IPG Photonics Announces Third Quarter 2023 Financial Results
October 31 2023 - 8:00AM
IPG Photonics Corporation (NASDAQ: IPGP) today reported
financial results for the third quarter ended September 30,
2023.
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|
(In millions, except per share data and
percentages) |
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
|
2022 |
|
|
Change |
Revenue |
|
$ |
301.4 |
|
|
$ |
349.0 |
|
|
(14)% |
|
$ |
988.5 |
|
|
$ |
1,096.0 |
|
|
(10)% |
Gross margin |
|
|
44.1 |
% |
|
|
43.1 |
% |
|
|
|
|
43.2 |
% |
|
|
45.1 |
% |
|
|
Operating income |
|
$ |
55.7 |
|
|
$ |
93.2 |
|
|
(40)% |
|
$ |
203.2 |
|
|
$ |
258.0 |
|
|
(21)% |
Operating margin |
|
|
18.5 |
% |
|
|
26.7 |
% |
|
|
|
|
20.6 |
% |
|
|
23.5 |
% |
|
|
Net income attributable to IPG
Photonics Corporation |
|
$ |
55.0 |
|
|
$ |
76.3 |
|
|
(28)% |
|
$ |
177.5 |
|
|
$ |
202.8 |
|
|
(12)% |
Earnings per diluted share |
|
$ |
1.16 |
|
|
$ |
1.47 |
|
|
(21)% |
|
$ |
3.73 |
|
|
$ |
3.93 |
|
|
(5)% |
Management Comments
"We are navigating through a challenging capital
investment cycle and our materials processing sales were impacted
by weak global industrial demand and reduced investments in
electric vehicle battery capacity in China. Nevertheless, we saw
growth in welding applications outside of China, including handheld
and e-mobility, and increased demand in 3D printing applications.
Our medical sales also increased following an inventory adjustment
by a large customer in the prior quarter," said Dr. Eugene
Scherbakov, IPG Photonics' Chief Executive Officer. "We are seeing
further adoption of laser welding technology and introduced
products to explore new applications for our lasers, such as
cleaning and drying, in order to unlock additional growth
opportunities for IPG. Our gross margin continues to improve,
despite lower revenue, as we focused on reducing costs, managing
inventory and improving manufacturing efficiency."
Financial Highlights
Third quarter revenue of $301 million decreased
14% year over year. Changes in foreign exchange rates reduced
revenue by approximately $6 million or 2%. Materials
processing sales accounted for 88% of total revenue and decreased
15% year over year. The decline was due to lower revenue in
cutting, welding and marking applications in China, partially
offset by growth in 3D printing applications and higher handheld
welder sales. Emerging growth products sales accounted for 42% of
total revenue and were negatively impacted by lower sales to
e-mobility applications in China and lower demand in solar cell
manufacturing applications. Other applications sales decreased 1%
year over year due to lower revenue in advanced and telecom
applications.
Revenue in high power continuous wave (CW)
lasers declined 22% year over year due to competition and lower
demand in flat sheet cutting and reduced demand in welding
applications due to the timing of projects. Sales of pulsed lasers
declined 25% compared with the prior year due to lower demand in
marking and solar cell manufacturing applications. By region, sales
decreased 28% in China and 13% in North America, but increased 3%
in Europe and 41% in Japan on a year-over-year basis.
Gross margin of 44.1% increased 100 basis points
year over year. Earnings per diluted share (EPS) of $1.16 decreased
21% year over year. The gain on sale of the telecom business
increased operating income by $22 million and benefited diluted EPS
by $0.32 in the third quarter of 2022. Foreign exchange transaction
gains increased operating income by $0.4 million and earnings per
share by $0.01 in the third quarter. The effective tax rate in the
quarter was 19%, benefiting from certain discrete items. During the
third quarter, IPG generated $86 million in cash from operations
and spent $26 million on capital expenditures and $46 million on
share repurchases.
Business Outlook and Financial Guidance
“Third quarter book-to-bill was below one due to
continued economic uncertainty which is impacting industrial demand
in China and Europe; European customer activity and sentiment
softened during the third quarter. General industrial demand in
North America has held up better than expected, but many customers
continue to predict a slowdown and are delaying purchase decisions,
so our visibility is limited. At the same time, we remain
optimistic that sales in China should recover with an increase in
investment in EV battery capacity in 2024 and sales in the U.S. are
likely to benefit from government investment and onshoring
initiatives in the next several years," concluded Dr.
Scherbakov.
For the fourth quarter of 2023, IPG expects
revenue of $270 million to $300 million. The Company expects the
fourth quarter tax rate to be approximately 20%, including certain
discrete items. IPG anticipates delivering earnings per diluted
share in the range of $0.80 to $1.10.
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 0.95, Russian ruble 97, Japanese yen 149
and Chinese yuan 7.18, respectively.
Supplemental Financial Information
Additional supplemental financial information is
provided in the unaudited Financial Data Workbook and Third 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,
October 31, 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 FedotoffSenior Director, Investor Relations IPG Photonics
Corporation 508-597-4713efedotoff@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.
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 sales in China should recover with an increase in
investment in EV battery capacity in 2024 and sales in U.S. are
likely to benefit from government investment and onshoring
initiatives in the next several years, revenue outlook, tax rate
and earnings guidance, and the impact of the U.S. dollar on our
guidance for fourth 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.
IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED) |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
(In thousands, except per share data) |
Net sales |
|
$ |
301,401 |
|
|
$ |
349,006 |
|
|
$ |
988,546 |
|
|
$ |
1,096,008 |
|
Cost of sales |
|
|
168,499 |
|
|
|
198,582 |
|
|
|
561,015 |
|
|
|
601,419 |
|
Gross profit |
|
|
132,902 |
|
|
|
150,424 |
|
|
|
427,531 |
|
|
|
494,589 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
22,243 |
|
|
|
19,383 |
|
|
|
63,518 |
|
|
|
58,767 |
|
Research and development |
|
|
24,708 |
|
|
|
25,436 |
|
|
|
70,990 |
|
|
|
89,494 |
|
General and administrative |
|
|
30,958 |
|
|
|
33,813 |
|
|
|
90,746 |
|
|
|
97,888 |
|
Gain on divestiture |
|
|
— |
|
|
|
(21,748 |
) |
|
|
— |
|
|
|
(21,748 |
) |
Impairment of long-lived assets |
|
|
1,237 |
|
|
|
919 |
|
|
|
1,237 |
|
|
|
919 |
|
Restructuring charges (recoveries), net |
|
|
(1,501 |
) |
|
|
— |
|
|
|
(357 |
) |
|
|
— |
|
(Gain) loss on foreign exchange |
|
|
(449 |
) |
|
|
(541 |
) |
|
|
(1,798 |
) |
|
|
11,289 |
|
Total operating expenses |
|
|
77,196 |
|
|
|
57,262 |
|
|
|
224,336 |
|
|
|
236,609 |
|
Operating income |
|
|
55,706 |
|
|
|
93,162 |
|
|
|
203,195 |
|
|
|
257,980 |
|
Other income, net: |
|
|
|
|
|
|
|
|
Interest income, net |
|
|
11,569 |
|
|
|
3,625 |
|
|
|
28,366 |
|
|
|
4,732 |
|
Other income, net |
|
|
545 |
|
|
|
301 |
|
|
|
1,161 |
|
|
|
683 |
|
Total other income |
|
|
12,114 |
|
|
|
3,926 |
|
|
|
29,527 |
|
|
|
5,415 |
|
Income before provision of income
taxes |
|
|
67,820 |
|
|
|
97,088 |
|
|
|
232,722 |
|
|
|
263,395 |
|
Provision for income taxes |
|
|
12,826 |
|
|
|
20,390 |
|
|
|
55,272 |
|
|
|
59,738 |
|
Net income |
|
|
54,994 |
|
|
|
76,698 |
|
|
|
177,450 |
|
|
|
203,657 |
|
Less: net income attributable to
non-controlling interests |
|
|
— |
|
|
|
434 |
|
|
|
— |
|
|
|
853 |
|
Net income attributable to IPG
Photonics Corporation |
|
$ |
54,994 |
|
|
$ |
76,264 |
|
|
$ |
177,450 |
|
|
$ |
202,804 |
|
Net income attributable to IPG
Photonics Corporation per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.16 |
|
|
$ |
1.48 |
|
|
$ |
3.75 |
|
|
$ |
3.94 |
|
Diluted |
|
$ |
1.16 |
|
|
$ |
1.47 |
|
|
$ |
3.73 |
|
|
$ |
3.93 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
47,237 |
|
|
|
51,629 |
|
|
|
47,364 |
|
|
|
51,449 |
|
Diluted |
|
|
47,388 |
|
|
|
51,737 |
|
|
|
47,536 |
|
|
|
51,626 |
|
IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED
BALANCE SHEETS (UNAUDITED) |
|
|
September 30, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
(In thousands, except share andper
share data) |
ASSETS |
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
528,284 |
|
|
$ |
698,209 |
|
Short-term investments |
|
|
605,207 |
|
|
|
479,374 |
|
Accounts receivable, net |
|
|
229,597 |
|
|
|
211,347 |
|
Inventories |
|
|
479,829 |
|
|
|
509,363 |
|
Prepaid income taxes |
|
|
32,538 |
|
|
|
40,934 |
|
Prepaid expenses and other current assets |
|
|
45,005 |
|
|
|
47,047 |
|
Total current assets |
|
|
1,920,460 |
|
|
|
1,986,274 |
|
Deferred income taxes, net |
|
|
79,583 |
|
|
|
75,152 |
|
Goodwill |
|
|
38,265 |
|
|
|
38,325 |
|
Intangible assets, net |
|
|
28,056 |
|
|
|
34,120 |
|
Property, plant and equipment,
net |
|
|
581,970 |
|
|
|
580,561 |
|
Other assets |
|
|
24,530 |
|
|
|
28,848 |
|
Total assets |
|
$ |
2,672,864 |
|
|
$ |
2,743,280 |
|
LIABILITIES AND EQUITY |
Current liabilities: |
|
|
|
|
Current portion of long-term debt |
|
$ |
— |
|
|
$ |
16,031 |
|
Accounts payable |
|
|
33,126 |
|
|
|
46,233 |
|
Accrued expenses and other current liabilities |
|
|
174,517 |
|
|
|
202,764 |
|
Income taxes payable |
|
|
12,066 |
|
|
|
9,618 |
|
Total current liabilities |
|
|
219,709 |
|
|
|
274,646 |
|
Other long-term liabilities and
deferred income taxes |
|
|
69,204 |
|
|
|
83,274 |
|
Total liabilities |
|
|
288,913 |
|
|
|
357,920 |
|
Commitments and
contingencies |
|
|
|
|
IPG Photonics Corporation
equity: |
|
|
|
|
Common stock, $0.0001 par value, 175,000,000 shares authorized;
56,249,626 and 46,921,754 shares issued and outstanding,
respectively, at September 30, 2023; 56,017,672 and 48,138,257
shares issued and outstanding, respectively, at December 31,
2022. |
|
|
6 |
|
|
|
6 |
|
Treasury stock, at cost, 9,327,872 and 7,879,415 shares held at
September 30, 2023 and December 31, 2022,
respectively. |
|
|
(1,097,537 |
) |
|
|
(938,009 |
) |
Additional paid-in capital |
|
|
978,331 |
|
|
|
951,371 |
|
Retained earnings |
|
|
2,753,966 |
|
|
|
2,576,516 |
|
Accumulated other comprehensive loss |
|
|
(250,815 |
) |
|
|
(204,524 |
) |
Total IPG Photonics Corporation equity |
|
|
2,383,951 |
|
|
|
2,385,360 |
|
Total liabilities and
equity |
|
$ |
2,672,864 |
|
|
$ |
2,743,280 |
|
IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) |
|
|
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
(In thousands) |
Cash flows from operating
activities: |
|
|
|
|
Net income |
|
$ |
177,450 |
|
|
$ |
203,657 |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
52,678 |
|
|
|
69,852 |
|
Impairment of long-lived assets and restructuring charges
(recoveries), net |
|
|
(486 |
) |
|
|
919 |
|
Provisions for inventory, warranty & bad debt |
|
|
43,889 |
|
|
|
58,990 |
|
Gain on divestiture |
|
|
— |
|
|
|
(21,748 |
) |
Other |
|
|
5,238 |
|
|
|
20,201 |
|
Changes in assets and liabilities that (used) provided cash, net of
acquisitions: |
|
|
|
|
Accounts receivable and accounts payable |
|
|
(35,257 |
) |
|
|
39,680 |
|
Inventories |
|
|
(20,736 |
) |
|
|
(148,959 |
) |
Other |
|
|
(32,852 |
) |
|
|
(51,566 |
) |
Net cash provided by operating activities |
|
|
189,924 |
|
|
|
171,026 |
|
Cash flows from investing
activities: |
|
|
|
|
Purchases of and deposits on property, plant and equipment |
|
|
(85,256 |
) |
|
|
(84,552 |
) |
Proceeds from sales of property, plant and equipment |
|
|
30,425 |
|
|
|
837 |
|
Purchases of short-term investments |
|
|
(898,455 |
) |
|
|
(914,598 |
) |
Proceeds from short-term investments |
|
|
789,844 |
|
|
|
1,355,883 |
|
Acquisitions of businesses, net of cash acquired |
|
|
— |
|
|
|
(2,000 |
) |
Proceeds from divestiture, net of cash sold |
|
|
— |
|
|
|
52,141 |
|
Other |
|
|
446 |
|
|
|
(246 |
) |
Net cash (used in) provided by investing activities |
|
|
(162,996 |
) |
|
|
407,465 |
|
Cash flows from financing
activities: |
|
|
|
|
Principal payments on long-term borrowings |
|
|
(16,031 |
) |
|
|
(17,829 |
) |
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 |
|
|
(432 |
) |
|
|
2,353 |
|
Purchase of treasury stock, at cost |
|
|
(159,528 |
) |
|
|
(382,885 |
) |
Purchase of non-controlling interests |
|
|
— |
|
|
|
(2,500 |
) |
Net cash used in financing activities |
|
|
(175,991 |
) |
|
|
(400,861 |
) |
Effect of changes in exchange
rates on cash and cash equivalents |
|
|
(20,862 |
) |
|
|
(17,461 |
) |
Net (decrease) increase in cash
and cash equivalents |
|
|
(169,925 |
) |
|
|
160,169 |
|
Cash and cash equivalents —
Beginning of period |
|
|
698,209 |
|
|
|
709,105 |
|
Cash and cash equivalents — End
of period |
|
|
528,284 |
|
|
|
869,274 |
|
Supplemental disclosures of cash
flow information: |
|
|
|
|
Cash paid for interest |
|
$ |
1,110 |
|
|
$ |
2,766 |
|
Cash paid for income taxes |
|
$ |
55,001 |
|
|
$ |
83,771 |
|
IPG PHOTONICS CORPORATIONSUPPLEMENTAL
SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS
(UNAUDITED) |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
(In thousands) |
Amortization of intangible
assets: |
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
564 |
|
$ |
796 |
|
$ |
1,692 |
|
$ |
3,024 |
Sales and marketing |
|
|
1,456 |
|
|
1,651 |
|
|
4,370 |
|
|
5,353 |
Total amortization of intangible
assets |
|
$ |
2,020 |
|
$ |
2,447 |
|
$ |
6,062 |
|
$ |
8,377 |
IPG PHOTONICS CORPORATIONSUPPLEMENTAL
SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED) |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
(In thousands) |
Cost of sales |
|
$ |
1,503 |
|
|
$ |
2,961 |
|
|
$ |
6,664 |
|
|
$ |
9,234 |
|
Sales and marketing |
|
|
1,362 |
|
|
|
1,191 |
|
|
|
4,045 |
|
|
|
3,709 |
|
Research and development |
|
|
2,330 |
|
|
|
986 |
|
|
|
6,171 |
|
|
|
5,889 |
|
General and
administrative |
|
|
2,949 |
|
|
|
3,640 |
|
|
|
10,582 |
|
|
|
10,370 |
|
Total stock-based
compensation |
|
|
8,144 |
|
|
|
8,778 |
|
|
|
27,462 |
|
|
|
29,202 |
|
Tax effect of stock-based
compensation |
|
|
(1,772 |
) |
|
|
(1,894 |
) |
|
|
(6,016 |
) |
|
|
(6,279 |
) |
Net stock-based compensation |
|
$ |
6,372 |
|
|
$ |
6,884 |
|
|
$ |
21,446 |
|
|
$ |
22,923 |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
(In thousands) |
Excess tax benefit (detriment) on
stock-based compensation |
|
$ |
(55 |
) |
|
$ |
(114 |
) |
|
$ |
(1,741 |
) |
|
$ |
(2,254 |
) |
IPG Photonics (NASDAQ:IPGP)
Historical Stock Chart
From Apr 2024 to May 2024
IPG Photonics (NASDAQ:IPGP)
Historical Stock Chart
From May 2023 to May 2024