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
IPG Photonics Reports Record Revenue Achieved in Third Quarter 2013
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