohort to light oil combinations that helps the customer.
To implement automation on the ultra leveraging processes.
I don't know if there's.
The lower cost.
Our medical business also had another April quarter visiting your increases in more than 70% year over year and as far as a continuing growth in booking.
Our tunable lasers, and consumable five or four.
Or all of its applications.
You can see that as a new global standard debt continue to replace Korlym laser.
Gaining adoption and the oral or the <unk>.
Market.
As they grow the number.
Installed units relative to the revenue from consumable fiber is also growing.
I am pleased to see that.
Well, we have to follow the target to double the business in two or three years.
Our medical revenue should approach 70 million this year.
From 43 million last year.
Before I turn the call to <unk>, let me update.
On our operations in Russia.
During the first nine months in 2022 diminished navigate the complex and evolving regulations.
Including the sanctions without material disruption.
Our ability to meet customer demand.
We are continuing to increase manufacturing complexity and safety stock of critical components.
United States and Europe .
In addition, we have started the bunches in mining Alaska critical components from third parties.
Does that clarify it earlier this year.
Recently.
<unk> and <unk>.
This was a new package of sanctions.
<unk> license requirements in each place even more limitations on tracy's inertia.
Essentially kept failing our ability here to import components for our European facility and export items.
Some facilities.
Effective January of next year.
We believe that contingency plans.
Yes execution.
Enable us to eliminate our dependence on that absolute production this was and European sanctions Batesville Patrick.
We will continue to monitor the situations loving it.
And with our broker video for us.
<unk> is a strategical options to our Russian facilities.
I'll have Don as it goes to the team to discuss financial highlights.
Water.
Thank you Eugene and good morning, everyone Mike.
My comments generally will follow the earnings call presentation, which is available on our Investor Relations website.
I will start with the financial review on slide four.
Revenue in the third quarter was $349 million.
A decline of 8% year over year.
Primarily due to foreign currency headwinds, which accounts for approximately seven percentage decline.
We also saw lower sales in China, Europe , and Japan, primarily in general industrial applications.
Our sales in North America was slightly higher year over year.
Revenue from materials processing applications decreased 10% year over year.
And revenue from other applications increased 10%.
GAAP gross margin was 43, 1%.
A decrease of 590 basis points year over year due to increased cost of products sold higher inventory reserves as well as higher shipping costs and tariffs.
We did see slightly better absorption of manufacturing costs in the quarter.
As we continue to increase our inventories of safety stock.
In the long term, we remain committed to our gross margin target of 45% to 50%.
If exchange rates relative to the U S. Dollar had been the same as one year ago, we would've expected revenue to be $26 million higher and gross profit to be $14 million higher.
GAAP operating income was $93 million and operating margin was 26, 7%.
Net income was $76 million or $1 47 per diluted share.
The effective tax rate in the quarter was 21%.
Foreign currency transaction gains related to re measuring foreign currency assets and liabilities to period end exchange rates only had a minor positive impact on the operating expenses of less than $1 million.
At the same time, we had several unusual items in the quarter.
It was a 22 million or 32 cents per diluted share gain on the sale of the telecom transmission business.
And $1 million or one cents per diluted share restructuring charge related to shutting down the remaining telecom business.
Excluding the currency transaction gain gain on sale of assets and restructuring charge operating expenses declined year over year, primarily in research and development as we reduced spending on telecom product development following the sale and restructuring of the business.
Yeah.
We are also looking at ways to further reduce our expenses, including sale of the corporate aircraft and two underutilized buildings.
Freed up resources will be available for activities that are core to our strategy.
Moving to slide five.
Sales of high power CW lasers decreased 14%.
And represented approximately 44% of total revenue.
Sales of Ultra high power lasers above six kilowatt represented 45% of total high power CW laser sales.
The decline was primarily due to lower demand in cutting applications in China and Europe as a result of lower economic activity.
<unk> impact the demand in China in general industrial applications.
Pulsed laser sales decreased 6% year over year due to lower demand in cutting and marking applications.
Partially offset by strong sales into solar cell manufacturing and cleaning applications.
System sales increased 10% year over year, driven by growth in laser systems and higher sales of light world.
Medium power laser sales decreased 16%, while Q CW laser sales were down 30% year over year.
Negatively impacted by lower sales to consumer electronics applications.
Other product sales increased driven by record sales in medical applications.
Looking at our performance by region on slide six.
Revenue in North America increased 1% driven by growth in cutting welding and medical applications.
Offset by lower sales in non laser systems as well as the telecom divestiture.
In Europe sales decreased 13%.
As a result of lower demand across all major materials processing applications and the weaker euro.
Customers are delaying projects as a result of high energy costs and economic uncertainty in Europe .
However, E mobility orders remained strong despite overall softness in the economy.
Revenue in China decreased 14% year over year as growth in welding for EV battery applications and three D. Printing applications was offset by Covid related Lockdowns continued softness in the cutting market and currency headwinds.
Moving to a summary of our balance sheets on slide seven we ended the quarter with cash cash equivalents and short term investments of <unk>.
$1 2 billion and total debt of $16 million.
Cash provided by operations was $76 million during the quarter and capital expenditures were $25 million in the quarter.
While continuing to maintain a strong balance sheet. We have returned a significant amount of capital to shareholders with our ongoing stock repurchases this year <unk>.
During the quarter, we repurchased shares for a total of $71 million.
Most of the repurchasing in the third quarter happened in the second half of September as we had a cooling off period between our <unk> programs.
We continued to repurchase shares in October .
Since the beginning of the year IPG has repurchased shares for a total of $383 million as of the end of the third quarter and approximately $440 million year to date.
Our capex has been trending below our initial expectations and we will likely finish the year at approximately $110 million well below our previous guidance of $130 million to $140 million.
As Eugene mentioned earlier, we are assessing strategic options for our Russian operations.
In addition, we are evaluating the effect of the new sanctions on our ability to recover the value of our working capital and long lived assets located in Russia.
As of the end of the third quarter, we had approximately $44 million in cash and short term investments.
And approximately $150 million in working capital, including $116 million in inventory in Russia.
Yeah.
The net value of long lived assets in Russia is approximately $95 million.
Yeah.
Moving to outlook on slide nine.
Third quarter book to Bill was slightly above one.
We saw further moderation in orders in Europe , as well as reduced bookings in China, primarily due to softening macroeconomic conditions, which impacted demand in general industrial markets.
However, we are seeing continued strong orders in E mobility and medical applications as well as more stable operating conditions in North America.
We continue to benefit from growth opportunities created by major macro trends such as electric vehicle battery manufacturing and renewable energy.
In addition.
Light World in medical sales further diversify our revenue.
We believe these trends and diversity will enable us to weather downturns in the economy with greater resiliency.
For the fourth quarter of 2022.
<unk> expects revenue of $300 million to $330 million.
Company expects, a fourth quarter tax rate to be approximately 25%.
IPG anticipates delivering earnings per diluted share in the range of <unk> 70.
To one dollar.
With approximately 51 million diluted common shares outstanding.
Continue to expect currency headwinds and estimate that the fourth quarter revenue guidance range is reduced by about $20 million.
Due to the strength of the U S dollar in the current quarter as compared to the fourth quarter 2021.
As discussed in the Safe Harbor passage of today's earnings press release.
Guidance is based upon current market conditions and expectations.
Assumes exchange rates referenced in our earnings press release and is subject to risks outlined in the safe harbour and the Companys reports with the SEC.
With that we'll be happy to take your questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
And confirmation tone will indicate your line is in the question queue. You May press star two if he'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Jim Ricchiuti with Needham <unk> Company. Please proceed with your question.
Hi, Thank you good morning.
Two questions. The first question just relates to gross margins and Tim I'm wondering if you could talk to some of the factors that might have contributed to the gross margin coming in a little below the expectations for Q3.
I assume some of that is volume driven.
And also how we might think about gross margins in the current quarter.
And a follow up thank you.
Thanks, Tim Good morning.
Gross margins were a little bit light in the quarter, we did come in at the bottom end of the.
The guidance range and even so we are slightly below that I think we guided 44% at the bottom end of the range.
Still got it.
A lot of different challenges out there in terms of.
Shipping costs, some higher import <unk>.
Certainly the foreign currency headwinds are impacting us if you looked at say average selling prices in Europe .
Japan Korea.
Other areas always selling in local currency. They were they were down slightly interestingly due to mix they were relatively stable and in China, but when you couple that with.
50% of our manufacturing cost actually being in the U S.
There is a headwind related to that.
The relative strength of the ruble also is playing through the business model a little bit at the moment.
So there's challenges there and then again.
Relatively speaking.
And compared to a year ago inventory reserves in the quarter was still at elevated levels given.
The relatively high level of inventory that we're carrying at the moment.
And just given all of that.
Any.
Any color you can provide on how we might think about gross margins given these moving parts for the current quarter.
Yes, sorry.
As in the.
Financial.
Presentation deck, we go 42% to 44% as assumed in our guidance range.
I apologize for not giving it to you.
No no it's my fault.
Just a follow up question is just and I don't know if you could answer. This obviously the Covid Lockdown has had an impact on sales in China, and I guess, what I'm trying to find out is it maybe better understand is what the non cutting business in China have been.
Excluding those lockdowns.
If there's any way for you to talk to that just the overall health of the business in China, excluding cutting and if there's a way to talk about the impact that lockdowns.
Yes.
On a year over year basis, the non cutting business was significantly up in China and cutting was.
Quite a bit weaker than it was in Q3.
Is that the Covid lockdowns are more impacting the industrial.
End market demand that would drive some of that cutting.
Whereas some of the other macro trends around EV or the share gains that we have around additive.
Generally.
Pretty positive trends.
Foil cutting was it was just because the timing of projects with a little bit weaker in Q3 compared to Q2.
Can't quite remember, where it was a year ago, but that's really just the timing of orders rather than any competitive dynamics on the foil cutting projects by the way when we are talking about content first of all we are talking about the metal cutting.
Not for oil cuts in forecasting the business is growing.
Table from outside because it's different kinds of applications not standup or foils.
We have to separate standard cutting visa metal cutting and floral category strategies in club but of action.
No. Thank you I appreciate the clarification and I'll jump back in the queue.
Our next question comes from Ruben Roy with Stifel. Please proceed with your question.
Hi, Thank you for the question.
First for Tim Timken.
Tim can you, maybe just talk a little bit about how youre thinking about.
Opex in this environment as we look out over the next couple of quarters, we've got the telco asset divested and just thinking about the macro and the currency headwinds any.
Any color you can give us on how to think about spending that'd be helpful. Thanks.
Yes, I think we've got some guidance on opex for the quarter, which is the ranges I think it was 78% 79 million say relative to the run rate that we had at the beginning of the year, it's down by $5 million to $6 million some of that benefit is really on.
Is on.
On the telco side of things, but we also referenced some of the other interactions not lets say on opex with the major thing.
We're looking at is disposal of corporate aircraft and that would bring then.
Some additional benefit to G&A.
Into 2023.
Overall, we are also looking at some of our <unk>.
Relatively underutilized facilities ethanol just is going to be an opex side of things. The depreciation on that is both in cost of sales and some of it would be on the sales and marketing side.
So we're being very disciplined around what we're doing but we're freeing up.
Resources that can be invested in.
In Q.
Core R&D projects that we think have a better chance of driving returns and are closer to what we're doing and also freeing up resources for investing in sales and marketing so.
It is not you know we're trying to manage expenses well, but we're also cognizant of the fact that you need to continue to invest in these areas in order to.
To achieve the growth targets that we have for the medium and long term.
Alright, I appreciate that detail.
Good segue for my follow up which is around medical it's great to see the progress there and almost doubling revenue. This year it looks like versus last year. How are you sizing that market sort of longer term, how should we think about the opportunity there and is it mostly urology or.
Are there other areas of potential opportunity from a competitive displacement perspective and any other.
You know markets that you could talk about around medical and how to think about the Tam longer term that'd be helpful. Thank you.
Yeah.
Of course, we are thinking about the dividend as applications, our laser because in principle now as a main our revenue from business.
From a special truly on lasers, but that exist.
Of course different other fiber lasers, which can be used for a mainly a potential medical applications of course, we're thinking about this.
There are also discussions with interest and project to penetrate or integrate out of fiber laser to existing.
Applications and medical applications.
Opportunities to penetrate this fiber laser technology.
Medical applications definitely.
In terms of the market I can just give you some detail on that.
And the total medical market is about $5 billion.
But it includes <unk>.
A significant proportion of aesthetic applications the market for surgical is about 20% of that over $1 billion.
And that's the area, we're primarily focused on the interesting thing about this I think like most medical end markets is that the growth rates are expected to be fairly robust. So in excess of 10% per year and then the other aspect we like to the businesses that there is a consumable fiber.
Good.
<unk> generates a recurring revenue as we deploy more systems.
And into different applications.
Great very helpful. Thanks, Dan.
Our next question is from Michael Feniger with Bank of America. Please proceed with your question.
Hey, everyone. Thanks for taking my questions I apologize could you addressed this earlier just trying to to understand the puts and takes so there is always there is a transition of the footprint are reducing dependency in Russia to U S and Germany. That's always been part of the plan that you guys have kind of outlined earlier.
Earlier. This year, you didn't mentioned increasing sanctions I believe in January 1st and assessing strategic options. So.
What are the strategic options to explore that we need to kind of consider by January one is this a new development relative to the last call.
And is there any shift in the time timeline on the contingency plans that you guys outlined earlier early this year just trying to flesh out some of these moving pieces.
Yes, I know this is a change given the change in the EU sanctions so.
We're evaluating various strategic options, we're not ready to talk about those at this point in time.
Related to the Russian operations, but.
There's a level of business the Russian operations is going to be able to.
Harry on.
Coming into the new year, we will be significantly reduced so we need to look at the cost structure and what to really do with that business and how to.
As best as possible realize value from it in terms of the contingency planning.
We've stated quite clearly through a combination of <unk>.
As either increasing capacity building inventory of critical components.
<unk> thoughts third party sources of supply for less critical components that we believe that we will be able to we're confident we can manage through that that situation now we're looking at the strategic alternatives over the coming.
Weeks 40 couple of months.
We'll be able to provide a more detailed update.
I know the latest during during Q1.
And depending upon what we evaluate is the outcomes all of the strategic alternative that we choose to pursue.
Understood in the Q4 margin guide the gross margin guide is that is that still with you guys producing in your Russia facility or is that starting to take into apart some of this transition.
Of ramping more than production in Germany, and the U S.
Definitely yes, the cost of the stock or the mass production in the United States, Australia, Europe , such kind of components of course, it's a little bit of decrease our gross margin.
But.
<unk>.
Thinking in mind that.
Not all of it.
We're making some expansion of our production.
Anytime you're also thinking about how we can optimize this.
Reduction of manufacture.
Some of components.
By installing this transaction in Europe really demonstrate is a much more optimally.
Optimal conditions and much more optimal.
I mean, effectively if activity's over this production.
And the next step.
We will be.
We introduced the automation for production some components.
I assume because there'll be the our goal next year R&D and <unk>.
I would like to expand our LNG activity in this area.
And in principle all of that was the main role he'll get ourselves as much as possible our committed production of mass components of Israel Union for our fiber laser production.
Understood. Thank you for that and just if I could squeeze one more in just when we think of the seasonality of the business do you does the business seasonally build in Q1 off of Q4 or do we kind of start the year softer and build through the year I understand its way.
Too early to talk about 2023, just conceptually when we think of how the business typically moves seasonally from Q4 to Q1. If there is anything you'd kind of want us to think about Tim as we as we kind of try to get a starting point for next year. Thanks, everybody.
Yes.
The problem with seasonality at the moment over the last two or three years has been really really difficult.
And in general when you do have a weak Q.
Q4, you generally expect to see Q1 can be flat to slightly up on that relative to a weaker Q4, you can have a stronger start to the year. It was interesting.
Because our Q3 book to Bill as I mentioned was slightly above one rights and relative to that the guidance is a bit weaker. So we actually have for example in China bookings were actually they were down year over year, but they were actually reasonably strong relative to that guidance number they've given us. So they actually have for example, some EV.
Projects, which they've got orders for that are expected to be delivered in the first half of next year. Some of them would be in Q1, we took a lot of orders for medical as well that that would sort of help to beginning of the year.
Yes, right now, it's a bit difficult to give you a definitive answer on that I think if you go back and look at the trends on the quarters, you'll be able to see where they stand out I mean, the other big thing Thats impacting Q4 is.
The exchange rates right. So.
I think at the moment the view is that the dollar is going to remain relatively strong versus the euro.
The Chinese one.
The Japanese yen is very weak at the moment.
I don't see the currency headwinds.
At Beijing right now in the first quarter.
But it is kind of dependent upon obviously, where.
Monetary policy goes in the different regions around the world.
Yeah.
Thank you.
Our next question comes from Mark Miller with the Benchmark Company. Please proceed with your question.
Thank you for the question could you tell us.
A lot of your sales were from recently introduced products.
Uh huh.
With the Super 70% of total sales model.
That's a pretty good jump from last couple of quarters.
Interest expense jumped up I'm, just wondering what's going on there and what we should how we should think about that going forward.
Interest income sorry.
Yeah.
Yes, I mean, that's basically because of the yields that you're getting on.
Cash and cash equivalents and short term investments going up so.
Probably on a weighted average basis in <unk>.
Q3, because interest rates carried on going up you would expect to see some.
Small increase in that coming into Q4.
As well.
Okay. Thank you.
Our next question comes from Hans Chung with D. A Davidson. Please proceed with your question.
Hi, Thank you for taking my questions so far.
Okay can you elaborate on the weakness in Italy.
The laser in third quarter.
The sequential and year over year decline.
So Paul so as we said slightly down on.
In the third quarter on foil cutting.
It was strong on.
Cleaning applications, which will be in the high power levels. So.
And then marking and engraving, which would be consumer electronics related.
Was also weak.
Compared to Q3 last year actually marking engraving and I think in the second and third quarters last year was actually very strong even though.
We compete with local suppliers in China for consumer electronics, because of the reliability of our lasers demand in consumer electronics. This year has been pretty weak.
By the way without talking about the pulse laser mistaken consideration.
Uh huh.
Power and others you are talking about it's from 10 watts.
<unk> power after several kilowatts.
Of course, the small power pulse laser hour.
Elizabeth last in comparison.
Previous quarter, but for high power I mean withdraw possibly have as evidenced by our more than one kilowatt is a good one.
Flat.
First of all we demonstrated the dilutive.
Brilliant results concern as a cleaning applications, but also for foil cutting special floral cut and also start to use our high power fiber.
Laser it's very important for the future.
Growing our own business in this area.
Right.
Helpful.
In terms of full Q guidance.
Can you provide some color around the trends.
This equates to a change.
Applications, which segment would be down the most.
B E.
And when we don't get into guidance by by applications in trends at all.
And we do give some some color around.
In our regions I mentioned that relative to <unk>.
China Order flows at Q3 revenue is a little bit light to that.
In Q Q3, Europe still both currency headwinds.
So the weakness in the North American business looks relatively resilient. She got a reasonable guide from revenue on Japan on the back of good order flow.
From Japan, and relatively stable situation Korea, but we just don't get into it.
The granular level of guidance by application.
Got it that's fair so.
One last if I may.
Just wondering why the gross margin in fourth Q solo.
From a sequential basis, while we see 10% decline in revenue. So I just wonder if anything help too and of course 95.
No I mean, I factored in there even some quite high.
Inventory provisions didn't change assumptions fundamentally.
Round.
Things like product cost of sales or.
Import duties and tariffs so we'd be expecting sort of relatively speaking good absorption of costs.
Relative to the revenue level.
Good cost management.
Relative to total output and production.
I think it is a reasonably conservative guide, even where I take your point the revenue is down.
Im.
It's a reasonably conservative guide on gross margin still.
Okay. Thank you.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.
Our next question comes from Jim Ricchiuti with Needham <unk> Company. Please proceed with your question.
Thank you the follow up question I had is just with respect to the.
The orders in Europe , and in North America as you went through the quarter Jos just given given concerns people have about slowing macro environment is there any did you notice any change in customer behavior. As you went through Q3 and those.
Regions.
Okay.
Yes, I think in Europe , I mean, Jim it's reflective of where the guidance number is that we go from Europe . It is certainly weaker there.
It's interesting as you saw a big pickup in orders coming into the end of the quarter.
Other issues in Europe like August is never a good bellwether for what's going on because it's the middle of.
Summer.
If anything overall the quarter started weak globally, and then saw some improvement into September and actually <unk>.
Total orders booked in the last few weeks of September were exceptionally strong I have pointed out that some of that is like medical and EV that is going to benefit us.
At the beginning of next year and is not driving the guide on Q4.
Got it.
And I also wanted to ask a quick question just because it seems like Youre seeing really nice traction with light world and I Wonder if you would talk to.
What's the contribution in broad terms through the first nine months has been.
For that product line and maybe how you see the growth over the next year it sounds like Youre getting some some very nice traction in the market with this.
Yes, as I mentioned in our presentations, we already received this year.
Certification from.
For Europe , and rest up those sales.
Our system in Europe countries in different countries.
But also.
Strong.
Sales not only in the United States, but also in Japan.
In Japan.
Pennsylvania goods sales.
Systems.
And taken in mind that that's also possible integrated health risk cohorts.
It opens for us new opportunities.
Business.
Our estimate is that we expect a minimal double our business next year in comparison to this year.
And then.
And three five years.
But I can also help our business there and growing.
This application is definitely.
What kind of percentage growth it's difficult not.
To make this forecast but.
Next year definitely our business will be available.
Co quantitatively, Jim I mean, we're approaching a $10 million per quarter run rates in.
And revenues growing at.
Sort of 80% year over year and sequentially very robustly as well so.
The product continues to get very very high.
Hi, Mark and acceptance from the end market and also very important because we are not viewed as only one model.
Practically every quarter, we introduced our newly newer models I mean, we have some special options like cleaning or assume goldmark laser inside that also demonstrate much better well results are cleaner and results for our customers.
This is also important.
I'm not saying all of it as one product.
That's it for me. Thank you I appreciate it.
Okay.
We've reached the end of the question and answer session I would now like to turn the call back over to Eugene Federal for closing comments.
Thank you for joining us this morning and for your continued interest in IPG.
As always we will be participating in a number of investor events. This quarter and are looking forward to speaking with you over the coming weeks have a great.
Have a great day everyone.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.