EX-99.1 2 exhibit991-20160930.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
 
 
 
 
 
 
 
 
CONTACT:
  
Tim Mammen
  
 
  
David Calusdian
 
  
Chief Financial Officer
  
 
  
President
 
  
IPG Photonics Corporation
  
 
  
Sharon Merrill Associates
 
  
(508) 373-1100
  
 
  
(617) 542-5300
IPG PHOTONICS REPORTS 9% REVENUE GROWTH FOR THIRD QUARTER 2016
Record Quarterly Revenues of $266.0 Million Driven by Strength in Materials Processing Sales
Growth in Core Applications From Strong Asian Sales and Solid Sales in Europe
OXFORD, Mass. – October 27, 2016 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2016.
 
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
(In millions, except per share data)
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
 
$
266.0

 
$
243.5

 
9
%
 
$
726.1

 
$
677.6

 
7
%
Gross margin
 
54.4
%
 
54.7
%
 
 
 
54.7
%
 
54.6
%
 
 
Operating income
 
$
94.1

 
$
89.6

 
5
%
 
$
259.1

 
$
259.0

 
—
%
Operating margin
 
35.4
%
 
36.8
%
 
 
 
35.7
%
 
38.2
%
 
 
Net income attributable to IPG Photonics Corporation
 
$
69.2

 
$
62.8

 
10
%
 
$
185.6

 
$
181.5

 
2
%
Earnings per diluted share
 
$
1.29

 
$
1.18

 
9
%
 
$
3.45

 
$
3.40

 
1
%
Management Comments
"IPG achieved another quarter of record sales for the third quarter of 2016," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Sales of $266 million were above the high end of our guidance range, reflecting a rebound in our core materials processing applications driven by increased demand in Asia, North America and certain parts of Europe. In addition to our record sales, we are also encouraged by robust bookings that remained strong throughout the quarter and were not impacted by the typical seasonality. As a result, our book-to-bill was above one for the third quarter."
Materials processing sales increased 10% year-over-year, primarily driven by demand for IPG's core cutting and welding applications, as well as strength in marking and engraving, laser sintering, hole drilling and cladding applications. High-power fiber laser sales had a record quarter with 17% growth year-over-year, while sales of medium-power, pulsed, QCW and laser systems decreased by single digits compared with the prior year. Sales to other markets were flat from the same quarter last year. Strong growth in telecom sales was offset by lower sales for medical and advanced applications. On a geographic basis, IPG reported strong growth in China, Japan and Korea despite foreign exchange headwinds, while sales in Europe and North America were up slightly from the third quarter of last year.
During the third quarter, IPG generated $87.7 million in cash from operations and used $30.8 million to finance capital expenditures. IPG ended the quarter with $772.5 million in cash and cash equivalents and short-term investments, representing an increase of $83.4 million from December 31, 2015.
Business Outlook and Financial Guidance
"We are seeing strong momentum in our business as we enter the final quarter of our fiscal year. We have significant opportunities to expand our business through both existing and new OEMs and end-users as we develop innovative products to address applications beyond our core markets. While the fourth quarter can be seasonally weaker, we believe we are well positioned for continued strong year-over-year sales and earnings growth and are confident in our short- and long-term opportunities," concluded Dr. Gapontsev.
IPG Photonics expects revenue in the range of $255 million to $270 million for the fourth quarter of 2016. The Company anticipates earnings per diluted share in the range of $1.17 to $1.32 based on 53,761,000 diluted common shares, which includes 53,071,000 basic common shares outstanding and 690,000 potentially dilutive options at September 30, 2016. 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 0.89, Russian Ruble 63, Japanese Yen 101 and Chinese Yuan 6.68, respectively.
Conference Call Reminder
The Company will hold a conference call today, October 27, 2016 at 10:00 a.m. ET. The conference call will be webcast live and can be accessed on the "Investors" section of the Company's website at www.ipgphotonics.com. The conference call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. An archived version of the webcast will be available for approximately one year on IPG's website.
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, strong momentum in IPG's business, significant opportunities to expand its business, development of innovative products to address applications beyond its core markets, continued strong year-over-year sales and earnings growth, and guidance for the fourth quarter of 2016. 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; 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 26, 2016) 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 September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(in thousands, except per share data)
NET SALES
 
$
266,017

 
$
243,541

 
$
726,052

 
$
677,639

COST OF SALES
 
121,226

 
110,237

 
329,147

 
307,805

GROSS PROFIT
 
144,791

 
133,304

 
396,905

 
369,834

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Sales and marketing
 
10,460

 
7,717

 
28,183

 
23,228

Research and development
 
20,543

 
16,221

 
56,444

 
45,565

General and administrative
 
16,797

 
14,679

 
46,849

 
42,474

Loss (gain) on foreign exchange
 
2,905

 
5,125

 
6,316

 
(460
)
Total operating expenses
 
50,705

 
43,742

 
137,792

 
110,807

OPERATING INCOME
 
94,086

 
89,562

 
259,113

 
259,027

OTHER INCOME (EXPENSE), Net:
 
 
 
 
 
 
 
 
Interest income (expense), net
 
373

 
(40
)
 
835

 
(335
)
Other income, net
 
194

 
132

 
342

 
378

Total other income (expense)
 
567

 
92

 
1,177

 
43

INCOME BEFORE PROVISION FOR INCOME TAXES
 
94,653

 
89,654

 
260,290

 
259,070

PROVISION FOR INCOME TAXES
 
(25,426
)
 
(26,897
)
 
(74,703
)
 
(77,721
)
NET INCOME
 
69,227

 
62,757

 
185,587

 
181,349

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
(8
)
 
(34
)
 
(33
)
 
(101
)
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION
 
$
69,235

 
$
62,791

 
$
185,620

 
$
181,450

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
 
 
 
 
 
 
 
 
Basic
 
$
1.30

 
$
1.19

 
$
3.50

 
$
3.45

Diluted
 
$
1.29

 
$
1.18

 
$
3.45

 
$
3.40

WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
Basic
 
53,071

 
52,675

 
53,039

 
52,628

Diluted
 
53,761

 
53,392

 
53,752

 
53,390







IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
 
2016
 
2015
 
2016
 
2015
Cost of sales
 
$
1,615

 
$
1,359

 
$
4,579

 
$
2,515

Sales and marketing
 
385

 
509

 
1,297

 
944

Research and development
 
1,268

 
993

 
3,581

 
1,863

General and administrative
 
2,395

 
1,874

 
6,642

 
3,540

Total stock-based compensation
 
5,663

 
4,735

 
16,099

 
8,862

Tax benefit recognized
 
(1,817
)
 
(1,565
)
 
(5,166
)
 
(2,908
)
Net stock-based compensation
 
$
3,846

 
$
3,170

 
$
10,933

 
$
5,954






IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
 
2016
 
2015
 
2016
 
2015
Cost of sales
 
 
 
 
 
 
 
 
Step-up of inventory (1)
 
$
1,012

 
$
—

 
$
1,385

 
$
—

Amortization of intangible assets (2)
 
931

 
387

 
1,978

 
1,033

Total acquisition related costs
 
$
1,943

 
$
387

 
$
3,363

 
$
1,033

 
(1) Amount relates to Menara step-up adjustment on inventory sold during the period
(2) Amount relates to intangible amortization expense during periods presented including amortization of acquired patents
    





IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
 
 
 
September 30,
 
December 31,
 
 
2016
 
2015
 
 
(In thousands, except share and per
share data)
ASSETS
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
645,558

 
$
582,532

Short-term investments
 
126,970

 
106,584

Accounts receivable, net
 
162,725

 
150,479

Inventories
 
242,370

 
203,738

Prepaid income taxes
 
35,342

 
33,692

Prepaid expenses and other current assets
 
38,913

 
25,564

Deferred income taxes, net
 
24,620

 
20,346

Total current assets
 
1,276,498

 
1,122,935

DEFERRED INCOME TAXES, NET
 
15,371

 
9,386

GOODWILL
 
20,142

 
505

INTANGIBLE ASSETS, NET
 
28,372

 
11,904

PROPERTY, PLANT AND EQUIPMENT, NET
 
367,474

 
288,604

OTHER ASSETS
 
19,441

 
20,095

TOTAL
 
$
1,727,298

 
$
1,453,429

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
 
 
 
 
Current portion of long-term debt
 
$
3,188

 
$
2,000

Accounts payable
 
17,899

 
26,314

Accrued expenses and other liabilities
 
96,376

 
75,667

Deferred income taxes, net
 
4,047

 
3,190

Income taxes payable
 
34,117

 
37,809

Total current liabilities
 
155,627

 
144,980

DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES
 
30,223

 
30,117

LONG-TERM DEBT, NET OF CURRENT PORTION
 
38,432

 
17,667

Total liabilities
 
224,282

 
192,764

COMMITMENTS AND CONTINGENCIES
 
 
 
 
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
 
 
 
 
Common stock, $0.0001 par value, 175,000,000 shares authorized; 53,171,115 and 53,129,315 shares issued and outstanding, respectively, at September 30, 2016; 52,883,902 shares issued and outstanding at December 31, 2015
 
5

 
5

Treasury stock, at cost (41,800 and 0 shares held)
 
(3,483
)
 
—

Additional paid-in capital
 
635,778

 
607,649

Retained earnings
 
1,018,976

 
833,356

Accumulated other comprehensive loss
 
(148,430
)
 
(181,482
)
Total IPG Photonics Corporation stockholders' equity
 
1,502,846

 
1,259,528

NONCONTROLLING INTERESTS
 
170

 
1,137

Total equity
 
$
1,503,016

 
$
1,260,665

TOTAL
 
$
1,727,298

 
$
1,453,429






IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
185,587

 
$
181,349

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
37,646

 
31,079

Provisions for inventory, warranty & bad debt
 
33,506

 
29,414

Other
 
10,282

 
3,029

Changes in assets and liabilities that used cash:
 
 
 
 
Accounts receivable/payable
 
(20,669
)
 
(15,485
)
Inventories
 
(42,814
)
 
(52,172
)
Other
 
(10,537
)
 
17,397

Net cash provided by operating activities
 
193,001

 
194,611

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of property, plant and equipment
 
(101,668
)
 
(50,759
)
Proceeds from sales of property, plant and equipment
 
1,841

 
231

Purchases of short-term investments
 
(179,374
)
 
—

Proceeds from short-term investments
 
158,808

 
—

Acquisition of businesses, net of cash acquired
 
(46,527
)
 
(4,958
)
Other
 
16

 
63

Net cash used in investing activities
 
(166,904
)
 
(55,423
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Line-of-credit facilities
 
—

 
(2,274
)
Proceeds on long-term borrowings
 
23,750

 
—

Principal payments on long-term borrowings
 
(1,797
)
 
(12,833
)
Purchase of noncontrolling interests
 
(950
)
 
—

Exercise of employee stock options and issuances under employee stock purchase plan
 
9,186

 
10,489

Tax benefits from exercise of employee stock options
 
2,844

 
5,822

Purchase of Treasury Stock, at cost

 
(3,483
)
 
—

Net cash provided by financing activities
 
29,550

 
1,204

EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
 
7,379

 
(11,322
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
 
63,026

 
129,070

CASH AND CASH EQUIVALENTS — Beginning of period
 
582,532

 
522,150

CASH AND CASH EQUIVALENTS — End of period
 
$
645,558

 
$
651,220

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid for interest
 
$
623

 
$
688

Cash paid for income taxes
 
$
92,539

 
$
65,376