Fourth Quarter Revenue Exceeds Guidance; Company Generates $130 Million Operating Cash FlowGoodwill and Asset Impairment, Inventory Provision and Restructuring Charges Reduce Earnings Per Diluted Share by $0.99OXFORD, Mass., Feb. 13, 2020 (GLOBE NEWSWIRE) — IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the fourth quarter ended December 31, 2019.Management Comments“We delivered fourth quarter revenue slightly above our guidance range on strength in the US market and new products,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “The global macroeconomic backdrop and the competitive landscape in China both remain challenging. However, we are responding with product cost reductions and differentiated new features and accessories for our core products. Furthermore, we are leveraging one of the largest R&D investments in the laser industry to launch leading-edge laser products and systems for new markets. These new solutions, which represent about one-fifth of total sales, enhance our growth and margin profile and provide greater geographic and end market diversification.”Financial HighlightsFourth quarter revenue of $307 million decreased 7% year over year. Currency depreciation relative to the exchange rates assumed in our fourth quarter guidance reduced revenue by approximately $2 million. Materials processing sales decreased 11% year over year while sales into other applications increased 42% year over year. Materials processing sales accounted for 90% of total revenue. The acquisition of Genesis Systems Group contributed $19 million during the quarter.Sales of high power continuous wave (CW) lasers, representing 51% of total revenue, decreased 15% year over year. Sales of fiber lasers at 6 kilowatts of power or greater were approximately 50% of all high power CW laser sales, and high power CW lasers at 10 kilowatts or greater increased more than 30% year over year. Sales of other high power lasers declined year over year due to the weaker demand environment in China and Europe and lower average selling prices. By region, sales decreased 21% in China, 17% in Europe, 37% in Japan and increased 30% in North America on a year over year basis.Net loss per diluted share was $0.08. Foreign exchange losses, higher inventory reserves and charges related to impairment of goodwill and other long-lived assets and restructuring reduced earnings per diluted share (“EPS”) by $0.99. During the fourth quarter, we incurred a charge of $42 million for impairment of goodwill and other long-lived assets, primarily related to our communications business, and a charge of $2 million related to our restructuring actions taken during the second half of 2019. During the fourth quarter, IPG generated $130 million in cash from operations. Capital expenditures were $26 million and stock repurchases totaled $15 million.Business Outlook and Financial Guidance“We believe we have significant long-term growth opportunities in welding, fine processing of electric vehicle batteries and our portfolio of new products addressing opportunities in microelectronics, medical, systems and beam delivery solutions. Current demand for our leading-edge laser solutions remains mixed, with strength in North America and emerging regions such as India and Southeast Asia offset by ongoing macro softness in Europe and Japan. Prior to the government-extended Lunar New Year holiday, there were signs that business in China was firming, with order flow having picked up in December and January. However, ongoing business disruption related to the novel coronavirus outbreak makes forecasting our business in China and the impact on global demand very challenging at this point. China is a large and important market for IPG, with repercussions for other markets, and we continue to monitor the situation closely,” said Dr. Gapontsev.For the first quarter of 2020, IPG expects revenue of $220 million to $250 million. The Company expects the first quarter tax rate to be approximately 26%. IPG anticipates delivering earnings per diluted share in the range of $0.00 to $0.30, with 52.9 million basic common shares outstanding and 53.6 million diluted common shares outstanding. This guidance assumes approximately $45 million in reduced revenue and $0.45 lower EPS from business disruption related to the novel coronavirus outbreak.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, tariffs, trade policy changes, health epidemics 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 62, Japanese Yen 109 and Chinese Yuan 6.98, respectively.Supplemental Financial InformationAdditional supplemental financial information is provided in the unaudited Fourth Quarter 2019 Financial Data Workbook available on the investor relations section of the Company’s website at investor.ipgphotonics.com.Conference Call ReminderThe Company will hold a conference call today, February 13, 2020 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.ContactJames Hillier
Vice President of Investor Relations
IPG Photonics Corporation
508-373-1467
[email protected]About IPG Photonics CorporationIPG 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 25 facilities worldwide. For more information, visit www.ipgphotonics.com.Safe Harbor StatementInformation 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 product cost reductions, core products having differentiated new features and accessories; leveraging the our R&D investment to launch leading edge laser products and systems for new markets; products and systems enhancing our growth and margin profile, and greater geographic and end market diversification; significant long-term growth opportunities in welding, fine processing of electric vehicle batteries and our portfolio of new products in microelectronics, medical. systems and beam delivery solutions; ongoing business disruption related to the novel coronavirus outbreak and its impact on global demand and other markets; and revenue, tax rate and earnings guidance for Q1 2020. 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 Quarterly Report on Form 10-Q (filed with the SEC on August 6, 2019) and its 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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SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS AND OTHER CHARGES (UNAUDITED)⁽¹⁾ 2018 amount relates to ILT step-up adjustments on inventory sold during the period.IPG PHOTONICS CORPORATION
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