Management Comments

"IPG delivered another year of record results in 2016 exceeding ney style="box-sizing: border-box; outline: 0px; border: 0px;">$1 billion in sales for the first time as we celebrate our 10th anniversary as a public company," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "For the fourth quarter of 2016 we reported revenue and EPS above our guidance ranges. Record sales of ney style="box-sizing: border-box; outline: 0px; border: 0px;">$280.1 million increased 25% year-over-year for the fourth quarter driven by continued strength in materials processing. We achieved a strong gross margin of 55.5% and a 22% year-over-year increase in earnings per diluted share to a record ney style="box-sizing: border-box; outline: 0px; border: 0px;">$1.39, demonstrating the leverage in our operating model."

Materials processing sales in the fourth quarter increased 24% year-over-year, primarily due to solid demand for cutting and micro materials processing applications. Sales to other markets were up 48% from the fourth quarter of 2015 driven by strong growth in telecom related to IPG's recent acquisition and robust organic growth. This was partially offset by lower sales for medical and advanced applications. High-power fiber laser sales had another record quarter with 35% growth year-over-year, while sales of QCW lasers grew by double digits and pulsed lasers by single digits. Medium-power, low-power and laser systems were essentially flat with the prior year. On a geographic basis, IPG reported strong growth in China, Europe, Russia and Japan, while sales in North Americawere slightly up from the fourth quarter of 2015.

During the fourth quarter, IPG generated ney style="box-sizing: border-box; outline: 0px; border: 0px;">$99.3 million in cash from operations and used ney style="box-sizing: border-box; outline: 0px; border: 0px;">$27.0 million to finance capital expenditures. During 2016, IPG generated ney style="box-sizing: border-box; outline: 0px; border: 0px;">$292.3 million in cash from operations and used ney style="box-sizing: border-box; outline: 0px; border: 0px;">$127.0 millionto finance capital expenditures. IPG ended the quarter with ney style="box-sizing: border-box; outline: 0px; border: 0px;">$830.6 million in cash and cash equivalents and short-term investments, representing an increase of ney style="box-sizing: border-box; outline: 0px; border: 0px;">$141.5 million from December 31, 2015.

Business Outlook and Financial Guidance

"The book-to-bill ratio was greater than one in the fourth quarter as order flow remained strong through the quarter," said Dr. Gapontsev. "Backlog for orders with firm shipment dates increased by 23% to ney style="box-sizing: border-box; outline: 0px; border: 0px;">$226.7 millionfrom ney style="box-sizing: border-box; outline: 0px; border: 0px;">$185.1 million while backlog of frame agreements expected to ship within one year decreased by 27% toney style="box-sizing: border-box; outline: 0px; border: 0px;">$187.2 million from ney style="box-sizing: border-box; outline: 0px; border: 0px;">$257.4 million primarily due to the timing of when new frame agreements have been received as, this year, a large number of frame agreements were booked in January 2017."

"Looking ahead, we are building on strong momentum as we capitalize on new growth opportunities with existing and new OEMs and end users. In addition, we are enthusiastic about the new innovative products we are bringing to market to extend our technology lead and address applications beyond our core markets. We are confident in our prospects for strong sales and profitability growth as we enter 2017," concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of ney style="box-sizing: border-box; outline: 0px; border: 0px;">$245 million to ney style="box-sizing: border-box; outline: 0px; border: 0px;">$260 million for the first quarter of 2017. The Company anticipates earnings per diluted share in the range of ney style="box-sizing: border-box; outline: 0px; border: 0px;">$1.10 to ney style="box-sizing: border-box; outline: 0px; border: 0px;">$1.25 based on 53,873,000 diluted common shares, which includes 53,097,000 basic common shares outstanding and 776,000 potentially dilutive options at December 31, 2016. For the full year 2017, IPG Photonics expects revenue growth in the range of 10% to 14%. The annual guidance reflects foreign currency headwinds that the Company estimates will reduce growth by approximately three percentage points. Therefore IPG Photonics expects local currency sales to show stronger growth in 2017 as compared to 2016. As discussed in more detail in the "Safe Harbor" passage of this news release, actual results may differ from this guidance due to various factors including, but not limited to, product demand, order cancellations and delays, competition and general economic conditions. This guidance is based upon current market conditions and expectations, and is subject to the risks outlined in the Company's reports with the SEC, and assumes exchange rates relative to the U.S. Dollar of ney style="box-sizing: border-box; outline: 0px; border: 0px;">Euro 0.94, ney style="box-sizing: border-box; outline: 0px; border: 0px;">Russian Ruble 63, ney style="box-sizing: border-box; outline: 0px; border: 0px;">Japanese Yen 105 and Chinese ney style="box-sizing: border-box; outline: 0px; border: 0px;">Yuan 7.00, respectively.

Conference Call Reminder

The Company will hold a conference call today, February 14, 2017 at 10:00 a.m. ET. The conference call will be webcast live and can be accessed on the "Investors" section of the Company's website at www.ipgphotonics.com. The conference call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. An archived version of the webcast will be available for approximately one year on IPG's website.

about IPG Photonics Corporation

IPG Photonics Corporation is the world leader in high-power fiber lasers and amplifiers. Founded in 1990, IPG pioneered the development and commercialization of optical fiber-based lasers for use in diverse applications, primarily materials processing. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs. IPG has its headquarters in Oxford, Massachusetts, and has additional plants and offices throughout the world. For more information, please visit www.ipgphotonics.com.