IPG Photonics Announces Third Quarter 2024 Financial Results
Focusing on Execution and Future Growth Opportunities
Delivered Results At the High End of Guidance
MARLBOROUGH, Mass., Oct. 29, 2024 (GLOBE NEWSWIRE) -- IPG Photonics Corporation (NASDAQ:IPGP) today reported financial results for the third quarter ended September 30, 2024.
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions, except per share data and percentages)
2024
2023
Change
2024
2023
Change
Revenue
$
233.1
$
301.4
(23
)%
$
742.8
$
988.5
(25
)%
Gross margin
23.2
%
44.1
%
33.4
%
43.2
%
Operating (loss) income
$
(253.3
)
$
55.7
NM
$
(222.2
)
$
203.2
NM
Operating margin
(108.7
)%
18.5
%
(29.9
)%
20.6
%
Net (loss) income attributable to IPG Photonics Corporation
$
(233.6
)
$
55.0
NM
$
(189.3
)
$
177.5
NM
(Loss) earnings per diluted share (1)
$
(5.33
)
$
1.16
NM
$
(4.22
)
$
3.73
NM
(1) Adjusted diluted EPS was $0.29 for the three months ended September 30, 2024. Refer to supplemental schedule of non-GAAP measures for reconciliation details.
NM - not meaningful.
Management Comments
"IPG has made important progress strategically and operationally in the last several months," said Dr. Mark Gitin, IPG Photonics' Chief Executive Officer. "Our third-quarter results were at the high end of our guidance when adjusted for the divested revenue. We completed our exit from Russia and are strengthening our position in fast-growing high-precision laser cleaning applications with the announced acquisition of cleanLASER. These moves, along with progress in our innovation pipeline and actions underway to gain efficiencies across our business, underscore that we are controlling what we can control as we position for demand recovery."
Financial Highlights
Third quarter revenue of $233 million decreased 23% year over year due to lower demand in industrial and e-mobility markets. Changes in foreign exchange rates did not have a material impact on revenue. Materials processing sales accounted for 89% of total revenue and decreased 22% year over year, primarily due to lower sales in cutting applications. Other sales decreased 28% year over year due to lower revenue in medical and advanced applications. Emerging growth products sales accounted for 45% of total revenue, a slight decrease from 46% in the prior quarter due to lower revenue for high power pulsed lasers and medical products. By region, sales decreased 20% in North America, 27% in China, 29% in Europe and 8% in Japan on a year-over-year basis.
Gross margin of 23.2% decreased significantly year over year due to increased inventory provision and reduced absorption of manufacturing expenses, partially offset by lower tariffs and shipping costs. The inventory provision included $30 million related to a change in estimate of recoverability due to the current demand environment, which reduced gross margin by 12.8%, and diluted EPS by $0.49. Excluding this inventory provision results in an adjusted gross margin of 36.0%. Loss per diluted share (EPS) of $5.33 included loss on divestiture of our Russian operations which decreased operating income by $198 million and asset impairment charges of $27 million. These items decreased diluted EPS by $5.16 in the third quarter. Foreign exchange transaction loss decreased operating income by $1 million and earnings per share by $0.02. Excluding these items results in an adjusted diluted EPS of $0.29 (1) in the third quarter. During the third quarter, IPG generated $66 million in cash from operations and spent $23 million on capital expenditures and $74 million on share repurchases.
Business Outlook and Financial Guidance
"We continue to believe we are bouncing along the bottom of a muted demand environment, which is supported by a book-to-bill of one for the third quarter. IPG's strong technology portfolio and expertise across lasers positions us well in new growth areas where fiber lasers can replace incumbent technologies and differentiates us from competition," concluded Dr. Gitin.
For the fourth quarter of 2024, IPG expects revenue of $210 million to $240 million, gross margin between 35% and 38%, and operating expenses of $78 million to $80 million. The Company expects the fourth quarter tax rate to be approximately 25%, including certain discrete items. IPG anticipates delivering earnings per diluted share in the range of $0.05 to $0.35. This guidance excludes Russian operations which were sold in the third quarter.
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 0.90, Japanese yen 143 and Chinese yuan 7.01, respectively.
Supplemental Financial Information
Additional supplemental financial information is provided in the unaudited Financial Data Workbook and Third 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, October 29, 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.
Contact
Eugene FedotoffSenior Director, Investor Relations IPG Photonics Corporation
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 the acquisition of cleanLASER, our strong technology portfolio and expertise across lasers positioning us well in new growth areas where fiber lasers can replace incumbent technologies and differentiates us from competition, and statements related to revenue, gross margin and operating expenses outlook, tax rate and earnings guidance, and the impact of the U.S. dollar on our guidance for fourth 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.
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"). Please see "Supplemental Schedule of Non-GAAP Financial Measures" below for additional information and a reconciliation of the Non-GAAP financial measures to the most comparable GAAP financial measures.
IPG PHOTONICS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In thousands, except per share data)
Net sales
$
233,143
$
301,401
$
742,797
$
988,546
Cost of sales
179,054
168,499
494,986
561,015
Gross profit
54,089
132,902
247,811
427,531
Operating expenses:
Sales and marketing
22,233
22,243
67,718
63,518
Research and development
27,177
24,708
84,045
70,990
General and administrative
32,660
30,958
95,420
90,746
Net loss from divestiture and sale of assets
197,651
—
190,201
—
Impairment of long-lived assets
26,566
1,237
26,566
1,237
Restructuring charges (recoveries), net
—
(1,501
)
—
(357
)
Loss (gain) on foreign exchange
1,148
(449
)
6,067
(1,798
)
Total operating expenses
307,435
77,196
470,017
224,336
Operating (loss) income
(253,346
)
55,706
(222,206
)
203,195
Other income, net:
Interest income, net
11,103
11,569
38,058
