IPG Photonics Reports Revenue Growth 95% over Prior Year and Net Income of $23.1 Million for First Quarter 2011

High Power and Pulsed Laser Sales for Materials Processing Applications Drive Growth

OXFORD, Mass.--(BUSINESS WIRE)--IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the first quarter of 2011 ended March 31, 2011.

	Three Months Ended
	March 31,
(In millions, except per share data)		2011			2010		% Change
Revenue	$	100.0		$	51.2		95	%
Gross margin		53.7	%		40.1	%
Operating income	$	34.1		$	5.3
Operating margin		34.1	%		10.4	%
Net income attributable to IPG Photonics Corporation	$	23.1		$	3.4
Earnings per diluted share	$	0.47		$	0.07

Management Comments

“IPG’s growth momentum continued through the first quarter of 2011,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “This was another outstanding quarter of revenue growth as sales increased 95% to $100 million. Although growth is compared to the first quarter of 2010 when we were still feeling the effects of the global economic downturn, demand was strong in what is typically a seasonally slow quarter. We reported year-over-year sales increases in all geographies and product lines. We also achieved gross margins of 54% and grew earnings per diluted share to $0.47 from $0.07 in the first quarter of 2010.”

“Sales for materials processing applications were up more than 100% year over year, driven primarily by purchases for marking, welding and cutting,” said Dr. Gapontsev. “Demand for high power and pulsed lasers continued to drive our product sales. Also, the growing number of OEM customers contributed to the sales increase in materials processing. Advanced applications and telecom sales were up 76% and 73%, respectively, and medical increased by 10% from last year. Geographically, sales increased in every region, with China and Europe the strongest performers with sales up 234% and 120%, respectively.”

“IPG generated $13.8 million in cash from operations and ended the quarter with $160.6 million in cash, an increase of $12.8 million sequentially,” said Gapontsev. “Capital expenditures for the first quarter of 2011 totaled $11.3 million as we invested in additional capacity, application development and sales facilities abroad.”

Business Outlook and Financial Guidance

“IPG’s order flow remains strong,” said Dr. Gapontsev. “It has become clear that our fiber lasers are now well accepted in many applications, especially in materials processing, as potential customers recognize our brand and the value our products provide. In addition, we are seeing customers, especially OEMs, order products in significantly greater quantities. Given the leverage in our business model, our sales performance should result in impressive profitability for the year.”

IPG Photonics expects revenues in the range of $102 million to $110 million for the second quarter of 2011. The Company anticipates earnings per diluted share in the range of $0.50 to $0.59 based on 48,690,000 common shares, which includes 47,099,000 basic common shares outstanding and 1,591,000 potentially dilutive options at March 31, 2011.

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.

Conference Call Reminder

The Company will hold a conference call to review its financial results and business highlights today, May 3, 2011 at 10:00 a.m. ET. The conference call will be webcast live and can be accessed on the “Investors” section of the Company’s website at www.ipgphotonics.com. The conference call also can be accessed by dialing [phone] or [phone]. Interested parties that are unable to listen to the live call may access an archived version of the webcast, which will be available for one year on IPG’s website.

About IPG Photonics Corporation

IPG Photonics Corporation is the world leader in high-power fiber lasers and amplifiers. Founded in 1990, IPG pioneered the development and commercialization of optical fiber-based lasers for use in a wide range of applications such as materials processing, advanced, telecommunications and medical. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs. IPG has its headquarters in Oxford, Massachusetts, and has additional plants and offices throughout the world. For more information, please visit www.ipgphotonics.com.

Safe Harbor Statement

Information and statements provided by the Company 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, but not limited to, our expectations relating to: strong order flow, OEM customers ordering products in significantly greater quantities, sales performance and impressive profitability for the year, its revenue and earnings per share expectations for the second quarter of 2011, and expectations for 2011. 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 the Company serves, particularly the effect of economic downturns; reduction in customer capital expenditures; potential order cancellations and push-outs and financial and credit market issues; the Company’s ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG’s products; effective management of growth; level of fixed costs from its vertical integration; intellectual property infringement claims and litigation; interruption in supply of key components, including from transportation disruptions from natural and man-made events; manufacturing risks; inventory write-downs; foreign currency fluctuations; competitive factors, including declining average selling prices; building and expanding field service and support operations; uncertainties pertaining to customer orders; demand for products and services; development of markets for the Company's products and services; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K (filed with the SEC on March 15, 2011) and its periodic 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. The Company 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.

IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
			Three Months Ended March 31,
			2011			2010
			(in thousands, except per share data)
NET SALES			$	99,958		$	51,204
COST OF SALES				46,292			30,657
GROSS PROFIT				53,666			20,547
OPERATING EXPENSES:
	Sales and marketing			4,948			4,338
	Research and development			5,731			4,158
	General and administrative			8,169			6,828
	Loss (gain) on foreign exchange			720			(108	)
		Total operating expenses		19,568			15,216
OPERATING INCOME				34,098			5,331
OTHER EXPENSE, Net:
	Interest expense, net			(206	)		(208	)
	Other income (expense), net			8			(66	)
		Total other expense		(198	)		(274	)
INCOME BEFORE PROVISION FOR INCOME TAXES				33,900			5,057
PROVISION FOR INCOME TAXES				(10,522	)		(1,633	)
NET INCOME				23,378			3,424
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS				310			27
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS
CORPORATION			$	23,068		$	3,397
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS
CORPORATION PER SHARE:
	Basic		$	0.49		$	0.07
	Diluted		$	0.47		$	0.07
WEIGHTED AVERAGE SHARES OUTSTANDING:
	Basic			47,099			46,098
	Diluted			48,690			47,191

IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
			March 31,		December 31,
			2011		2010
			(In thousands, except share and per share data)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	160,618	$	147,860
	Accounts receivable, net			57,970		55,399
	Inventories, net			88,698		72,470
	Income taxes receivable			2,376		2,663
	Prepaid expenses and other current assets			17,834		13,816
	Deferred income taxes			9,314		8,593
		Total current assets		336,810		300,801
DEFERRED INCOME TAXES				3,547		4,489
INTANGIBLE ASSETS, NET				8,104		7,131
PROPERTY, PLANT AND EQUIPMENT, NET				131,300		120,683
OTHER ASSETS				8,868		8,751
TOTAL			$	488,629	$	441,855
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Revolving line-of-credit facilities		$	6,587	$	6,841
	Current portion of long-term debt			1,531		1,333
	Accounts payable			12,526		9,510
	Accrued expenses and other liabilities			47,512		50,105
	Deferred income taxes			7,557		3,387
	Income taxes payable			7,688		11,594
		Total current liabilities		83,401		82,770
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES				1,828		1,735
LONG-TERM DEBT, NET OF CURRENT PORTION				17,112		15,644
REDEEMABLE NONCONTROLLING INTERESTS				25,839		24,903
		Total liabilities		128,180		125,052
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY:
	Common stock, $0.0001 par value, 175,000,000 shares authorized; 47,229,615 shares issued and outstanding at March 31, 2011; 46,988,566 shares issued and outstanding at December 31, 2010			5		5
	Additional paid-in capital			317,709		310,218
	Retained earnings			28,635		5,567
	Accumulated other comprehensive income			13,890		810
		Total IPG Photonics Corporation stockholders’ equity		360,239		316,600
NONCONTROLLING INTERESTS				210		203
		Total stockholders' equity		360,449		316,803
TOTAL			$	488,629	$	441,855

IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
			Three Months Ended March 31,
			2011			2010
			(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	23,378		$	3,424
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			5,658			5,226
	Provisions for inventory, warranty & bad debt			3,806			1,718
	Other			8,260			(1,755	)
	Changes in assets and liabilities that provided (used) cash:
	Accounts receivable/payable			1,043			(1,296	)
	Inventories			(13,720	)		(3,349	)
	Other			(14,672	)		3,908
		Net cash provided by operating activities		13,753			7,876
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property, plant and equipment			(11,267	)		(4,953	)
	Acquisition of businesses, net of cash acquired			(450	)		(748	)
	Other			(341	)		181
		Net cash used in investing activities		(12,058	)		(5,520	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Line-of-credit facilities			(415	)		1,162
	Long-term borrowings			1,346			(333	)
	Exercise of employee stock options and related tax benefit from exercise			4,884			211
		Net cash provided by financing activities		5,815			1,040
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS				5,248			(1,909	)
NET INCREASE IN CASH AND CASH EQUIVALENTS				12,758			1,487
CASH AND CASH EQUIVALENTS — Beginning of period				147,860			82,920
CASH AND CASH EQUIVALENTS — End of period			$	160,618		$	84,407
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for interest		$	255		$	281
	Income taxes paid		$	8,865		$	1,445