IPG Photonics Reports 15% Revenue Growth for First Quarter 2013

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IPG Photonics Reports 15% Revenue Growth for First Quarter 2013

Materials Processing Applications Sales Increase 29%

Order Flow Remains Strong


OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (NAS: IPGP) today reported financial results for the first quarter ended March 31, 2013.

  Three Months Ended March 31,  
(In millions, except per share data)2013  2012% Change
Revenue$141.9$123.215%
Gross margin53.3%55.8%
Operating income$49.6$45.210%
Operating margin35.0%36.7%
Net income attributable to IPG Photonics Corporation$35.1$29.917%
Earnings per diluted share$0.67$0.6110%
 

Management Comments

"IPG's core materials processing business grew by 29% year-over-year and comprised 94% of our revenues," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Gross margins of 53.3% recovered from Q4 due to improved product mix, lower component costs and enhanced manufacturing efficiency. Order flow remains firm with a book-to-bill ratio solidly in excess of 1. The strong growth in our core materials processing applications was partially offset by lower sales in other applications."

"In materials processing, we reported a record quarter for high power laser sales, which increased 19% year-over-year," said Dr. Gapontsev. "Strong materials processing sales were also driven by growth across all regions, particularly, Asia and Europe. In addition, during Q1 we received our largest automotive contract in our history from a major German manufacturer."

"Cash and cash equivalents decreased from $384.1 million to $355.7 million due to the payment of German corporation taxes related to 2011 and 2012 of approximately $32 million and capital and acquisition related expenditures that totaled $23.3 million," Dr. Gapontsev said.

Business Outlook and Financial Guidance

"The fundamentals that drive our business remain intact with strong order flow and sequentially improving margins. We are continuing to develop new industry-leading products and applications which should generate future growth. The core materials processing applications continue to drive growth as they gain significant market share from legacy technologies. Our scale, technological and cost advantages drive customer acceptance and make IPG the top choice for many laser processing applications. Our guidance for the second quarter takes into consideration these improving dynamics," concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $155 million to $165 million for the second quarter of 2013. The Company anticipates earnings per diluted share in the range of $0.72 to $0.82 based on 52,350,000 diluted common shares, which includes 51,407,000 basic common shares outstanding and 943,000 potentially dilutive options at March 31, 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, May 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, IPG's continuing development of new industry-leading products and applications which should generate future growth, gaining significant market share from legacy technologies, customer acceptance being driven by IPG's scale, technological and cost advantages and making IPG the top choice for many laser processing applications, improving dynamics, and guidance for the second 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 Ended March 31,
2013  2012
(in thousands, except per share data)
NET SALES$141,852$123,192
COST OF SALES66,211 54,508 
GROSS PROFIT75,641 68,684 
OPERATING EXPENSES:
Sales and marketing5,8685,132
Research and development8,7987,140
General and administrative11,8109,949

(Gain) loss on foreign exchange

(481)1,286 
Total operating expenses25,995 23,507 
OPERATING INCOME49,646 45,177 
OTHER INCOME (EXPENSE), Net:
Interest expense, net(53)(129)
Other income (expense), net70 (1,094)
Total other income (expense)17 (1,223)
INCOME BEFORE PROVISION FOR INCOME TAXES49,66343,954
PROVISION FOR INCOME TAXES(14,536)(13,406)
NET INCOME35,12730,548
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 633 
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION$35,127 $29,915 
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
Basic$0.68$0.63
Diluted$0.67$0.61
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic51,40748,446
Diluted52,35049,582
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION

  
Three Months Ended March 31,
(In thousands)2013  2012
Cost of sales$676$460
Sales and marketing284252
Research and development382303
General and administrative1,190 983 
Total stock-based compensation2,5321,998
Tax benefit recognized(817)(607)
Net stock-based compensation$1,715 $1,391 
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES

  
Three Months Ended March 31,
(In thousands)2013  2012
Cost of sales
Step-up of inventory (1)$406$
Amortization of intangible assets (2)182 308
Total acquisition related costs$588 $308
 

(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

    
March 31,December 31,
20132012
(In thousands, except share and per
share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$355,715$384,053
Accounts receivable, net102,79396,630
Inventories142,096139,618
Prepaid income taxes and income taxes receivable14,39713,071
Prepaid expenses and other current assets23,26518,639
Deferred income taxes, net11,105 12,948 
Total current assets649,371664,959
DEFERRED INCOME TAXES, NET2,3442,107
GOODWILL3,2582,898
INTANGIBLE ASSETS, NET11,4127,510
PROPERTY, PLANT AND EQUIPMENT, NET218,995210,563
OTHER ASSETS6,878 7,461 
TOTAL$892,258 $895,498 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities$9,802$2,442
Current portion of long-term debt1,5291,505
Accounts payable14,57517,783
Accrued expenses and other liabilities50,13851,451
Deferred income taxes, net2,8759,831
Income taxes payable9,191 42,443 
Total current liabilities88,110125,455
DEFFERED INCOME TAXES AND OTHER LONG-TERM LIABILITIES18,39813,102
LONG-TERM DEBT, NET OF CURRENT PORTION12,525 14,014 
Total liabilities119,033152,571
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,432,894 shares issued and outstanding at March 31, 2013; 51,359,247 shares issued and outstanding at December 31, 201255
Additional paid-in capital515,755511,039
Retained earnings270,104234,977
Accumulated other comprehensive loss(12,639)(3,094)
Total IPG Photonics Corporation stockholders' equity773,225 742,927 
TOTAL$892,258 $895,498 
 
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IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

  
Three Months Ended March 31,
2013  2012
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$35,127$30,548
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation and amortization7,2176,215
Provisions for inventory, warranty & bad debt3,7053,799
Other6,3596,611
Changes in assets and liabilities that used cash:
Accounts receivable/payable(10,186)(11,501)
Inventories(6,984)(4,027)
Other(46,577)(4,640)
Net cash (used) provided by operating activities(11,339)27,005 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(17,746)(13,779)
Proceeds from sales of property, plant and equipment89
Proceeds from short-term investments7,001
Acquisition of businesses(5,555)
Other375 149 
Net cash used in investing activities(22,837)(6,629