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IPG Photonics Reports Record Revenue on 27% Sales Growth and 34% Increase in Net Income in Second Quarter of 2008

IPG Agrees to Purchase of Minority Interests in Russian Subsidiary

OXFORD, Mass., Aug 05, 2008 (BUSINESS WIRE) -- IPG Photonics Corporation (Nasdaq: IPGP), the world leader in high-power fiber lasers and amplifiers, today reported that revenues for the second quarter of 2008 increased by 27% to $56.0 million and net income increased by 34% to $8.6 million compared with the second quarter of 2007. For the first six months of 2008, revenues increased 27% to $108.9 million from $85.7 million in the first six months of 2007 and net income for the first six months of 2008 increased by 28% to $16.7 million from $13.0 million. Revenue growth for the quarter was driven by sales of the Company's fiber lasers used for materials processing applications, which increased by 42% from the second quarter of 2007 to $46.9 million, as well as strong sales to European and Asian markets.

                         Three Months            Six Months
                             Ended                  Ended
                           June 30,               June 30,
                         -------------          -------------
(In millions, except per
 share data)              2008   2007  % Change  2008   2007  % Change
                         ------ ------ -------- ------ ------ --------
Revenue                  $ 56.0 $ 44.0   27%    $108.9 $ 85.7   27%
Gross margin              48.1%  46.2%           47.2%  46.3%
Operating income         $ 12.8 $ 10.1   26%    $ 25.3 $ 21.2   20%
Operating margin          22.8%  23.0%           23.3%  24.7%
Net income               $  8.6 $  6.4   34%    $ 16.7 $ 13.0   28%
Earnings per diluted
 share                   $ 0.19 $ 0.14   36%    $ 0.36 $ 0.29   24%

Operating income increased 26% to $12.8 million for the second quarter of 2008, up from $10.1 million for the same period in 2007. Earnings per diluted share increased 36% to $0.19 from $0.14 a year ago. Operating expenses for the second quarter of 2008 were $14.2 million, or 25% of revenue, compared with $10.2 million, or 23% of revenue, in the second quarter of 2007.

For the first six months of 2008, operating income increased 20% to $25.3 million, up from $21.2 million for the same period in 2007. Earnings per diluted share increased 24% to $0.36 from $0.29 a year ago. Operating expenses were $26.0 million, or 24% of revenue, in the first six months of 2008, compared with $18.5 million, or 22% of revenue, in the six-month period a year ago.

Cash and cash equivalents were $44.9 million on June 30, 2008, compared with $38.0 million on December 31, 2007, primarily as a result of $11.6 million of cash provided by operating activities, proceeds from the sale of marketable securities of $5.5 million and net proceeds from the Company's credit lines of $8.1 million, offset by capital expenditures and investments in intangible assets of $20.3 million.

Comments on the Second Quarter

"Demand for our energy-efficient, cost-saving and high performance products remained strong in the second quarter, despite a challenging macroeconomic environment," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "This allowed IPG to report revenues and net income at the top of our guidance range. Our results this quarter reflect the growing penetration of our fiber lasers into new industrial manufacturing applications, the marketplace's growing acceptance of the benefits of our fiber lasers, and our presence in the world's major industrial manufacturing markets. We are particularly pleased that IPG's fiber lasers continue to win orders over legacy laser technologies in a number of high profile installations. This was demonstrated again shortly after the close of the quarter with a major order from the BMW Group for our high-power fiber lasers used in a critical welding application."

"Our strongest market segment continues to be materials processing, which experienced a 42% year-over-year increase in revenues for the quarter," continued Gapontsev. "Geographically, we saw strong demand across Europe and Asia, and we were pleased that sales improved in Japan and North America. Pulsed laser sales continued to be strong with a 66% increase over the prior year, driven by demand for photovoltaic manufacturing and marking applications. And our margin growth has continued to increase, both sequentially and year-over-year, due to favorable product mix and higher production, part of which resulted in an increase in inventories."

Purchase of Minority Interests in Russian Subsidiary

The Company also announced today that it agreed to purchase the minority interests in its majority-owned subsidiary NTO IRE-Polus from Valentin P. Gapontsev and Igor Samartsev, a member of its Board of Directors and Acting General Manager of NTO IRE-Polus. NTO IRE-Polus currently provides IPG with component manufacturing capacity and sells products to customers in Russia and neighboring countries. The purchase price for the 31.6% ownership interests is $6.1 million in total, and would be paid in unregistered shares of IPG common stock. After giving effect to the purchases from Dr. Gapontsev and Mr. Samartsev, and other minority interest purchases that have been previously agreed upon, IPG would own 100% of NTO IRE-Polus. The transaction is expected to be accretive to the earnings of IPG. The purchase is expected to close in October 2008, subject to filing required government notices and receiving required government approvals.

Business Outlook and Financial Guidance

"The interest expressed from both new and existing customers for our fiber lasers is a strong indicator that the momentum we established in the first half of the year will continue," stated Dr. Gapontsev. "For the second half of 2008, we expect that materials processing applications will continue to be our primary growth driver."

For the third quarter of 2008, IPG Photonics expects revenues in the range of $57 million to $61 million. The Company anticipates earnings per diluted share in the range of $0.18 to $0.22 based on 46,132,000 common shares, which include 44,355,000 basic common shares outstanding and 1,777,000 potentially dilutive options at June 30, 2008.

Conference Call Reminder

The Company will hold a conference call to review its financial results and business highlights today, August 5, 2008 at 10:00 a.m. ET. The conference call will be webcast live over the Internet 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) 741-4249 or (719) 325-4831. Interested parties that are unable to listen to the live call may access an archived version of the webcast 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 a wide range of applications such as materials processing, advanced applications, telecommunications and medical applications. 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.

Safe Harbor Statement

Information and statements provided by the Company and its employees, including statements in this press release, that relate to future plans, events or performance are forward-looking statements. These statements involve risks and uncertainties. Any statements in this press release that are not statements of historical fact are forward-looking statements, including, but not limited to, those relating to increasing demand for the Company's products from existing and new customers, improved gross margins, growth rates in Europe and Asia, increased orders in the U.S. and elsewhere, expected shipment dates for new orders, and the Company's revenue and EPS guidance for the third quarter of 2008. Factors that could cause actual results to differ materially include risks and uncertainties, including risks associated with the Company's ability to penetrate new applications for fiber lasers and increase market share, the rate of acceptance and penetration of IPG's products, effective management of growth, level of fixed costs from its vertical integration, intellectual property infringement claims and litigation, interruption in supply of key components, contract cancellations, manufacturing risks, competitive factors including declining average selling prices, building and expanding field service and support operations, uncertainties pertaining to customer orders, demand for products and services, development of markets for the Company's products and services 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 (filed with the SEC on March 13, 2008) 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 update the forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

IPGP-G

                      IPG PHOTONICS CORPORATION
                CONSOLIDATED STATEMENTS OF OPERATIONS

                                Three Months Ended  Six Months Ended
                                     June 30,            June 30,
                                ------------------- ------------------

                                  2008      2007      2008      2007
                                --------  --------  --------  --------

                                (in thousands, except per share data)
NET SALES                       $ 55,994  $ 43,952  $108,870  $ 85,705
COST OF SALES                     29,047    23,633    57,523    46,055
                                --------  --------  --------  --------

GROSS
 PROFIT                           26,947    20,319    51,347    39,650
                                --------  --------  --------  --------

OPERATING EXPENSES:
 Sales and marketing               3,703     2,836     6,850     4,745
 Research and development          4,447     2,388     7,321     4,517
 General and administrative        6,024     4,989    11,863     9,230
                                --------  --------  --------  --------

       Total operating expenses   14,174    10,213    26,034    18,492
                                --------  --------  --------  --------

OPERATING INCOME                  12,773    10,106    25,313    21,158
                                --------  --------  --------  --------

OTHER INCOME, Net:
 Interest (expense) income, net    (183)       117     (278)       513
 Other income (expense), net         489       (8)       536        36
                                --------  --------  --------  --------

       Total other income            306       109       258       549
                                --------  --------  --------  --------

INCOME BEFORE PROVISION FOR
 INCOME TAXES AND MINORITY
 INTERESTS IN CONSOLIDATED
 SUBSIDIARIES                     13,079    10,215    25,571    21,707
PROVISION FOR INCOME TAXES       (4,058)   (3,611)   (8,055)   (8,118)
MINORITY INTERESTS IN
 CONSOLIDATED SUBSIDIARIES         (469)     (216)     (815)     (588)
----------------------------------------  --------  --------  --------

NET
 INCOME                         $  8,552  $  6,388  $ 16,701  $ 13,001
                                ========  ========  ========  ========

NET INCOME PER SHARE:
 Basic                          $   0.19  $   0.15  $   0.38  $   0.30
 Diluted                        $   0.19  $   0.14  $   0.36  $   0.29
WEIGHTED AVERAGE SHARES:
 Basic                            44,355    42,974    44,225    42,942
 Diluted                          46,132    45,631    46,087    45,616

                      IPG PHOTONICS CORPORATION
                     CONSOLIDATED BALANCE SHEETS

                                                  June 30,   December
                                                                31,
                                                 ----------  ---------
                                                    2008       2007
                                                 ----------  ---------
ASSETS                                              (in thousands)
CURRENT ASSETS:
     Cash and cash equivalents                    $  44,926  $  37,972
     Marketable securities, at fair value                 -      6,950
     Accounts receivable, net                        37,747     33,946
     Inventories, net                                76,574     60,412
     Income taxes receivable                            935      3,145
     Prepaid expenses and other current assets        7,759      7,071
     Deferred income taxes                            8,065      6,195
                                                 ----------  ---------

                  Total current assets              176,006    155,691
DEFERRED INCOME TAXES                                 2,654      2,795
PROPERTY, PLANT, AND EQUIPMENT, Net                 111,207     96,369
OTHER ASSETS                                         13,164      8,466
                                                 ----------  ---------

TOTAL                                             $ 303,031  $ 263,321
                                                 ==========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Revolving line-of-credit facilities          $  19,850  $  11,218
     Current portion of long-term debt                1,333          -
     Accounts payable                                 9,613      9,444
     Accrued expenses and other liabilities          17,313     13,160
     Deferred income taxes                              940        564
     Income taxes payable                             1,875         96
                                                 ----------  ---------

                  Total current liabilities          50,924     34,482
                                                 ----------  ---------

DEFERRED INCOME
 TAXES                                                2,645      4,204
                                                 ----------  ---------

LONG-TERM DEBT                                       18,710     20,000
                                                 ----------  ---------

COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS                                    5,270      4,455
                                                 ----------  ---------

STOCKHOLDERS'
 EQUITY:
     Common stock                                         4          4
     Additional paid-in capital                     277,875    275,506
     Accumulated deficit                           (73,796)   (90,497)
     Accumulated other comprehensive income          21,399     15,167
                                                 ----------  ---------

                  Total stockholders' equity        225,482    200,180
                                                 ----------  ---------

TOTAL                                             $ 303,031  $ 263,321
                                                 ==========  =========

SOURCE: IPG Photonics Corporation

IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief Financial Officer
or
Sharon Merrill Associates, Inc.
David Calusdian, 617-542-5300
Executive Vice President

Copyright Business Wire 2008

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