IPG Photonics Reports Top and Bottom Line Sequential Growth for Q3 of 2009
Sequential Growth in Pulsed Lasers Driven by Strength in Asia Generated $12m in Cash from Operations less Capex
OXFORD, Mass. - November 3, 2009 - IPG Photonics Corporation (Nasdaq: IPGP) today reported financial results for the third quarter of 2009 ended September 30, 2009.
Comments on the Third Quarter
"Despite the challenging economic environment, we surpassed our guidance on the top- and bottom-line in addition to recording a third-quarter profit of five cents, after reporting a loss in the second quarter," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Although the demand environment continues to be very difficult compared with the third quarter a year ago, revenues grew by more than 13 percent on a sequential basis. Year-over-year, sales for the third quarter were down 26 percent. We were particularly encouraged with the 63 percent sequential increase in pulsed laser sales, which offset soft demand for high power lasers primarily due to continued restructuring in the auto sector."
"Asian markets, especially China, performed well during the quarter and were responsible for driving our sequential revenue growth," said Gapontsev. "In Europe, Germany continued to be weak, but that was partially offset by increasing demand for cutting applications in southern Europe. Materials processing, our largest market, continues to be affected by recessionary conditions, but still posted 17 percent growth on a sequential basis due to increasing demand in China. The advanced applications market turned in solid growth in the third quarter on a sequential and year-over-year basis. Sales for medical applications continued to increase on a year-over-year basis, while telecom growth slowed in the third quarter due to spending delays in the U.S. and Russia."
"During the quarter, we generated $13.9 million in cash from operations, repaid $16.2 million in bank debt and ended the quarter with $76.3 million in cash and cash equivalents, an increase of $25.0 million from year-end 2008," said Gapontsev. "We also reduced capital expenditures to $1.9 million in the quarter, and $9.6 million year-to-date." For the nine months ended September 30, 2009, cash provided by operating activities was $37.7 million and cash used in investing activities totaled $9.5 million.
While gross margin was 36.5% in the third quarter of 2009 compared with 47.4% in the same quarter in 2008, it increased sequentially by 7.4 percentage points from the second quarter of 2009. Operating income was $3.6 million in the third quarter of 2009 compared with operating income of $17.1 million for the same period in 2008. Operating expenses, including foreign exchange gains and losses, for the third quarter of 2009 were $13.1 million, or 28.5% of revenue, compared with $12.3 million, or 19.9% of revenue, in the third quarter of 2008.
For the first nine months of 2009, gross margin was 33.7% compared with 47.3% in 2008. Operating income was $4.4 million in the first nine months of 2009 compared with $42.4 million for the first nine months of 2008. Operating expenses, including foreign exchange gains and losses, for the first nine months of 2009 were $40.0 million, or 30.4% of revenue, compared with $38.4 million, or 22.5% of revenue, in the same period of 2008.
IPG also announced that it is planning to file a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission to register up to $130 million in securities, including $30 million in secondary shares. IPG anticipates that the registration statement would be filed within the next ten days. While the Company has no immediate plans to raise capital under the shelf registration statement, it provides IPG with the financial flexibility to do so at the appropriate time.
This announcement shall not constitute an offer to sell or a solicitation of an offer to buy any securities. It is the Company's intention to file a shelf registration statement, however there can be no assurance that the Company will actually make such a filing or that the SEC will declare the registration statement effective.
Business Outlook and Financial Guidance
"Despite the challenging business environment, some segments of IPG's business showed signs of improvement in the third quarter," said Gapontsev. "While we expect to see continued strength in demand from Asia, corporate buyers are still very cautious in the United States and Europe. However, our sales force is reporting an increase in quoting activity in those geographies. Looking forward, given the positive trends in some markets and the fact that the book-to-bill ratio was greater than one for the second consecutive quarter, we are cautiously optimistic that we have seen the worst of the macroeconomic environment. However, we cannot predict how the macro-environment will affect our markets as we move into 2010."
For the fourth quarter of 2009, IPG Photonics expects revenues in the range of $44 million to $49 million. The Company anticipates earnings per diluted share in the range of $0.04 to $0.09 based on 46,695,000 common shares, which includes 45,573,000 basic common shares outstanding and 1,122,000 potentially dilutive options at September 30, 2009.
As discussed in more detail below, actual results may differ from this guidance due to various factors including but not limited to product demand, competition and general economic conditions. This guidance is subject to the risks outlined in the Company's reports with the SEC, and assumes that exchange rates remain at present levels.
Conference Call Reminder
The Company will hold a conference call to review its financial results and business highlights today, November 3, 2009 at 10:00 a.m. ET. The conference call will be webcast live and can be accessed on the "Investors" section of the Company's website at www.ipgphotonics.com. The conference call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. Interested parties that are unable to listen to the live call may access an archived version of the webcast, which will be available for one year on IPG's website.
About IPG Photonics Corporation
IPG Photonics Corporation is the world leader in high-power fiber lasers and amplifiers. Founded in 1990, IPG pioneered the development and commercialization of optical fiber-based lasers for use in a wide range of applications such as materials processing, advanced, telecommunications and medical applications. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs. IPG has its headquarters in Oxford, Massachusetts, and has additional plants and offices throughout the world. For more information, please visit www.ipgphotonics.com.
Safe Harbor Statement
Information and statements provided by the Company 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, the filing of a Form S-3 registration statement, bookings for the fourth quarter of 2009, expectations for continued strength in demand from Asia, the outlook for demand in United States and Europe, optimism that IPG may have come out of the worst of the macroeconomic environment, and the Company's revenues and EPS guidance for the fourth quarter of 2009. 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 the Company serves, particularly the effect of economic downturns; reduction in customer capital expenditures; potential order cancellations and push-outs and financial and credit market issues; the Company's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; effective management of growth; level of fixed costs from its vertical integration; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; inventory write-downs; foreign currency fluctuations; competitive factors, including declining average selling prices; building and expanding field service and support operations; uncertainties pertaining to customer orders; demand for products and services; development of markets for the Company's products and services; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K (filed with the SEC on March 12, 2009) and its periodic 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. The Company 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.
To view the complete release and financial tables, click here or visit the "Investors" section of IPG Photonics' website at www.ipgphotonics.com.
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