INVESTOR PRESENTATION December 1, 2017
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
Our Mission Making our fiber laser technology the tool of choice in mass production 3
Key Takeaways Global market leader in fiber laser technology across multiple end markets and applications Vertical integration, manufacturing scale, and technology driving industryleading margins Expanding multi-billion dollar addressable market opportunity Rapidly growing earnings and cash flow 4
Dual Secular Growth Strategies (1) Conversion from Non-Laser to Laser Technologies $100B Global Machine Tool Consumption in 2017: ~$78B Global Laser Systems for Materials Processing in 2017: ~$14B Laser Systems 18% of Worldwide Machine Tools and Growing (2) Conversion from Traditional to Fiber $3B Fiber a Growing Percentage of Annual Demand for High-Power Industrial Laser Sources $80B $60B Non-Laser Machine Tools $2B Other Laser Sources $40B $20B $1B Fiber Laser-Based Systems $0B 2004 2006 2008 2010 2012 2014 2016 2018 2020 $0B 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Oxford Economics, Optech Consulting and IPG Photonics Corporation Source: Optech Consulting and IPG Photonics Corporation 5
Broadest Portfolio of Fiber Any wavelength, mode of operation, power, beam quality or application 10 nm 400 nm 700 nm Diode 1.5 μm Holmium Fe:ZnSe/S 10 μm X-Ray Ultraviolet Visible Near-Infrared Mid-Infrared Far-IR EUV Excimer UV Blue, Green, Yellow, Orange, Red Ytterbium Erbium Thulium Cr:Zn/Se/S Peak Power (Megawatts) Peak Power: 120kW Applications: cutting, welding, soldering, drilling, brazing Pulse Rate: 0.05-50 ms Peak Power: 23kW Applications: cutting, welding, soldering, drilling, brazing, annealing Pulse Rate: 1-200 ns Peak Power: 1 MW Applications: scribing, thin-film ablation, via drilling and flex cutting, surface preparation, texturing, annealing, marking, drilling and scribing Pulse Rate: 0.7-5 ns Peak Power: >150 kw Applications: thinfilm ablation, low-k and silicon dicing, glass scribing Pulse Rate: ~2 ps Peak Power: >10 MW Applications: black marking, sapphire and glass scribing, solar thin films, OLED film cutting, scientific Pulse Rate: <500 fs Peak Power: >20 MW Applications: thin metal cutting and drilling, ophthalmic surgery, high precision, scientific Thick steel cut with a continuous wave laser Drilling using a quasi-continuous wave laser Surface Cleaning using a pulsed laser Continuous Wave Throughput Quasi- Continuous Wave Nanosecond Pulsed Nanosecond Pulsed Picosecond Pulsed Precision Femtosecond Pulsed Time Micromachining using an ultrafast laser 6
Advantages of Our Fiber Monolithic Design Highest Power Record Power Efficiency Beam Quality MOPA Configuration Reliability Modular / Scalable Architecture Faster Processing Speed Lower Operating Costs Easy Systems Integration Small Footprint Efficient Cooling 7
Significant Barriers to Entry Technology: IP & Process Know-How Business: Vertical Integration & Scale 8
Highest Volume, Lowest Cost Diode Producer Tested Chips Produced 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Packaged Diode Costs % Chg. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% Tested Chip Production Cost/Watt Decrease (2009 Base Year) Source: IPG Photonics Corporation 9
Global Presence Oxford & Marlborough, MA, USA Wafer fab operation, chip-onsubmount assembly, wafer packaging, components and final assembly ~2,000 employees Clean Room Percent 650,000 total ft 2 Clean Room Percent 370,000 total ft 2 Burbach, Germany Components and final assembly ~1,300 employees Clean Room Percent 530,000 total ft 2 Fryazino, Russia Components and final assembly ~1,500 employees R&D 10% Contractors 7% G&A 7% Sales 4% 5,193 Current Employees Manufacturing 72% US 13% Other China 6% 3% China 54% Sales by Region, 2017 Germany 9% Russia 29% 5,193 Current Employees US 38% Other Europe 24% Germany 24% 10
Metal Cutting Laser Metal Cutting Sources $1,500M $1,000M $500M CO 2 & Other Installed Base of ~100,000 Laser Cutting Systems Worldwide Fiber $0M 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Optech Consulting and IPG Photonics Corporation 11
Metal Joining (Welding & Brazing) $800M Laser Metal Welding & Brazing Sources $600M $400M $200M CO 2 & Other Fiber Laser Welding $0.7B >$5B Annual Demand For Welding Equipment Globally Traditional Welding Equipment, $4.6B $0M 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Optech Consulting and IPG Photonics Corporation Source: Freedonia Group & LMR 12
New Addressable Applications $4B $3B $2B $1B $0B 2014 2015 2016 2017 2018 2019 2020 Source: Laser Markets Research and IPG Photonics Corporation Note: Estimated data, market for OLED annealing of displays not included, which is assumed to be ~$500M in 2017 13
Total Addressable Market $12B $10B $8B Telecom Metal Processing $3.3B Telecom $6B $2.6B 2017 Total Addressable Market > $5B $4B New Applications $2B Metal Processing $2.7B $0B 2014 2015 2016 2017 2018 2019 2020 New Applications Source: Laser Markets Research and IPG Photonics Corporation 14
Strong Growth and Industry-Leading Margins $1,200 100% $900 $1,048 80% Revenue ($ Millions) $600 $300 37% $474 39% 60% 40% 20% Operating Margin $0 2011 2012 2013 2014 2015 2016 9M Sep-17 Revenue Operating Margin 0% 15
Rapidly Growing Cash Flow $350 $300 $250 $84 $ Millions $200 $150 $100 $50 $53 $213 $0 $34 2011 2012 2013 2014 2015 2016 9M Sep-17 Free Cash Flow Capex 16
Return Profile 50% 45% 40% 35% 46% 43% 30% 25% 31% 20% 15% 21% 10% 5% 0% 2011 2012 2013 2014 2015 2016 TTM Sep-17 Return on Equity Return on Invested Capital, Excluding Cash 17
Target Business Model Revenue Growth 12% 37%-39% Market Growth Gross Margin 55% 50%-55% 50%-55% Operating Margin 37% 32%-37% 32%-37% 18