IPG Photonics Announces First Quarter 2024 Financial Results

Published

 Delayed E-mobility Investments and Soft Industrial Demand Negatively Impacted Results

Strong Operating Cash Flow Benefited from Working Capital Management

MARLBOROUGH, Mass., April 30, 2024 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter ended March 31, 2024.

  Three Months Ended March 31,   
(In millions, except per share data and percentages)  2024   2023  Change
Revenue $252.0  $347.2  (27)%
Gross margin  38.7%  42.3%   
Operating income $19.1  $75.4  (75)%
Operating margin  7.6%  21.7%   
Net income attributable to IPG Photonics Corporation $24.1  $60.1  (60)%
Earnings per diluted share $0.52  $1.26  (59)%
            

Management Comments

"In the first quarter, we continued to generate strong cash flow from operations, reduce inventory and control manufacturing expenses, in spite of the challenging conditions. We also remained focused on our strategy to unlock additional growth opportunities for fiber lasers such as welding, cleaning, heating and medical, which would allow us to diversify our revenue away from highly competitive markets," said Dr. Eugene Scherbakov, IPG Photonics' Chief Executive Officer. "While delayed investments in electric battery capacity worldwide, soft industrial demand across most of our major geographies, and inventory management by some large OEM customers impacted first quarter results, we believe that our strong technology differentiation helps us continue to displace other laser and non-laser tools across a growing range of applications, positioning our business for growth in the future."

Financial Highlights

First quarter revenue of $252 million decreased 27% year over year. Changes in foreign exchange rates reduced revenue growth by approximately $8 million or 2%. By region, sales decreased across all major geographies and were down 38% in China, 16% in North America, 21% in Europe and 23% in Japan on a year-over-year basis. Materials processing sales accounted for 90% of total revenue and decreased 28% year over year. The decline was due to lower revenue in most applications, except for growth in 3D printing and heating, and flat sales in parts and services. Other applications sales decreased 25% year over year due to lower revenue in medical and advanced applications.

Emerging growth products sales accounted for 45% of total revenue and were negatively impacted by lower demand in e-mobility and solar cell manufacturing applications, lower sales in handheld welding applications and inventory adjustment by a large medical customer.

Gross margin of 38.7% decreased 360 basis points year over year due to reduced absorption of manufacturing expenses and increased inventory reserves, partially offset by lower product and shipping costs. Earnings per diluted share (EPS) of $0.52 decreased 59% year over year. The gain on sale of assets increased operating income by $7 million and increased diluted EPS by $0.11. Foreign exchange transaction loss decreased operating income by $2 million and earnings per share by $0.03 in the first quarter. The effective tax rate in the quarter was 28%. During the first quarter, IPG generated $55 million in cash from operations and spent $28 million on capital expenditures and $90 million on share repurchases.

Business Outlook and Financial Guidance

“Despite a challenging first quarter, our book-to-bill was slightly above one for the first time since the first quarter last year, which may indicate that industrial demand is stabilizing and could start to improve modestly later in the year," concluded Dr. Scherbakov.

For the second quarter of 2024, IPG expects revenue of $240 million to $270 million. The Company expects the second quarter tax rate to be approximately 25%, including certain discrete items. IPG anticipates delivering earnings per diluted share in the range of $0.30 to $0.60.

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, trade policy changes and trade restrictions, product demand, order cancellations and delays, competition, tariffs, currency fluctuations 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 filed with the SEC, and assumes exchange rates relative to the U.S. dollar of euro 0.93, Russian ruble 92, Japanese yen 151 and Chinese yuan 7.10, respectively.

Supplemental Financial Information

Additional supplemental financial information is provided in the unaudited Financial Data Workbook and First Quarter 2024 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, April 30, 2024 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 FedotoffSenior Director, 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 Company’s mission is to develop innovative laser solutions making the world a better place. 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. IPG is headquartered in Marlborough, 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 indications of stabilizing industrial demand and improvements later in the year, revenue outlook, tax rate and earnings guidance, and the impact of the U.S. dollar on our guidance for second quarter of 2024. 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; inability to manage risks associated with international customers and operations; changes in trade controls and trade policies; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; 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 21, 2024) 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 March 31,
   2024   2023 
  (In thousands, except per share data)
Net sales $252,009  $347,174 
Cost of sales  154,473   200,236 
Gross profit  97,536   146,938 
Operating expenses:    
Sales and marketing  22,998   21,088 
Research and development  29,381   22,770 
General and administrative  31,158   30,128 
Gain on sale of assets  (6,776)   
Restructuring charges, net     181 
Loss (gain) on foreign exchange  1,675   (2,655)
Total operating expenses  78,436   71,512 
Operating income  19,100   75,426 
Other income, net:    
Interest income, net  14,177   7,533 
Other income, net  325   331 
Total other income  14,502   7,864 
Income before provision of income taxes  33,602   83,290 
Provision for income taxes  9,503   23,155 
Net income attributable to IPG Photonics Corporation $24,099  $60,135 
Net income attributable to IPG Photonics Corporation per share:    
Basic $0.52  $1.26 
Diluted $0.52  $1.26 
Weighted average common shares outstanding:    
Basic  45,960   47,542 
Diluted  46,175   47,776 

IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
     
  March 31, December 31,
   2024   2023 
  (In thousands, except share and per share data)
ASSETS
Current assets:    
Cash and cash equivalents $496,452  $514,674 
Short-term investments  643,655   662,807 
Accounts receivable, net  184,012   219,053 
Inventories  431,899   453,874 
Prepaid income taxes  24,530   26,038 
Prepaid expenses and other current assets  49,071   38,208 
Total current assets  1,829,619   1,914,654 
Deferred income taxes, net  84,452   88,788 
Goodwill  38,351   38,540 
Intangible assets, net  24,802   26,234 
Property, plant and equipment, net  585,751   602,257 
Other assets  35,461   28,425 
Total assets $2,598,436  $2,698,898 
LIABILITIES AND EQUITY
Current liabilities:    
Accounts payable $26,675  $28,618 
Accrued expenses and other current liabilities  163,011   181,350 
Income taxes payable  2,441   4,893 
Total current liabilities  192,127   214,861 
Other long-term liabilities and deferred income taxes  65,589   68,652 
Total liabilities  257,716   283,513 
Commitments and contingencies    
IPG Photonics Corporation equity:    
Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,521,438 and 45,566,746 shares issued and outstanding, respectively, at March 31, 2024; 56,317,438 and 46,320,671 shares issued and outstanding, respectively, at December 31, 2023.  6   6 
Treasury stock, at cost, 10,954,692 and 9,996,767 shares held at March 31, 2024 and December 31, 2023, respectively.  (1,251,121)  (1,161,505)
Additional paid-in capital  1,002,600   994,020 
Retained earnings  2,819,493   2,795,394 
Accumulated other comprehensive loss  (230,258)  (212,530)
Total IPG Photonics Corporation equity  2,340,720   2,415,385 
Total liabilities and equity $2,598,436  $2,698,898 

IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
   
  Three Months Ended March 31,
   2024   2023 
  (In thousands)
Cash flows from operating activities:    
Net income $24,099  $60,135 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  16,214   17,889 
Provisions for inventory, warranty & bad debt  14,761   17,214 
Other  143   19,561 
Changes in assets and liabilities that provided (used) cash, net of acquisitions:    
Accounts receivable and accounts payable  32,579   (29,242)
Inventories  1,498   (8,989)
Other  (34,698)  (39,288)
Net cash provided by operating activities  54,596   37,280 
Cash flows from investing activities:    
Purchases of and deposits on property, plant and equipment  (28,052)  (33,404)
Proceeds from sales of property, plant and equipment  25,262   1,600 
Purchases of short-term investments  (226,521)  (343,820)
Proceeds from short-term investments  252,890   279,499 
Other  157   107 
Net cash provided by (used in) investing activities  23,736   (96,018)
Cash flows from financing activities:    
Principal payments on long-term borrowings     (298)
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  (1,158)  (3,844)
Purchase of treasury stock, at cost  (89,616)  (113,094)
Net cash used in financing activities  (90,774)  (117,236)
Effect of changes in exchange rates on cash and cash equivalents  (5,780)  (1,098)
Net decrease in cash and cash equivalents  (18,222)  (177,072)
Cash and cash equivalents — Beginning of period  514,674   698,209 
Cash and cash equivalents — End of period  496,452   521,137 
Supplemental disclosures of cash flow information:    
Cash paid for interest $4  $525 
Cash paid for income taxes $8,005  $19,203 

IPG PHOTONICS CORPORATIONSUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)
 
  Three Months Ended March 31,
  2024 2023
  (In thousands)
Amortization of intangible assets:    
Cost of sales $488 $564
Sales and marketing  937  1,457
Total amortization of intangible assets $1,425 $2,021

IPG PHOTONICS CORPORATIONSUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED)
 
  Three Months Ended March 31,
   2024   2023 
  (In thousands)
Cost of sales $2,075  $2,646 
Sales and marketing  1,502   1,293 
Research and development  2,631   1,796 
General and administrative  3,524   3,876 
Total stock-based compensation  9,732   9,611 
Tax effect of stock-based compensation  (2,140)  (2,096)
Net stock-based compensation $7,592  $7,515 

  Three Months Ended March 31,
   2024   2023 
  (In thousands)
Excess tax benefit (detriment) on stock-based compensation $(3,649) $(1,708)

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Source: IPG Photonics Corporation

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