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Form 8-K IPG PHOTONICS CORP For: May 03

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May 3, 2022 8:01 AM EDT
Exhibit 99.1

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IPG PHOTONICS ANNOUNCES FIRST QUARTER 2022 FINANCIAL RESULTS
Successful Diversification Across Geographies and Applications Drives Strong Demand, Enhanced by Solid Performance in Electric Vehicle Applications and Emerging Growth Products
OXFORD, Mass. – May 3, 2022 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter ended March 31, 2022.
Three Months Ended March 31,
(In millions, except per share data and percentages)20222021Change
Revenue$370.0 $345.6 7 %
Gross margin46.4 %47.5 %
Operating income$93.1 $88.8 5 %
Operating margin25.2 %25.7 %
Net income attributable to IPG Photonics Corporation$69.6 $68.1 2 %
Earnings per diluted share$1.31 $1.26 4 %

Management Comments
"We are pleased to report another solid quarter with growth driven by higher demand across many diverse applications in Europe, North America and Japan. Increased laser welding adoption, primarily in electric vehicle manufacturing, drove record welding revenue for IPG this quarter," said Dr. Eugene Scherbakov, IPG Photonics' Chief Executive Officer. "As we execute on growth opportunities that diversify our revenue across geographies and applications, such as electric vehicle production, handheld welding and medical products, China's share of revenue decreased to 35% this quarter. Given increased geopolitical risks, we are reducing our reliance on manufacturing in Russia and have stopped new investments in the region while increasing manufacturing capacity in North America and Western Europe."
Financial Highlights
First quarter revenue of $370 million increased 7% year over year. Materials processing sales accounted for 92% of total revenue and increased 7% year over year with higher sales in welding, marking, systems, cleaning and 3D printing, partially offset by lower revenue in cutting and solar cell manufacturing applications. Sales into Other applications increased 9% year over year, driven by the strength in medical, partially offset by lower sales in advanced applications and telecom. Emerging growth products sales accounted for 36% of total revenue.
Revenue in high power continuous wave (CW) lasers declined 2% year over year due to softer demand in high power cutting applications in China that was partially offset by strong growth in welding in the region as well as growth in welding and cutting across most other major regions. Sales of medium power and pulsed lasers improved significantly compared with the prior year, primarily driven by emerging growth products. By region, sales increased 27% in Europe, 5% in North America, and 18% in Japan, and decreased 7% in China on a year-over-year basis.
Earnings per diluted share (EPS) of $1.31 increased by 4% year over year. The effective tax rate in the quarter was 25%. During the first quarter, IPG generated $16 million in cash from operations. Capital expenditures were $25 million and stock repurchases were $79 million in the quarter.
1
Exhibit 99.1
Business Outlook and Financial Guidance
“First quarter book-to-bill was greater than one and while bookings were at a record level driven by strong demand for electric vehicle battery manufacturing, handheld welding and medical applications, we received several orders that we expect to ship after the second quarter. Our strategy of diversifying revenue sources and geographical exposure is providing us with confidence in the long-term growth strategy for the Company, despite a challenging operating environment. We believe that fiber laser adoption continues across many applications and geographies. To support quicker adoption of our lasers, we are focusing on meeting customers' demands and working on providing solutions with our commitment to quality, innovative technology, reliability and global customer support," concluded Dr. Scherbakov.
For the second quarter of 2022, IPG expects revenue of $355 to $385 million. The Company expects the second quarter tax rate to be approximately 26%. IPG anticipates delivering earnings per diluted share in the range of $0.95 to $1.25.
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 with Russia, the COVID-19 pandemic, product demand, order cancellations and delays, competition, tariffs, 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 0.90, Russian Ruble 84, Japanese Yen 122 and Chinese Yuan 6.35, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited First Quarter 2022 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, May 3, 2022 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.
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Exhibit 99.1
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 our strategy of diversifying revenue sources and geographical exposure that is providing us with confidence in the long-term growth for the Company, fiber laser adoption across many applications and geographies, meeting customers' demands and working on providing solutions with our commitments to quality, innovative technology, reliability and global customer support, as well as revenue, tax rate and earnings guidance for second quarter of 2022. 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 22, 2022) 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.
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Exhibit 99.1
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
Three Months Ended March 31,
20222021
(In thousands, except per share data)
Net sales$369,979 $345,585 
Cost of sales198,158 181,594 
Gross profit171,821 163,991 
Operating expenses:
Sales and marketing20,374 18,883 
Research and development33,450 33,339 
General and administrative30,664 30,092 
Gain on foreign exchange(5,810)(7,165)
Total operating expenses78,678 75,149 
Operating income93,143 88,842 
Other (expense) income, net:
Interest expense, net(70)(495)
Other (expense) income, net(236)253 
Total other expense(306)(242)
Income before provision of income taxes92,837 88,600 
Provision for income taxes23,209 20,378 
Net income69,628 68,222 
Less: net income attributable to non-controlling interests56 95 
Net income attributable to IPG Photonics Corporation$69,572 $68,127 
Net income attributable to IPG Photonics Corporation per share:
Basic$1.32 $1.27 
Diluted$1.31 $1.26 
Weighted average shares outstanding:
Basic52,810 53,541 
Diluted53,100 54,201 

4
Exhibit 99.1
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
March 31,December 31,
20222021
(In thousands, except share and 
per share data)
ASSETS
Current assets:
Cash and cash equivalents$642,517 $709,105 
Short-term investments774,161 805,400 
Accounts receivable, net257,464 262,121 
Inventories484,971 460,747 
Prepaid income taxes40,888 36,990 
Prepaid expenses and other current assets82,833 73,320 
Total current assets2,282,834 2,347,683 
Deferred income taxes, net49,942 47,761 
Goodwill39,741 38,609 
Intangible assets, net50,017 52,678 
Property, plant and equipment, net625,366 635,302 
Other assets50,569 48,507 
Total assets$3,098,469 $3,170,540 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt$17,459 $18,126 
Accounts payable46,481 55,839 
Accrued expenses and other current liabilities203,579 230,826 
Income taxes payable12,317 8,642 
Total current liabilities279,836 313,433 
Other long-term liabilities and deferred income taxes94,650 93,855 
Long-term debt, net of current portion15,734 16,031 
Total liabilities390,220 423,319 
Commitments and contingencies
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,921,562 and 52,542,466 shares issued and outstanding, respectively, at March 31, 2022; 55,788,246 and 53,010,265 shares issued and outstanding, respectively, at December 31, 2021.
6 6 
Treasury stock, at cost, 3,379,096 and 2,777,981 shares held at March 31, 2022 and December 31, 2021, respectively.
(517,260)(438,503)
Additional paid-in capital917,693 908,423 
Retained earnings2,536,179 2,466,607 
Accumulated other comprehensive loss(229,369)(189,951)
Total IPG Photonics Corporation equity2,707,249 2,746,582 
Non-controlling interests1,000 639 
Total equity2,708,249 2,747,221 
Total liabilities and equity$3,098,469 $3,170,540 

5
Exhibit 99.1
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Three Months Ended March 31,
20222021
(In thousands)
Cash flows from operating activities:
Net income$69,628 $68,222 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization23,435 23,819 
Provisions for inventory, warranty & bad debt16,142 16,685 
Other6,572 6,421 
Changes in assets and liabilities that used cash, net of acquisitions:
Accounts receivable and accounts payable(5,827)26,340 
Inventories(50,951)(20,084)
Other(42,576)(33,860)
Net cash provided by operating activities16,423 87,543 
Cash flows from investing activities:
Purchases of property, plant and equipment(25,177)(27,421)
Proceeds from sales of property, plant and equipment428 130 
Purchases of short-term investments(475,435)(513,564)
Proceeds from short-term investments505,818 480,163 
Acquisitions of businesses, net of cash acquired(2,000)— 
Other(1,164)(2)
Net cash provided by (used in) investing activities2,470 (60,694)
Cash flows from financing activities:
Principal payments on long-term borrowings(964)(946)
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(724)4,981 
Purchase of treasury stock, at cost(78,757)(3,048)
Payment of purchase price holdback from business combination— (2,624)
Net cash used in financing activities(80,445)(1,637)
Effect of changes in exchange rates on cash and cash equivalents and restricted cash(5,036)(7,024)
Net (decrease) increase in cash, cash equivalents and restricted cash(66,588)18,188 
Cash, cash equivalents and restricted cash — Beginning of period709,105 878,553 
Cash, cash equivalents and restricted cash — End of period642,517 896,741 
Supplemental disclosures of cash flow information:
Cash paid for interest$857 $703 
Cash paid for income taxes$25,423 $21,340 

6
Exhibit 99.1
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)
 
Three Months Ended March 31,
20222021
(In thousands)
Amortization of intangible assets:
Cost of sales$1,173 $1,241 
Sales and marketing1,848 2,016 
Total amortization of intangible assets$3,021 $3,257 


7
Exhibit 99.1
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED)
 
Three Months Ended March 31,
20222021
(In thousands)
Cost of sales$3,058 $2,626 
Sales and marketing1,209 1,160 
Research and development2,529 2,118 
General and administrative3,162 2,949 
Total stock-based compensation9,958 8,853 
Tax effect of stock-based compensation(2,134)(1,878)
Net stock-based compensation$7,824 $6,975 
Three Months Ended March 31,
20222021
(In thousands)
Tax (detriment) benefit on stock-based compensation$(1,713)$5,596 
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