IPG Photonics Announces First Quarter 2017 Financial Results
Revenue Grows 38% and Earnings per Diluted Share Increases 50%, Exceeding the High-End of Guidance
OXFORD, Mass., May 02, 2017 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ:IPGP) today reported financial results for the first quarter ended March 31, 2017.
| Three Months Ended March 31, | |||||||||||
| (In millions, except per share data) | 2017 | 2016 | % Change | ||||||||
| Revenue | $ | 285.8 | $ | 207.2 | 38 | % | |||||
| Gross margin | 55.0 | % | 55.2 | % | |||||||
| Operating income | $ | 101.5 | $ | 70.0 | 45 | % | |||||
| Operating margin | 35.5 | % | 33.8 | % | |||||||
| Net income attributable to IPG Photonics Corporation | $ | 74.9 | $ | 49.3 | 52 | % | |||||
| Earnings per diluted share | $ | 1.38 | $ | 0.92 | 50 | % | |||||
Management Comments
"Our first quarter results were driven by rapid growth across our core products, applications and geographies. First quarter revenue and EPS were above the high end of our guidance as the pace at which our fiber lasers are replacing conventional lasers and non-laser technology appears to be accelerating. During the first quarter we achieved record sales of $285.8 million, which increased 38% year over year, while EPS of $1.38 increased 50% year over year," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer.
Materials processing sales increased 33% year-over-year in the first quarter and accounted for approximately 92% of total sales driven by strength in cutting and welding. Sales to other markets were up 140% year-over-year driven by strong sales in telecom and advanced applications. Demand within IPG's core materials processing business was especially strong in China, which grew 89% year over year in the first quarter. Sales of high-power lasers increased 42% year over year from rapid growth in cutting and welding applications while sales of QCW lasers increased 148% year over year driven by growth in welding and percussion hole drilling.
During the first quarter, IPG generated $50.8 million in cash from operations and used $21.9 million to finance capital expenditures. IPG ended the quarter with $862.8 million in cash and cash equivalents and short-term investments, representing an increase of $32.2 million from December 31, 2016.
Business Outlook and Financial Guidance
"We achieved record orders during the quarter, with a book-to-bill ratio greater than one. Based on our current backlog, we believe we are in excellent position to deliver strong results again in the second quarter," said Dr. Gapontsev.
IPG Photonics expects revenue in the range of $320 million to $340 million for the second quarter of 2017. The Company anticipates earnings per diluted share in the range of $1.50 to $1.70 based on 54,370,000 diluted common shares, which includes 53,368,000 basic common shares outstanding and 1,002,000 potentially dilutive options at March 31, 2017.
Dr. Gapontsev added, "The magnitude of our first quarter out-performance and second quarter revenue guidance has exceeded our expectations when compared to those assumed in our annual guidance of 10% to 14% revenue growth in 2017. As such, we believe the stronger-than-expected performance and guidance for the first half of the year should be treated as additive to our full-year revenue growth outlook. However, it should not be used, at this time, as an assumption for out-performance in the second half of the year. While order flow remains strong, our visibility into the back half of the year, particularly the fourth quarter, remains somewhat limited."
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 0.94, Russian Ruble 56, Japanese Yen 112 and Chinese Yuan 6.90, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the First Quarter 2017 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, May 2, 2017 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.
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 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, delivering a strong set of results again in the second quarter, guidance for the second quarter of 2017 and full-year revenue growth outlook. 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; 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 Annual Report on Form 10-K (filed with the SEC on February 27, 2017) 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. 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 | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||
| Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| (in thousands, except per share data) | ||||||||
| NET SALES | $ | 285,846 | $ | 207,248 | ||||
| COST OF SALES | 128,579 | 92,838 | ||||||
| GROSS PROFIT | 157,267 | 114,410 | ||||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing | 10,827 | 8,034 | ||||||
| Research and development | 22,780 | 17,489 | ||||||
| General and administrative | 17,726 | 13,901 | ||||||
| Loss on foreign exchange | 4,453 | 4,967 | ||||||
| Total operating expenses | 55,786 | 44,391 | ||||||
| OPERATING INCOME | 101,481 | 70,019 | ||||||
| OTHER (EXPENSE) INCOME, Net: | ||||||||
| Interest income, net | 308 | 192 | ||||||
| Other (expense) income, net | (529 | ) | 7 | |||||
| Total other (expense) income | (221 | ) | 199 | |||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 101,260 | 70,218 | ||||||
| PROVISION FOR INCOME TAXES | (26,328 | ) | (20,890 | ) | ||||
| NET INCOME | 74,932 | 49,328 | ||||||
| LESS: NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (13 | ) | 2 | |||||
| NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION | $ | 74,945 | $ | 49,326 | ||||
| NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: | ||||||||
| Basic | $ | 1.40 | $ | 0.93 | ||||
| Diluted | $ | 1.38 | $ | 0.92 | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
| Basic | 53,368 | 52,898 | ||||||
| Diluted | 54,370 | 53,621 | ||||||
| IPG PHOTONICS CORPORATION | ||||||||
| SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION AND ACCOUNTING STANDARD IMPACTS TO NET INCOME AND EARNINGS PER SHARE | ||||||||
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
| Cost of sales | $ | 1,391 | $ | 1,419 | ||||
| Sales and marketing | 452 | 415 | ||||||
| Research and development | 1,205 | 1,093 | ||||||
| General and administrative | 2,303 | 2,032 | ||||||
| Total stock-based compensation | 5,351 | 4,959 | ||||||
| Tax benefit recognized | (1,720 | ) | (1,584 | ) | ||||
| Net stock-based compensation | $ | 3,631 | $ | 3,375 | ||||
| (In thousands, except share and per share data) | Three Months Ended March 31, | |||||||
| 2017 | 2016 | |||||||
| Excess tax benefit on exercise of stock options included in net income | $ | 4,130 | $ | — | ||||
| Increase in weighted-average diluted shares outstanding | 184,161 | — | ||||||
| IPG PHOTONICS CORPORATION | ||||||||
| SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS AND OTHER CHARGES | ||||||||
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
| Amortization of intangible assets | ||||||||
| Cost of sales | $ | 745 | $ | 345 | ||||
| Sales and marketing | 160 | 38 | ||||||
| Research and development | 160 | 160 | ||||||
| Impairment charge related to long-lived asset | ||||||||
| General and administrative | 162 | — | ||||||
| Total acquisition related costs and other charges | $ | 1,227 | $ | 543 | ||||
| IPG PHOTONICS CORPORATION | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (In thousands, except share and per share data) |
||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 697,778 | $ | 623,855 | ||||
| Short-term investments | 165,025 | 206,779 | ||||||
| Accounts receivable, net | 180,226 | 155,901 | ||||||
| Inventories | 261,893 | 239,010 | ||||||
| Prepaid income taxes | 41,959 | 34,128 | ||||||
| Prepaid expenses and other current assets | 44,133 | 41,289 | ||||||
| Total current assets | 1,391,014 | 1,300,962 | ||||||
| DEFERRED INCOME TAXES, NET | 47,048 | 42,442 | ||||||
| GOODWILL | 19,831 | 19,828 | ||||||
| INTANGIBLE ASSETS, NET | 27,892 | 28,789 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | 395,858 | 379,375 | ||||||
| OTHER ASSETS | 20,930 | 18,603 | ||||||
| TOTAL | $ | 1,902,573 | $ | 1,789,999 | ||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of long-term debt | $ | 3,188 | $ | 3,188 | ||||
| Accounts payable | 25,388 | 28,048 | ||||||
| Accrued expenses and other liabilities | 105,737 | 102,485 | ||||||
| Income taxes payable | 23,423 | 24,554 | ||||||
| Total current liabilities | 157,736 | 158,275 | ||||||
| DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES | 41,726 | 36,365 | ||||||
| LONG-TERM DEBT, NET OF CURRENT PORTION | 36,839 | 37,635 | ||||||
| Total liabilities | 236,301 | 232,275 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY: | ||||||||
| Common stock, $0.0001 par value, 175,000,000 shares authorized; 53,636,419 and 53,425,945 shares issued and outstanding, respectively, at March 31, 2017; 53,354,579 and 53,251,805 shares issued and outstanding, respectively, at December 31, 2016 | 5 | 5 | ||||||
| Treasury stock, at cost (210,474 and 102,774 shares held) | (21,485 | ) | (8,946 | ) | ||||
| Additional paid-in capital | 668,003 | 650,974 | ||||||
| Retained earnings | 1,171,198 | 1,094,108 | ||||||
| Accumulated other comprehensive loss | (151,626 | ) | (178,583 | ) | ||||
| Total IPG Photonics Corporation stockholders' equity | 1,666,095 | 1,557,558 | ||||||
| NONCONTROLLING INTERESTS | 177 | 166 | ||||||
| Total equity | $ | 1,666,272 | $ | 1,557,724 | ||||
| TOTAL | $ | 1,902,573 | $ | 1,789,999 | ||||
| IPG PHOTONICS CORPORATION | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| (In thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 74,932 | $ | 49,328 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 14,504 | 11,394 | ||||||
| Provisions for inventory, warranty & bad debt | 9,002 | 8,927 | ||||||
| Other | 13,863 | 7,195 | ||||||
| Changes in assets and liabilities that used cash: | ||||||||
| Accounts receivable/payable | (24,361 | ) | 1,391 | |||||
| Inventories | (22,408 | ) | (19,365 | ) | ||||
| Other | (14,712 | ) | 6,027 | |||||
| Net cash provided by operating activities | 50,820 | 64,897 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property, plant and equipment | (21,875 | ) | (24,960 | ) | ||||
| Proceeds from sales of property, plant and equipment | 99 | 129 | ||||||
| Purchases of short-term investments | (28,173 | ) | (29,899 | ) | ||||
| Proceeds from short-term investments | 70,370 | 10,000 | ||||||
| Other | (47 | ) | 46 | |||||
| Net cash provided by (used in) investing activities | 20,374 |
(44,684 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Line-of-credit facilities | — | (9 | ) | |||||
| Principal payments on long-term borrowings | (797 | ) | (500 | ) | ||||
| Exercise of employee stock options and shares withheld to cover employee restricted stock taxes | 9,600 | 2,644 | ||||||
| Purchase of Treasury Stock, at cost | (12,539 | ) | — | |||||
| Net cash (used in) provided by financing activities | (3,736 | ) | 2,135 | |||||
| EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 6,465 | 8,812 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 73,923 | 31,160 | ||||||
| CASH AND CASH EQUIVALENTS — Beginning of period | 623,855 | 582,532 | ||||||
| CASH AND CASH EQUIVALENTS — End of period | $ | 697,778 | $ | 613,692 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | 447 | $ | 171 | ||||
| Cash paid for income taxes | $ | 31,371 | $ | 11,955 | ||||
Contact James Hillier Vice President of Investor Relations IPG Photonics Corporation 508-373-1467 jhillier@ipgphotonics.com
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