Good morning and welcome to IPG Photonics’ Third Quarter 2013 Financial Results Conference Call. Today’s call is being recorded and webcast. There will be an opportunity for questions at the end of the call. (Operator Instructions) At this time, I would like to turn the call over to Mr. Angelo Lopresti, IPG’s Vice President, General Counsel and Secretary for introductions. Please go ahead, sir.

Thank you and good morning, everyone. With us today is IPG Photonics’ Chairman and Chief Executive Officer, Dr. Valentin Gapontsev; and Senior Vice President and Chief Financial Officer, Tim Mammen. Statements made during the course of this conference call that discusses management’s or the company’s intentions, expectations or predictions of the future are forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause the company’s actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties include those detailed in IPG Photonics’ Form 10-K for the year ended December 31, 2012, and other 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 by contacting the company directly. You may also find copy on the SEC’s website. Any forward-looking statements made on this call are the company’s expectations or predictions only as of today, November 1, 2013. The company assumes no obligation to publicly release any updates or revisions to any such statements. We will post these prepared remarks on our website following the completion of the call. I’ll turn the call over to Dr. Valentin Gapontsev.

Good morning, everyone. As we have published it today in third quarter IPG reached record high revenue of $172.2 million or 10% more than $156.4 million a year ago. The year-over-year growth rate [indiscernible] than usual for IPG however we have to remind you the year ago primary result was improved essentially by watch one time order in advanced application field. Sales for advanced applications in the recent quarter were lower related last year due to lighter government spending in several countries year-to-date. Further, we experienced weak telecom medical demand in Q3 of this year. Due to peak sales in our traditional material processing segment which represent today 95% of our revenue it grew by approximately 19%. Additionally, we have to note the year-ago quarter was benefited from very much single time pulsed laser sales for consumer electronics giant. Due to this order our sales in high power fiber lasers increased by 42% year-over-year. So once again our results demonstrate IPG’s strong fiber laser technology leadership position and ability to capitalize from growing demand for several key material process and application. As these numbers show we continue to make good progress in penetrating industrial end market particularly cutting, welding, cladding, cold drilling, marking and engraving. In additional smaller and fewer market such as additive manufacturing and ceramic cutting have starting to contribute more meaningfully into growth. Fiber lasers continue to gain sales and increasing number of OEMs deploy them more widely in their system to displace existing laser and non-laser technology. A positive trend for IPG is a shift towards using higher power fiber laser for several applications including cutting and adhesive manufacturing. So this is driven by the need to process larger parts plastic and metals and mark different material with higher energy. Not only are the selling prices…

(Operator Instructions). Our first question comes from the line of Patrick Newton with Stifel. Please proceed with your question. Patrick Newton – Stifel: Tim, hi, number one, something struck me on your guidance is that you widening your revenue and EPS guidance range for the first time I think in the history since you guys went public. I would love your thoughts on was there a process behind this, whether you see increased volatility in your end markets or what drove the widening of guidance.

First of all, it’s the second time we widened guidance since we went public so when the company was significantly smaller we increase our range from I think about $5 million to $10 million, this quarter again the company is got larger so part of that reasoning is the increased scale of the company. But also coming into the end – the year in Q4 a little bit more variability around revenue and certainly seasonality in some areas so we just wanted to be a little bit more cautious on that. The bottom of the range well-adjusted to the total orders in hand is pretty conservative number. So we are confident about the range we have given. But yes we have broadened our range a little bit. Patrick Newton – Stifel: So sounds like you have more broaden the down side just based on that orders commentary.

No comments is whether the downside is broaden versus the upside, when we decided to go with a wider range and the guidance has been generated on a similar basis to that that we use each quarter. Patrick Newton – Stifel: Okay, great. And some details on expansion of your manufacturing capabilities between Oxford [ph], Germany and Russia. Could you help us understand how much capacity you have actually brought on line perhaps quantify in terms of quarterly revenue. And then you also note in your prepared remarks that net income was flat year-over-year largely from investment activities, and I was wondering if you could quantify the impact force given this investment phases virtually coming to an end.

In terms of facilities that we have been constructed because you can’t build half a building, now we could so well and excess of $200 million in quarterly revenue, over time though we will continue to add equipment and ramp up headcount as revenue grow so investment phase that has been entered into over the last 12 to 18 months and will come to conclusion through next year really positioned us very strongly for the next two to three years of revenue growth. I terms of operating expense, a very significant investment in R&D and G&A partly related to acquisition also related to specific headcount, next year we expect operating expenses to increase a slower rate than revenue, we haven’t given any specific guidance around that but I would hope to get some leverage back into the model as we access the investment phase of the company and hopefully positioned our self-returning cash and profitability particularly on some of the R&D with new product introduction. So we have been suffering the cost of that R&D without getting any revenue benefit this year really. Patrick Newton – Stifel: All right and then just Tim, one more on product commercialization, I guess can you update us on your pipeline for advanced application and just thought process on how that particular product line will there in 2014 and are you still roughly 18 months away from commercialization and I might have missed but any update on the timing of your UV product when enter in the market.

On the advanced applications we work with different end customers around the world. There is no clear indication, some of the government applications will reach commercialized position next year, there is some smaller applications that they are going to get there, but there is nothing meaningfully that we have to discuss around that. Only UV, I think that’s question that Valentin should really address because he is much closer on that and I think we are all optimistic the UV product is getting close to introduction.

Now we are continue some qualification product in the right step and so we prepare manufacturing facility for next year so that must production penetration different market application, it is a new our product family to ultra-fast [ph] laser, beam laser, , green laser, it’s fantastic to compare with current situations in the market both in performance and price. We believe merit of this product minimum ten times better than all existing product in the market now.

Thank you. Our next question comes from the line of Jagadish Iyer with Piper Jaffray. Please proceed with your question. Jagadish Iyer – Piper Jaffray: Yes, thanks for taking my question. Two questions. First question is a two part question. Why did the pulsed laser decline and why were sales in North America down given the fact that orders were still pretty strong. Can you elaborate on that Tim please?

Yes, hi, Jagadish. The pulsed laser decline was caused out by for the last – almost the last year I say so, a year ago we had very strong sales of pulsed laser into the consumer electronic applications primarily related to new product introduction.

It was one very large order one order in consumer electronics order; it is only but very much first order for during three months we said to deliver some thousand lasers to this customer is what unique situation not repeated every year. Jagadish Iyer – Piper Jaffray: Okay, on the North American orders being low, despite the –

It’s same driver there so –

It’s order was not to one integrate, we did not shipped directly to end user, we ship through four different integrator, some of the integrator first in China, other integrator in the U.S. and all these integrate provide for the same application towards the same customer, final manufacture facility was in China Jagadish Iyer – Piper Jaffray: Just as a follow up, what should be thinking, how should we be thinking about the OpEx now that your investment cycle is over for now? How should we think about OpEx as we look into 2014? Thank you.

As I just articulate this well I think the rate of growth of OpEx will be lower than the rate of growth of revenue in 2014. And certainly R&D is not going to go down because we’ve hired talented scientist and PhD people but the rate of growth of that and G&A should be much more moderate and I hope to get some leverage back into the model on the OpEx side, if we get some reasonable revenue growth next year.

Thank you. Our next question comes from Krish Sankar with Bank of America Merrill Lynch. Please proceed with your question. Krish Sankar – Bank of America Merrill Lynch: Hi, thanks for taking my question. And I have a couple of them. Number one, Tim, when I look into Q4, can you help us understand which segment of you laser product would be down sequentially, would it be high power in pulsed or you expecting other segments going down to.

We don’t really get into giving guidance around specific product line, the main seasonally weaker area is going to be China, and that would be around some of the pulsed and cutting application there, that will be offset by there is some increasing strength in Europe, their order flows for the first three weeks have been pretty reasonable. Increased system sales and, pressure and high power laser sales in Russia and then if you order flow in Japan so particularly high power laser primarily in cutting and welding application has improved, so the seasonality and weakness is really again coming we pulled out pretty frequently relates to China. But we don’t get into specific product line guidance.

The most of the quarter would be as you know higher risk in the revenue recognition given we sit in – ready to ship product order for this but some customer usually shipped payment for next year and there can some problem with revenue recognition risk of this. Krish Sankar – Bank of America Merrill Lynch: All right and then if you look at your pulsed laser business, what percentage of your pulsed laser goes into consumer electronics this year.

I didn’t give a specific number on that. There is a wide variety of end market, some of the pulsed laser sales in consumer electronics actually better in Q2; I don’t have a specific percentage on that. We don’t get a lot of huge amount of insight into where the OEMs are putting the product. It’s a more of general trend that we understand unless there is a very large specific order.

In consumer electronics it was around – there are only few what you watch customers. And already know where the watch customer and then they making you introduce new product or you know iPod for example that sooner I think is very – by cycling so for each new product they making new production line with new equipment but it’s not regular order as going by cycling, it’s open bottom we are watching for many application for such customers and we expect very watch order sending, but as process [indiscernible] each and so on so it’s not smooth quarter per quarter growth or the cycling to convert bottom all time.

Thank you. Our next question comes from the line of Joe Maxa with Dougherty & Company. Please proceed with your question. Joe Maxa – Dougherty & Company: Thank you and good morning. Wondering on the North America, what kind of growth option that you see in North America in the coming year?

Continue to see the automotive business I think tracking well, there are lot of different projects around that particularly on welding application, introduction of the same steps to North America and then major growth opportunities around some of the micro processing applications as we get new product introduced. Cutting continues to perform well here with OEMs that are both based in North America as well as have presence here but are based in Europe. And I think that is the main areas of growth in North America. Joe Maxa – Dougherty & Company: And regarding the auto market, how do you see that longer terms, I mean are those sales have been strong in the U.S. and China? You got the larger OEMs say they are going to undertake their largest manufacturing expansion take the years, so I just want to know how you think about the auto market moving forward?

The general trends on automotive a new material that continue to be used in the manufacture of vehicles to reduce weight and improve fuel efficiency. Primary example of that is high strain steel, high strain steel, has to be cut with laser because machine tool dies wear out too rapidly. And that trend continues, our OEMs continue to forecast that 3D cutting will be firmly growth driver for automotive application. On the welding side, it’s important to reiterate that welding applications tend to have been the most specialized application to date. So for example seat back, transmissions, air bag detonators, the use of laser welding in building the main car body is still very, very thinly penetrated and that continuous to be target market for us for example with the C stepper or the introduction of our integrated laser loading system with the scanner, that’s an area where IPG has been a little bit weaker and where we have lost orders to competition. So the greater integrated system we can have on the welding side, we think we can drive some sales out of that. So the general trends on automotive towards new material to product lighter and more fuel efficient cars over the longer term benefit the laser industry as a whole.

Thank you. Our next question comes from the line of Jim Ricchiuti with Needham & Company. Please proceed with your question. Jim Ricchiuti – Needham & Company: Hi, thank you. Good morning. The large customers you have been alluding is in the midst of pretty significant launch of refreshed product, you anticipate potentially participating in some pick up and sales of the pulsed laser over the next quarter or two.

We are working for some projects and very successful up to now but still process of the rail fund qualification of technology. Jim Ricchiuti – Needham & Company: Okay and question that you called out additive manufacturing a couple of times. Is that getting to the point where it is closing in on 5% of revenues or is it still below that? And do you see that as potentially a good growth driver with a next year for you?

It’s still below 5% of revenues, Jim, it’s certainly up by almost a 100% year-on-year, so the interesting thing there are so to yes it’s definitely a growth driver, secondly I think on the additive manufacturing side, a lot of the historic rate came out of plastics additive manufacturing. The increasing trend now is towards growth in metal, additive manufacturing and the other trends that we think which we think is particularly interesting is a trend towards higher power laser, I mentioned that we have had customer buy laser with up to 10 kilowatt of output power so some of the additive manufacturing applications, the other side of that market is interesting and very nascent though we think will drive growth is cutting and there are high speed cutting technology that we have been working with. For example a major university in the U.K. around will develop systems that will be brought to market in the next year or so. So yes I think the additive manufacturing, I certainly hope to see that get up to more than 5% of revenue and probably put a time frame on it but I think it will be a major application for us.

I can say the additive manufacturer now is special for metal, part for metal power dust and the most current now integrated for using system for such application, new IPG laser, in principle we even don’t know how many power customer use for such application because not all only our customer for what application they buy now laser. I think 5% is very conservative estimation of laser with such application. Jim Ricchiuti – Needham & Company: And if I may just slip on the UV laser, if you continue to make the kind of progress that you are seeing with that, can you give us any sense as to when we might see commercial launch next year and potentially how we might think about this in terms of adding growth to the company.

We started to sell some of product to the market for evaluation for testing so nobody buying volume before more test, design system manufacturing system with new laser, so it take process going only year for minimum [indiscernible] market new product so difficult to expect immediate during one quarter-to-quarter would jump and it’s – we hope our product have so many serious advantage that their processor and implementation would be much shorter than a year but in any case it will take one to year north of few months. But you will be to see essential contribution to our revenue.

Thank you. Our next question comes from the line of Avinash Kant with DA Davidson & Company. Please proceed with your question. Avinash Kant – DA Davidson & Company: Good morning, Valentin and Tim. So my question is more related to the ASP trends that you are seeing and may be if you could give us some idea about pricing trends both in different segments of the market and also different regions especially Asia.

General trends on ASP

It’s euro level prices much cheaper than competition in high-power laser but for them it’s difficult to compete with from the point at all. And with [indiscernible] future positive we need to stop competition but now we are in a level and don’t need to go further decrease our price so increasing our project for in high power is essentially for our growth margin for high power is sales growing of that. Regarding the pulsed laser situation, in pulsed laser it is not one two pulsed if you say, it’s different kind of laser with different specification, with a more green pulsed laser, not a second range, situations now is still much strong competition from Chinese customers, Chinese manufacturers for more and very simple major for primary marking business in other people don’t need high performance, for them the most important price. Now Chinese company drop price practically with eyes to compare only one year ago two years ago price in this Chinese market biggest market. So we are ready to meet such challenge and we are prepared with the new balance sheet and more grade, grade better than Chinese but price would be similar and cheaper and so we don’t like to give to Chinese this market segment. For other side, we are developing new family, a very high grade, high end pulsed laser which penetrate now very fast to the market, it replace will grade for OEM customers, consumer customers for example or the customer for many others. This penetration we feel very serious advantage to any competition both in quality and price so we don’t worry about this and we are ready for our future sales the most revenue we will generate with high end laser. But low end we will also don’t like to give to the Chinese manufacturer. All other manufactures, European, American are not able to compete in this market at all.

Thank you. Our next question comes from the line Tom Haynes with Thompson Research. Please proceed with your question. Tom Haynes – Thompson Research: Thanks, good morning, gentleman. Tim, you mentioned large sales to Turkey, just wondered may be if you could talk about that – it was that couple sales that were pent up with shipped out previous quarters and that for Turkey

No real timing issues around, Turkey in Q2 was also very strong in Turkey where it grew by more than a 100% again; we’ve got three large OEMs on the costing side there. A couple of customer itself pulsed laser to Turkish market and economy has grown fairly dramatically there. They are fairly advanced from manufacturing, both on automotive but even for example there is smaller aerospace industry there. The OEMs in Turkey given their cost basis, supply a lot of product into Eastern Europe, they even sold product down for cutting systems and sort of laser that we deliver down on Africa, South America, so that business is not really timing issue. I think it is growing so strongly that it is not going to grow by 100% next year; you are getting some more moderate growth for Turkey next year and general secular trends rather than accelerating growth.

Thank you. (Operator Instructions). Our next question comes from the line of Mark Douglass with Longbow Research. Please proceed with your question. Mark Douglass – Longbow Research: Okay, important question then. Tim, can you talk about the growth in China, that the breadth it is lot of due to high-power or I guess now you know the way we look at how much is the high-power growth is – overall high power growth is coming from China.

Yeah, China has performed very well on high-power for cutting and welding application this year. Other areas of growth in China though have been on the QCW applications. The mid power applications for micro welding and cutting, the pulsed laser this year in China have been a bit weaker. They are pretty diverse set of end market that we are addressing there. And to look into other side of the equation the high power is not all being driven by China, high-power sales for example, if you exclude the defense business but in Europe have been very strong for cutting applications in North America year-to-date high power laser sales have been strong as well for cutting and welding application. The high power business in Japan has actually picked up a little bit this years both for welding and cutting application too. So year-to-date in Korea high power has been a little bit weaker but they are actually now starting to get some traction there in the high power business in Korea should be stronger in the fourth quarter.

I disagree with Tim or carefully correct it. Our sales for pulsed laser in China are not going down in quantity of unit, they increase again and Korea is right its 15% to 20% compare to last year in quantity. Question is pricing, revenue, revenue because price drop very essential so revenue is but units we sell more than a year ago.

Thank you. Our next question comes from the line of Mark Miller with Noble Financial Capital Market. Please proceed with your question. Mark Miller – Noble Financial Capital Market: Thank you for taking my question. I am just wondering that as you develop on especially on installed base, what is the outlook in terms of the replacement opportunity and in terms of replacement whether sales from replacement now versus new opportunities and where that might be in two years.

It depend which product line you are looking at, Mark. So for example on pulsed lasers there has been a replacement market that exist today for several years in some of the application interesting on pulsed laser, you will find product being replaced even after three to four years. So the cycle time and the quality of delays were improved to the degree that when people install a new production line they are not transferring existing pulsed laser over. So replacement market on high power is probably starting to begin in the first high-power laser in volume or in store by IPG in 2005-2006. So that just starting, I think the more interesting question is to really look at what our penetration into the installed base of cutting systems as that fiber penetration, in the installed base of cutting systems it has been quoted as being as high 70,000 units I think that includes a lot of lower power level lasers. Our view is the installed base of high-power cutting system is probably about 45,000-55,000 units around the world. The total number of high-power fiber laser sold still is less than 10% so it’s probably more meaningful to look at where we are in the cycle of replacing the installed base of existing CO2 and despite of strong growth we think we are still relatively early in that cycle.

Thank you. Our next question comes from the line of Jiwon Lee with Sidoti & Company. Please proceed with your question. Jiwon Lee – Sidoti & Company: Thank you. You highlighted some upcoming strength from the Russian high-power systems. Could you talk a little bit more about what that outlook might be within and outside of Russia?

During one year we create very strong team for development and introducing the marking systems and during the time we develop [indiscernible] our sales in quantity now, we started sales for such system now in quarter four now we see very much order, very much multi million order per quarter proceed that system the one of the Russian customer is only just start next year. We expect good win many customer base prepare bed sheet for such order for IPG so next year would be very interesting growth sale of full complete system, for cutting, welding, for additive manufacturing some hole drilling and it’s not one, two system it is full express order, we have taken 14 different full complete system to one customer, 14 different system. Also we might in seven that to sell for micro for machine system here in U.S. We have some unit business, we also sell this year, we expect within $6 million to $8 million only income U.S. our unit. Its customized system, each system has different specification or complete target for different customers. Some customer repeat and serious customer, normal customer repeat after first test and use first test, for minimum three customers that too by some units additionally, so it’s really just – plus soon we are experience serious contribution to our revenue.

Thank you. Our next question comes from the line of Jeremie Capron with CLSA Americas. Please proceed with your question.

Good morning and thanks for taking my question. On the competitive environment you talked about the situation for pulsed lasers in China but what about higher power among your conventional laser competitors, is there any company that you see is a potentially becoming more of a threat?

We haven’t really seen anybody make significant progress against IPG and there has been lot of product announcement based upon our initial reading and some of the published results by public I mean they trying to get into this market, they really haven’t made any meaningful progress on the high power level in the last year or so. Particularly, even one and two kilowatt, but now as you see that the end market trend a little bit more towards as we mentioned cutting systems going to 6 kilowatts, welding applications to the higher power level, those high-power lasers are even more difficult for people to build. So their ability to compete both technically and on prices is limited.

You can compare for example this year we expect a minimum 1,000, we will be able to sell high-power laser more than last year, this year minimum 1,000 total would be above 3,000 laser with compare or rather people reporting, it is not comparable, a tall number 43% growth only during one year, 43% growth.

Thank you. Our next question comes from the line of Patrick Newton with Stifel. Please proceed with your question. Patrick Newton – Stifel: Yes, thank you, just two quick follow ups for you, Tim. One is, why would the inventory reserves is so big in the September quarter? And would it repeat in December? And two is, should we expect that gross margins will be up sequentially in to December quarter?

We’ve mentioned some of the areas that we’ve had business tracking a little bit slower on, so we took pretty hard look at some of the telecom inventory, we don’t give guidance about inventory reserves specifically so no commentary about Q4. And then on gross margin at the bottom end of our guidance range, given the lower absorption that you would expect, I used about 51.5% gross margin of the top end of the range assuming about 54% and gross margin we’ve highlighted that we target gross margin to be in the 50% -55%, we are not trying to chase them up to 56%-57%, we believe it’s much more important to continue to grow the business as a whole and increase in installed base.

Thank you. At this time, we have reached at the end of our Q&A session. I would now like to turn the conference back over to Dr. Valentin Gapontsev for any closing or additional remark.

Thank you for joining us. We look forward to speaking with you next quarter.