Attached files
| file | filename |
|---|---|
| 8-K - 8-K - IPG PHOTONICS CORP | ipgp-20170630x8kpressrelea.htm |
| EX-10.3 - EXHIBIT 10.3 - IPG PHOTONICS CORP | exhibit103guaranteeofthere.htm |
| EX-10.2 - EXHIBIT 10.2 - IPG PHOTONICS CORP | exhbit102annex1tocorporate.htm |
| EX-10.1 - EXHIBIT 10.1 - IPG PHOTONICS CORP | exhibit101creditfacilityag.htm |
Exhibit 99.1
IPG PHOTONICS ANNOUNCES SECOND QUARTER 2017 FINANCIAL RESULTS
Revenue and Earnings per Diluted Share at Record Levels, Increasing 46% and 53%, Respectively
OXFORD, Mass. – August 1, 2017 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the second quarter ended June 30, 2017.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
(In millions, except per share data) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||||
Revenue | $ | 369.4 | $ | 252.8 | 46 | % | $ | 655.2 | $ | 460.0 | 42 | % | ||||||||||
Gross margin | 55.9 | % | 54.5 | % | 55.5 | % | 54.8 | % | ||||||||||||||
Operating income | $ | 141.1 | $ | 95.0 | 49 | % | $ | 242.6 | $ | 165.0 | 47 | % | ||||||||||
Operating margin | 38.2 | % | 37.6 | % | 37.0 | % | 35.9 | % | ||||||||||||||
Net income attributable to IPG Photonics Corporation | $ | 104.1 | $ | 67.1 | 55 | % | $ | 179.1 | $ | 116.4 | 54 | % | ||||||||||
Earnings per diluted share | $ | 1.91 | $ | 1.25 | 53 | % | $ | 3.29 | $ | 2.17 | 52 | % | ||||||||||
Management Comments
"IPG delivered record quarterly results, driven by rapid growth in our core products, applications, and geographies," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "As the market leader in fiber lasers, we are benefiting from accelerating adoption of fiber lasers over conventional lasers and non-laser cutting and welding equipment. Second quarter revenue and net income were both at record levels, highlighting the strength of our business model."
Second quarter revenue of $369.4 million increased 46% year over year, and earnings per diluted share ("EPS") of $1.91 increased 53% year over year. Materials processing sales increased 48% year-over-year in the second quarter and accounted for approximately 96% of total sales driven by strength in cutting and welding applications. Sales to other markets were up 19% year-over-year driven by strong sales in telecom. High-power laser sales increased 57% year over year from rapid growth in cutting and welding applications while sales of QCW lasers increased 82% year over year driven by growth in consumer electronics production and percussion hole drilling. While all main geographies other than Japan experienced increases, sales growth in China was particularly strong, almost doubling, and represented half of total revenue in the second quarter.
During the second quarter, IPG generated $82.3 million in cash from operations and used $21.8 million to finance capital expenditures. IPG ended the quarter with $930.4 million in cash and cash equivalents and short-term investments, representing an increase of $99.8 million from December 31, 2016.
Business Outlook and Financial Guidance
"Demand for our core products, particularly high-power, kilowatt-scale fiber lasers, has never been stronger. Our leadership position within this fast-growing market drove record order activity in the quarter, resulting in a book-to-bill ratio above one. Based on these trends and the strength of our current backlog, we believe we are in excellent position to deliver another strong quarter in three months," said Dr. Gapontsev.
IPG Photonics expects revenue in the range of $350 million to $375 million for the third quarter of 2017. The Company anticipates earnings per diluted share in the range of $1.70 to $1.90 based on 54,471,000 diluted common shares, which includes 53,380,000 basic common shares outstanding and 1,091,000 potentially dilutive options at June 30, 2017.
Dr. Gapontsev added, "Year-to-date bookings have exceeded our expectations, pointing to strong revenue growth in 2017. Based on first half outperformance and current backlog, we are now targeting approximately 32% to 34% revenue growth for the full year. Our fourth quarter performance will be driven by order activity through the end of the third quarter and during the fourth quarter, for which our visibility is low. Given the magnitude of outperformance during the first half of the year, we believe it is prudent to assume a lower growth rate in the fourth quarter due to more challenging comparisons and an expected slowdown in spending related to typical seasonality in China and the consumer electronics investment cycle. Should this
anticipated spending slowdown fail to materialize at a level consistent with historic trends, this could result in upside to our full year guidance range."
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 0.88, Russian Ruble 59, Japanese Yen 112 and Chinese Yuan 6.77, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the Second 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, August 1, 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.
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 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 third quarter, guidance for the third quarter of 2017, full-year revenue growth outlook, growth rates in fourth quarter and spending slowdown in China. 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 June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
NET SALES | $ | 369,373 | $ | 252,787 | $ | 655,219 | $ | 460,035 | ||||||||
COST OF SALES | 163,077 | 115,084 | 291,656 | 207,921 | ||||||||||||
GROSS PROFIT | 206,296 | 137,703 | 363,563 | 252,114 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Sales and marketing | 12,136 | 9,689 | 22,963 | 17,723 | ||||||||||||
Research and development | 25,960 | 18,412 | 48,740 | 35,901 | ||||||||||||
General and administrative | 19,875 | 16,151 | 37,601 | 30,052 | ||||||||||||
Loss (gain) on foreign exchange | 7,183 | (1,556 | ) | 11,636 | 3,411 | |||||||||||
Total operating expenses | 65,154 | 42,696 | 120,940 | 87,087 | ||||||||||||
OPERATING INCOME | 141,142 | 95,007 | 242,623 | 165,027 | ||||||||||||
OTHER INCOME (EXPENSE), Net: | ||||||||||||||||
Interest income, net | 468 | 270 | 776 | 462 | ||||||||||||
Other income (expense), net | 23 | 141 | (506 | ) | 148 | |||||||||||
Total other income (expense) | 491 | 411 | 270 | 610 | ||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 141,633 | 95,418 | 242,893 | 165,637 | ||||||||||||
PROVISION FOR INCOME TAXES | (37,530 | ) | (28,387 | ) | (63,858 | ) | (49,277 | ) | ||||||||
NET INCOME | 104,103 | 67,031 | 179,035 | 116,360 | ||||||||||||
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (13 | ) | (27 | ) | (26 | ) | (25 | ) | ||||||||
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION | $ | 104,116 | $ | 67,058 | $ | 179,061 | $ | 116,385 | ||||||||
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: | ||||||||||||||||
Basic | $ | 1.95 | $ | 1.26 | $ | 3.35 | $ | 2.20 | ||||||||
Diluted | $ | 1.91 | $ | 1.25 | $ | 3.29 | $ | 2.17 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||||||||
Basic | 53,380 | 53,065 | 53,403 | 52,981 | ||||||||||||
Diluted | 54,471 | 53,788 | 54,450 | 53,705 | ||||||||||||
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION AND ACCOUNTING STANDARD IMPACTS TO NET INCOME AND EARNINGS PER SHARE
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Cost of sales | $ | 1,462 | $ | 1,545 | $ | 2,853 | $ | 2,964 | ||||||||
Sales and marketing | 516 | 497 | 968 | 912 | ||||||||||||
Research and development | 1,232 | 1,220 | 2,437 | 2,313 | ||||||||||||
General and administrative | 2,498 | 2,215 | 4,801 | 4,247 | ||||||||||||
Total stock-based compensation | 5,708 | 5,477 | 11,059 | 10,436 | ||||||||||||
Tax benefit recognized | (1,853 | ) | (1,765 | ) | (3,573 | ) | (3,349 | ) | ||||||||
Net stock-based compensation | $ | 3,855 | $ | 3,712 | $ | 7,486 | $ | 7,087 | ||||||||
(In thousands, except share and per share data) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Excess tax benefit on exercise of stock options included in net income | $ | 3,394 | $ | — | $ | 7,524 | $ | — | ||||||||
Increase in weighted-average diluted shares outstanding | 238,917 | — | 210,776 | — | ||||||||||||
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS AND OTHER CHARGES
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Step-up of inventory (1) | ||||||||||||||||
Cost of sales | $ | 10 | $ | 374 | $ | 10 | $ | 374 | ||||||||
Amortization of intangible assets | ||||||||||||||||
Cost of sales | $ | 592 | $ | 579 | $1,337 | $924 | ||||||||||
Sales and marketing | 416 | 162 | 576 | 200 | ||||||||||||
Research and development | 160 | 160 | 320 | 320 | ||||||||||||
Impairment charge related to long-lived asset | ||||||||||||||||
General and administrative | — | — | 162 | — | ||||||||||||
Total acquisition related costs and other charges | $ | 1,178 | $ | 1,275 | $ | 2,405 | $ | 1,818 | ||||||||
(1) 2016 amount relates to Menara while 2017 relates to OptiGrate step-up adjustment on inventory sold during the period
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In thousands, except share and per share data) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 808,111 | $ | 623,855 | ||||
Short-term investments | 122,304 | 206,779 | ||||||
Accounts receivable, net | 237,332 | 155,901 | ||||||
Inventories | 260,661 | 239,010 | ||||||
Prepaid income taxes | 37,912 | 34,128 | ||||||
Prepaid expenses and other current assets | 44,454 | 41,289 | ||||||
Total current assets | 1,510,774 | 1,300,962 | ||||||
DEFERRED INCOME TAXES, NET | 47,843 | 42,442 | ||||||
GOODWILL | 28,728 | 19,828 | ||||||
INTANGIBLE ASSETS, NET | 32,294 | 28,789 | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 389,853 | 379,375 | ||||||
OTHER ASSETS | 21,050 | 18,603 | ||||||
TOTAL | $ | 2,030,542 | $ | 1,789,999 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current portion of long-term debt | $ | 1,188 | $ | 3,188 | ||||
Accounts payable | 28,996 | 28,048 | ||||||
Accrued expenses and other liabilities | 116,499 | 102,485 | ||||||
Income taxes payable | 10,102 | 24,554 | ||||||
Total current liabilities | 156,785 | 158,275 | ||||||
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES | 48,025 | 36,365 | ||||||
LONG-TERM DEBT, NET OF CURRENT PORTION | 21,375 | 37,635 | ||||||
Total liabilities | 226,185 | 232,275 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY: | ||||||||
Common stock, $0.0001 par value, 175,000,000 shares authorized; 53,793,622 and 53,492,316 shares issued and outstanding, respectively, at June 30, 2017; 53,354,579 and 53,251,805 shares issued and outstanding, respectively, at December 31, 2016 | 5 | 5 | ||||||
Treasury stock, at cost (301,306 and 102,774 shares held) | (33,058 | ) | (8,946 | ) | ||||
Additional paid-in capital | 681,263 | 650,974 | ||||||
Retained earnings | 1,275,314 | 1,094,108 | ||||||
Accumulated other comprehensive loss | (119,167 | ) | (178,583 | ) | ||||
Total IPG Photonics Corporation stockholders' equity | 1,804,357 | 1,557,558 | ||||||
NONCONTROLLING INTERESTS | — | 166 | ||||||
Total equity | $ | 1,804,357 | $ | 1,557,724 | ||||
TOTAL | $ | 2,030,542 | $ | 1,789,999 | ||||
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 179,035 | $ | 116,360 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 29,714 | 23,653 | ||||||
Provisions for inventory, warranty & bad debt | 22,754 | 20,459 | ||||||
Other | 21,818 | 3,702 | ||||||
Changes in assets and liabilities that used cash: | ||||||||
Accounts receivable/payable | (71,720 | ) | (5,556 | ) | ||||
Inventories | (25,820 | ) | (34,668 | ) | ||||
Other | (22,679 | ) | (15,646 | ) | ||||
Net cash provided by operating activities | 133,102 | 108,304 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (43,632 | ) | (70,863 | ) | ||||
Proceeds from sales of property, plant and equipment | 15,284 | 184 | ||||||
Purchases of short-term investments | (71,244 | ) | (62,211 | ) | ||||
Proceeds from short-term investments | 156,171 | 41,720 | ||||||
Acquisition of businesses, net of cash acquired | (11,307 | ) | (46,527 | ) | ||||
Other | (568 | ) | 72 | |||||
Net cash provided by (used in) investing activities | 44,704 | (137,625 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Purchase of noncontrolling interests | (197 | ) | (950 | ) | ||||
Proceeds on long-term borrowings | — | 23,750 | ||||||
Principal payments on long-term borrowings | (18,260 | ) | (1,000 | ) | ||||
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 | 17,152 | 8,579 | ||||||
Purchase of Treasury Stock, at cost | (24,112 | ) | — | |||||
Net cash (used in) provided by financing activities | (25,417 | ) | 30,379 | |||||
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 31,867 | 3,696 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 184,256 | 4,754 | ||||||
CASH AND CASH EQUIVALENTS — Beginning of period | 623,855 | 582,532 | ||||||
CASH AND CASH EQUIVALENTS — End of period | $ | 808,111 | $ | 587,286 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 975 | $ | 349 | ||||
Cash paid for income taxes | $ | 80,956 | $ | 66,478 | ||||