IPG Photonics Corporation The Fiber Laser Company (NASDAQ: IPGP) - PowerPoint PPT Presentation

World Leadership in High Power Fiber Lasers IPG Photonics Corporation The Fiber Laser Company™ (NASDAQ: IPGP) Investor Presentation September 2016 www. ipgphotonics .com

Safe Harbor Statement The statements in this presentation that relate to future plans, market forecasts, events or performance are forward-looking statements. These statements involve risks and uncertainties, including, risks associated with the strength or weakness of the business conditions in industries and geographic markets that IPG serves, particularly the effect of downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; inability to manage risks associated with international customers and operations; foreign currency fluctuations; high levels of fixed costs from IPG's vertical integration; the appropriateness of IPG's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 2

IPG Overview  Global leader in industrial fiber lasers  FY 2015 sales of $901 million; YOY growth of 17%  $4.53 diluted EPS; up 20% YOY  Q2 2016 sales of $252.8 million; YOY growth of 8%  $1.25 diluted EPS; up 9% YOY  Growing acceptance of fiber lasers replacing traditional lasers  Products are sold to OEMs, systems integrators and end users for use in many industries  Global operations with over 3,700 employees 3

Investment Highlights The technology leader and most profitable company in the rapidly growing fiber laser market  Expanding $4.8 billion opportunity for all lasers  Approximate average annual growth rate of 6%  Recognized leader in the rapidly growing fiber laser market  Estimated 12% CAGR from 2015 to 2020  Significant competitive advantages  First mover advantage  Performance, product range and reliability  Lowest cost (vertically integrated model)  Strong IP position  Vertical integration and direct sales model drives industry-leading margins (54.6% GM in FY 2015, 54.5% GM in Q2 2016)  Broad geographies, end markets and applications  Asia & Australia 51%, Europe 33%, North & South America 15% 4

Rapidly Taking Share in Large, Existing Laser Markets (000) $8,000 2015 - Share of Total Laser Market $6,751 $7,000 $6,000 Fiber 31% $4,800 $5,000 $4,000 $3,000 $2,600 $2,000 $1,480 $1,000 2020 - Share of Total Laser Market $- All Lasers Fiber Lasers All Lasers Fiber Lasers 2015 2020 Fiber Forecast 39% Materials Processing Advanced Applications Medical ____________________ Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates. 5

Materials Processing – Diverse End Uses and Customers Automotive General Manufacturing Heavy Industry Oil & Gas Shipbuilding Nuclear Construction Aerospace Shipbuilding Semi/ Electronics Displays Consumer 6

Materials Processing Laser Market Opportunity for Continued Fiber Laser Market Share Gain is Significant (US$ mm) IPG’s Core Existing Applications New Applications $1,867 $1,453 $1,323 $718 $662 $644 $569 $520 $431 $385 $352 $333 $278 $219 $183 $144 2015 2020 2015 2020 2015 2020 2015 2020 High Power Marking Fine Processing Micro Processing ( Excludes lithography) All Lasers Fiber Lasers ____________________ Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates. 7

IR Laser Applications Welding Brazing Cutting Drilling Cladding Marking Surface Treatment Additive Manufacturing 8

Fiber Laser Penetration of High Power Applications $1,400 80% 70% $1,200 Welding $364 60% Opportunity - $1,000 potentially 50% much more $800 significant 40% $591 $600 30% $967 $180 $400 20% $219 $462 $200 $356 10% $182 $- 0% 2015 2020 2015 2020 (US$ mm) Cutting Welding & Other High Power Fiber Lasers All Other Lasers Fiber Market Share Cutting Applications Welding Applications 7% Flat Sheet 3% 9% 16% Power Train Cutting Tube Welding 27% Tube Cutting 17% Car Body Scanner Welding 81% 3D Cutting Car Body Seam Welding 40% / Brazing Other 9

Transitions in Welding – Medium and Long Term FUTURE CURRENT Limited Materials Diverse Materials Diverse Industries Diverse Products Aircraft Automotive Autos High Strength Aerospace Bridges Steel Construction Buildings Aluminum Heavy Niche Welding Pipelines Titanium Equipment Applications Rails Railways Alloys Railcars Shipbuilding Thick Ships Materials Transportation Storage Tanks & Storage Trucks In many instances strength of the laser weld > welded material Decreasing cost of laser welding, new laser welding technologies, know-how, software & algorithms 10

A Diverse Mix with Year-over-Year Growth IPG Sales by Product Lines ($US mm) $550 $499.6 $500 $450 $426.1 $400 $344.1 $350 $300 $259.6 $250 $200 $135.3 $150 $131.6 $124.8 $99.5 $100 $81.0 $65.2 $49.7 $53.8 $56.5 $50 $34.9 $24.8 $21.5 $13.8 $13.3 $13.2 $6.1 $0 Pulsed High-Power Medium-Power Low-Power QCW 2013 2014 2015 YTD 2016 11

Acceptance Drives High-Power Growth 2011 – 2015 Total Units Sold CAGR: 17% 2011 – 2015 KW Power Sold (Medium and HP) CAGR: 43% 2011 – 2015 KW Power Sold (QCW) CAGR: 113% 35,000 32,800 Kilowatts of High Power and Medium Power Lasers Kilowatts of QCW Lasers 30,000 24,800 25,000 21,200 20,900 20,000 17,600 Units & KW of Power Sold 14,200 KW 15,000 9,900 KW 10,000 7,100 KW 4,800 KW 4,100 KW 3,400 5,000 KW 2,100 KW 1,000 500 500 200 200 KW KW KW 0 2011 2012 2013 2014 2015 Total Units Sold* ____________________ *Units excludes telecom components and component PLDs. 12

Diode Production a Significant Advantage  High volume production levels of pump diodes, proprietary processes and use of unique chip and package designs allows IPG to increase yields, lower component costs and assure high quality Diode Production and Cost Trends 6,000,000 120% 100% 5,000,000 % Change in Packaged Diode Cost 80% Tested Chips Produced 4,000,000 60% 3,000,000 40% 20% 2,000,000 0% 1,000,000 -20% - -40% 2009 2010 2011 2012 2013 2014 2015 Tested Chip Production Cost/watt % decrease (base yr 2009) Annual cost decrease % ____________________ Source: IPGP estimates. 13

Recent & New Product Introductions  Expand addressable market and enhance future growth opportunities by addressing new application and customer specific requirements CURRENT FUTURE  Brazing  Drilling  Welding of Alloys and Specialty  Marking & Materials Engraving  Cladding & Deposition  Cutting  Ablation  Welding  Display & Imaging  Fine  3D-Cinema Processing  Entertainment and Projection  Additive  Micro-processing Manufacturing  Medical Devices  Bio-Medical  Sensing & LIDAR 14

Recent & New Product Introductions - Beam Delivery Products • Highest Power Handling > 100kW BEAM • Fast Switch Time < 50usec SWITCHES • Energy or Time Share Options Shutter Coupler Multi-Channel • HIGH-POWER Highest Power Handling > 100kW • Plug and Play with all IPG Lasers COLLIMATORS High-Power • Highest Power Handling > 50kW Welding WELDING • Modules for Advanced Welding: Heads Advance HEADS Seam Tracking, Wobble, Dual Spot, etc. Welding Modules Manual & • Highest Power Handling > 12kW CUTTING HEADS Zoom Motorized Micro-Cutting • Advance Modules for Cutting Collimator Cutting Heads Heads • Integrated Solutions Integrated High-Power SCANNING • Range of applications from low- Marker Scanning HEADS power marking to very high-power Mid-Power welding Scanning  Expands total available market, simplifies customer supply chain & improves customer experience & results 15

Recent & New Product Introductions – Trifocal Laser Brazing OBJECTIVES  Reliable brazing process Laser  Spot Increased brazing speed  High quality seam Laser appearance Spot  Multi-spot technology  Inline cleaning process Laser Spot ADVANTAGES  Cleaning and joining in one step  Reduction of manual cleaning effort, automated process  Improved reproducibility  Maximum joint strength  Increased brazing speed  Improved joint appearance: straight seam borders, smooth surface, no spatter, control of brazing temperature  Minimized heat effects on the assembly  Minimized cost 16