MRO Magazine

IPG Photonics Reports Second Quarter 2015 Revenue Growth of 22%


July 28, 2015
By Business Wire News

OXFORD, Mass.

IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the second quarter ended June 30, 2015.

   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

 
(In millions, except per share data)2015  2014% Change2015  2014% Change
Revenue $ 235.1 $ 192.2 22 % $ 434.1 $ 362.8 20 %
Gross margin 54.7 % 54.2 % 54.5 % 53.3 %
Operating income $ 87.4 $ 68.7 27 % $ 169.5 $ 126.5 34 %
Operating margin 37.2 % 35.8 % 39.0 % 34.9 %
Net income attributable to IPG Photonics Corporation $ 61.3 $ 48.3 27 % $ 118.7 $ 88.8 34 %
Earnings per diluted share $ 1.15 $ 0.92 25 % $ 2.22 $ 1.68 32 %

Management Comments

“IPG grew revenues 22% year over year to a record $235.1 million for the second quarter of 2015, as we continue to expand market penetration of fiber lasers in materials processing applications,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “Through our increasing scale, continued innovation and operating efficiencies, we achieved a gross margin of 54.7% and increased earnings per diluted share by 25% year-over-year to $1.15.”

Expansion in existing and new OEM customers delivered a 21% increase in materials processing sales for the second quarter of 2015. High-power fiber lasers sales grew strongly increasing by 27%, and IPG also had healthy growth in medium-power, low-power and QCW lasers. Sales for other applications, including advanced applications, telecom and medical applications, increased 54% from the same quarter last year, and as a group accounted for 5% of total revenue. Geographically, IPG delivered its highest sales growth in Asia followed by lower levels of growth in Europe and North America.

In the second quarter, earnings per diluted share increased by 25% to a record $1.15, which includes $0.04 per share related to foreign exchange losses as compared to a $0.01 foreign exchange loss in 2014. The growth in earnings per share was driven by the increase in revenue and an improvement in operating margins.

During the second quarter, IPG generated $49.4 million in cash from operations and used $18.6 million to finance capital expenditures. IPG ended the quarter with $571.5 million in cash and cash equivalents after repayment of an $11 million term loan which matured in the second quarter.

Business Outlook and Financial Guidance

“In the second quarter, our book-to-bill ratio continued to be significantly better than one. As we enter the second half of 2015, we remain focused on establishing partnerships with new OEMs and end-users, deepening our relationships with existing customers and developing the next generation of fiber laser-based products to address new markets and applications,” concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $235 million to $250 million for the third quarter of 2015. The Company anticipates earnings per diluted share in the range of $1.15 to $1.30 based on 53,442,000 diluted common shares, which includes 52,657,000 basic common shares outstanding and 785,000 potentially dilutive options at June 30, 2015.

As discussed in more detail in the “Safe Harbor” passage of this news release, actual results may differ from this guidance due to various factors including, but not limited to, product demand, order cancellations and delays, competition and general economic conditions. This guidance is based upon current market conditions and expectations, and is subject to the risks outlined in the Company’s reports with the SEC, and assumes exchange rates relative to the U.S. Dollar of Euro 0.92, Russian Ruble 57 and Japanese Yen 124, respectively.

Conference Call Reminder

The Company will hold a conference call today, July 28, 2015 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. An archived version of the webcast 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 focus on establishing partnerships with new OEMs and end-users, deepening relationships with existing customers and developing the next generation of fiber laser-based products to address new markets and applications and guidance for the third quarter of 2015. 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; inability to manage risks associated with international customers and operations; foreign currency fluctuations; 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; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; 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, 2015) 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,

2015  20142015  2014
(in thousands, except per share data)
NET SALES $ 235,138 $ 192,204 $ 434,098 $ 362,779
COST OF SALES 106,435   87,977   197,568   169,268  
GROSS PROFIT 128,703   104,227   236,530   193,511  
OPERATING EXPENSES:
Sales and marketing 7,962 8,047 15,511 15,212
Research and development 15,114 13,362 29,344 26,146
General and administrative 15,017 13,124 27,795 26,040
Loss (gain) on foreign exchange 3,167   945   (5,585 ) (425 )
Total operating expenses 41,260   35,478   67,065   66,973  
OPERATING INCOME 87,443   68,749   169,465   126,538  
OTHER INCOME (EXPENSE), Net:
Interest expense, net (112 ) (296 ) (139 )
Other income, net 161   239   246   573  
Total other income (expense) 49   239   (50 ) 434  
INCOME BEFORE PROVISION FOR INCOME TAXES 87,492 68,988 169,415 126,972
PROVISION FOR INCOME TAXES (26,249 ) (20,705 ) (50,825 ) (38,158 )
NET INCOME 61,248 48,283 118,590 88,814
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (55 )   (68 )  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION $ 61,299   $ 48,283   $ 118,658   $ 88,814  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
Basic $ 1.16 $ 0.93 $ 2.26 $ 1.71
Diluted $ 1.15 $ 0.92 $ 2.22 $ 1.68
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 52,657 52,068 52,572 52,019
Diluted 53,442 52,769 53,355 52,747
 
 

IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION

     

Three Months Ended June 30,

Six Months Ended June 30,
(In thousands)2015  20142015  2014
Cost of sales $ 1,359 $ 1,041 $ 2,515 $ 1,931
Sales and marketing 509 434 944 807
Research and development 993 772 1,863 1,426
General and administrative 1,874   1,658   3,540   3,008  
Total stock-based compensation 4,735 3,905 8,862 7,172
Tax benefit recognized (1,565 ) (1,250 ) (2,908 ) (2,295 )
Net stock-based compensation $ 3,170   $ 2,655   $ 5,954   $ 4,877  
 
 

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)2015  20142015  2014
Cost of sales
Amortization of intangible assets (1) 410   156   645   312
Total acquisition related costs $ 410   $ 156   $ 645   $ 312
 

(1) Amount relates to intangible amortization expense during periods presented including amortization of acquired patents

 

IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS

     
June 30,
2015
December 31,
2014

(In thousands, except share and per
share data)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 571,508 $ 522,150
Accounts receivable, net 169,828 143,109
Inventories 190,848 171,009
Prepaid income taxes 27,822 20,967
Prepaid expenses and other current assets 24,241 21,295
Deferred income taxes, net 18,123   15,308  
Total current assets 1,002,370 893,838
DEFERRED INCOME TAXES, NET 7,495 5,438
GOODWILL 516 455
INTANGIBLE ASSETS, NET 14,013 9,227
PROPERTY, PLANT AND EQUIPMENT, NET 288,553 275,082
OTHER ASSETS 21,594   26,847  
TOTAL $ 1,334,541   $ 1,210,887  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities $ 1,600 $ 2,631
Current portion of long-term debt 2,000 13,333
Accounts payable 21,537 17,141
Accrued expenses and other liabilities 68,274 64,057
Deferred income taxes, net 3,670 3,241
Income taxes payable 28,690   21,672  
Total current liabilities 125,771 122,075
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES 26,348 22,584
LONG-TERM DEBT, NET OF CURRENT PORTION 18,667   19,667  
Total liabilities 170,786 164,326
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY:

Common stock, $0.0001 par value, 175,000,000 shares authorized;
52,721,014 shares issued and outstanding at June 30, 2015;
52,369,688 shares issued and outstanding at December 31, 2014

5 5
Additional paid-in capital 591,718 567,617
Retained earnings 709,860 591,202
Accumulated other comprehensive loss (139,262 ) (112,263 )
Total IPG Photonics Corporation stockholders’ equity 1,162,321 1,046,561
NONCONTROLLING INTERESTS 1,434    
Total equity $ 1,163,755   $ 1,046,561  
TOTAL $ 1,334,541   $ 1,210,887  
 
 

IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Six Months Ended June 30,
2015  2014
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 118,590 $ 88,814
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 20,176 17,088
Provisions for inventory, warranty & bad debt 18,804 12,207
Other 3,427 389
Changes in assets and liabilities that used cash:
Accounts receivable/payable (27,326 ) (23,404 )
Inventories (33,211 ) (14,988 )
Other 950   (3,231 )
Net cash provided by operating activities 101,410   76,875  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment and intangible assets (32,606 ) (45,781 )
Proceeds from sales of property, plant and equipment 139 254
Acquisition of businesses, net of cash acquired (4,958 )
Other 86   42  
Net cash used in investing activities (37,339 ) (45,485 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities (777 ) (535 )
Principal payments on long-term borrowings (12,333 ) (667 )
Tax benefits from exercise of employee stock options 5,665 2,426
Exercise of employee stock options and issuances under employee stock purchase plan 9,574   3,379  
Net cash provided by financing activities 2,129   4,603  
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (16,842 ) (1,337 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 49,358 34,656
CASH AND CASH EQUIVALENTS — Beginning of period 522,150   448,776  
CASH AND CASH EQUIVALENTS — End of period $ 571,508   $ 483,432  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 533   $ 223  
Cash paid for income taxes $ 44,728   $ 41,525  
 

IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief Financial Officer
or
Sharon Merrill
David Calusdian, 617-542-5300
Executive Vice President