U.S. Markets closed
  • S&P Futures

    3,657.75
    +34.50 (+0.95%)
     
  • Dow Futures

    29,901.00
    +272.00 (+0.92%)
     
  • Nasdaq Futures

    12,392.50
    +115.50 (+0.94%)
     
  • Russell 2000 Futures

    1,843.80
    +23.70 (+1.30%)
     
  • Crude Oil

    45.01
    -0.33 (-0.73%)
     
  • Gold

    1,788.10
    +7.20 (+0.40%)
     
  • Silver

    22.96
    +0.37 (+1.62%)
     
  • EUR/USD

    1.1962
    +0.0027 (+0.2273%)
     
  • 10-Yr Bond

    0.8440
    +0.0020 (+0.24%)
     
  • Vix

    20.57
    -0.27 (-1.30%)
     
  • GBP/USD

    1.3359
    +0.0027 (+0.2044%)
     
  • USD/JPY

    104.4070
    +0.0830 (+0.0796%)
     
  • BTC-USD

    19,533.26
    +23.38 (+0.12%)
     
  • CMC Crypto 200

    383.35
    +18.75 (+5.14%)
     
  • FTSE 100

    6,266.19
    -101.39 (-1.59%)
     
  • Nikkei 225

    26,824.46
    +390.84 (+1.48%)
     

IPG Photonics Announces Fourth Quarter 2019 Financial Results

Fourth Quarter Revenue Exceeds Guidance; Company Generates $130 Million Operating Cash Flow

Goodwill and Asset Impairment, Inventory Provision and Restructuring Charges Reduce Earnings Per Diluted Share by $0.99

OXFORD, Mass., Feb. 13, 2020 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (IPGP) today reported financial results for the fourth quarter ended December 31, 2019.

Three Months Ended December 31,

Twelve Months Ended December 31,

(In millions, except per share data and percentages)

2019

2018

Change

2019

2018

Change

Revenue

$

306.6

$

330.1

(7

)

%

$

1,314.6

$

1,459.9

(10

)

%

Gross margin

40.5

%

50.5

%

46.1

%

54.8

%

Operating income

$

0.2

$

96.1

(100

)

%

$

233.8

$

523.4

(55

)

%

Operating margin

0.1

%

29.1

%

17.8

%

35.9

%

Net income attributable to IPG Photonics Corporation

$

(4.5

)

$

75.6

(106

)

%

$

180.2

$

404.0

(55

)

%

Earnings per diluted share

$

(0.08

)

$

1.40

(106

)

%

$

3.35

$

7.38

(55

)

%

Management Comments

"We delivered fourth quarter revenue slightly above our guidance range on strength in the US market and new products," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "The global macroeconomic backdrop and the competitive landscape in China both remain challenging. However, we are responding with product cost reductions and differentiated new features and accessories for our core products. Furthermore, we are leveraging one of the largest R&D investments in the laser industry to launch leading-edge laser products and systems for new markets. These new solutions, which represent about one-fifth of total sales, enhance our growth and margin profile and provide greater geographic and end market diversification."

Financial Highlights

Fourth quarter revenue of $307 million decreased 7% year over year. Currency depreciation relative to the exchange rates assumed in our fourth quarter guidance reduced revenue by approximately $2 million. Materials processing sales decreased 11% year over year while sales into other applications increased 42% year over year. Materials processing sales accounted for 90% of total revenue. The acquisition of Genesis Systems Group contributed $19 million during the quarter.

Sales of high power continuous wave (CW) lasers, representing 51% of total revenue, decreased 15% year over year. Sales of fiber lasers at 6 kilowatts of power or greater were approximately 50% of all high power CW laser sales, and high power CW lasers at 10 kilowatts or greater increased more than 30% year over year. Sales of other high power lasers declined year over year due to the weaker demand environment in China and Europe and lower average selling prices. By region, sales decreased 21% in China, 17% in Europe, 37% in Japan and increased 30% in North America on a year over year basis.

Net loss per diluted share was $0.08. Foreign exchange losses, higher inventory reserves and charges related to impairment of goodwill and other long-lived assets and restructuring reduced earnings per diluted share ("EPS") by $0.99. During the fourth quarter, we incurred a charge of $42 million for impairment of goodwill and other long-lived assets, primarily related to our communications business, and a charge of $2 million related to our restructuring actions taken during the second half of 2019. During the fourth quarter, IPG generated $130 million in cash from operations. Capital expenditures were $26 million and stock repurchases totaled $15 million.

Business Outlook and Financial Guidance

"We believe we have significant long-term growth opportunities in welding, fine processing of electric vehicle batteries and our portfolio of new products addressing opportunities in microelectronics, medical, systems and beam delivery solutions. Current demand for our leading-edge laser solutions remains mixed, with strength in North America and emerging regions such as India and Southeast Asia offset by ongoing macro softness in Europe and Japan. Prior to the government-extended Lunar New Year holiday, there were signs that business in China was firming, with order flow having picked up in December and January. However, ongoing business disruption related to the novel coronavirus outbreak makes forecasting our business in China and the impact on global demand very challenging at this point. China is a large and important market for IPG, with repercussions for other markets, and we continue to monitor the situation closely," said Dr. Gapontsev.

For the first quarter of 2020, IPG expects revenue of $220 million to $250 million. The Company expects the first quarter tax rate to be approximately 26%. IPG anticipates delivering earnings per diluted share in the range of $0.00 to $0.30, with 52.9 million basic common shares outstanding and 53.6 million diluted common shares outstanding. This guidance assumes approximately $45 million in reduced revenue and $0.45 lower EPS from business disruption related to the novel coronavirus outbreak.

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, tariffs, trade policy changes, health epidemics 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 0.89, Russian Ruble 62, Japanese Yen 109 and Chinese Yuan 6.98, respectively.

Supplemental Financial Information

Additional supplemental financial information is provided in the unaudited Fourth Quarter 2019 Financial Data Workbook available on the investor relations section of the Company's website at investor.ipgphotonics.com.

Conference Call Reminder

The Company will hold a conference call today, February 13, 2020 at 10:00 am ET. To access the call, please dial 877-407-6184 in the US or 201-389-0877 internationally. A live webcast of the call will also be available and archived on the investor relations section of the Company's website at investor.ipgphotonics.com.

Contact

James Hillier
Vice President of Investor Relations
IPG Photonics Corporation
508-373-1467
jhillier@ipgphotonics.com

About IPG Photonics Corporation

IPG Photonics Corporation is the leader in high-power fiber lasers and amplifiers used primarily in materials processing and other diverse applications. The Company’s mission is to make its fiber laser technology the tool of choice in mass production. IPG accomplishes this mission by delivering superior performance, reliability and usability at a lower total cost of ownership compared with other types of lasers and non-laser tools, allowing end users to increase productivity and decrease costs. A member of the S&P 500® Index, IPG is headquartered in Oxford, Massachusetts and has more than 25 facilities worldwide. For more information, 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 product cost reductions, core products having differentiated new features and accessories; leveraging the our R&D investment to launch leading edge laser products and systems for new markets; products and systems enhancing our growth and margin profile, and greater geographic and end market diversification; significant long-term growth opportunities in welding, fine processing of electric vehicle batteries and our portfolio of new products in microelectronics, medical. systems and beam delivery solutions; ongoing business disruption related to the novel coronavirus outbreak and its impact on global demand and other markets; and revenue, tax rate and earnings guidance for Q1 2020. 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; changes in trade controls and trade policies; 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; asset impairment charges; 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 Quarterly Report on Form 10-Q (filed with the SEC on August 6, 2019) and its 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(In thousands, except per share data)

Net sales

$

306,627

$

330,051

$

1,314,581

$

1,459,874

Cost of sales

182,424

163,303

708,372

659,606

Gross profit

124,203

166,748

606,209

800,268

Operating expenses:

Sales and marketing

18,838

16,284

77,745

57,815

Research and development

30,469

31,501

129,997

122,769

General and administrative

25,071

27,572

107,597

102,429

Goodwill impairment

37,120

37,120

Impairment of long-lived assets and other restructuring charges

7,130

7,130

Loss (gain) on foreign exchange

5,332

(4,661

)

12,827

(6,150

)

Total operating expenses

123,960

70,696

372,416

276,863

Operating income

243

96,052

233,793

523,405

Other income, net:

Interest income, net

2,501

4,132

14,238

9,057

Other income, net

216

681

345

1,933

Total other income

2,717

4,813

14,583

10,990

Income before provision of income taxes

2,960

100,865

248,376

534,395

Provision for income taxes

7,263

25,399

68,115

130,226

Net (loss) income

(4,303

)

75,466

180,261

404,169

Less: net income (loss) attributable to non-controlling interests

147

(93

)

27

142

Net (loss) income attributable to IPG Photonics Corporation

$

(4,450

)

$

75,559

$

180,234

$

404,027

Net (loss) income attributable to IPG Photonics Corporation per share:

Basic

$

(0.08

)

$

1.42

$

3.40

$

7.55

Diluted

$

(0.08

)

$

1.40

$

3.35

$

7.38

Weighted average shares outstanding:

Basic

52,916

53,243

53,061

53,522

Diluted

52,916

54,107

53,839

54,726


IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

December 31,

2019

2018

(In thousands, except share and per
share data)

ASSETS

Current assets:

Cash and cash equivalents

$

680,070

$

544,358

Short-term investments

502,546

500,432

Accounts receivable, net

238,479

255,509

Inventories

380,790

403,579

Prepaid income taxes

38,873

43,782

Prepaid expenses and other current assets

55,876

57,764

Total current assets

1,896,634

1,805,424

Deferred income taxes, net

31,395

19,165

Goodwill

82,092

100,722

Intangible assets, net

74,271

87,139

Property, plant and equipment, net

600,852

543,068

Other assets

45,192

18,932

Total assets

$

2,730,436

$

2,574,450

LIABILITIES AND EQUITY

Current liabilities:

Current portion of long-term debt

$

3,740

$

3,671

Accounts payable

27,329

36,302

Accrued expenses and other liabilities

149,782

154,640

Income taxes payable

11,053

51,161

Total current liabilities

191,904

245,774

Deferred income taxes and other long-term liabilities

98,121

80,734

Long-term debt, net of current portion

37,968

41,707

Total liabilities

327,993

368,215

Commitments and contingencies

IPG Photonics Corporation equity:

Common stock, $0.0001 par value, 175,000,000 shares authorized; 54,743,227 and 53,010,875 shares issued and outstanding, respectively, at December 31, 2019; 54,371,701 and 52,941,607 shares issued and outstanding, respectively, at December 31, 2018.

5

5

Treasury stock, at cost, 1,732,352 and 1,430,094 shares held at December 31, 2019 and December 31, 2018, respectively.

(265,730

)

(224,998

)

Additional paid-in capital

785,636

744,937

Retained earnings

2,028,734

1,848,500

Accumulated other comprehensive loss

(146,919

)

(162,896

)

Total IPG Photonics Corporation shareholders' equity

2,401,726

2,205,548

Non-controlling interests

717

687

Total equity

2,402,443

2,206,235

Total liabilities and equity

$

2,730,436

$

2,574,450


IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Twelve Months Ended December 31,

2019

2018

(In thousands)

Cash flows from operating activities:

Net income

$

180,261

$

404,169

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

96,268

80,271

Goodwill impairment

37,120

Impairment of long-lived assets

5,350

Provisions for inventory, warranty & bad debt

63,752

38,862

Other

32,198

17,195

Changes in assets and liabilities that used cash:

Accounts receivable and accounts payable

(481

)

(20,240

)

Inventories

(28,105

)

(135,440

)

Other

(62,842

)

8,484

Net cash provided by operating activities

323,521

393,301

Cash flows from investing activities:

Purchases of property, plant and equipment

(133,536

)

(160,343

)

Proceeds from sales of property, plant and equipment

661

1,026

Purchases of short and long-term investments

(760,300

)

(765,310

)

Proceeds from short-term investments

768,078

470,328

Acquisitions of businesses, net of cash acquired

(15,115

)

(109,115

)

Other

237

415

Net cash used in investing activities

(139,975

)

(562,999

)

Cash flows from financing activities:

Principal payments on long-term borrowings

(3,671

)

(3,604

)

Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards

7,336

12,183

Cash contributed by non-controlling interest

839

Purchase of treasury stock, at cost

(40,732

)

(176,065

)

Net cash used in financing activities

(37,067

)

(166,647

)

Effect of changes in exchange rates on cash and cash equivalents

(7,853

)

(29,197

)

Net increase (decrease) in cash, cash equivalents and restricted cash

138,626

(365,542

)

Cash and cash equivalents — Beginning of period

544,358

909,900

Cash, cash equivalents and restricted cash — End of period

$

682,984

$

544,358

Supplemental disclosures of cash flow information:

Cash paid for interest

$

2,683

$

3,052

Cash paid for income taxes

$

116,951

$

112,762


IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS AND OTHER CHARGES (UNAUDITED)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(In thousands)

(In thousands)

Step-up of inventory (1):

Cost of sales

$

$

$

$

556

Amortization of intangible assets:

Cost of sales

1,273

1,213

5,167

4,840

Sales and marketing

1,779

976

7,138

2,690

Research and development

160

160

640

640

Total acquisition related costs and other charges

$

3,212

$

2,349

$

12,945

$

8,726

(1) 2018 amount relates to ILT step-up adjustments on inventory sold during the period.

IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION IMPACT TO NET INCOME (UNAUDITED)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(In thousands)

(In thousands)

Cost of sales

$

2,443

$

1,292

$

9,249

$

6,535

Sales and marketing

908

586

3,815

2,550

Research and development

1,735

1,516

7,690

6,410

General and administrative

2,728

3,190

12,824

12,532

Total stock-based compensation

7,814

6,584

33,578

28,027

Tax effect of stock-based compensation

(2,007

)

(1,578

)

(8,128

)

(6,632

)

Net stock-based compensation

$

5,807

$

5,006

$

25,450

$

21,395


Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(In thousands)

(In thousands)

Excess tax benefit on exercise of stock options included in net income

$

645

$

146

$

5,114

$

13,926