IPG Photonics Reports Record Revenue Achieved in Third Quarter 2013
Materials Processing Applications Increase 19% Over Prior Year
OXFORD, Mass.--(BUSINESS WIRE)--
IPG
Photonics Corporation (NASDAQ: IPGP) today reported financial
results for the third quarter ended September 30, 2013.
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|
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(In millions, except per share data)
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2013
|
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2012
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% Change
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2013
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2012
|
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% Change
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Revenue
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$
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172.2
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$
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156.4
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10
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%
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$
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482.2
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$
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417.5
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15
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%
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Gross margin
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53.9
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%
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55.0
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%
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53.6
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%
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55.0
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%
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Operating income
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$
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59.8
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$
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60.0
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—
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%
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$
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169.3
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$
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161.6
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5
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%
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Operating margin
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34.7
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%
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38.4
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%
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35.1
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%
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38.7
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%
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Net income attributable to IPG Photonics Corporation
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$
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42.3
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$
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42.4
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—
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%
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$
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119.2
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$
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110.1
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8
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%
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Earnings per diluted share
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$
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0.81
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$
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0.81
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|
—
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%
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$
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2.28
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|
$
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2.16
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6
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%
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Management Comments
"Record revenue in the third quarter of 2013 was driven by a 19%
increase in sales for materials processing applications, which account
for 95% of our business," said Dr. Valentin Gapontsev, IPG Photonics'
Chief Executive Officer. "We saw particularly strong demand for
high-power lasers within materials processing. Gross margins of 53.9%
were within our target range. EPS was flat with the year ago quarter and
reflects the peak of our current investment cycle expanding
manufacturing capacity, R&D and sales and marketing, which we believe
will drive future revenue and earnings growth.
"Total revenue growth of 10% over last year came from increased demand
in high-power lasers for cutting and welding applications, and in our
mid-power and QCW product lines. However, the increases were offset by
declines in pulsed laser sales for consumer electronic applications,
which were strong last year, and declines in other applications.
"Geographically, Asia was our strongest performing region, with a 40%
increase in sales primarily due to growth in Chinese and Turkish sales,
which increased by 57% and more than 100%, respectively. These increases
were tempered by lower sales in Europe and North America.
"During the third quarter, IPG generated $36.7 million in cash from
operations and used $14.1 million to finance capital expenditures. We
ended the quarter with $398.4 million in cash and cash equivalents.
Business Outlook and Financial Guidance
"While we expect fourth-quarter revenue to be seasonally weaker in
certain areas and have reflected this in our guidance, we continue to
believe that IPG still has a significant opportunity of profitable
growth ahead for existing and new applications and product line
expansion. As the technology pioneer and industry leader, we intend to
continue to capitalize on the market we have created for reliable,
flexible, high-performing and cost-effective fiber laser sources, while
expanding our product line to capitalize on profitable new
opportunities," concluded Dr. Gapontsev.
IPG Photonics expects revenue in the range of $155 million to $170
million for the fourth quarter of 2013. The Company anticipates earnings
per diluted share in the range of $0.68 to $0.82 based on 52,367,000
diluted common shares, which includes 51,495,000 basic common shares
outstanding and 872,000 potentially dilutive options at September 30,
2013.
As discussed in more detail below, actual results may differ from this
guidance due to various factors including, but not limited to, product
demand, competition and general economic conditions. This guidance is
subject to the risks outlined in the Company's reports with the SEC, and
assumes that exchange rates remain at present levels.
Conference Call Reminder
The Company will hold a conference call to review its financial results
and business highlights today, November 1, 2013 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) 709-8155 or
(201) 689-8881. Interested parties that are unable to listen to the live
call may access an archived version of the webcast, which 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.
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, expected seasonal weakness, a
significant runway of profitable growth for existing and new
applications, capitalizing on the market the Company has created,
expanding its product line, capitalizing on profitable new opportunities
for IPG, and guidance for the fourth quarter of 2013. Factors that could
cause actual results to differ materially include risks and
uncertainties, including risks associated with the strength or weakness
of the business conditions in industries and geographic markets that the
Company serves, particularly the effect of downturns in the markets IPG
serves; uncertainties and adverse changes in the general economic
conditions of markets; 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; high levels of fixed costs
from IPG's vertical integration; the appropriateness of the Company's
manufacturing capacity for the level of demand; competitive factors,
including declining average selling prices; the effect of acquisitions
and investments; inventory write-downs; foreign currency fluctuations;
intellectual property infringement claims and litigation; interruption
in supply of key components; manufacturing risks; building and expanding
field service and support operations; inability to manage risks
associated with international customers and operations; 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 February 28, 2013) 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.
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IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2013
|
|
2012
|
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2013
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2012
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(in thousands, except per share data)
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NET SALES
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$
|
172,152
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$
|
156,379
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|
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$
|
482,175
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$
|
417,498
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COST OF SALES
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|
79,339
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|
70,420
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|
223,799
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|
187,945
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GROSS PROFIT
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|
|
92,813
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|
85,959
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|
258,376
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229,553
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OPERATING EXPENSES:
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Sales and marketing
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6,801
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|
5,785
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|
19,514
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|
16,771
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Research and development
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|
11,501
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7,762
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|
30,782
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|
22,131
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General and administrative
|
|
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|
|
13,175
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|
|
10,609
|
|
|
37,814
|
|
|
29,294
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|
|
Loss (gain) on foreign exchange
|
|
|
|
|
1,563
|
|
|
1,796
|
|
|
972
|
|
|
(272
|
)
|
|
Total operating expenses
|
|
|
|
|
33,040
|
|
|
25,952
|
|
|
89,082
|
|
|
67,924
|
|
|
OPERATING INCOME
|
|
|
|
|
59,773
|
|
|
60,007
|
|
|
169,294
|
|
|
161,629
|
|
|
OTHER INCOME (EXPENSE), NET:
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Interest income (expense), net
|
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|
|
63
|
|
|
55
|
|
|
(25
|
)
|
|
541
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|
|
Other income (expense), net
|
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|
|
218
|
|
|
205
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49
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(981
|
)
|
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Total other income (expense)
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|
|
281
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260
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24
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(440
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)
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INCOME BEFORE PROVISION FOR INCOME TAXES
|
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|
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60,054
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|
60,267
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169,318
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|
|
161,189
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PROVISION FOR INCOME TAXES
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|
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(17,716
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)
|
|
(17,832
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)
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(50,133
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)
|
|
(48,357
|
)
|
|
NET INCOME
|
|
|
|
|
42,338
|
|
|
42,435
|
|
|
119,185
|
|
|
112,832
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|
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,740
|
|
|
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION
|
|
|
|
|
$
|
42,338
|
|
|
$
|
42,435
|
|
|
$
|
119,185
|
|
|
$
|
110,092
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|
|
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
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Basic
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|
|
|
|
$
|
0.82
|
|
|
$
|
0.83
|
|
|
$
|
2.32
|
|
|
$
|
2.20
|
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|
Diluted
|
|
|
|
|
$
|
0.81
|
|
|
$
|
0.81
|
|
|
$
|
2.28
|
|
|
$
|
2.16
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|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
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|
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|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
51,495
|
|
|
51,090
|
|
|
51,474
|
|
|
50,204
|
|
|
Diluted
|
|
|
|
|
52,367
|
|
|
52,102
|
|
|
52,346
|
|
|
51,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Cost of sales
|
|
|
|
|
$
|
842
|
|
|
$
|
563
|
|
|
$
|
2,324
|
|
|
$
|
1,590
|
|
|
Sales and marketing
|
|
|
|
|
327
|
|
|
289
|
|
|
928
|
|
|
827
|
|
|
Research and development
|
|
|
|
|
512
|
|
|
334
|
|
|
1,377
|
|
|
976
|
|
|
General and administrative
|
|
|
|
|
1,450
|
|
|
973
|
|
|
3,975
|
|
|
2,965
|
|
|
Total stock-based compensation
|
|
|
|
|
3,131
|
|
|
2,159
|
|
|
8,604
|
|
|
6,358
|
|
|
Tax benefit recognized
|
|
|
|
|
(996
|
)
|
|
(655
|
)
|
|
(2,772
|
)
|
|
(1,938
|
)
|
|
Net stock-based compensation
|
|
|
|
|
$
|
2,135
|
|
|
$
|
1,504
|
|
|
$
|
5,832
|
|
|
$
|
4,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF
SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Step-up of inventory (1)
|
|
|
|
|
$
|
456
|
|
|
$
|
—
|
|
|
$
|
1,318
|
|
|
$
|
—
|
|
Amortization of intangible assets (2)
|
|
|
|
|
179
|
|
|
360
|
|
|
541
|
|
|
1,024
|
|
Total acquisition related costs
|
|
|
|
|
$
|
635
|
|
|
$
|
360
|
|
|
$
|
1,859
|
|
|
$
|
1,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amount relates to Microsystems step-up adjustment on inventory
sold during the period
|
|
(2) Amount relates to intangible amortization expense during
periods presented including amortization of acquired patents
|
|
|
|
|
|
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
(In thousands, except share and per
share data)
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
398,355
|
|
|
$
|
384,053
|
|
|
Accounts receivable, net
|
|
|
|
|
120,640
|
|
|
96,630
|
|
|
Inventories
|
|
|
|
|
171,268
|
|
|
139,618
|
|
|
Prepaid income taxes and income taxes receivable
|
|
|
|
|
17,326
|
|
|
13,071
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
30,072
|
|
|
18,639
|
|
|
Deferred income taxes, net
|
|
|
|
|
11,547
|
|
|
12,948
|
|
|
Total current assets
|
|
|
|
|
749,208
|
|
|
664,959
|
|
|
DEFERRED INCOME TAXES, NET
|
|
|
|
|
6,100
|
|
|
2,107
|
|
|
GOODWILL
|
|
|
|
|
455
|
|
|
2,898
|
|
|
INTANGIBLE ASSETS, NET
|
|
|
|
|
10,131
|
|
|
7,510
|
|
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
|
236,507
|
|
|
210,563
|
|
|
OTHER ASSETS
|
|
|
|
|
7,395
|
|
|
7,461
|
|
|
TOTAL
|
|
|
|
|
$
|
1,009,796
|
|
|
$
|
895,498
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Revolving line-of-credit facilities
|
|
|
|
|
$
|
1,547
|
|
|
$
|
2,442
|
|
|
Current portion of long-term debt
|
|
|
|
|
1,333
|
|
|
1,505
|
|
|
Accounts payable
|
|
|
|
|
14,293
|
|
|
17,783
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
59,553
|
|
|
51,451
|
|
|
Deferred income taxes, net
|
|
|
|
|
2,050
|
|
|
9,831
|
|
|
Income taxes payable
|
|
|
|
|
27,031
|
|
|
42,443
|
|
|
Total current liabilities
|
|
|
|
|
105,807
|
|
|
125,455
|
|
|
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES
|
|
|
|
|
16,635
|
|
|
13,102
|
|
|
LONG-TERM DEBT, NET OF CURRENT PORTION
|
|
|
|
|
11,667
|
|
|
14,014
|
|
|
Total liabilities
|
|
|
|
|
134,109
|
|
|
152,571
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 175,000,000 shares authorized;
51,604,568 shares issued and outstanding at September 30, 2013;
51,359,247 shares issued and outstanding at December 31, 2012
|
|
|
|
|
5
|
|
|
5
|
|
|
Additional paid-in capital
|
|
|
|
|
526,481
|
|
|
511,039
|
|
|
Retained earnings
|
|
|
|
|
354,162
|
|
|
234,977
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(4,961
|
)
|
|
(3,094
|
)
|
|
Total IPG Photonics Corporation stockholders' equity
|
|
|
|
|
875,687
|
|
|
742,927
|
|
|
TOTAL
|
|
|
|
|
$
|
1,009,796
|
|
|
$
|
895,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
(In thousands)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
$
|
119,185
|
|
|
$
|
112,832
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
23,414
|
|
|
19,168
|
|
|
Provisions for inventory, warranty & bad debt
|
|
|
|
|
18,203
|
|
|
14,762
|
|
|
Other
|
|
|
|
|
2,354
|
|
|
10,585
|
|
|
Changes in assets and liabilities that (used) provided cash:
|
|
|
|
|
|
|
|
|
Accounts receivable/payable
|
|
|
|
|
(28,950
|
)
|
|
(34,344
|
)
|
|
Inventories
|
|
|
|
|
(43,705
|
)
|
|
(17,050
|
)
|
|
Other
|
|
|
|
|
(29,540
|
)
|
|
10,552
|
|
|
Net cash provided by operating activities
|
|
|
|
|
60,961
|
|
|
116,505
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
|
|
(48,333
|
)
|
|
(51,715
|
)
|
|
Proceeds from sales of property, plant and equipment
|
|
|
|
|
202
|
|
|
—
|
|
|
Proceeds from short-term investments
|
|
|
|
|
—
|
|
|
25,452
|
|
|
Acquisition of businesses
|
|
|
|
|
(5,555
|
)
|
|
(11,596
|
)
|
|
Other
|
|
|
|
|
442
|
|
|
(313
|
)
|
|
Net cash used in investing activities
|
|
|
|
|
(53,244
|
)
|
|
(38,172
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Line-of-credit facilities
|
|
|
|
|
(895
|
)
|
|
(1,958
|
)
|
|
Principal payments on long-term borrowings
|
|
|
|
|
(2,519
|
)
|
|
(1,848
|
)
|
|
Purchase of noncontrolling interests
|
|
|
|
|
—
|
|
|
(700
|
)
|
|
Purchase of redeemable noncontrolling interests
|
|
|
|
|
—
|
|
|
(55,400
|
)
|
|
Tax benefits from exercise of employee stock options
|
|
|
|
|
3,610
|
|
|
3,870
|
|
|
Exercise of employee stock options and issuances under employee
stock purchase plan
|
|
|
|
|
3,228
|
|
|
4,275
|
|
|
Proceeds from follow-on public offering, net of offering expenses
|
|
|
|
|
—
|
|
|
167,963
|
|
|
Net cash provided by financing activities
|
|
|
|
|
3,424
|
|
|
116,202
|
|
|
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
|
|
|
|
|
3,161
|
|
|
(2,200
|
)
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
|
|
14,302
|
|
|
192,335
|
|
|
CASH AND CASH EQUIVALENTS — Beginning of period
|
|
|
|
|
384,053
|
|
|
180,234
|
|
|
CASH AND CASH EQUIVALENTS — End of period
|
|
|
|
|
$
|
398,355
|
|
|
$
|
372,569
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
|
$
|
190
|
|
|
$
|
553
|
|
|
Cash paid for income taxes
|
|
|
|
|
$
|
74,107
|
|
|
$
|
20,967
|
|
IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief
Financial Officer
or
Sharon Merrill
Dennis Walsh,
617-542-5300
Vice President
Source: IPG Photonics Corporation
News Provided by Acquire Media