Delivered Revenue At the High End of the Guidance
Improved Gross Margin and Generated Strong Cash Flow From Operations
MARLBOROUGH, Mass., Feb. 11, 2025 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the fourth quarter ended December 31, 2024.
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
| (In millions, except per share data and percentages) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||
| Revenue | $ | 234.3 | $ | 298.9 | (22 | )% | $ | 977.1 | $ | 1,287.4 | (24 | )% | ||||||||||
| Gross margin | 38.6 | % | 38.2 | % | 34.6 | % | 42.1 | % | ||||||||||||||
| Operating income (loss) | $ | 14.0 | $ | 28.8 | (51 | )% | $ | (208.3 | ) | $ | 232.0 | NM | ||||||||||
| Operating margin | 6.0 | % | 9.6 | % | (21.3 | )% | 18.0 | % | ||||||||||||||
| Net income (loss) attributable to IPG Photonics Corporation | $ | 7.8 | $ | 41.4 | (81 | )% | $ | (181.5 | ) | $ | 218.9 | NM | ||||||||||
| Earnings (loss) per diluted share | $ | 0.18 | $ | 0.89 | (80 | )% | $ | (4.09 | ) | $ | 4.63 | NM | ||||||||||
NM - not meaningful.
Management Comments
"Our revenue was at the high end of our guidance, and we delivered strong cash flow from operations despite challenging demand," said Dr. Mark Gitin, IPG Photonics' Chief Executive Officer. "In this environment, we are focused on managing our costs, investing in strategic growth initiatives and strengthening our execution. We believe these efforts will help IPG differentiate and win in emerging laser applications, delivering sustainable and profitable growth over the long term."
Financial Highlights
Fourth quarter revenue of $234 million decreased 22% year over year due to lower sales in materials processing and medical applications, partially offset by growth in advanced applications. Changes in foreign exchange rates reduced revenue growth by approximately $2 million or 1%. Materials processing sales accounted for 85% of total revenue and decreased 24% year over year, primarily as a result of lower sales in welding and cutting applications, partially offset by higher revenue in additive manufacturing and micro-machining applications. Other applications sales decreased 6% year over year due to lower revenue in medical applications partially offset by higher sales in advanced applications. Emerging growth products sales accounted for 48% of total revenue, increasing from 45% in the prior quarter. By region, sales decreased 31% in North America, 22% in China, 22% in Europe and increased 15% in Japan on a year-over-year basis.
Gross margin of 38.6% increased 40 basis points year over year driven by lower product costs, lower tariffs and shipping costs as well as more stable inventory provisions, but was negatively impacted by reduced absorption of manufacturing expenses. Earnings per diluted share (EPS) of $0.18 decreased 80% in the fourth quarter. Foreign exchange transaction gains increased operating income by $1 million and had an immaterial impact on earnings per share. The effective tax rate was 64% due to unusual tax items which totaled $3.4 million and reduced EPS by $0.08 in the quarter. During the fourth quarter, IPG generated $74 million in cash from operations and spent $23 million on capital expenditures and $57 million on share repurchases.
Business Outlook and Financial Guidance
Total backlog was $636 million and consisted of $371 million of orders with firm shipment dates and $265 million of frame agreements. Total backlog decreased by 8%, driven by an 8% decrease in orders with firm shipment dates and a 9% decrease in frame agreements.
"Global industrial demand remains subdued so far in early 2025, which was reflected in our book-to-bill ratio of slightly below one for the fourth quarter. However, with our leading product portfolio, expertise across laser solutions, and strong balance sheet, we believe that we will be well-positioned when the market rebounds. We are navigating through this environment by focusing on execution, managing costs and redeploying the savings to fund strategic investments in long-term growth opportunities, which we expect to show results in 2026 and beyond," concluded Dr. Gitin.
For the first quarter of 2025, IPG expects revenue of $210 million to $240 million, gross margin between 36% and 39%, and operating expenses of $82 million to $84 million. The Company expects the first quarter tax rate to be approximately 28%, excluding discrete items. IPG anticipates delivering adjusted earnings per diluted share in the range of $0.05 to $0.35 and adjusted EBITDA in the range of $19 million to $35 million.
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, 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 0.96, Japanese yen 157 and Chinese yuan 7.19, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited Financial Data Workbook and Fourth Quarter 2024 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, February 11, 2025 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.
Contact
Eugene Fedotoff
Senior Director, Investor Relations
IPG Photonics Corporation
508-597-4713
efedotoff@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 develop innovative laser solutions making the world a better place. 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 Marlborough, 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 those statements related to managing our costs effectively, investing in strategic growth initiatives and strengthening our execution, helping IPG to differentiate and win in emerging laser applications, delivering sustainable and profitable growth over the long term, being well-positioned for a market recovery, focusing on execution, managing costs and redeploying the savings to fund strategic investments, expectation to show results in 2026 and beyond, and statements related to revenue, gross margin and operating expenses outlook, tax rate, earnings, adjusted earnings per share and adjusted EBITDA guidance, and the impact of the U.S. dollar on our guidance for first quarter of 2025. 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 21, 2024) 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.
Use of Non-GAAP Adjusted Financial Information
We refer to certain financial measures that are not recognized under United States generally accepted accounting principles ("GAAP") and are provided as supplemental information to enhance understanding of the company's financial performance. These measures should not be considered as a substitute for, or superior to, GAAP financial measures.
We have not provided a quantitative reconciliation of forward-looking Non-GAAP net earnings per diluted share and Adjusted EBITDA to their most directly comparable GAAP financial measures because we are unable to estimate with reasonable certainty the ultimate timing or amount of certain significant items without unreasonable efforts. These items include, but are not limited to, the amortization of acquired intangible assets of $2.5 million excluded from the calculation of adjusted EPS, stock based compensation of $11.0 million excluded from the calculation of adjusted EBITDA and the income tax effect of these items.
| IPG PHOTONICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| Net sales | $ | 234,337 | $ | 298,893 | $ | 977,134 | $ | 1,287,439 | |||||||
| Cost of sales | 143,993 | 184,726 | 638,979 | 745,741 | |||||||||||
| Gross profit | 90,344 | 114,167 | 338,155 | 541,698 | |||||||||||
| Operating expenses: | |||||||||||||||
| Sales and marketing | 21,864 | 22,161 | 89,582 | 85,679 | |||||||||||
| Research and development | 25,738 | 27,714 | 109,783 | 98,704 | |||||||||||
| General and administrative | 28,893 | 35,003 | 124,313 | 125,749 | |||||||||||
| Net loss from divestiture and sale of assets | - | - | 190,201 | - | |||||||||||
| Impairment of long-lived assets | 440 | - | 27,006 | 1,237 | |||||||||||
| Restructuring charges (recoveries), net | - | 69 | - | (288 | ) | ||||||||||
| (Gain) loss on foreign exchange | (543 | ) | 442 | 5,524 | (1,356 | ) | |||||||||
| Total operating expenses | 76,392 | 85,389 | 546,409 | 309,725 | |||||||||||
| Operating income (loss) | 13,952 | 28,778 | (208,254 | ) | 231,973 | ||||||||||
| Other income, net: | |||||||||||||||
| Interest income, net | 7,409 | 13,369 | 45,467 | 41,735 | |||||||||||
| Other income, net | 651 | 6 | 899 | 1,167 | |||||||||||
| Total other income | 8,060 | 13,375 | 46,366 | 42,902 | |||||||||||
| Income (loss) before provision for income taxes | 22,012 | 42,153 | (161,888 | ) | 274,875 | ||||||||||
| Provision for income taxes | 14,197 | 725 | 19,638 | 55,997 | |||||||||||
| Net income (loss) attributable to IPG Photonics Corporation | $ | 7,815 | $ | 41,428 | $ | (181,526 | ) | $ | 218,878 | ||||||
| Net income (loss) attributable to IPG Photonics Corporation per share: | |||||||||||||||
| Basic | $ | 0.18 | $ | 0.89 | $ | (4.09 | ) | $ | 4.64 | ||||||
| Diluted | $ | 0.18 | $ | 0.89 | $ | (4.09 | ) | $ | 4.63 | ||||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 42,652 | 46,533 | 44,336 | 47,154 | |||||||||||
| Diluted | 42,781 | 46,656 | 44,336 | 47,320 | |||||||||||
| IPG PHOTONICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (In thousands, except share and per share data) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 620,040 | $ | 514,674 | ||||
| Short-term investments | 310,152 | 662,807 | ||||||
| Accounts receivable, net | 171,131 | 219,053 | ||||||
| Inventories | 284,780 | 453,874 | ||||||
| Prepaid income taxes | 17,592 | 26,038 | ||||||
| Prepaid expenses and other current assets | 27,300 | 38,208 | ||||||
| Total current assets | 1,430,995 | 1,914,654 | ||||||
| Deferred income taxes, net | 115,031 | 88,788 | ||||||
| Goodwill | 67,241 | 38,540 | ||||||
| Intangible assets, net | 55,376 | 26,234 | ||||||
| Property, plant and equipment, net | 588,375 | 602,257 | ||||||
| Other assets | 32,246 | 28,425 | ||||||
| Total assets | $ | 2,289,264 | $ | 2,698,898 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 35,385 | $ | 28,618 | ||||
| Accrued expenses and other current liabilities | 152,048 | 181,350 | ||||||
| Income taxes payable | 17,586 | 4,893 | ||||||
| Total current liabilities | 205,019 | 214,861 | ||||||
| Other long-term liabilities and deferred income taxes | 59,774 | 68,652 | ||||||
| Total liabilities | 264,793 | 283,513 | ||||||
| Commitments and contingencies | ||||||||
| IPG Photonics Corporation equity: | ||||||||
| Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,632,974 and 42,548,561 shares issued and outstanding, respectively, at December 31, 2024; 56,317,438 and 46,320,671 shares issued and outstanding, respectively, at December 31, 2023. | 6 | 6 | ||||||
| Treasury stock, at cost, 14,084,413 and 9,996,767 shares held at December 31, 2024 and December 31, 2023, respectively. | (1,505,321 | ) | (1,161,505 | ) | ||||
| Additional paid-in capital | 1,035,285 | 994,020 | ||||||
| Retained earnings | 2,613,868 | 2,795,394 | ||||||
| Accumulated other comprehensive loss | (119,367 | ) | (212,530 | ) | ||||
| Total IPG Photonics Corporation stockholders' equity | 2,024,471 | 2,415,385 | ||||||
| Total liabilities and equity | $ | 2,289,264 | $ | 2,698,898 | ||||
| IPG PHOTONICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
| Twelve Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | (181,526 | ) | $ | 218,878 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 61,443 | 69,621 | ||||||
| Impairment of long-lived assets and restructuring (recoveries), net | 27,006 | (486 | ) | |||||
| Provisions for inventory, warranty & bad debt | 90,377 | 61,058 | ||||||
| Net loss from divestiture and sale of assets | 190,201 | - | ||||||
| Other | (1,124 | ) | 1,471 | |||||
| Changes in assets and liabilities that provided (used) cash, net of acquisitions: | ||||||||
| Accounts receivable and accounts payable | 45,301 | (26,714 | ) | |||||
| Inventories | 47,725 | 1,823 | ||||||
| Other | (31,507 | ) | (29,665 | ) | ||||
| Net cash provided by operating activities | 247,896 | 295,986 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of and deposits on property, plant and equipment | (98,524 | ) | (110,483 | ) | ||||
| Proceeds from sales of property, plant and equipment | 28,578 | 31,241 | ||||||
| Purchases of short-term investments | (713,151 | ) | (1,232,863 | ) | ||||
| Proceeds from short-term investments | 1,083,464 | 1,073,993 | ||||||
| Acquisitions of businesses, net of cash acquired | (66,738 | ) | - | |||||
| Net cash outflow from divestiture | (25,324 | ) | - | |||||
| Other | 427 | 558 | ||||||
| Net cash provided by (used in) investing activities | 208,732 | (237,554 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Principal payments on long-term borrowings | - | (16,031 | ) | |||||
| 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 | 4,195 | 3,147 | ||||||
| Purchase of treasury stock, at cost | (343,816 | ) | (223,496 | ) | ||||
| Net cash used in financing activities | (339,621 | ) | (236,380 | ) | ||||
| Effect of changes in exchange rates on cash and cash equivalents | (11,641 | ) | (5,587 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 105,366 | (183,535 | ) | |||||
| Cash and cash equivalents - Beginning of period | 514,674 | 698,209 | ||||||
| Cash and cash equivalents - End of period | $ | 620,040 | $ | 514,674 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 277 | $ | 1,284 | ||||
| Cash paid for income taxes | $ | 40,632 | $ | 62,916 | ||||
| IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Amortization of intangible assets: | ||||||||||||||||
| Cost of sales | $ | 631 | $ | 550 | $ | 2,000 | $ | 2,242 | ||||||||
| Sales and marketing | 1,122 | 1,283 | 3,933 | 5,653 | ||||||||||||
| Total amortization of intangible assets | $ | 1,753 | $ | 1,833 | $ | 5,933 | $ | 7,895 | ||||||||
| IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION (UNAUDITED) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Cost of sales | $ | 2,215 | $ | 1,265 | $ | 8,687 | $ | 7,929 | ||||||||
| Sales and marketing | 1,289 | 1,376 | 5,941 | 5,421 | ||||||||||||
| Research and development | 2,191 | 3,225 | 10,239 | 9,396 | ||||||||||||
| General and administrative | 2,025 | 6,276 | 12,283 | 16,858 | ||||||||||||
| Total stock-based compensation | 7,720 | 12,142 | 37,150 | 39,604 | ||||||||||||
| Tax effect of stock-based compensation | (1,687 | ) | (2,644 | ) | (8,191 | ) | (8,660 | ) | ||||||||
| Net stock-based compensation | $ | 6,033 | $ | 9,498 | $ | 28,959 | $ | 30,944 | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Excess tax (detriment) benefit on stock-based compensation | $ | (419 | ) | $ | (94 | ) | $ | (4,532 | ) | $ | (1,835 | ) | ||||
