14 Feb 2019
Nine per cent fall to $330m in line with guidance; China sales tank, Europe down, but US demand boosted.
High power fiber laser giant IPG Photonics this week reported mixed financial results for the fourth quarter ended December 31, 2018. But overall, fourth quarter revenue of $330 million decreased 9% year over year.
Ups and downs
Materials processing sales accounted for 94% of total revenue, decreasing 9% year over year due to lower sales in metal cutting and 3D printing, partially offset by higher sales in welding applications. Sales to other markets increased 5% year-over-year driven by growth in communications, government and medical applications.
Sales of high power continuous wave lasers, representing 56% of total revenue, decreased 20% year over year. On a year over year basis, pulsed lasers sales increased 33%, medium power CW laser sales decreased 29%, quasi continuous wave (QCW) lasers sales decreased 12% and systems sales increased 42%. By region, sales decreased 19% in China and 12% in Europe but increased 32% in North America and 4% in Japan on a year over year basis.
The acquisition of Genesis Systems Group, which closed in early December, contributed $8 million of revenue, and currency depreciation relative to the exchange rates assumed in the company's fourth quarter guidance reduced revenue by $2 million.
"Despite further weakening of the macroeconomic climate in our largest markets, we were able to deliver results in line with our guidance," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "More importantly, we have made meaningful strides in key new product areas and undertaken strategic acquisitions that help us capitalize on the long-term growth opportunities for our laser solutions. We believe our progress delivering on new growth opportunities reinforces our industry leadership in fiber laser technology, strengthens our relationships with leading-edge customers and enables the next-generation of product creation."
During the fourth quarter, IPG generated $113 million in cash from operations. Capital expenditures were $27 million, and the company repurchased 466 thousand shares for $64 million completing its $125 million repurchase authorization. As of December 31, 2018, IPG’s total backlog was $712 million, decreasing 4% year over year. Orders with firm shipment dates were $339 million, up 4% year over year and frame agreements, which are non-binding indications of customer pricing and volume levels, decreased 11% to $374 million.
Backlog excluding the acquisition of Genesis was $673 million and decreased by 10% year over year while orders with firm shipment dates excluding Genesis were $299 million, decreasing 8% year over year. Fourth quarter book-to-bill was below 1.0, “in line with normal seasonality.”
IPG: Mixed results.
For the first quarter of 2019, IPG expects revenue of $290 million to $320 million. The Company expects the first quarter tax rate to be approximately 25%, excluding effects relating to equity grants. IPG anticipates delivering earnings per diluted share in the range of $1.00 to $1.20, with 53.2 million basic common shares outstanding and 54.1 million diluted common shares outstanding.
“We expect pricing headwinds related to more aggressive competition in China to continue, exacerbating this challenging demand environment. However, we are reinforcing our competitive lead in our core metal processing markets, retaining our established relationships with large customers and winning new business with emerging OEM customers," said Dr. Gapontsev.
Dr. Gapontsev added, "Although conversations with our OEM customers in China suggest cautious optimism regarding a mid-year pickup in demand driven by government stimulus and continued infrastructure investment, we do not have clear visibility into full year OEM order plans at this time. As such, we do not believe it is appropriate to provide full year revenue guidance until this visibility improves.
“In general, we would expect year over year declines in revenue to persist in the first and second quarter of 2019 due to more challenging comparisons, followed by improving trends in the back half of 2019 driven by potential market recovery and strength in new products and solutions."