IPGP IPG Photonics Corporation

Revenue Growth of Approximately 7% on Constant Currency Basis

IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter ended March 31, 2016.

        Three Months Ended March 31, (In millions, except per share data) 2016     2015 % Change Revenue $ 207.2 $ 199.0 4 % Gross margin 55.2 % 54.2 % Operating income $ 70.0 $ 82.0 (15 )% Operating margin 33.8 % 41.2 % Net income attributable to IPG Photonics Corporation $ 49.3 $ 57.4 (14 )% Earnings per diluted share $ 0.92 $ 1.08 (15 )%  

Management Comments

"We reported revenue and EPS in-line with our guidance for the first quarter as we continued to execute on our long-term growth strategy," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Revenues of $207.2 million increased 4% year-over-year, or by approximately 7% on a constant currency basis. First-quarter 2016 EPS of $0.92 included $0.07 per share related to foreign exchange losses, compared with Q1 2015 EPS of $1.08, which included an $0.11 foreign exchange gain."

Materials processing sales in the first quarter increased 3% year-over-year, primarily reflecting solid growth in cutting applications which is IPG's largest end-use, partially offset by a decline in automotive welding, marking and engraving. In addition, Q1 2015 benefited from several million dollars in revenue from a one-time order for a novel surface patterning application.

Sales to Other Applications were up 30% from the first quarter of 2015 with strong performances in advanced applications and telecom. Geographically, IPG reported strong growth in North America, China and Turkey, while sales were lower in Korea, Japan and Russia. Despite foreign exchange headwinds and continuing competition, sales growth in China was approximately 9% driven by cutting and welding applications.

During the first quarter, IPG generated $64.0 million in cash from operations and used $25.0 million to finance capital expenditures. IPG ended the quarter with $740.0 million in cash and cash equivalents and short-term investments, representing an increase of $50.8 million from December 31, 2015.

Business Outlook and Financial Guidance

"We continue to see large opportunities to expand our business through both existing and new OEMs and end-users as we develop innovative products to address applications beyond our core markets. We are making significant progress on the testing and development of these new product lines and we look forward to their launch," concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $235 million to $250 million for the second quarter of 2016. The Company anticipates earnings per diluted share in the range of $1.10 to $1.25 based on 53,621,000 diluted common shares, which includes 52,898,000 basic common shares outstanding and 723,000 potentially dilutive options at March 31, 2016. 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 0.90, Russian Ruble 70, Japanese Yen 113 and Chinese Yuan 6.51, respectively.

Conference Call Reminder

The Company will hold a conference call today, April 28, 2016 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) 407-5790 or (201) 689-8328. 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 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, expanding our business through existing and new OEMs and end-users, developing innovative products to address applications beyond our core markets, making significant progress on the testing and development of these new product lines and guidance for the second quarter of 2016. 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; 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 26, 2016) 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 CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

    Three Months Ended March 31, 2016     2015 (in thousands, except per share data) NET SALES $ 207,248 $ 198,960 COST OF SALES 92,838   91,133   GROSS PROFIT 114,410   107,827   OPERATING EXPENSES: Sales and marketing 8,034 7,549 Research and development 17,489 14,230 General and administrative 13,901 12,778 Loss (gain) on foreign exchange 4,967   (8,752 )

Total operating expenses

44,391   25,805   OPERATING INCOME 70,019   82,022   OTHER INCOME (EXPENSE), Net: Interest income (expense), net 192 (184 ) Other income, net 7   85   Total other income (expense) 199   (99 ) INCOME BEFORE PROVISION FOR INCOME TAXES 70,218 81,923 PROVISION FOR INCOME TAXES (20,890 ) (24,577 ) NET INCOME 49,328 57,346 LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 2   (13 ) NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION $ 49,326   $ 57,359   NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: Basic $ 0.93 $ 1.09 Diluted $ 0.92 $ 1.08 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 52,898 52,486 Diluted 53,621 53,267  

   

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION

  Three Months Ended March 31, (In thousands) 2016     2015 Cost of sales $ 1,419 $ 1,156 Sales and marketing 415 435 Research and development 1,093 870 General and administrative 2,032   1,666   Total stock-based compensation 4,959 4,127 Tax benefit recognized (1,584 ) (1,343 ) Net stock-based compensation $ 3,375   $ 2,784      

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES

  Three Months Ended March 31, (In thousands) 2016   2015 Cost of sales Amortization of intangible assets (1) 345   235 Total acquisition related costs $ 345   $ 235  

(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, 2016 2015

(In thousands, except share and per share data)

ASSETS CURRENT ASSETS: Cash and cash equivalents $ 613,692 $ 582,532 Short-term investments 126,273 106,584 Accounts receivable, net 146,505 150,479 Inventories 226,907 203,738 Prepaid income taxes 37,159 33,692 Prepaid expenses and other current assets 24,577 25,564 Deferred income taxes, net 22,526   20,346   Total current assets 1,197,639 1,122,935 DEFERRED INCOME TAXES, NET 11,889 9,386 GOODWILL 502 505 INTANGIBLE ASSETS, NET 11,066 11,904 PROPERTY, PLANT AND EQUIPMENT, NET 309,206 288,604 OTHER ASSETS 19,798   20,095   TOTAL $ 1,550,100   $ 1,453,429   LIABILITIES AND EQUITY CURRENT LIABILITIES: Revolving line-of-credit facilities $ — $ — Current portion of long-term debt 2,000 2,000 Accounts payable 20,277 26,314 Accrued expenses and other liabilities 70,987 75,667 Deferred income taxes, net 3,751 3,190 Income taxes payable 53,656   37,809   Total current liabilities 150,671 144,980 DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES 35,264 30,117 LONG-TERM DEBT, NET OF CURRENT PORTION 17,167   17,667   Total liabilities 203,102 192,764 COMMITMENTS AND CONTINGENCIES IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:

Common stock, $0.0001 par value, 175,000,000 shares authorized; 52,966,460shares issued and outstanding at March 31, 2016; 52,883,902 shares issued andoutstanding at December 31, 2015

5 5 Additional paid-in capital 616,156 607,649 Retained earnings 882,682 833,356 Accumulated other comprehensive loss (152,987 ) (181,482 ) Total IPG Photonics Corporation stockholders' equity 1,345,856 1,259,528 NONCONTROLLING INTERESTS 1,142   1,137   Total equity $ 1,346,998   $ 1,260,665   TOTAL $ 1,550,100   $ 1,453,429    

 

IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

        Three Months Ended March 31, 2016   2015 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 49,328 $ 57,346 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,394 9,743 Provisions for inventory, warranty & bad debt 8,927 8,017 Other 7,195 4,470 Changes in assets and liabilities that used cash: Accounts receivable/payable 1,391 (13,116 ) Inventories (19,365 ) (13,898 ) Other 5,123   (554 ) Net cash provided by operating activities 63,993   52,008   CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (24,960 ) (14,027 ) Proceeds from sales of property, plant and equipment 129 131 Purchases of short-term investments (29,899 ) — Proceeds from short-term investments 10,000 — Acquisition of businesses, net of cash acquired — (4,958 ) Other 46   60   Net cash used in investing activities (44,684 ) (18,794 ) CASH FLOWS FROM FINANCING ACTIVITIES: Line-of-credit facilities (9 ) (1,872 ) Principal payments on long-term borrowings (500 ) (833 ) Exercise of employee stock options and issuances under employee stock purchase plan 2,644 4,409 Tax benefits from exercise of employee stock options 904   4,773   Net cash provided by financing activities 3,039   6,477   EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 8,812   (20,367 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 31,160 19,324 CASH AND CASH EQUIVALENTS — Beginning of period 582,532   522,150   CASH AND CASH EQUIVALENTS — End of period $ 613,692   $ 541,474   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 171   $ 293   Cash paid for income taxes $ 11,955   $ 11,889    

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IPG Photonics CorporationTim Mammen, 508-373-1100Chief Financial OfficerorSharon MerrillDavid Calusdian, 617-542-5300Executive Vice President