Good morning and welcome to IPG Photonics Q4 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 of Investor Relations, for introductions. Please go ahead with your conference. Thank you and good morning, everyone. With me today is IPG Photonics CEO, Dr. Mark Gitin, and Senior Vice President and CFO, Tim Mammen. Let me remind you that statements made during the course of this call that discuss management or the company's intentions, expectations, or predictions are the forward-looking statements. These forward-looking statements are subject to risks and uncertainties and could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties are detailed in IPG Photonics Form 10-K for the period ended December 31, 2023, and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investor 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, February 11, 2025, only, and the company assumes no obligation to publicly release any updates or revisions to any such statements. For additional details on our reported results, please refer to the earnings press release, earnings call presentation, and the financial data workbook posted on our Investor Relations website. We will also post these prepared remarks on our website after this call. With that, I'll now turn the call over to Mark. Thanks, Eugene, and good morning, everyone. For today's call, I'll provide a high-level overview of the quarter and share progress we've made on our strategy to drive long-term, sustainable, and profitable growth. After that, I will turn it over to Tim to provide more of the financial details, and then we will open the call for questions. Starting with our Q4, revenue came in at the high end of our guidance, up slightly from our Q3, and consistent with a business environment that continues to bounce along the bottom. Gross margin improved in the quarter, helped by our efforts to reduce inventories. Our operating expenses were also better than expected and down both year-over-year and sequentially. Our progress on expenses reflects the hard work the team has already undertaken to reduce our cost structure, and we will be deploying the savings towards strategic investments in the business. Our free cash flow remains strong, reflecting higher profits and the positive working capital impact, and we maintain a very strong balance sheet. Although our results do not yet reflect our full potential, I'm proud of the progress we've made in navigating a challenging business environment that is impacting us on two levels: one, the tough macro conditions in general industrial and automotive markets, including EV; and two, a more competitive environment in cutting. Over the last few months, we've undertook a comprehensive review of our strategy, markets, technologies, and competition. We then developed a plan to strengthen our current products, penetrate new applications and markets, introduce novel solutions, and set the foundation for return to growth and better profitability in 2026 and 2027. Our leadership team and board are aligned around our strategic plan, and we are hitting the ground running. We are addressing the challenging near-term demand environment and increased competition by reducing product costs, accelerating product development, and strengthening relationships and support for our OEM customers. A prime example of our efforts to reduce product costs is our recent introduction of a new high-power fiber laser platform. This platform features next-generation high-power pump diodes that enable a more compact design at a lower manufacturing cost to help our cutting OEM customers defend against low-cost Chinese-made systems. We also remain well-positioned for opportunities in applications such as welding and cleaning as industrial and e-mobility demand recovers. In order to win in the long term, we are making investments in our business to drive differentiation in attractive markets where we can earn the greatest returns on our capital. Since I joined, we've taken a deep dive into every R&D program. Entering 2025, we are accelerating investment in several dedicated programs with strong market potential. Examples include urology applications, key micromachining opportunities, and other areas where we have strong expertise and important relationships with market-leading customers. In aggregate, these programs target markets exceeding $5 billion in TAM and offer IPG multiple hundreds of millions of dollars in revenue opportunities over the next several years. It's important to note that these roadmaps will develop over time and have multiple milestones to hit on the path to market, but we are engaged with key customers today and have booked initial orders for a number of products in development. For competitive reasons, we prefer to keep many of these initiatives out of the spotlight, but one area that I can highlight is urology. Urology is a multi-billion-dollar TAM where we already have a solid position and where our applications and laser expertise can be utilized to create novel treatment solutions and outperform what's on the market today. We expect to introduce the next product on our urology roadmap later this year, our new generation of thulium laser systems for the treatment of kidney stones, and we are making good progress in our other targeted R&D program. We expect to generate initial revenue from some of these programs in 2025, with more meaningful returns on our investments beginning in 2026 and beyond as new products gain traction. We're also actively seeking opportunities to expand product offerings and market reach in key application areas throughout targeted acquisitions. We are integrating our December acquisition of CleanLASER, a maker of laser-based cleaning systems. CleanLASER is an example of our plan to complement focused R&D with strategic tuck-in acquisitions that accelerate our penetration of important markets. By leveraging CleanLASER's unique technological expertise and European presence and combining it with our strength in other markets, we aim to accelerate growth of our laser-based cleaning systems. Cleaning is a promising market, particularly for laser systems for the long term, and it's a market where we bring differentiated solutions. Furthermore, to support our strategy, we are strengthening discipline and execution across the organization. We are increasing intimacy with our customers so that we can focus product development on their foremost needs. We are enhancing our go-to-market by optimizing our sales team structure to drive targeted business development opportunities and improve account and product management. And finally, we're enhancing our service strategy and our offerings to better support our customers, build trust, and create recurring revenue opportunities. In summary, from innovation and cost savings to strategic acquisitions and tailored solutions, our initiatives showcase the depth of work underway to strengthen IPG for the long term. While some of our initiatives, including our product development programs, will take time to be reflected in our results, our work today to strengthen our organization and execution will put us in a position to mitigate the near-term environment while positioning IPG for a stronger 2026 and beyond. Moving to our near-term outlook, we continue to believe we are bouncing along the bottom, with Q4 book-to-bill close to one. As I've discussed, we are investing in the growth of our business, which will have an impact on our profitability in the near term, but we are committed to these investments as they will drive shareholder value in the long term. When revenue growth returns, we expect to show strong operating leverage that highlights the value of our platform. Before turning the call over to Tim, I wanted to touch on a few other items. The first is how we are thinking about capital allocation as we invest for the future. IPG has exciting opportunities ahead. We also have one of the strongest balance sheets in the industry, with over $900 million of cash and no debt. This financial strength provides flexibility and a significant competitive advantage. We've talked today about our strategic investments and differentiation and growth, both organic and via tuck-in acquisitions. As we prioritize investing in our business, you should expect us to be less aggressive on share repurchases in the near term. We are excited about the initiatives we're driving as we position the company for long-term value creation. The second item relates to the founders' trusts that are significant long-term shareholders of IPG. The Gapontsev Trusts have always operated with IPG's long-term interest in mind and have historically sold modest amounts in the open market under Rule 144A to cover their expenses. Since Trust I and III remaining shares are not currently eligible to be sold under Rule 144, we plan to file a resale registration statement following our 10-K to facilitate an orderly distribution of shares over the next three years to cover expenses and diversify trust assets. The total amount of shares to be registered represents approximately 5% of IPG's total outstanding shares today. The trusts have indicated that they intend to remain significant long-term shareholders and support our strategy. In closing, IPG is a great company with enormous potential. I am confident that with our continued focus on innovation and execution, we are well-positioned to leverage our strengths to drive sustained growth. With that, I will now turn the call over to Tim. Thank you, Mark, and good morning, everyone. My comments will generally follow the earnings call presentation, which is available on our Investor Relations website. I will start with the financial review on slide four. Revenue came in at the top of our guidance in the Q4 at $234 million, up slightly on a sequential basis despite the full quarter impact from the disposal of Russian operations and only a modest revenue contribution from CleanLASER. Revenue was down 22% year-over-year and down 18%, excluding divested operations. Foreign currency reduced revenue by approximately 1% this quarter. Revenue from materials processing applications decreased 24% year- over- year, primarily due to lower sales in welding, cutting, and marking applications, while sales increased in additive manufacturing and micromachining applications. Revenue from other applications decreased 6% due to lower sales in medical, partially offset by increased sales in advanced applications. Gross margin was 38.6%, an increase of 40 basis points year- over- year and above our guidance, driven by lower product costs and a decrease in import duty and shipping costs, partially offset by lower absorption of manufacturing expenses as a result of lower revenue. Continued effort to right-size inventory resulted in a more moderate impact from inventory provisions. Operating expenses were below our guidance range because of a one-time benefit from stock-based compensation expense, and we were down both year- over- year and sequentially due to the disposition of our Russian operations and controlled spending. Currency translation had a minor impact on revenue and gross profit in the quarter of approximately $2 million and $1 million, respectively. Foreign currency transaction gains had a positive impact on operating income of $1 million. GAAP operating income was $14 million and reported net income was $8 million, or $0.18 per diluted share. The effective tax rate was 64% in the quarter due to certain unusual tax items, primarily related to repatriation of cash, which impacted the quarter by $3.4 million and earnings by $0.08 per share. In addition to this item, the effective tax rate was impacted by no tax benefits from losses in certain regions, other discrete items, and the geographic spread of income in the quarter. Now let's look at our revenue by application, which we provide an update on annually. Welding was 37% of total sales in 2024 and was down year-over-year due to weakness in general industrial manufacturing and automotive, including EV battery manufacturing, compared to a strong 2023. Cutting revenue continued to decline and represented 21% of total revenue in 2024. We saw soft demand in general manufacturing and e-mobility markets across all regions, and our OEM customers went through inventory destocking due to a lack of market recovery in the second half of the year. Competition continued to impact cutting sales in China, although these represent less than 5% of our consolidated revenue. Our OEM customers are seeing some increased competition from low-cost Chinese laser cutting system suppliers selling outside of China, and we are working closely with customers to help them maintain their market share. Medical bounced back significantly in the Q4 but was down slightly for the year, adjusting for the divestiture of Russia. We expect medical to grow in 2025, with more significant revenue increases in 2026 and beyond. Medical is one of the attractive areas, with strong growth opportunities that Mark detailed. Moving to the revenue performance by region on slide six. Sales in North America increased 6% sequentially but were down 31% year-over-year due to lower sales in welding applications as a result of a large e-mobility purchase in the prior year that did not repeat this year. Our medical orders from a large customer improved significantly from the prior quarter but were still down year-over-year. Excluding divested revenue, sales in Europe increased 5%, sequentially driven by growth in additive manufacturing and advanced applications. European sales declined 22% year-over-year due to lower sales in cutting applications as the industrial demand environment remained weak. Revenue in China decreased 10% sequentially and 22% year-over-year due to lower sales in cutting and welding applications to general industrial and e-mobility customers, which was partially offset by growth in additive manufacturing. Moving to a summary of our balance sheet and cash flow on slide seven, we ended the quarter with cash, cash equivalents, and short-term investments of $930 million and no debt. Cash provided by operations was $74 million, and capital expenditures were $23 million during the Q4. Despite revenue being down this year, we continued to generate strong cash flow from operations and positive cash flow from inventory as we managed our investment in working capital. We sold two buildings earlier this year, realizing $25 million in proceeds, and our capital expenditures for the full year came in at approximately $99 million, which was well below our earlier expectations. However, some projects were delayed and will drive higher capital spending in 2025. We spent $57 million on share repurchases in the Q4 and $344 million for the full year. Moving to our outlook on slide nine, for the Q1 of 2025, we expect revenue of $210 million-$240 million. We expect the Q1 gross margin to be between 36%-39%. As Mark alluded to, we are increasing investments in the growth of our business. As a result, our operating expenses are expected to be between $82 million-$84 million in the Q1. We expect these expenses to increase further in the Q2 and remain elevated over the course of the year. We anticipate delivering adjusted earnings per diluted share in the range of $0.05-$0.35, with approximately 43 million diluted common shares outstanding. The adjusted EPS excludes amortization, acquisition-related charges, and any other non-recurring items. Q1 adjusted EBITDA, which excludes stock-based compensation, is expected to be between $19 million-$35 million. We are planning on providing these non-GAAP financial metrics starting in the Q1 of 2025 to help you keep track of our underlying financial performance. We expect our 2025 CapEx to be between $105 million and $115 million. The increase is primarily related to investment in manufacturing capacity in Germany in order to replace fiber and other critical production that we lost access to in Russia. As mentioned earlier, a significant part of the 2025 expenditure relates to this project that was deferred from 2024. We continue to expect our normal maintenance CapEx to return to less than 5% of revenue once these critical investments are completed in the next 12 to 15 months. In closing, I would like to highlight that our team remains focused and continues to execute well through the current environment. As we prioritize near-term investment in our future opportunities, we believe that these initiatives strengthen our foundation and position us well to deliver healthy operating leverage as the company returns to growth. We will also be able to improve free cash flow even further as we complete our near-term CapEx commitments. With that, we will be happy to take your questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press Star 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 the Star keys. One moment, please, while we poll for questions. Our first question comes from Ruben Roy with Stifel. Please proceed with your question. Thank you. Hi, Mark and Tim. I wanted to start, Mark, if I could, on maybe drilling into some of the details around your review of the business a bit. And specifically, as you look at some of these new opportunities and then balance that against what's going on in cutting, I'd love to maybe get some thoughts on how you're thinking about cutting, investments in cutting, and how you see cutting kind of play out over the next several years as you invest in some of these other growth areas. Great. Well, thanks a lot for the question, Ruben. It's good to talk to you. So yes, I've now spent six months doing a deep dive into all of our technology capabilities, execution, and really all of the R&D programs. And entering the new year, then we've really aligned on a three-year strategic plan now to drive differentiation and profitable growth. We'll talk about that with respect to cutting as well. So we're launching new high-power fiber lasers that I talked about on lower-cost platforms with smaller form factors. And these are really competitive in today's market, and these provide a competitive edge now for our OEMs to compete in the market. Because just to speak about cutting for a minute, remember that cutting in China has really been the biggest issue from a competitive aspect, and that's less than 5% of the business now. As we go to other markets, we're starting to see, as Tim mentioned, some of our cutting OEMs seeing Chinese systems play into some of their markets. And we're providing now these new higher-power, smaller form factor lasers at lower costs that allow them to compete. So that's where we're playing on the cutting side. And then we're driving now to really move towards differentiation in the marketplace and launch profitable growth in some other key areas that I talked about. And the key areas that I'm talking about there are urology, micromachining, advanced applications. And these are programs that target markets exceeding $5 billion in TAM and offer IPG really hundreds of millions of dollars in revenue opportunities over the next several years. It's important to also mention that in these areas, we're working collaboratively with key customers, and we already have purchase orders in place for some of these programs. We expect to see benefits from these later this year and really kicking in in 2026 and 2027. Now, just to bring back to that, so these are differentiated areas that we're driving. That's what's really going to drive the growth of the company. Cutting will continue to provide differentiation where we can, but again, the real growth from the company is going to be from these key areas that I mentioned. We've got key programs in place now to drive these, and we've got customers engaged, and that's where the growth's going to come. We'll see some of that later in 2025, but the real growth from those differentiated programs is going to be in 2026 and 2027. Okay. Thanks for all that detail, Mark. I guess just to make sure I'm understanding correctly on Tim's comments about competition starting to boil up here and there outside of China, are you saying that, Mark? Tim mentioned that you're working with customers to maintain their market share. I assume what you're talking about there is more on competitive differentiation rather than price. Is that the way to think about that, or is it something else that you're working on? The way that I would. Come on. Yeah. So the way that I would talk about it here is, again, we're launching, and we already launched at the Photonics West show, so people saw this, a very high power. So 40 kilowatts based upon our newest higher-power diode platform. So that gives the OEM a smaller form factor with higher power at lower cost. So now think about that from them competing in the marketplace. That allows them to put a higher power laser into their system in that same kind of form factor. So the form factor, to give you an idea, our 40-kilowatt laser is now on a form factor that years ago was a 4-kilowatt laser. And again, at a better dollars-per-watt level. So they can then put those in their systems and compete with the Chinese players that may be encroaching in some of their markets with their systems. Okay. Okay. And then just one last question. You mentioned, Mark, sort of a lot of these areas of focus and investment and expectations for return to growth in 2026. With this mindset of bouncing along the bottom, book-to-bill a little bit under one, can you give us a little bit of detail about how you're thinking about visibility or the second half of the year? You think revenues are sort of steady state here? Can things get worse, maybe a little bit better? What are the sort of puts and takes as you think about the rest of 2025? Thank you. Yeah. I mean, we're not guiding to the full year. What I can say, again, we're seeing book-to-bill is around one or a little bit below one. The industrial markets have still been under pressure, and you can see varied forecasts of what's going to happen to the industrial markets. There's a little bit of uptick in some of the PMIs that gives a little bit of good indication. We're seeing some of our customers are coming to more normalized inventories, but again, it's really going to depend on what happens later in the year in those industrial markets and how that plays out. Absolutely. We are expecting some contribution from some of the investments we're making towards the end of the year. I think positively, cutting picked up a little bit in Q4. That reflects some of the sentiment that we're hearing from our OEMs that their inventory levels are back down to a much more normal basis, and the demand environment is definitely stable. On the book-to-bill, one thing I will point out, the reason why it was just a little bit below one was because of all the geopolitical uncertainty in Korea, and our Korean bookings came in very weak versus expectations. Those orders are not canceled, and they're expecting to book a lot of those orders in Q1. But just given the uncertainty there, that impacted total bookings. Had it not been for that Korean impact, book-to-bill would have been at or slightly above one. Good stuff. Thank you, Tim. Thanks, Mark. Thanks. Our next question comes from Jim Ricchiuti with Needham & Company. Please proceed with your question. Hi, thanks. Good morning. I just wanted to talk a little bit about the step-up you're anticipating in OpEx in Q1 from Q4. And I wonder if you can give us a sense as to how that plays out between sales and marketing and R&D. It sounds like you've got a fair amount of investment going on on the new product front, but I assume there's also market development. And maybe just to clarify, you're anticipating, Tim, I think you said further increase in Q2, and then are you expecting that OpEx level to somewhat level off in the back half? I may have misinterpreted what you said. So let's do it as in stages, Tim. First of all, yeah, Q1 OpEx increases. First of all, Q4 benefited from about $3 million of stock-based compensation that related to PSUs that were not going to vest. So you layer that back in to get to a more normalized level for stock-based comp. The second thing that really impacts it is that bonus levels do end up being accrued at more of a target level where they've been below target because we've been underperforming relative to our budgets. And you then start to see some of the investments in the business start to ramp up. So yeah, in Q2, we expect OpEx will increase further and then stabilize for the remainder of the year. I haven't got a split on SG&A and R&D for the Q1, but a lot of the PSU and stock comp stuff would be mainly in G&A and selling. So SG&A and then the increase in some of the bonuses is really spread across all SG&A and R&D as well. And Jim, you're right. Some of that is focused on the go-to-market, right? So the business development aspects of this, some more focused OEM sales as well as our service infrastructure. And these programs, as I mentioned, that we're doubling down on, these are programs that will really drive us into the future. Got it. And then two quick ones, if I may. It sounds like you're anticipating growth in the medical business in 2025. Are you seeing, Mark, some broadening out of the customer base? I know you've had concentration in this area of the business. And then the other follow-up question just relates. I was struck by the increase you saw in Japan. And Tim, maybe you can give a little color on that, whether that's sustainable. Thanks. Yeah. Thanks, Jim. It was great to see you at the show. Thank you. So following up on that, yes, we are expecting some uptick towards the end of the year because on the medical, we're launching a new product in our line of thulium lasers for lithotripsy. That's kidney stones. So that's where we're going to see the first part of the uptick. But we have a very significant roadmap that we're continuing to invest in that will drive further growth in 2026 and 2027. And the other piece of your question, yes, we have picked up another key OEM in urology, and that will also start to turn on this year and give us some uptick. Yeah. Japan, they had a good quarter. So overall, they actually had quite a reasonable year. Japan revenue can be a bit volatile from quarter to quarter and uneven just in the way that they run their businesses. Q1 actually has got reasonable guidance, not particularly strong, but they've got a reasonable budget out there for the year. It's actually a good business because it's fairly diverse. Some of the feedback we've heard on an improvement in the cutting business comes from Japanese OEM customers. I think there's a bit more of a positive tone around the Japanese economy as a whole. Got it. Thank you. Our next question comes from Keith Housum with North Coast Research. Please proceed with your question. Good morning, guys. I appreciate it. Hey, Tim, just want to make sure I understand. In terms of the manufacturing process for the high-powered lasers, are you guys already implementing your cost-cutting measures there in terms of reducing costs as well for those, or is that still ongoing here? You're talking about the new low-cost high-power lasers? Correct. Yep. S o we're rolling them. The new cost high-power lasers, when are they being rolled out, or are they fully reflected in the business model already, and yeah, so those are the questions. Yeah. Thanks for the question. So we're just launching those. We announced this actually at Photonics West this last couple of weeks ago where we showed our high-power 40-kilowatt laser in a very small form factor. Again, this is all based upon our new high-powered diodes that then can give us higher power fiber lasers in a smaller form factor, and yes, at a lower cost. And we're rolling those out in Q1 and Q2 of this year. Gotcha. Appreciate it. And prior to the question, that's tough to answer, but I've got to ask that question. Obviously, a lot of moving parts with tariffs going on these days. You guys sold to OEMs around the world. How are you guys thinking about tariffs as we stand today? So first of all, I mean, in the worst case, tariffs would probably have a 150-200 basis points impact if we did nothing, right? Continue to source and supply lasers. But we actually have quite a lot of flexibility in what we can do. So we can move manufacturing from one location to another and supply customers in different regions from different areas. So that does provide us with a lot of flexibility in relation to potential tariffs. I mean, it's not possible to say they'll have no impact, but we think the impact, at least from a cost side, can be managed and will be relatively small. I I think it's more difficult to identify how much uncertainty this drives into the near-term environment from a demand perspective. In the longer term, I mean, in the U.S., for example, tariffs are designed to drive reshoring of manufacturing, and that would largely come from automation and using flexible, efficient tools like lasers. So there'd be a longer-term potential medium to longer-term benefit from that. But from a cost side, we've got a relatively manageable situation and some flexibility in what we can do. Okay. Appreciate that. And I guess last question for you here. We continue here the question on volume versus price. And obviously, I understand the different parts of the business may have different impacts. But maybe you can perhaps provide a little color in terms of where you're seeing the biggest pressure on volume versus price these days. Yeah. I think the place to talk about that is really in cutting, as I mentioned earlier. So again, just to review, the biggest issue in competition and volume and price has really been in China with cutting. That's now less than 5% of the business. If you go outside of China, our OEMs, we have very good position with those OEMs because they know the performance and the reliability and the support and service that we provide. Now, they're starting to see some pressures from cutting systems coming from China into their marketplace, and that's where that's driving some of that. And from now bringing out the higher power, lower cost, lower dollars per watt, you can say, in a smaller form factor, now those customers will be in positions to win against the Chinese players using higher power systems, higher power lasers within their systems at similar cost, and/or in some cases, driving some lower cost within their system from the lasers. And we would expect that from a volume standpoint, today, it's been the cutting market's depressed for some time. We're starting to see some of that destocking subside. And so as industrial markets come back and the volumes come back, we should see those things start to normalize. Great. Thank you. Good luck. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we pull for questions. Our next question comes from Michael Feniger with Bank of America. Please proceed with your question. Great. Thanks, guys, for squeezing me in. Just can you remind us just on the auto side and e-mobility, just how big of that is as a percent of the business right now and what you're kind of seeing currently with that? Is there any expectation that we can see some of that come back in the second half? Just curious kind of how you guys are looking at that side of the business. Yeah. I mean, we haven't given an EV number on that this year. I think EVs basically have gone down over the year, so it's less than 20% of total revenue. It was above 20%. And then you have other automotive business. I haven't actually got that number in hand, Michael, but you add that to the EV, we're probably still in the range of 25-plus% for total automotive sales. The EV environment, I think, remains uncertain and unclear. I mean, capacity utilization is picking up. There are a number of projects that we know that are out there that we're very closely working with the end customers on. So the business is we're expecting it to stabilize and potentially improve a little bit this year, but no significant massive momentum behind it yet. The only thing I would add to that, just to remind you, we've got a very strong position in EV batteries, even with it being down, because again, we have the combination of our Adjustable Mode Laser plus what's called the LDD or our Laser Depth Dynamics that actually will measure the weld in- situ and provide quality control plus some of the scanning and system, so we have a very big moat around that area, so as the EV comes back, we will get our fair share of that business, and the other thing, just to point out on because EV is often equated to batteries, there are other areas of batteries that are continuing to grow. For example, stationary storage is becoming a big area that's grown 100% year-over-year and continues to grow. There are other areas of electrification where we play in the batteries because of these unique capabilities that we bring in the laser and the process. Mark, just to double-click on that, the competition intensifying, it sounds like that's still more that your customers are seeing. That's still cutting side. Is that correct? It's not showing up on welding or on the EV side. That's right. The biggest issues in competition are in that cutting side. The other areas like welding, like EV welding, and some of the areas that I talked about where we're investing in, these are areas where we have key differentiation. Remember, as a company, we have tremendous technologies in fibers and diodes and optics and scanning and the whole host. Plus, there's tremendous process and applications knowledge within the company. So you put those pieces together, and then that really creates a moat. And so if we talk about that and even shift to where we're investing, we're investing for growth in areas where we have these key differentiations in medical, in micromachining, in some of these advanced areas where we can bring those pieces and really drive the growth and have real moats around the business. Fair enough, Mark. And I think Tim addressed this in an earlier question, but I'm just curious, with some of the tariffs, I mean, how much of the U.S. revenue do you guys kind of import from Europe? I know you guys have the CapEx that you're set to invest in the capacity increase in Germany. I'm just curious, with tariffs, do you have to think a little bit differently on you guys have moved a lot of your production footprint, obviously, out of Russia, and you guys have expanded in certain areas. I'm just curious if we are in a more tariff-driven world. Do you have to kind of think a little bit more about maybe your footprint? Is that more smaller or bigger changes to think about? Thank you. Yeah. Again, there's a lot of uncertainty on the tariff side. What I would tell you, and Tim mentioned this, we have a lot of flexibility in our manufacturing platform. We have a lot of capability in the U.S. and in Europe. So there's the ability to decide where we should build, and we have some of that flexibility as we look at potential future tariffs and how that works. So I think we have a lot of capability to mitigate depending on what's happening. Go ahead, Tim. Yeah, Mike, maybe a question. We do not expect tariffs to suddenly turn around. We don't expect to turn around and say, "Oh, we're going to have to increase CapEx by another $50 million," right? We actually have a significant facility in the U.S. that's just about to be completed, so that would enable us to ramp production in the U.S. If we don't want to import stuff from our German facility, that would in turn free up capacity in Germany to supply other countries around the world. And then when the German investment in fiber and the optical component manufacturing is completed this year that replaces Russia, that actually provides a lot of capacity within Germany as well. So the one thing I'm pretty I'll say it with a very good degree of certainty. We're not going to turn around and say, "We have to build another $50 million building somewhere because of tariffs." We expect free cash flow to improve significantly in 2026 once we're over this investment cycle. Perfect. Thank you. Our next question comes from Scott Graham with Seaport Research. Please proceed with your question. Hi, good morning. Thanks for taking my question. I wanted to explore cutting a little bit more. I know you ended the year with about 21% of sales from cutting, and if we let's just say take out the China piece, call that 4 or 5%. We're looking at in the upper teens% of sales basis. I know you're launching new products to help defend your market positions, but maybe help us understand what percentage of that sort of mid-teens cutting away from China is kind of under this competitive pressure you're talking about, and how much of that are you going to go out and try to really defend with new products? So again, from this side, the cutting percentage is a bit less than that again outside of China. And we will be defending that business with these new lasers. Again, the new lasers provide a significant benefit in size, performance, and cost. So we believe that these will provide our OEMs a very good position to compete. So just to clarify, Mark, just on that, the 15% that remains includes foil cutting, which is another specialized cutting. So we haven't given the specific number on the flat sheet metal cutting, but it's less than the 15%. And that's where our customers are on a global basis, and we intend to defend that business vigorously over the coming year and beyond. And again, just realize too that we have very close relationships with these OEMs. We've been supporting them for years. And it's the lasers, it's the performance, it's the reliability, and it's also the support and infrastructure that we provide to service our customers and their customers. So that's a key piece of this. When it comes to these OEMs that are outside of China, it's a bigger piece than just power and dollars per watt. Got it. Thank you for that. I appreciate it. The other question I wanted to ask, actually, I have one more after this, if you don't mind, but within the Q1 guide for adjusted EPS, could you tell us what the sort of add-back is for amortization that you're changing to an adjusted EPS tax approach? So what is that going to be in cents per share and in full dollars so we can see the tax rate too? Yeah. The amortization is about $2.3 million per quarter. And then on an EPS basis, it would be just over $0.03 on an EPS basis after tax. That's the only add-back that we're incorporating in guidance on adjusted EPS. And then adjusted EBITDA, we said, includes the add-back of stock comp as well as all of the depreciation and amortization. Yes. Thank you for that. Last question. I don't know if you can answer it or if you will, but it kind of sounded a little bit, Mark, like setting the stage for 2026, 2027 sales growth was your comment. I mean, for 2025, is it really just sort of hoping to get back to flat in the second half of the year at this point? We're not guiding for the full year. What I would tell you is that we've mentioned the fact that some of our new products will be launching towards the end of the year. I mentioned that we have a new medical product that will be coming out late in the year. Also mentioned that we have a new customer coming online there. And some of the other programs that I talked about where we're making these significant investments in the micromachining, in the medical, and these advanced markets, we'll start to see some early sales in that area. These are programs that we're engaged with customers, and we even have some purchase orders for some of the initial products that will start to come out. Combine that. And then if we see some. Maybe some pickup during the course of the year on welding. Correct. On On welding and some of the other. And machining, cleaning. And then, I mean, the tone we've heard from the cutting OEMs is a little bit more positive, but obviously, we're going in there with lower-cost lasers and defending that business pretty vigorously, so. Understood. Hey, thank you. Our next question comes from Mark Miller with The Benchmark Company. Please proceed with your question. Besides your aforementioned lower-cost, high-power lasers, what other measures are you taking to try to improve margins? What other measures are we taking to improve margins? I think, first of all, I'll talk about a little bit on the gross margin side, Mark, and talk about things like LDD, where we're taking some costs out and other areas. But on the gross margin side, having got inventory much more under control, the impact of inventory provisions this year will decrease. We expect to see some benefit from the low-cost product as it's rolled out. We're definitely working on looking at how to improve operational efficiency, even at these lower revenue levels, to try and reduce further some of the underabsorption. We had a little bit of a benefit from that in Q4, but we're still underabsorbed relative to an optimal level by about 600 basis points. So we need to sometimes preserve the investment in the manufacturing capacity. We've had a rebound in demand, for example, for a product that was running at very, very low levels last year. And had we dismantled that manufacturing, we would have been able to respond to the customer demand. But we certainly want to try and take out a few hundred basis points on underabsorption this year. That would be a thing. And then if the investments, the product from the investments starts to gain some traction, there'll probably be a bit of mix benefit on gross margin. Mark, I mean, as a— Yeah, I mean, exactly. As I talked about, the investments that we're making are in areas for quite differentiated products where we can maintain and gain margin. So in each of these areas, in medical and advanced, and also in areas like micromachining where we're bringing out new products, the gross margins, the differentiation is very high. The moats are high, and we'll be able to demand higher margin with mix. And as Tim said, we're also continuing to work on gross margin benefits across the portfolio. We are working on also reducing costs on some other products. And as Tim said, we're working on operational efficiencies that will continue to help margins. So overall, we're working on a number of areas that over time will drive the margins up. Your laser and non-laser system sales were down sequentially year-over-year. I'm just wondering what's going on there? Laser and non-laser sales. Most of that's just timing of orders with customers. Some of the larger automation systems, they've got a very strong pipeline of orders they're working on, but I think customers have been sitting on their hands. Even post the election, we didn't see a big pickup in orders, but they've got a still strong pipeline that they're working through on that, so we should see a pickup in that over the course of this year. Thank you. We have 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. 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 I'm looking forward to speaking with you again soon. 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.