Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 1, 2023

Date of Report (Date of earliest event reported)

IPG PHOTONICS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or Other Jurisdiction

of Incorporation)

001-33155

(Commission File No.)

04-3444218

(IRS Employer

Identification No.)

377 Simarano Drive

Marlborough, Massachusetts 01752

(Address of Principal Executive Offices, including Zip Code)

(508) 373-1100

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



☐						Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐						Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐						Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐						Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	IPGP	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition

On August 1, 2023, IPG Photonics Corporation (the "Company") announced its financial results for the quarter ended June 30, 2023. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 referenced herein, shall not be deemed "filed" for purposes of Section 18 of the Securities Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On July 28, 2023, the Board of Directors (the "Board") of the Company increased the size of the Board from ten to eleven members and appointed Kolleen Kennedy as a director to fill the vacancy resulting from that increase, effective August 1, 2023. The initial term as director for Ms. Kennedy will expire at the Company’s 2024 annual meeting of stockholders.

As a non-employee director, Ms. Kennedy will receive a $40,000 annual retainer for her service on the Board, paid in monthly installments, and participate in the Company's Non-Employee Director Compensation Plan (the “Non-Employee Director Plan”). Upon her appointment, Ms. Kennedy received an initial grant of restricted stock units ("RSUs") with a value of approximately $250,000 under the Non-Employee Director Plan. The RSUs vest on the first anniversary of the date of grant. In connection with her appointment, the Company and Ms. Kennedy will enter into the Company’s standard indemnification agreement for directors.

Ms. Kennedy is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. There were no arrangements or understandings pursuant to which Ms. Kennedy was selected as a director.

Item 7.01. Regulation FD Disclosure.

On August 1, 2023, the Company issued a press release announcing changes to the Board. A copy of the press release is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 referenced herein, shall not be deemed "filed" for purposes of the Exchange Act, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 8.01 Other Events.

Certain directors and officers of the Company adopt from time to time pre-arranged trading plans (each, a “Plan”) designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and the Company’s policies regarding stock transactions. Under Rule 10b5-1, directors, officers and other persons who are not in possession of material non-public information may adopt a plan or contract for pre-arranged sales of Company securities under specified conditions and at specified times. Using these Plans, insiders can gradually diversify their investment portfolios, spread stock trades out over an extended period of time to reduce market impact and avoid concerns about transactions occurring at a time when they might possess inside information.

The Plan adopted by Ms. Agnes Tang, Director, provides for the sale of up to 900 shares over a period ending March 2024, unless terminated sooner in certain circumstances. Shares will be sold under the Plan on the open market at prevailing market prices, subject to minimum price thresholds.

The Company does not undertake to report Plans that may be adopted by any directors, officers or affiliates of the Company in the future, or to report any modification or termination of any Plan, except to the extent required by law.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit 99.1 relating to Item 2.02 and Exhibit 99.2 related to Item 7.01 shall be deemed to be furnished, and not filed:




Exhibit Number						Exhibit Description
Exhibit 99.1						Press Release issued by IPG Photonics Corporation on Au gust 1 , 2023.
Exhibit 99.2						Press Release issued by IPG Photonics Corporation on August 1, 2023.
Exhibit 104						Inline XBRL for the cover page of this Current Report on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned thereunto duly authorized.

IPG PHOTONICS CORPORATION

August 1, 2023

By:

/s/ Timothy P.V. Mammen

Timothy P.V. Mammen

Senior Vice President and Chief Financial Officer

Exhibit 99.1

IPG PHOTONICS ANNOUNCES SECOND QUARTER 2023 FINANCIAL RESULTS

Continued Growth in Welding and Cleaning Applications Driven by E-Mobility

Softer Demand in Industrial Markets Impacted Sales and Outlook

MARLBOROUGH, Mass. – August 1, 2023 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the second quarter ended June 30, 2023.


	Three Months Ended June 30,								Six Months Ended June 30,
(In millions, except per share data and percentages)	2023			2022			Change		2023			2022			Change
Revenue	$	340.0		$	377.0		(10)	%	$	687.1		$	747.0		(8)	%
Gross margin	43.4		%	45.7		%			42.9		%	46.1		%
Operating income	$	72.1		$	71.7		1	%	$	147.5		$	164.8		(10)	%
Operating margin	21.2		%	19.0		%			21.5		%	22.1		%
Net income attributable to IPG Photonics Corporation	$	62.3		$	57.0		9	%	$	122.5		$	126.5		(3)	%
Earnings per diluted share	$	1.31		$	1.10		19	%	$	2.57		$	2.41		7	%

Management Comments

"Our materials processing business, excluding China, performed well in the second quarter with continued strong demand in welding and cleaning applications, driven by e-mobility. We also saw a sequential improvement in flat sheet cutting sales across many regions despite macroeconomic uncertainties and competition in China," said Dr. Eugene Scherbakov, IPG Photonics' Chief Executive Officer. "Adoption of fiber laser technology continues and we are proud that our solutions have become an industry standard in many industrial applications. We are exploring additional opportunities to replace laser and non-laser technologies with IPG fiber laser solutions across many new and existing markets and applications."

Financial Highlights

Second quarter revenue of $340 million decreased 10% year over year. Changes in foreign exchange rates reduced revenue by approximately $9 million or 2% and divestitures reduced revenue by approximately 1% compared to the same period last year. Materials processing sales accounted for 92% of total revenue and decreased 8% year over year with growth in welding, cleaning, 3D printing and solar cell manufacturing applications offset by lower revenue in cutting and marking applications. Sales into other applications decreased 23% year over year due to lower revenue in medical and advanced applications, as well as the telecom divestiture. Emerging growth products sales accounted for 41% of total revenue.

Revenue in high power continuous wave (CW) lasers declined 10% year over year due to lower demand in flat sheet cutting applications. Sales of pulsed lasers declined 24% compared with the prior year as growth in cleaning and solar cell manufacturing applications was offset by lower demand in foil cutting and marking applications. By region, sales decreased 28% in China and 11% in North America, but increased 4% in Europe and 14% in Japan on a year-over-year basis.

Earnings per diluted share (EPS) of $1.31 increased 19% year over year. Foreign exchange transaction loss decreased operating income by $1 million, but had no material impact on net income and earnings per share due to a tax benefit. The effective tax rate in the quarter was 24%. During the second quarter, IPG generated $67 million in cash from operations and spent $26 million on capital expenditures.

Exhibit 99.1

Business Outlook and Financial Guidance

“Second quarter book-to-bill was below one as increased economic uncertainty negatively impacted customer orders in our key geographies. In particular, general industrial demand in Europe and North America has weakened while industrial demand and EV investment remain soft in China. However, we are pleased to see continued strong orders in e-mobility applications, driven by increased investments in EV battery capacity in Europe, North America, Korea and Japan, which should drive sales for our welding, foil cutting and cleaning solutions. We are also seeing increasing orders for 3D printing applications and laser diode heating and drying solutions and are excited about additional opportunities for these applications in the second half of 2023. The EV investment cycle in China is expected to rebound in 2024," concluded Dr. Scherbakov.

For the third quarter of 2023, IPG expects revenue of $300 million to $330 million. The Company expects the third quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $0.85 to $1.15.

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, trade policy changes and trade restrictions, the COVID-19 pandemic, product demand, order cancellations and delays, competition, tariffs, currency fluctuations 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 filed with the SEC, and assumes exchange rates relative to the U.S. dollar of Euro 0.92, Russian ruble 87, Japanese yen 145 and Chinese yuan 7.23, respectively.

Supplemental Financial Information

Additional supplemental financial information is provided in the unaudited Financial Data Workbook and Second Quarter 2023 Earnings Call Presentation 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, August 1, 2023 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

Eugene Fedotoff

Senior Director, Investor Relations

IPG Photonics Corporation

508-597-4713

efedotoff@ipgphotonics.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 develop innovative laser solutions making the world a better place. 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. IPG is headquartered in Marlborough, Massachusetts and has more than 30 facilities worldwide. For more information, visit www.ipgphotonics.com.

Exhibit 99.1

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 strong orders in e-mobility applications, which should drive sales for our welding, foil cutting and cleaning solutions, additional opportunities for 3D printing applications and laser diode heating and drying solutions, expected rebound of the EV investment cycle in China in 2024, revenue, tax rate and earnings guidance, and the impact of the U.S. dollar on our guidance for third quarter of 2023. 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; inability to manage risks associated with international customers and operations; changes in trade controls and trade policies; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; 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 27, 2023) 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.

Exhibit 99.1

IPG PHOTONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands, except per share data)
Net sales	$	339,971	$	377,023	$	687,145	$	747,002
Cost of sales	192,280		204,679		392,516		402,837
Gross profit	147,691		172,344		294,629		344,165
Operating expenses:
Sales and marketing	20,187		19,010		41,275		39,384
Research and development	23,512		30,608		46,282		64,058
General and administrative	29,660		33,411		59,788		64,075


Other restructuring charges	963		—		1,144		—
Loss (gain) on foreign exchange	1,306		17,640		(1,349)		11,830
Total operating expenses	75,628		100,669		147,140		179,347
Operating income	72,063		71,675		147,489		164,818
Other income, net:
Interest income, net	9,264		1,177		16,797		1,107
Other income, net	285		618		616		382
Total other income	9,549		1,795		17,413		1,489
Income before provision of income taxes	81,612		73,470		164,902		166,307
Provision for income taxes	19,291		16,139		42,446		39,348
Net income	62,321		57,331		122,456		126,959
Less: net income attributable to non-controlling interests	—		363		—		419
Net income attributable to IPG Photonics Corporation	$	62,321	$	56,968	$	122,456	$	126,540
Net income attributable to IPG Photonics Corporation per share:
Basic	$	1.32	$	1.10	$	2.58	$	2.42
Diluted	$	1.31	$	1.10	$	2.57	$	2.41
Weighted average shares outstanding:
Basic	47,316		51,687		47,429		52,111
Diluted	47,453		51,795		47,618		52,311

Exhibit 99.1

IPG PHOTONICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,		December 31,
	2023		2022
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	573,071	$	698,209
Short-term investments	523,341		479,374
Accounts receivable, net	231,125		211,347
Inventories	491,301		509,363
Prepaid income taxes	50,748		40,934
Prepaid expenses and other current assets	54,482		47,047

Total current assets	1,924,068		1,986,274
Deferred income taxes, net	69,644		75,152
Goodwill	38,494		38,325
Intangible assets, net	30,086		34,120
Property, plant and equipment, net	609,344		580,561
Other assets	24,781		28,848
Total assets	$	2,696,417	$	2,743,280
LIABILITIES AND EQUITY
Current liabilities:

Current portion of long-term debt	$	—	$	16,031
Accounts payable	37,418		46,233
Accrued expenses and other current liabilities	184,156		202,764

Income taxes payable	6,613		9,618
Total current liabilities	228,187		274,646
Other long-term liabilities and deferred income taxes	69,680		83,274

Total liabilities	297,867		357,920

Commitments and contingencies
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,242,504 and 47,364,320 shares issued and outstanding, respectively, at June 30, 2023; 56,017,672 and 48,138,257 shares issued and outstanding, respectively, at December 31, 2022.	6		6
Treasury stock, at cost, 8,878,184 and 7,879,415 shares held at June 30, 2023 and December 31, 2022, respectively.	(1,051,040)		(938,009)
Additional paid-in capital	969,889		951,371
Retained earnings	2,698,972		2,576,516
Accumulated other comprehensive loss	(219,277)		(204,524)
Total IPG Photonics Corporation equity	2,398,550		2,385,360


Total liabilities and equity	$	2,696,417	$	2,743,280

Exhibit 99.1

IPG PHOTONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2023		2022
	(In thousands)
Cash flows from operating activities:
Net income	$	122,456	$	126,959
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,343		47,104


Provisions for inventory, warranty & bad debt	31,846		38,644

Other	13,615		25,579
Changes in assets and liabilities that used cash, net of acquisitions:
Accounts receivable and accounts payable	(31,348)		4,691
Inventories	(12,103)		(99,233)
Other	(55,863)		(48,583)
Net cash provided by operating activities	103,946		95,161
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment	(59,139)		(59,903)

Proceeds from sales of property, plant and equipment	1,740		645
Purchases of short-term investments	(583,347)		(583,828)
Proceeds from short-term investments	549,879		925,657
Acquisitions of businesses, net of cash acquired	—		(2,000)

Other	326		(350)
Net cash (used in) provided by investing activities	(90,541)		280,221
Cash flows from financing activities:


Principal payments on long-term borrowings	(16,031)		(1,932)

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	(731)		2,088


Purchase of treasury stock, at cost	(113,031)		(311,606)


Net cash used in financing activities	(129,793)		(311,450)
Effect of changes in exchange rates on cash and cash equivalents	(8,750)		(1,249)
Net (decrease) increase in cash and cash equivalents	(125,138)		62,683
Cash and cash equivalents — Beginning of period	698,209		709,105
Cash and cash equivalents — End of period	573,071		771,788
Supplemental disclosures of cash flow information:
Cash paid for interest	$	947	$	1,600
Cash paid for income taxes	$	58,178	$	61,715

Exhibit 99.1

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands)


Amortization of intangible assets:
Cost of sales	$	564	$	1,055	$	1,128	$	2,228
Sales and marketing	1,457		1,854		2,914		3,702



Total amortization of intangible assets	$	2,021	$	2,909	$	4,042	$	5,930

Exhibit 99.1

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands)
Cost of sales	$	2,515	$	3,215	$	5,161	$	6,273
Sales and marketing	1,390		1,309		2,683		2,518
Research and development	2,045		2,374		3,841		4,903
General and administrative	3,757		3,568		7,633		6,730
Total stock-based compensation	9,707		10,466		19,318		20,424
Tax effect of stock-based compensation	(2,148)		(2,251)		(4,244)		(4,385)
Net stock-based compensation	$	7,559	$	8,215	$	15,074	$	16,039


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands)
Excess tax benefit (detriment) on stock-based compensation	$	22	$	(427)	$	(1,686)	$	(2,140)

Exhibit 99.2

IPG Photonics Announces Addition to its Board of Directors

MARLBOROUGH, Mass. – August 1, 2023 - IPG Photonics Corporation (Nasdaq: IPGP) today announced that its Board of Directors has elected Kolleen Kennedy as a new director of the company, increasing the size of the Board to 11 members.

“I am pleased to welcome Ms. Kennedy to the Board,” said John Peeler, non-executive Chair of the Board. “Ms. Kennedy brings more than 25 years of medical device industry experience that will be valuable to IPG as our medical sales continue to be a growth driver for the company." Dr. Eugene Scherbakov, IPG's Chief Executive Officer and director, added, "I am looking forward to working with Kolleen and believe she will be a great contributor to IPG’s strategy, particularly in the medical field, given her track record of delivering consistent value creation through top-line growth.”

Ms. Kennedy spent over two decades at Varian Medical Systems, where she most recently served as President, Proton Solutions and Chief Growth Officer. Ms. Kennedy has served as a member of the board of ICU Medical, Inc., manufacturer of medical technologies, since 2021. She holds B.S. degrees in Radiation Oncology and Psychology and a M.S. in Medical Physics from the University of Colorado, Denver.

Contact

Eugene Fedotoff

Senior Director, Investor Relations

IPG Photonics Corporation

508-597-4713

efedotoff@ipgphotonics.com

About IPG Photonics Corporation

Document and Entity Information	Aug. 01, 2023
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001111928
Document Type	8-K
Document Period End Date	Aug. 01, 2023
Entity Registrant Name	IPG PHOTONICS CORP
Entity Incorporation, State or Country Code	DE
Entity File Number	001-33155
Entity Tax Identification Number	04-3444218
Entity Address, Address Line One	377 Simarano Drive
Entity Address, City or Town	Marlborough
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01752
City Area Code	508
Local Phone Number	373-1100
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	IPGP
Security Exchange Name	NASDAQ
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false