IPG Photonics Corporation — Earnings Call Q3 2026

Operator: Good morning, and welcome to IPG Photonics Third Quarter 26 Conference Call. Today's call is being recorded and webcast. At this time, I would like to turn the call over to your host, Eugene Fedotoff, IPG's Senior Director, Investor Relations for introductions. Please go ahead with your conference. Eugene Fedotoff: Thank you, and good morning, everyone. With me today is IPG Photonics CEO, Dr. Mark Gitin, and senior vice president and CFO, Timothy Mammen. On today's call, Mark will provide a summary of our third quarter results as well as the overview of demand environment, and then walk you through the progress we are making on our long-term strategy. After that, he will turn it over to Timothy to provide financial details. Let me remind you that statements made during this call that discuss our 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 our Form 10-Ks for the period ended 12/31/2025 and our reports on file with the Securities and Exchange Commission. Any forward looking statements made on this call are the company's expectations or predictions as of today 11/03/2026 only. And the company assumes no obligation to publicly release any updates or revisions to any such statements. During this call, we will be referencing certain non-GAAP measures. For more information on how we define these non GAAP measures, and a reconciliation of such measures, to the most directly comparable GAAP measures, as well as 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 will now turn the call over to Mark. Mark Milton Gitin: Thanks, Eugene. Good morning, everyone. Our third quarter revenue increased 15% year over year, making it the fourth consecutive quarter of double digit revenue growth with both Industrial Solutions and Advanced Solutions contributing to the results. Our adjusted EBITDA and adjusted EPS also improved. This reflects continued progress in executing our strategy. Driving sustainable, profitable growth through technological leadership product innovation, operational excellence, and disciplined capital allocation. Customers continue to adopt our differentiated solutions across several strategic growth markets. We saw strong growth in our industrial solutions particularly in welding applications where our laser technology beam delivery, process monitoring and applications expertise provide meaningful competitive advantages. We remain focused on helping customers improve productivity, quality and manufacturing economics through advanced laser based integrated solutions. We have also made good progress in advanced solutions, driving our laser and photonics technologies into attractive high growth markets. Let's look more closely at revenue by application and the meaningful progress we are making on our strategic growth initiatives. Starting with Industrial Solutions, revenue increased 12% year over year driven by strong growth in welding and additive manufacturing applications. Across these and other markets, we are strengthening our leadership by expanding laser adoption, displacing incumbent technologies, and moving up the value chain with differentiated subsystem and system solutions. Our welding revenue benefited from higher demand in battery manufacturing, general industrial and consumer electronics in the third quarter. The production of advanced batteries for electric vehicles and stationary energy storage systems involves a range of demanding welding requirements that significantly impact battery performance, safety, and manufacturing efficiency. Our solutions are critical for high capacity battery applications used in energy storage, supporting global electric and growing energy infrastructure build out, including for data centers. We are a leader in this space and are excited about the long-term for battery growth. At the same time, we are encouraged by the strong growth in our welding solutions in other areas such as consumer electronics and industrial markets. In additive manufacturing, we saw increasing momentum as customers continued to adopt this technology for industries such as aerospace, medical device manufacturing, and consumer electronics. Our beam shaping and multi beam technologies, high beam stability, and applications expertise are delivering improvements in throughput and cost per part down. This quarter, we secured new business in Europe that we expect to meaningfully contribute to our additive manufacturing revenue in 2027. Moving to advanced solutions, revenue improved 33% year over year and 15% sequentially as we continue to expand our technology leadership into attractive high growth markets, focusing on medical, defense, semiconductor, and micromachining. Revenue growth in semiconductor and defense applications were the major drivers behind our results this quarter. In semiconductor applications, revenue continued to accelerate and more than doubled year-over-year. As device complexity increases, and feature size decreases, semiconductor manufacturers are investing in advanced process technologies to meet growing demand for GPUs high performance computing, and high bandwidth memory. Our differentiated laser solutions. We are a critical supplier to a number of top tier wafer equipment manufacturers where we are qualified for the next generation lithography, metrology, and inspection tools. Defense revenue was also a large contributor in the year over year growth in Advanced Solutions in the third quarter, as we shipped most of the Lockheed Martin order for Crossbow. The remaining shipments will be delivered in the fourth quarter, and we are actively pursuing multiple additional opportunities. We remain encouraged by customer engagement and the growing recognition of our expanded portfolio of XFO directed energy systems as an effective ready to ship, cost efficient solution for countering evolving UAS threats. While this market remains in its early stages, revenue can be lumpy in the short term, We believe our technology leadership decades of directed energy laser expertise, and commercial laser and systems manufacturing capabilities enable us to establish leading positions in these opportunities. Moving to medical, our business continued to perform well during the quarter, supported by strong customer demand, new product shipments and ongoing adoption of our technologies across multiple applications. We are building on our long history of medical innovation and laser expertise by expanding our leading thorium fiber laser platform with next generation systems for urology applications. Last quarter, we announced the acquisition of Lumibird Medical, an important milestone in the execution of our strategy to expand our business in attractive high margin medical markets. The addition of Lumibird Medical creates a scaled medical laser platform with leading positions in ophthalmology and urology. Expands our medical addressable market to more than $2 billion, enhances our advanced solutions portfolio, and strengthens our long term growth and profitability profile. The acquisition is expected to close in the fourth quarter. We are pleased with the initial integration planning and preparation and are excited about the long-term opportunities to leverage our complementary technologies applications expertise, commercial capabilities, and innovative culture to drive future value creation. I look forward to working with the LumiBird team to accelerate growth and innovation across our medical business. In summary, we achieved another quarter of double digit year over year growth above the midpoint of our guidance range. Customer demand for our unique solutions has strengthened across most markets. Orders also remain strong with book to bill of approximately 1. We continue to make meaningful progress on our strategic objectives delivering profitable growth and creating sustained long term shareholder value. Finally, I am pleased to announce that we plan to host an Investor Day on Tuesday, March 2, 2027 in New York City. We look forward to sharing a deeper view of our strategy and long-term financial targets. Details will be announced soon. Please mark your calendars and plan to join us for this event. With that, I will now turn the call over to Timothy. Timothy V. Mammen: Thank you, Mark, and good morning, everyone. My comments will generally follow the earnings call presentation which is available on our Investor Relations website. I will start with revenue trends by application on Slide 4. Industrial solutions revenue increased 12% year over year and 1% sequentially in the third quarter driven by growth in welding and additive manufacturing applications. Advanced solutions revenue increased 33% year over year and 15% sequentially on strong growth in defense and semiconductor applications. Sales of our emerging growth products accounted for 52% of our total revenue in the third quarter down from 58% in the prior quarter due to product mix. Moving to revenue performance by region on Slide 5. North American revenue was up 14% sequentially due to increased sales in defense, medical, cleaning, cutting, and additive manufacturing. Revenue increased 33% compared with last year primarily on growth in welding, and defense applications. European sales declined 1% year over year due to lower cutting and welding revenue, partially offset by increased revenue in additive manufacturing and semiconductor applications. Revenue was up 4% sequentially driven by improved cutting and welding revenue, as well as continued growth in semiconductor applications. Revenue in Asia was flat sequentially and increased 14% year over year. Driven by growth in welding. Moving to a detailed review of financial performance on Slide 6. Total revenue was $288 million up 15% year over year and 3% sequentially. Foreign currency benefited revenue by approximately 1% in the quarter compared to the same period in the prior year. GAAP gross margin was 40.7% and adjusted gross margin was 41%. Above the top end of our guidance range. We recorded a $5 million net benefit from tariff refunds that had a positive impact on gross margin. Of approximately 170 basis points in the quarter. Lower costs of products sold helped margins in the quarter were offset by lower fixed cost absorption on a year over year basis due to a significant build in inventory last year. Total adjusted operating expenses were $91 million below our guidance range. While we are focused on controlling expenses, we still expect operating expenses to increase modestly going forward due to our continued investments in multiple growth opportunities. GAAP operating income in the quarter was $21 million and GAAP net income was $20 million or $0.47 per diluted share. Adjusted operating income was $27 million and adjusted net income was $26 million. With adjusted earnings per diluted share of $0.61. Adjusted EBITDA was $52 million Both adjusted EPS and adjusted EBITDA came in at the top end of our expectations but also benefited from the $5 million in net tariff refunds. Excluding the tariff refund, both adjusted EBITDA and adjusted EPS improved year over year and sequentially and were above the midpoint of our guidance. Moving to a summary of our balance sheet and cash flow statement on Slide 7, We ended the quarter with $926 million in cash, cash equivalents and short term investments with no debt. Cash flow from operations continued to improve reaching $46 million in the third quarter. We spent $17 million on capital expenditures in the quarter bringing year to date CapEx to $54 million. Our CapEx remains elevated this year due to investments in our major fiber manufacturing facility in Germany. Excluding the German investment, we expect CapEx to be at about 5% of revenue going forward. Moving to our outlook on Slide 8. For the fourth quarter of 26, we expect revenue of $265 million to $295 million. While we are seeing some moderation in battery capacity additions in China, after several strong quarters, we are very pleased with demand trends across other markets and regions. Which are reflected in our book to bill of approximately 1. Adjusted gross margin is expected to be between 37% to 40% as we are not anticipating a meaningful benefit from tariff refunds. We estimate adjusted operating expenses in the range of $91 million to $94 million For the fourth quarter, we expect to deliver adjusted earnings per diluted share in the range of $0.30 to $0.60, with approximately 43 million diluted common shares outstanding. Our adjusted EBITDA is expected to be between $33 million and $50 million This guidance does not assume any contribution from the acquisition of Lumibird Medical. In summary, we are pleased with our third quarter results with growth in revenue and bookings as well as improvements in EBITDA and adjusted EPS. We believe that we are well positioned to continue improving our performance. We are seeing solid long-term demand trends across our markets and are gaining traction on initiatives to expand margins even as we continue to invest in the growth opportunities ahead. I will now turn the call back to Mark. Mark Milton Gitin: Thanks, Timothy. We are pleased with our performance through the first 3 quarters of the year, driven by growth in both Industrial and Advanced Solutions. Our recently announced acquisition of Lumibird Medical accelerates our strategic evolution and considerably expands our advanced solutions portfolio into higher-growth and higher-margin medical applications. We continue to execute our growth strategy supported by operational excellence, and an innovation engine that unlocks significant areas of opportunity. We continue along this path, I am increasingly confident in our ability to achieve above market growth, expand margins, and deliver lasting value for our customers and shareholders. With that, we will be happy to take your questions. Operator: Thank you. At this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. 1 moment please while we poll for questions. Our first question comes from Ruben Roy with Stifel. Your line is now live. Ruben Roy: Thank you, and good morning. Timothy, let's start with the comment you made on moderation in battery capacity additions in China. You have had several strong quarters, as you mentioned. Can you start with maybe talking about Welding or total revenue related to China battery today and how much of that sort of slowdown is built into the midpoint for Q4 And I guess, sorry, 1 more on that is would you say the book to bill was above 1 outside of the China battery moderation? Mark Milton Gitin: Yeah. I will take that, Ruben. Good to hear from you. So after strong growth, over the last several quarters, we are seeing some moderation, as mentioned, in the China battery capacity additions. We see that as a near term effect. We are not breaking it out specifically, but we have factored this into the guidance for Q4. Longer term, we are excited about the growth opportunity, and we certainly still see a lot of capacity to be added there. We have talked about the market drivers there before, electric vehicles, but also stationary storage where that drives grid electrification. Of course, data centers are a key driver there, and we have a very strong competitive position there with our technology solution. And, as was mentioned in the prepared remarks, overall, we are seeing strong growth across most of our markets and regions, and that is giving us still a book to bill of 1. Ruben Roy: Okay. Understood. Thank you, Mark. On the advanced solutions, it sounds like you shipped most of the Lockheed Crossbow order in Q3. You have got some coming up in Q4. Are you expecting a little bit of a gap? I know you mentioned this is a lumpy business. Obviously. How are you thinking about defense in general for the first half of 2027? And I know you have other opportunities in semiconductor and medical. Do you think you will see growth in Advanced Solutions despite potentially you know, some lumpiness post the Lockheed orders. Mark Milton Gitin: Yeah. So, you know, first of all, as you said, we did ship much of the Lockheed order in Q3, and I want to say also we are shipping from production. We are completing the rest of the shipments this quarter. As you mentioned and I did, it is lumpy but very attractive longer term. We are seeing, you know, continued strong customer engagements and pipeline there. I wanna say also that if you did not see, we did launch an extension of the product line. it is called the SE and that has longer range and addresses larger drones well. We are very excited and we have very strong momentum on the customer side there and see good future there going forward. As far as the rest of the advanced solutions, we have talked about that. Semiconductor, is a very strong area for us now. it is smaller, but it is growing quite fast. It doubled year over year. We have very good engagement with Tier 1 fab equipment players where we are being designed into their product solving, really key problems there. And that, of course, has the drive of data centers and AI and that is a area I love also because the winds are sticky, and they stack on each other over time. So, you know, that is a key 1. Medical, we have talked about urology, the urology platform and the growth that we are expecting there. A new customer came on. Last year. We have a great platform for growth there. And remember, we have talked about that business doubling over the next 2 to 3 years. So medical is very strong. Of course, we are bringing Lumibird in finishing that acquisition. We are really excited about what that will bring. The combination of the 2 brings some significant growth. And remember that Lumibird will be accretive in 2027, in that first year. And there is new products that have already been announced, the first new product from Lumibird So lots of exciting things going on there. In our advanced area. So, we are expecting growth in both our advanced and our industrial solutions over time. Ruben Roy: Okay. Thanks for that detail, Mark. And I just have 1 more for Timothy. On the gross margins, if we take out the tariff refunds in Q3, it looks like adjusted gross margins would have been around 39.3%. Your midpoint for fourth quarter is 38.5%. So can you talk about what accounts for the other 80 or so basis points lower on the gross margin? Is that mix absorption, etcetera? And is sort of the 39% level the right starting point to think about as you get into 2027? Timothy V. Mammen: Yeah. So, actually, your math is very good. 39.3% is the adjusted excluding the tariff. That reflects revenue that was $287 million. Right? So at the midpoint, our revenue is $280 million and that actually. The 37. That 38 and a half, sorry, ties right in with what was reported on the third quarter Ruben. And, yeah, I would say we are sort of more consistent here. it is kind of, like, 39% range, and there is a tremendous amount of work that is continuing to be done in node 3 of the areas that I have talked about, whether it is you know, optimizing the value of the product that we are delivering, continuing to get cost reductions with our new higher power diodes, which change in turn the form factor of the product. Right? We are starting to roll those out more meaningfully. And then there is a lot of work continuing on optimizing manufacturing efficiency, utilization, looking at lower cost areas to make some parts, And we want to drive improved absorption and we still see several 100 basis points of gain that we can we can get from that. So it is a we are making good progress, and this is it is a bit slow to get there, but I think we are starting to get to the point where more meaningful gains in gross margin should materialize in 2027. Ruben Roy: Sounds great. Thank you. Operator: Our next question comes from James Ricchiuti with Needham and Company. Your line is now live. James Ricchiuti: Hi, thanks. Good morning. I wonder if you could you may have given it, but the medical growth in the quarter, how big a contributor was that to the overall growth in Advanced Solutions Because as I recall, I think you are anticipating a pickup in the second half. Yeah. Analyst: Maybe that is due to the new customer. Timothy V. Mammen: So medical increased slightly year over year but improved significantly sequentially, which would be the pickup in the second half and we are starting to see the ramp on some of the new product introductions and the new customer. The consumable business is also performing well, and we are expecting that obviously to continue into Q4 for both the hardware and the consumable. And then Mark said that we expect medical to be a nice growth driver for advanced solutions next year, Jim. So, yeah, we are seeing that pick up in the second half of the year that we thought we would Okay. James Ricchiuti: Got it. And just on the industrial solutions, nice growth there. And I am wondering you know, the bigger part of that I think, is still cutting, and correct me if I am wrong. But what kind of growth did you see in cutting? I assume modest versus what you described in welding and additive, but maybe if you could frame that a little better for us. Timothy V. Mammen: Now the main application is really welding these days that drives the underlying industrial solutions. There is still a cutting business there, but it is. We have said before, like, last year, less than 20% of total revenue. it is very small in China. The other main applications that are still material would be the additive manufacturing, which globally is doing quite well. that is, you know, both in Asia, Europe, and North America. We have had good performance out of that. Continuing to get good traction and make progress on cleaning applications. there is actually a marking and engraving business, which is still a reasonable size, and that can perform well when different end markets are stronger there. And then, yeah, the cutting is a smaller part of the business, and not 1 where we expect any meaningful growth on it, although we are actually defending our position there and have got some opportunities in 2027-2028 that could be a little bit more positive. James Ricchiuti: Yeah. Mark Milton Gitin: Just to remind you, Jim, we oh, go ahead. James Ricchiuti: Sorry. No. I was just gonna say they said the growth that you saw in China was really driven, for the most part, by welding and additive, and cutting as you described, is a much smaller part of the business. But that was really the driver. You showed pretty healthy growth, it looks like, year over year in China. Timothy V. Mammen: Yes. it is primarily welding. Additive manufacturing in China, Mark and grading can be good there. The cutting is a small part of that business. Analyst: The flat sheet metal cutting is very small in China now. Mark Milton Gitin: I am sorry, Mark. Go ahead. We covered it. Perfect. James Ricchiuti: Thank you. Operator: Our next question comes from Scott Graham with Seaport Research Partners. Your line is now live. Scott Graham: Hey. Good morning. So kind of like 140 basis points of premium. You know, you got a better set of industrial. General industrial end markets obviously, certainly in The US, maybe not as much in Europe, but that but that is supposed to improve. I am just wondering with that general industrial being your, sort of your largest vertical, how do you approaching getting customers to trade up to fiber. Right? You talked about a couple of elements of, you know, how the market may be starting to move up. But how are you showing a value proposition there? there is this significant runway here for you guys on this. And it is just been very slow in the coming So how are you approaching that? Mark Milton Gitin: Yeah. So, Scott, good to hear from you. Yeah. We are very encouraged by the growth that we are seeing in the industrial the industrial solutions. The areas that we are seeing growth, Timothy mentioned some of this certainly, we are seeing growth in welding, additive manufacturing, cleaning. Those are all areas that are strong and growing in The US. In that industrial space. On the welding, you know, a lot of this comes down to the applications expertise. We are world experts in applications. We have a large number in The US, and globally, we have nearly 100 applications engineers That piece is really critical, especially for welding, developing the key applications there. And then being able to get the solution to the customer, whether it is a laser, a subsystem, or a system, is part of our growth expertise there. And that is on the whether it is welding, whether it is cleaning, and then if you look at additive manufacturing, there the customers are moving to additive manufacturing because we are helping to drive the cost per part down. So if you look at additive manufacturing, we develop lasers with special modes. You have heard us talk about a ring mode and also with multiple outputs. When those are incorporated into the additive manufacturing systems, it drops the cost per part and allows expansion into new areas for where a lot of that started in areas of defense and aerospace. Now that is expanding into areas of medical devices and even into consumer electronics So the application piece that we are working and then using that in a really virtuous cycle to drive the development of the lasers, subsystem, and systems, and being able to provide solutions to the customers is really what is driving our growth, and we will continue to drive that at an outsized level. Scott Graham: that is a very comprehensive answer. Thank you, Mark, for that. Just the other 1 was about inflation. And maybe this is more for you, Timothy. You know, what was pricing in the quarter, What was inflation? And how are you looking at that heading into 2027 with inflation so elevated, not just on materials, but also on freight. Timothy V. Mammen: Yeah. I mean, on freight, actually, it is sort of. Yeah. Let me step back a bit, Scott. there is always inflationary pressures every year that you have to deal with, and you have to pay for, for example, merit increases. We do those halfway through the year. So our costs actually went up a little bit in Q3 in relation to that. The material costs you know, 20% of our revenues on materials, so you have to deal with the inflationary cost there. We actually have a couple of things that we look at. We are obviously looking at how we optimize the value proposition of what we deliver customers. Right? And that involves the pricing. We are in turn as I mentioned, moving to higher power diodes So that means for each dollar of output power, we need fewer diodes. We actually can also then change the form factor of the laser. Like, a 10 kilowatt laser today is much, much smaller than a 10 kilowatt laser was even 2 or 3 years ago. Right? So you got less material going into that. And then we actually run programs internally where we call it a profit and cash program. Where we are actually looking at how we can drive cost savings across different areas. Some of those are in operations. Some of those are in SG and A, OpEx. And we use those to try and fund some of the inflationary impacts of the business that are kind of inevitable from each year. Scott Graham: Thank you. Operator: Our next question comes from Keith Housum with Northcoast Research. Your line is now live. Keith Housum: Good morning, guys. Mark, I know we are asking you to pick at favorite is kind of like asking you to pick your favorite children, but as you think about growth initiatives in the next 2 to 3 years, do you do you think are the top 2 to 3 growth initiatives that I guess are your favorite that you think will have the biggest impact on IPG as we look going forward? Mark Milton Gitin: Yeah. As you said, difficult to pick among the children, but let me just say that, you know, we are excited about growth opportunities in both the industrial solutions and the advanced solutions. I started in the advanced-- course, we have talked about the medical and the great roadmap that we have there in urology. We picked up a new customer last year. We have a great roadmap for growth. And we have talked about that doubling over the next 2 to 3 years. And remember then, we are in the midst of completing the acquisition of Lumibird Medical, and Lumibird Medical is going to add to that. that is accretive in the first year, has great growth potential on that piece. And certainly, the combination of Lumibird Medical and our urology you know, that expands the SAM significantly, so that is above $22 billion and gives us a great platform to grow on. The other piece, again, I will name a couple You know, we have talked about defense, where we are making great progress with the crossbow. I mentioned that we have the new product line that is. Addition that we have, the SC which gets us longer range and crosses into larger drones. And we have, you know, great customer interest from that product line. Certainly have good expectations for that area. Semiconductor, Keith, that is going well. Again, we have great. We have been embedded now. In key customer programs and products in major wafer front end, WFE, players in metrology inspection, and lithography. We are seeing the benefits there. And we have built out the capability there not only in the technology that we have always had, but now in the quality systems and manufacturing systems to be able to drive that forward So excited about that area. And then at micromachining, we have great products in process there. Great technology to get us into the shorter pulses and UV and into some of the exciting areas in microelectronics. Micromachining and medical devices. Those are all real key areas that we see growth there in the advanced. And then I do not want to forget the areas that we are driving also in the industrial solutions. We have great programs there, and we are seeing some of the benefits that we have talked about, not only in welding but also in additive. I talked about that a bit earlier. So overall, see great opportunities for growth for the company going forward on these new areas that we are driving. Keith Housum: Great. Great. And I know a little bit of work, the acquisition has not even closed yet. So maybe my questions are bit premature. But how are you guys thinking about M&A from here? Do you need to take a pause as you guys integrate Lumibird or is it still an active process that you guys are willing to do more here? Quickly? Mark Milton Gitin: Yeah. So, happy to talk about that. First, you know, let me just step back and frame it with our capital allocation strategy here. You know, first and foremost, it is investing in our organic programs. it is the ones that we talked about here in both industrial and advanced and the opportunities that we have to grow with our organic programs. And then the inorganic piece, right, tuck in or bolt on acquisitions, that can get us there faster or augment the markets, and we have seen success with that with cleanLASER. You know, fantastic integration team there. And that is really paying back very well now. With great new products combining the road maps of both cleanLASER and our laser road maps having, you know, clean systems that are a quarter of the size and cogs, And then Lumibird Medical, as you mentioned, great We have talked about the great fit there and how that is gonna allow us to grow. We have got a really strong integration team on that now and all the integration planning there will continue to look for opportunities. But we will be very disciplined in our approach. But you know, we have our arms around that. And then, you know, just to complete the allocation. Capital allocation, we always balance that with share repurchases. We did some over the past several years, and we have another $100 million authorized. You know, it just excited to have such a strong balance sheet and you see the free cash flow continues to be strong and got great flexibility and optionality going forward. Keith Housum: Thank you. Operator: As a reminder, you would like to ask. Our next question comes from James Ricchiuti with Needham. Please proceed with your question. James Ricchiuti: I just had a follow-up question on semi. I know it is a small part of the overall business. I am guessing, maybe less than 5% or so. But as we think about the WFE market in 2027, and looking out to 2028, well, you know, we are talking, I guess, the numbers being out. Thrown out there, you know, 35% or so growth in WFE in 2027. Is this a business mark that you see becoming a more meaningful part of the advanced solutions revenue base going forward? Mark Milton Gitin: Yeah. Jim, you know, glad you glad you raised that. I am. I have to say I am very encouraged by the progress that we are making in semi. You know, this is something that I really focused on when I came in because of my experience in that area. And this is an area where the technology was always there. You know, we have some unique technologies in the company that the WFE players were interested in, but what we were what we have been able to do now is transition that into design wins in the programs because we put in, you know, the other key pieces that you need there. Quality systems, the manufacturing systems to be able to really engage and supply that market and that is why we are seeing it. As you. You know, the numbers you talked about are. You know, it is, again, a smaller piece, but you can see that we have now doubled that year over year. And, you know, we see good opportunity to continue to grow that business, both in the areas that we have design wins now from the growth of the markets, as you talked about, driven by AI and data centers and those things. We are in those newer programs. And we continue to work with these companies on, you know, next generation areas. So longer term, I think this can become a more meaningful part of the business for sure. it is a great area The technology is there, and we are making that crossover. James Ricchiuti: And maybe, you know, just on that topic, of crossover that you raised As we think of that, I do not wanna front run your Investor Day coming up early next year, but as we think about Crossbow, and the opportunity in defense, is there any color you can provide? Or maybe, you know, just broad expectations as to how we should think about that business looking out to 2027 and 2028 recognizing right now it is small, it is lumpy, but how should we think about the potential for Crossbow from what you have seen so far? I mean, obviously, you are shipping finishing the big order with Lockheed, but beyond that, how do we think about it? Mark Milton Gitin: Yes, Jim, I am really optimistic about the Crossbow business. As I mentioned, we have very good engagement We have as I mentioned, we have now extended the product line, so that is the next piece of the product line with the SE product that now gives us both longer range and crosses over into some of the larger drone classes as well. You know, we are we are shipping from production, which is really key as well we can, we can react quickly And I would say that, you know, the customer engagements are very, very good, and the programs that we are discussing and working with are you know, they are large programs, and we are excited about where that can go. The product is working. it is been tested in, you know, multiple environments. As I talked about, And, again, we are excited about where that can go. James Ricchiuti: Okay. Thank you. Operator: We have reached the end of the question and answer session. I would now like to turn the call back over to Eugene Fedotoff for closing comments. Eugene Fedotoff: Thank you for joining us this morning and your continued interest in IPG. We will be participating in several investor events this quarter, and are looking forward to speaking with you again soon. Have a great day, everyone. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.