IPG Photonics Corp (IPGP) 2024 Q2 法說會逐字稿

Good morning and welcome to IPG Photonics' second quarter 2024 conference call. Today's call being recorded and webcast. At this this, I'd like to turn the call over to Eugene Fedotoff IPG's Senior Director, Investor Relation, for introductions. Please go ahead with your conference.

Thank you, and good morning everyone. With me today is IPG Photonics' CEO, Dr. Mark Gitin; and Senior Vice President and CFO, Tim Mammen.

Let me remind you that statements made during the course of this call that discuss management'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 are detailed in IPG Photonics' Form 10-K for the period ended December 31, 2023 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 on the SEC's website directly.

Any forward-looking statements made on this call are the company's expectations or predictions as of today, July 30, 2024 only, and the company assumes no obligation to publicly release any updates or revisions to any such statements.

For additional details on our reported results, please refer to the earnings press release, earnings call presentation and the financial data workbook posted on our investor relations website. We will also post these prepared remarks on our website after this call. With that, I'll now turn the call over to Mark.

Good morning, everyone. I am excited to be here with you on my first earnings call as CEO of IPG Photonics. I look forward to meeting many of you and to talking more about our story and our plans at IPG.

Before diving into our second quarter performance, I'd like to spend a moment on my background, why I took on this role, and what I've been focusing on since I joined just over seven weeks ago.

For the past 35 years, I have been actively involved with lasers and laser applications, leading different functions at coherent and the photonics solutions division at MKS Instruments. I joined MKS to integrate the Newport acquisition and significantly improved the performance of the business over five years. During my career, I have always admired IPG, its industry leadership, culture of innovation and ability to drive fiber lasers into new use cases.

I am thrilled to have joined such an innovative and dynamic organization and see a lot of great opportunities ahead of us. Since joining in June, I've focused on diving deep into key aspects of the business. The dedication, creativity, and passion of IPG's team is truly inspiring, and conversations with employees have given me an even deeper appreciation of the team's knowledge and expertise.

I am especially excited about IPG's R&D pipeline. I believe we have a number of projects in process that will put us in a strong position to extend our industry leadership, provide further differentiation and reduce product costs.

I know that in the current macroeconomic cycle we have seen competitors get more aggressive, particularly in cutting. Competition is expected, and as a leader, it's important to keep driving innovation.

Our team has been focusing on multiple initiatives to increase technological moats around laser products and provide complete solutions and world-class support to customers, which cannot be easily replicated. We are clearly seeing these efforts bear fruit in the areas such as EV battery welding and 3D printing.

We are also expanding into new applications and use cases for new fiber lasers in areas where we offer significant advantages relative to other laser and non-laser solutions, including efficiency, speed and environmentally-friendly solutions.

In the coming months, I will be working with my management team to enhance existing strategies and develop new goals and objectives that provide a foundation for IPG’s success in the coming years.

On the operational side, we will be investing in our business where we can generate attractive returns while managing our discretionary costs. I strongly believe that by providing our customers with the highest quality solutions, the best service, and optimizing our operational efficiencies, we will be best positioned to drive shareholder value in the long term.

Internally, we will prioritize continued focus on collaboration, growth, and continuous improvement. I look forward to being able to share more details about these strategies with you in the future.

Moving on to the second quarter results, we continued to generate strong operating cash flow in a challenging demand environment, as we executed on inventory reduction initiatives. Second quarter sales and earnings per share were above the midpoint of our revenue guidance with overall demand conditions stabilizing at a low level, particularly in general manufacturing and EV markets.

Revenue was relatively stable in Asia sequentially, and improved in North America, helped by stronger sales in the emerging growth products, such as LightWELD and medical. Trends in Europe continued to moderate with industrial markets facing persistent headwinds and macroeconomic uncertainty.

Turning to the key applications that we serve. In welding, revenue decreased year-over-year primarily due to lower demand in e-mobility, and partially offset by growth in handheld welding. However, I am pleased to see that welding revenue was stable sequentially and we were able to gain market share in Europe, winning EV customer accounts even in a challenging operating environment.

IPG's strength is our unique knowledge of laser material interaction and process know-how that significantly increases speed and quality of welding. Putting this together with our real-time process monitoring enables meaningful yield improvements for customers. Our laser welding processes and real-time weld monitoring have been widely adopted in EV battery manufacturing where faulty welds can have catastrophic results.

We feel very good about our competitive position when investment spending in EV battery capacity resumes. And furthermore, we saw a strong pickup in sales of our handheld welding solutions, driven by our new partnership with Miller Electric, a leader in welding solutions.

Continuous innovations driving improved efficiency, smaller form factor and lower cost enabled the commercial viability of laser welding for metal fabricators and job shops, opening up a huge new market opportunity for IPG.

Moving on to our second largest application, cutting, which is where we have seen the greatest impact to our business over the past several years from Chinese competition. The good news is our China cutting OEM business now accounts for less than 5% of our total revenue.

In our European, US and Japanese businesses, we have a stronger competitive position and customers who value productivity and uptime. This business was impacted by our customers working down inventory as they manage through significantly lower end-market demand. Now we are starting to see those customers' inventories normalizing, but the overall demand conditions in general industrial markets remain weak, primarily in Europe.

We have strong relationships with all of the major global cutting OEM customers and are confident the decline is macro driven. We are working closely with our customers to understand their needs, enhance our service capabilities and reduce product costs. This approach ensures that our products not only stand out from the competition, but also deliver higher value to our customers.

We are excited to announce the launch of a series of innovative products over the next two quarters, which are designed to foster win-win relationships and solidify our market position. I am particularly excited about the new growth opportunities for IPG where fiber lasers can replace incumbent technologies.

There are areas where we can innovate to provide solutions to specific problems in a way that is much better for the environment as we are replacing processes that are typically done with harmful chemicals or a significant use of electricity.

A perfect example would be cleaning and heating applications. IPG is extremely proud to provide the most energy efficient and environmentally friendly solutions in these areas.

Medical is another exciting area for the company with significant barriers to entry. We have a strong growth pipeline in urology applications and are seeing robust demand in lasers for skin rejuvenation and lesion removal. We believe that new product launches in 2024 and 2025 will result in strong revenue growth opportunities for this business.

Moving to the outlook, our second quarter book-to-bill was below 1. We are seeing more stable demand sequentially in China, but macroeconomic uncertainty is still negatively impacting demand across general industrial markets and applications in Europe and North America.

While we believe strongly in the future of EVs, the well-publicized slowdown in EV adoption in Europe and US has prompted several customers to delay further investment in battery capacity around the world.

Our prior expectation for a rebound in demand in second half seems less likely to materialize and we currently are not expecting to see a meaningful recovery in our laser sales until sometime in 2025.

Before I turn the call to Tim to discuss financial results, I would like to thank Dr. Scherbakov for his significant contributions to IPG and the laser community over the last 30 years. I would also like to thank the Board for their trust in me. I look forward to leading this company, pushing the boundaries of innovation, and transforming the world around us by applying light in ways that improve life.

With that, I will now turn the call over to Tim.

Thank you Mark, and good morning everyone. My comments generally will follow the earnings call presentation which is available on our investor relations website. I will start with the financial review on slide 5.

Revenue in the second quarter was $258 million, a decline of 24% year-over-year. Foreign currency headwinds reduced revenue growth by approximately 2%. Revenue from materials processing applications decreased 28% year-over-year, while revenue from other applications increased 24%.

GAAP gross margin was 37.3%, a decrease of 610 basis points year-over-year due to lower absorption of manufacturing costs as a result of lower revenue and our continued effort to reduce inventory, which reduced gross margin by over 700 basis points; this was despite achieving a $23 million decrease in manufacturing expenses as compared to the prior year.

Higher inventory provisions added another 200 basis points to the headwinds in the quarter. I am happy with the progress we are making on the inventory side, but more work needs to be done before we get back to more normalized levels.

These negative impacts to gross margin were partially offset by a decrease in import duty and shipping costs. Operating expenses came in at the low end of our expectations, due to reduced variable compensation, but increased year over year, primarily due to increased investment in research and development and sales and marketing.

FX headwinds also had a negative impact on revenue and gross profit in the quarter. If exchange rates relative to the US dollar had been the same as one year ago, we would have expected revenue to be $6 million higher and gross profit to be $3 million higher.

GAAP operating income was $12 million and operating margin was 4.7%. Net income was $20 million, or $0.45 per diluted share. The effective tax rate in the quarter was 19% and benefited from certain discrete items.

Foreign currency transaction losses, as a result of remeasuring of foreign currency assets and liabilities to period-end exchange rates, had a negative impact on operating income of $3 million, or $0.05 per share. We continued to optimize our footprint and had a gain on sale of assets in the quarter, which increased operating income by $1 million and increased diluted EPS by $0.01.

Moving to revenue performance by region on slide 6. Sales in North America decreased 2% year-over-year. We saw a strong growth in medical, 3D printing and advanced applications, which was offset by lower revenue in cutting, welding, and cleaning applications.

Sales in North America held up relatively well, but macro headwinds have continued in the general industrial markets as well as led to reduced EV investments. In addition, continued inventory management by cutting OEMs is leading to more uncertain outlook in the region.

In Europe, sales decreased 27% compared to the prior year. Similar to the trends we saw in North America, cutting sales were impacted by large OEM customers reducing purchases as they managed their inventories.

Economic conditions in Europe seem to be deteriorating further and impacting investments in industrial and automotive markets. EV investment is also delayed and current projects are being pushed out into 2025.

Revenue in China decreased 34% year-over-year as demand declined in general industrial and e-mobility markets, negatively impacting sales across cutting and welding applications.

On the other hand, sales to cleaning and 3D printing applications continued to increase in the region. China revenue improved sequentially and we are seeing some stabilization there.

Moving to a summary of our balance sheet and cash flow on slide 7, we ended the quarter with cash, cash equivalents, and short-term investments of $1.1 billion and no debt. We continued to manage inventory, reducing it by $31 million from the prior quarter.

We are targeting further reductions in inventory over the course of 2024. Cash provided by operations was $53 million and capital expenditures were $24 million during the second quarter.

While maintaining a strong balance sheet, we have been returning a significant amount of capital to shareholders through opportunistic share repurchases. We spent $122 million on share repurchases in the second quarter and $212 million year to date. Since the beginning of 2021, we have returned over $1 billion to shareholders through share repurchases.

Moving to our outlook on slide 9, for the third quarter of 2024, we expect revenue of $210 million to $240 million. The third quarter gross margin is estimated to be between 34% and 37%.

We anticipate delivering earnings per diluted share in the range of $0.00 to $0.30, with approximately 45 million diluted common shares outstanding. As discussed in the Safe Harbor passage of today's earnings press release, our guidance is based upon current market conditions and expectations, assumes exchange rates referenced in our earnings press release, and is subject to risks outlined in the Safe Harbor and the company's reports with the SEC.

With that, we will be happy to take your questions.

Thank you. At this time we'll be conducting a question and answer session. (Operator Instructions)

James Ricchiuti, Needham & Company.

Hi, thanks. I'm wondering if you could talk a little bit about whether you're seeing much variability and the book-to-bill by region it looks like North America seems to be holding up, although, I'm sure you're seeing some pockets of weakness in some of those industrial markets that you talked about. So maybe that's my first question.

Yes, hi, Jame. Yeah, on the book to bill for the quarter was below one. The weakness continues to really be in Europe. So that was down compared to the first quarter. North America all together was relatively stable, but we saw some headwinds around the industrial in other businesses. We actually had a strong quarter on bookings for medical.

And then Asian bookings, actually, as we've alluded to, really much more stable than Europe. So we're actually quite pleased with the performance of underlying bookings in Asia as a whole, so China, Japan, and South Korea as well.

Yeah. Ex-cutting in China, are you -- I don't know how to think about what you're seeing in China, frankly, just because of what we're seeing now and the weakness on the EV side, how would you characterize the business in China, excluding the legacy cutting?

Hey, Jim, this is Mark. How are you?

Hi Mark. Welcome aboard by the way.

Thanks very much. Yeah. So China is still a very important part of our business. It's about 25% of the business and we've been able to over time really diversify that business. So the China cutting market, as you said, that's now become a very small part of our business. It's less than 5%.

And we've been diversifying into areas like EV to welding area. We've been very successful in that region because of the capabilities that we have in not only the -- we've talked about the AMB lasers, the special mode for being able to well without spotter. But that combined with our scanning capability and our sensing capability actually measure and look at the world in fits you, right, to be able to do that has been really critical.

That's a quality control for the for the customer. And really a safety prevention issue as well. So that's been really important in EV, and we've kept a significant market share there.

And then also in the area of another example would be 3D printing, where our lasers are really unmatched there because we have very high-power single-mode lasers that are low noise as well. And that's really important to these very high-speed machines that it need very high performance and key to be -- key to those devices.

So those are a couple of areas where it's really been important and again, where we have a significant business in China and continue to drive direct scenario so we're in China, their first to take some of the new technologies. So it's been important for us as we bring out from our roadmap new technologies. China is a great place because they're willing to start with those on an early basis. So again, it was to diversify the business in that region and so important region for us.

Thank you. I'll jump back in the queue, let somebody else in.

Ruben Roy, Stifel.

Thank you very much and Mark welcome, thank you for providing some, I guess a preview on some of the areas of focus and how you're thinking about things here at IPG.

I guess, Mark, a question for you. You made a comment on cutting still, obviously a big, big market small in China -- smaller in China, but still a big market for IPG. And you made a comment, I think you're talking about Europe where you're talking about the decline is macro-driven, I assume you were implying that not a competitive issue.

In the past IPG managements talk about cutting ex China as a potential area of growth longer term, as overall cutting in other geographies is still on the comet. It really hasn't and gotten to a critical mass in some areas. I guess as you think about cutting and R&D and cutting. And maybe if you could give us a little more perspective on how you're thinking about that market specifically and IPG's positioning in some of these markets outside of China, that would be helpful.

Yeah, absolutely. Thanks very much for the question. As you mentioned, cutting is still an important piece of our business, although welding is now the largest part of IPG business. And as you said, the competition for us has really been in China and that part of the business is less than 5% now.

In Europe and Japan and in the US, the OEMs, we have great relationships with them and they really understand the value that we provide. This is a quality uptime, uptime on the systems. And that's very critical for those customers.

And we talk to them all the time. That's an area where we're not losing share because of that it's the services to support. It's the full package with those OEMs. And yes, we are continuing to drive in that area. It's an important area. So you've heard us talk about our roadmap in cutting. So very shortly, we'll be releasing a very new high-power lasers that are at the high end, a very big change in the volume of the lasers.

So smaller form factor and then lower cost saving 15% to 20% and the cost. So again, very key, and we're also constantly working with the customers and I mentioned, to support -- the support infrastructure. So we've invested a lot in our service infrastructure to support those OEMs. And that's very key as well.

Very helpful detail. Thanks, Mark. And then as a follow-up around the discussion on EV. I think most of us understand that adoption has slowed and there's a lot of macro impacts, interest rates and otherwise kind of creating issues for the market. But when you talk to your customers, it sounds like you're pushing out any expectations for improvement out into somewhere in 2025.

What drives that improvement? I mean, are we close on the inventory level? I mean, are you seeing some signs from your discussions that there will be some capacity added as you get into '25? Any detail on actual customer feedback would be helpful.

Yeah. What I can tell you, thanks for the thanks for the second follow up question. We're in a very good position in the in the EV I mentioned earlier the kind of a technical solution that we provide in EV. Being able to lock up both the NB laser plus scanning plus the capability to measure those well. So that puts us in a very good position, both at the component subsystem and systems level in that EV market.

Now and talking with the customers, the last quarter they told us they thought things were going to be coming back in the second half of the year. And we see some of those projects start to come back and in the second half. What they've been telling us recently is that they just see things really pushing to the right in 2025. And so that's what we're hearing and that's what we're seeing right now.

Okay. Thanks, Mark. And just really quick for Tim on the model. In terms Tim of the some of the new lasers coming out and the cost out on some of the high-power stuff, how is that looking from a timing perspective? Just wondering how you're thinking about gross margins, given the reality of where revenues are into year-end here and maybe even early '25 is sort of how you're thinking about it sort of a potential bottom for gross margin as some of those new products roll out? Any color there would be helpful.

Sure, Ruben. On gross margin, really the underperformance continues to be related to under-absorption, even though we managed to take out a lot of manufacturing costs. So the product gross margin, when I look at that on an isolated basis, is holding up very well.

So what I would expect as we get some of those cost reduction initiatives actually rolled out into products towards the end of this year into next year, we'll start to see the margin off the product improve potentially a little bit because we're going to keep some of those cost reductions in hand.

And then as we start to grow the business again, you'll start to recover some of the under-absorption on the fixed cost basis. So I think at this level of revenue, if we can start to recover a little bit from here, you are talking about gross margin being kind of at a trough level.

The other thing that's impacting us is the need at the time we've got the headwinds around revenues to continue to take inventory down, right. So that is also driving some of the under-absorption as we get closer to target level of inventory.

I said, we've got more work to do on that in the second half of the year. But I expect that situation to ameliorate certainly into 2025, the sort of double whammy of lower revenue and getting inventory down really shifts. We hope to turn that on both accounts, both on the revenue and the inventory side of it. So that will drive some improvement in gross margin as well.

And then Ruben, as Tim was saying, this is largely an under-absorption issue. So we've been investing and are continuing to invest in our product roadmap driving differentiation. We've got a lot of exciting things in a number of areas. You've heard us talk about the heating and drying applications.

We've been very successful on the medical products, those are growing and you've heard us talk about like well, the mood and the combination with the with Miller, those are all areas that are going to drive growth. And as that growth drives, of course, it's going to improve the absorption and we'll see those margins improve. So that plus the cost balancing that Tim was saying our important areas.

Got it. Thank you, [Gitin].

Keith Housum, Northcoast Research.

Good morning. Thank you and Mark, congratulations and welcome aboard. The investment in SG&A and R&D. I guess maybe as we look at the SG&A, in particular, after several years down results. Obviously, I appreciate the investments in SG&A, but is there a particular strategy order area that you guys are focused on or to help drive growth in the future.

Yeah, I can take that. Thanks very much for the question, Keith. So as I said, again, we have a very exciting, exciting roadmap and absolutely investing in R&D, we've got a lot of capability that I have to tell you. I'm really thrilled coming, of course, was looking at the company very closely over a number of years.

And then before coming to IPG, I looked very, very closely at what I saw as technology and product roadmaps. But now being here seeing under the covers it's even better than I expected. So really great innovation. There are great things to do drive, the product roadmap drives differentiation. You've heard us talk about some of the new products and it's beyond products now just lasers and components.

We've been investing into the applications and the process development side. So that's a very critical piece for us because we're able to go and we're able to work with the customers. We now have these labs and these capabilities all over the world. We're working with the customers. We're seeing the problem that they need to solve. We're working with them.

We're developing a solution and that's the laser, but it's also being delivery. It's also I talked about some of the sensing capability. So when you put all of those things together and wrap that process together and then be able to deliver to the customer a subsystem and a system that's a whole another way to put a moat around the products. So that's another area we're absolutely investing on that SG&A side that will continue to drive growth in the business.

Okay. So just so I understand in terms of investing in the applications and solutions, are you expanding, are you going to be start competing with a more with some of your OEMs and integrators or just developing beyond just the lasers and doing more of it for which they would have done themselves.

It's -- so what I would tell you is that we've got our development on the lasers, development again on that delivery and the process side and a lot of the processes that we're growing in our new processes, things like heating and cleaning, which there. That's a -- those are big areas for us to grow in particular markets. That's something that we've done in the EV, for example, the cleaning application where we can read some of those processes of chemical kinds of processes and be able to do that with lasers.

So there we're really driving improvements or new laser parameters that can do that by understanding the process and then being able to provide some of the wraparound pieces that really are unique because of our process knowledge. So that allows us to expand into unique new applications as well.

Great. Thank you. Good luck.

Michael Feniger, Bank of America.

Hey everyone, thanks for taking my questions. Mark, you kind of touched on this, but I'm just curious about driving the penetration of lasers in the industrial applications. Is it just IPGP have to think differently maybe on either pricing to help drive that adoption?

Or is it market applications or is it maybe go-to-market strategy in terms of -- I know it was touched on before when it comes to some of these the OEMs and distributors. I'm just curious if with fresh eyes, if you feel like getting that penetration up outside of China, requires maybe a different approach.

Thanks very much. It's a very good question. And we are taking a deeper approach on some of these. It's a little bit different. So even look at the handheld welding, we've taken a different go to market approach there. We've partnered with our light well with a premier welding supplier in North America, Miller Electric that supplies today or has supplied that to date with a conventional making [tig] experts in the welding.

They provide those systems and they are still working with us in partnership to take that on to label it as a Miller products. So they're seeing the -- that this is the right way to go in welding and they're seeing that because you're able with our system, with our LightWELD system, we build the process. So again, this is talking about that process development.

We've actually build it into the system. So you can actually dial in, hey, I'm doing aluminum -- aluminum or aluminum and copper and the system will set itself and you can go and do that welding where in standard processes, if you're making bigger welder you might have to apprentice for years before you can do those processes. Here, you can do that. I have even welded with the system.

So you can go from years to hours being competence. So that allows us a different market -- go-to-market strategy, again with Miller and putting that into the market. And then again, pushing on that application that and that process development, again, taking and optimizing not only the lasers for a particular process.

Let's take something like cleaning we can -- that's again replacing a process that would potentially have been done with chemicals, right? So something better for the environment now using a laser but you have to optimize the laser to be able to do that. So we're making high-power lasers with short pulses that are optimized for that.

But then you also have to drive the scanning has to work as well. So we've actually developed case use scanners that are very high speed for that cleaning applications are tied to that laser. The tide of the process and then working with the customer, be able to provide the solution right, either in a subsystem or system level.

So again, a different go-to-market strategy because we need to solve the problem in that non-laser space, right and be able to provide that whole piece. So that's an investment that we've been making. As I mentioned, and that's a change in go-to-market that we're going to continue to invest in.

Understood. And Tim, just curious on seasonality. Like if you look back typically Q4 might be down a little bit versus first Q3, depending on some years. But this year, obviously, because of some of the macros, some of the factors feels like Q3, that's a little bit weaker seasonally than normal.

I'm just curious, Tim, is there anything you want to flag in terms like seasonal, factors as we kind of think about this year, if it's different than what you kind of seen in prior years when we think of the seasonality of the business.

Michael, it's completely different at the moment. I mean, any historic trends on seasonality right now can be sort of disregarded. We're in a pretty deep downturn, particularly in Europe. You've got a different dynamic to the China business and a weak demand environment, even though that business has stabilized.

But we'd often see Q3 in Q2 is stronger quarters, given some of those demand dynamics you'd see out of those areas. At this point in time, I think seasonality is not -- you can't pick anything from it. And what we've stated is we just don't seem -- we don't see any meaningful recovery until sometime in 2025 at this point.

Fair enough. And if I could just squeeze one more in Mark. I think you really are emphasizing sounds like really spending to drive growth in investing the business. I'm just curious with where the balance sheet is Mark is, do you feel like the growth can get revitalized just by the organic growth profile and some of these markets you guys are trying to tack.

Obviously, I think the macros important as well. Do you think you can get back to that double digit kind of growth profile that IPG was kind of used to before the softness was observed? Or do you think M&A has been a very key component of us talking about the growth profile going forward? Thank you.

Yeah, sure. Thanks. Thanks for that follow-up question. So first of all, I just want to emphasize the -- again the product roadmap and the technology here. So first and foremost is continuing to drive that. We've got a great lineup of things that we're working on that will be coming up. That will absolutely drive growth in the material processing side, you've heard me talk about lot the lasers and then some of the components like the fast scanning, tying those things together and driving growth with the subsystem and system capability.

And then also in other areas like medical that we've seen that fantastic growth. And we've got a great roadmap that we're investing in, that will give us great growth over the next years now. Of course, I'm always interested in anything that could drive that growth faster and give us differentiation, faster time to market, put us into adjacent markets.

So the M&A, I'm certainly always interested, always looking but in that area, not looking for any giant transitional kinds of acquisitions. Again, we have a really great opportunity to continue to grow that business.

(Operator Instructions) Mark Miller, Benchmark.

I too would like to welcome Mark to IPG. And I had a question on General Motors and Ford recently reported strong EV sales. Just wondering what you're seeing in terms of EV related sales in both North America and China?

Yeah, I can take that Mark, thank you for the questions. Again, as I mentioned earlier, in the call, we're in a really good position on the EV because of the solutions that we bring, not only in the laser, but also the wraparound process there.

And so we have a great share in them. But what we've seen, again, as we talk to the customers, those projects are being pushed to the right, where we thought they were going to come in, in the second half of this year the customers in each of the regions are talking about those projects being more into 2025.

And Mark, maybe just picking up on a couple of good data points. I think overall EV sales in the first half of the year up 20%, in China they're up 30%. Europe have been flat at the moment. Off a smaller base, North America has actually performed quite well.

So total battery capacity utilization we think has increased by about 20%. That's going to help drive higher utilization overall globally. And I think supports the thesis that we start to see a recovery in 2025.

Okay. Last question is in terms of recently introduced products, what percent of sales -- 45%?

46% this quarter.

Thank you.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eugene Fedotoff for closing comments.

Thank you for joining us this morning. And your continued interest in IPG. We will be participating in a number of investor events this quarter and are looking forward to speaking with you soon again. A great day everyone.

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