IPG Photonics(IPGP) - 2025 Q2 - Quarterly Results

Executive Summary This section summarizes IPG Photonics' Q2 2025 financial performance, management commentary, and key highlights, noting sequential revenue improvement Second Quarter 2025 Financial Performance Overview IPG Photonics reported Q2 2025 financial results above expectations, with sequential revenue improvement driven by demand recovery, and a book-to-bill ratio of approximately one Financial Performance Summary (in millions, except percentages and per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Revenue | $250.7 million | $257.6 million | (3)% | $478.5 million | $509.7 million | (6)% | | Gross margin | 37.3% | 37.3% | 0% pts | 38.3% | 38.0% | +0.3% pts | | Operating income | $0.1 million | $12.0 million | (99)% | $1.9 million | $31.1 million | (94)% | | Operating margin | — % | 4.7% | (4.7)% pts | 0.4% | 6.1% | (5.7)% pts | | Net income | $6.6 million | $20.2 million | (67)% | $10.4 million | $44.3 million | (77)% | | Earnings per diluted share | $0.16 | $0.45 | (64)% | $0.24 | $0.97 | (75)% | | Adjusted gross margin | 37.8% | 37.5% | +0.3% pts | 38.9% | 38.2% | +0.7% pts | | Adjusted EBITDA | $31.5 million | $39.4 million | (20)% | $64.2 million | $79.6 million | (19)% | | Adjusted earnings per diluted share | $0.30 | $0.52 | (42)% | $0.61 | $1.03 | (41)% | Management Comments Dr. Mark Gitin, CEO, expressed satisfaction with Q2 results exceeding expectations, noting sequential revenue improvement driven by general industrial and e-mobility markets - Revenue improved sequentially, driven by modest demand recovery in general industrial and e-mobility markets[3] - Excluding divestitures, Q2 2025 marked the first year-over-year revenue increase since 2022[3] - Reported strong growth in medical and advanced applications, supported by a customer win[3] - Launching a directed energy system for counter-UAV applications[3] Financial Highlights Second quarter revenue was $251 million, a 3% year-over-year decrease due to divestitures, but showed growth excluding them, with materials processing sales decreasing 6% YoY and other applications sales increasing 21% YoY Key Financial Metrics (in millions, except percentages) | Metric | Q2 2025 | Q2 2024 | Change YoY | | :----------------------------- | :------ | :------ | :--------- | | Revenue | $251M | $257.6M | (3)% | | Materials Processing Sales | 85% of total revenue | - | (6)% | | Other Applications Sales | - | - | 21% | | Emerging Growth Products Sales | 54% of total revenue | 51% (prior quarter) | +3% pts QoQ | | Asia Sales | - | - | 14% | | North America Sales | - | - | (4)% | | Europe Sales | - | - | (24)% | | GAAP Gross Margin | 37.3% | 37.3% | Flat | | Adjusted EBITDA | $31.5M | $39.4M | (20)% | | Adjusted EPS | $0.30 | $0.52 | (42)% | - Changes in foreign exchange rates increased revenue growth by approximately 1%[4] - IPG spent $15 million on capital expenditures and $30 million on share repurchases during the second quarter[5] Business Outlook and Financial Guidance This section outlines IPG Photonics' Q3 2025 financial guidance, including revenue, margin, earnings, and associated risks Q3 2025 Guidance For the third quarter of 2025, IPG Photonics anticipates revenue between $225 million and $255 million, with an adjusted gross margin of 36% to 38% - The second quarter book-to-bill ratio was approximately one on the higher revenue[6] - Continued demand is observed into the third quarter despite uncertainty related to tariffs[6] Q3 2025 Financial Guidance (in millions, except per share data and percentages) | Metric | Q3 2025 Guidance | | :----------------------------- | :--------------- | | Revenue | $225M - $255M | | Adjusted Gross Margin | 36% - 38% | | Operating Expenses | $89M - $91M | | Adjusted Earnings per Diluted Share | $0.05 - $0.35 | | Adjusted EBITDA | $22M - $36M | Risk Factors and Assumptions The provided guidance is subject to various risks, including trade policy changes, product demand fluctuations, order cancellations, competition, tariffs, currency fluctuations, and general economic conditions - Actual results may differ from guidance due to factors such as trade policy changes, product demand, order cancellations, competition, tariffs, currency fluctuations, and general economic conditions[8] - Guidance assumes exchange rates relative to the U.S. dollar of euro 0.85, Japanese yen 144, and Chinese yuan 7.16[8] Company Information and Disclosures This section provides supplemental financial information, conference call details, company overview, and a safe harbor statement Supplemental Financial Information & Conference Call Additional unaudited financial information is available on the company's investor relations website, and a conference call was held on August 5, 2025, to discuss the financial results - Additional supplemental financial information is available in the unaudited Financial Data Workbook and Second Quarter 2025 Earnings Call Presentation on investor.ipgphotonics.com[9] - A conference call was held on August 5, 2025, at 10:00 am ET, with a live webcast and archive available on the investor relations website[10] About IPG Photonics Corporation IPG Photonics Corporation is a global leader in high-power fiber lasers and amplifiers, primarily serving materials processing and other diverse applications - IPG Photonics Corporation is the leader in high-power fiber lasers and amplifiers[11] - Products are primarily used in materials processing and other diverse applications[11] - Mission is to develop innovative laser solutions delivering superior performance, reliability, and usability at a lower total cost of ownership[11] Safe Harbor Statement The Safe Harbor Statement clarifies that forward-looking statements in the release involve inherent risks and uncertainties, outlining numerous factors that could cause actual results to differ materially - Statements relating to future plans, events, or performance are forward-looking and involve risks and uncertainties[12] - Factors that could cause actual results to differ materially include business conditions in served markets, general economic conditions, international operations risks, trade controls and tariffs, market penetration, foreign currency fluctuations, fixed costs, competition, acquisitions, inventory write-downs, intellectual property claims, supply chain interruptions, and government regulations[12] Condensed Consolidated Financial Statements (Unaudited) This section presents unaudited condensed consolidated statements of operations, balance sheets, and cash flows, detailing financial position and performance Condensed Consolidated Statements of Operations This section presents the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025, and 2024, detailing revenue, cost of sales, gross profit, operating expenses, operating income, and net income Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $250,721 | $257,645 | $478,514 | $509,654 | | Cost of sales | $157,148 | $161,459 | $295,129 | $315,932 | | Gross profit | $93,573 | $96,186 | $183,385 | $193,722 | | Operating expenses: | | | | | | Sales and marketing | $25,552 | $22,487 | $49,982 | $45,485 | | Research and development | $29,937 | $27,487 | $58,273 | $56,868 | | General and administrative | $34,882 | $31,602 | $67,690 | $62,760 | | Loss on foreign exchange | $3,098 | $3,244 | $5,509 | $4,919 | | Total operating expenses | $93,469 | $84,146 | $181,454 | $162,582 | | Operating income | $104 | $12,040 | $1,931 | $31,140 | | Net income | $6,605 | $20,154 | $10,363 | $44,253 | | Diluted EPS | $0.16 | $0.45 | $0.24 | $0.97 | Condensed Consolidated Balance Sheets This section provides the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing the company's assets, liabilities, and total equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $359,184 | $620,040 | | Short-term investments | $540,414 | $310,152 | | Accounts receivable, net | $201,038 | $171,131 | | Inventories | $303,841 | $284,780 | | Total current assets | $1,474,156 | $1,430,995 | | Property, plant and equipment, net | $621,352 | $588,375 | | Total assets | $2,379,448 | $2,289,264 | | LIABILITIES AND EQUITY | | | | Accounts payable | $41,522 | $35,385 | | Accrued expenses and other current liabilities | $170,790 | $152,048 | | Total current liabilities | $216,952 | $205,019 | | Total liabilities | $274,896 | $264,793 | | Total IPG Photonics Corporation stockholders' equity | $2,104,552 | $2,024,471 | | Total liabilities and equity | $2,379,448 | $2,289,264 | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024, categorizing cash flows into operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net income | $10,363 | $44,253 | | Net cash provided by operating activities | $11,229 | $108,054 | | Net cash (used in) provided by investing activities | $(261,516) | $308,644 | | Net cash used in financing activities | $(34,457) | $(210,228) | | Effect of changes in exchange rates on cash and cash equivalents | $23,888 | $(604) | | Net (decrease) increase in cash and cash equivalents | $(260,856) | $205,866 | | Cash and cash equivalents — End of period | $359,184 | $720,540 | Supplemental Schedule of Non-GAAP Financial Measures (Unaudited) This section details the company's non-GAAP financial measures, including definitions, rationale, and reconciliations to GAAP Use of Non-GAAP Adjusted Financial Information This section defines and explains the company's use of non-GAAP financial measures, presented as supplemental information to enhance understanding of financial performance by excluding certain non-recurring or non-cash items - Non-GAAP financial measures are provided as supplemental information to enhance understanding of the Company's financial performance and should not be considered a substitute for GAAP measures[19] - Adjusted gross profit, adjusted operating income, adjusted EBITDA, and adjusted net income exclude non-recurring, infrequent, or unusual charges, including acquisition and integration charges, amortization of acquisition-related intangibles, foreign exchange gains/losses, and gain/loss on disposal of assets/divestiture[20][21][22][23] - Management uses non-GAAP measures to evaluate operating results and trends by eliminating items that might obscure comparisons or reduce forecasting ability[25] - A quantitative reconciliation of forward-looking Non-GAAP adjusted EPS and adjusted EBITDA to GAAP is not provided due to the inherent difficulty in estimating the timing or amount of certain significant items[28] Reconciliation of Gross Profit to Adjusted Gross Profit, Adjusted Gross Margin This section provides a detailed reconciliation of GAAP gross profit to adjusted gross profit and adjusted gross margin for the three and six months ended June 30, 2025, and 2024, highlighting adjustments for amortization of acquisition-related intangibles and acquisition and integration charges Reconciliation of Gross Profit to Adjusted Gross Profit, Adjusted Gross Margin (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Gross profit | $93,573 | $96,186 | $183,385 | $193,722 | | Gross margin | 37.3% | 37.3% | 38.3% | 38.0% | | Amortization of acquisition-related intangibles | $1,061 | $440 | $2,077 | $928 | | Acquisition and integration charges | $260 | — | $482 | — | | Adjusted gross profit | $94,894 | $96,626 | $185,944 | $194,650 | | Adjusted gross margin | 37.8% | 37.5% | 38.9% | 38.2% | Reconciliation of Operating Income to Adjusted Operating Income This section reconciles GAAP operating income to adjusted operating income for the three and six months ended June 30, 2025, and 2024, by adding back amortization of acquisition-related intangibles, acquisition and integration charges, and loss on foreign exchange Reconciliation of Operating Income to Adjusted Operating Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Operating income | $104 | $12,040 | $1,931 | $31,140 | | Amortization of acquisition-related intangibles | $2,594 | $1,377 | $5,096 | $2,802 | | Acquisition and integration charges | $1,068 | — | $2,059 | — | | Loss on foreign exchange | $3,098 | $3,244 | $5,509 | $4,919 | | Gain on sale of assets | — | — | — | $(6,776) | | Adjusted operating income | $6,864 | $16,661 | $14,595 | $32,085 | Reconciliation of Net Income to Adjusted EBITDA This section provides a reconciliation from GAAP net income to EBITDA and then to adjusted EBITDA for the three and six months ended June 30, 2025, and 2024, by adjusting for various non-cash and non-recurring items Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $6,605 | $20,154 | $10,363 | $44,253 | | Interest income, net | $(8,001) | $(12,778) | $(15,445) | $(26,955) | | Provision for income taxes | $1,666 | $4,858 | $8,523 | $14,361 | | Depreciation | $12,172 | $13,309 | $23,728 | $27,236 | | Amortization | $3,654 | $2,010 | $7,439 | $4,270 | | EBITDA | $16,096 | $27,553 | $34,608 | $63,165 | | Stock based compensation | $11,287 | $8,570 | $22,054 | $18,302 | | Acquisition and integration charges | $1,068 | — | $2,059 | — | | Loss on foreign exchange | $3,098 | $3,244 | $5,509 | $4,919 | | Gain on sale of assets | — | — | — | $(6,776) | | Adjusted EBITDA | $31,549 | $39,367 | $64,230 | $79,610 | Reconciliation of GAAP to Non-GAAP Net Income, and GAAP to Non-GAAP Net Income per Share, Diluted This section provides a reconciliation of GAAP net income to adjusted net income and adjusted net earnings per diluted share for the three and six months ended June 30, 2025, and 2024, by adjusting for various items and their tax impacts Reconciliation of GAAP to Non-GAAP Net Income, and GAAP to Non-GAAP Net Income per Share, Diluted (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $6,605 | $20,154 | $10,363 | $44,253 | | Amortization of acquisition-related intangibles | $2,594 | $1,377 | $5,096 | $2,802 | | Acquisition and integration charges | $1,068 | — | $2,059 | — | | Loss on foreign exchange | $3,098 | $3,244 | $5,509 | $4,919 | | Certain discrete tax items | $275 | $(85) | $4,889 | $1,912 | | Tax impact of non-GAAP adjustments | $(710) | $(1,075) | $(1,858) | $(342) | | Adjusted net income | $12,930 | $23,615 | $26,058 | $46,768 | | Adjusted net earnings per diluted share | $0.30 | $0.52 | $0.61 | $1.03 | | Weighted average diluted shares outstanding | 42,577 | 45,012 | 42,720 | 45,601 | Reconciliation of GAAP to Non-GAAP Effective Tax Rate This section reconciles the GAAP effective tax rate to the non-GAAP adjusted tax rate for the three and six months ended June 30, 2025, and 2024, by accounting for discrete tax items and the net impact of non-GAAP adjustments Reconciliation of GAAP to Non-GAAP Effective Tax Rate (in percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Tax rate | 20% | 19% | 45% | 25% | | Discrete tax items | (3)% | — % | (26)% | (3)% | | Net impact of non-GAAP adjustments | (3)% | 1% | (2)% | (1)% | | Adjusted tax rate | 14% | 20% | 17% | 21% | - During the first fiscal quarter of 2025, the Company refined its methodology to report non-GAAP measures, recasting prior period non-GAAP financial measures to conform to the current presentation[35]