IPG Photonics : Reports Second Quarter 2021 Financial Results
August 03, 2021 at 08:02 am EDT
Share
OXFORD, Mass., Aug. 03, 2021 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the second quarter ended June 30, 2021.
Three Months Ended June 30,
Six Months Ended June 30,
(In millions, except per share data and percentages)
2021
2020
Change
2021
2020
Change
Revenue
$
371.7
$
296.4
25
%
$
717.2
$
545.7
31
%
Gross margin
48.6
%
46.0
%
48.0
%
43.9
%
Operating income
$
92.3
$
47.2
96
%
$
181.1
$
92.0
97
%
Operating margin
24.8
%
15.9
%
25.2
%
16.9
%
Net income attributable to IPG Photonics Corporation
$
69.8
$
38.2
83
%
$
137.9
$
74.6
85
%
Earnings per diluted share
$
1.29
$
0.71
82
%
$
2.55
$
1.39
83
%
Management Comments
"Increased economic activity across our core markets and focus on execution and growth opportunities by the team drove our performance in the second quarter," said Dr. Valentin Gapontsev, IPG Photonics' Executive Chair of the Board. "We were pleased with our revenue growth this quarter, driven by improved underlying demand in cutting applications in Europe and U.S. and robust growth in welding applications across most geographies, which was partially offset by moderated demand for cutting in China and an impact from supply chain constraints," said Dr. Eugene Scherbakov, IPG Photonics’ Chief Executive Officer. "Strong demand in emerging materials processing applications, such as solar cell manufacturing, cleaning and 3D printing, also contributed to our revenue growth in the quarter."
Financial Highlights
Second quarter revenue of $372 million increased 25% year over year. Materials processing sales accounted for 93% of total revenue in the quarter and increased 27% year over year due to higher sales in welding, cutting, solar cell manufacturing, cleaning and additive applications with a growing contribution from service and parts. Sales into other applications increased 5% year over year due to higher sales in medical and advanced applications.
Sales of high power continuous wave ("CW") lasers, representing 51% of total revenue, increased 20% year over year. Ultra-high power fiber lasers (6 kilowatts of power or greater) represented 51% of all high power CW laser sales in the quarter. Second quarter sales benefited from strong growth in adjustable mode beam (AMB) and pulsed lasers. Systems sales also generated significant growth in the quarter. By region, sales increased 10% in China, 50% in Europe, and 23% in North America on a year-over-year basis.
Earnings per diluted share ("EPS") of $1.29 increased 82% year over year. Foreign exchange losses decreased EPS by $0.04. The effective tax rate in the quarter was 24%. During the second quarter, IPG generated $116 million in cash from operations. Capital expenditures were $27 million and stock repurchases totaled $39 million.
Business Outlook and Financial Guidance
"Our outlook implies a 15% year-over-year revenue growth at the midpoint of our guidance despite a more difficult comparison to the third quarter 2020, when revenue started to recover from the pandemic. Book-to-bill was above one in the second quarter increasing our total backlog. However, deliveries for cutting applications in China are likely to be extended over the remainder of the year and there is continued uncertainty due to the ongoing impact of supply chain constraints on our customers and us. Despite this near-term uncertainty, strength in battery and other precision applications in China as well as robust revenue expected outside of China for the third quarter gives us confidence to guide to year-over-year growth. We remain excited about the future of our business with significant long-term growth opportunities from our leading market position in cutting, EV welding and new product introductions such as the LightWELD handheld laser," concluded Dr. Scherbakov.
For the third quarter of 2021, IPG expects revenue of $350 to $380 million. The Company expects the third quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $1.10 to $1.40, with 53.5 million basic common shares outstanding and 54.0 million diluted common shares outstanding.
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, government and Company measures implemented to address the COVID-19 pandemic, supply chain constraints, product demand, order cancellations and delays, competition, tariffs, trade policy changes 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 0.84, Russian Ruble 72, Japanese Yen 111 and Chinese Yuan 6.46, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited Second Quarter 2021 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 3, 2021 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
Eugene Fedotoff Director of Investor Relations IPG Photonics Corporation 508-597-4713 efedotoff@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 30 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, 15% implied year-over-year revenue growth, timing of deliveries in China, impact of supply chain constraints on our customers and us, strength in battery and other precision applications in China, robust revenue outside of China, year-over-year growth, significant long-term growth opportunities, leading position in cutting, EV welding and product introductions, impacts of COVID-19 on our business, the global economy and government policies, revenue, tax rate and earnings guidance for Q3 2021. 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 Annual Report on Form 10-K (filed with the SEC on February 22, 2021) and IPG's 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 June 30,
Six Months Ended June 30,
2021
2020
2021
2020
(In thousands, except per share data)
Net sales
$
371,658
$
296,411
$
717,243
$
545,653
Cost of sales
191,130
159,962
372,724
306,328
Gross profit
180,528
136,449
344,519
239,325
Operating expenses:
Sales and marketing
19,193
17,326
38,076
36,009
Research and development
35,191
31,584
68,530
63,422
General and administrative
31,066
26,399
61,158
53,523
Impairment of long-lived assets and other restructuring charges
—
1,165
—
1,165
Loss (gain) on foreign exchange
2,826
12,766
(4,339
)
(6,799
)
Total operating expenses
88,276
89,240
163,425
147,320
Operating income
92,252
47,209
181,094
92,005
Other (expense) income, net:
Interest (expense) income, net
(407
)
1,856
(902
)
4,929
Other income, net
28
449
281
640
Total other (expense) income
(379
)
2,305
(621
)
5,569
Income before provision of income taxes
91,873
49,514
180,473
97,574
Provision for income taxes
22,196
11,148
42,574
22,442
Net income
69,677
38,366
137,899
75,132
Less: net (loss) income attributable to non-controlling interests
(123
)
140
(28
)
503
Net income attributable to IPG Photonics Corporation common stockholders
$
69,800
$
38,226
$
137,927
$
74,629
Net income attributable to IPG Photonics Corporation per common share:
Deferred income taxes and other long-term liabilities
92,102
92,854
Long-term debt, net of current portion
32,225
34,157
Total liabilities
380,232
341,589
Commitments and contingencies
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,725,678 and 53,491,889 shares issued and outstanding, respectively, at June 30, 2021; 55,416,246 and 53,427,234 shares issued and outstanding, respectively, at December 31, 2020.
6
6
Treasury stock, at cost, 2,233,789 and 2,034,012 shares held at June 30, 2021 and December 31, 2020, respectively.
(345,345
)
(303,614
)
Additional paid-in capital
883,546
854,301
Retained earnings
2,326,118
2,188,191
Accumulated other comprehensive loss
(159,407
)
(146,065
)
Total IPG Photonics Corporation equity
2,704,918
2,592,819
Non-controlling interests
1,362
1,292
Total equity
2,706,280
2,594,111
Total liabilities and equity
$
3,086,512
$
2,935,700
IPG PHOTONICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
2021
2020
(In thousands)
Cash flows from operating activities:
Net income
$
137,899
$
75,132
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
47,976
47,350
Impairment of long-lived assets
—
671
Provisions for inventory, warranty and bad debt
32,654
24,484
Other
18,665
13,142
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable and accounts payable
37,404
46,256
Inventories
(61,220
)
(15,160
)
Other
(10,188
)
(61,619
)
Net cash provided by operating activities
203,190
130,256
Cash flows from investing activities:
Purchases of property, plant and equipment
(54,344
)
(37,370
)
Proceeds from sales of property, plant and equipment
258
460
Purchases of short-term investments
(1,014,033
)
(421,321
)
Proceeds from short-term investments
785,023
422,912
Other
(547
)
115
Net cash used in investing activities
(283,643
)
(35,204
)
Cash flows from financing activities:
Principal payments on long-term borrowings
(1,896
)
(1,862
)
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
10,567
8,271
Purchase of treasury stock, at cost
(41,731
)
(28,230
)
Payment of purchase price holdback from business combination
(2,624
)
(1,650
)
Net cash used in financing activities
(35,684
)
(23,471
)
Effect of changes in exchange rates on cash and cash equivalents and restricted cash
(8,217
)
(4,523
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(124,354
)
67,058
Cash, cash equivalents and restricted cash — Beginning of period
878,553
682,984
Cash and cash equivalents — End of period
$
754,199
$
750,042
Supplemental disclosures of cash flow information:
Cash paid for interest
$
1,388
$
1,061
Cash paid for income taxes
$
41,809
$
53,670
IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
(In thousands)
Amortization of intangible assets:
Cost of sales
$
1,200
$
1,172
$
2,441
$
2,394
Sales and marketing
1,879
1,777
3,895
3,555
Research and development
—
—
—
133
Total amortization of intangible assets
$
3,079
$
2,949
$
6,336
$
6,082
IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
(In thousands)
Cost of sales
$
2,843
$
2,507
$
5,469
$
5,039
Sales and marketing
1,247
1,188
2,407
2,149
Research and development
2,472
2,475
4,590
4,547
General and administrative
3,349
3,092
6,298
5,966
Total stock-based compensation
9,911
9,262
18,764
17,701
Tax effect of stock-based compensation
(2,114
)
(2,123
)
(3,992
)
(4,059
)
Net stock-based compensation
$
7,797
$
7,139
$
14,772
$
13,642
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
(In thousands)
Excess tax benefit on exercise of stock options included in net income
IPG Photonics Corporation develops, manufactures, and sells fiber lasers, fiber amplifiers and diode lasers that are used for diverse applications, primarily in materials processing. The Companyâs portfolio of laser solutions is used in materials processing, medical and advanced applications. It designs and manufactures components used in its finished products, from semiconductor diodes to optical fiber preforms, finished fiber lasers and amplifiers. It manufactures complementary products used with its lasers, including optical delivery cables, fiber couplers, beam switches, optical processing heads, in-line sensors and chillers. The Company offers laser-based and non-laser-based systems for certain markets and applications. It sells its products to original equipment manufacturers (OEMs), system integrators and end users. It markets its products internationally, through its direct sales force. Its manufacturing facilities are located in the United States, Germany, Russia and Belarus.
IPG PHOTONICS CORPORATION 
