OXFORD, Mass.--(BUSINESS WIRE)--IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2012.
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
September 30, |
September 30, |
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| (In millions, except per share data) |
2012 |
2011 |
% Change |
2012 |
2011 |
% Change |
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| Revenue | $ | 156.4 | $ | 129.1 | 21% | $ | 417.5 | $ | 351.0 | 19% | ||||||
| Gross margin | 55.0% | 54.6% | 55.0% | 54.4% | ||||||||||||
| Operating income | $ | 60.0 | $ | 49.2 | 22% | $ | 161.6 | $ | 129.5 | 25% | ||||||
| Operating margin | 38.4% | 38.1% | 38.7% | 36.9% | ||||||||||||
| Net income attributable to IPG Photonics Corporation | $ | 42.4 | $ | 32.9 | 29% | $ | 110.1 | $ | 86.7 | 27% | ||||||
| Earnings per diluted share | $ | 0.81 | $ | 0.66 | 23% | $ | 2.16 | $ | 1.77 | 22% | ||||||
Management Comments
“IPG’s performance momentum continued into the third quarter by delivering record results on the top and bottom lines,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “Revenues grew by more than 21% over the prior year and net income increased by 29%.”
“Materials processing sales increased by 21%, driven primarily by high-power laser sales for automotive and general manufacturing applications,” said Dr. Gapontsev. “High-power laser sales increased 16%, while pulsed laser sales grew by 51% driven by increased demand for consumer electronics applications. Medium-power laser sales grew by 11%, primarily due to demand for thin metal cutting and welding in micro-processing applications.”
“Strength in the U.S. and Europe for cutting and welding applications in automotive and general manufacturing, as well as marking and engraving in consumer electronics, were the primary drivers of our record revenue performance. In addition, advanced applications revenue benefited from sales of several high-power and brightness lasers,” said Dr. Gapontsev. “Our growth in Europe was partially offset by lower demand in Russia. In Asia, we continued to expand our business in Turkey, while Japan and China both showed moderate growth.”
“During the third quarter, IPG generated $38 million in cash from operations,” said Dr. Gapontsev. “A portion of that cash was used to fund the acquisition of JP Sercel Associates, Inc., which we expect to strengthen our product portfolio and accelerate IPG’s penetration into the fine-processing markets. We maintained a strong balance sheet, ending the quarter with $372.6 million in cash and cash equivalents.”
Business Outlook and Financial Guidance
“We expect to report strong year-over-year growth in the fourth quarter as we continue to capitalize on the fundamentals that are driving our business,” said Dr. Gapontsev. “At the same time, we will face challenges in the fourth quarter, including historical seasonality in some markets and macro-economic pressures in a few key geographies. As a result of these factors, our book-to-bill ratio was less than one in Q3. Looking ahead, we remain confident that the fundamentals of our business and competitive position are strong and we expect to continue to displace incumbent technologies and add OEM customers as our lasers are qualified for more applications.”
IPG Photonics expects revenue in the range of $140 million to $150 million for the fourth quarter of 2012. The Company anticipates earnings per diluted share in the range of $0.65 to $0.75 based on 52,102,000 diluted common shares, which includes 51,090,000 basic common shares outstanding and 1,012,000 potentially dilutive options at September 30, 2012.
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, October 31, 2012 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) 270-2148 or (412) 902-6510. 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, strengthening the Company's product portfolio, accelerating its penetration into the fine-processing market, reporting strong year-over-year growth in the fourth quarter, continuing to capitalize on the fundamentals that are driving the Company's business, that the fundamentals of its business and competitive position are strong, continued displacement of incumbent technologies and adding OEM customers as IPG's lasers are qualified for more applications, and revenue and earnings per share expectations for the fourth quarter of 2012. 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 economic downturns; reduction in customer capital expenditures; potential order cancellations and push-outs and financial and credit market issues; 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; effective management of growth; level of fixed costs from its vertical integration; intellectual property infringement claims and litigation; interruption in supply of key components, including from transportation disruptions from natural and man-made events; manufacturing risks; inventory write-downs; foreign currency fluctuations; competitive factors, including declining average selling prices; building and expanding field service and support operations; uncertainties pertaining to customer orders; demand for products and services; development of markets for the Company's products and services; 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 27, 2012) 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||
| NET SALES | $ | 156,379 | $ | 129,064 | $ | 417,498 | $ | 350,958 | |||||||||||||
| COST OF SALES | 70,420 | 58,605 | 187,945 | 160,127 | |||||||||||||||||
| GROSS PROFIT | 85,959 | 70,459 | 229,553 | 190,831 | |||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||
| Sales and marketing | 5,785 | 5,656 | 16,771 | 16,451 | |||||||||||||||||
| Research and development | 7,762 | 6,501 | 22,131 | 18,842 | |||||||||||||||||
| General and administrative | 10,609 | 10,997 | 29,294 | 27,499 | |||||||||||||||||
| Loss (gain) on foreign exchange | 1,796 | (1,927 | ) | (272 | ) | (1,413 | ) | ||||||||||||||
| Total operating expenses | 25,952 | 21,227 | 67,924 | 61,379 | |||||||||||||||||
| OPERATING INCOME | 60,007 | 49,232 | 161,629 | 129,452 | |||||||||||||||||
| OTHER INCOME (EXPENSE), Net: | |||||||||||||||||||||
| Interest income (expense), net | 55 | (209 | ) | 541 | (585 | ) | |||||||||||||||
| Other income (expense), net | 205 | 145 | (981 | ) | (465 | ) | |||||||||||||||
| Total other income (expense) | 260 | (64 | ) | (440 | ) | (1,050 | ) | ||||||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 60,267 | 49,168 | 161,189 | 128,402 | |||||||||||||||||
| PROVISION FOR INCOME TAXES | (17,832 | ) | (14,899 | ) | (48,357 | ) | (39,248 | ) | |||||||||||||
| NET INCOME | 42,435 | 34,269 | 112,832 | 89,154 | |||||||||||||||||
|
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
- | 1,400 | 2,740 | 2,481 | |||||||||||||||||
|
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION |
$ | 42,435 | $ | 32,869 | $ | 110,092 | $ | 86,673 | |||||||||||||
|
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: |
|||||||||||||||||||||
| Basic | $ | 0.83 | $ | 0.68 | $ | 2.20 | $ | 1.82 | |||||||||||||
| Diluted | $ | 0.81 | $ | 0.66 | $ | 2.16 | $ | 1.77 | |||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||||||||||||||||||
| Basic | 51,090 | 47,483 | 50,204 | 47,298 | |||||||||||||||||
| Diluted | 52,102 | 48,747 | 51,281 | 48,684 | |||||||||||||||||
| IPG PHOTONICS CORPORATION | ||||||||||||||||
| SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
September 30, |
September 30, |
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| (In thousands) |
2012 |
2011 |
2012 |
2011 |
||||||||||||
| Cost of sales | $ | 563 | $ | 419 | $ | 1,590 | $ | 1,303 | ||||||||
| Sales and marketing | 289 | 311 | 827 | 1,206 | ||||||||||||
| Research and development | 334 | 252 | 976 | 789 | ||||||||||||
| General and administrative | 973 | 897 | 2,965 | 2,882 | ||||||||||||
| Total stock-based compensation | 2,159 | 1,879 | 6,358 | 6,180 | ||||||||||||
| Tax benefit recognized | (655 | ) | (575 | ) | (1,938 | ) | (1,982 | ) | ||||||||
| Net stock-based compensation | $ | 1,504 | $ | 1,304 | $ | 4,420 | $ | 4,198 | ||||||||
| IPG PHOTONICS CORPORATION | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| September 30, | December 31, | ||||||||||
| 2012 | 2011 | ||||||||||
| (In thousands, except share and per share data) | |||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 372,569 | $ | 180,234 | |||||||
| Short-term investments | - | 25,451 | |||||||||
| Accounts receivable, net | 110,649 | 75,755 | |||||||||
| Inventories, net | 135,121 | 116,978 | |||||||||
| Prepaid income taxes and income taxes receivable | 13,968 | 13,285 | |||||||||
| Prepaid expenses and other current assets | 18,296 | 11,855 | |||||||||
| Deferred income taxes, net | 10,503 | 10,899 | |||||||||
| Total current assets | 661,106 | 434,457 | |||||||||
| DEFERRED INCOME TAXES, NET | 4,419 | 4,830 | |||||||||
| GOODWILL | 3,113 | - | |||||||||
| INTANGIBLE ASSETS, NET | 7,875 | 6,157 | |||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | 195,153 | 155,202 | |||||||||
| OTHER ASSETS | 6,719 | 7,486 | |||||||||
| TOTAL | $ | 878,385 | $ | 608,132 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Revolving line-of-credit facilities | $ | 4,900 | $ | 7,057 | |||||||
| Current portion of long-term debt | 1,572 | 1,613 | |||||||||
| Accounts payable | 14,291 | 11,122 | |||||||||
| Accrued expenses and other liabilities | 55,733 | 47,285 | |||||||||
| Deferred income taxes, net | 7,181 | 5,405 | |||||||||
| Income taxes payable | 37,604 | 21,230 | |||||||||
| Total current liabilities | 121,281 | 93,712 | |||||||||
| OTHER LONG-TERM LIABILITIES | 13,191 | 8,961 | |||||||||
| LONG-TERM DEBT, NET OF CURRENT PORTION | 14,341 | 15,726 | |||||||||
| Total liabilities | 148,813 | 118,399 | |||||||||
| REDEEMABLE NONCONTROLLING INTERESTS | - | 46,123 | |||||||||
| IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY: | |||||||||||
| Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,270,197 shares issued and outstanding at September 30, 2012; 47,616,115 shares issued and outstanding at December 31, 2011 | 5 | 5 | |||||||||
| Additional paid-in capital | 506,854 | 332,585 | |||||||||
| Retained earnings | 233,418 | 122,833 | |||||||||
| Accumulated other comprehensive loss | (10,705 | ) | (12,100 | ) | |||||||
| Total IPG Photonics Corporation stockholders’ equity | 729,572 | 443,323 | |||||||||
| NONCONTROLLING INTERESTS | - | 287 | |||||||||
| Total equity | 729,572 | 443,610 | |||||||||
| TOTAL | $ | 878,385 | $ | 608,132 | |||||||
| IPG PHOTONICS CORPORATION | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
|
Nine Months Ended September 30, |
|||||||||||
| 2012 | 2011 | ||||||||||
| (In thousands) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 112,832 | $ | 89,154 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 19,168 | 18,182 | |||||||||
| Provisions for inventory, warranty & bad debt | 14,762 | 11,859 | |||||||||
| Other | 10,585 | 7,110 | |||||||||
| Changes in assets and liabilities that provided (used) cash: | |||||||||||
| Accounts receivable/payable | (34,344 | ) | (20,746 | ) | |||||||
| Inventories | (17,050 | ) | (52,261 | ) | |||||||
| Other | 10,552 | 2,697 | |||||||||
| Net cash provided by operating activities | 116,505 | 55,995 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment | (51,715 | ) | (34,750 | ) | |||||||
| Proceeds from short-term investments | 25,452 | - | |||||||||
| Acquisition of businesses, net of cash acquired | (11,596 | ) | (450 | ) | |||||||
| Other | (313 | ) | 189 | ||||||||
| Net cash used in investing activities | (38,172 | ) | (35,011 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Line-of-credit facilities | (1,958 | ) | 585 | ||||||||
| Principal payments on long-term borrowings | (1,848 | ) | (1,046 | ) | |||||||
| Purchase of noncontrolling interests | (700 | ) | - | ||||||||
| (Purchase) sale of redeemable noncontrolling interests | (55,400 | ) | 19,973 | ||||||||
| Exercise of employee stock options and issuances under employee stock purchase plan | 8,145 | 12,001 | |||||||||
| Proceeds from follow-on public offering, net of offering expenses | 167,963 | - | |||||||||
| Net cash provided by financing activities | 116,202 | 31,513 | |||||||||
| EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (2,200 | ) | (3,771 | ) | |||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 192,335 | 48,726 | |||||||||
| CASH AND CASH EQUIVALENTS — Beginning of period | 180,234 | 147,860 | |||||||||
| CASH AND CASH EQUIVALENTS — End of period | $ | 372,569 | $ | 196,586 | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||
| Cash paid for interest | $ | 553 | $ | 809 | |||||||
| Cash paid for income taxes | $ | 20,967 | $ | 19,465 | |||||||