IPG Photonics Reports 22% Revenue Growth for Second Quarter 2013

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IPG Photonics Reports 22% Revenue Growth for Second Quarter 2013

Fiber Laser Adoption Drives 26% Surge Year-Over-Year in Materials Processing Sales

OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (NAS: 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% Change2013 2012% Change
Revenue$168.2$137.922%$310.0$261.119%
Gross margin53.5%54.3%53.4%55.0%
Operating income$59.9$56.46%$109.5$101.68%
Operating margin35.6%40.9%35.3%38.9%
Net income attributable to IPG Photonics Corporation$41.7$37.711%$76.8$67.714%
Earnings per diluted share$0.80$0.7211%$1.47$1.3410%
 

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 Ended
June 30,

Six Months Ended
June 30,

2013 20122013 2012
(in thousands, except per share data)
NET SALES$168,171$137,927$310,023$261,119
COST OF SALES78,249 63,017 144,460 117,525 
GROSS PROFIT89,922 74,910 165,563 143,594 
OPERATING EXPENSES:
Sales and marketing6,8455,85412,71310,986
Research and development10,4837,22919,28114,369
General and administrative12,8298,73624,63918,685
Gain on foreign exchange(110)(3,354)(591)(2,068)
Total operating expenses30,047 18,465 56,042 41,972 
OPERATING INCOME59,875 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 TAXES59,60156,968109,264100,922
PROVISION FOR INCOME TAXES(17,881)(17,119)(32,417)(30,525)
NET INCOME41,72039,84976,84770,397
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:
Basic51,46250,98951,43549,717
Diluted52,38552,07152,35750,826
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION

  
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2013 20122013 2012
Cost of sales$806$567$1,482$1,027
Sales and marketing317286601538
Research and development482339864642
General and administrative1,335 1,009 2,525 1,992 
Total stock-based compensation2,9402,2015,4724,199
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 20122013 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,
20132012
(In thousands, except share and per

share data)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents$369,484$384,053
Accounts receivable, net114,49896,630
Inventories154,093139,618
Prepaid income taxes and income taxes receivable16,14613,071
Prepaid expenses and other current assets25,94218,639
Deferred income taxes, net11,422 12,948 
Total current assets691,585664,959
DEFERRED INCOME TAXES, NET3,4022,107
GOODWILL4552,898
INTANGIBLE ASSETS, NET10,9567,510
PROPERTY, PLANT AND EQUIPMENT, NET225,195210,563
OTHER ASSETS7,662 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 debt1,3331,505
Accounts payable18,52517,783
Accrued expenses and other liabilities53,45051,451
Deferred income taxes, net2,2119,831
Income taxes payable17,861 42,443 
Total current liabilities95,202125,455
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES16,08613,102
LONG-TERM DEBT, NET OF CURRENT PORTION12,000 14,014 
Total liabilities Read Full Story

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