IPG Photonics Announces Third Quarter 2022 Financial Results

Strong Demand from E-Mobility and Medical were Offset by Currency Headwinds and Softer General Industrial Demand in China and Europe

OXFORD, Mass., Nov. 01, 2022 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2022.

  Three Months Ended September 30,   Nine Months Ended September 30,  
(In millions, except per share data and percentages)  2022   2021  Change  2022   2021  Change
Revenue $349.0  $379.2  (8)% $1,096.0  $1,096.4  %
Gross margin  43.1%  49.0%    45.1%  48.4%  
Operating income $93.2  $102.0  (9)% $258.0  $283.1  (9)%
Operating margin  26.7%  26.9%    23.5%  25.8%  
Net income attributable to IPG Photonics Corporation $76.3  $75.4  1% $202.8  $213.3  (5)%
Earnings per diluted share $1.47  $1.40  5% $3.93  $3.95  (1)%

Management Comments

"We continued to see upward momentum in our emerging growth products with strength in welding, primarily in e-mobility applications, cleaning, solar cell manufacturing, medical and 3D printing applications in the third quarter," said Dr. Eugene Scherbakov, IPG Photonics' Chief Executive Officer. "The operating environment remains challenging, including currency headwinds, softer general industrial demand in Europe and Covid-related restrictions in China. At the same time, we are seeing accelerating investments in lithium-ion batteries used in electric vehicles globally and expect to benefit from continued higher sales to EV applications in the next several years. Additionally, our medical sales nearly doubled compared to the same period last year as we are focusing on diversifying revenues across end markets and applications and reducing cyclical sensitivity of the business."

Financial Highlights

Third quarter revenue of $349 million decreased 8% year over year. The strong U.S. dollar reduced revenue by approximately $26 million or 7% compared to the same period last year. Materials processing sales accounted for 90% of total revenue and decreased 10% year over year with higher sales in welding, cleaning and solar cell applications offset by lower revenue in cutting applications in China and Europe. Sales into Other applications increased 10% year over year, driven by the strength in medical, partially offset by lower revenue following the divestiture of the telecom transmission product lines and lower sales in advanced applications. Emerging growth products sales accounted for 43% of total revenue.

Revenue in high power continuous wave (CW) lasers declined 14% year over year due to lower demand in high power cutting applications, which was partially offset by strong growth in welding. Sales of pulsed lasers declined 6% compared with the prior year due to lower demand in cutting and marking applications, partially offset by growth in solar cell manufacturing and cleaning applications. By region, sales increased 1% in North America and decreased 13% in Europe, 14% in China and 21% in Japan on a year-over-year basis.

Earnings per diluted share (EPS) of $1.47 increased 5% year over year. The gain on sale of the telecom transmission business increased operating income by $22 million and benefited diluted EPS by $0.32, which was slightly offset by a restructuring charge of $1 million or $0.01 per diluted share, also related to the telecom business. Foreign exchange transaction gains increased operating income by less than $1 million. The effective tax rate in the quarter was 21%, benefiting from certain discrete items. During the third quarter, IPG generated $76 million in cash from operations. Capital expenditures were $25 million and stock repurchases were $71 million in the quarter.

Business Outlook and Financial Guidance

“Third quarter book-to-bill was slightly above one as higher bookings for emerging growth products across most geographies helped to offset some of the weaknesses in European and Chinese cutting markets. Despite increased global economic uncertainty, we believe that macro trends such as e-mobility, investments in renewable energy and automation as well as focus on energy efficiency due to increased energy costs should continue to drive higher demand for our lasers," concluded Dr. Scherbakov.

For the fourth quarter of 2022, IPG expects revenue of $300 to $330 million. The Company expects the fourth quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $0.70 to $1.00. The fourth quarter guidance range is reduced by approximately $28 million due to foreign currency headwinds that are related to the current strength of the U.S. dollar as compared to the fourth quarter of 2021.

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, 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 1.02, Russian ruble 57, Japanese yen 145 and Chinese yuan 7.10, respectively.

Supplemental Financial Information

Additional supplemental financial information is provided in the unaudited Third 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, November 1, 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.


Eugene Fedotoff
Director of Investor Relations
IPG Photonics Corporation

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. 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 macro trends such as e-mobility, investments in renewable energy and automation as well as focus on energy efficiency due to increased energy costs should continue to drive higher demand for our lasers, as well as revenue, tax rate and earnings guidance, and the impact of the U.S. dollar on our guidance for fourth 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.


  Three Months Ended September 30, Nine Months Ended September 30,
   2022   2021   2022   2021 
  (In thousands, except per share data)
Net sales $349,006  $379,150  $1,096,008  $1,096,393 
Cost of sales  198,582   193,276   601,419   566,000 
Gross profit  150,424   185,874   494,589   530,393 
Operating expenses:        
Sales and marketing  19,383   20,688   58,767   58,764 
Research and development  25,436   34,277   89,494   102,807 
General and administrative  33,813   32,557   97,888   93,715 
Gain on divestiture  (21,748)     (21,748)   
Impairment of long-lived assets and other restructuring charges  919      919    
(Gain) loss on foreign exchange  (541)  (3,634)  11,289   (7,973)
Total operating expenses  57,262   83,888   236,609   247,313 
Operating income  93,162   101,986   257,980   283,080 
Other income (expense), net:        
Interest income (expense), net  3,625   (288)  4,732   (1,190)
Other income (expense), net  301   (211)  683   70 
Total other income (expense)  3,926   (499)  5,415   (1,120)
Income before provision of income taxes  97,088   101,487   263,395   281,960 
Provision for income taxes  20,390   26,788   59,738   69,362 
Net income  76,698   74,699   203,657   212,598 
Less: net income (loss) attributable to non-controlling interests  434   (703)  853   (731)
Net income attributable to IPG Photonics Corporation $76,264  $75,402  $202,804  $213,329 
Net income attributable to IPG Photonics Corporation per share:        
Basic $1.48  $1.41  $3.94  $3.99 
Diluted $1.47  $1.40  $3.93  $3.95 
Weighted average shares outstanding:        
Basic  51,629   53,387   51,449   53,501 
Diluted  51,737   53,834   51,626   54,053 


  September 30, December 31,
   2022   2021 
  (In thousands, except share and
per share data)
Current assets:    
Cash and cash equivalents $869,274  $709,105 
Short-term investments  365,409   805,400 
Accounts receivable, net  195,194   262,121 
Inventories  555,537   460,747 
Prepaid income taxes  49,496   36,990 
Prepaid expenses and other current assets  84,177   73,320 
Total current assets  2,119,087   2,347,683 
Deferred income taxes, net  69,323   47,761 
Goodwill  37,963   38,609 
Intangible assets, net  36,171   52,678 
Property, plant and equipment, net  661,510   635,302 
Other assets  38,466   48,507 
Total assets $2,962,520  $3,170,540 
Current liabilities:    
Current portion of long-term debt $16,328  $18,126 
Accounts payable  55,072   55,839 
Accrued expenses and other current liabilities  199,636   230,826 
Income taxes payable  24,752   8,642 
Total current liabilities  295,788   313,433 
Other long-term liabilities and deferred income taxes  86,223   93,855 
Long-term debt, net of current portion     16,031 
Total liabilities  382,011   423,319 
Commitments and contingencies    
IPG Photonics Corporation equity:    
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,974,063 and 49,393,642 shares issued and outstanding, respectively, at September 30, 2022; 55,788,246 and 53,010,265 shares issued and outstanding, respectively, at December 31, 2021.  6   6 
Treasury stock, at cost, 6,580,421 and 2,777,981 shares held at September 30, 2022 and December 31, 2021, respectively.  (821,388)  (438,503)
Additional paid-in capital  939,040   908,423 
Retained earnings  2,669,411   2,466,607 
Accumulated other comprehensive loss  (206,560)  (189,951)
Total IPG Photonics Corporation equity  2,580,509   2,746,582 
Non-controlling interests     639 
Total equity  2,580,509   2,747,221 
Total liabilities and equity $2,962,520  $3,170,540 


  Nine Months Ended September 30,
   2022   2021 
  (In thousands)
Cash flows from operating activities:    
Net income $203,657  $212,598 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  69,852   72,127 
Impairment of long-lived assets and other restructuring charges  919    
Provisions for inventory, warranty & bad debt  58,990   50,364 
Gain on divestiture  (21,748)   
Other  20,201   25,294 
Changes in assets and liabilities that used cash, net of acquisitions:    
Accounts receivable and accounts payable  39,680   14,015 
Inventories  (148,959)  (105,384)
Other  (51,566)  36,142 
Net cash provided by operating activities  171,026   305,156 
Cash flows from investing activities:    
Purchases of and deposits on property, plant and equipment  (84,552)  (93,857)
Proceeds from sales of property, plant and equipment  837   859 
Purchases of short-term investments  (914,598)  (1,437,193)
Proceeds from short-term investments  1,355,883   1,226,445 
Acquisitions of businesses, net of cash acquired  (2,000)   
Proceeds from divestiture, net of cash sold  52,141    
Other  (246)  (1,078)
Net cash provided by (used in) investing activities  407,465   (304,824)
Cash flows from financing activities:    
Principal payments on long-term borrowings  (17,829)  (2,851)
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  2,353   11,427 
Purchase of treasury stock, at cost  (382,885)  (78,071)
Payment of purchase price holdback from business combination     (2,624)
Purchase of non-controlling interests  (2,500)   
Net cash used in financing activities  (400,861)  (72,119)
Effect of changes in exchange rates on cash and cash equivalents and restricted cash  (17,461)  (11,862)
Net increase (decrease) in cash, cash equivalents and restricted cash  160,169   (83,649)
Cash, cash equivalents and restricted cash — Beginning of period  709,105   878,553 
Cash and cash equivalents — End of period  869,274   794,904 
Supplemental disclosures of cash flow information:    
Cash paid for interest $2,766  $1,932 
Cash paid for income taxes $83,771  $35,982 


  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
  (In thousands)
Amortization of intangible assets:        
Cost of sales $796  $1,202  $3,024  $3,643 
Sales and marketing  1,651   1,849   5,353   5,744 
Total amortization of intangible assets $2,447  $3,051  $8,377  $9,387 


  Three Months Ended September 30, Nine Months Ended September 30,
   2022   2021   2022   2021 
  (In thousands)
Cost of sales $2,961  $2,866  $9,234  $8,335 
Sales and marketing  1,191   1,244   3,709   3,651 
Research and development  986   2,465   5,889   7,055 
General and administrative  3,640   3,256   10,370   9,554 
Total stock-based compensation  8,778   9,831   29,202   28,595 
Tax effect of stock-based compensation  (1,894)  (2,110)  (6,279)  (6,102)
Net stock-based compensation $6,884  $7,721  $22,923  $22,493 

  Three Months Ended September 30, Nine Months Ended September 30,
   2022   2021   2022   2021 
  (In thousands)
Excess tax (detriment) benefit on stock-based compensation $(114) $103  $(2,254) $6,200