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| 8-K - 8-K - IPG PHOTONICS CORP | ipgp-20180331x8kpressrelea.htm |
Exhibit 99.1
IPG PHOTONICS ANNOUNCES RECORD FIRST QUARTER 2018 FINANCIAL RESULTS
Revenue and Earnings per Diluted Share Increase 26% and 40%, Respectively
OXFORD, Mass. – May 1, 2018 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter ended March 31, 2018.
Three Months Ended March 31, | |||||||||||
(In millions, except per share data) | 2018 | 2017 | % Change | ||||||||
Revenue | $ | 359.9 | $ | 285.8 | 26 | % | |||||
Gross margin | 56.5 | % | 55.0 | % | |||||||
Operating income | $ | 141.1 | $ | 101.5 | 39 | % | |||||
Operating margin | 39.2 | % | 35.5 | % | |||||||
Net income attributable to IPG Photonics Corporation | $ | 106.3 | $ | 74.9 | 42 | % | |||||
Earnings per diluted share | $ | 1.93 | $ | 1.38 | 40 | % | |||||
Management Comments
"The momentum that carried IPG through an outstanding year in 2017 continued in the first quarter of 2018. We delivered record first quarter revenue and net income, driven by the rapid adoption of IPG's high power products within our largest market segments and geographies," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer.
First quarter revenue of $359.9 million increased 26% year over year. Materials processing sales increased 28% year over year and accounted for approximately 94% of total sales driven by strength in cutting and 3D printing applications. Sales to other markets decreased 5% year over year. High power CW laser sales increased 37% year over year, representing 64% of total revenue, with even stronger growth in sales of ultra-high power CW lasers with power levels of six kilowatts and above. By region, sales increased 29% in China and Europe, 39% in Japan, and 3% in the United States, on a year over year basis.
Earnings per diluted share ("EPS") of $1.93 increased 40% year over year. Foreign exchange gains benefited EPS by $0.07. The effective tax rate in the quarter was 25%. IPG's tax rate benefited from the lower U.S. Federal tax rate of 21%, while certain discrete items, including excess tax benefits related to equity compensation, were offset by additional taxes accrued for Global Intangible Low Taxed Income ("GILTI") net of Foreign Derived Intangible Income ("FDII") deduction benefits.
During the first quarter, IPG generated $99.7 million in cash from operations and used $39.1 million to finance capital expenditures. IPG ended the quarter with $1.18 billion in cash and cash equivalents and short-term investments, representing an increase of $59.8 million from December 31, 2017.
Business Outlook and Financial Guidance
"During the first quarter of 2018 we achieved the highest level of quarterly bookings in the Company's history. As a result, our first quarter book-to-bill ratio was above 1, positioning us to deliver strong results in the second quarter as well," said Dr. Gapontsev.
For the second quarter of 2018, IPG expects revenue of $400 million to $430 million, representing growth of 8% to 15% year over year. The Company expects the second quarter tax rate to be approximately 26% excluding effects relating to equity grants, and anticipates delivering earnings per diluted share in the range of $2.05 to $2.35, representing growth in the range of 7% to 23% year over year, with 53.7 million basic common shares outstanding and 55.2 million diluted common shares outstanding. At this time, IPG is not updating its 2018 annual guidance.
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 0.81, Russian Ruble 57, Japanese Yen 106 and Chinese Yuan 6.29, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the First Quarter 2018 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 1, 2018 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, delivering strong results in the second quarter, and revenue and earnings guidance for the second quarter. 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 28, 2018) 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, | ||||||||
2018 | 2017 | |||||||
(in thousands, except per share data) | ||||||||
NET SALES | $ | 359,864 | $ | 285,846 | ||||
COST OF SALES | 156,502 | 128,579 | ||||||
GROSS PROFIT | 203,362 | 157,267 | ||||||
OPERATING EXPENSES: | ||||||||
Sales and marketing | 13,516 | 10,827 | ||||||
Research and development | 28,546 | 22,780 | ||||||
General and administrative | 25,495 | 17,726 | ||||||
(Gain) loss on foreign exchange | (5,295 | ) | 4,453 | |||||
Total operating expenses | 62,262 | 55,786 | ||||||
OPERATING INCOME | 141,100 | 101,481 | ||||||
OTHER INCOME (EXPENSE), Net: | ||||||||
Interest income, net | 311 | 308 | ||||||
Other income (expense), net | 443 | (529 | ) | |||||
Total other income (expense) | 754 | (221 | ) | |||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 141,854 | 101,260 | ||||||
PROVISION FOR INCOME TAXES | (35,520 | ) | (26,328 | ) | ||||
NET INCOME | 106,334 | 74,932 | ||||||
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | (13 | ) | |||||
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION | $ | 106,334 | $ | 74,945 | ||||
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: | ||||||||
Basic | $ | 1.98 | $ | 1.40 | ||||
Diluted | $ | 1.93 | $ | 1.38 | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
Basic | 53,694 | 53,368 | ||||||
Diluted | 55,182 | 54,370 | ||||||
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) | 2018 | 2017 | ||||||
Cost of sales | $ | 1,568 | $ | 1,391 | ||||
Sales and marketing | 556 | 452 | ||||||
Research and development | 1,416 | 1,205 | ||||||
General and administrative | 2,875 | 2,303 | ||||||
Total stock-based compensation | 6,415 | 5,351 | ||||||
Tax benefit recognized | (1,431 | ) | (1,720 | ) | ||||
Net stock-based compensation | $ | 4,984 | $ | 3,631 | ||||
(In thousands, except share and per share data) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Excess tax benefit on exercise of stock options included in net income | $ | 3,159 | $ | 4,130 | ||||
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS AND OTHER CHARGES
Three Months Ended March 31, | ||||||||
(In thousands) | 2018 | 2017 | ||||||
Step-up of inventory (1) | ||||||||
Cost of sales | $ | 282 | $ | — | ||||
Amortization of intangible assets | ||||||||
Cost of sales | $ | 1,169 | $ | 745 | ||||
Sales and marketing | 602 | 160 | ||||||
Research and development | 160 | 160 | ||||||
Impairment charge related to long-lived asset | ||||||||
General and administrative | — | 162 | ||||||
Total acquisition related costs and other charges | $ | 2,213 | $ | 1,227 | ||||
(1) 2018 amount relates to ILT step-up adjustments on inventory sold during the period.
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
(In thousands, except share and per share data) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 969,123 | $ | 909,900 | ||||
Short-term investments | 206,786 | 206,257 | ||||||
Accounts receivable, net | 235,477 | 237,278 | ||||||
Inventories | 356,375 | 307,712 | ||||||
Prepaid income taxes | 42,430 | 44,944 | ||||||
Prepaid expenses and other current assets | 54,695 | 47,919 | ||||||
Total current assets | 1,864,886 | 1,754,010 | ||||||
DEFERRED INCOME TAXES, NET | 24,940 | 26,976 | ||||||
GOODWILL | 55,705 | 55,831 | ||||||
INTANGIBLE ASSETS, NET | 49,284 | 51,223 | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 479,058 | 460,206 | ||||||
OTHER ASSETS | 24,134 | 19,009 | ||||||
TOTAL | $ | 2,498,007 | $ | 2,367,255 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current portion of long-term debt | $ | 3,604 | $ | 3,604 | ||||
Accounts payable | 33,369 | 35,109 | ||||||
Accrued expenses and other liabilities | 135,750 | 144,417 | ||||||
Income taxes payable | 22,820 | 15,773 | ||||||
Total current liabilities | 195,543 | 198,903 | ||||||
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES | 112,612 | 100,652 | ||||||
LONG-TERM DEBT, NET OF CURRENT PORTION | 44,483 | 45,378 | ||||||
Total liabilities | 352,638 | 344,933 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY: | ||||||||
Common stock, $0.0001 par value, 175,000,000 shares authorized; 54,204,016 and 53,742,849 shares issued and outstanding, respectively, at March 31, 2018; 54,007,708 and 53,629,439 shares issued and outstanding, respectively, at December 31, 2017 | 5 | 5 | ||||||
Treasury stock, at cost (461,167 and 378,269 shares held) | (69,004 | ) | (48,933 | ) | ||||
Additional paid-in capital | 714,255 | 704,727 | ||||||
Retained earnings | 1,550,807 | 1,443,867 | ||||||
Accumulated other comprehensive loss | (50,694 | ) | (77,344 | ) | ||||
Total IPG Photonics Corporation stockholders' equity | 2,145,369 | 2,022,322 | ||||||
TOTAL | $ | 2,498,007 | $ | 2,367,255 | ||||
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 106,334 | $ | 74,932 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 19,223 | 14,504 | ||||||
Provisions for inventory, warranty & bad debt | 9,318 | 9,002 | ||||||
Other | 11,829 | 13,863 | ||||||
Changes in assets and liabilities that used cash: | ||||||||
Accounts receivable/payable | 9,076 | (24,361 | ) | |||||
Inventories | (49,744 | ) | (22,408 | ) | ||||
Other | (6,383 | ) | (14,712 | ) | ||||
Net cash provided by operating activities | 99,653 | 50,820 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (39,113 | ) | (21,875 | ) | ||||
Proceeds from sales of property, plant and equipment | 210 | 99 | ||||||
Purchases of short-term investments | (70,777 | ) | (28,173 | ) | ||||
Proceeds from sales of short-term investments | 70,161 | 70,370 | ||||||
Other | 76 | (47 | ) | |||||
Net cash (used in) provided by investing activities | (39,443 | ) | 20,374 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments on long-term borrowings | (895 | ) | (797 | ) | ||||
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 | 3,113 | 9,600 | ||||||
Purchase of Treasury Stock, at cost | (20,071 | ) | (12,539 | ) | ||||
Net cash used in financing activities | (17,853 | ) | (3,736 | ) | ||||
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 16,866 | 6,465 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 59,223 | 73,923 | ||||||
CASH AND CASH EQUIVALENTS — Beginning of period | 909,900 | 623,855 | ||||||
CASH AND CASH EQUIVALENTS — End of period | $ | 969,123 | $ | 697,778 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 799 | $ | 447 | ||||
Cash paid for income taxes | $ | 19,546 | $ | 31,371 | ||||