MARLBOROUGH, Mass. – April 30, 2024 - IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter ended March 31, 2024.

"In the first quarter, we continued to generate strong cash flow from operations, reduce inventory and control manufacturing expenses, in spite of the challenging conditions. We also remained focused on our strategy to unlock additional growth opportunities for fiber lasers such as welding, cleaning, heating and medical, which would allow us to diversify our revenue away from highly competitive markets," said Dr. Eugene Scherbakov, IPG Photonics' Chief Executive Officer." While delayed investments in electric battery capacity worldwide, soft industrial demand across most of our major geographies, and inventory management by some large OEM customers impacted first quarter results, we believe that our strong technology differentiation helps us continue to displace other laser and non-laser tools across a growing range of applications, positioning our business for growth in the future."

First quarter revenue of $252 million decreased 27% year over year. Changes in foreign exchange rates reduced revenue growth by approximately $8 million or 2%. By region, sales decreased across all major geographies and were down 38% in China, 16% in North America, 21% in Europe and 23% in Japan on a year-over-year basis. Materials processing sales accounted for 90% of total revenue and decreased 28% year over year. The decline was due to lower revenue in most applications, except for growth in 3D printing and heating, and flat sales in parts and services. Other applications sales decreased 25% year over year due to lower revenue in medical and advanced applications.

Emerging growth products sales accounted for 45% of total revenue and were negatively impacted by lower demand in e-mobility and solar cell manufacturing applications, lower sales in handheld welding applications and inventory adjustment by a large medical customer.

Gross margin of 38.7% decreased 360 basis points year over year due to reduced absorption of manufacturing expenses and increased inventory reserves, partially offset by lower product and shipping costs. Earnings per diluted share (EPS) of $0.52 decreased 59% year over year. The gain on sale of assets increased operating income by $7 million and increased diluted EPS by $0.11. Foreign exchange transaction loss decreased operating income by $2 million and earnings per share by $0.03 in the first quarter. The effective tax rate in the quarter was 28%. During the first quarter, IPG generated $55 million in cash from operations and spent $28 million on capital expenditures and $90 million on share repurchases.

“Despite a challenging first quarter, our book-to-bill was slightly above one for the first time since the first quarter last year, which may indicate that industrial demand is stabilizing and could start to improve modestly later in the year," concluded Dr. Scherbakov.

For the second quarter of 2024, IPG expects revenue of $240 million to $270 million. The Company expects the second quarter tax rate to be approximately 25%, including certain discrete items. IPG anticipates delivering earnings per diluted share in the range of $0.30 to $0.60.

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 0.93, Russian ruble 92, Japanese yen 151 and Chinese yuan 7.10, respectively.

Additional supplemental financial information is provided in the unaudited Financial Data Workbook and First Quarter 2024 Earnings Call Presentation available on the investor relations section of the Company's website at investor.ipgphotonics.com.

The Company will hold a conference call today, April 30, 2024 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.

508-597-4713

efedotoff@ipgphotonics.com

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 indications of stabilizing industrial demand and improvements later in the year, revenue outlook, tax rate and earnings guidance, and the impact of the U.S. dollar on our guidance for second quarter of 2024. 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.

 

						Three Months Ended March 31,
						2024						2023
						(In thousands, except per share data)
Net sales						$	252,009					$	347,174
Cost of sales						154,473						200,236
Gross profit						97,536						146,938
Operating expenses:
Sales and marketing						22,998						21,088
Research and development						29,381						22,770
General and administrative						31,158						30,128
Gain on sale of assets						(6,776)						—
Restructuring charges, net						—						181
Loss (gain) on foreign exchange						1,675						(2,655)
Total operating expenses						78,436						71,512
Operating income						19,100						75,426
Other income, net:
Interest income, net						14,177						7,533
Other income, net						325						331
Total other income						14,502						7,864
Income before provision of income taxes						33,602						83,290
Provision for income taxes						9,503						23,155
Net income attributable to IPG Photonics Corporation						$	24,099					$	60,135
Net income attributable to IPG Photonics Corporation per share:
Basic						$	0.52					$	1.26
Diluted						$	0.52					$	1.26
Weighted average common shares outstanding:
Basic						45,960						47,542
Diluted						46,175						47,776

 

						March 31,						December 31,
						2024						2023
						(In thousands, except share and  per share data)
ASSETS
Current assets:
Cash and cash equivalents						$	496,452					$	514,674
Short-term investments						643,655						662,807
Accounts receivable, net						184,012						219,053
Inventories						431,899						453,874
Prepaid income taxes						24,530						26,038
Prepaid expenses and other current assets						49,071						38,208
Total current assets						1,829,619						1,914,654
Deferred income taxes, net						84,452						88,788
Goodwill						38,351						38,540
Intangible assets, net						24,802						26,234
Property, plant and equipment, net						585,751						602,257
Other assets						35,461						28,425
Total assets						$	2,598,436					$	2,698,898
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable						$	26,675					$	28,618
Accrued expenses and other current liabilities						163,011						181,350
Income taxes payable						2,441						4,893
Total current liabilities						192,127						214,861
Other long-term liabilities and deferred income taxes						65,589						68,652
Total liabilities						257,716						283,513
Commitments and contingencies
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,521,438 and 45,566,746 shares issued and outstanding, respectively, at March 31, 2024; 56,317,438 and 46,320,671 shares issued and outstanding, respectively, at December 31, 2023.						6						6
Treasury stock, at cost, 10,954,692 and 9,996,767 shares held at March 31, 2024 and December 31, 2023, respectively.						(1,251,121)						(1,161,505)
Additional paid-in capital						1,002,600						994,020
Retained earnings						2,819,493						2,795,394
Accumulated other comprehensive loss						(230,258)						(212,530)
Total IPG Photonics Corporation equity						2,340,720						2,415,385
Total liabilities and equity						$	2,598,436					$	2,698,898

 

						Three Months Ended March 31,
						2024						2023
						(In thousands)
Cash flows from operating activities:
Net income						$	24,099					$	60,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						16,214						17,889
Provisions for inventory, warranty & bad debt						14,761						17,214
Other						143						19,561
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable and accounts payable						32,579						(29,242)
Inventories						1,498						(8,989)
Other						(34,698)						(39,288)
Net cash provided by operating activities						54,596						37,280
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment						(28,052)						(33,404)
Proceeds from sales of property, plant and equipment						25,262						1,600
Purchases of short-term investments						(226,521)						(343,820)
Proceeds from short-term investments						252,890						279,499
Other						157						107
Net cash provided by (used in) investing activities						23,736						(96,018)
Cash flows from financing activities:
Principal payments on long-term borrowings						—						(298)
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						(1,158)						(3,844)
Purchase of treasury stock, at cost						(89,616)						(113,094)
Net cash used in financing activities						(90,774)						(117,236)
Effect of changes in exchange rates on cash and cash equivalents						(5,780)						(1,098)
Net decrease in cash and cash equivalents						(18,222)						(177,072)
Cash and cash equivalents — Beginning of period						514,674						698,209
Cash and cash equivalents — End of period						496,452						521,137
Supplemental disclosures of cash flow information:
Cash paid for interest						$	4					$	525
Cash paid for income taxes						$	8,005					$	19,203

 

						Three Months Ended March 31,
						2024						2023
						(In thousands)
Amortization of intangible assets:
Cost of sales						$	488					$	564
Sales and marketing						937						1,457
Total amortization of intangible assets						$	1,425					$	2,021

 

						Three Months Ended March 31,
						2024						2023
						(In thousands)
Cost of sales						$	2,075					$	2,646
Sales and marketing						1,502						1,293
Research and development						2,631						1,796
General and administrative						3,524						3,876
Total stock-based compensation						9,732						9,611
Tax effect of stock-based compensation						(2,140)						(2,096)
Net stock-based compensation						$	7,592					$	7,515

MARLBOROUGH, Mass. – April 30, 2024 - IPG Photonics Corporation (NASDAQ: IPGP) (“IPG” or the “Company”) today announced that its Board of Directors (the “Board”) has appointed Mark Gitin, 57, as the next Chief Executive Officer of the Company and as a member of the Board, effective June 5, 2024. Dr. Gitin’s appointment follows a robust succession planning process, which was conducted with the assistance of a leading independent search firm and considered both internal and external candidates. Following Dr. Gitin’s addition, the Board will expand to 11 members.

Dr. Gitin will succeed Dr. Eugene Scherbakov, 76. Dr. Scherbakov is a co-founder of IPG and has spent 30 years with the Company. He will remain a member of the Board and serve as an advisor to the newly appointed CEO.

Dr. Gitin currently oversees the Photonics Solutions Division at MKS Instruments, Inc., a business with more than $1 billion in revenue. Dr. Gitin has more than 30 years of experience in the lasers and optics sector and possesses extensive technical and scientific expertise. Prior to joining MKS, he held several executive roles at Coherent. Dr. Gitin has a Ph.D. in Electrical Engineering from Cornell University, with a focus on ultra-short pulse lasers.

“The entire Board has been focused on the next phase of IPG’s evolution, and we are confident that now is the right moment for an orderly transition to build on the strong foundation that has been established to deliver sustainable and profitable long-term growth,” said John Peeler, Non-Executive Chair of the Board. “After thoroughly reviewing a broad range of candidates, we selected Dr. Gitin to lead IPG due to his track record as a strategic industry leader with the ability to identify and execute growth opportunities. He has proven he can drive operational excellence and manage both organic and inorganic growth, and his impressive scientific background speaks for itself. The Board looks forward to working with him and welcomes him to IPG.”

In the near-term, IPG will continue to focus on executing its stated strategic objectives, including diversifying and growing revenue away from China, investing in emerging growth products and continuing to generate strong cash flow and value for stockholders.

Mr. Peeler continued, “The Board is exceptionally grateful to Dr. Scherbakov for his significant contributions over the last 30 years, and particularly during the past three years when he took over as CEO from co-founder Valentin Gapontsev during the COVID-19 pandemic. Additionally, Dr. Scherbakov helped IPG successfully shift the Company’s manufacturing capacity out of Russia following the beginning of the conflict in Ukraine. Dr. Scherbakov strengthened IPG’s competitive position and laid the foundation for its next phase by establishing a clear strategic plan focused on key growth markets and applications, reorganizing R&D and disposing of non-core assets. He was able to manage a smooth and successful transition when Dr. Gapontsev stepped down, and we look forward to continuing to work with Dr. Scherbakov in his capacity as a director.”

“For more than three decades I have been committed to the growth and success of IPG, and it has been an honor to serve as CEO,” Dr. Scherbakov stated. “During the search process, it became clear that Dr. Gitin possessed a unique combination of relevant scientific expertise and a proven ability as a successful operator in our industry. We are thrilled to have secured Dr. Gitin as our next CEO, and I look forward to helping him to make this transition seamless for our customers and other stakeholders.”

“I have long-admired IPG as an industry leader that has consistently been able to deliver innovative laser products while maintaining a strong reputation and identity as a science-led organization,” said Dr. Gitin. “I look forward to getting to work and helping drive this next phase for the Company. I would also like to thank the members of the Board, and especially Dr. Scherbakov, both for how welcoming they have been throughout this process and for their trust in me in this role.”

Dr. Gitin currently serves as Executive Vice President and General Manager, Photonics Solutions Division of MKS Instruments, Inc. Dr. Gitin joined MKS in September 2017 as Vice President and General Manager of the Photonics Business Unit and in 2018, also assumed responsibility for the Instruments and Motion Business Unit. At MKS, Dr. Gitin was recruited to help drive the integration of the Newport Corporation acquisition. Under Dr. Gitin’s leadership, the business grew substantially in both revenue and profitability.

Prior to joining MKS, from March 1995 to September 2017, Dr. Gitin held various management positions covering a wide range of technologies at Coherent, Inc., including Vice President of Strategic Marketing, Vice President of Business Development, and Vice President and General Manager of the Diodes, Fibers and Systems Business Unit.

Dr. Gitin holds a B.S. in Electrical Engineering from the University of California, Davis and an M.Eng. and Ph.D. in Electrical Engineering from Cornell University. He has been issued five patents and has published peer-reviewed articles on lasers and opto-electronic technologies.

508-597-4713

efedotoff@ipgphotonics.com

Dan Zacchei / Joe Germani

IPG@longacresquarepartners.com