IPG Photonics fourth quarter revenues increase 86% year-over-year to $101 million

IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the fourth quarter of fiscal 2010 ended December 31, 2010.

“The sales growth we achieved in 2010 was the result of growing industry acceptance of the superiority of fiber lasers and our products, especially in materials processing applications”

Management Comments

"IPG reported an excellent quarter of revenue and profitability growth to complete what was a strong 2010," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "For the fourth quarter, we reported an 86% year-over-year increase in revenues to $101 million with broad-based demand strength across most geographies, product lines and end markets. We achieved earnings per diluted share of $0.56 for the fourth quarter of 2010 compared with $0.07 in the prior year. Our gross margin increased to 55.0% from 36.7% in the fourth quarter of 2009 and 50.0% in the third quarter of 2010. Our gross margin and earnings performance demonstrates the leverage that we have in our business model."

"Geographically, we achieved sales growth in every major region, with China and Europe reporting the largest year-over-year increases of 256% and 92% for the quarter, respectively," continued Dr. Gapontsev. "Materials processing, our largest market, was our strongest application in the quarter, with a 106% increase in sales from the fourth quarter of 2009. We are seeing increases in acceptance of fiber lasers for materials processing applications across a variety of the largest laser applications such as cutting, welding, marking and engraving. Telecommunications sales increased 43% year-over-year and Advanced Applications sales grew 39%. The only market that experienced lower sales was Medical, which was primarily related to lower demand from our main OEM customer."

"For the full year 2010, sales increased 61% to $299.3 million and earnings per diluted share by more than 800% to $1.13 as a result of strong demand for high power and pulsed lasers, growing acceptance of fiber lasers in different applications and a recovering global economy. The leverage in our business model drove the substantial increase in earnings over 2009."

"Our ability to generate cash continued to be strong in the fourth quarter as our cash position grew by $51.2 million. The increase included $34.0 million generated from operations and a $25.0 million investment in our Russian subsidiary by The Russian Corporation for Nanotechnologies in the fourth quarter of 2010. We ended the year with $147.9 million in cash and cash equivalents despite a 170% increase in capital expenditures. We accelerated certain property, plant and equipment investments, ending the year with $28.4 million in capital expenditures due to the positive demand that we saw."

Business Outlook and Financial Guidance

"The sales growth we achieved in 2010 was the result of growing industry acceptance of the superiority of fiber lasers and our products, especially in materials processing applications," said Dr. Gapontsev. "Going forward, we plan to continue to drive the proliferation of fiber lasers in new and existing applications and further extend our technology and brand leadership. We plan to continue to invest in product and manufacturing technology development, capacity expansion and sales and service infrastructure to meet growing demand and capitalize on growth opportunities."

"Seasonally, the first quarter is historically the lowest. We began 2011 with strong order flow, and anticipate that IPG will report strong year-over-year sales and earnings growth for Q1 to begin what should be an excellent year for IPG," concluded Dr. Gapontsev.

IPG Photonics expects revenues in the range of $89 million to $95 million for the first quarter of 2011. The Company anticipates earnings per diluted share in the range of $0.37 to $0.44 based on 48,141,000 common shares, which includes 46,835,000 basic common shares outstanding and 1,306,000 potentially dilutive options at December 31, 2010.