Category: Semiconductors

IPG Photonics Corporation ( IPGP )

Published: 28 July 2015
Written by Editor
Nasdaq   Financial Results   Up on News  

IPG Photonics Reports Second Quarter 2015 Revenue Growth of 22%

Record Revenues of $235.1 Million Due to Strength in Materials Processing and High Power Laser Sales

Powers 25% Rise in EPS

OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (IPGP) today reported financial results for the second quarter ended June 30, 2015.

     

Three Months Ended
June 30,

      

Six Months Ended
June 30,

    
(In millions, except per share data)     2015   2014   % Change   2015   2014   % Change
Revenue     $ 235.1     $ 192.2     22 %   $ 434.1     $ 362.8     20 %
Gross margin     54.7 %   54.2 %       54.5 %   53.3 %    
Operating income     $ 87.4     $ 68.7     27 %   $ 169.5     $ 126.5     34 %
Operating margin     37.2 %   35.8 %       39.0 %   34.9 %    
Net income attributable to IPG Photonics Corporation     $ 61.3     $ 48.3     27 %   $ 118.7     $ 88.8     34 %
Earnings per diluted share     $ 1.15     $ 0.92     25 %   $ 2.22     $ 1.68     32 %

Management Comments

"IPG grew revenues 22% year over year to a record $235.1 million for the second quarter of 2015, as we continue to expand market penetration of fiber lasers in materials processing applications," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Through our increasing scale, continued innovation and operating efficiencies, we achieved a gross margin of 54.7% and increased earnings per diluted share by 25% year-over-year to $1.15."

Expansion in existing and new OEM customers delivered a 21% increase in materials processing sales for the second quarter of 2015. High-power fiber lasers sales grew strongly increasing by 27%, and IPG also had healthy growth in medium-power, low-power and QCW lasers. Sales for other applications, including advanced applications, telecom and medical applications, increased 54% from the same quarter last year, and as a group accounted for 5% of total revenue. Geographically, IPG delivered its highest sales growth in Asia followed by lower levels of growth in Europe and North America.

In the second quarter, earnings per diluted share increased by 25% to a record $1.15, which includes $0.04 per share related to foreign exchange losses as compared to a $0.01 foreign exchange loss in 2014. The growth in earnings per share was driven by the increase in revenue and an improvement in operating margins.

During the second quarter, IPG generated $49.4 million in cash from operations and used $18.6 million to finance capital expenditures. IPG ended the quarter with $571.5 million in cash and cash equivalents after repayment of an $11 million term loan which matured in the second quarter.

Business Outlook and Financial Guidance

"In the second quarter, our book-to-bill ratio continued to be significantly better than one. As we enter the second half of 2015, we remain focused on establishing partnerships with new OEMs and end-users, deepening our relationships with existing customers and developing the next generation of fiber laser-based products to address new markets and applications," concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $235 million to $250 million for the third quarter of 2015. The Company anticipates earnings per diluted share in the range of $1.15 to $1.30 based on 53,442,000 diluted common shares, which includes 52,657,000 basic common shares outstanding and 785,000 potentially dilutive options at June 30, 2015.

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 0.92, Russian Ruble 57 and Japanese Yen 124, respectively.

Conference Call Reminder

The Company will hold a conference call today, July 28, 2015 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. 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 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, IPG's focus on establishing partnerships with new OEMs and end-users, deepening relationships with existing customers and developing the next generation of fiber laser-based products to address new markets and applications and guidance for the third quarter of 2015. 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; 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 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; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; 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, 2015) 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
June 30,

  

Six Months Ended
June 30,
      2015   2014   2015   2014
      (in thousands, except per share data)
NET SALES     $ 235,138     $ 192,204     $ 434,098     $ 362,779  
COST OF SALES     106,435     87,977     197,568     169,268  
GROSS PROFIT     128,703     104,227     236,530     193,511  
OPERATING EXPENSES:                  
Sales and marketing     7,962     8,047     15,511     15,212  
Research and development     15,114     13,362     29,344     26,146  
General and administrative     15,017     13,124     27,795     26,040  
Loss (gain) on foreign exchange     3,167     945     (5,585 )   (425 )
Total operating expenses     41,260     35,478     67,065     66,973  
OPERATING INCOME     87,443     68,749     169,465     126,538  
OTHER INCOME (EXPENSE), Net:                  
Interest expense, net     (112 )   —     (296 )   (139 )
Other income, net     161     239     246     573  
Total other income (expense)     49     239     (50 )   434  
INCOME BEFORE PROVISION FOR INCOME TAXES     87,492     68,988     169,415     126,972  
PROVISION FOR INCOME TAXES     (26,249 )   (20,705 )   (50,825 )   (38,158 )
NET INCOME     61,248     48,283     118,590     88,814  
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS     (55 )   —     (68 )   —  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION     $ 61,299     $ 48,283     $ 118,658     $ 88,814  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:                  
Basic     $ 1.16     $ 0.93     $ 2.26     $ 1.71  
Diluted     $ 1.15     $ 0.92     $ 2.22     $ 1.68  
WEIGHTED AVERAGE SHARES OUTSTANDING:                  
Basic     52,657     52,068     52,572     52,019  
Diluted     53,442     52,769     53,355     52,747  
                           
 

IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
           
     

Three Months Ended June 30,

   Six Months Ended June 30,
(In thousands)     2015   2014   2015   2014
Cost of sales     $ 1,359     $ 1,041     $ 2,515     $ 1,931  
Sales and marketing     509     434     944     807  
Research and development     993     772     1,863     1,426  
General and administrative     1,874     1,658     3,540     3,008  
Total stock-based compensation     4,735     3,905     8,862     7,172  
Tax benefit recognized     (1,565 )   (1,250 )   (2,908 )   (2,295 )
Net stock-based compensation     $ 3,170     $ 2,655     $ 5,954     $ 4,877  
                                   
 

IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES
         
    Three Months Ended June 30,   Six Months Ended June 30,
(In thousands)   2015   2014   2015   2014
Cost of sales                
Amortization of intangible assets (1)   410     156     645     312
Total acquisition related costs   $ 410     $ 156     $ 645     $ 312
                               

(1) Amount relates to intangible amortization expense during periods presented including amortization of acquired patents

 

IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
           
      June 30,
2015		   December 31,
2014
     

(In thousands, except share and per
share data)
ASSETS
CURRENT ASSETS:          
Cash and cash equivalents     $ 571,508     $ 522,150  
Accounts receivable, net     169,828     143,109  
Inventories     190,848     171,009  
Prepaid income taxes     27,822     20,967  
Prepaid expenses and other current assets     24,241     21,295  
Deferred income taxes, net     18,123     15,308  
Total current assets     1,002,370     893,838  
DEFERRED INCOME TAXES, NET     7,495     5,438  
GOODWILL     516     455  
INTANGIBLE ASSETS, NET     14,013     9,227  
PROPERTY, PLANT AND EQUIPMENT, NET     288,553     275,082  
OTHER ASSETS     21,594     26,847  
TOTAL     $ 1,334,541     $ 1,210,887  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:          
Revolving line-of-credit facilities     $ 1,600     $ 2,631  
Current portion of long-term debt     2,000     13,333  
Accounts payable     21,537     17,141  
Accrued expenses and other liabilities     68,274     64,057  
Deferred income taxes, net     3,670     3,241  
Income taxes payable     28,690     21,672  
Total current liabilities     125,771     122,075  
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES     26,348     22,584  
LONG-TERM DEBT, NET OF CURRENT PORTION     18,667     19,667  
Total liabilities     170,786     164,326  
COMMITMENTS AND CONTINGENCIES          
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:          

Common stock, $0.0001 par value, 175,000,000 shares authorized;
52,721,014 shares issued and outstanding at June 30, 2015;
52,369,688 shares issued and outstanding at December 31, 2014

     5     5  
Additional paid-in capital     591,718     567,617  
Retained earnings     709,860     591,202  
Accumulated other comprehensive loss     (139,262 )   (112,263 )
Total IPG Photonics Corporation stockholders' equity     1,162,321     1,046,561  
NONCONTROLLING INTERESTS     1,434     —  
Total equity     $ 1,163,755     $ 1,046,561  
TOTAL     $ 1,334,541     $ 1,210,887  
                   
 

IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
       
      Six Months Ended June 30,
      2015   2014
      (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income     $ 118,590     $ 88,814  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization     20,176     17,088  
Provisions for inventory, warranty & bad debt     18,804     12,207  
Other     3,427     389  
Changes in assets and liabilities that used cash:          
Accounts receivable/payable     (27,326 )   (23,404 )
Inventories     (33,211 )   (14,988 )
Other     950     (3,231 )
Net cash provided by operating activities     101,410     76,875  
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property, plant and equipment and intangible assets     (32,606 )   (45,781 )
Proceeds from sales of property, plant and equipment     139     254  
Acquisition of businesses, net of cash acquired     (4,958 )   —  
Other     86     42  
Net cash used in investing activities     (37,339 )   (45,485 )
CASH FLOWS FROM FINANCING ACTIVITIES:          
Line-of-credit facilities     (777 )   (535 )
Principal payments on long-term borrowings     (12,333 )   (667 )
Tax benefits from exercise of employee stock options     5,665     2,426  
Exercise of employee stock options and issuances under employee stock purchase plan     9,574     3,379  
Net cash provided by financing activities     2,129     4,603  
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS     (16,842 )   (1,337 )
NET INCREASE IN CASH AND CASH EQUIVALENTS     49,358     34,656  
CASH AND CASH EQUIVALENTS — Beginning of period     522,150     448,776  
CASH AND CASH EQUIVALENTS — End of period     $ 571,508     $ 483,432  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Cash paid for interest     $ 533     $ 223  
Cash paid for income taxes     $ 44,728     $ 41,525  
                   

 

Contact:

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

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