Good morning, and welcome to IPG Photonics' First Quarter 2017 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. At this time, I would like to turn the call over to Mr. James Hillier, IPG's Senior Vice President, General Counsel and Secretary (sic) [Vice President of Investor Relations] (0:33) for introductions. Please go ahead, sir.

Thank you, and good morning, everyone. With us today is IPG Photonics' Chairman and CEO, Dr. Valentin Gapontsev; and Senior Vice President and CFO, Tim Mammen. Statements made during the course of this conference call that discuss 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, 2016 and other reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investors section of IPG's website or by contacting the company directly. You may also find copies on the SEC's website. Any forward-looking statements made on this call are the company's expectations or predictions only as of today, May 2, 2017. 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 now turn the call over to Dr. Valentin Gapontsev.

Good morning, everyone. IPG first quarter 2017 revenue and EPS were well above the high end of our guidance ranges driven by rapid growth across our core products, applications and geographies. First quarter orders came in at a record level and based on our current backlog, we believe we are in excellent position to deliver another strong quarter in Q2. As a reminder, we are focused on three key initiatives for 2017: enhancing our leadership position within our core materials processing markets; expanding into new products and applications; and generating industry-leading profit and cash flow. Starting with our core markets, we had our strongest Q1 ever. The pace at which our fiber lasers are replacing conventional lasers and non-laser-based technologies is accelerating. At the same time, the competitive environment seems to have shifted more in IPG's favor, as the competition is finding it increasingly difficult to match our power advantages, global scale, low cost and high quality. And we continue to drive adoption with a goal of making fiber lasers the preferred tool of quality – sorry, that's the preferred tool of choice across both typical laser and non-laser materials processing applications. Over the last 18 to 24 months, we have made considerable investments to enhance our product portfolio, our sales staff and our service capabilities. These investments we believe played a crucial role in our ability to execute this quarter, helping us better identify opportunities and win business in our core markets. Sales of high-power lasers increased 42% year-over-year due to rapid growth in cutting and welding, our two largest applications. Total kilowatts of high-power lasers sold in the first quarter increased by more than 60% year-over-year in revenue and about 70% in units. In addition, more than 30% of our high-power laser sales were at 6 kilowatts and…

Thank you, Valentin. And good morning, everyone. Before I begin my comments on the quarter, I would like to make a few opening remarks. First, I would like to welcome Jim Hillier, our new Vice President of Investor Relations. Quite a few of you have met Jim already, and we believe he will be a valuable addition to the IPG team. While Angelo Lopresti, our General Counsel and Corporate Secretary, no longer needs to make the introductory comments on these earnings calls, he remains actively engaged in our Investor Relations process, and a valued member of the IPG senior leadership team. I would also like to thank Sharon Merrill Associates for 10 great years of IR advisory service to IPG. Finally, I want to draw your attention to the financial data workbook posted to our Investor Relations website in conjunction with our earnings release. The Excel-based model contains IPG historic financial results and key metrics over the last 10 years. We hope you find this to be a valuable resource as you update or build your financial models on IPG. Because much of the data we typically review in our prepared comments can be found in this model, I will focus our prepared comments on the key highlights and significant changes during the period. We believe this change in format will enable us to spend more time addressing your questions on our earnings calls. Turning to the results, first quarter revenue grew 38% to a record $286 million. Materials processing sales increased 33% year-over-year and accounted for approximately 92% of total sales during the quarter. Year-over-year growth rates accelerated in applications for cutting and welding, our two largest end markets, while marking and engraving grew by a single-digit percentage, year-over-year. Notably, fiber laser sales for welding applications were at a…

Our first question comes from the line of Patrick Newton with Stifel. Please go ahead with your question. Patrick Newton - Stifel, Nicolaus & Co., Inc.: Yeah. Good morning, Valentin and Tim. Thank you for taking my question. I guess the first one is just on the full-year guidance commentary, and understanding that the first half should be additive to your original guidance. If we just take the results, the midpoint of your June quarter guidance and then what would appear to be normal seasonality in the back half of the year, it would seem to indicate that growth could be 25% plus for the full year. Is that the right way to be thinking about the revenue potential this year?

When we look at that we're looking at the midpoint of the guidance range we gave at the beginning of the year and adding the outperformance in. We get to a slightly lower number than that. If you went to 25%, Patrick, you'd be factoring-in continued outperformance in the second half of the year which at this point in time we're not providing guidance around. I think one of the challenges as well is you had an exceptionally strong Q4 a year ago when the momentum that we're seeing now really started to pick-up. That started in Q3, accelerated into Q4. So we're bearing in mind that we actually have a pretty difficult comparison in Q4. Nonetheless, the thing that we do want to call out is that order flow right now remains very strong through April and that's reflected in the Q2 guidance and the strength of order flow through Q1 is reflected in that as well. So I'm not going to get drawn on the 25%. I think I've given enough color around that, but if you add the amount that we estimate should be added to the midpoint of the original guidance, it's quite a bit below that 25% number. Patrick Newton - Stifel, Nicolaus & Co., Inc.: Great. Thank you for that. And then, I guess just shifting to the high power growth it was really impressive moving to 40% plus year-over-year. Could you speak a little bit more to the underlying unit growth that you saw in the quarter and then maybe speak a little bit to pricing trends. I think that you've recently alluded to them being relatively stable compared to some pricing erosion that happened this time in 2016.

So first of all, I think the kilowatts of units sold was up by about – kilowatts of power sold was up by 60% and then valves in reference unit sales up by approximately 70%. So you've got a couple of trends that we're seeing there. First of all, yes, some degradation in ASPs particularly compared to Q1 a year ago. The ASP situation has been much more stable recently, but within that trend you've also got a couple of interesting things. First of all, ASPs can be impacted because the actual increase in 6 kilowatt and 10 kilowatt lasers, the ASP per kilowatt on those is slightly lower. We've also seen unit volume increases in the 1 kilowatt and 2 kilowatts driven by some of the fine processing cutting customers in China and particularly moving up from 500 watts and 700 watts to our compact YLR 1 kilowatt and 1.5 kilowatt lasers and we've also seen in the 3D printing and additive business a transition from some of the medium power to the 1 kilowatt and 1.5 kilowatt lasers for that. So those would also contribute to the increase in unit volumes at the lower power levels. So there's a number of different dynamics that are happening there. I'd say the really pleasing aspect of that is the general move up in power across several different applications and then the real acceleration that we're seeing in the 6 kilowatts to 10 kilowatts and now with customers demonstrating 12 kilowatts cutting systems.

I can also add hear that (28:46) recently published strategy unlimited market review, that now last year we control more than 86% total sales of high-powered kilowatt CO2 (29:02) lasers in the world, 86%. This year our fare in this business should increase due to performance. It would be increased essentially. Patrick Newton - Stifel, Nicolaus & Co., Inc.: And, Tim, just one clarification or Valentin, I think in the prepared remarks I just want to make sure I heard this correctly, you said over 50% of high power units are now at 6 kilowatts and above compared to 20% a year ago. Was that accurate?

30% is the number. 30% is... Patrick Newton - Stifel, Nicolaus & Co., Inc.: 3-0. Awesome. Thank you. Good luck.

Thank you.

Our next questions come from the line of Krish Sankar with Bank of America Merrill Lynch. Please go ahead with your questions.

Yeah. Hi. Thanks for taking my question. Tim, I had a couple of them. I understand you don't give forward guidance beyond the current quarter but since you said you don't have order visibility into Q4 but I'm guessing you have some visibility into Q3. Should we assume Q3 levels stay at June quarter levels?

So the color we've given around this is that order flow remains very strong. We're choosing at this point in time to not give guidance on Q3, but state that the outperformance in the first half of the year should be added to the initial guidance that we gave. If order flow remains where it is, we're going to have – just talking about this in a qualitative manner, a good strong Q3 performance as well. I mentioned that order flow through April was in no way diminished from what we saw in the first three months of the year. And, so the overall trends behind the business are very strong. We're choosing to give the guidance on Q2 rather than get drawn into the second half of the year at the moment. When we get to having that visibility in the second half of the year, if necessary, we'll provide an updated range to annual guidance. I'd say, overall the tone of the business is as good as I've seen it, even though we've performed very well over the last couple of years. It's been an extraordinary period for us and I think that just is a testament to the execution, the quality of the product, as we've mentioned, and the acceleration of the adoption of fiber as compared to other technologies.

Got it. That's very helpful. And then, two other quick questions. The CapEx addition of $90 million to $100 million this year, you guys said, is there a way to quantify what your revenue capacity or how much revenue your diode capacity can generate with that?

Do you want to talk to that, Valentin, a bit more?

As you see then in analogies, market demand for our products growing very fast, so of course it's a huge challenge for us because we have to produce this year and ship to customers. A lot of new ways that's generate additional capacity. So 30%, 40% growth per year in our production sales. It's a very serious challenge for any company. IPG up till now has demonstrated enough power to meet this demand. And our capital expenses, we promote to grow our capacity to build new facility to new equipment and so on. I believe we can meet any request of market.

Got it. Got it. That's really helpful. And then, final question I had was, is there a way to kind of like pass through, like looking at your products, how much of the growth is coming from your traditional fiber laser versus what I'd call this new market that you entered in the last one year? Is there a way to figure like how much the core business is contributing to the revenues?

The core business is still fundamentally driving the revenues at the moment, so the newer products are still really just starting out. We mentioned some sales of the RGB for the cinema. That was a few units, but it was good to see that happen so it was a very small contribution. There's some acceleration in the telecom business which is helping a little bit, but that's more I'd say a thin layer of icing on a large cake at the moment. So if we can continue to execute around getting these newer products into the market, into addressing a broader part of the micromaterials processing business, we are seeing some penetration in micromaterials processing even with our core 1 micron product, but we hope to see significant improvement in that with some of the ultra-fast product and the UV applications. So there's still – you know the great thing is, there's still not much contribution from those. And when they start to come to bear on revenue it should be a good backup that we have.

(34:08) the experience four-way and mired (34:10) markets, typical (34:11). For example with QCW laser, we introduced QCW laser to the market six years ago, even seven – we claim seven years ago. Despite it was a great product at all, quality was ordered (34:25) of value better than existing flash pump we had (34:30) existing market was very large market, like 20,000 units per year or so on. But acceptance by market was very small. Only 2015, first time we exceed 1,000 units, despite we are estimating our sales should reach, we hope should reach 10,000 units. In 2016 year, it was the same, even less than 2015. Only this year with – see these markets start to grow as a rocket. First our OEM customer accepts, start to using their own flash pump here (35:14). And now many other people with major (35:17) companies especially in China, where other OEMs start immediately (35:21) in Europe and the United States and so on. And we believe we'll reach these numbers, 7,000 plus units soon. But you see how many years you need for the OEM market to accept even highest quality new products. The same situation with other which we introduce now. We know now not so naïve to think that market immediately will accept even much better products than exist in the market. But during three – we need three, five years to deal with that new, each of these new products will show a real essential contribution to our total revenue. But you have to work, introduce or run very fast and try to well coverage (36:10) this introduction. But it takes time. It's any new product, any series need (36:16) very serious and time before you really will have one of the major force in your business.

Thank you. Our next question comes from the line of Joe Wittine with Longbow Research. Please go ahead with your question.

Hi. Thank you. Dr. Gapontsev's commentary on share gains was interesting, since the number of competitive offerings obviously is not shrinking. So what is the principle driver, if you had to isolate it to one? Are you more seeing competitors struggle to keep up at six-plus? Or is it more using price as a weapon? I think Tim referenced some price takedowns in the prepared comments. So, I mean, I know the products are great, but I'm just trying to get a better sense of the timing, and what's driving this inflection now?

I think competition is finding it extremely difficult to compete across the leading edge of the technology of the product, which drives the different performance parameters in terms of electrical efficiency being one, beam quality, the tremendous scale that we have on manufacturing, the service and support we have around the world, the application laboratories that support that service and sales, the investment that's gone into that. All of those things put us in a pretty enviable position. I think in terms of applications, a couple of the highlights are the welding, whilst it can be a bit uneven, quarter-to-quarter depends a bit more on projects. They're starting to get some more momentum into it. I think that's great. And it's not just the consumer electronic cycle spend this year. We talked about some of the automotive and other areas, for example pipe welding. On the cutting side, I think this is a difficult thing to state without – there's very little data behind it, but one of the things we've said is that you shouldn't just focus on the annual sales of high-powered lasers for cutting applications. You should look at how deeply penetrated fiber is into the installed base. And there are different numbers in terms of total in store base of cutting systems, 60,000-plus of them around the world. Fiber a year ago was probably less than 30% of that installed base. Now we're being not as aggressive maybe, only 25%. We think there's an acceleration of the replacement of some of the older CO2 lasers, because job shops just cannot be competitive with that technology as more and more fiber lasers are deployed in the field. Right? So they're increasing against job shops that have a fiber laser. The CO2, even if it's older and fully depreciated with its high maintenance and running costs, is just no longer a viable alternative. And we've seen that commentary coming out of a couple of surveys that we've seen. So it's a number of different things across different applications. Then you've got some of the other applications in ablation, the cleaning, the hole-drilling was a good contributor on the QCW. So the QCW wasn't just welding. And these are all area that we're looking for growth, so it's across a variety of different things that we're succeeding at.

Great. And then I'll also ask on the sustainability of the current trend. I mean I know you suggested we don't carry this forward into the second half, which is prudent. And Tim, I know you're not going to guide the first half of next year, but at least qualitatively talk us through how much of this first half upside in total that you're seeing, if any, is either one-time in nature or perhaps represents any sort of catch-up from last year like on those CE investments that kind of skipped a year. Or is this trend you're executing on here purely organic? I know it's tough to answer but any comments could help us kind of not get too out in front of our skis as we adjust our models for next year.

So the great thing is that it's across a variety of applications and a lot of those applications are generally sort of organic with what we think are sustainable trends in the market. And the one thing that's just – is always a two-year cycle is the consumer electronics stuff, but certainly the outperformance that we're showing in the first half of the year isn't just driven by that. That's really no – a relatively even small part of it. Of course, that's probably a bit of a thicker layer of icing on the cake than the newer applications, but it's not just that. It is the cutting and the welding, those ablative processes, the drilling, which is a shift that you're seeing across a variety of different industries. So it's difficult to call it out for next year yet, but we think we're in an exceptionally strong position relative to the other technologies and even non-laser technologies at this point in time.

Thank you. Our next question comes from the line of Jagadish Iyer with Summit Redstone. Please go ahead with your questions.

Yeah. Thanks for taking my question. Congrats, Tim and Valentin. My first question is how should we be thinking about gross margin. I would imagine that if you look at your revenue profile and how you're guiding and compare it with last year, your mix is clearly moving to a favorable high-power laser types. I thought your gross margins would have picked up. Can you talk about your puts and takes for gross margins as we move forward? And I have a follow-up.

We continue to remain in that range of 50% to 55% and are very, very pleased with executing at the top end of that range. We've mentioned that you're always trying to balance the declines in ASPs across different product lines with new product introductions and getting a benefit from the higher power lasers in different product categories that we get to. We also are adding manufacturing capacity. Valentin mentioned that we've got a tremendous uptick in unit and kilowatts of power that we have to keep up with. So you also try to balance your manufacturing efficiency with the semi-fixed labor costs that are brought on, the fixed costs that are brought on with increasing depreciation as you're placing buildings and equipment into service. So I'm delighted with where gross margins are at this point in time. I think Valentin would probably second that. On the cost side, I think one of the interesting things here is that we think the market price of diodes is still around $10 per watt. Of course, some company's manufacturing is below that. Our bill of material fully loaded on a large part of our kilowatt lasers is now at less than the market price. But the entire bill of material on a cost per watt basis is less than the market price of diodes at the moment. So if nothing else, that should be taken as a point to tremendous advantage to the company.

We'll use our advantage for control of the fore-most technology we need for our product, it's a result we're working very hard to decrease the costs of each components. For example, that same diode over here again would drop 15%, we drop cost per watt. And all-in-all, (43:46) compared was only five years ago, our cost per one watt per diode perhaps two times cheaper than it was four years ago. And we're planning (43:59) to improve technology automation and the process and so on. And we're going down, down much faster than other people doing this. The same with other components, parts and so on.

Okay. So as a follow-up question, Tim, specifically on Q2, what is providing the strength and which geography? And by the way, did you disclose any backlog information? Thank you.

No. We didn't disclose any backlog information. As usual, the sort of strength on order flow is really reflected in the guidance number. It's pretty similar to what we're seeing in Q1. We'll get another good quarter out of China showing strong year-over-year growth. The momentum in Europe continues to be good. You'll see a pick-up in Japan in Q2. Less meaningful, but good backlog in Korea and Russia. The U.S. as well has a good opening backlog. So there's no fundamental change, it's just a continuation of the overall trends.

Thank you. Our next question comes from the line of Bobby Burleson with Canaccord. Please go ahead with your questions.

Yeah. Good morning. So just curious if there's any particular vertical or geography you're watching more closely to get a read on Q4?

Nothing in particular. I think it's just waiting for the overall trends on order flow through end of Q2 and into the beginning of Q3, seeing how those are going to materialize. You can see – in about 50% of the time you see Q4 being lower than Q3. And that's generally driven by in those years where you have a strong consumer electronics cycle you can see China revenue a bit lower in Q4, so we'll watch that. But, we watch everything, Bobby, in terms of the different geographies and applications.

My personal opinion – Tim was very careful, much more careful to deal with above answer (46:17) because you see consumer electronic may be second half of the year or some time could be a worth business, but in the share of our consumer electronic and our business, it's only 20%, 25%. Even they drop twice, it would be a very small impact at our quarterly revenue. So I don't worry about what happens second half of the year with Chinese consumer electronics, like happen with some other people. So, I don't see it's as a serious impact on our business, this situation.

Okay. Great. Thanks. And then just thoughts on automotive. It looks like there's some mixed data points out there on demand, depending on where you look. Just curious how much visibility you have for that particular vertical? I know you don't have always look through to the actual end applications, but any thoughts on automotive from here.

So automotive, I think, is strong, and it's certainly strong and weaker, stronger in some areas and weaker in others. So, the real strength on automotive at the moment is North America and China, in particular. Europe's okay, not showing tremendous growth year-over-year on the automotive applications. And Japan might be an area, where we're starting to get some indications from some of the major customers there that maybe in the second half of the year, the automotive investment cycle may start to improve there where it's been – I'd call Japan as well sluggish like Europe over the last year or so. But, you're right, we don't have – it's not like the traditional OEM business where you can rank your predictive visibility more fundamentally.

Okay. Thank you. Our next question comes from the line of Joe Maxa with Dougherty & Company. Please go ahead with your questions. Joe Maxa - Dougherty & Company LLC: Thank you. I just wonder if you could remind us on your relative size of your cutting versus welding business and then the growth rates of those?

Sorry. I think we've disclosed in the K, and this is very approximate number because I could caution you again, the application date that we get sometimes is not the most accurate, but in all cutting applications both high-power and mid-power and even some of the QCW is about 50% of total revenue. The welding is about 20%, and then marking and engraving will be the next biggest application after that. The two main ones, cutting and welding at those levels. Joe Maxa - Dougherty & Company LLC: Right.

And that's, of course, multiple products, Joe, not just high-power. Joe Maxa - Dougherty & Company LLC: Okay. And you saw some strong growth in welding, so I was trying to get that is what do you think the growth rate is of these two segments now and what are your opportunities? I mean, I know, there's still a big market out there, but where are you going to see the most growth coming here in the next say year or two?

Trends on cutting continue to be very strongly. We continue to see the displacement of the installed base of lasers and then move towards higher power, both with fine metal and that should continue to provide some sustained growth for the company. Clearly, the welding market is one that we have called out. We see that over a three-year horizon as being a fundamental area, where we want to execute not just on high-power but on QCW as well. In terms of like a three to five-year time horizon welding, the welding market we're targeting and growing substantially by displacing not only existing laser, but non-laser welding technology as well. Joe Maxa - Dougherty & Company LLC: Right.

In the welding market, still penetration on laser is very low. It's due to much more difficult work in this direction because each customer needs customized solution, the most of these welding players or companies, many of them even don't know about opportunities and where is the new opportunities, which way is open for them. So it's a more difficult market to build, but it has huge potential in our opinion whether it'd be, I said it before, we only can confirm this, but it's absolutely different approach than cutting. In cutting market, you still from what 20 or 30 years installed (51:00) CO2 cutters with CO2 lasers. Now what, it's still until a couple years ago it was (51:09) what people argued different advantage, CO2 or fiber. But now all market practical and they said fiber provides enormous advantage to CO2 laser. In other words, recognized, and not only it is cheaper, better, easy to use but productivity with fiber laser now two, three times is becoming higher than productivity, the same cutting machine with CO2 laser. It's major engine for future. And the people we expect will start mass replacement of CO2 machines. Even if they could be used, it's still working by fiber because the companies who use CO2 approach now will generate more, if they're not able more to use own technology. Welding still only starting to penetrate. Volume of welding market on our estimation 10 times more than current penetration, still big opportunities. But we develop many other applications. Again, each of them separately attempts new application even outside of the metal weld processing. But each of them still small, few tens million dollars award. But during some years, we expect each of them will contribute $100 million, multiple by 10. Different, it would be very essential growth for other non-metal applications. But it takes time, not during one development (52:50) unique new products. It's only first step. Then one way to introduce provide and to build the market and the distribution network and so. Only medical, for this year, for last time, we reached an excellent result in the program and overall to replace traditional volume in YAG with our new tooling approach. It's so big advantage and you must rate in. It's now covered statistics and operation, 1,000 operation, very successful made now, but we expect only this (53:29), it's only one from many medical applications, we're working now creating new business. It's some hundred million business. And we qualify this new first approval for people to demonstrate fantastic new results.

Okay. Thank you. Our next question comes from the line of Tom Hayes with Northcoast Research. Please go ahead with your question.

Thanks. Good morning. Thanks for taking my questions. Tim, I guess regarding China, I know last year you mentioned that some of the growth in that region came from signing new OEMs. Is some of the growth you saw this quarter and the expectations for the second quarter an indication that you're continuing to gain traction with those relationships? Or maybe just talk about the growth drivers in that market? Thank you.

Yeah. I think that's part of it to continue to gain traction with those relationships, continuing to compete fiercely against even the local companies like Raycus and other competitors there. You've actually seen also a rebound in the business with our largest OEM there this year, and that's benefiting from recovery in their cutting markets. So, that customer continues to be very much sourcing their fiber laser technology at high-power and QCW from IPG. So there's different end market dynamics there, so you've got the welding market for EV, electronic vehicles, for batteries and other applications continues to be a driver too.

Great. Thanks for the color.

Our next question comes from the line of James Ricchiuti with Needham & Company. Please go ahead with your questions. Jim Ricchiuti - Needham & Company, LLC: Hi. Just a follow-up to, again the question about China. I mean, the revenues that you started the year in China, significantly above the high watermark last year. How much of a surprise was the start that you got off to in China? I mean, obviously you had bookings, good bookings in backlog. But just wondering, were there some other issues in the quarter? And it sounds like that momentum has continued through April?

Yeah. It definitely has continued through April. There's clearly a surprise with the strength with which China started at, because you always think that in January, China orders are going to be slow before China New Year. And that order flow is very strong, and then it carried on through February and March. So yeah, it's difficult to quantify like clearly relative to guidance and the outperformance, you can see how much of a surprise that has been to us. I think sometimes the inflection points on the upside, Jim, are some of the most difficult things to forecast, regardless of how good your relationships are with the OEMs. I think the OEMs themselves find it very difficult to forecast sometimes the adoption curve that they see on some of the applications. For example, the move towards higher power levels. And that's not just in China, it's even in Europe as well.

But a list of OEM customers in China, for last year half year increased dramatically. Before it was only couple serious OEM in China. Now we have 10 OEMs. The competition is growing there very fast. All of that start to purchase in quantities, serious quantities. For us it's about a new OEM customer in China, not only in China, but in China, it was (57:24). So it's not only – we're talking about shippable order with fixed date of delivery date and so on. But it's to include also the frame order, it's fantastic growth into countries, but then growth for frame order. We don't take them into account in our backlog. But the frame orders, it's never before we talk about such large quantities. Jim Ricchiuti - Needham & Company, LLC: Has the customer concentration, the profile of the customer base changed? Did that change much dramatically in the quarter in China?

No. Fundamentally, I think that this is pleasing. Actually, you'll see our former largest customer will report some stronger sales this year. So relatively speaking, a little bit more of a concentration there, but also as Valentin mentioned, many new OEMs across a variety of applications as well.

Thank you. Our next question...

In many case, we don't know the application even. We don't know.

Thank you. Our next question comes from the line of Mark Miller with The Benchmark Company. Please go ahead with your question.

Congratulations on your results. Very impressive. I was just wondering, you cited a number of reasons for the upside numbers in guidance. You did say China was stronger than expected. How much of the upside and the expectations is driven by overall macro improvements globally?

It's only thing, that's having a benefit. You're seeing overall I think global PMIs are at or close to five-year highs. They're at that level coming into the end of the year and through Q1. You continue to see some improvement in the European economic environment. And there's a bit more momentum there. The U.S. economy clearly at the moment is pretty strong. China credit remains available. So yeah, I think the global economies is as strong as it has been for a while, and that helps with the industrial investment cycle.

While it's not a big part of your sales, there is some concern about slowing up the telecom business in China. You said China was very strong. Is that too small to be concerned about for you guys?

Yeah. We're not big on telecom in China at the moment. It's a very small part of our business. Most of our telecom is outside of China.

Finally, the UV fiber laser. Any more color you can provide there? You said new products were coming, but not as quickly as some people believed in terms of the sales.

Yes. UV product, it's very difficult product because what we introduce it compete with the same quality of 1,000 people sales now which it need enormous service concern, services, so on, we removed lifetime of crystals and so on. We don't try to go this way. Our culture is to provide with highest quality absolutely industry grade product. We developed a family of UV products and still (01:00:58) a long time, a (01:00:01) improving and so on. But now we've introduced – it's also the most critical for this new, highest quality crystal growth facility, and not only growth crystal, but also the process increase, to make a new gen, a new level, higher grade crystal element for UVs. And we've opened this now facility. And we developed new technology for non-linear crystals, which provide (01:01:28) better quality and lifetime also then exist in other sources. With this new crystal, we've done the UV business on absolutely new level, with quality lifetime cost and so on. But the process is going very well, but it takes time to really introduce and qualify people. And then after that, the major OE, these integrators need also time then for test and for qualify for the applications. And it builds a system. It takes a couple of years. But we introduced this product now with much higher quality than all existing in this market segment. And based on new technology, first of all, crystal and also a higher polishing technology, record (01:02:27) and so on to deal with. With such new technology, of course we'll change situation on UV waves – UV markets. The same, by the way, with ultrashort pulse lasers, the same situation today. We're now near the (01:02:51) with ultrashort pulse systems laser, we have perhaps new, unique patent pending with much higher performance than all existing in this market segment though. But, it takes time. Introduction, we mentioned to deal with, material-wise in hundred millions, it takes some years. Not immediately.

Thank you. Our next question comes from the line of Tom Diffely with D.A. Davidson. Please go ahead with your questions. Thomas Robert Diffely - D.A. Davidson & Co.: Yes. Good morning. So obviously, it looks like you're getting some nice momentum here at the high end of the market competitively, but what are you seeing at the low power market from a competitive point of view, and in particular, in the Chinese market?

Low power market, you mean market – marking market. Market – marking market stagnate in China, it became absolutely not profitable, practical with people working with zero margin. Even a major play in this market, Chinese, said actually, we don't like to provide names. They support still or have thinking of to convert for them this market, or support it, waiting when situation will change, when the small competitor, many tens or hundreds competitors would destroy all the price policy and so on will disappear, will become bankrupt, then they will deal with – remain only few players and would be renewed this, recover this market. But now the market practically don't generate any real profit. We're still more competitive, but we have to follow the prices and so, they will drop, the essential price still is enough profitable here. But the total price now for them traditional 20 to 30-watt is not about lasers for the main forces (01:04:58) with this market drop 10 times to less than $3,000 (01:05:05) and so not able to now to generate profit, even Chinese company don't able to generate any profit. Thomas Robert Diffely - D.A. Davidson & Co.: So are you seeing a lot of those companies start to drop off then, or you think that's coming?

We're still filling and quoting the quantity, we will increase units, but in revenue, it's stabilized now, not growing practical for us. We start to grow the marking business due to new high grade lasers which still high-power and much more perfect and (01:05:42) laser still not – Chinese not able to compete with us to produce it, so on. There, we have normal start to growing sales. But for standard lasers, for mass market, we sell in quantity, but the revenue not growing (01:05:59). In spite for us, it's still profitable because our production cost minimum twice cheaper than any Chinese co.

Okay. Thank you. This concludes our question-and-answer session. I would like to turn the floor back to Dr. Gapontsev for closing comments.

Okay. Thank you, again, for joining us this morning. Again, we look forward to speaking with you next quarter call. You have a great day.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.