Date Announced: 01 Nov 2010
Strong Demand for Pulsed and High Power Lasers Drive Sales; Gross Margin Increases to 50%; Announces Partnership with RUSNANO and Sale of a Minority Interest in IPG’s Russian Subsidiary to Enhance Opportunities in Russian Market.
OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (NASDAQ:IPGP - News) today reported financial results for the third quarter of fiscal 2010 ended September 30, 2010.
Comments on the Third Quarter
“IPG continued its strong growth momentum in the third quarter with record revenues,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “For the third quarter of 2010, IPG reported revenues which grew by 74% year-over-year and 19% sequentially. We achieved earnings per share of $0.28 compared with $0.05 in the third quarter of 2009 and $0.22 in the second quarter of 2010. We also demonstrated the strength of our business model, as gross margins increased to 50.0% compared with 36.5% in the third quarter of 2009 and 45.3% in the second quarter of 2010. Our operating results for the third quarter included a loss of $2.1 million, or approximately $0.03 per diluted share, relating to foreign exchange losses.”
“An 88% increase in pulsed laser sales, the best selling product in the quarter, was driven by strong demand for marking/engraving, and an 83% increase in high-power laser sales, the second-best selling product line in the quarter, benefited from the increase in the cutting OEMs and welding demand,” said Gapontsev. “Telecommunication sales increased by 160% year-over-year, and 144% sequentially, due to demand in Russia and the U.S. We had a year-over-year decline for medical sales, which was primarily related to lower sales to our large U.S. medical OEM customer. Sales for advanced applications, which tend to be more uneven, were down 18% year-over-year due to strong European sales in the third quarter of 2009. Geographically, we experienced robust growth in all major regions as the general economic climate improved.”
“IPG generated $6.2 million in cash from operations and ended the quarter with $96.6 million in cash,” said Gapontsev. “Capital expenditures for the third quarter totaled $5.1 million and we continue to expect the total amount spent on capital expenditures and acquisitions to be approximately $25 million for the year.”
Partnership with RUSNANO and Sale of Minority Interest
IPG also announced today the sale of a 12.5% ownership in its Russia-based subsidiary, NTO IRE-Polus (NTO) to the Russian Corporation of Nanotechnologies (RUSNANO) for $25 million. RUSNANO was established in 2007 to invest in nanotechnology development, including projects in solar energy, nanostructured materials, medicine and biotech, mechanical engineering and metal working, optoelectronics and infrastructure. Under the terms of the agreement, RUSNANO will have options to purchase up to an additional 12.5% of NTO for an additional $25 million over the next five years if certain sales targets at NTO are achieved. IPG will maintain majority ownership and control of NTO and has a call option after three years to buy back the minority stake at a predetermined value. RUSNANO has a put option after five years to sell its minority stake to IPG at a predetermined value.
“This partnership with RUSNANO enables IPG to more strategically address a large and growing market in Russia for fiber optic telecom equipment and laser systems and to increase industrial laser sales in that territory,” said Gapontsev. “With the proceeds from the transaction, we will be able to make strategic R&D and capital expenditure investments in NTO, and develop our sales infrastructure in the Russian market. In addition, a partnership with RUSNANO will significantly expand the number of telecommunications, industrial and other important commercial relationships we have in Russia, ultimately driving growth by increasing our portfolio of customers.”
Business Outlook and Financial Guidance
“We anticipate that the sales momentum we have experienced during the first nine months of 2010 will continue through the end of the year,” said Gapontsev. “As we enter the last quarter of the year, we will continue to focus on maintaining the high quality of our products while we increase the penetration of our fiber lasers in existing and new applications, expanding our OEM and customer base, and further extend our leadership position in the markets we serve. As sales of our lasers continue to increase, we expect to benefit from the leverage in our business model.”
IPG Photonics expects revenues in the range of $80 million to $86 million for the fourth quarter of 2010. The Company anticipates earnings per diluted share in the range of $0.30 to $0.35 based on 47,700,000 common shares, which includes 46,533,000 basic common shares outstanding and 1,167,000 potentially dilutive options at September 30, 2010.
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.
Source: IPG Photonics
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Web Site: www.ipgphotonics.com