IPG Photonics Corp. reported that revenues for the second quarter of 2008 increased by 27% to $56.0 million and net income increased by 34% to $8.6 million compared with the second quarter of 2007. For the first six months of 2008, revenues increased 27% to $108.9 million from $85.7 million in the first six months of 2007 and net income for the first six months of 2008 increased by 28% to $16.7 million from $13.0 million. Revenue growth for the quarter was driven by sales of the company's fiber lasers used for materials processing applications, which increased by 42% from the second quarter of 2007 to $46.9 million, as well as strong sales to European and Asian markets.
Operating income increased 26% to $12.8 million for the second quarter of 2008, up from $10.1 million for the same period in 2007. Earnings per diluted share increased 36% to $0.19 from $0.14 a year ago. Operating expenses for the second quarter of 2008 were $14.2 million, or 25% of revenue, compared with $10.2 million, or 23% of revenue, in the second quarter of 2007.
For the first six months of 2008, operating income increased 20% to $25.3 million, up from $21.2 million for the same period in 2007. Earnings per diluted share increased 24% to $0.36 from $0.29 a year ago. Operating expenses were $26.0 million, or 24% of revenue, in the first six months of 2008, compared with $18.5 million, or 22% of revenue, in the six-month period a year ago.
Cash and cash equivalents were $44.9 million on June 30, 2008, compared with $38.0 million on December 31, 2007, primarily as a result of $11.6 million of cash provided by operating activities, proceeds from the sale of marketable securities of $5.5 million and net proceeds from the Company's credit lines of $8.1 million, offset by capital expenditures and investments in intangible assets of $20.3 million.
Comments on the Second Quarter
"Demand for our energy-efficient, cost-saving and high performance products remained strong in the second quarter, despite a challenging macroeconomic environment," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "This allowed IPG to report revenues and net income at the top of our guidance range. Our results this quarter reflect the growing penetration of our fiber lasers into new industrial manufacturing applications, the marketplace's growing acceptance of the benefits of our fiber lasers, and our presence in the world's major industrial manufacturing markets. We are particularly pleased that IPG's fiber lasers continue to win orders over legacy laser technologies in a number of high profile installations. This was demonstrated again shortly after the close of the quarter with a major order from the BMW Group for our high-power fiber lasers used in a critical welding application."
"Our strongest market segment continues to be materials processing, which experienced a 42% year-over-year increase in revenues for the quarter," continued Gapontsev. "Geographically, we saw strong demand across Europe and Asia, and we were pleased that sales improved in Japan and North America. Pulsed laser sales continued to be strong with a 66% increase over the prior year, driven by demand for photovoltaic manufacturing and marking applications. And our margin growth has continued to increase, both sequentially and year-over-year, due to favorable product mix and higher production, part of which resulted in an increase in inventories."
Purchase of Minority Interests in Russian Subsidiary
The Company also announced today that it agreed to purchase the minority interests in its majority-owned subsidiary NTO IRE-Polus from Valentin P. Gapontsev and Igor Samartsev, a member of its Board of Directors and Acting General Manager of NTO IRE-Polus. NTO IRE-Polus currently provides IPG with component manufacturing capacity and sells products to customers in Russia and neighboring countries. The purchase price for the 31.6% ownership interests is $6.1 million in total, and would be paid in unregistered shares of IPG common stock. After giving effect to the purchases from Dr. Gapontsev and Mr. Samartsev, and other minority interest purchases that have been previously agreed upon, IPG would own 100% of NTO IRE-Polus. The transaction is expected to be accretive to the earnings of IPG. The purchase is expected to close in October 2008, subject to filing required government notices and receiving required government approvals.
Business Outlook and Financial Guidance
"The interest expressed from both new and existing customers for our fiber lasers is a strong indicator that the momentum we established in the first half of the year will continue," stated Dr. Gapontsev. "For the second half of 2008, we expect that materials processing applications will continue to be our primary growth driver."
For the third quarter of 2008, IPG Photonics expects revenues in the range of $57 million to $61 million. The Company anticipates earnings per diluted share in the range of $0.18 to $0.22 based on 46,132,000 common shares, which include 44,355,000 basic common shares outstanding and 1,777,000 potentially dilutive options at June 30, 2008.