Good morning and welcome to IPG Photonics First Quarter 2020 Conference Call. Today’s call is being recorded and webcast.At this time, I’d like to turn the call over to James Hillier, IPG’s Vice President of Investor Relations for introductions. Please go ahead, sir.

Thank you, Doug, and good morning, everyone. With us today is IPG Photonics’ Chairman and CEO, Dr. Valentin Gapontsev; Chief Operating Officer, Dr. Eugene Shcherbakov; and Senior Vice President and CFO, Tim Mammen.Statements made during the course of this 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 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 the impact of the COVID-19 pandemic on our business and those detailed in IPG Photonics’ Form 10-K for the period ended December 31, 2019, 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 5, 2020. 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 and the Excel-based financial data workbook posted to our Investor Relations website. We will post these prepared remarks on our Investor Relations website following the completion of the call.With that I’ll now turn the call over to Valentin.

Good morning, everyone. Before I discuss our results and strategic initiatives, I want to address how IPG is navigating the effects of the novel coronavirus outbreak. The well-being of our people, our customers and our partners is our highest priority. IPG employees who can work from home are doing so.In all regions, we continue to manufacture and service our solution. Although, there are some restrictions to US production, the impact to-date has not been material during our products are used across a wide variety of critical infrastructure sector.In Germany, we didn’t stop work practically at all. In Russia, it’s post only one week vacation during these two months. In order to save our people, we have employed additional distancing and cleaning measures in our facilities. Forced masks for use in our production, we introduced very effective UV means for total disinfection of all production on optic rooms, and temporary increased wages for our early employees who continue to work on site.As a result, as to-date, we are proud to report that IPG did not have any COVID-19 infected cases on all our world locations in spite of more than 80% of our staff that are going to work on site practically on these two months. IPG was trying to help also to vacate to local communities, communities somewhere, everywhere.In China, we have donated approximately RMB 1 million fill the drought affected by this worldwide epidemic. In the US, we have donated many tens of thousands masks to local hospitals in need. In Russia, we donated a modern CT imaging system to local hospitals as well as masks and other needs. Eugene will discuss the impact on COVID-19 in our operation in greater detail.I want to assure you that at IPG, we are doing all we can to help save our…

Thank you, Valentin, and good morning everyone. I will begin my discussion with the effects of COVID-19 on our production. Currently, all three of our major production facility in Germany, the US and Russia remain open. However, we have scaled back production in Massachusetts to the products required to support essential businesses.These include lasers and laser system used in the transportation, medical, agriculture, communications, and defense end markets among them. Our German operations operate on more normalized basis albeit with social distancing measures in place. In Russia, our employees are working on rotating basis to limit contact.Our highest priority remains the safety of our employees, their families, our business partners and community. And as Valentin noted, we have put in place additional health safety and workplace measures to safeguard the health and well-being of our valued employees and colleagues.Our vertical integration production model continues to provide us with critical advantages in this time of supply chain disruption. Also, we source certain raw materials from third party. We internally produce th more complex components and modules used in our technology. Our leading edge components and modules are the critical technical performance and cost differentiator between IPG and our competition.We continue to leverage this advantage we learned for more than 20 years of investment in technology, people and processes. Many of our third party suppliers remain open, provided us companies we need. However, the supply chain constraint we face are primarily related to logistic including available air cargo space and higher freight rates.Available cargo space on slide between the US and Europe. In Europe and Asia is more limited, so shipment are taking longer. In addition, shipments with Europe are limited to the countries worst effected by COVID-19 and experiences some delays in other places due to check at border crossing.Recognizing this…

Thank you, Eugene, and good morning everyone. Revenue in the first quarter declined 21% year-over-year to $249 million. Revenue from materials processing applications decreased 28% year-over-year and revenue from other applications increased 123%. Sales of high power CW lasers decreased 33% year-over-year and represented approximately 48% of total revenue.Sales of ultra-high power lasers at 6 kilowatts or greater represented nearly 50% of total high power CW lasers total high power CW laser sales.Pulse laser sales increased 1% year-over-year with growth in green and high power pulse lasers, partially offset by lower sales of lower power pulse lasers for marking applications. Systems sales decreased 43% year-over-year as growth in systems for medical device manufacturing was offset by lower sales of other IPG laser systems and Genesis non-laser systems.Medium power laser sales decreased 28% on continued softness in additive manufacturing and the transition to kilowatt scale lasers in cutting while QCW laser sales decreased 30% year-over-year. Other product sales increased 38% year-over-year driven by growth in medical laser sales and total service revenue.Q1 GAAP gross margin was 41% which declined 600 basis points year-over-year. Compared with the year ago period, the year-over-year decline in gross margin was driven by the following factors. 200 basis points from less favorable absorption of manufacturing expenses, 190 basis points from a higher inventory reserves, 90 basis points from an increase in shipping costs, 20 basis points from foreign exchange and 100 basis points from other factors including lower product pricing.First quarter GAAP operating income was $45 million and operating margin was 18%. During the quarter, we recognized the primarily related to revaluation of US dollar cash and other assets in Russia given the depreciation of the ruble versus the US dollar.Executing this foreign exchange gain, operating margin was 10%. Q1 net income was $36 million or…

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of John Marchetti with Stiefel. Please proceed with your question.

Thanks very much. I was just wondering Valentin, if you could comment a little bit or add some color to your pricing commentary about the China market. It sounded like pricing there at least was a little bit more stable on a quarter-over-quarter basis. I'm curious, if you think that is something that's somewhat more sustainable or if it has to do more with the restrictions that we saw in place during the March quarter?

Okay. China’s market is now demonstrates most abilities than it was two years in 2018. In 2019, the price is now much -- was therefore battery prices becoming more stable. And the situation, of course very uncertain and so on battle. Important experience for us now, it looks very much more greater than we expected.So during the – for example, the last two month, we receive order for mid-power laser much, much more than before the time. It’s only during two months we receive order of about, last year, it was half of last year.So it is, if it’s paramount the same trend, so we can expect to double the business in the mid-power lasers this year to compare to 2019. Of course situation, certain nobody can predict what happens next month, but even very pessimistic case look very promising.But it’s still we introduced, especially we call traditional [indiscernible] in the -- to compare to our Chinese competition. In the second half of this year, when we introduced new generation mid-power lasers much more preferred and much more higher much more perfect and more perfect and much more higher functionality and the roll much more higher functionality and the roll out [indiscernible] to compare with the family, which we'll develop in '20, and now we sell in the market. So situation for high powered in China also growing fast.They purchase more and more high-power laser family, which we'll develop and now we sell in the market. So, situation for high power in China also growing fast and ship more and more high power laser with more than 10 kilowatt hour, special framework that is huge it’s all growing now.So let’s say we still – as a result, our now production facility, especially in Germany and Russia with its first Chinese market now, all are busy. So we have now work in 80% of people in the – working on-site. And we see over time not enough people to procure in current order.For new products, we introduce the mainly – developed in the US now, introduce now that we have to deal with new production line, product – or market accepts very well, but now we still have problem to produce in volume. We are looking everywhere to create new production line. Especially…

Thank you for sharing that.

Very well.

Great. And then, Tim, maybe just a quick one for you. Last quarter, you talked about an expected impact of around $45 million. I'm curious how that actually played out in the quarter, if you are above, below that or in line there. And maybe with the guidance that you've given, if you can maybe quantify a little bit which you actually can say that the revenue impact and maybe the EPS impact of the ongoing virus situation is? Thank you.

So, given that we came in at the top end of the guidance range we gave for Q1 the actual impact in the first quarter was slightly below the $45 million that we had framed Q1 guidance around. That really was based upon a strong rebound in demand in China in March having really lost February as a month. That was characterized as a lost month.And overall demand actually in Europe was reasonably strong in Q1 with total order flow. And as you saw, given North America actually grew a little bit year-over-year particularly with the strength on the new medical applications, that demand environment held up reasonably well.Within our Q2 guidance number, we're not going to give a specific estimates of how much it's impacted. It's more difficult to do because whilst you are seeing strength and significant strength that Val has just talked about in Europe, the demand environment at least at the moment – sorry, significant strength in China. The demand environment in Europe and order flow there, as we mentioned, has weakened.It's also weaker in North America, and there's a bit more uncertainty as well for China – Japan relative to the original forecast that we had there. So, the overall impact though on Q2 is more than the $45 million that we guided to for Q1, but we're not going to go and give a specific number around it.The drop through to EPS is probably a bit more difficult to quantify given that we're not giving any specific revenue number, but it will result in gross margins being lower than they would otherwise have been and certainly earnings per share being reduced below the level that we were expecting in the second quarter.

Our next question comes from the line of Jim Ricchiuti with Needham & Company. Please proceed with your question.

Regarding the pickup that you saw demand China in March and April, is that – do you think to support the current demand for these manufacturers as they've emerged from lock down or does this appear to be them adding additional manufacturing capacity for business there perhaps, assuming is coming in Q2, Q3?

Jim, I mean some of the rebound from very little demand happening for a six-week period. But I think it's in part, it's not necessarily new capacity coming on board. It's that of probably all of the economies that have gone through the coronavirus and COVID-19 China went into earlier. China is certainly exhibiting at this point in time more of perhaps a V-shaped recovery in terms of the letters that everyone is talking about.It's probably evolved and said total demand for some of the lower power kilowatt scale lasers has rebounded very strongly. We've seen also good demand from higher power pulsed lasers for EV, higher power lasers for welding reference the A and B.I think like everybody it's not entirely certain how sustainable this can be. Valentin’s comment was that if it is sustained, it does point to a nice recovery in our business over a reasonable recovery in Q2 and potentially that picking up in Q3. I think there's just so much uncertainty out there at the moment about whether a V-shaped recovery in China will be sustained or what kind of recovery we'll see in Europe, North America, and other Asian countries as we get out of this.And certainly we've been surprised by the strength of the demand and it's been a positive thing coming into this positive thing coming into this quarter from China.

And with respect to the systems business down pretty significantly in Q1, I guess is it fair to say this is mainly more a US business to a lesser extent European? Is this – was the decline more concentrated in a medical device manufacturing? And you've got some tougher comps as you look out at the back half. Is this an area of business that perhaps has more uncertainty to it or do you see some recovery off these low levels?

No. So in fact, the demand for the medical device systems used to manufacture medical devices draw a distinction between that and the medical lasers result of medical procedures, right? There’s the ILT acquisition which services medical device manufacturing. Demand within that application is actually held up reasonably well. Demand for our more specialized multi-axis systems that are used in fine processing has also held up well.The weakness is really being on the systems side for the smaller form compact cutting system where that has certainly been impacted by people pushing out investment decisions. So that would be used more on the job shop and less advanced applications. And with Genesis Welding Systems to be on the non-laser side where again it’s sometimes a significant investment decision, certainly that business has shown a slowdown. So, I’d characterize some of the non-laser welding applications for Genesis and the more basic cutting systems, small form compact cutting systems.

No, we -- this system business, we are changing with IoT, and with any sense, we're changing the time a new product line, which includes a laser [indiscernible] or and so on increased share total system with laser. IoT for example, they were using our new ultra custom lasers, new generation of machine stent making, and before, there was a very small cell, with former product without laser.Now with laser, new laser, now this qualification going very well, we’re now reaching demand for start to grow very fast for this machine. Second also, for IoT for example, for the other sales force within the US. And now, we extend the IoT marketing, IoT system in Europe also. East Europe in going even to the East because new generation such machine, very competitive, becoming very competitive in quality and also in cost to compare to this local manufacturer.

So it sounds like you're suggesting this business may be bottoming here and should improve with the new products in the back half?

I think what we saw, and we're seeing strength from some of the more advanced and newer products that we're introducing. And as we introduce more of those newer products, that's really been the target of the business strategically is to drive that growth from those areas. So it is to introduce more laser based welding systems with Genesis and to grow the medical device manufacturing capability that we acquired as well. So that's a slight nuance to what you're saying, Jim, but pretty similar.

Okay. Thank you.

With it’s more longer to make this new version machine in mobile abate process is going very well. So we next year we'll enter the market in new way, efficient, very effective in sales performance margin with [indiscernible] processing.

Our next question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question.

Yes. Good morning. Thanks for taking the call. Just wondering based on the cost cutting that Eugene referenced earlier, I was wondering Tim, is there a change to the long-term target models from a margin point of view? Are you still at 45 to 50 range, do you think?

At the moment, we're not taking a lot changing the long-term target model. We're clearly operating at revenue levels below even medium and longer-term targets and that's really why the current performance is below that range. At this point in time, we are still trying to manage the business and definitely targeting trying to get back to the 45%, 50% range.

Okay. And then, just another question on the COVID impact on capacity. It sounds like it's not really impacting you right now as much as maybe it would be if you're at full production. Curious, is there someone to quantify the impact to your capacity either through having to do social spacing or your supplier constraints?

Eugene, do want to address that question from an operations perspective?

Yes. In principle, I already mentioned that we didn't get any big problem in Germany because our capacity was where we used approximately 90% of our capacity. This results in some strong limitations. In other countries also, I mentioned that in Massachusetts where – o on the produced products which are required support for essential businesses.In Russia, of course, it’s other situation but and Russia, of course, it’s other situation, but our main production now in Germany; and I think we have a lot of, today, orders and definitely we’ll ship these orders in time. It’s no deal – no risk. And for the future, we’ll see if it will be [indiscernible] introduce some additional measures like second shifts, some additional people, and so on.Again, for production point of view, I don’t see any decrease in time. It's no risk. And from the future, we will not have enough orders. But if orders will come, we will definitely proceed all these orders.

For current product, we have enough capacity for current product. For new products we introduce now, they’re the same, but visible green waves, UV waves, ultra-short waves and so on, they still don’t have enough capacity. We have people and creating new production line. We're still in the first phase this year and next year, we have it to mass production. Then today, we would be realize potential; now, our current capacity not able to support this demand.

Okay. Thank you.

We don’t need equipment. We don’t need the facility. We have these. We need people, need to training the people in electronics, in the optic engineers, technician, high quality in the US. In Germany, it’s very difficult Germany, it’s very difficult available with their people. So we transfer more and more of this production to East Europe to Russia. And we built new very large mass production capacity in Belarussia.

Our next question comes from the line of Michael Feniger of Bank of America. Please proceed with your question.

Hey, guys. Thanks for taking my question and apologies if this question was already answered and addressed. The gross margin actually picked up in Q1, first, the fourth quarter even with the sequential drop in revenue. Go back a few years, your Q1 margin sequentially actually goes down.So I was hoping you could kind of address some of the measures you were able to put in place to actually show that improvement and with the revenue recovering in Q2, and hopefully in Q3, I'm just wondering if on that target gross margin, has the revenue that you need to get to has not changed in terms of hitting $300 million or $350 million or that $400 million mark. Has that changed the paradigm in terms of what gross margin ranges could be?

Michael, the first part of the question about Q1 gross margin, I think we were pleased given the revenue level with the gross margin that we achieved particularly given that we also had some higher inventory provisions. So the performance even relative to our guidance was better. I've not really attracted as to comparably what gross margin does Q1 to Q4, I don't tend to focus on that.So Mike, what I will say is in Q1, we've referenced that we've had these cost reduction initiatives that were started really in Q3 2019. They accelerated in Q4. So, one of the benefits we had in the first quarter with those cost reduction initiatives flowed more completely and fully through the business model.As Eugene mentioned, the total amount of expenses that we incurred in the first quarter were both manufacturing and operating, we haven’t spit it out between the two was $20 million lower. A significant part of that compared, for example, to the middle of last year was on the manufacturing side, so partly due to lower activity but lower head count because of some of the restructuring, fewer contractors used in certain locations.So, it's really around the way that we try to manage the cost base of the business and some of that wasn't even really clearly because we started this last year. it wasn't related to the pandemic taking hold. These were operational initiatives that we had started to execute upon over the last six and nine monthsWith regard to the future, I think the thing that is most pertinent to that, so we're not fundamentally changing the range of revenue that needs to be achieved for the business model to show decent leverage in it. I think as we get back above $300 million, transition to $330 million, $350 million, we get into a much more comfortable position.And if we can grow revenue to $370 million or $400 million, we think that we will be again getting back towards close to 50% margin in particular if some of that growth comes from our leading edge products that we're introducing to the market, whether it's not just the higher power lasers for cutting but some of the AMB lasers for welding, the new product in ultrafast, the green lasers, the more advanced systems, the medical devices, the devices for medical procedures.So, all of those as those have started to show strength and then some of the defense applications and we shipped another 100-kilowatt laser this quarter, these are all things that over time should benefit the business model.So there’s no fundamental change in seeing some accretion and leverage out of gross margin that we expect to happen as revenues starts to recover.

Generally in all product – all product, current products like the mid-power lasers, high powered lasers, one micron range as this – this year we introduced new generation laser with the quartz of them manufactured in quartz would be 26% of recent current product. Performance would be better, but the quartz would be 20% to 30% to it. So we expect – so with this product we will increase gross margin essential from this market product.

That’s helpful. And longer term, I'd love to get a sense of how you think COVID impacts your customer base with manufacturing facilities, but also just the supply chain? With social distancing do new facilities need more automation and laser technology for safety concerns? Do you see with – what we've seen play out in other markets with supply chains, do they – so we have to see them get reoriented maybe the manufacturing facilities have to move out of China or be rebuilt locally in other regions? Just curious have you seen any of that?

I mean I think from a productivity perspective within our own systems, the safety and cleaning and even some of Valentin referenced this sort of UV light planting that we're using. We're not seeing a fundamental change in the ability to use our space for the productivity from it. Some of the things that you referenced are actions and initiatives that we’ve already taken and being investing in several years.So increased use of automation and in diode manufacturing and packaging are all part of our strategies. It’s one of the reasons that we have a supply chain that is really focused in either North America, Germany or Russian while we don't use lower cost labor in other areas around the world.So certainly, automation is an area where we think that potentially IPG will use more of it over time and some of our customers will use more real-time. That continued transition towards automation will help lay the base sales particularly as they're integrated within robotic and other systems. Some of the other questions I think are broader based economic and supply chain strategic and logistics decisions the companies may make.One of the outcomes of this is given the disruption of being able to get components from different places around the world is that, you may see a reversion from just simply concentrating manufacturing in low-cost countries like China or in other areas in Asia because the actual cost of doing so is higher than having your supply chain more distributed. So you may well see some investments around component manufacturing in North America or in Europe. And that again, may be over the longer term, a benefit to IPG.

And our strategic target that mass production with, we’re making more and more in our target to make in for East Europe. East Europe means Russian, -- Russia. New batch production facility. If for China for the east for low-cost products and so on. But America and US and of new products introduction if the market – this product qualification and so on, to serve this West Europe and American market only. But mass production, we move for more cost of production, for example, now Russia will be cheaper than in China.It's much more protected and much more higher quality people and very well organized with good sources and facility. We have built only 300,000 -- we have view -- we have that production. But next year, it will start to work in the fall. So this will help us to deal with mass production with a very low cost, very high quality and so on, and well protected against any political and other problems.

Thank you.

Our next question comes from the line of Jed Dorsheimer with Canaccord Genuity. Please proceed with your question.

Hi. Thanks and it's nice to see a positive outlook here. I guess question regarding the uptick with respect to what I presume is pent-up demand from things being shut down over in China. I'm curious if we look at China's GDP being largely export, and we look at the rest of the world largely seeing a decline in GDP from a consumption perspective. I'm just curious how you reconcile the pickup in manufacturing capacity. Is it a function of utilization or do you see – or is it upgrades in existing facilities that is attributing to the demand? Thanks.

First of all, I think that there continues to be uncertainty as to how global GDP and China GDP, North America, European GDP will recover over the next six to nine months. I think that remains the uncertain question and some of the outlook of that.With regard to the China rebound and demand specifically, yes, some of the China investments relate to exports but don't forget that the Chinese government has been pursuing a strategy of trying to drive local consumption in demand. So, that may be driving part of this recovery. Many of the industries we also serve are not so much export orientated, whether it be electric vehicle manufacturing to supply local demand, the housing sector consumer durable goods. Of course, some of the consumer electronics stuff is exported but there’s also strong local demand there as well.So I think perhaps some of the supply chains that we serve are not just solely export focused. They are also driven by internal China demand. I think over the medium-term, really the data points that we're going to be looking at are how you know regional and global PMIs trend, what export data looks like for robotic orders coming out of other Asian countries and machines for data export.So, whilst we’re pleased with the overall performance in Q1 with revenue coming in the top end of the range, I'm pleased to be able to guide at least sequentially higher. It's not as though we or the global economy is out of the woods yet .I think there remains some uncertainty on that, Jed.

That's helpful. Thank you. Just as a follow-up. And I may have missed this. I jumped on a little bit late on the call but with the price stabilization, particularly in the low- to mid-power range where we’ve seen intense price pressure over the past year or so, is that – do you attribute the stabilization to less competitors? Are we seeing attrition that’s finally playing out or are you seeing – we’ve just hit a bottom in terms of that pricing or maybe just a little bit more color on the pricing dynamic in what was a more competitive segment of the market?

Well, first of all, we do not price with China, stimulates drop of prices to win this market where the market worldwide. When we had this challenge, and we also drop prices despite our product, much higher quality, much more reliable and so on and so on.But our prices finished prices especially we drop very essential cost of this upgrade the design. And now our price is very low price, where Chinese could not drop more because many of them without government support near bankruptcy now.Whether now, very low gross margin and artificial, even. You continue gross margin much well then reported and most of them because government support on the compensation. But we, without any compensation provided in -- we had not a big difference in price.By the way, from the point any European, any American can be competitors now they wait and they're not able to compete it with not only with our quality, but also really with our quality, but also prices for practical. China remain only competitor for IPG in this area. And they could not drop prices more essentially because if they have for the NOI sales so they generate only a more – the operating cost will only artificially supported like 35% gross margin, but it’s artificial, not the real margin, gross margin. So no way to go down.

Got it. Thank you. That’s really helpful color.

We still value it as one. Even with this prices, we now renew our design, with our gross margin, we increased again. We dropped like 40%, 50%, now we increase again up to 60% and even 70%. So real gross margin and so on. So we’re very competitive now besides price and profitable.

Our next question comes from the line of Mark Miller with The Benchmark Company. Please proceed with your question.

Thank you for taking my question. I just was wondering about the supply chain again, are you seeing any impact, you mentioned air shipments in terms of component supply or are you being impacted by some of your customers, they have problems related to the virus?

Eugene, do you want to take that question on supply chain and components?

Yeah. From the point of component supply, we didn’t get any problems because we made some measure before. It means we have enough components to our continuous operation of our stock, our main components. And for of course COVID-19’s influence for our customers sometimes And this is why some of them they delay these orders and also to ask us to delay shipment for some existing orders.These are our main problems, but in principle, we don’t see any big problems today, connected to COVID-19 as we use our supply chain.

Just wondered if you could estimate…

Due to a little policy, because first of all we shipping our size much less components than any of our competitor. Most components, especially expensive and so we produce it in out. Now, produce account and not only what's electrical – metal capacity. Anything get sold. Soon – maybe 80%, 90% past we will buy – we're making insight, only 10% to 15% I would say. Number one.Second, we hoped our typical policy to hold three-month storage for all series products. They also help the one-month shortage, two-month shortage we have not most cases but in-house in storage. So to wonder – what is your problem with components which we're awaiting, especially with new product, but not for March product.

You mentioned ultra-fast lasers – you mentioned ultra-fast lasers were strong. I just wondered if you could estimate what percent of recently-introduced products were – what percent do they represent of total sales, it is around 20%?

The ultra-fast product as a percent of total sales is still relatively small, Mark. I think what Valentin was referencing was that – there’s good progress being made on numerous different projects. We mentioned one specifically that IPG subsidiary to ILT has developed a new system for stent cutting using our own ultrafast lasers.So, the numerous projects we have there are moving well. Ultrafast was reasonably – performed reasonably in the quarter but is certainly no one near the level we wanted to get to.

We have major product we introduced market on the end of last year, beginning this year. It's all testing very wide customers that we provide for sale. They are very wide, but our problem now to install mass production. Now, we produce not enough even for current demand.During this year, we have installed production up to the couple thousands per year. Then it would be real if we come and see this business. But it's still -- it's a complicated assembly need trained people for this.

No. I was actually referring to all new product sales, not just for ultrafast lasers recently introduced.

Those were 23% of total revenue, Mark.

Okay. Thank you.

I can’t remember exactly but it’s a share of its burn.

Our next question comes from the line of Krish Sankar with Cowen & Company. Please proceed with your question.

Yeah. Hi. Thanks for taking my question. I have two of them. Tim, just wanted to get your thoughts on the Commerce Department ruling from last week expanding the scope of the export rules. Given the fact that you guys have quite a bit of exposure to China, how do you think about it to the extent that you understand and interpret those rules? And then, I had a follow-up.

All right. Krish, I can’t answer that question at this point in time. I haven't done enough work on it. I wasn’t able to look at it and see how it might impact us. So I don’t have an answer to that question right now.

Got it. No worries. And then, the second question, I just want to find out on the June quarter sequencing update, can you just tell us which product lines are going to grow more than others? And are you seeing your typical seasonal uptick you see in pulsed lasers because of the consumer electronics end market?

I mean, we don't know how to get that granular on it. We expected obviously to see a high pickup because of the demand from China. QCW will see some increase, but it's not a fundamental investment cycle that we normally see from consumer electronics, but that we’d expect to see some pickup in pulsed and maybe some additional marketing. But again, it's – you're not – you haven't gotten a major consumer electronics investment cycle that is driving our sequential improvement in Q2.And as I said, even though it's great to see a bit of a sequential improvement compared to what guidance may have been without COVID and the demand that we were seeing, it's still a relatively weak performance.

Got it. Thanks, Tim.

That is all the time we have for questions. I'd like to turn the call back to management for closing remarks.

Great. Thank you for joining us this morning and for your continued interest in IPG. We look forward to speaking with you over the coming weeks. We’ll participating in a number of virtual investor conferences this quarter. Have a great day and keep safe, everyone.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.