IPG Photonics' CEO Discusses Q2 2012 Results - Earnings Call Transcript

IPG Photonics Corporation (IPGP)

Q2 2012 Earnings Conference Call

July 31, 2012 10:00 ET

Executives

Angelo Lopresti – Vice President, General Counsel and Secretary

Dr. Valentin Gapontsev – Chairman and Chief Executive Officer

Tim Mammen – Vice President and Chief Financial Officer

Analysts

Zach Larkin – Stephens Incorporated

Krish Sankar – Bank of America-Merrill Lynch

Tom Hayes – Thompson Research

Joe Maxa – Dougherty & Company

Jim Ricchiuti – Needham & Company

Patrick Newton – Stifel Nicolaus

Jagadish Iyer – Piper Jaffray

Avinash Kant – D.A. Davidson

Mark Douglass – Longbow Research

Olga Levinzon – Barclays Capital

Mark Miller – Noble Financial

Jiwon Lee – Sidoti & Company

Presentation

Operator

Good morning, and welcome to IPG Photonics’ Second Quarter 2012 Financial Results Conference Call. Today’s call is being recorded and webcast. There will be an opportunity for questions at the end of the call. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Angelo Lopresti, IPG’s Vice President, General Counsel and Secretary for introduction. Please go ahead sir.

Angelo Lopresti – Vice President, General Counsel and Secretary

Thank you and good morning everyone. With us today is IPG Photonics’ Chairman and Chief Executive Officer, Dr. Valentin Gapontsev, and Vice President and Chief Financial Officer, Tim Mammen.

Statements made during the course of this conference call that discuss management’s or the company’s intentions, expectations or predictions of the future are forward-looking statements. These forward-looking statements are subject to known and unknown 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 include those detailed in IPG Photonics’ Form 10-K for the year ended December 31, 2011 and other reports on file with the Securities and Exchange Commission.

Copies of these filings may be obtained by visiting the Investors section of IPG’s website at investor.ipgphotonics.com/sec.cfm or by contacting the company directly. You may also find copies on the SEC’s website, at www.sec.gov.

Any forward-looking statements made on this call are the company’s expectations or predictions only as of today, July 31, 2012. The company assumes no obligation to publicly release any updates or revisions to any such statements. We will post these prepared remarks on our website following the completion of the call. Please go to www.ipgphotonics.com and select Investors to review these remarks.

I will now turn the call over to Dr. Valentin Gapontsev.

Dr. Valentin Gapontsev – Chairman and Chief Executive Officer

Good morning everyone. IPG delivered another successful quarter with record revenues of $138 million, gross margins of 54.3% and net income of $37.7 million, which increased by 23% year-over-year. High-power fiber laser sales for materials processing applications continue to drive IPG’s top-line growth. We also reported a record quarter for pulsed laser sales and solid growth in medium power and QCW laser sales.

Our sales growth continues to be driven by three factors. The first is the adoption of fiber laser over other laser technologies. I’ve discussed many times before the efficiency, superior performance and cost benefits of the fiber laser. The second factor is the overall use of lasers in an increasing number of applications. This is due to new types of materials used in manufacturing, the growing use of automation, and the need for precision and speed that only lasers can handle.

The third factor is the strong demand we’re seeing in several of our key industries that is currently holding up despite prevailing economic concerns. For example, automotive OEMs are using new materials such as high-strength steel in advanced manufacturing techniques, and fiber lasers are the best solution to cut or weld these materials. We believe that meaningful transition to laser processing is just starting for some of these applications. As a consequence, the fiber laser is continuing to make significant market share gains across applications. These factors also explained why IPG is doing well in geographies like China and Europe, despite slower macro-economic growth.

Looking to the future, we are conducting internal research and working with industrial institutes and other strategic partners to develop new applications and new products in applications where lasers have not been widely used before. We plan to further leverage our leadership position by pursuing large-scale, higher-margin applications, including welding and cladding with high power lasers, micro-processing and ceramic cutting with QCW lasers, as well as processing of non-metals, micro-processing, scribing and marking with high-power green lasers.

In addition, we are expanding our geographic footprint to meet customer demand. In Q2, we opened an office in Turkey to service a numerous OEM materials processing customers we have there.

Finally, we remain focused on developing specialized laser-based systems to meet the specific needs of manufacturers whose requirements are not currently met by standard systems or in certain geographic areas where fiber laser systems are not currently available. We also are improving the flexibility of our existing products. For example, we have developed a 2 kilowatt air-cooled laser for use in dry environments and an ultra-compact 1 kilowatt fiber laser for use in applications requiring a small footprint.

We are continuing to make the necessary investments to support the increasing demand for our products and meet the needs of our customers as well as to identify opportunities to expand and grow our business.

With that, I’ll turn the call over to Tim Mammen.

Tim Mammen – Vice President and Chief Financial Officer

Thank you Valentin and good morning everyone. I’ll start with a review of our end markets, products and geographic regions. After that, I’ll provide highlights from our income statements and balance sheet, and close with our guidance. Second-quarter materials processing sales increased 16% year-over-year to $124.6 million. This market continues to drive our growth and accounted for 90% of total sales during the quarter. The most significant materials processing applications for fiber lasers are cutting, welding, and marking and engraving. We’re also seeing growth from applications such as cladding, drilling, brazing, annealing, and rapid prototyping.

Read the rest of this transcript for free on seekingalpha.com

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