High Power Fiber Laser Demand in Cutting and
Welding Drives Increase in Materials Processing Sales
29% Increase in Net Income Excluding Foreign
Exchange Transaction Gains
IPG Photonics Corporation (NASDAQ:
IPGP) today reported financial results for the first quarter ended
March 31, 2015.
Three Months Ended March
31, (In millions, except per share data) 2015
2014 % Change Revenue $ 199.0 $ 170.6
17 % Gross margin 54.2 % 52.3 % Operating income $ 82.0 $ 57.8 42 %
Operating margin 41.2 % 33.9 % Net income attributable to IPG
Photonics Corporation $ 57.4 $ 40.5 42 % Earnings per diluted share
$ 1.08 $ 0.77 40 %
Management Comments
"IPG delivered another strong quarter and we are off to a
terrific start this year," said Dr. Valentin Gapontsev, IPG
Photonics' Chief Executive Officer. "Despite foreign currency
headwinds that impacted our anticipated sales growth, demand for
IPG's high-power fiber lasers boosted revenue 17% year-over-year
for the first quarter of 2015. Using average exchange rates for
last year, the underlying growth for the first quarter would have
been more than 20%. Gross margin of 54.2% was within our target
range and we grew our bottom line by 29% year-over-year, excluding
the benefit from foreign exchange transaction gains."
Materials processing sales grew 18% year-over-year as demand
expands in cutting, welding and additive manufacturing applications
across a number of industries and markets. Growth of cutting in
Europe continues to be strong while in Japan adoption accelerated
in the first quarter. In addition, welding sales improved
substantially compared with a year ago and is being used in a
variety of new and existing applications. High-power fiber laser
sales increased 14% and medium power, pulsed, QCW and laser systems
sales also increased compared with the prior year. Geographically,
we experienced strong growth in Europe, the U.S. and China, while
sales were lower in Japan and Russia.
In the first quarter, earnings per diluted share increased by
40% to a record $1.08 and by 29% excluding a benefit of $0.11
related to foreign exchange transaction gains. The growth in
earnings per share was driven by the increase in revenue and an
improvement in operating margins.
During the first quarter, IPG generated $52.0 million in cash
from operations and used $13.7 million to finance capital
expenditures and $5 million on an acquisition. IPG ended the
quarter with $541.5 million in cash and cash equivalents.
Business Outlook and Financial Guidance
"Our order flow and book-to-bill remain at strong levels in our
three main geographies and we expect that to continue in the near
term. We remain focused on gaining share in our established
materials processing applications, developing new product
applications that will expand our available market and applying our
lasers in large scale and novel applications beyond our core
applications in materials processing," concluded Dr. Gapontsev.
IPG Photonics expects revenue in the range of $215 million to
$225 million for the second quarter of 2015. The Company
anticipates earnings per diluted share in the range of $1.05 to
$1.15 based on 53,267,000 diluted common shares, which includes
52,486,000 basic common shares outstanding and 781,000 potentially
dilutive options at March 31, 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 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 0.93, Russian Ruble 52 and Japanese Yen
119, respectively.
Conference Call Reminder
The Company will hold a conference call today, April 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, the Company's expectation that order flow and book-bill
will remain at strong levels, IPG's focus on gaining share in its
established materials processing applications, developing new
product applications that will expand the Company's available
market and applying its lasers in large scale and novel
applications beyond the Company's core applications in materials
processing, and guidance for the second 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 March 31,
2015 2014 (in thousands, except per
share data) NET SALES $ 198,960 $ 170,575 COST OF SALES 91,133
81,291 GROSS PROFIT 107,827 89,284
OPERATING EXPENSES: Sales and marketing 7,549 7,165 Research and
development 14,230 12,784 General and administrative 12,778 12,916
Gain on foreign exchange (8,752 ) (1,370 ) Total operating expenses
25,805 31,495 OPERATING INCOME 82,022 57,789
OTHER (EXPENSE) INCOME, Net: Interest expense, net (184 )
(139 ) Other income, net 85 334 Total other (expense)
income (99 ) 195 INCOME BEFORE PROVISION FOR INCOME TAXES
81,923 57,984 PROVISION FOR INCOME TAXES (24,577 ) (17,453 ) NET
INCOME 57,346 40,531 LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (13 ) — NET INCOME ATTRIBUTABLE TO
IPG PHOTONICS CORPORATION $ 57,359 $ 40,531 NET
INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: Basic $
1.09 $ 0.78 Diluted $ 1.08 $ 0.77 WEIGHTED AVERAGE SHARES
OUTSTANDING: Basic 52,486 51,970 Diluted 53,267 52,724
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED
COMPENSATION
Three Months
Ended March 31, (In thousands) 2015
2014 Cost of sales $ 1,156 $ 890 Sales and marketing 435 373
Research and development 870 654 General and administrative 1,666
1,350 Total stock-based compensation 4,127 3,267 Tax
benefit recognized (1,343 ) (273 ) Net stock-based compensation $
2,784 $ 2,994
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION
RELATED COSTS IN COST OF SALES
Three Months Ended March 31, (In thousands)
2015 2014 Cost of sales
Amortization of intangible assets (1)
235 156
Total acquisition related costs
$ 235 $ 156
(1) Amount relates to intangible amortization expense during
periods presented including amortization of acquired patents
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2015 2014
(In thousands, except share and pershare data)
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 541,474 $
522,150 Accounts receivable, net 149,781 143,109 Inventories, net
174,140 171,009 Prepaid income taxes 25,712 20,967 Prepaid expenses
and other current assets 23,785 21,295 Deferred income taxes, net
16,136 15,308 Total current assets 931,028 893,838
DEFERRED INCOME TAXES, NET 5,868 5,438 GOODWILL 519 455 INTANGIBLE
ASSETS, NET 14,913 9,227 PROPERTY, PLANT AND EQUIPMENT, NET 274,145
275,082 DEPOSITS AND OTHER ASSETS 22,787 26,847 TOTAL
$ 1,249,260 $ 1,210,887
LIABILITIES AND EQUITY
CURRENT LIABILITIES: Revolving line-of-credit facilities $ 523 $
2,631 Current portion of long-term debt 13,000 13,333 Accounts
payable 15,916 17,141 Accrued expenses and other liabilities 62,209
64,057 Deferred income taxes, net 5,876 3,241 Income taxes payable
25,606 21,672 Total current liabilities 123,130
122,075
DEFERRED INCOME TAXES AND OTHER LONG-TERM
LIABILITIES
26,444 22,584 LONG-TERM DEBT, NET OF CURRENT PORTION 19,167
19,667 Total liabilities 168,741 164,326 COMMITMENTS AND
CONTINGENCIES IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value, 175,000,000 shares authorized;
52,620,428 shares issued and outstanding at March 31, 2015;
52,369,688 shares issued and outstanding at December 31, 2014 5 5
Additional paid-in capital 580,926 567,617 Retained earnings
648,561 591,202 Accumulated other comprehensive loss (150,539 )
(112,263 ) Total IPG Photonics Corporation stockholders' equity
1,078,953 1,046,561 NONCONTROLLING INTERESTS 1,566 —
Total equity $ 1,080,519 $ 1,046,561 TOTAL $
1,249,260 $ 1,210,887
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Three Months Ended March 31,
2015 2014 (In thousands) CASH
FLOWS FROM OPERATING ACTIVITIES: Net income $ 57,346 $ 40,531
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 9,743 8,102
Provisions for inventory, warranty & bad debt 8,017 5,284 Other
4,470
(276 ) Changes in assets and liabilities that used cash: Accounts
receivable/payable
(13,116
) (3,857 ) Inventories (13,898 ) (3,856 ) Other (554 ) (2,537 ) Net
cash provided by operating activities
52,008
43,391
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment and intangible assets
(14,027
) (11,456 ) Proceeds from sales of property, plant and equipment
131 119 Acquisition of businesses, net of cash acquired (4,958 ) —
Other 60 32 Net cash used in investing activities
(18,794
) (11,305 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities (1,872 ) (972 ) Principal payments on
long-term borrowings (833 ) (333 ) Tax benefits from exercise of
employee stock options 4,773 1,565 Exercise of employee stock
options 4,409 611 Net cash provided by financing
activities 6,477 871 EFFECT OF CHANGES IN EXCHANGE
RATES ON CASH AND CASH EQUIVALENTS
(20,367
)
(1,124 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 19,324 31,833
CASH AND CASH EQUIVALENTS — Beginning of period 522,150
448,776 CASH AND CASH EQUIVALENTS — End of period $ 541,474
$ 480,609 SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION: Cash paid for interest $ 254 $ 102 Cash
paid for income taxes $ 11,819 $ 20,893
IPG Photonics CorporationTim Mammen, 508-373-1100Chief Financial
OfficerorSharon MerrillDavid Calusdian, 617-542-5300Executive Vice
President
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