IPG Photonics Reports Record Revenue Achieved in Third Quarter 2013

  IPG Photonics Reports Record Revenue Achieved in Third Quarter 2013

        Materials Processing Applications Increase 19% Over Prior Year

Business Wire

OXFORD, Mass. -- November 1, 2013

IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for
the third quarter ended September30, 2013.

                                                                   
               Three Months Ended               Nine Months Ended
               September 30,                    September 30,
(In
millions,      2013       2012        %        2013       2012        %
except per                             Change                           Change
share data)
Revenue        $ 172.2     $ 156.4     10  %    $ 482.2     $ 417.5     15  %
Gross margin   53.9    %   55.0    %            53.6    %   55.0    %
Operating      $ 59.8      $ 60.0      —   %    $ 169.3     $ 161.6     5   %
income
Operating      34.7    %   38.4    %            35.1    %   38.7    %
margin
Net income
attributable
to IPG         $ 42.3      $ 42.4      —   %    $ 119.2     $ 110.1     8   %
Photonics
Corporation
Earnings per
diluted        $ 0.81      $ 0.81      —   %    $ 2.28      $ 2.16      6   %
share
                                                                            

Management Comments

“Record revenue in the third quarter of 2013 was driven by a 19% increase in
sales for materials processing applications, which account for 95% of our
business,” said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive
Officer. “We saw particularly strong demand for high-power lasers within
materials processing. Gross margins of 53.9% were within our target range. EPS
was flat with the year ago quarter and reflects the peak of our current
investment cycle expanding manufacturing capacity, R&D and sales and
marketing, which we believe will drive future revenue and earnings growth.

“Total revenue growth of 10% over last year came from increased demand in
high-power lasers for cutting and welding applications, and in our mid-power
and QCW product lines. However, the increases were offset by declines in
pulsed laser sales for consumer electronic applications, which were strong
last year, and declines in other applications.

“Geographically, Asia was our strongest performing region, with a 40% increase
in sales primarily due to growth in Chinese and Turkish sales, which increased
by 57% and more than 100%, respectively. These increases were tempered by
lower sales in Europe and North America.

“During the third quarter, IPG generated $36.7 million in cash from operations
and used $14.1 million to finance capital expenditures. We ended the quarter
with $398.4 million in cash and cash equivalents.

Business Outlook and Financial Guidance

“While we expect fourth-quarter revenue to be seasonally weaker in certain
areas and have reflected this in our guidance, we continue to believe that IPG
still has a significant opportunity of profitable growth ahead for existing
and new applications and product line expansion. As the technology pioneer and
industry leader, we intend to continue to capitalize on the market we have
created for reliable, flexible, high-performing and cost-effective fiber laser
sources, while expanding our product line to capitalize on profitable new
opportunities,” concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $155 million to $170 million for
the fourth quarter of 2013. The Company anticipates earnings per diluted share
in the range of $0.68 to $0.82 based on 52,367,000 diluted common shares,
which includes 51,495,000 basic common shares outstanding and 872,000
potentially dilutive options at September30, 2013.

As discussed in more detail below, actual results may differ from this
guidance due to various factors including, but not limited to, product demand,
competition and general economic conditions. This guidance is subject to the
risks outlined in the Company's reports with the SEC, and assumes that
exchange rates remain at present levels.

Conference Call Reminder

The Company will hold a conference call to review its financial results and
business highlights today, November1, 2013 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) 709-8155 or (201) 689-8881. Interested parties that
are unable to listen to the live call may access an archived version of the
webcast, which 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 the Company 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, expected seasonal weakness, a significant runway of profitable
growth for existing and new applications, capitalizing on the market the
Company has created, expanding its product line, capitalizing on profitable
new opportunities for IPG, and guidance for the fourth quarter of 2013.
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 the Company
serves, particularly the effect of downturns in the markets IPG serves;
uncertainties and adverse changes in the general economic conditions of
markets; the Company's ability to penetrate new applications for fiber lasers
and increase market share; the rate of acceptance and penetration of IPG's
products; high levels of fixed costs from IPG's vertical integration; the
appropriateness of the Company's manufacturing capacity for the level of
demand; competitive factors, including declining average selling prices; the
effect of acquisitions and investments; inventory write-downs; foreign
currency fluctuations; intellectual property infringement claims and
litigation; interruption in supply of key components; manufacturing risks;
building and expanding field service and support operations; inability to
manage risks associated with international customers and operations; and other
risks identified in the Company's SEC filings.Readers are encouraged to refer
to the risk factors described in the Company's Annual Report on Form 10-K
(filed with the SEC on February 28, 2013) 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. The Company 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          Nine Months Ended
                         September 30,               September 30,
                         2013         2012          2013         2012
                         (in thousands, except per share data)
NET SALES                $ 172,152     $ 156,379     $ 482,175     $ 417,498
COST OF SALES            79,339       70,420       223,799      187,945   
GROSS PROFIT             92,813       85,959       258,376      229,553   
OPERATING
EXPENSES:
Sales and                6,801         5,785         19,514        16,771
marketing
Research and             11,501        7,762         30,782        22,131
development
General and              13,175        10,609        37,814        29,294
administrative
Loss (gain) on           1,563        1,796        972          (272      )
foreign exchange
Total operating          33,040       25,952       89,082       67,924    
expenses
OPERATING INCOME         59,773       60,007       169,294      161,629   
OTHER INCOME
(EXPENSE), NET:
Interest income          63            55            (25       )   541
(expense), net
Other income             218          205          49           (981      )
(expense), net
Total other              281          260          24           (440      )
income (expense)
INCOME BEFORE
PROVISION FOR            60,054        60,267        169,318       161,189
INCOME TAXES
PROVISION FOR            (17,716   )   (17,832   )   (50,133   )   (48,357   )
INCOME TAXES
NET INCOME               42,338        42,435        119,185       112,832
LESS: NET INCOME
ATTRIBUTABLE TO          —            —            —            2,740     
NONCONTROLLING
INTERESTS
NET INCOME
ATTRIBUTABLE TO          $ 42,338     $ 42,435     $ 119,185    $ 110,092 
IPG PHOTONICS
CORPORATION
NET INCOME
ATTRIBUTABLE TO
IPG PHOTONICS
CORPORATION PER
SHARE:
Basic                    $ 0.82        $ 0.83        $ 2.32        $ 2.20
Diluted                  $ 0.81        $ 0.81        $ 2.28        $ 2.16
WEIGHTED AVERAGE
SHARES
OUTSTANDING:
Basic                    51,495        51,090        51,474        50,204
Diluted                  52,367        52,102        52,346        51,281
                                                                             
                                                                             

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
                                                 
                        Three Months Ended September   Nine Months Ended
                        30,                            September 30,
(In thousands)          2013           2012           2013         2012
Cost of sales           $  842          $  563         $  2,324      $ 1,590
Sales and               327             289            928           827
marketing
Research and            512             334            1,377         976
development
General and             1,450          973           3,975        2,965   
administrative
Total
stock-based             3,131           2,159          8,604         6,358
compensation
Tax benefit             (996      )     (655      )    (2,772    )   (1,938  )
recognized
Net stock-based         $  2,135       $  1,504      $  5,832     $ 4,420 
compensation
                                                                             
                                                                             

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES
                                                
                           Three Months Ended         Nine Months Ended
                           September 30,              September 30,
(In thousands)             2013         2012         2013           2012
Cost of sales
Step-up of                 $  456        $  —         $  1,318        $  —
inventory (1)
Amortization
of intangible              179          360         541            1,024
assets (2)
Total
acquisition                $  635       $  360      $  1,859       $  1,024
related costs
                                                                         
(1) Amount relates to Microsystems step-up adjustment on inventory sold during
the period
(2) Amount relates to intangible amortization expense during periods presented
including amortization of acquired patents



IPG PHOTONICS CORPORATION

CONSOLIDATED BALANCE SHEETS
                                                         
                                           September 30,        December 31,
                                           2013                 2012
                                           (In thousands, except share and per
                                           share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                  $   398,355          $  384,053
Accounts receivable, net                   120,640              96,630
Inventories                                171,268              139,618
Prepaid income taxes and income            17,326               13,071
taxes receivable
Prepaid expenses and other current         30,072               18,639
assets
Deferred income taxes, net                 11,547              12,948      
Total current assets                       749,208              664,959
DEFERRED INCOME TAXES, NET                 6,100                2,107
GOODWILL                                   455                  2,898
INTANGIBLE ASSETS, NET                     10,131               7,510
PROPERTY, PLANT AND EQUIPMENT, NET         236,507              210,563
OTHER ASSETS                               7,395               7,461       
TOTAL                                      $   1,009,796       $  895,498  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit                   $   1,547            $  2,442
facilities
Current portion of long-term debt          1,333                1,505
Accounts payable                           14,293               17,783
Accrued expenses and other                 59,553               51,451
liabilities
Deferred income taxes, net                 2,050                9,831
Income taxes payable                       27,031              42,443      
Total current liabilities                  105,807              125,455
DEFERRED INCOME TAXES AND OTHER            16,635               13,102
LONG-TERM LIABILITIES
LONG-TERM DEBT, NET OF CURRENT             11,667              14,014      
PORTION
Total liabilities                          134,109              152,571
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION
STOCKHOLDERS’ EQUITY:
Common stock, $0.0001 par value,
175,000,000 shares authorized;
51,604,568 shares issued and               5                    5
outstanding at September 30, 2013;
51,359,247 shares issued and
outstanding at December 31, 2012
Additional paid-in capital                 526,481              511,039
Retained earnings                          354,162              234,977
Accumulated other comprehensive            (4,961         )     (3,094      )
loss
Total IPG Photonics Corporation            875,687             742,927     
stockholders’ equity
TOTAL                                      $   1,009,796       $  895,498  
                                                                            
                                                                            

IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          
                                               Nine Months Ended September 30,
                                               2013             2012
                                               (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                     $  119,185        $  112,832
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization                  23,414            19,168
Provisions for inventory, warranty &           18,203            14,762
bad debt
Other                                          2,354             10,585
Changes in assets and liabilities that
(used) provided cash:
Accounts receivable/payable                    (28,950     )     (34,344     )
Inventories                                    (43,705     )     (17,050     )
Other                                          (29,540     )     10,552      
Net cash provided by operating                 60,961           116,505     
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and               (48,333     )     (51,715     )
equipment
Proceeds from sales of property, plant         202               —
and equipment
Proceeds from short-term investments           —                 25,452
Acquisition of businesses                      (5,555      )     (11,596     )
Other                                          442              (313        )
Net cash used in investing activities          (53,244     )     (38,172     )
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities                      (895        )     (1,958      )
Principal payments on long-term                (2,519      )     (1,848      )
borrowings
Purchase of noncontrolling interests           —                 (700        )
Purchase of redeemable noncontrolling          —                 (55,400     )
interests
Tax benefits from exercise of employee         3,610             3,870
stock options
Exercise of employee stock options and
issuances under employee stock                 3,228             4,275
purchase plan
Proceeds from follow-on public                 —                167,963     
offering, net of offering expenses
Net cash provided by financing                 3,424            116,202     
activities
EFFECT OF CHANGES IN EXCHANGE RATES ON         3,161            (2,200      )
CASH AND CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH                  14,302            192,335
EQUIVALENTS
CASH AND CASH EQUIVALENTS — Beginning          384,053          180,234     
of period
CASH AND CASH EQUIVALENTS — End of             $  398,355       $  372,569  
period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest                         $  190           $  553      
Cash paid for income taxes                     $  74,107        $  20,967   

Contact:

IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief Financial Officer
or
Sharon Merrill
Dennis Walsh, 617-542-5300
Vice President