Fourth Quarter Revenue and Operating Income
Increase 29% and 41%, Respectively
IPG Photonics Corporation (NASDAQ:IPGP) today reported financial
results for the fourth quarter ended December 31, 2017.
|
|
Three Months EndedDecember 31, |
|
|
|
|
|
|
Twelve Months EndedDecember 31, |
|
|
|
|
|
(In millions,
except per share data) |
|
2017 |
|
|
2016 |
|
|
% Change |
|
|
2017 |
|
|
2016 |
|
|
% Change |
|
Revenue |
|
$ |
361.1 |
|
|
$ |
280.1 |
|
|
29 |
% |
|
$ |
1,408.9 |
|
|
$ |
1,006.2 |
|
|
40 |
% |
Gross margin |
|
57.8 |
% |
|
55.5 |
% |
|
|
|
|
56.6 |
% |
|
54.9 |
% |
|
|
|
Operating income |
|
$ |
148.3 |
|
|
$ |
105.2 |
|
|
41 |
% |
|
$ |
551.1 |
|
|
$ |
364.3 |
|
|
51 |
% |
Operating margin |
|
41.1 |
% |
|
37.6 |
% |
|
|
|
|
39.1 |
% |
|
36.2 |
% |
|
|
|
Net income attributable
to IPG Photonics Corporation |
|
$ |
53.0 |
|
|
$ |
75.1 |
|
|
(30 |
)% |
|
$ |
347.6 |
|
|
$ |
260.8 |
|
|
33 |
% |
Earnings per diluted
share |
|
$ |
0.96 |
|
|
$ |
1.39 |
|
|
(31 |
)% |
|
$ |
6.36 |
|
|
$ |
4.85 |
|
|
31 |
% |
Management Comments
"We capped off one of the strongest growth years in IPG's
history with a record fourth quarter, driven by accelerating
adoption of our high-power fiber lasers across our largest
applications and geographies," said Dr. Valentin Gapontsev, IPG
Photonics' Chief Executive Officer. "Our outstanding performance is
a direct result of our scale advantages and unique business model
combining a vertically-integrated manufacturing operation with
broad-based technology and process abilities that enable us to
rapidly increase production, reduce costs and deliver
innovation."
Fourth quarter revenue of $361.1 million increased 29% year over
year. Materials processing sales increased 32% year over year and
accounted for approximately 94% of total revenue driven by strength
in cutting, welding and 3D printing applications. Sales to other
markets decreased 6% from the fourth quarter of 2016. High-power
laser sales increased 40% year over year and pulsed laser sales
increased 20% year over year. Sales of other laser products
increased 24% year over year driven by growth in systems and beam
delivery accessories. On a geographic basis, IPG achieved
double-digit year over year sales growth in China, Europe, North
America and Turkey and grew modestly in Japan.
Earnings per diluted share ("EPS") were $0.96. Charges related
to the 2017 U.S. Tax Cuts and Jobs Act reduced net income by $49
million and EPS by $0.90. These estimated charges include $47
million related to the one-time transition tax on undistributed
foreign earnings, $1 million for the associated state tax on
foreign earnings no longer deemed to be permanently reinvested and
$1 million from a reduction in the value of U.S. net deferred tax
assets resulting from the recently-enacted lower U.S. Federal tax
rate. The estimated tax charges are subject to change based upon
additional analysis and subsequent regulations, interpretations and
guidance.
During the fourth quarter, IPG generated $108 million in cash
from operations and used $27 million to finance capital
expenditures. IPG ended the quarter with $1.12 billion in cash and
cash equivalents and short-term investments, representing an
increase of $286 million from December 31, 2016.
Business Outlook and Financial Guidance
"Order flow was strong in the fourth quarter with our
book-to-bill ratio at 1.0, representing solid performance in light
of our record quarterly revenue. Backlog of orders with firm
shipment dates increased by 44% to $326 million. Backlog of
non-binding frame agreements increased by 123% to $417 million,"
said Dr. Gapontsev. It should be noted that frame agreements are
non-binding indications of customer pricing and volume levels but
are not firm customer purchase obligations. The underlying growth
in frame agreements, while positive, also reflects lower backlog of
year-end 2016 frame agreements. As we reported last year, a large
number of frame agreements were booked in January 2017.
For the full year 2018 IPG Photonics is targeting 10% to 15%
revenue growth. Our annual guidance reflects current backlog and
annual order indications from our largest OEM customers. This
guidance assumes continued momentum in our core materials
processing markets, further progress in new application areas, and
strong worldwide macroeconomic conditions offset by lower spending
related to consumer electronics applications. Based on the
accelerating growth within our business in 2017, we expect capital
expenditures to be $170 million to $190 million, the high end of
our target range of 8% to 12% of revenue. Finally, we expect the
recently enacted U.S. tax legislation to lower our 2018 corporate
tax rate to 26% from 30% in 2017, excluding effects relating to
equity grants.
For the first quarter, we expect revenue growth in the range of
15% to 24% year over year or $330 million to $355 million and
anticipate earnings per diluted share in the range of $1.62 to
$1.87, which reflects earnings growth in the range of 17% to 36%
year over year.
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 0.83, Russian Ruble 58, Japanese Yen 113
and Chinese Yuan 6.53, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the
Fourth Quarter 2017 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, February 16,
2018 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
James HillierVice President of Investor RelationsIPG Photonics
Corporation508-373-1467jhillier@ipgphotonics.com
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 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, revenues from non-binding frame agreements, revenue and
earnings guidance for the first quarter 2018, revenue guidance for
full year 2018, continued momentum in our core materials processing
markets, further progress in new application areas, strong
worldwide macroeconomic conditions, spending related to consumer
electronics applications and expected corporate tax rates. 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; 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, 2017) 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. 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
CORPORATIONCONSOLIDATED STATEMENTS OF
INCOME
|
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember
31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(in thousands, except per share data) |
NET SALES |
|
$ |
361,055 |
|
|
$ |
280,121 |
|
|
$ |
1,408,889 |
|
|
$ |
1,006,173 |
|
COST OF SALES |
|
152,262 |
|
|
124,785 |
|
|
611,978 |
|
|
453,933 |
|
GROSS PROFIT |
|
208,793 |
|
|
155,336 |
|
|
796,911 |
|
|
552,240 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
Sales and
marketing |
|
13,454 |
|
|
10,210 |
|
|
49,801 |
|
|
38,393 |
|
Research
and development |
|
26,589 |
|
|
22,108 |
|
|
100,870 |
|
|
78,552 |
|
General
and administrative |
|
21,576 |
|
|
19,637 |
|
|
80,668 |
|
|
66,486 |
|
(Gain)
loss on foreign exchange |
|
(1,093 |
) |
|
(1,820 |
) |
|
14,460 |
|
|
4,496 |
|
Total
operating expenses |
|
60,526 |
|
|
50,135 |
|
|
245,799 |
|
|
187,927 |
|
OPERATING INCOME |
|
148,267 |
|
|
105,201 |
|
|
551,112 |
|
|
364,313 |
|
OTHER INCOME, Net: |
|
|
|
|
|
|
|
|
Interest
income, net |
|
86 |
|
|
469 |
|
|
737 |
|
|
1,304 |
|
Other
income, net |
|
69 |
|
|
606 |
|
|
22 |
|
|
948 |
|
Total
other income |
|
155 |
|
|
1,075 |
|
|
759 |
|
|
2,252 |
|
INCOME BEFORE PROVISION
FOR INCOME TAXES |
|
148,422 |
|
|
106,276 |
|
|
551,871 |
|
|
366,565 |
|
PROVISION FOR INCOME
TAXES |
|
(95,466 |
) |
|
(31,146 |
) |
|
(204,283 |
) |
|
(105,849 |
) |
NET INCOME |
|
52,956 |
|
|
75,130 |
|
|
347,588 |
|
|
260,716 |
|
LESS: NET LOSS
ATTRIBUTABLE TO NONCONTROLLING INTEREST |
|
— |
|
|
(3 |
) |
|
(26 |
) |
|
(36 |
) |
NET INCOME ATTRIBUTABLE
TO IPG PHOTONICS CORPORATION |
|
$ |
52,956 |
|
|
$ |
75,133 |
|
|
$ |
347,614 |
|
|
$ |
260,752 |
|
NET INCOME ATTRIBUTABLE
TO IPG PHOTONICS CORPORATION PER SHARE: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.99 |
|
|
$ |
1.42 |
|
|
$ |
6.50 |
|
|
$ |
4.91 |
|
Diluted |
|
$ |
0.96 |
|
|
$ |
1.39 |
|
|
$ |
6.36 |
|
|
$ |
4.85 |
|
WEIGHTED AVERAGE SHARES
OUTSTANDING: |
|
|
|
|
|
|
|
|
Basic |
|
53,460 |
|
|
53,097 |
|
|
53,495 |
|
|
53,068 |
|
Diluted |
|
54,923 |
|
|
53,873 |
|
|
54,699 |
|
|
53,797 |
|
IPG PHOTONICS
CORPORATIONSUPPLEMENTAL SCHEDULE OF STOCK-BASED
COMPENSATION AND ACCOUNTING STANDARD IMPACTS TO NET INCOME AND
EARNINGS PER SHARE
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In
thousands) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cost of sales |
|
$ |
1,543 |
|
|
$ |
1,439 |
|
|
$ |
5,863 |
|
|
$ |
6,018 |
|
Sales and
marketing |
|
537 |
|
|
523 |
|
|
2,041 |
|
|
1,820 |
|
Research and
development |
|
1,286 |
|
|
1,324 |
|
|
5,001 |
|
|
4,905 |
|
General and
administrative |
|
2,666 |
|
|
2,349 |
|
|
10,116 |
|
|
8,991 |
|
Total stock-based
compensation |
|
6,032 |
|
|
5,635 |
|
|
23,021 |
|
|
21,734 |
|
Tax benefit
recognized |
|
(1,894 |
) |
|
(1,805 |
) |
|
(7,367 |
) |
|
(6,971 |
) |
Net stock-based
compensation |
|
$ |
4,138 |
|
|
$ |
3,830 |
|
|
$ |
15,654 |
|
|
$ |
14,763 |
|
(In thousands,
except share and per share data) |
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Excess tax benefit on
exercise of stock options included in net income |
|
$ |
3,700 |
|
|
$ |
— |
|
|
$ |
14,585 |
|
|
$ |
— |
|
Increase in
weighted-average diluted shares outstanding |
|
407,316 |
|
|
— |
|
|
255,812 |
|
|
— |
|
IPG PHOTONICS
CORPORATIONSUPPLEMENTAL SCHEDULE OF ACQUISITION
RELATED COSTS AND OTHER CHARGES
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In
thousands) |
|
2017 |
|
2016 |
|
|
2017 |
|
|
2016 |
Step-up of inventory
(1) |
|
|
|
|
|
|
|
|
Cost of
sales |
|
$ |
992 |
|
|
$ |
715 |
|
|
$ |
2,573 |
|
|
$ |
2,100 |
|
Amortization of
intangible assets |
|
|
|
|
|
|
|
|
Cost of
sales |
|
$ |
1,435 |
|
|
$ |
866 |
|
|
$ |
3,774 |
|
$ |
2,966 |
Sales and
marketing |
|
346 |
|
|
38 |
|
|
|
1,485 |
|
|
|
153 |
|
Research
and development |
|
160 |
|
|
160 |
|
|
|
640 |
|
|
|
640 |
|
Impairment charge
related to long-lived asset |
|
|
|
|
|
|
|
|
General
and administrative |
|
— |
|
|
— |
|
|
|
162 |
|
|
|
— |
|
Total acquisition
related costs and other charges |
|
$ |
2,933 |
|
|
$ |
1,778 |
|
|
$ |
8,634 |
|
|
$ |
5,859 |
|
(1) 2016 amount relates to Menara while
2017 relates to OptiGrate and ILT step-up adjustments on inventory
sold during the
period.
IPG PHOTONICS
CORPORATIONCONSOLIDATED BALANCE
SHEETS
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
|
(In thousands, except share and per
share data) |
ASSETS |
CURRENT ASSETS: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
909,900 |
|
|
$ |
623,855 |
|
Short-term investments |
|
206,257 |
|
|
206,779 |
|
Accounts
receivable, net |
|
237,278 |
|
|
155,901 |
|
Inventories |
|
307,712 |
|
|
239,010 |
|
Prepaid
income taxes |
|
44,944 |
|
|
34,128 |
|
Prepaid
expenses and other current assets |
|
47,919 |
|
|
41,289 |
|
Total
current assets |
|
1,754,010 |
|
|
1,300,962 |
|
DEFERRED INCOME TAXES,
NET |
|
31,696 |
|
|
42,442 |
|
GOODWILL |
|
55,831 |
|
|
19,828 |
|
INTANGIBLE ASSETS,
NET |
|
51,223 |
|
|
28,789 |
|
PROPERTY, PLANT AND
EQUIPMENT, NET |
|
460,206 |
|
|
379,375 |
|
OTHER ASSETS |
|
19,009 |
|
|
18,603 |
|
TOTAL |
|
$ |
2,371,975 |
|
|
$ |
1,789,999 |
|
LIABILITIES AND EQUITY |
CURRENT
LIABILITIES: |
|
|
|
|
Current
portion of long-term debt |
|
$ |
3,604 |
|
|
$ |
3,188 |
|
Accounts
payable |
|
35,109 |
|
|
28,048 |
|
Accrued
expenses and other liabilities |
|
144,417 |
|
|
102,485 |
|
Income
taxes payable |
|
15,773 |
|
|
24,554 |
|
Total
current liabilities |
|
198,903 |
|
|
158,275 |
|
DEFERRED INCOME TAXES
AND OTHER LONG-TERM LIABILITIES |
|
105,372 |
|
|
36,365 |
|
LONG-TERM DEBT, NET OF
CURRENT PORTION |
|
45,378 |
|
|
37,635 |
|
Total
liabilities |
|
349,653 |
|
|
232,275 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
IPG PHOTONICS
CORPORATION STOCKHOLDERS' EQUITY: |
|
|
|
|
Common
stock, $0.0001 par value, 175,000,000 shares authorized;
54,007,708and 53,629,439 shares issued and outstanding,
respectively, at December 31,2017; 53,354,579 and 53,251,805 shares
issued and outstanding, respectively,at December 31, 2016 |
|
5 |
|
|
5 |
|
Treasury
stock, at cost (378,269 and 102,774 shares held) |
|
(48,933 |
) |
|
(8,946 |
) |
Additional paid-in capital |
|
704,727 |
|
|
650,974 |
|
Retained
earnings |
|
1,443,867 |
|
|
1,094,108 |
|
Accumulated other comprehensive loss |
|
(77,344 |
) |
|
(178,583 |
) |
Total IPG
Photonics Corporation stockholders' equity |
|
2,022,322 |
|
|
1,557,558 |
|
NONCONTROLLING
INTERESTS |
|
— |
|
|
166 |
|
Total
equity |
|
$ |
2,022,322 |
|
|
$ |
1,557,724 |
|
TOTAL |
|
$ |
2,371,975 |
|
|
$ |
1,789,999 |
|
IPG PHOTONICS
CORPORATIONCONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
Twelve Months Ended December 31, |
|
|
2017 |
|
2016 |
|
|
(In thousands) |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
Net
income |
|
$ |
347,588 |
|
|
$ |
260,716 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
64,568 |
|
|
51,475 |
|
Provisions for inventory, warranty & bad debt |
|
44,978 |
|
|
46,469 |
|
Other |
|
54,837 |
|
|
13,848 |
|
Changes
in assets and liabilities that used cash: |
|
|
|
|
Accounts
receivable/payable |
|
(60,916 |
) |
|
(11,851 |
) |
Inventories |
|
(71,080 |
) |
|
(53,626 |
) |
Other |
|
24,473 |
|
|
(9,335 |
) |
Net cash
provided by operating activities |
|
404,448 |
|
|
297,696 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Purchases
of property, plant and equipment |
|
(126,535 |
) |
|
(127,042 |
) |
Proceeds
from sales of property, plant and equipment |
|
15,882 |
|
|
658 |
|
Purchases
of short-term investments |
|
(211,832 |
) |
|
(299,508 |
) |
Proceeds
from sales of short-term investments |
|
212,515 |
|
|
198,808 |
|
Acquisitions of businesses, net of cash acquired |
|
(59,536 |
) |
|
(47,792 |
) |
Other |
|
(352 |
) |
|
468 |
|
Net cash
used in investing activities |
|
(169,858 |
) |
|
(274,408 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Purchase
of noncontrolling interests |
|
(197 |
) |
|
(950 |
) |
Proceeds
on long-term borrowings |
|
28,000 |
|
|
— |
|
Principal
payments on long-term borrowings |
|
(19,842 |
) |
|
(2,594 |
) |
Proceeds
from issuance of common stock under employee stock option and
purchase plans lesspayments for taxes related to net share
settlement of equity awards |
|
28,654 |
|
|
16,183 |
|
Purchase
of Treasury Stock, at cost |
|
(39,987 |
) |
|
(8,946 |
) |
Net cash
(used in) provided by financing activities |
|
(3,372 |
) |
|
3,693 |
|
EFFECT OF CHANGES IN
EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
|
54,827 |
|
|
(9,408 |
) |
NET INCREASE IN CASH
AND CASH EQUIVALENTS |
|
286,045 |
|
|
17,573 |
|
CASH AND CASH
EQUIVALENTS — Beginning of period |
|
623,855 |
|
|
582,532 |
|
CASH AND CASH
EQUIVALENTS — End of period |
|
$ |
909,900 |
|
|
$ |
600,105 |
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
Cash paid
for interest |
|
$ |
2,583 |
|
|
$ |
942 |
|
Cash paid
for income taxes |
|
$ |
155,559 |
|
|
$ |
126,964 |
|
IPG Photonics (NASDAQ:IPGP)
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From Mar 2024 to Apr 2024
IPG Photonics (NASDAQ:IPGP)
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From Apr 2023 to Apr 2024