OXFORD, Mass., Oct. 30, 2020 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2020.
Management Comments
"We delivered third quarter results above our guidance range due to sales growth in China and a sequential improvement in Europe," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "We continue to introduce leading-edge solutions to the market thanks to our technology differentiation, low-cost production capabilities and global footprint. Although bottom-line results were impacted by a goodwill impairment charge of $45 million, we achieved a 160 basis point year-over-year increase in gross margin on 3% lower revenue. We demonstrated excellent execution given the circumstances."
Financial Highlights
Third quarter revenue of $318 million decreased 3% year over year. Materials processing sales decreased 5% year over year due to lower sales in cutting, welding and marking applications, while sales into other applications increased 24% year over year on strength in advanced applications and devices used in medical procedures. Materials processing sales accounted for 91% of total revenue.
Sales of high power continuous wave ("CW") lasers, representing 58% of total revenue, were flat on a year over year basis. These sales benefited from growth of ultra-high power fiber lasers (6 kilowatts of power or greater) which represented 58% of all high power CW laser sales. By region, sales increased 22% in China, and decreased 10% in Europe, 41% in Japan and 26% in North America on a year over year basis.
Earnings per diluted share ("EPS") of $0.66 decreased 38% year over year. A goodwill impairment charge reduced EPS by $0.63, while foreign exchange gains benefited EPS by $0.15. The effective tax rate in the quarter was 16%, which benefited from certain discrete tax items. The goodwill impairment charges related to Genesis Systems Group reduced operating income by $45 million and operating margin by 14 percentage points. The results of this business were impacted by lower capital investments from industries impacted greatly by the COVID-19 pandemic, such as aerospace and transportation, as projects have been delayed. During the third quarter, IPG generated $70 million in cash from operations. Capital expenditures were $25 million and stock repurchases totaled $10 million.
Business Outlook and Financial Guidance
"Bookings growth in North America and Europe was strong when compared sequentially with the second quarter. In North America, we had record bookings aided by several orders for advanced applications. While total orders in China for the third quarter were lower, China continues to have a significant backlog given the exceptional level of orders booked in the first half of the year. In total, third quarter book-to-bill was slightly below 1. Overall, it was notable that order bookings improved markedly during September.
“While the pandemic represents considerable macroeconomic uncertainty for the months ahead, we have continued to demonstrate our ability to execute even in these challenging times. Further, our strong balance sheet and free cash flow provide us ample flexibility to respond to business disruptions and maintain our leading competitive position. We continue to benefit from near-term growth opportunities in ultra-high power cutting, electric vehicle battery processing, medical procedures and advanced applications. We believe the strides we are making in higher power products within our core materials processing business and new solutions will enable us to emerge from the current downturn in a stronger competitive position," concluded Dr. Gapontsev.
For the fourth quarter of 2020, IPG expects revenue of $290 to $320 million. The Company expects the fourth quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $0.75 to $1.05, with 53.1 million basic common shares outstanding and 53.7 million diluted common shares outstanding. Financial guidance provided this quarter is subject to greater risk and uncertainty given the COVID-19 pandemic and its associated impacts to the global business environment, public health requirements and government mandates.
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, 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 0.85, Russian Ruble 80, Japanese Yen 106 and Chinese Yuan 6.81, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited Third Quarter 2020 Financial Data Workbook available on the investor relations section of the Company's website at investor.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 25 facilities worldwide. For more information, visit www.ipgphotonics.com.
