OXFORD, Mass., Feb. 16, 2021 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the fourth quarter ended December 31, 2020.
Management Comments
"We are very pleased with our fourth quarter results as we delivered revenue that was 10% higher than the fourth quarter 2019 and was above the top end of our guidance range," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "In addition, book-to-bill was above one in the fourth quarter as we saw the traction in order flow continue from the third quarter. We are benefiting from the advantages of our leading-edge products, technology differentiation, low-cost production capabilities and global footprint. Although gross margin was reduced by 410 basis points by an additional inventory charge of $14 million, we still achieved a 310 basis point year-over-year increase in gross margin driven by an increase in revenue, product cost reductions, and product mix. Despite numerous challenges in 2020 from COVID-19, we ended the year with a strong performance and are very well positioned as we enter 2021."
Financial Highlights
Fourth quarter revenue of $337 million increased 10% year over year. Materials processing, which is comprised of many different applications, accounted for 90% of total revenue, and increased 10% year over year primarily due to higher sales in cutting applications. Sales into other applications increased 12% year over year, driven by the strength in advanced applications and devices used in medical procedures.
Sales of high power continuous wave ("CW") lasers, representing 55% of total revenue, increased 17% year over year. These sales benefited from growth of ultra-high power fiber lasers (6 kilowatts of power or greater) which represented 56% of all high power CW laser sales. By region, sales increased 52% in China, and decreased 5% in Europe, 29% in Japan and 11% in North America on a year-over-year basis. During the fourth quarter, emerging product and application sales were 28% of total revenue and increased 22% year over year.
Earnings per diluted share ("EPS") of $0.92 increased by more than 100% year over year. The additional inventory charge that negatively impacted EPS was related to optical components that have been replaced by components with better performance. The effective tax rate in the quarter was 24%. During the fourth quarter, IPG generated $85 million in cash from operations and capital expenditures were $26 million. There was no stock repurchased during the quarter.
Business Outlook and Financial Guidance
"Bookings growth was strong across all our key geographies, building on the improvements that started in the third quarter. We believe we are starting to benefit more meaningfully from a stronger investment cycle driven by equipment upgrades, automation, the need for flexible processing and even improved efficiency. In total, fourth quarter book-to-bill was above 1. Our total backlog was $674 million, which comprised of $376 million of orders with firm shipment dates, and $298 million of frame agreements. While total backlog decreased by 3%, this was due to a 27% decrease in frame agreements. Importantly, orders with firm shipment dates increased by 32%. In addition, order flow for frame agreements, which are primarily booked in China, has been very strong in the first weeks of the year."
"While considerable macroeconomic uncertainty related to the pandemic remains, we are incrementally more optimistic in our outlook given the near-term trends we have seen in the last quarter. We continue to see sales improve in our core materials processing market and are excited about our ability to grow in other applications outside of cutting and welding, primarily in advanced applications, electric vehicle battery processing, micro-processing and medical. We have continued to execute admirably in these challenging times, and our strong balance sheet and free cash flow provide us ample flexibility to respond to business disruptions and maintain our leading competitive position," concluded Dr. Gapontsev.
For the first quarter of 2021, IPG expects revenue of $310 to $340 million. The Company expects the first quarter tax rate to be approximately 25%. IPG anticipates delivering earnings per diluted share in the range of $0.90 to $1.20, with 53.2 million basic common shares outstanding and 53.9 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 on 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 0.82, Russian Ruble 74, Japanese Yen 103 and Chinese Yuan 6.52, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited Fourth 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.
