IPG Photonics Corporation CAPEX jumped on 26.7% and Revenue increased on 3.6%
02/12/2019 • About IPG Photonics Corporation (
$IPGP) • By InTwits
IPG Photonics Corporation reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- IPG Photonics Corporation has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.4%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $60m in 2018, $59m in 2017, $44m in 2016, $17m in 2015, $14m in 2014
- The company has highly profitable business model: ROIC is 22.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 3.6%. Revenue growth showed slowdown in 18Q4 - it was -8.6% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin decreased slightly on 1.7 pp from 56.6% to 54.8% in 2018. During 2014-2018 Gross Margin topped in 2017 at 56.6%. SG&A as a % of Revenue increased slightly on 1.7 pp from 9.3% to 11.0% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018.
Net Income margin increased on 3.0 pp from 24.7% to 27.7% in 2018. The efficient tax rate was 24.4% in 2018 while the average for the last five years was 30.0%.
Investments (CAPEX, working capital and M&A)
In 2018 IPG Photonics Corporation had CAPEX/Revenue of 11.0%. The company's CAPEX/Revenue increased on 3.2 pp from 7.8% in 2015 to 11.0% in 2018. It's average CAPEX/Revenue for the last three years was 10.9%.
Accounts receivable as a % of Revenue increased slightly on 0.66 pp from 16.8% to 17.5% in 2018. Inventories as a % of Revenue increased on 5.8 pp from 21.8% to 27.6% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
IPG Photonics Corporation has spent
$109m on M&A in 2018 which accounts for 7.5% of revenue.
Return on investment
The company operates at high and attractive ROIC (22.9%) while ROE is a bit lower (19.1%). ROIC decreased on 7.1 pp from 29.9% to 22.9% in 2018. ROE showed almost no change in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.8x and Debt / EBITDA is 0.1x. Debt decreased on 7.4% while cash dropped on 40.2%.
IPG Photonics Corporation has no short term refinancing risk: cash is higher than short term debt (14,828.6%).
Valuation and dividends
IPG Photonics Corporation's trades at EV/EBITDA 12.5x and P/E 19.7x.
Management team
The company's CEO is Valentin P Gapontsev. Valentin P Gapontsev is a founder and has 21 years tenure with the company. CEO total compensation was
$1,653,996 in 2018 which included
$1,004,585 salary. IPG Photonics Corporation's CFO is Timothy P V Mammen. Timothy P V Mammen has 18 years tenure at the company.
At the end of financial year the company had 2.6% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 6,220 employees. The number of employees surged on 23.7%. Average revenue per employee in 2018 was
$234,706 and it dropped on 16.2%.
Financial and operational results
FY ended 12/31/2018
IPG Photonics Corporation ($IPGP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 770 | 901 | 1,006 | 1,409 | 1,460 | 3.6% |
| Gross Profit | 417 | 492 | 552 | 797 | 800 | 0.4% |
| SG&A | 86 | 89 | 105 | 130 | 160 | 22.8% |
| EBITDA | 319 | 382 | 420 | 630 | 598 | -5.2% |
| EBIT | 284 | 339 | 369 | 566 | 517 | -8.5% |
| Tax | 84 | 100 | 106 | 204 | 130 | -36.3% |
| Net Income | 200 | 242 | 261 | 348 | 404 | 16.2% |
| Stock Based Compensation | 9 | 12 | 22 | 23 | 28 | 21.7% |
Balance Sheet
|
|---|
| Cash | 522 | 583 | 624 | 910 | 544 | -40.2% |
| Accounts Receivable | 143 | 150 | 156 | 237 | 256 | 7.7% |
| Inventory | 171 | 204 | 239 | 308 | 404 | 31.2% |
| Accounts Payable | 17 | 26 | 28 | 35 | 36 | 3.4% |
| Short Term Debt | 16 | 2 | 3 | 4 | 4 | 1.9% |
| Long Term Debt | 20 | 18 | 38 | 45 | 42 | -8.1% |
Cash flow
|
|---|
| Capex | 89 | 70 | 127 | 127 | 160 | 26.7% |
| Acquisitions | | 5 | 48 | 60 | 109 | 80.4% |
Ratios
|
|---|
| Revenue growth | 18.8% | 17.1% | 11.6% | 40.0% | 3.6% | |
| EBITDA growth | 27.9% | 19.6% | 10.1% | 49.9% | -5.2% | |
|
|---|
| Gross Margin | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% | -1.7% |
| EBITDA Margin | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% | -3.8% |
| EBIT Margin | 36.9% | 37.7% | 36.7% | 40.1% | 35.4% | -4.7% |
| SG&A, % of revenue | 11.2% | 9.9% | 10.4% | 9.3% | 11.0% | 1.7% |
| SBC, % of revenue | 1.2% | 1.3% | 2.2% | 1.6% | 1.9% | 0.3% |
| Net Income Margin | 26.0% | 26.9% | 25.9% | 24.7% | 27.7% | 3.0% |
| CAPEX, % of revenue | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% | 2.0% |
|
|---|
| ROIC | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% | -7.1% |
| ROE | 20.3% | 21.0% | 18.5% | 19.4% | 19.1% | -0.3% |
| Net Debt/EBITDA | -1.5x | -1.5x | -1.4x | -1.4x | -0.8x | 0.5x |
People
|
|---|
| Insider ownership | 2.6% | 2.6% | 2.6% | 2.6% | 2.6% | 0.0% |
| Employees | 3,030 | 3,740 | 4,230 | 5,030 | 6,220 | 23.7% |
| Revenue/Employee, th. $ | 254 | 241 | 238 | 280 | 235 | -16.2% |
IPG Photonics Corporation ($IPGP) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 360 | 414 | 356 | 330 | | 25.9% | 12.0% | -9.2% | -8.6% |
| EBITDA | 155 | 184 | 146 | 113 | | 28.7% | 12.5% | -19.4% | -31.8% |
| Net Income | 106 | 122 | 101 | 76 | | 41.9% | 16.8% | -13.0% | 42.7% |
Balance Sheet
|
|---|
| Cash | 969 | 817 | 648 | 544 | | 38.9% | 1.1% | -26.4% | -40.2% |
| Short Term Debt | 4 | 4 | 4 | 4 | | 13.6% | 206.1% | 2.2% | 1.9% |
| Long Term Debt | 44 | 44 | 43 | 42 | | 20.7% | 103.7% | -7.9% | -8.1% |
Ratios
|
|---|
| Gross Margin | 56.5% | 56.8% | 54.8% | 50.5% | | 1.5% | 1.0% | -2.4% | -7.3% |
| EBITDA Margin | 43.1% | 44.5% | 40.9% | 34.2% | | 0.9% | 0.2% | -5.2% | -11.6% |
| Net Income Margin | 29.5% | 29.4% | 28.2% | 22.9% | | 3.3% | 1.2% | -1.2% | 8.2% |
Peers in Electronic Manufacturing Servi
Below we provide IPG Photonics Corporation benchmarking against other companies in Electronic Manufacturing Servi industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | | 41.9% | -7.8% | -24.0% | 118.4% |
| Alpine 4 Technologies Ltd ($ALPP) | | | 35,893.8% | 5.8% | 71.5% |
| Kemet Corporation ($KEM) | | -1.3% | -10.7% | 3.1% | 58.4% |
| SMTC Corporation ($SMTX) | | -3.5% | -23.9% | -17.1% | 55.2% |
| Deswell Industries, Inc. ($DSWL) | | -7.0% | 17.1% | -0.1% | 36.3% |
| |
|---|
| Median (27 companies) | | 2.6% | 1.2% | 1.9% | 9.8% |
|---|
| IPG Photonics Corporation ($IPGP) | | 17.1% | 11.6% | 40.0% | 3.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Neonode Inc. ($NEON) | 68.2% | 66.0% | 86.9% | 77.1% | 89.2% |
| Andrea Electronics Corp ($ANDR) | 83.8% | 99.1% | 88.5% | 96.2% | 70.4% |
| Data I/O Corporation ($DAIO) | 53.9% | 52.4% | 55.0% | 58.9% | 59.4% |
| CTS Corporation ($CTS) | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% |
| RF Industries, Ltd. ($RFIL) | 45.2% | 34.3% | 28.0% | 30.4% | 34.1% |
| |
|---|
| Median (27 companies) | 14.5% | 14.8% | 16.7% | 13.8% | 12.1% |
|---|
| IPG Photonics Corporation ($IPGP) | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TE Connectivity Ltd. ($TEL) | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% |
| CTS Corporation ($CTS) | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% |
| Methode Electronics, Inc. ($MEI) | 12.6% | 15.4% | 16.5% | 16.5% | 16.1% |
| RF Industries, Ltd. ($RFIL) | 12.4% | 6.7% | -12.1% | 3.1% | 15.9% |
| Kemet Corporation ($KEM) | 3.8% | 7.7% | 9.7% | 9.7% | 13.6% |
| |
|---|
| Median (27 companies) | 4.4% | 5.2% | 4.8% | 4.5% | 4.7% |
|---|
| IPG Photonics Corporation ($IPGP) | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 3.7% | 2.5% | 4.9% | 6.6% | 11.3% |
| eMagin Corporation ($EMAN) | 5.8% | 4.7% | 6.7% | 6.2% | 8.8% |
| TE Connectivity Ltd. ($TEL) | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% |
| CTS Corporation ($CTS) | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% |
| Kemet Corporation ($KEM) | 3.9% | 2.7% | 2.8% | 3.4% | 5.4% |
| |
|---|
| Median (27 companies) | 2.5% | 2.4% | 2.8% | 2.7% | 2.4% |
|---|
| IPG Photonics Corporation ($IPGP) | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | 8.5% | 4.6% | -18.7% | 0.9% | 29.2% |
| Methode Electronics, Inc. ($MEI) | 19.7% | 26.1% | 22.7% | 20.8% | 19.2% |
| TE Connectivity Ltd. ($TEL) | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% |
| Kemet Corporation ($KEM) | -2.8% | 3.8% | 6.2% | 6.9% | 16.9% |
| CTS Corporation ($CTS) | 11.4% | 5.3% | 18.1% | 9.8% | 14.8% |
| |
|---|
| Median (29 companies) | 4.4% | 4.9% | 6.2% | 4.2% | 6.4% |
|---|
| IPG Photonics Corporation ($IPGP) | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | | 34.1x | 65.7x |
| SigmaTron International, Inc. ($SGMA) | 2.7x | 4.1x | 2.4x | 3.4x | 16.0x |
| SMTC Corporation ($SMTX) | 3.5x | 1.8x | 1.0x | | 11.3x |
| IEC Electronics Corp. ($IEC) | 7.1x | 14.0x | 2.0x | 5.6x | 4.9x |
| Key Tronic Corporation ($KTCC) | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x |
| |
|---|
| Median (22 companies) | 0.2x | -0.2x | 0.6x | 0.5x | 0.5x |
|---|
| IPG Photonics Corporation ($IPGP) | -1.5x | -1.5x | -1.4x | -1.4x | -0.8x |
