Q1 2024 IPG Photonics Corp Earnings Call
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Operator: Good morning, and welcome to IPG Photonics' first quarter 2024 conference call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to your host, Eugene Fedotoff, IPG Senior Director, Investor Relations, for an introduction. Please go ahead with your questions.
Good morning, and welcome to IPG Photonics first quarter 'twenty 'twenty four conference call today's call's being recorded and webcast at this time I'd like to turn the call over to your host Eugene Federal I P. J Senior director Investor Relations for introductions. Please go ahead with your conference.
Eugene Fedotoff: Thank you, Robin. Good morning, everyone.
Eugene Fedotoff: Thank you Robin and good morning, everyone with me today is IPG Photonics CEO I've got for you James Chair.
Eugene Fedotoff: With me today is IPG Photonics CEO, Dr. Eugene Scherbakov, and Senior Vice President and CFO, Tim Mammen. Let me remind you that statements that we make during the course of this call that discuss management 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.
Eugene Fedotoff: And senior Vice President and CFO, Tim Mammen, Let me remind you that statements that.
As he made during the course of this call that discuss management's or the company's intentions expectations or predictions of the.
Future 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.
Eugene Fedotoff: These risks and uncertainties are detailed in IPG Photonics' Form 10-K for the period ending December 31st, 2023, and our reports are filed with the Securities and Exchange Commission. Copies of these files may be obtained by visiting the Investors section of IPG's website or the SEC's website directly. Any forward-looking statements made on this call are the company's expectations or predictions as of today, April 30, 2024 only, and the company assumes no obligation to publicly release any updates or revisions to any such statement.
These risks and uncertainties are detailed in IPG.
Eugene Fedotoff: Are you exploring okay for the period ended December 20.
Eugene Fedotoff: 2023, and other reports on file with the Securities and Exchange Commission copies of these filings maybe obtained by visiting the investors section of Ipg's website or the Sec's website directly.
Eugene Fedotoff: Any forward looking statements made on this call are the company's expectations or predictions as of today.
Eugene Fedotoff: Real acuity 'twenty 'twenty, four only and the company assumes no obligation to publicly release any updates or revisions to any it's nice statements for additional details on our reported results.
Eugene Fedotoff: For additional details on our reported results, please refer to the earnings press release, earnings call presentation, and the financial data work posted on the Industry Relations website. We will also post these prepared remarks on the website following the completion of this call. With that, I'll now turn the call over to Eugene Scherbakov.
You're correct in the earnings press release earnings call presentation, and the financial that was posted on the industrial relations website.
Eugene Fedotoff: We will also close these prepared remarks on the website following the completion of this call.
Eugene Fedotoff: I'll now turn the call over to you Jay Sherwood.
Eugene A. Scherbakov: Good morning, everyone. In addition to our earnings release this morning, we announced a leadership transition. Let me start by commenting on the quarterly results first, and then I will speak about the CO2 change later in the call. In the first quarter, we continued to generate strong operating cash flow, reduce inventories, manage product costs, and return capital to shareholders. We achieve this while facing soft demand in general industrial manufacturing and the immobility and market, which together represent over 60% of total sales and negatively impact revenue across many applications.
Jay Sherwood: Good morning, everyone.
Jay Sherwood: In addition to our earliest announced leadership transition of this morning, let.
Jay Sherwood: Well, let me start my my commentary on the quarterly results first and then I will speak about what does she thought change later in the call.
Jay Sherwood: And the first quarter, we continued to generate strong operating cash flow.
Jay Sherwood: And then there is managed products the cost and return capital to our shareholders.
Jay Sherwood: We achieved this while facing soft demand in general industrial manufacturer.
Jay Sherwood: And it might be that your end markets, which that goes they are present or 60% of total sales and negatively impacted revenue across many applications.
Eugene A. Scherbakov: Our book to BU was about one, and we believe that we are seeing a bottom in demand with potential modest improvement toward the end of this year. At the same time, we remain focused on the execution of our long-term strategy to displace other laser or non-laser tools with our fiber lasers and grow revenue in a number of key applications such as welding, cleaning, heating, and medical, and diversify away from more competitive applications such as cutting and marking.
Jay Sherwood: Our book to Bill was about one and we believe that Korea has seen a bottom in demand for us.
Jay Sherwood: So modest improvement there.
Jay Sherwood: The anthropologist yeah.
Jay Sherwood: At the same time, we remain focused on execution of our long term strategy to this.
Jay Sherwood: Place, although laser or non laser tools with our fiber lasers and got over in Europe in a number of focused applications such as welding gleaning he team and medical did that surprise anyway for a more comprehensive application saturate is cutting and marking.
Eugene A. Scherbakov: Revenue in our emerging growth products accounted for 45% of total sales in the first quarter. These laser products and solutions can prove significant improvements in speed and quality of manufacturing processes while reducing energy consumption and other environmental impacts. I will discuss the highlights and comment on the revenue by applications first, and Tim will cover our financial results in more detail, starting with our largest applications.
Jay Sherwood: I think they know in our American girl sporadic.
Jay Sherwood: Colin can buy it for 45% of total sales in the first quarter.
Jay Sherwood: These laser products and solutions can prove significant improvements in speed and quality of manufacturing processes, while reducing energy consumption and Asa environment impacts.
Speaker Change: I won't go to highlights and comment on anything you buy application, Scott and team who will cover our financial results in more detail.
Starting with our largest applications welding anybody new declined year over year, primarily due to lower demand from it might be with the customers.
Eugene A. Scherbakov: However, revenue declined year over year, primarily due to lower demand from immobility customers. A significant reduction in new battery investment in China compared to the prior year and delayed EV battery projects in North America reduced demand for our welding products and solutions. At the same time, we believe that we are able to gain some market share in EV welding, closing new business opportunities both with significant new customers and in new applications.
Jay Sherwood: A significant reduction in new but it ends up in China.
Eugene Fedotoff: But it doesn't vary E R and delayed EV battery project.
Eugene A. Scherbakov: Most of America reduce the amount of a four hour of Elgin products and solutions.
Jay Sherwood: At the same time, we believe that the ammo to gain some market share in E E.
Eugene A. Scherbakov: E beam welding clause of new business opportunities. Your bus is significant new customers and in your applications.
Eugene A. Scherbakov: Additionally, we are working with a number of leading automotive manufacturers of new fiber laser applications and batteries, and Zero Automotive Assembly. We are optimistic that EV battery investment may increase again, towards the end of 2024 and into 2025, resuming a multi-year trend of building our required battery capacity to support the transition from internal combustion vehicles to battery-electric cars or plug-in hybrids.
Eugene A. Scherbakov: Additionally, we are working with a number of leading automotive manufacturer of new fiber laser applications and batteries.
Jay Sherwood: And Seattle after automotive Assembly.
Eugene A. Scherbakov: But am I optimistic that even better investments may increase again.
Jay Sherwood: It was at the end of 'twenty to 'twenty four into 'twenty or 'twenty five.
The only and a multi year trend of building out a required but I think the capacity to support the transition from internal combustion vehicles.
Eugene A. Scherbakov: The battery electric class or a block in cabinets.
Eugene A. Scherbakov: Additionally, we are very pleased to see a pick-up in demand from consumer electronics battery applications, as well as growth in rental revenue in general automotive and general industrial applications. Adoption of our real-time welding monitoring system and complete automated welding solutions is also showing good results. Our Handheld Welder Sales flowed in North America in the quarter, with some smaller customers being impacted by uncertainty in demand and higher financial costs. However, the order pipeline and customer interest remains strong.
Eugene A. Scherbakov: Additionally, we are pleased to see it pick up in demand from consumer electronics and battery applications as well as the growth in it.
Jay Sherwood: In general automotive and general industrial applications.
Eugene A. Scherbakov: Adoption of our audio time, we only take money Italian system and complete a stomach automated welding solutions are also showing good results.
Eugene A. Scherbakov: Our Huntsville, well dinner sales.
Eugene A. Scherbakov: Hello.
I met a guy he was like what are you some smaller customer.
Eugene A. Scherbakov: Impacted by uncertainty in demand and higher financial costs.
Eugene A. Scherbakov: But order pipeline and customer interest remains strong.
Eugene A. Scherbakov: In addition, we are starting to ship these devices to Miller Electric for health welder sales in the second quarter, and we'll have more measurable impact in the second half of the year. Sales in cutting applications declined in the first quarter due to continued soft industrial demand across all major geographies. Largely younger customers were managing their inventories, which negatively impacted our cutting sales in Europe, North America, and Japan.
Eugene A. Scherbakov: In addition, we are starting to ship devices electric.
Eugene A. Scherbakov:
Eugene A. Scherbakov: Yep.
Eugene A. Scherbakov: Uh huh.
Eugene A. Scherbakov: In the second quarter, and you'll have more measurable impact into the second half over half the year.
Eugene A. Scherbakov: So I think that's an applications declined because the first quarter due to continued soft industrial demand.
Eugene A. Scherbakov: Across all major geographies.
Eugene A. Scherbakov: Larger OEM customers were managing their inventories, it's negatively impacted our costume because sales in Europe, North America and Japan.
Eugene A. Scherbakov: Market conditions remain difficult but appear to be more stable compared to the last several quarters, and we expect that improvement in general economic conditions and reduced customer inventories should result in more stable demand in the second half of the year. Foil-cutting cells also remained soft due to weak demand and immobility, but our assistant cells showed some improvement year over year. In other material processing applications, cleaning cells have been negatively impacted by softer demand for e-mobility.
Eugene A. Scherbakov: Market conditions remain difficult, but appear to be more stable compared to the last several quarters and we expect that improvement in general economic conditions and reduced cost of mine at Antares should result in more stable demand in the second half of the year.
Eugene A. Scherbakov: Four Oh God himself also remained soft due to weak demand in it might be the change, but I Wanna system sales showed some improvement year over year.
Eugene A. Scherbakov: And I was I'm aikido processing applications cleaning sales when you got you and you've got you were impacted by softer demand and he might be this year, but we are making progress introducing our cleaning solution across the many general manufacturing applications.
Eugene A. Scherbakov: But we are making progress introducing our cleaning solution across many general manufacturing applications. Cleaning revenue has been increasing, and the applications are becoming meaningful, contributing to total sales. While still relatively small, heating and drying lasers are another area of future growth for IPG. The application delivered a strong increase in sales this quarter, as we shipped a large order for foil drying to an immobility customer. Additionally, we are working with a number of large manufacturers from across a number of application areas to build innovative heating and drying solutions to suit their needs.
Eugene A. Scherbakov: Clean and good evening to you because it's been increasing and the application of any kind of meaningful contributor to the total sales.
Eugene A. Scherbakov: While still relatively.
Eugene A. Scherbakov: Small keeping dry leases is in Oh.
Eugene A. Scherbakov: <unk> future growth for IPG.
Eugene A. Scherbakov: The application delivered strong increases in sales this quarter.
Eugene A. Scherbakov: We received a large order for foil drying tour and it might be that your customer.
Eugene A. Scherbakov: Additionally, we are working as a number of large manufacturers from across a number of application areas to build innovative teaching and training solutions to suit their needs.
Eugene A. Scherbakov: Finally, a new increase in 3D printing applications as the industry is using a large number of high-quality lasers to melt metal powder to create parts. IPG has a strong position in this market, providing lasers with high stability beam characteristics. Outside of material processing, other applications' revenue declined due to lower sales in medical and advanced applications.
Eugene A. Scherbakov: Finally, I mean, you increased in three D printing applications as they investigate it uses a large number of high quality lasers.
Eugene A. Scherbakov: And milk metal powder to create bucks.
Eugene A. Scherbakov: Did you have a strong position as this market providing lasers are these highest that needed to beam characteristics.
Eugene A. Scherbakov: Outside of Aikido processing applications or anything you have declined due to lower sales in medical and in the Bronx applications.
Eugene A. Scherbakov: Applications.
Eugene A. Scherbakov: Our medical business was negatively impacted by a large customer management inventory in the first quarter. We expect medical revenue to normalize in the second quarter, and we are working on several new opportunities that will launch in 2025 and 2026 and should help this business to grow and become a more meaningful contributor to IPG total stress. Before I turn the call to Tim, I will provide a few comments on the leadership transition that was reannounced this morning.
Eugene A. Scherbakov: Our medical business was negatively impacted by a large customer management and then tours in the first quarter.
Eugene A. Scherbakov: Expect medical or anything you're doing none of my life in the second quarter.
Eugene A. Scherbakov: We are working on several new opportunity was at a lunch in 'twenty, you're trying to fly from 'twenty to 'twenty six and so this is a.
Tim: Most of it all and become more meaningful contributors to Ipg's total space.
Tim: Before I turn the call to the team I think I'll provide a few comments on the leadership transition.
Eugene A. Scherbakov: We announced this morning.
Eugene A. Scherbakov: I would like to welcome Mark Gittin as IPG Next CEO. The board performed an extensive research, and selection process, and close marketing because he demonstrated a unique combination of relevant scientific expertise and proven ability as a successful operator in our industry.
Tim: I'd like to welcome Mark Oki team as IPG next CLO.
Eugene A. Scherbakov: The box platform and extensive as such.
Eugene A. Scherbakov: And selection process and gloss mountain region, because he has a unique combination of scientific expertise.
Tim: And proven ability as a successful IPO.
Eugene A. Scherbakov: In our trading desk.
Eugene A. Scherbakov: I look forward to helping him to make the transition seamless for our customers, employers, and other stakeholders. I also would like to thank the IPG team for its contribution over the last 30 years. I was fortunate enough to be a part of the team that transformed the laser industry and helped IPG to become a global industrial leader. I believe that the best opportunities are still ahead for IPG, and fiber lasers will continue to displace other technologies.
Eugene A. Scherbakov: I look forward to Coca him tomato transition seamless for our customers employees and stakeholders.
Eugene A. Scherbakov: Stakeholders.
Eugene A. Scherbakov: I also would like the songs that ITG team for each country vision over the last 30 years.
Eugene A. Scherbakov: I was fortunate enough to be a part of the team that transforms their laser invest there and help IPG to become a global industrial leader.
Eugene A. Scherbakov: I believe that's the best opportunity for.
Eugene A. Scherbakov: For IPG.
Eugene A. Scherbakov: And so I believe that we will continue to displace other technologies.
Eugene A. Scherbakov: Driving future growth for the company, I will miss my day-to-day interaction with my IPG colleagues. But I make this transition knowing that we have accomplished great things. This will be my last earnings call, but I will remain on the board supporting the next leg of the journey for IPG. And I will also be involved as an advisor to Mark and to the board. With that, I will now turn the call over to Tim to discuss financial results.
Eugene A. Scherbakov: Drivers of future growth for the company.
Speaker Change: I don't Miss My day to day interaction with them.
Tim: I could your colleagues.
Tim: They may because these transition knowing exactly yeah yeah.
Tim: The completion dates.
Tim: Great things.
Tim: This will be my last earnings call, but I've already met all their work supporting the next leg of the journey for IPG.
Tim: And I also would be involved is that they do either the mark on the book.
Tim: Is that I don't know Don is the coal or the team. They just got financial results.
Eugene A. Scherbakov: Okay.
Timothy P. V. Mammen: Thank you, Eugene, and good morning, everyone. My comments generally will follow the earnings call presentation, which is available on our investor relations website. I'll start with the financial review on slide five. Despite the headwinds to our revenue, I'm pleased with the resilience of our financial model and the company's ability to generate strong cash flow from operations to support current and future investments, as well as continued opportunistic share repurchases. Revenue in the first quarter was $252 million, a decline of 27% year over year.
Tim: Thank you Eugene and good morning, everyone.
Timothy P. V. Mammen: My comments generally well following the earnings call presentation, which is available on our Investor Relations website.
Timothy P. V. Mammen: I'll start with the financial review on slide five.
Timothy P. V. Mammen: Despite the headwinds to our revenue I'm pleased with the resilience of our financial model and the <unk>.
Timothy P. V. Mammen: Company's ability to generate strong cash flow from operations to support current and future investments.
Timothy P. V. Mammen: Wireless continued opportunistic share repurchases.
Timothy P. V. Mammen: Revenue in the first quarter was $252 million.
Timothy P. V. Mammen: A decline of 27% year over year.
Timothy P. V. Mammen: Foreign currency headwinds reduced revenue growth by approximately 2%.
Timothy P. V. Mammen: Revenue from materials processing applications decreased 28% year over year, while revenue from other applications decreased 25%.
Timothy P. V. Mammen: Foreign currency headwinds reduced revenue growth by approximately 2%. Revenue from materials processing applications decreased 28% year-over-year, while revenue from other applications decreased 25%. Gap gross margin was 38.7%, a decrease of 360 basis points year over year due to lower absorption of manufacturing costs as a result of lower revenue and higher inventory provisions. However, these negative impacts were partially offset by improved product costs, mostly as a result of product mix, and lower shipping and tariff costs.
Timothy P. V. Mammen: GAAP gross margin was 38, 7% a.
Timothy P. V. Mammen: A decrease of 360 basis points year over year.
Timothy P. V. Mammen: The lower absorption of manufacturing costs as a result of lower revenue and higher inventory provisions.
Timothy P. V. Mammen: These negative impacts were partially offset by improved product cost.
Timothy P. V. Mammen: Mostly as a result of product mix and lower shipping and tariff costs.
Timothy P. V. Mammen: On a sequential basis.
Timothy P. V. Mammen: Margin improved due to lower product costs, a decrease in expenses related to scrap and jus T, which were partially offset by an increase in inventory provisions and Unabsorbed manufacturing expenses expressed as a percentage of revenue.
Timothy P. V. Mammen: Operating expenses came in at the high end of our expectations.
Timothy P. V. Mammen: On a sequential basis, gross margin improved due to lower product cost and a decrease in expenses related to scrap and duty, which were partially offset by an increase in inventory provisions and unobserved manufacturing expenses expressed as a percent of revenue. Operating expenses came in at the high end of our expectations and increased both year-over-year and sequentially, primarily for research and development in sales and marketing, as we invested in resources to drive future growth while still controlling general and administrative expenses.
Timothy P. V. Mammen: Increased both year over year and sequentially, primarily in research and development and sales and marketing.
Timothy P. V. Mammen: We invested in resources to drive future growth, while still controlling general and administrative expenses.
Timothy P. V. Mammen: Okay.
Timothy P. V. Mammen: FX headwinds also had a negative impact on revenue and <unk>.
Timothy P. V. Mammen: Gross profit in the quarter.
Timothy P. V. Mammen: If exchange rates relative to the U S. Dollar had been the same as one year ago.
Timothy P. V. Mammen: We would have expected revenue to be $8 million higher and gross profit to be $5 million higher.
Timothy P. V. Mammen: GAAP operating income was $19 million.
Timothy P. V. Mammen: Operating margin was seven 6%.
Timothy P. V. Mammen: Net income was $24 million or <unk> 52 cents per diluted share.
Timothy P. V. Mammen: The effective tax rate in the quarter was 28%.
Timothy P. V. Mammen: Foreign currency transaction losses.
Timothy P. V. Mammen: FX headwinds also had a negative impact on revenue and gross profit in the quarter. If exchange rates relative to the U.S. dollar had been the same as one year ago, we would have expected revenue to be $8 million higher and gross profit to be $5 million higher. Gap operating income was $19 million, and its operating margin was 7.6%. Net income was $24 million, or $0.52 per diluted share. The effective tax rate in the quarter was 28%; foreign currency transaction losses related to remeasuring foreign currency assets and liabilities to period end exchange rates had a negative impact on operating income of $2 million, or $0.03 per share. We continue to optimize our footprint.
Timothy P. V. Mammen: Related to re measuring foreign currency assets and liabilities to period end exchange rates.
Timothy P. V. Mammen: Had a negative impact on operating income of $2 million or three cents per share.
Timothy P. V. Mammen: We continue to optimize our footprint.
Timothy P. V. Mammen: As a result, we sold two buildings during the quarter.
Timothy P. V. Mammen: The gain on sale of these assets increased all breaking income.
Timothy P. V. Mammen: $7 million and increased diluted EPS by <unk> 11 cents.
Timothy P. V. Mammen: Moving to revenue performance by region on slide six.
Timothy P. V. Mammen: Sales in North America decreased 16%.
Timothy P. V. Mammen: Sort of decline in revenue in medical welding screening and advanced applications.
Timothy P. V. Mammen: She offset by growth in cutting systems.
Timothy P. V. Mammen: Increased revenue in parts and services.
Timothy P. V. Mammen: Uncertainty in the general demand environment, and lower E mobility sales as well as cutting Oems and medical customers managing inventories.
Timothy P. V. Mammen: What are the main reasons behind the decline in North America.
Timothy P. V. Mammen: In Europe sales decreased 21%.
Timothy P. V. Mammen: Both in welding was more than offset by reduced sales in cutting applications.
Timothy P. V. Mammen: And as a result, we sold two buildings during the quarter. The gain on the sale of these assets increased operating income by $7 million and increased diluted EPS by $0.11. Moving to revenue performance by region, on slide six, sales in North America decreased 16%.
Timothy P. V. Mammen: Two large cutting OEM customers reducing purchases.
Timothy P. V. Mammen: Manage inventories.
Timothy P. V. Mammen: Demand in three D printing applications was also soft in the region.
Timothy P. V. Mammen: Economic conditions in Europe remain challenging.
Timothy P. V. Mammen: We saw some improvements in E mobility sales and benefited from a continued rollout of lightweights in the region.
Timothy P. V. Mammen: Revenue in China decreased 38% year over year.
Timothy P. V. Mammen: We saw a decline in revenue in medical, welding, cleaning, and advanced applications, although this was vastly offset by growth in cutting systems and increased revenue in parts and services. Uncertainty in the general demand environment and lower e-mobility sales as well as cutting OEMs and medical customers managing inventories were the main reasons behind the decline in North America. In Europe, sales decreased 21% as growth in welding was more than offset by reduced sales in cutting applications, due to large-cutting OEM customers reducing purchases to manage inventory. Demand for 3D printing applications was also soft in the region. However, economic conditions in Europe remain challenging.
Timothy P. V. Mammen: As demand declined in general industrial and even though it's actually markets negatively impacting sales across cutting and welding applications.
Timothy P. V. Mammen: On the other hand sales to three D printing applications increased in China as the industry is seeing growing investments in the region.
Timothy P. V. Mammen: Moving to a summary of our balance sheet and cash flow on slide seven.
Timothy P. V. Mammen: We ended the quarter with cash cash equivalents and short term investments of $1 $1 billion.
Timothy P. V. Mammen: No debt.
Timothy P. V. Mammen: Our inventory continued to decrease sequentially and we're targeting further reductions over the course of 2024.
Timothy P. V. Mammen: Cash provided by operations was $55 million.
Timothy P. V. Mammen: Capital expenditures were $28 million during the first quarter.
Timothy P. V. Mammen: As I mentioned earlier, we sold two buildings in the quarter, realizing $25 million in proceeds.
Timothy P. V. Mammen: Which means net capital expenditures were just under $3 million.
Timothy P. V. Mammen: Well below the same period last year.
Timothy P. V. Mammen: While maintaining a strong balance sheet, we have been returning a significant amount of capital to shareholders through opportunistic share repurchases.
Timothy P. V. Mammen: We spent $90 million on share repurchases in the first quarter.
Timothy P. V. Mammen: We saw some improvements in e-mobility sales and benefited from a continued rollout of light weld in the region. However, revenue in China decreased 38% year-over-year as demand declined in general industrial and e-mobility markets, negatively impacting sales across cutting and welding applications. On the other hand, sales to 3D printing applications increased in China as the industry is seeing growing investments in the region.
Timothy P. V. Mammen: Continue to view current share price is attractive at current levels.
Timothy P. V. Mammen: Moving to our outlook on slide nine.
Timothy P. V. Mammen: First quarter book to Bill was slightly above one.
Timothy P. V. Mammen: However, macroeconomic uncertainty is still negatively impacting demand across all of our major.
Timothy P. V. Mammen: Major markets.
Timothy P. V. Mammen: And resulting in project delays and reduced orders.
Timothy P. V. Mammen: Additionally project delays related to battery capacity expansion.
Timothy P. V. Mammen: Providing headwinds to our sales in China and North America.
Timothy P. V. Mammen: On the bright side.
Timothy P. V. Mammen: Leading manufacturing indicators have been improving and U S and China.
Timothy P. V. Mammen: And Boston Me.
Timothy P. V. Mammen: In Europe and Japan.
Timothy P. V. Mammen: Moving to a summary of our balance sheet and cash flow on slide 7, we ended the quarter with cash, cash equivalents, and short-term investments of $1.1 billion. But I'm no dad.
Timothy P. V. Mammen: Which should lead to more stable demand for our customers.
Timothy P. V. Mammen: We also expect that medical in light well it will return to more normalized revenue levels in the second quarter.
Timothy P. V. Mammen: Yes.
Timothy P. V. Mammen: For the second quarter of 2024, we expect revenue of 240 million to $270 million.
Timothy P. V. Mammen: Our inventories continue to decrease sequentially, and we are targeting further reductions over the course of 2024. Cash provided by operations was $55 million, and Capital Expenditures were worth $28 million, during the first quarter. As I mentioned earlier, we sold two buildings in the quarter, realizing $25 million in proceeds, which means net capital expenditures were just under $3 million, well below the same period last year. Additionally, while maintaining a strong balance sheet, we have been returning a significant amount of capital to shareholders through opportunistic share repurchase.
Timothy P. V. Mammen: The second quarter gross margin estimate is between 37% and 40%.
Timothy P. V. Mammen: We anticipate delivering earnings per diluted share in the range.
Timothy P. V. Mammen: Teach a 67.
Timothy P. V. Mammen: With approximately 46 million diluted common shares outstanding.
Timothy P. V. Mammen: As discussed in the Safe Harbor passage of today's earnings press release.
Timothy P. V. Mammen: This is based upon current market conditions and expectations.
Timothy P. V. Mammen: Assumes exchange rates referenced in our earnings press release and are subject to risks outlined in the safe harbour and the company's reports with the SEC.
Speaker Change: Before we move on to questions.
Speaker Change: I'd like to express our gratitude to adopt a share of the call on behalf of the board.
Timothy P. V. Mammen: Management team and employees of IPG.
Timothy P. V. Mammen: He has made vast contributions over the past 30 is.
Timothy P. V. Mammen: Too many to describe today.
Timothy P. V. Mammen: But we should recognize these contributions, particularly during his time as CEO, including.
Timothy P. V. Mammen: We spent $90 million on share repurchases in the first quarter and continue to view current share prices attractive at current levels. Moving to our outlook, our first quarter book to go was slightly above one.
Timothy P. V. Mammen: Including by strengthening Ipg's competitive position at.
Timothy P. V. Mammen: Laying the foundation for our next phase by establishing a clear strategic plan.
Timothy P. V. Mammen: Just on key growth markets and applications.
Timothy P. V. Mammen: Organizing our R&D and disposing of non core assets.
Timothy P. V. Mammen: We all look forward to continuing to work with them to show the call in his capacity as a director.
Timothy P. V. Mammen: However, macroeconomic uncertainty is still negatively impacting demand across all of our major markets and resulting in project delays and reduced orders. Additionally, project delays related to battery capacity expansion are providing headwinds to our sales in China and North America. On the bright side, leading manufacturing indicators have been improving in the U.S. and China and bottoming out in Europe and Japan, which should lead to more stable demand for our customers. We also expect that medical and light weld will return to more normalized revenue levels in the second quarter.
Speaker Change: With that we'll be happy to take your questions.
Speaker Change: 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.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two if he 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.
Timothy P. V. Mammen: Our first question comes from James Ricchiuti with Needham <unk> Company. Please proceed with your question.
Speaker Change: Hi, Thank you good morning.
Timothy P. V. Mammen: First our Doctor Shcherbakov congratulations on that.
Timothy P. V. Mammen: For the second quarter of 2024, we expect revenue of $240 million to $270 million. The second quarter gross margin estimate is between 37 and 40 percent. We anticipate delivering earnings per diluted share in the range of 30 to 60 cents, with approximately 46 million diluted common shares outstanding. As discussed in the Safe Harbor passage of today's earnings press release, our guidance is based upon current market conditions and expectations. This report assumes exchange rates referenced in our earnings press release and is subject to risks outlined in the Safe Harbor and the company's reports with the SEC.
Timothy P. V. Mammen: Your your many accomplishments.
Speaker Change: T J and I wish you best of luck.
Speaker Change: Thank you a couple of questions.
Timothy P. V. Mammen: The book to Bill at one.
Speaker Change: You seem to be suggesting a bottoming.
Speaker Change: And a recovery later in the year and I'm, just trying to get a sense as.
Timothy P. V. Mammen: Two they would.
Speaker Change: What's giving you the confidence of the yeah, albeit probably a modest recovery in the back half of a year.
Speaker Change: Are you seeing in some of the emerging areas, including E V and in the welding market.
Timothy P. V. Mammen: Okay.
Speaker Change: So Jamie I think.
Timothy P. V. Mammen: First.
Timothy P. V. Mammen: Positive or slight glimmer of light specs at the end of the tunnel is the fact that booked.
Timothy P. V. Mammen: Book to Bill, albeit off a relatively low revenue number was above one for the first time in a year right. So we've gone through a period of.
Timothy P. V. Mammen: Before we move on to questions... I would like to express our gratitude to Dr. Scherbakov on behalf of the board, management team, and employees of IPG. He has made vast contributions over the past 30 years, too many to describe today.
Timothy P. V. Mammen: Serious macroeconomic headwinds.
Timothy P. V. Mammen: I think as well when you couple that with some of the key economic data that we look at there's some.
Timothy P. V. Mammen: Improvements in not in North America, even in China.
Timothy P. V. Mammen: There's a bit of an uptick in the PMI data the PMI data as we mentioned in Europe and Japan.
Timothy P. V. Mammen: We should recognize his contributions, particularly during his time as CEO, including strengthening IPG's competitive position and laying the foundation for our next phase by establishing a clear strategic plan focused on key growth markets and applications, reorganizing R&D, and disposing of non-core assets. With that, we'll be happy to take your questions. Thank you.
Timothy P. V. Mammen: Yes.
Timothy P. V. Mammen: It seems to have portions and it's certainly not as strong in Europe.
Timothy P. V. Mammen: But it's improving and in Japan.
Timothy P. V. Mammen: More specific to our business.
Speaker Change: I mean, the cutting market ex China is still quite weak you've obviously seen some of the results from the major companies in Europe that are public so that they're not seeing.
Timothy P. V. Mammen: Specific churn in that business at this point in time.
Timothy P. V. Mammen: They do expect some improvement in the second half of the year I would say that improvement is probably more towards the latter part of the year at this point.
Timothy P. V. Mammen: They are starting to run down some of the inventory.
Operator: Thank you. We'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'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 star 2.
Timothy P. V. Mammen: That they've had on the EV side.
Operator: There are some positives out of that as well, particularly in Europe, where we qualified with several new customers and are working on a project. So the welding business in Europe was actually quite reasonable.
Operator: There are a number of projects.
Operator: In in Asia, and in China that we're hoping to get more.
Operator: Visibility into it there's a lot of work I think going on with those that should crystallize one way or another in June with some of the feedback I've had from from the sales folks.
Operator: It was at least some activity that appears to be.
Operator: One moment, please, while we poll for questions. Our first question comes from James Ricchiuti with Needham & Company. Please proceed with your question.
Operator:
Operator: That appears to be starting in that direction.
James Andrew Ricchiuti: I'd say.
James Andrew Ricchiuti: It still remains a difficult.
James Andrew Ricchiuti: Time and improvements clearly the guidance in Q2 already shows a very small improvement.
James Andrew Ricchiuti: Thank you. Good morning. First, Dr. Scherbakov, congratulations on your many accomplishments at IPG, and I wish you the best of luck. Thank you. A couple of questions. You know, the book to bill at one. You seem to be suggesting a bottoming and a recovery later in the year, and I'm just trying to get a sense. As to what's given you the confidence of, you know, albeit probably a modest recovery in the back half of the year, what are you seeing in some of the emerging areas, including the EV and the welding market?
James Andrew Ricchiuti: It reflects the modest positive book to.
James Andrew Ricchiuti: Bill.
Speaker Change: <unk> seen I think I covered a lot of different things and you did Tim.
Speaker Change: Actually I appreciate that color you know I'm wondering as we think about it a little further out as we can look out to 'twenty five and you look at it.
James Andrew Ricchiuti: Some of these emerging opportunities.
James Andrew Ricchiuti: Are there any that you feel more strongly about that could be meaningful I mean, I was a little surprised it might well, maybe it's some seasonality, but that I thought would you know.
James Andrew Ricchiuti: Now gain a little bit more traction.
James Andrew Ricchiuti: It's early days with the partnership with Miller, and maybe that plays out over the next year or so, but just thinking about the emerging opportunities medical what gives you more confidence as you look out beyond this is rough spot here.
Timothy P. V. Mammen: So, Jim, I think the first positive or slight glimmer of light perhaps at the end of the tunnel is the fact that book-to-bill, albeit off a relatively low revenue number, was above one for the first time in a year, right? So we've gone through a period of serious macroeconomic headwinds. I think as well, when you couple that with some of the key economic data that we look at, there's some.
Timothy P. V. Mammen: I think well wait with light wells, you've got the Minna.
Timothy P. V. Mammen: Relationship that's starting to accelerate youre seeing the.
Timothy P. V. Mammen: Demand cycle in Europe, as we've introduced that product start to ramp up.
Timothy P. V. Mammen: An improvement in the underlying macro in North America will help with that and what are the.
Timothy P. V. Mammen: The product still has.
Timothy P. V. Mammen: Tremendous acceptance in the market.
Timothy P. V. Mammen: The improvements in that in North America, even in China, there's a bit of an uptick in the PMI data. PMI data, as we mentioned, in Europe and Japan has, seems to have bottomed out, and it's certainly not strong in Europe, but it's improving in Japan. You know, more specific to our business...
Timothy P. V. Mammen: So strategically we remain very optimistic about that we still remain optimistic about the EV market I think one of the largest battery makers in China discussed that that utilization was up.
Timothy P. V. Mammen: 70% overall last year EV battery demand grew globally.
Timothy P. V. Mammen: 37% from 35% in.
Timothy P. V. Mammen: In China, specifically the growth by the way in storage battery was over 50% last year. So whilst utilization is still not like at 80 or 90% of it continues to increase so we think that perhaps you know about China water in a half a battery capacity is being built out in that.
Timothy P. V. Mammen: I mean, the cutting market in ex-China is still quite weak. You perhaps have seen some of the results from the major cutting companies in Europe that are public, so they're not seeing a specific turn in that business at this point in time, but they do expect some improvement in the second half of the year. I'd say that improvement is probably more towards the latter part of the year at this point.
Timothy P. V. Mammen: You know that still needs to increase dramatically over time as.
Timothy P. V. Mammen: I suppose the EV sales continue to grow and storage capacity is added sheet.
Timothy P. V. Mammen: I think the other areas of strategic part to go out the medical business is it's got to come back in Q2.
Timothy P. V. Mammen: Working with.
Timothy P. V. Mammen: On the E-V side, there are some positives out of that as well, particularly in Europe, where we have qualified with several new customers and are working on projects there, so the welding business in Europe was actually quite reasonable. There are a number of projects in Asia and China that we're hoping to get more. [inaudible] that appears to be starting in that direction. I'd say, though, that time and improvements, you know, clearly, the guidance in Q2 only shows a very small improvement that reflects the modest, you know, positive book to bill that we've seen. I think I covered a lot of different things in my answer. You did, Tim, and actually, I appreciate that color.
Timothy P. V. Mammen: Numerous new product introductions and other major partners on medical I think that will start to bear.
Timothy P. V. Mammen: Great.
Timothy P. V. Mammen: <unk> and better performance and traction around both in 2025.
Timothy P. V. Mammen: We actually had a good quarter on some of our micro processing business, it's still small, but some of the ultra fast business performed reasonably well with strong delivery of all ultrafast product I think that the strongest quarter on ultra fast.
Timothy P. V. Mammen: And then we continue to remain very strong conviction around.
Timothy P. V. Mammen: The work, we're doing on cleaning and <unk> and drawing applications. So I think strategically as we said there was a very strong foundation here.
Timothy P. V. Mammen: Various headwinds around these different parts of the business, but there's a lot of work going on with with.
Timothy P. V. Mammen: With developing relationships with customers for the longer term in each of those areas.
Speaker Change: Got it.
Speaker Change: Q I also add something cool new what.
Speaker Change: Sure Alex so be sure to stop paying but I do it this quarter it syndrome.
Timothy P. V. Mammen: Especially for a three D applications in the oil industry was the first part of it to our potential customer and existing customer.
James Andrew Ricchiuti: You know, I'm wondering, as we think about—it's a little further out—but as we look out to 2025 and you look at some of these emerging opportunities, are there any that you feel more strongly about that could be meaningful? I mean, I was a little surprised that light weld, maybe it's some seasonality, but that, I thought, would gain a little bit more traction, you know, and maybe it's the early days with the partnership with Miller, and maybe that plays out over the next year or so. But just thinking about the emerging opportunities, medical, what gives you more confidence as you look out beyond that? This is a rough spot here.
James Andrew Ricchiuti: Does the first feedback is very positive.
James Andrew Ricchiuti: The main advantage of these lasers first of all of course, it's a much more come back much more efficient and cost.
James Andrew Ricchiuti: But I do this I always have.
James Andrew Ricchiuti: This cost optimization.
James Andrew Ricchiuti: And we see that there's also potential for us.
James Andrew Ricchiuti: The additional business for three D applications.
James Andrew Ricchiuti: Yeah.
Speaker Change: Got it thank you and again congratulations electroscope accounts.
James Andrew Ricchiuti: Our next question comes from Ruben Roy with Stifel. Please proceed with your question.
Speaker Change: Thank you very much and I'd like to Echo my congratulations and best wishes to you Dr Sharp cost.
Speaker Change: Thank you.
Timothy P. V. Mammen: I think, well, with LightWorld, you've got the Miller relationship that's starting to accelerate. You're seeing the demand cycle in Europe, as we've introduced that product, start to ramp up. An improvement in the underlying macro in North America will help with that. The product still has tremendous acceptance in the market, so we remain very optimistic about that. We still remain optimistic about the EV market. I think one of the largest battery makers in China discussed that their utilization was at about 70% overall last year. EV battery demand grew globally, I think by about 37% and 35% in 2018.
James Andrew Ricchiuti: For my first question.
Speaker Change: It's sort of a follow up I guess to Jim's question.
Timothy P. V. Mammen: Tim which is you know sort of thinking through the improving book to Bill and.
Timothy P. V. Mammen: What sounds like a little bit of improving visibility on where your customer stand with inventory.
Timothy P. V. Mammen: Project delays et cetera, but at the same time.
Speaker Change: It seems like Theres been a little bit of a push out on how youre thinking about recovery, so recover a modest and and you know maybe pushed out to the end of the year versus last quarter. When we were thinking about a second half recovery in EV, perhaps is that the right way to think about it are you being conservative on recovery just because of what we've seen and you know the difficulty in assessing.
Timothy P. V. Mammen: Customer progression or has something changed on kind of the timing of rescheduling of this recovery as youre thinking about it.
Timothy P. V. Mammen: You know, that still needs to increase dramatically over time as both EV sales continue to grow and storage capacity is added. I think the other areas of strategic growth, the medical business, is going to come back in Q2. We're working with numerous new product introductions and other major partners in the medical space. I think that we'll start to bear fruit.
Speaker Change: Yes, I would say I think we have.
Timothy P. V. Mammen: Moderates and the expectations are.
Timothy P. V. Mammen: The degree of pickup in the second half of the year I think.
Timothy P. V. Mammen: The bill being a bit stronger in Q1 and that momentum was definitively starting to.
Timothy P. V. Mammen: Accelerate that would give us a lot more confidence I think it is more later in the in the year as I said, there's several projects on the EV side that we're waiting to hear about it in June that we're working on is to I think those projects sort of have a bit of a go no go gauge around then.
Timothy P. V. Mammen: Greater performance and better performance and traction around growth in 2025. And, you know, we actually had a good quarter in some of our microprocessing business. It's still small, but some of the ultra-fast business performed reasonably well with strong delivery of the ultra-fast product. I think we had the strongest quarter for ultra-fast. And then we continue to remain, you know, have a very strong conviction around the work we're doing on cleaning, heating, and drying applications. So I think strategically, as we said, there's a very strong foundation.
Timothy P. V. Mammen: I think you can see from the cutting business, whilst it was okay in North America.
Timothy P. V. Mammen: Europe is really challenged by that if you've seen some of the results from some of the major.
Timothy P. V. Mammen: Major players there.
Timothy P. V. Mammen: Where we are.
Timothy P. V. Mammen: With feeling that we're turning the corner a bit.
Speaker Change: I would say, yes tone around that is that.
Timothy P. V. Mammen: It's not going to be an immediate ramp in and into the end of Q2 Q3 with some but it's a more modest improvements into the end of the.
Eugene A. Scherbakov: I'll also add something for new products which we start to introduce this quarter. It's single-mode lasers, especially for 3D applications. And we already shipped the first batch to our potential customer, an existing customer, and the first feedback was very positive. The main advantage of these lasers, first of all, of course, it's much more compact, produces lasers with cost optimization. And we see that there will also be potential for us to take the traditional business for 3D applications.
Timothy P. V. Mammen: End of the year.
Eugene A. Scherbakov:
Speaker Change: That's how I'd characterize it.
Speaker Change: Right. Okay. That's helpful. Thanks, Tim and then.
Eugene A. Scherbakov: Just a question on the gross margins as you know and that's where it comes down again and you just thinking through.
Eugene A. Scherbakov: Perhaps a little bit of a better half revenue wise I know you were working on.
Eugene A. Scherbakov: Working cap et cetera, but from here it looks like we've got you know sort of stabilization in gross margins. So as revenue improves as one would expect that you get a little bit about.
James Andrew Ricchiuti: Got it. Thank you. And again, congratulations, Dr. Scherbakov.
James Andrew Ricchiuti: Additional bump as as your inventories have come down can you can you just walk me through how youre thinking about the second half on gross margins.
Operator: Our next question comes from Ruben Roy with Stiefel. Please proceed with your question.
Ruben Roy: Yeah revenue daily revenue dying up your absorption improves what actually again when I came back to this and looked at it in in Q1 in detail I was actually pleased with the gross margin off the actual product. There was some mixed benefit in there we had some ultra high power single mode lasers.
Ruben Roy: Thank you very much, and I'd like to echo my congratulations and best wishes to you, Dr. Scherbakov. For my first question, it's sort of a follow-up, I guess, to Jim's question, Tim, which is, you know, sort of thinking through the improvement in book to bill and, what sounds like a little bit of improving visibility on where your customers stand with inventory and project delays, etc. But at the same time, it seems like there's been a little bit of a push back on how you're thinking about recovery.
Ruben Roy: We're starting to introduce has talked to sugarcoat mentioned on.
Ruben Roy: On the attitude of the single mode lasers at a better cost profile, but we're also introducing to the.
Ruben Roy: The rollout of the higher power lasers with.
Ruben Roy: The lower bill of material that is still on target to start.
Ruben Roy: Delivering product into.
Ruben Roy: At the end of Q2, beginning of Q3 Q4, so one of the things I always look at is what's the what's the gross margin of the product and that that's holding up pretty well and we have these cost reduction initiatives that should start to benefit things and if revenue picks up that will help with the absorption side. So it's really relative to a year ago. It was it was it was the absorption rather than.
Ruben Roy: So, you know, recovery will be modest and, you know, maybe pushed out to the end of the year versus last quarter when we were thinking about a second half recovery in EV perhaps. Is that the right way to think about it? Are you being conservative on recovery just because of what we've seen and, you know, the difficulty in, you know, assessing, you know, customer progression, or has, you know, something changed on, you know, kind of the timing or scheduling of the recovery as you're saying? Yeah, I would...
Ruben Roy: Then say pricing or a structural shift on product gross margin that affected us.
Ruben Roy: In.
Ruben Roy: Actually both Q4 and Q1 this.
Ruben Roy: This year.
Speaker Change: Alright, okay. Thank you.
Ruben Roy: Our next question comes from Mark Miller with the Benchmark Company. Please proceed with your question.
Speaker Change: Let me also add my congratulations to Dr. Sherman cough, and I've enjoyed working with him and certainly appreciate all the contributions he's made to IPG.
Ruben Roy: I would say we have... moderated the expectations for the degree of pickup in the second half of the year. I think, you know, I'd looked at Bill being a bit stronger in Q1 and that momentum was definitively starting to... (inaudible) You know, Europe is really challenged by that. Have you seen some of the results from some of the major players there?
Speaker Change: Thank you.
Ruben Roy: Alright.
Ruben Roy: Maybe dig a little deeper into your you mentioned some factors I think welding and cutting it remains weak, but the drop off there was a double digit drop off sequentially in high power laser sales can you provide any more insights about that.
Ruben Roy: Okay.
Ruben Roy: I mean, that's continued to be the weakness on the coffee market, particularly in in in Europe, and then also we had.
Timothy P. V. Mammen: So I think we're... We feel like we're turning the corner a bit. But I would say, yeah, our tone around that is that it's not going to be an immediate ramp into the end of Q2-Q3, but some more modest improvement into the end of the year. This is how I characterize it.
Ruben Roy: At the end of last year, we had quite a number of EV.
Timothy P. V. Mammen: Welding programs that we supplied product into North America, So that EV demand in North America was also weak in Q1 those would be the two main things.
Timothy P. V. Mammen: Okay.
Timothy P. V. Mammen: Couple of them quite large projects in Q4.
Timothy P. V. Mammen: EV welding lock.
Timothy P. V. Mammen: In North America.
Speaker Change: You mentioned, a large order I think it was full related could you give a little more color on that also.
Ruben Roy: Right. Okay. That's helpful. Thanks, Tim.
Timothy P. V. Mammen: A large order for <unk>, sorry, I thought you said it was a full application maybe I'm wrong. So large order you received.
Ruben Roy: And then just a question on the gross margins as inventory comes down again and just thinking through perhaps a little bit of a better half revenue-wise. I know you're working on working capital, etc., but from here, it looks like we've got sort of stabilization in gross margins. So as revenue improves, one would expect that you get a little bit of an additional bump as your inventories have come down. Can you just walk me through how you're thinking about the second half for gross margin?
Ruben Roy: It means that the high end applications and all what yes.
Ruben Roy: We've assumed is a big enough water.
Ruben Roy: This quarter.
Ruben Roy: It's for foil drawing.
Ruben Roy: Very important customer for us and also the first demonstrations.
Ruben Roy: How successful can be used out of diode high efficiency diode lasers as efficiency more than 57% for such kind of applications.
Ruben Roy: It's the only show shows such kind of shipment and you'll see that whether it be opportunities to use. This later for such kind of a vacation.
Speaker Change: Okay. So it was for full drawing application okay. Thank you yep.
Timothy P. V. Mammen: Yeah, I mean, we've got revenue, clearly, you know, revenue going up, your absorption improves. What I actually, again, when I came back to this and looked at it in detail in Q1, I was actually pleased with the gross margin of the actual product. There was some mixed benefit; we had some ultra-high power single mode lasers. We're starting to introduce, as Dr. Scherbakov mentioned on the additive, the single mode laser is a better cost profile, but we're also introducing the rollout of the higher power lasers with the lower bill of materials that is still on target to start delivering product into I think the end of Q2, beginning of Q3, and Q4.
Ruben Roy: Yep.
Timothy P. V. Mammen: 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.
Timothy P. V. Mammen: Our next question comes from Keith has them with Northcoast Research. Please proceed with your question.
Speaker Change: Good morning, and once again I'll Echo congratulations Tucker.
Timothy P. V. Mammen: On a great career and all you've done.
Timothy P. V. Mammen: Just if I can ask real quick in terms of the performance during the quarter understanding on.
Timothy P. V. Mammen: Markets are challenged right now, but in terms of the mix between the price.
Timothy P. V. Mammen: That pricing had versus volume can you add any color on the impact of one versus the other.
Timothy P. V. Mammen: It's all it's basically all volume related pricing continues to be.
Timothy P. V. Mammen: Pretty stable in the market, we continue to we haven't changed our pricing policy.
Timothy P. V. Mammen: So one of the things I always look at is the gross margin on the product, and that's holding up pretty well, and we have these cost reduction initiatives that should start to benefit things. And if revenue picks up, that will help with the absorption side. So it's really relative to a year ago; it was absorption rather than say pricing or a structural shift on product gross margin that affected us in actually both Q4 and Q1 this year.
Timothy P. V. Mammen: On an average basis, maybe a little bit of a mix benefit because we sold.
Timothy P. V. Mammen: Some ultra high power lasers for advanced applications that had.
Timothy P. V. Mammen: Very strong average selling price per kilowatt.
Timothy P. V. Mammen: Volume is the primary.
Timothy P. V. Mammen: Driver of.
Timothy P. V. Mammen: The poor results at the moment.
Speaker Change: Got you I appreciate that.
Timothy P. V. Mammen: So the gross margins can you help misunderstand the inventory reserves or provisions you took in the quarter the impact that had on gross margin this quarter versus perhaps last year.
Timothy P. V. Mammen:
Timothy P. V. Mammen: Specific or not I'm going to hand, it was probably 100 basis points higher or something like that on the total provision.
Ruben Roy: All right. Okay. Thank you.
Operator: Our next question comes from Mark Miller with the Benchmark Company. Please proceed with your question.
Ruben Roy: Yeah.
Mark S. Miller: Okay. Thank you.
Operator: Okay.
Mark S. Miller: The provision will be in the Q the specific number on it.
Mark S. Miller: Alright, I'll check it there thank you.
Mark S. Miller: Let me also add my congratulations to Dr. Scherbakov, and I enjoyed working with him and certainly appreciate all the contributions he's made to IPG. I just wanted to maybe dig a little deeper into some factors you mentioned. I think welding and cutting remain weak, but the drop-off, there was a double-digit drop-off sequentially in high-power laser sails. Can you provide any more insights about that?
Operator: We have reached the end of the question and answer session I'd now like to turn the call back over to Eugene Federal for closing comments.
Speaker Change: Thank you for joining us this morning, and your continued interest in IPG.
Mark S. Miller: Participating in a number of investor events. This quarter and are looking forward to speaking with you again soon have a great day everyone.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Timothy P. V. Mammen: I mean, that's continued to be the weakness in the cutting market, particularly in Europe. And then also we had... At the end of last year, we had quite a number of EV welding programs that we supply product to in North America. So EV demand in North America was also weak in Q1. Those would be the two main things. A couple of quite large projects in Q4 for EV Welding, Mark.
Timothy P. V. Mammen: Okay.
Mark S. Miller: You mentioned a large order. I think it was fold-related. Could you give a little more color on that also?
Mark S. Miller: A large order for where, sir?
Mark S. Miller: I thought you said it was a full application, maybe I'm wrong, a large order you received.
Eugene A. Scherbakov: Do you mean the drying applications or what? Yes.
Eugene A. Scherbakov: We've shipped this big enough order this quarter. It's for foil drying. It's a very important customer for us. And also, the first demonstration of how successful our diode, high efficiency diode lasers with efficiency more than 57% can be used for such kind of applications. And of course, it's the only such kind of shipment, and you'll see the very big opportunity to use this laser for such kind of applications.
Mark S. Miller: Okay, so it was full. It was full.
Mark S. Miller: Okay, so it was a full drawing application. Okay, thank you. Yep.
Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Keith Haslam with North Coast Research. Please proceed with your question. Good morning.
Keith Haslam: Great. Good morning. And once again, I'll echo congratulations, Dr. Scherbakov, on a great career and all that you've done. Just, if I could ask real quick, in terms of the performance during the quarter, I understand that a lot of markets are challenged right now, but in terms of the mix between price and volume, the impact that pricing had versus volume, can you add any color on, you know, the impact one had versus the
Timothy P. V. Mammen: It's all, it's basically all volume-related pricing continues to be pretty stable in the market. We continued, we haven't changed our pricing policy. There was, on an average basis, maybe a little bit of mixed benefit because we sold some ultra-high power lasers for advanced applications that had a very strong average selling price per kilowatt, but its volume is the primary driver of results at the moment. Gotcha. I appreciate that
Keith Haslam: Gotcha, I appreciate that. In terms of the gross margins, can you help us understand the inventory reserves or provisions you took this quarter and the impact that had on gross margins this quarter versus perhaps last year?
Timothy P. V. Mammen: Transcribed by https://otter.ai
Keith Haslam: Okay, thank you.
Keith Haslam: The provisional will be in the queue, at the specific number. All right, I'll check it there. Thank you.
Eugene Fedotoff: We've reached the end of the question and answer session. I'd now like to turn the call back over to Eugene Fedotoff for closing comments.
Keith Haslam: Today's conference call has ended please disconnect your lines at this time. Thank you.
Eugene Fedotoff: Thank you for joining us this morning and for your continued interest in IPG. We will be participating in a number of investor events this quarter and are looking forward to speaking with you again soon.
Operator: 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.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Today's conference call has ended. Please disconnect your lines at this time. Thank you.