GlobeNewswire Inc | Nov 2, 2021 08:00AM EDT

November 02, 2021

OXFORD, Mass., Nov. 02, 2021 (GLOBE NEWSWIRE) -- IPG Photonics Corporation(NASDAQ: IPGP) today reported financial results for the third quarter ended September30, 2021.

Three Months Ended Nine Months Ended September 30, September 30,(Inmillions,except per 2021 2020 Change 2021 2020 Changeshare dataandpercentages)Revenue $ 379.2 $ 318.4 19 % $ 1,096.4 $ 864.1 27 %Gross margin 49.0 % 48.0 % 48.4 % 45.4 % Operating $ 102.0 $ 41.4 146 % $ 283.1 $ 133.4 112 %incomeOperating 26.9 % 13.0 % 25.8 % 15.4 % marginNet incomeattributableto IPG $ 75.4 $ 35.6 112 % $ 213.3 $ 110.2 94 %PhotonicsCorporationEarnings perdiluted $ 1.40 $ 0.66 112 % $ 3.95 $ 2.05 93 %share

Management Comments

"We are very pleased with our results and execution this quarter as an increasing geographic and product diversification helped us deliver one of the highest quarterly revenues in the Company's history," said Dr. Eugene Scherbakov, IPG Photonics Chief Executive Officer. "Growth in demand in welding applications across most geographies and higher revenue in cutting in North America and Europe as well as emerging products and applications, such as foil cutting, cleaning, 3D printing, drilling, medical and solar cell applications drove strong revenue in the quarter, despite significantly softer demand in cutting applications in China."

Financial Highlights

Third quarter revenue of $379 million increased 19% year over year. Materials processing sales accounted for 91% of total revenue and increased 19% year over year driven by higher sales in welding, marking and additive manufacturing applications, while revenue in Other applications increased 17% year over year due to higher medical sales.

Increased sales in welding and strong growth in cutting in North America and Europe were offset by lower revenue in cutting applications in China, which resulted in a decrease of 4% year over year in sales of high power continuous wave (CW) lasers. Pulsed and medium power lasers revenue increased, driven by growth in emerging products and applications. Systems also generated solid growth in the quarter helped by a sharp increase in LightWELD sales. By region, sales increased 50% in Europe and 55% in North America, and decreased 7% in China, on a year-over-year basis.

Earnings per diluted share (EPS) of $1.40 increased 112% year over year. Foreign exchange gains increased EPS by $0.04. The effective tax rate in the quarter was 26%. During the third quarter, IPG generated $102 million in cash from operations. Capital expenditures were $40 million and stock repurchases totaled $36 million in the quarter.

Business Outlook and Financial Guidance

"Third quarter book-to-bill was slightly greater than one as we continued to see strong demand from emerging products and applications and benefit from macro trends such as investments into EV, clean energy and automation. We remain excited about growth prospects for IPG in EV applications, medical, handheld laser, ultrafast lasers, and many other opportunities, which we believe will drive our revenue growth in the future. However, ongoing weakness in cutting applications in China resulted in a more cautious near-term outlook," concluded Dr. Scherbakov.

For the fourth quarter of 2021, IPG expects revenue of $330 to $360 million. The Company expects the fourth quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $1.00 to $1.30.

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 0.86, Russian Ruble 73, Japanese Yen 112 and Chinese Yuan 6.49, respectively.

Appointment of John Peeler as Non-executive Chairman of the Board

Effective October 29, 2021, John Peeler, Lead Independent Director of the Company, assumed the role of non-executive Chairman of the Board of Directors (the Board). Mr. Peeler was appointed to the Board in 2012 and has served as Lead Independent Director since 2017. Mr. Peeler succeeds the late Dr. Valentin P. Gapontsev, founder of the Company, who had been appointed executive Chairman of the Board after the roles of Chairman and CEO were separated in May 2021.

Supplemental Financial Information

Additional supplemental information is provided in the unaudited Third Quarter 2021 Financial Data Workbook and Earnings Call Presentation 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, November2, 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 FedotoffDirector of Investor Relations IPG Photonics Corporation 508-597-4713efedotoff@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 Companys 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, strong demand from new applications and benefits from macro trends such as investments into EV, clean energy and automation, growth prospects for IPG in emerging products and opportunities such as EV applications, medical, handheld laser and ultrafast lasers, ongoing weakness in cutting applications in China, and revenue, tax rate and earnings guidance for the fourth quarter of 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 CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended Nine Months Ended September September 30, 30, 2021 2020 2021 2020 (Inthousands,exceptpersharedata)Net sales $ 379,150 $ 318,441 $ 1,096,393 $ 864,094 Cost of sales 193,276 165,649 566,000 471,977 Gross profit 185,874 152,792 530,393 392,117 Operating expenses: Sales and marketing 20,688 17,332 58,764 53,341 Research and 34,277 31,710 102,807 95,132 developmentGeneral and 32,557 29,038 93,715 82,561 administrativeGoodwill impairment ? 44,589 ? 44,589 Impairment oflong-lived assets and ? 12 ? 1,177 other restructuringchargesGain on foreign (3,634 ) (11,302 ) (7,973 ) (18,101 )exchangeTotal operating 83,888 111,379 247,313 258,699 expensesOperating income 101,986 41,413 283,080 133,418 Other (expense) income, net:Interest (expense) (288 ) 1,168 (1,190 ) 6,097 income, netOther (expense) (211 ) (59 ) 70 581 income, netTotal other (expense) (499 ) 1,109 (1,120 ) 6,678 incomeIncome beforeprovision of income 101,487 42,522 281,960 140,096 taxesProvision for income 26,788 6,992 69,362 29,434 taxesNet income 74,699 35,530 212,598 110,662 Less: net (loss)income attributable (703 ) (74 ) (731 ) 429 to non-controllinginterestsNet incomeattributable to IPG $ 75,402 $ 35,604 $ 213,329 $ 110,233 Photonics Corporationcommon stockholdersNet incomeattributable to IPG Photonics Corporationper common share:Basic $ 1.41 $ 0.67 $ 3.99 $ 2.07 Diluted $ 1.40 $ 0.66 $ 3.95 $ 2.05 Weighted averagecommon shares outstanding:Basic 53,387 53,098 53,501 53,136 Diluted 53,834 53,664 54,053 53,691

IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, December 31, 2021 2020 (Inthousands,exceptshareand per share data)ASSETSCurrent assets: Cash and cash equivalents $ 794,904 $ 876,231 Short-term investments 724,103 514,835 Accounts receivable, net 272,699 264,321 Inventories 435,070 364,993 Prepaid income taxes 34,482 69,893 Prepaid expenses and other current 63,917 57,804 assetsTotal current assets 2,325,175 2,148,077 Deferred income taxes, net 49,008 43,197 Goodwill 38,705 41,366 Intangible assets, net 55,786 62,114 Property, plant and equipment, net 624,576 597,527 Other assets 50,660 43,419 Total assets $ 3,143,910 $ 2,935,700 LIABILITIES AND EQUITYCurrent liabilities: Current portion of long-term debt $ 18,788 $ 3,810 Accounts payable 52,428 25,748 Accrued expenses and other current 208,915 176,740 liabilitiesIncome taxes payable 12,709 8,280 Total current liabilities 292,840 214,578 Deferred income taxes and other 94,897 92,854 long-term liabilitiesLong-term debt, net of current portion 16,328 34,157 Total liabilities 404,065 341,589 Commitments and contingencies IPG Photonics Corporation equity: Common stock, $0.0001 par value,175,000,000 shares authorized;55,738,779 and 53,305,485 sharesissued and outstanding, respectively, 6 6 at September 30, 2021; 55,416,246 and53,427,234 shares issued andoutstanding, respectively, at December31, 2020.Treasury stock, at cost, 2,433,294 and2,034,012 shares held at September 30, (381,685 ) (303,614 )2021 and December 31, 2020,respectively.Additional paid-in capital 894,264 854,301 Retained earnings 2,401,520 2,188,191 Accumulated other comprehensive loss (174,753 ) (146,065 )Total IPG Photonics Corporation equity 2,739,352 2,592,819 Non-controlling interests 493 1,292 Total equity 2,739,845 2,594,111 Total liabilities and equity $ 3,143,910 $ 2,935,700

IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2021 2020 (In thousands)Cash flows from operating activities: Net income $ 212,598 $ 110,662 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 72,127 71,188 Goodwill impairment ? 44,589 Impairment of long-lived assets ? 671 Provisions for inventory, warrantyand bad debt 50,364 42,559 Other 25,294 1,336 Changes in assets and liabilities that provided (used) cash, net of acquisitions:Accounts receivable and accounts payable 14,015 11,127 Inventories (105,384 ) (34,213 )Other 36,142 (47,902 )Net cash provided by operating activities 305,156 200,017 Cash flows from investing activities: Purchases of property, plant and equipment (93,857 ) (61,871 )Proceeds from sales of property, plant and 859 689 equipmentPurchases of short-term investments (1,437,193 ) (732,729 )Proceeds from short-term investments 1,226,445 697,816 Other (1,078 ) 17 Net cash used in investing activities (304,824 ) (96,078 )Cash flows from financing activities: Principal payments on long-term borrowings (2,851 ) (2,798 )Proceeds from issuance of common stock underemployee stock option and purchase plans less 11,427 16,767 payments for taxes related to net share settlementof equity awardsPurchase of treasury stock, at cost (78,071 ) (37,884 )Payment of purchase price holdback from business (2,624 ) (1,650 )combinationNet cash used in financing activities (72,119 ) (25,565 )Effect of changes in exchange rates on cash and (11,862 ) 4,692 cash equivalents and restricted cashNet (decrease) increase in cash, cash equivalents (83,649 ) 83,066 and restricted cashCash, cash equivalents and restricted cash ? 878,553 682,984 Beginning of periodCash and cash equivalents ? End of period $ 794,904 $ 766,050 Supplemental disclosures of cash flow information: Cash paid for interest $ 1,932 $ 1,650 Cash paid for income taxes $ 35,982 $ 65,895

IPG PHOTONICS CORPORATIONSUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (In thousands)Amortization of intangible assets:Cost of sales $ 1,202 $ 1,168 $ 3,643 $ 3,562 Sales and marketing 1,849 1,779 5,744 5,334 Research and development ? ? ? 133 Total amortization of $ 3,051 $ 2,947 $ 9,387 $ 9,029 intangible assets



IPG PHOTONICS CORPORATIONSUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED)

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (In thousands)Cost of sales $ 2,866 $ 2,663 $ 8,335 $ 7,702 Sales and marketing 1,244 1,126 3,651 3,275 Research and 2,465 2,258 7,055 6,805 developmentGeneral and 3,256 2,732 9,554 8,698 administrativeTotal stock-based 9,831 8,779 28,595 26,480 compensationTax effect ofstock-based (2,110 ) (1,527 ) (6,102 ) (5,586 )compensationNet stock-based $ 7,721 $ 7,252 $ 22,493 $ 20,894 compensation

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (In thousands)Excess tax benefit onexercise of stock options $ 103 $ 1,896 $ 6,200 $ 6,590 included in net income