IPG Photonics Reports 22% Revenue Growth For Second Quarter 2013

IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the second quarter ended June 30, 2013.
  Three Months Ended June 30,     Six Months Ended June 30,  
(In millions, except per share data) 2013   2012 % Change 2013   2012 % Change
Revenue $ 168.2 $ 137.9 22 % $ 310.0 $ 261.1 19 %
Gross margin 53.5 % 54.3 % 53.4 % 55.0 %
Operating income $ 59.9 $ 56.4 6 % $ 109.5 $ 101.6 8 %
Operating margin 35.6 % 40.9 % 35.3 % 38.9 %
Net income attributable to IPG Photonics Corporation $ 41.7 $ 37.7 11 % $ 76.8 $ 67.7 14 %
Earnings per diluted share $ 0.80 $ 0.72 11 % $ 1.47 $ 1.34 10 %
 

Management Comments

“Strong demand for IPG's high-power lasers for materials processing applications, particularly in Asia and the U.S., drove a 22% year-over-year sales increase during the second quarter,” said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. “Gross margins of 53.5% were within our target range and net income increased 11%. The strong revenue growth during the quarter further demonstrates the increasing adoption rate of fiber laser technologies for various applications. Excluding foreign exchange rate gains, operating income grew by 12.6%. While this was lower than the growth in revenue, it reflects our investment in operating expenses to support IPG's future growth.”

“Materials processing sales grew by 26% and accounted for approximately 94% of total sales,” said Dr. Gapontsev. “We continue to penetrate major OEMs and are gaining market share from conventional lasers for cutting and welding applications. High-power laser sales were up 38% year over year, driven by automotive and general manufacturing applications. Medium power lasers benefited from strong sales for welding and cutting of thinner materials, primarily for consumer electronics, resulting in 41% growth. We more than doubled our unit sales for QCW lasers during the quarter.”

“Geographically, sales grew quarter over quarter across most regions,” said Dr. Gapontsev. “China and Turkey led the Asian region, primarily with cutting OEMs, and the U.S. also experienced strong sales. Weak automotive sales in Germany slightly offset our otherwise solid growth in Europe.”

“During the second quarter, IPG generated $35.3 million in cash from operations and used $16.5 million to finance capital expenditures. We ended the quarter with $369.5 million in cash and cash equivalents,” Dr. Gapontsev said.

Business Outlook and Financial Guidance

“We continue to see solid demand in most of our end markets and we maintain a strong technological advantage over our competition,” said Dr. Gapontsev. “Order flow in Q2 was strong and the book-to-bill ratio substantially exceeded 1. We continue to make significant investments to support the expected growth of our business, strengthen our competitive position and improve and develop new products to expand our offerings.”

IPG Photonics expects revenue in the range of $165 million to $175 million for the third quarter of 2013. The Company anticipates earnings per diluted share in the range of $0.77 to $0.87 based on 52,385,000 diluted common shares, which includes 51,462,000 basic common shares outstanding and 923,000 potentially dilutive options at June 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, July 30, 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, IPG's future growth, solid demand, maintaining a strong technological advantage over IPG’s competition, making investments to support the expected growth of IPG’s business, strengthen the Company’s competitive position and developing new products to expand its product line, and guidance for the third 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.

IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
   

Three Months EndedJune 30,

Six Months EndedJune 30,
2013   2012 2013   2012
(in thousands, except per share data)
NET SALES $ 168,171 $ 137,927 $ 310,023 $ 261,119
COST OF SALES 78,249   63,017   144,460   117,525  
GROSS PROFIT 89,922   74,910   165,563   143,594  
OPERATING EXPENSES:
Sales and marketing 6,845 5,854 12,713 10,986
Research and development 10,483 7,229 19,281 14,369
General and administrative 12,829 8,736 24,639 18,685
Gain on foreign exchange (110 ) (3,354 ) (591 ) (2,068 )
Total operating expenses 30,047   18,465   56,042   41,972  
OPERATING INCOME 59,875   56,445   109,521   101,622  
OTHER (EXPENSE) INCOME, NET:
Interest (expense) income, net (35 ) 615 (88 ) 486
Other expense, net (239 ) (92 ) (169 ) (1,186 )
Total other (expense) income (274 ) 523   (257 ) (700 )
INCOME BEFORE PROVISION FOR INCOME TAXES 59,601 56,968 109,264 100,922
PROVISION FOR INCOME TAXES (17,881 ) (17,119 ) (32,417 ) (30,525 )
NET INCOME 41,720 39,849 76,847 70,397
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   2,107     2,740  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION $ 41,720   $ 37,742   $ 76,847   $ 67,657  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
Basic $ 0.81 $ 0.74 $ 1.49 $ 1.37
Diluted $ 0.80 $ 0.72 $ 1.47 $ 1.34
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 51,462 50,989 51,435 49,717
Diluted 52,385 52,071 52,357 50,826
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
   
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2013   2012 2013   2012
Cost of sales $ 806 $ 567 $ 1,482 $ 1,027
Sales and marketing 317 286 601 538
Research and development 482 339 864 642
General and administrative 1,335   1,009   2,525   1,992  
Total stock-based compensation 2,940 2,201 5,472 4,199
Tax benefit recognized (959 ) (676 ) (1,776 ) (1,283 )
Net stock-based compensation $ 1,981   $ 1,525   $ 3,696   $ 2,916  
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES
   
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2013   2012 2013   2012
Cost of sales
Step-up of inventory (1) $ 456 $ $ 862 $
Amortization of intangible assets (2) 180   356   643   962
Total acquisition related costs $ 636   $ 356   $ 1,505   $ 962

(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
   
June 30, December 31,
2013 2012
(In thousands, except share and per

share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 369,484 $ 384,053
Accounts receivable, net 114,498 96,630
Inventories 154,093 139,618
Prepaid income taxes and income taxes receivable 16,146 13,071
Prepaid expenses and other current assets 25,942 18,639
Deferred income taxes, net 11,422   12,948  
Total current assets 691,585 664,959
DEFERRED INCOME TAXES, NET 3,402 2,107
GOODWILL 455 2,898
INTANGIBLE ASSETS, NET 10,956 7,510
PROPERTY, PLANT AND EQUIPMENT, NET 225,195 210,563
OTHER ASSETS 7,662   7,461  
TOTAL $ 939,255   $ 895,498  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities $ 1,822 $ 2,442
Current portion of long-term debt 1,333 1,505
Accounts payable 18,525 17,783
Accrued expenses and other liabilities 53,450 51,451
Deferred income taxes, net 2,211 9,831
Income taxes payable 17,861   42,443  
Total current liabilities 95,202 125,455
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES 16,086 13,102
LONG-TERM DEBT, NET OF CURRENT PORTION 12,000   14,014  
Total liabilities 123,288 152,571
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,518,051 shares issued and outstanding at June 30, 2013; 51,359,247 shares issued and outstanding at December 31, 2012 5 5
Additional paid-in capital 521,044 511,039
Retained earnings 311,824 234,977
Accumulated other comprehensive loss (16,906 ) (3,094 )
Total IPG Photonics Corporation stockholders’ equity 815,967   742,927  
TOTAL $ 939,255   $ 895,498  
 

IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended June 30,
2013   2012
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 76,847 $ 70,397
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,885 12,358
Provisions for inventory, warranty & bad debt 10,255 8,502
Other 1,956 3,735
Changes in assets and liabilities that (used) provided cash:
Accounts receivable/payable (18,704 ) (11,117 )
Inventories (23,814 ) (10,148 )
Other (37,151 ) 4,728  
Net cash provided by operating activities 24,274   78,455  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (34,263 ) (35,966 )
Proceeds from sales of property, plant and equipment 166
Proceeds from short-term investments 15,687
Acquisition of businesses (5,555 )
Other 407   (39 )
Net cash used in investing activities (39,245 ) (20,318 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities (620 ) (2,743 )
Principal payments on long-term borrowings (2,186 ) (1,476 )
Purchase of noncontrolling interests (700 )
Purchase of redeemable noncontrolling interests (55,400 )
Tax benefits from exercise of employee stock options 2,356 1,095
Exercise of employee stock options and issuances under employee stock purchase plan 2,177 2,249
Proceeds from follow-on public offering, net of offering expenses   168,022  
Net cash provided by financing activities 1,727   111,047  
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (1,325 ) (3,840 )
NET INCREASE IN CASH AND CASH EQUIVALENTS (14,569 ) 165,344
CASH AND CASH EQUIVALENTS — Beginning of period 384,053   180,234  
CASH AND CASH EQUIVALENTS — End of period $ 369,484   $ 345,578  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 165   $ 411  
Cash paid for income taxes $ 61,308   $ 14,446  

Copyright Business Wire 2010

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