IPG Photonics Corporation (NASDAQ: IPGP) today reported financial
results for the third quarter ended September 30, 2020.
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|
(In millions, except
per share data and percentages) |
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
Revenue |
|
$ |
318.4 |
|
|
$ |
329.1 |
|
|
(3)% |
|
$ |
864.1 |
|
|
$ |
1,008.0 |
|
|
(14)% |
Gross margin |
|
48.0 |
% |
|
46.4 |
% |
|
|
|
45.4 |
% |
|
47.8 |
% |
|
|
Operating income |
|
$ |
41.4 |
|
|
$ |
74.1 |
|
|
(44)% |
|
$ |
133.4 |
|
|
$ |
233.6 |
|
|
(43)% |
Operating margin |
|
13.0 |
% |
|
22.5 |
% |
|
|
|
15.4 |
% |
|
23.2 |
% |
|
|
Net income attributable to IPG
Photonics Corporation |
|
$ |
35.6 |
|
|
$ |
57.3 |
|
|
(38)% |
|
$ |
110.2 |
|
|
$ |
184.7 |
|
|
(40)% |
Earnings per diluted share |
|
$ |
0.66 |
|
|
$ |
1.07 |
|
|
(38)% |
|
$ |
2.05 |
|
|
$ |
3.43 |
|
|
(40)% |
Management Comments
"We delivered third quarter results above our
guidance range due to sales growth in China and a sequential
improvement in Europe," said Dr. Valentin Gapontsev, IPG Photonics'
Chief Executive Officer. "We continue to introduce leading-edge
solutions to the market thanks to our technology differentiation,
low-cost production capabilities and global footprint.
Although bottom-line results were impacted by a goodwill impairment
charge of $45 million, we achieved a 160 basis point year-over-year
increase in gross margin on 3% lower revenue. We demonstrated
excellent execution given the circumstances."
Financial Highlights
Third quarter revenue of $318 million decreased
3% year over year. Materials processing sales decreased 5%
year over year due to lower sales in cutting, welding and marking
applications, while sales into other applications increased 24%
year over year on strength in advanced applications and devices
used in medical procedures. Materials processing sales accounted
for 91% of total revenue.
Sales of high power continuous wave ("CW")
lasers, representing 58% of total revenue, were flat on a year over
year basis. These sales benefited from growth of ultra-high
power fiber lasers (6 kilowatts of power or greater) which
represented 58% of all high power CW laser sales. By region, sales
increased 22% in China, and decreased 10% in Europe, 41% in Japan
and 26% in North America on a year over year basis.
Earnings per diluted share ("EPS") of $0.66
decreased 38% year over year. A goodwill impairment charge reduced
EPS by $0.63, while foreign exchange gains benefited EPS by $0.15.
The effective tax rate in the quarter was 16%, which benefited from
certain discrete tax items. The goodwill impairment charges
related to Genesis Systems Group reduced operating income by $45
million and operating margin by 14 percentage points. The results
of this business were impacted by lower capital investments from
industries impacted greatly by the COVID-19 pandemic, such as
aerospace and transportation, as projects have been delayed. During
the third quarter, IPG generated $70 million in cash from
operations. Capital expenditures were $25 million and stock
repurchases totaled $10 million.
Business Outlook and Financial Guidance
"Bookings growth in North America and Europe was
strong when compared sequentially with the second quarter. In North
America, we had record bookings aided by several orders for
advanced applications. While total orders in China for the
third quarter were lower, China continues to have a significant
backlog given the exceptional level of orders booked in the first
half of the year. In total, third quarter book-to-bill was
slightly below 1. Overall, it was notable that order bookings
improved markedly during September.
“While the pandemic represents considerable
macroeconomic uncertainty for the months ahead, we have continued
to demonstrate our ability to execute even in these challenging
times. Further, our strong balance sheet and free cash flow
provide us ample flexibility to respond to business disruptions and
maintain our leading competitive position. We continue to benefit
from near-term growth opportunities in ultra-high power cutting,
electric vehicle battery processing, medical procedures and
advanced applications. We believe the strides we are making in
higher power products within our core materials processing business
and new solutions will enable us to emerge from the current
downturn in a stronger competitive position," concluded Dr.
Gapontsev.
For the fourth quarter of 2020, IPG expects
revenue of $290 to $320 million. The Company expects the fourth
quarter tax rate to be approximately 25%. IPG anticipates
delivering earnings per diluted share in the range of $0.75 to
$1.05, with 53.1 million basic common shares outstanding and 53.7
million diluted common shares outstanding. Financial guidance
provided this quarter is subject to greater risk and uncertainty
given the COVID-19 pandemic and its associated impacts to the
global business environment, public health requirements and
government mandates.
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,
government and Company measures implemented to address the COVID-19
pandemic, product demand, order cancellations and delays,
competition, tariffs, trade policy changes 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 0.85, Russian Ruble 80, Japanese Yen 106
and Chinese Yuan 6.81, respectively.
Supplemental Financial Information
Additional supplemental financial information is
provided in the unaudited Third Quarter 2020 Financial Data
Workbook available on the investor relations section of the
Company's website at investor.ipgphotonics.com.
Conference Call Reminder
The Company will hold a conference call today,
October 30, 2020 at 10:00 am ET. To access the call, please
dial 877-407-6184 in the US or 201-389-0877 internationally. A live
webcast of the call will also be available and archived on the
investor relations section of the Company's website at
investor.ipgphotonics.com.
Contact
Nicholas P. ManganaroSenior AssociateSharon Merrill Associates,
Inc617-542-5300nmanganaro@investorrelations.com
About IPG Photonics Corporation
IPG Photonics Corporation is the leader in
high-power fiber lasers and amplifiers used primarily in materials
processing and other diverse applications. The Company’s mission is
to make its fiber laser technology the tool of choice in mass
production. IPG accomplishes this mission by delivering superior
performance, reliability and usability at a lower total cost of
ownership compared with other types of lasers and non-laser tools,
allowing end users to increase productivity and decrease costs. A
member of the S&P 500® Index, IPG is headquartered in Oxford,
Massachusetts and has more than 25 facilities worldwide. For more
information, visit www.ipgphotonics.com.
Safe Harbor Statement
Information and statements provided by IPG 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, continuing to introduce leading-edge solutions, ability
to execute in challenging times, our strong balance sheet and free
cash flow providing us ample flexibility to respond to business
disruptions and maintain our leading competitive position, growth
opportunities in ultra-high power cutting, electric vehicle battery
processing, medical procedures and advanced applications, strides
in higher power products and new solutions enabling us to emerge
from the pandemic in a stronger competitive position, impacts of
COVID-19 on our business, the global economy and government
policies, revenue, tax rate and earnings guidance for Q4 2020.
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 IPG serves, particularly the effect of
downturns in the markets IPG serves; uncertainties and adverse
changes in the general economic conditions of markets; IPG'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; changes in trade controls and trade
policies; foreign currency fluctuations; high levels of fixed costs
from IPG's vertical integration; the appropriateness of IPG's
manufacturing capacity for the level of demand; competitive
factors, including declining average selling prices; the effect of
acquisitions and investments; inventory write-downs; asset
impairment charges; intellectual property infringement claims and
litigation; interruption in supply of key components; manufacturing
risks; government regulations and trade sanctions; and other risks
identified in IPG's SEC filings. Readers are encouraged to refer to
the risk factors described in IPG's Annual Report on Form 10-K
(filed with the SEC on February 24, 2020), Current Report on Form
8-K (filed with the SEC on May 5, 2020) and IPG's 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.
IPG 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
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands, except per share data) |
Net sales |
|
$ |
318,441 |
|
|
$ |
329,138 |
|
|
$ |
864,094 |
|
|
$ |
1,007,954 |
|
Cost of sales |
|
165,649 |
|
|
176,280 |
|
|
471,977 |
|
|
525,948 |
|
Gross profit |
|
152,792 |
|
|
152,858 |
|
|
392,117 |
|
|
482,006 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Sales and marketing |
|
17,332 |
|
|
18,969 |
|
|
53,341 |
|
|
58,907 |
|
Research and development |
|
31,710 |
|
|
32,160 |
|
|
95,132 |
|
|
99,528 |
|
General and administrative |
|
29,038 |
|
|
26,776 |
|
|
82,561 |
|
|
82,526 |
|
Goodwill impairment |
|
44,589 |
|
|
— |
|
|
44,589 |
|
|
— |
|
Impairment of long-lived assets and other restructuring
charges |
|
12 |
|
|
— |
|
|
1,177 |
|
|
— |
|
(Gain) loss on foreign exchange |
|
(11,302 |
) |
|
808 |
|
|
(18,101 |
) |
|
7,495 |
|
Total operating expenses |
|
111,379 |
|
|
78,713 |
|
|
258,699 |
|
|
248,456 |
|
Operating income |
|
41,413 |
|
|
74,145 |
|
|
133,418 |
|
|
233,550 |
|
Other income, net: |
|
|
|
|
|
|
|
|
Interest income, net |
|
1,168 |
|
|
3,734 |
|
|
6,097 |
|
|
11,737 |
|
Other income (expense), net |
|
(59 |
) |
|
(520 |
) |
|
581 |
|
|
129 |
|
Total other income |
|
1,109 |
|
|
3,214 |
|
|
6,678 |
|
|
11,866 |
|
Income before provision of income
taxes |
|
42,522 |
|
|
77,359 |
|
|
140,096 |
|
|
245,416 |
|
Provision for income taxes |
|
6,992 |
|
|
20,232 |
|
|
29,434 |
|
|
60,852 |
|
Net income |
|
35,530 |
|
|
57,127 |
|
|
110,662 |
|
|
184,564 |
|
Less: net (loss) income
attributable to non-controlling interests |
|
(74 |
) |
|
(126 |
) |
|
429 |
|
|
(120 |
) |
Net income attributable to IPG
Photonics Corporation |
|
$ |
35,604 |
|
|
$ |
57,253 |
|
|
$ |
110,233 |
|
|
$ |
184,684 |
|
Net income attributable to IPG
Photonics Corporation per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.67 |
|
|
$ |
1.08 |
|
|
$ |
2.07 |
|
|
$ |
3.48 |
|
Diluted |
|
$ |
0.66 |
|
|
$ |
1.07 |
|
|
$ |
2.05 |
|
|
$ |
3.43 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
53,098 |
|
|
52,928 |
|
|
53,136 |
|
|
53,073 |
|
Diluted |
|
53,664 |
|
|
53,622 |
|
|
53,691 |
|
|
53,864 |
|
IPG PHOTONICS
CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
September 30, |
|
December 31, |
|
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands, except share and
per share data) |
ASSETS |
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
763,920 |
|
|
$ |
680,070 |
|
Short-term investments |
|
537,696 |
|
|
502,546 |
|
Accounts receivable, net |
|
240,352 |
|
|
238,479 |
|
Inventories |
|
370,344 |
|
|
380,790 |
|
Prepaid income taxes |
|
60,436 |
|
|
38,873 |
|
Prepaid expenses and other current assets |
|
58,905 |
|
|
55,876 |
|
Total current assets |
|
2,031,653 |
|
|
1,896,634 |
|
Deferred income taxes, net |
|
38,616 |
|
|
31,395 |
|
Goodwill |
|
37,731 |
|
|
82,092 |
|
Intangible assets, net |
|
64,999 |
|
|
74,271 |
|
Property, plant and equipment,
net |
|
576,398 |
|
|
600,852 |
|
Other assets |
|
45,535 |
|
|
45,192 |
|
Total assets |
|
$ |
2,794,932 |
|
|
$ |
2,730,436 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
Current liabilities: |
|
|
|
|
Current portion of long-term debt |
|
$ |
3,792 |
|
|
$ |
3,740 |
|
Accounts payable |
|
37,375 |
|
|
27,329 |
|
Accrued expenses and other current liabilities |
|
156,472 |
|
|
149,782 |
|
Income taxes payable |
|
3,806 |
|
|
11,053 |
|
Total current liabilities |
|
201,445 |
|
|
191,904 |
|
Deferred income taxes and other
long-term liabilities |
|
87,296 |
|
|
98,121 |
|
Long-term debt, net of current
portion |
|
35,117 |
|
|
37,968 |
|
Total liabilities |
|
323,858 |
|
|
327,993 |
|
Commitments and
contingencies |
|
|
|
|
IPG Photonics Corporation
equity: |
|
|
|
|
Common stock, $0.0001 par value, 175,000,000 shares authorized;
55,278,428 and 53,244,416 shares issued and outstanding,
respectively, at September 30, 2020; 54,743,227 and 53,010,875
shares issued and outstanding, respectively, at December 31,
2019. |
|
6 |
|
|
5 |
|
Treasury stock, at cost, 2,034,012 and 1,732,352 shares held at
September 30, 2020 and December 31, 2019, respectively. |
|
(303,614 |
) |
|
(265,730 |
) |
Additional paid-in capital |
|
828,796 |
|
|
785,636 |
|
Retained earnings |
|
2,138,852 |
|
|
2,028,734 |
|
Accumulated other comprehensive loss |
|
(193,827 |
) |
|
(146,919 |
) |
Total IPG Photonics Corporation equity |
|
2,470,213 |
|
|
2,401,726 |
|
Non-controlling interests |
|
861 |
|
|
717 |
|
Total equity |
|
2,471,074 |
|
|
2,402,443 |
|
Total liabilities and
equity |
|
$ |
2,794,932 |
|
|
$ |
2,730,436 |
|
IPG PHOTONICS
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
|
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands) |
Cash flows from operating
activities: |
|
|
|
|
Net income |
|
$ |
110,662 |
|
|
$ |
184,564 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
71,188 |
|
|
72,531 |
|
Goodwill impairment |
|
44,589 |
|
|
— |
|
Impairment of long-lived assets |
|
671 |
|
|
— |
|
Provisions for inventory, warranty & bad debt |
|
42,559 |
|
|
38,748 |
|
Other |
|
1,336 |
|
|
29,244 |
|
Changes in assets and liabilities that provided (used) cash, net of
acquisitions: |
|
|
|
|
Accounts receivable and accounts payable |
|
11,127 |
|
|
(15,699 |
) |
Inventories |
|
(34,213 |
) |
|
(51,032 |
) |
Other |
|
(47,902 |
) |
|
(64,774 |
) |
Net cash provided by operating activities |
|
200,017 |
|
|
193,582 |
|
Cash flows from investing
activities: |
|
|
|
|
Purchases of property, plant and equipment |
|
(61,871 |
) |
|
(107,540 |
) |
Proceeds from sales of property, plant and equipment |
|
689 |
|
|
348 |
|
Purchases of short-term and long-term investments |
|
(732,729 |
) |
|
(557,674 |
) |
Proceeds from short-term investments |
|
697,816 |
|
|
568,501 |
|
Acquisitions of businesses, net of cash acquired |
|
— |
|
|
(15,115 |
) |
Other |
|
17 |
|
|
243 |
|
Net cash used in investing activities |
|
(96,078 |
) |
|
(111,237 |
) |
Cash flows from financing
activities: |
|
|
|
|
Principal payments on long-term borrowings |
|
(2,798 |
) |
|
(2,747 |
) |
Proceeds from issuance of common stock under employee stock option
and purchase plans less payments for taxes related to net share
settlement of equity awards |
|
16,767 |
|
|
1,644 |
|
Purchase of treasury stock, at cost |
|
(37,884 |
) |
|
(25,921 |
) |
Payment of purchase price holdback from business combination |
|
(1,650 |
) |
|
— |
|
Net cash used in financing activities |
|
(25,565 |
) |
|
(27,024 |
) |
Effect of changes in exchange
rates on cash and cash equivalents and restricted cash |
|
4,692 |
|
|
(16,561 |
) |
Net increase in cash, cash
equivalents and restricted cash |
|
83,066 |
|
|
38,760 |
|
Cash, cash equivalents and
restricted cash — Beginning of period |
|
682,984 |
|
|
544,358 |
|
Cash, cash equivalents and
restricted cash — End of period |
|
$ |
766,050 |
|
|
$ |
583,118 |
|
Supplemental disclosures of cash
flow information: |
|
|
|
|
Cash paid for interest |
|
$ |
1,650 |
|
|
$ |
1,655 |
|
Cash paid for income taxes |
|
$ |
65,895 |
|
|
$ |
97,172 |
|
IPG PHOTONICS
CORPORATIONSUPPLEMENTAL SCHEDULE OF ACQUISITION
RELATED COSTS AND OTHER CHARGES (UNAUDITED)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands) |
Amortization of intangible
assets: |
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
1,168 |
|
|
$ |
1,484 |
|
|
$ |
3,562 |
|
|
$ |
4,318 |
|
Sales and marketing |
|
1,779 |
|
|
1,973 |
|
|
5,334 |
|
|
5,783 |
|
Research and development |
|
— |
|
|
160 |
|
|
133 |
|
|
480 |
|
Total acquisition related costs
and other charges |
|
$ |
2,947 |
|
|
$ |
3,617 |
|
|
$ |
9,029 |
|
|
$ |
10,581 |
|
IPG PHOTONICS
CORPORATIONSUPPLEMENTAL SCHEDULE OF STOCK-BASED
COMPENSATION AND ACCOUNTING STANDARD IMPACTS TO NET INCOME AND
EARNINGS PER SHARE (UNAUDITED)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands) |
Cost of sales |
|
$ |
2,663 |
|
|
$ |
2,575 |
|
|
$ |
7,702 |
|
|
$ |
6,806 |
|
Sales and marketing |
|
1,126 |
|
|
1,266 |
|
|
3,275 |
|
|
2,907 |
|
Research and development |
|
2,258 |
|
|
2,035 |
|
|
6,805 |
|
|
5,955 |
|
General and
administrative |
|
2,732 |
|
|
2,678 |
|
|
8,698 |
|
|
10,096 |
|
Total stock-based
compensation |
|
8,779 |
|
|
8,554 |
|
|
26,480 |
|
|
25,764 |
|
Tax effect of stock-based
compensation |
|
(1,527 |
) |
|
(2,074 |
) |
|
(5,586 |
) |
|
(6,121 |
) |
Net stock-based compensation |
|
$ |
7,252 |
|
|
$ |
6,480 |
|
|
$ |
20,894 |
|
|
$ |
19,643 |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands) |
Excess tax benefit on exercise of stock options included in net
income |
|
$ |
1,896 |
|
|
$ |
1,713 |
|
|
$ |
6,590 |
|
|
$ |
13,780 |
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IPG Photonics (NASDAQ:IPGP)
Historical Stock Chart
From May 2024 to Jun 2024
IPG Photonics (NASDAQ:IPGP)
Historical Stock Chart
From Jun 2023 to Jun 2024