Investor Presentation March 2017 Tim Mammen Chief Financial Officer www. ipgphotonics .com
Safe Harbor Statement The statements in this presentation that relate to future plans, market forecasts, events or performance are forward-looking statements. These statements involve risks and uncertainties, including, risks associated with the strength or weakness of the business conditions in industries and geographic markets that IPG serves, particularly the effect of downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; inability to manage risks associated with international customers and operations; foreign currency fluctuations; high levels of fixed costs from IPG's vertical integration; the appropriateness of IPG's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward- looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 2
Key Takeaways 3
Our Mission Making fiber lasers the tool of choice in mass production 4
Materials Processing Cutting Welding Brazing Drilling General Manufacturing & OEM Automotive Heavy Surface Industry Additive Treatment Manufacturing Marking Cladding Aerospace Additive Manufacturing Semiconductor & Electronics 5
Fiber Laser Leader $3.5 Metal-Based Materials Processing $3.0 $1.5 Fiber Lasers Revenue in Billions Revenue in Billions $2.5 $2.0 Others $1.0 $1.5 $1.0 $0.5 IPG $0.5 $0.0 $0.0 2016 2017 2018 2019 2020 2021 Fiber Lasers CO2 & Other Lasers Source: IPG Photonics and Laser Markets Research, 2017 6
IPG Lasers Cover More Applications (1) Any Wavelength 0.4 m m (10 -6 meters) 0.7 m m 1.5 m m 1 m m > 5 m m Ultra-violet Visible Near-Infra-red Mid-Infra-red UV Lasers Thulium, Diode Blue, Green, Yellow , Ytterbium Erbium Cr:Zn/Se/S Fe:ZnSe/S Holmium Orange, Red Lasers Lasers Lasers Lasers Lasers Lasers Lasers (2) Any Pulse Duration (3) Any Power CW (Continuous Wave): laser is on all the time Laser power: from several watts to hundreds of KW % of Laser Sales = Majority % of CW Laser Sales by power level: <1 KW = ~25% QCW (Quasi-Continuous Wave): laser is modulated 1 to 5 KW = ~50% % of Laser Sales = <10% >5 KW = ~25% Pulsed : laser switched on for 10 -9 seconds Includes ultrafast picosecond 10 -12 and femtosecond 10 -15 % of Laser Sales = 10% to 15% 7
IPG Fiber Laser – Technology Advantages Higher Power Lower Energy Faster Consumption Performance Lower Compact Maintenance Footprint Higher Versatility & Reliability Flexibility 8
Significant Barriers to Entry Business: Technology: IP & Process Vertical Know-How Integration & Scale 9
Highest Volume, Lowest Cost Producer of Pump Diodes 10,000,000 120% Packaged Diode Costs % Chg. Tested Chips Produced 100% 8,000,000 80% 60% 6,000,000 40% 4,000,000 20% 0% 2,000,000 -20% 0 -40% 2009 2010 2011 2012 2013 2014 2015 2016 Tested Chip Production Cost/Watt Decrease (2009 Base Year) Annual Cost Decrease 10
Global Manufacturing Scale, Sales & Service Capability Headquarters, Manufacturing, R&D, Sales, Service Manufacturing R&D, Sales, Service Sales, Service 11
$6 Billion Addressable Market New Applications ($2.4B) Cinema and Displays / Sensors and Inspection / R&D / Defense / Medical / Mid-IR Spectroscopy Core Materials Processing Applications ($2.6B) Cutting / Welding / Brazing / Drilling / Marking Cladding / Additive Manufacturing / Surface Treatment Other Lasers Fiber Lasers Micro Materials Processing Applications ($0.8B) $0.3B: Semi, PC Board / Non-Metal Processing / Solar $0.5B: Excimer Lasers for FPD Source: Laser Markets Research, 2017 12
Growth Opportunities – New Applications & Products Beam Medical Delivery Ultraviolet Additive Fiber Lasers Manufacturing Ultrafast Laser Ablation Lasers Cinema & Laser Display Systems 13
Strong Growth & Industry-Leading Operating Margin $1,200 100% $1,006 Revenue ($ Millions) Operating Margin 80% $900 60% $474 $600 40% $300 20% 37% 37% $0 0% 2011 2012 2013 2014 2015 2016 Revenue Operating Margin 14
Rapidly Growing Operating Cash Flow $350 $296 $300 $ Millions $250 $200 $150 $87 $100 $50 $0 2011 2012 2013 2014 2015 2016 Free Cash Flow Capex 15
Target Business Model Market Revenue Growth 10%-14% (1) 12% Growth 50%-55% (2) Gross Margin 55% 50%-55% 32%-37% (2) Operating Margin 37% 32%-37% (1) Foreign exchange headwind ~3 percentage points in 2017 (2) Targeting upper half of the range 16
Thank You NASDAQ: IPGP Questions? Contact Investor Relations: Web: investor.ipgphotonics.com Email: jhillier@ipgphotonics.com Phone: (508) 373-1467 www. ipgphotonics .com
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