IPG Photonics at Bank of America Conference: Navigating Growth Amid Tariffs

On Tuesday, 13 May 2025, IPG Photonics (NASDAQ:IPGP) presented at the Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025, unveiling a strategic plan focused on growth and adaptation. While the company faces challenges from tariffs, it remains optimistic about its prospects in the laser technology market, driven by innovations and strategic investments.

Key Takeaways

• IPG Photonics is shifting production to Europe to mitigate tariff impacts, including a $50 million order delay.
• The company is focusing on displacing non-laser processes across industries, with significant growth expected in the EV and medical markets.
• A new CEO is driving organizational changes to enhance communication and strategic planning.
• IPG aims to improve gross margins and maintain a balanced capital allocation strategy, including potential acquisitions and buybacks.
• The company’s book-to-bill ratio remains above one, indicating strong demand despite sluggish PMIs.

Financial Results

• Revenue: Achieved $228 million with a gross margin close to 40%; targeting mid-40s margins at revenues below $300 million.
• Tariffs: Currently paying tariffs on open purchase orders with Chinese suppliers; plans to offset these impacts in the second half of the year.
• Capital Allocation: Returned $350 million to shareholders last year, totaling $1 billion over the past three years.

Operational Updates

• New CEO: Mark’s leadership is refreshing, focusing on breaking down silos and improving communication.
• Tariff Mitigation: 80% of products for China are now supplied from Europe; production shift to Europe for delayed orders.
• Medical Penetration: Qualified with a new OEM in Q1, enhancing distribution in the medical sector.

Future Outlook

• Growth Drivers: Expects growth at two to three times GDP when investment cycles are strong; legacy technology displacement will drive growth.
• Target Markets: Significant growth anticipated in medical and micromachining sectors; welding market offers substantial potential.
• Strategic Initiatives: Continued investment in application labs and manufacturing efficiency to boost gross margins.

Q&A Highlights

• Demand Drivers: Capital equipment cycles and new technology adoption are key demand drivers.
• EV Market: Transition to EVs is positive, with increased laser content in batteries and motors.
• Competitive Landscape: Tariffs may lead to more localized manufacturing, creating barriers for low-cost suppliers.
• Acquisition Strategy: Focused on strategic, programmatic acquisitions, exemplified by the Clean Laser acquisition.

For a deeper dive into IPG Photonics’ strategies and insights from the conference, refer to the full transcript below.

Full transcript - Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025:

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Good afternoon, everyone. Michael Feniger, the machinery engineering construction analyst at Bank of America. Thanks for joining us today and anyone who’s on the line. This is the second year in a row we’ve had IPG Photonics with us. We have Tim, the CFO, with us.

I’m going to send it over to Tim just to introduce himself, give a little bit of his background. We’re going to just jump into some Q and A and keep this an informal discussion on IPG and really the opportunities that present themselves going forward. So Tim?

Tim Marmon, CFO, IPG Photonics: Yes. Hi, everybody. I’m Tim Marmon. I’m the CFO at IPG. I’ve been there for quite a long time, twenty five odd years or so, so seeing the company through various growth phases and challenges.

And we’re hoping to get the company back into consistent growth in the near term with a lot of the investments and strategic initiatives that we’ve laid out over the last two or three months under the new CEO market.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Perfect. And maybe just to bring everybody on the same page, you know, IPG Photonics is a really like a technology company, Tim, that services some industrial markets and other markets as well. You know, the founder of IPG kind of is considered the the godfather of the fiber laser market in some sense. Just maybe you can help everyone who who’s new to the story. What are the solutions that you guys provide to customers?

Who are your customers? What are these end markets that you guys serve?

Tim Marmon, CFO, IPG Photonics: So I’d probably best step back a little a little bit on that. And, you know, the fundamental strategy that we have as a company is to take legacy applications that will be performed by non laser processes, right? If you go back into even the marking and gravy and cutting arenas, you had inkjet markings by way of an example or cutting your punches, presses, tool, dies, saws, mechanical processes, water jet. Welding, obviously, is a very broad based application with traditional areas in that. Cleaning, right, use a lot of chemicals, media blasts, sand.

We’ve got new application in heating and drying. It’s relatively small at the moment, but that’s got an opportunity to displace traditional ovens, which are electrically inefficient. So in medical, the same way, you’re taking surgical processes and converting them to being used in lasers. So what you’ve got is a very, very large total available market that covers these different applications that runs to tens of billions of dollars. And strategically, if you can then convert those applications over time to lasers, you increase the SAM for lasers.

That’s happened very successfully in cutting historically and marking engraving. It started to happen a lot more. It took quite a long time to get there. But on welding applications, we’re starting to see it on cleaning. I mentioned things like additive manufacturing is another area where you’re actually replacing machining and growing complex parts from powder.

So you’re basically the objective is to grow the SAM from existing large TAMs. Probably a bit more unusually, you may have really completely new laser based type of applications that come to the fore. More often than not, they may be in like instrumentation or other areas. Typically, our customers are either OEMs who buy the laser or a system and then distribute that add technology around it sometimes and then distribute it. So large companies that produce companies that produce large scale cutting systems, cleaning applications, there are cutting OEMs that produce cutting cleaning systems.

And then end users, like a lot of the welding market is more end user driven, so into automotive and other areas. And so yes, your large for the OEMs on the industrial side, their large end customers would be in automotive or heavy equipment manufacturing, agricultural equipment manufacturing, elevator manufacturing, furniture, light fixtures. So durable goods, consumer durable goods would be a large users of lasers across a variety of those those applications.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: So for investors, Tim, what typically drives the demand for these project products? I mean, what what’s considered in your view a good environment for for IBGP? Is there any rule of thumb we should think about if GDP or industrial production is x, this might translate to y in terms of the growth that we can see from from the company?

Tim Marmon, CFO, IPG Photonics: Yeah. And and and and and it sometimes, you know, at the moment, you got a GDP growth that’s being largely driven by services. Right?

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: So but

Tim Marmon, CFO, IPG Photonics: But typically if your capital equipment and investment cycles are strong, you’ve historically grown at two to three times GDP depending upon the application set that you’re addressing. I’d say there’s two phases to this, right? When you’re really just a GDP growth and you’ve been you’re getting into some cyclical applications because you’ve got the investment cycles that come and go. The other side that’s very much a growth driver is the adoption and displacement story. So in applications that are relatively new to penetrating an end market, you’ll see that displacement even in a weaker environment will drive growth in that, right?

And for example, last year, the underlying welding market outside of electric vehicles, which was impacted by the underutilization of capacity, the remaining welding market actually it was very stable and maybe even grew a very little bit last year. Medical has grown even because you’re going through an adoption phase. That’s an area we’re targeting for significant growth. Micromachining at the moment has started to go through better performance on a year over year basis. That’s because we’ve introduced new technology into that end market that’s going through an adoption phase on it and demand has ramped up quite quickly.

So I’d say part of it is driven by the underlying industrial and economic demand level, which would be a GDP would be an indicator there. PMI, perhaps on the capital equipment and manufacturing side is another good indicator. And then with newer applications, you’ve got an adoption and displacement story. When those really get legs on them, that’s what can drive really accretive growth rates.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: That makes sense. What’s interesting is you mentioned PMIs and PMIs have been kind of stuck in the doldrums below 50 across most regions. Really the last, you know, year or so, you guys just reported results. Your book to bill was solidly above one time. So you just discuss what you saw there in an environment that has been maybe more sluggish on the capital goods manufacturing side that you guys are seeing a book to bill above one times?

Tim Marmon, CFO, IPG Photonics: Yeah, sure. I think it’s been it has been a struggle and it’s been a mixed bag, right? I mean, The US had actually started had recovered to 53 and then dropped back to like just below 51. So it’s still expansionary. Japan had got above 50, then it’s fallen back to sort of 48.

Europe’s been down as low as 42 and come back up to 48. So I think it’s very much a mixed bag. Some of the positive momentum we saw in that was not necessarily also it didn’t have to be tied specifically to the PMI and the underlying. This comes back to you’ve still got probably an underlying industrial demand environment that is quite weak. So the performance in Q1 with strong book to bill in that environment was positive, right?

We did see some of our customers on the cutting OEM say that their overall inventory levels had adjusted down to the levels they want to see them at. So we got actually good order flow from a couple of customers there. But some of the other stuff was on a rebound on EV demand with utilization in battery manufacturing, both actually for EV and storage picking up significantly. Some of that’s demand in additive manufacturing in Europe and China, where we’ve got very specific capability and perhaps that’s not quite tied again to the underlying macro, very strong order flow on medical, which again is new technology and more adoption. And then we had positive momentum on the micromachining and advanced applications.

So I think the positive to take away from Q1 was that it was from a lot of the areas we said we’re going to invest in. And it wasn’t just well, it wasn’t yet a recovery in any fundamental recovery in the underlying industrial demand environment, which was probably reflected in the European order flow still being a little bit weak relative to some of the other geographies in Europe, still kind of industrial end market focused with the cutting applications and automotive end markets there being in the doldrums.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Makes sense. And you touched on this earlier, Tim. Last year, you announced a new CEO. He’s he’s an outsider. It’s you know, usually, you know, IPGB has a very rich history.

And to see someone come from the outside, it’s been kind of a year plus since he’s been in the seat. Tim, what is he bringing to the table as someone from the outside? What is kind of changing you from your sense for this company, having someone from the outside with a new perspective?

Tim Marmon, CFO, IPG Photonics: So, yeah, I mean, Mark’s, I think, it it, had been a refreshing change, I think, to the organization. The company was and he’ll talk about this, has got a tremendous depth of technology and capability and still has a tremendous amount of differentiation across many applications and laser capability. Mark has talked about the fact that it was almost still operated like a billion dollar startup, right, where Valentin had built this fantastic company. But Mark’s trying to sort of break down some of the silos, improve the communication in the company by way of example, getting, for example, the sales function and the product line management and R and D to really talk and communicate closely so that they’re understanding what the customer wants to see on the product solutions, really getting I think the role of finance is playing within the organization, for example, has been elevated. So there’s a lot more financial discipline is a long word to use about it.

But we’re establishing more financial KPIs for departments and areas within the business to operate in. There’s a bit more rigor around the financial analysis around the costing side of the business and new product introductions, a gating process within and a proper R and D product development process with gating processes in that so that you’re evaluating at different stages how well you’re doing in developing the new product? And are you achieving where you need to be on the cost side of that? Because sometimes you have to make the hard decisions of actually stopping R and D rather than and in other instances, you want to actually commit more capital to that, right? So the organizational, cross functional, collaborative areas are one of the things he’s working on.

I think the development and enhancement of what was an original strategic plan, he came in and he didn’t find anything fundamentally that we were missing or that he thought we should be doing, but he’s put a lot more structure around that. And we presented that to the board and was rolled out in Q1 to the investment community. And some of the investments that we’re making are a result of that sort of cohesive strategic plan that’s been put out there. So I think Mark’s really objective is to take the sort of the gem of a company and the technology that really continues to exist and ensure that it is successful going forward. And some of that’s also in areas like focusing on things like ensuring your quality and customer service is world class as well.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Makes sense. Maybe we could just put some numbers around these opportunities. I mean, you referenced before the cutting market, how you guys were able to really drive a penetration story where it was really displacing legacy, solutions. What do you feel like is the addressable opportunity when we think of for iBGP in terms of the industrial side, but maybe outside of industrial applicate applications? You guys have talked a little bit more about medical and some of these other markets.

I’m just curious if you guys have any TAMs out there that you guys kind of try to target.

Tim Marmon, CFO, IPG Photonics: Yeah. I think like the cutting business was well talked about. I mean, that’s not one focus area of us at the moment. But even on welding applications, we’re trying to think about the whole welding market, right, and the capital equipment spend on welding, excluding the wire and the consumable is over a $5,000,000,000 market. Lasers are still 15 plus percent penetrated into that, right?

There’s a lot of older type applications or areas where you have to have a lot of certification like pressure vessel manufacturing or steel tank manufacturing or even in shipbuilding where lasers are still relatively lightly used. The handheld laser has actually enabled us to get into the metal fabrication business a lot more. The other areas and things like the medical, the micromachining, the instrumentation and scientific, the medical is about just the urology is about a $2,000,000,000 market. We sell into the aesthetic market. But as an OEM, we’re not doing our own aesthetic systems.

That aesthetic market is very large as well, where the laser part of it is a subset of it. Micromachining is another market, depends excluding lithography rights, which we don’t play in. It’s probably like a And then instrumentation and other areas add up to make the total opportunity maybe as close to $5,000,000,000 But we’re very early stages in some of that. But penetrating even 10% of that opportunity is very significant runway for the company.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: And as CFO, what what are the levers you think you could pull to kinda drive that penetration? Is it a different go to market strategy than than maybe we saw in the past with cutting? Just kinda curious how we can kind of create that penetration, that displacement a little faster than maybe we’ve seen in the past.

Tim Marmon, CFO, IPG Photonics: Yeah, I think on the sales and marketing side, there have been significant investments made. Some of these applications continue to be a bit like the OEM market for materials processing, right? In medical, once you qualify with your partners and your OEMs and we talked about qualifying with a new OEM in Q1 and starting distribution to them, there’s a lot of leverage in that, right? It then becomes more of a technical support. You’re not actually out banging on doors trying to sell another urology system.

Your OEMs are doing that for On medical, there’s quite a lot of value captured by that OEM. Maybe on some of the other applications, we would look at whether we want to do distribution internally ourselves on these. But that’s a difficult that’s really you have to have a proper decision made around that because the capability that other people have is very high. I think on the other side of it is on something on the welding side, it’s not just the sales and marketing, it’s actually the investment in the application capability. That application capability is really another differentiator, understanding the material science and actually helping customers solve the problems there.

So we’ve continued to invest in our application labs and areas. And then I mean, on the R and D side, it’s really that discipline around the stage gating process and the project management and ensuring that you’re either pulling back or adding capital. I will say from my perspective as well, one of the things that I think we’re continuing to do well and work on is not so much just on the investments there, but really trying to get our gross margins even at lower revenue levels back up so that when we get revenue growth back in, we’ll see that accretion come in. And I’ve said that right now we’re close to 40% on $228,000,000 of revenue. That would mean that we’ve got 500 basis points still of under absorption.

And as we get inventory further under control, you’re seeing fewer provisions come through. But I believe you’d be getting close to the mid-40s at revenue that’s probably a bit below $300,000,000 where historically I said it’s a $300,000,000 target. So that whole efficiency on the manufacturing side is also an important area for us to focus on.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: And maybe, Tim, just we made it halfway without talking about tariffs, which is probably a record right now at the conference. Every fireside check They should probably started with it, to be fair. But we wanna talk more about the long term opportunity. So now we have to talk just about right now in the near term. How how are you guys coping with this tariff regime?

Do you expect to shift incrementally production around to The US or other areas because of the tariff policy?

Tim Marmon, CFO, IPG Photonics: Yeah. So I mean, you’ve seen escalation, de escalation, ninety day pause. I mean, I’m not saying anything that probably nobody else has talked about here. For us, think the developments over the last twenty four or forty eight hours certainly make the near term a bit easier to navigate, right? You potentially could ship some of the products out of The U.

S. With only a 10% tariff plus the original tariffs in China. So sometimes a lot of the lasers had zero. There are some of the accessories that have a 3% to 5%. So your inbound tariff in China now would be 15%.

At least in the near term, you may want to use that to satisfy the customers who want the product. But you still got to our intention is because this is still a highly uncertain situation is believe that you’ve got to optimize your manufacturing and capability to best serve regions from different areas geographically. So we’re not going to pull back on that optimization strategy and suddenly have in eight or twelve weeks’ time another ramping up of the tariffs and not be ready to supply product out of Europe or primarily out of Europe for China. The most important thing to understand is that 80% of our product that goes into China at moment is already supplied primarily from Europe, right? And then on the cost side of this, you’ve got obviously with the lower inbound tariff, you’ve got the 20% fentanyl and the 10% reciprocal at the moment, that’s 30%.

You still have actually the original tariffs on whatever the Harmonite tariff code would have been for a specific product. So the total tariff still inbound is more than the 30% and everyone’s talking about the 30% rate. We’re halfway through the quarter. We had open POs with our Chinese suppliers. We don’t make stuff.

So we’ve had to already pay those tariffs over April and the May. But we had also already started to move to other suppliers in Southeast Asia and elsewhere for a lot of that product. So there’s still going be a hit in this quarter, but we’d already said that we can rebalance this in the second half of the year and substantially offset that impact. It’s easier to substantially offset that impact at this point in time given the developments over the last twenty four hours or so.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: It’s good to hear. And Tim, on the call you guys discussed a shift in an order for a customer. I think it was, 50,000,000 you guys quantified. Can you just let us know what what happened there? Is this a delay?

Is this was this a cancellation? Just kinda help us understand as you’re navigating the tariff regime and policies, what kind of happened there with that customer? And, you know, do we see that come back in the third quarter?

Tim Marmon, CFO, IPG Photonics: Yeah. No, it’s not just one customer. There are, you know, two or three customers. It was different products. They were not cancellations.

These are products that the customers want. The problem was that there are two or three of these product lines that we only made in The U. S. They were developments of technology that have happened here and we’ve continued to make them here rather than quite a lot of our products we make both in Europe and in The US. It just happens that these two or three product lines were made exclusively in The US.

So the problem was that if you started to ship that product out of The U. S, you had 170 it was actually not even 145%, was 170 actually now I’m getting confused, 170 is going down to The U. S. Is 135% into China. And these are lasers that are anything from $20,000 30 thousand dollars and accessories that are 12,000 or $15,000 right?

That’s a huge incremental cost. So we were we basically talked and negotiated with the customers to delay delivery of those until we ramped up manufacturing in Europe. We did that we’ve done that pretty quickly. I think we started shipping some of those units out of at a very low volumes in the last few days even out of Europe and going to try and ship some more and ramp up that volume through the end of the quarter and then deliver the rest of it in Q3. So yes, absolutely not cancellations.

Product the customer wants, which is you can’t take a 20,000 laser and put $25,000 of tariff on top of that. It’s

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Get a little pushback on that one. Yeah. But with with the tariff conversation, Tim, I am curious just when you think of the competitive dynamic, right, because I think when it comes to your guy, you know, you you have a business in China. You guys have diversified even outside of China. I know there’s the high end of the laser, the low end.

I am kinda curious when we think of the tariff policy. Has that created any barriers to entry? Does it make it harder for low cost, you know, suppliers to enter certain markets? Are you seeing that? Is that coming up in conversation with customers?

Tim Marmon, CFO, IPG Photonics: Yeah. I I think it it will. In certain geographies like in The US, the penetration of the low cost suppliers was relatively limited, right? People were averse to buying. But certainly, even with a 50% tariff, that’s a significant increase in their cost.

A lot of them running with margins that are ranging from 15% to 20% per quarter gross rights and kind of breakeven. So this cost increase is pretty significant even with the revised tariffs. I should think certainly at the higher level, was a massive increase to them. In Europe, think there’s a lot of in many of these areas, we’re still very technologically differentiated, right? So in Europe, there isn’t a significant tariff on like cutting systems, for example, coming from China.

I think the other side of the equation is that there’s just a lot of uncertainty around this and the impact of it will be ultimately you’re probably going to have more localized manufacturing reshoring in Europe even though there’s a lot of there’s no tariff war per se. I think customers even may be looking at not customers, but companies looking at we’ve never made any stuff in China. I don’t think we’re to make stuff in China, but we use subcontract manufacturing in Asia as another lever that we could pull to help meet customer demand with less of a cost impact.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: And there’s a high degree of laser cutting when it comes to the auto market. Yet also you guys are positioned when it comes to welding side for that EV penetration story as well. So maybe we could just talk broadly, where do you guys serve the auto market? And then we kind of touch on that on where like the EV e mobility side and potential there comes to play.

Tim Marmon, CFO, IPG Photonics: The auto market is pretty broad based set of applications, right? There’s a lot of cutting that the cutting OEMs sell into the automakers for cutting panels, tailor welded blanks. On the welding side, we do a lot of seatback welding, for example, specialized welding of airbag detonators, some welding on the body in white, but there’s still a lot of electrical welding done with the spot welding on that. On the EV side, you actually see an increase in welding obviously related to the battery. It doesn’t change of a seatback or airbag detonator, right, or the main body.

There’s no fundamental difference there. But so you see a big increase related to welding on EV related to battery and electric motors. On the other area, actually, where on traditional automotive lasers have been adopted quite significantly was on welding of transmissions. Obviously, that is a decrease, but the increase relative to EV, if you eliminate transmissions, is a multiple higher. And then I mean, there’s some marking and engraving done on the vehicle as well.

But that would basically be it. There’s some clean actually, there’s cleaning applications, too. Whether using resins or sometimes resins are used in adjoining or used as a dampener for sound, there’s often either coatings or resins that have to be removed. So we’re using lasers with the customers are using lasers with their coatings removal as well.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Well, Tim, let me pull on this thread a little bit. I’m just curious with your position with the auto industry and then the opportunity EV. Do do you feel like the transition is a positive for for IPG Photonics as we kinda transition away from ICE to EV based on your penetration opportunity, the, you know, the the competitor set, but how much, you know, actual work you’re doing on the EV relative to what a traditional vehicle would

Tim Marmon, CFO, IPG Photonics: look like? Overall, because of the laser content on the battery and the motors, yes, it’s definitely a net positive. It’s important also on the battery to note that a large amount of battery demand is not even EV driven now, it’s storage, right, which is serving a whole host of different industries and end markets. So net net, EV transition has been a significant driver and benefit to us in terms of total automotive sales. And I think it’s interesting, some of the data out there is actually showing like even North American electric vehicle sales are forecast to grow at 15% this year.

Europe’s coming back with a bit of rebound. China’s already half the vehicle sold a EV. So I think there’s a I read somewhere in the article that most people who buy an EV actually are not unhappy with it. They kind of actually think that the solution is pretty positive, whatever the geopolitical debate is around it. And

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: maybe, Tim, just cause you are a CFO, I’m sure you look at a lot of other companies and benchmark. The question we get sometimes is cause you are a technology company that services industrial markets. It’s a very unique company. What do you look like as when you think about peers? What are some companies that you look at in terms of what they’re reporting, what trends they’re discussing that maybe we on this side aren’t paying attention to?

And I’m wondering if it’s, you know, robotic companies, automation companies, just what other companies out there or subsectors do you kinda look at as the CFO to say, you know, that’s how we should benchmark or those trends are relevant to us based on our unique product servicing and our end market mix?

Tim Marmon, CFO, IPG Photonics: Yes, I think that’s a good question because a lot of the traditional laser companies, if you looked at a coherent or a Lumentum and KSI where Mark was, have become like they’re much more diversified. They’ve got very big telecom businesses, right? They’re doing the data storage, data transmission. So we’ll look at the subset of their welding business and what they’re saying about that, but not the whole entity. We’ll track sort of what Cognex’s tone is about business because they’re very they don’t do lasers, but their end markets are industrial and other tech areas.

I think, yes, the robotic companies are interesting ones to follow. Some of the other industrial I mean, there’s many of the other companies are so big compared to us. It’s more sort of like looking at what they’re stating about the end markets that are out there. Obviously, we work with Miller, part of Illinois Toolwork. But yes, it’s a difficult the laser companies were a bit more laser specific and they’re less so at the moment.

So I think the industrial tech universe is what we kind of look at, but a lot of them are a lot bigger than us, right? So that’s where Cognex perhaps fits in a bit more directly.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: And you’ve been in a process, Tim, of getting your costs down, working down your inventories, which we saw a lot of progress last few quarters. And it seems like you’re kinda waiting for those volumes to come come back to really give that absorption, you know, with with the factories and and with the company. Just what are some of the indicators you’re keeping an eye on? I mean, in this conversation, you mentioned PMIs. I think you also mentioned maybe utilization rates when you look at some of the EV battery players.

I’m just kind of curious what data points you’re following that would make us feel more comfortable as we kind of head into 2026.

Tim Marmon, CFO, IPG Photonics: Yeah. We look at I mean, macro trends and commentary GDP. I mean, you mentioned the PMI machine tool data from different places around the world, right? The Japanese machine tool data is always good to look at. There’s German machine tool data, although there’s a Eugene was reminding me there’s like a three or four month lag on that.

Robotics sales, we look a lot of the PMI data and the underlying tone that you’re hearing from and utilization, we’ll try and find like battery utilization or just looking at where EV total sales are, trying to find data on battery storage applications. The medical is less it’s not a discretionary medical spend. Like if you’ve got a kidney stone, you generally want to have it removed fairly quickly.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Not looking at the PMIs on that one.

Tim Marmon, CFO, IPG Photonics: No. We’re not. But,

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Tim, as we as we wrap up, an interesting conversation that that we have with investors is actually on your balance sheet. You guys have a large net cash position. You kind of discussed that. You just recently acquired a business. It was last year, Clean Laser.

Just help us understand with such a large cash position, what as a CFO are you are you monitoring and how you’re kind of thinking about using that cash going forward?

Tim Marmon, CFO, IPG Photonics: So I mean, what we’ve said is that we want to have a more balanced approach to capital allocation than we’ve had over the last three years when we’ve returned a very significant amount of capital to shareholders. I think last year, $350,000,000 and the last three years, one billion dollars We want to maintain firepower to execute, I think, on a programmatic, strategically driven acquisition plan. We’re going to continue doing opportunistic buybacks, but just probably in a more balanced way rather than the level we were operating at before. I think Clean Laser was a really good example of an acquisition that fits very closely with IPG. They were sourcing lasers from us.

They were utilizing some of their own lasers internally. They were a leader in terms of process and know how for cleaning based systems and the core technologies around that, right? We’re able to build upon that with our global distribution, for example. So I think that was a very good example of like a bolt on that was very complementary to an area of growth that we were prioritizing. And I think we’re looking at similar types of acquisitions there.

You probably want to do things with a little bit more scale on them so you get a bit more incremental revenue and hopefully margin out of it because we’re looking at profitable companies.

Michael Feniger, Machinery Engineering Construction Analyst, Bank of America: Make make sense. Alright, Tim. Thank you. I just wanna thank Tim and Eugene for coming to the conference today. Always great checking with you guys and learning more about the company and the journey.

So thanks, everyone.

Tim Marmon, CFO, IPG Photonics: Great. Michael, thank you very much.

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