IPG Photonics Corporation reports 34.3% CAPEX decline in 2020 and 8.7% Revenue decline
02/16/2021 • About IPG Photonics Corporation (
$IPGP) • By InTwits
IPG Photonics Corporation reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is declining: 24.0% in 2020 vs. 26.8% in 2019 vs. 41.8% in 2016
- IPG Photonics Corporation has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.0%. At the same time it's a lot of higher than industry average of 3.0%.
- CAPEX is quite volatile: $15m in FY2020, $47m in FY2019, $45m in FY2018, $70m in FY2017, $187m in FY2016
- The company has business model with low profitability: ROIC is 7.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
IPG Photonics Corporation's Revenue decreased on 8.7%. Annual revenue decline showed slowdown in 20Q4 - revenue increased on 9.8%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.8 pp from 26.8% to 24.0% in 2020. EBITDA Margin declined at -5.4 pp per annum in the last 5 years.
Gross Margin decreased slightly on 1.2 pp from 46.1% to 44.9% in 2020. Gross Margin declined at -3.0 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 0.94 pp from 14.1% to 15.0% in 2020. SG&A as a % of Revenue followed a growing trend at 1.4 pp per annum in 2016-2020.
Net Income margin showed almost no change in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 7.3% in 2020. CAPEX/Revenue decreased slightly on 1.7 pp from 9.0% in 2017 to 7.3% in 2020. It's average CAPEX/Revenue for the last three years was 9.5%.
Return on investment
The company operates at low ROIC (7.3%) and ROE (6.4%). ROIC decreased on 3.0 pp from 10.2% to 7.3% in 2020. ROE decreased slightly on 1.4 pp from 7.8% to 6.4% in 2020. ROIC followed a declining trend at -5.5 pp per annum in the last 5 years. During the last 5 years ROE topped in 2017 at 19.4% and was declining since that time.
Leverage (Debt)
Debt level is -2.8x Net Debt / EBITDA and 0.2x Debt / EBITDA. Debt decreased on 7.8% while cash jumped on 28.8%.
IPG Photonics Corporation has no short term refinancing risk: cash is higher than short term debt (9,138.8%).
Valuation and dividends
IPG Photonics Corporation's trades at EV/EBITDA 39.3x and P/E 76.0x.
Management team
Valentin P Gapontsev is a the company's CEO. Valentin P Gapontsev has spent 23 years with the company. Timothy P V Mammen is a the company's CFO. Timothy P V Mammen has spent 20 years at the company.
Financial and operational results
FY ended 12/31/2020
IPG Photonics Corporation ($IPGP) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,006 | 1,409 | 1,460 | 1,315 | 1,201 | -8.7% |
| Gross Profit | 552 | 797 | 800 | 606 | 539 | -11.1% |
| SG&A | 105 | 130 | 160 | 185 | 181 | -2.6% |
| EBITDA | 420 | 630 | 598 | 352 | 288 | -18.1% |
| EBIT | 369 | 566 | 517 | | | |
| Tax | 106 | 204 | 130 | | | |
| Net Income | 261 | 348 | 404 | 180 | 160 | -11.5% |
| Stock Based Compensation | 22 | 23 | 28 | | | |
Balance Sheet
|
|---|
| Cash | 624 | 910 | 544 | 680 | 876 | 28.8% |
| Accounts Receivable | 156 | 237 | 256 | | | |
| Inventory | 239 | 308 | 404 | | | |
| Accounts Payable | 28 | 35 | 36 | | | |
| Short Term Debt | 3 | 4 | 4 | 9 | 10 | 6.1% |
| Long Term Debt | 38 | 45 | 42 | 58 | 53 | -9.9% |
Cash flow
|
|---|
| Capex | 127 | 127 | 160 | 134 | 88 | -34.3% |
| Acquisitions | 48 | 60 | 109 | | | |
Ratios
|
|---|
| Revenue growth | 11.6% | 40.0% | 3.6% | -10.0% | -8.7% | |
| EBITDA growth | 10.1% | 49.9% | -5.2% | -41.1% | -18.1% | |
|
|---|
| Gross Margin | 54.9% | 56.6% | 54.8% | 46.1% | 44.9% | -1.2% |
| EBITDA Margin | 41.8% | 44.7% | 40.9% | 26.8% | 24.0% | -2.8% |
| EBIT Margin | 36.7% | 40.1% | 35.4% | | |
| SG&A, % of revenue | 10.4% | 9.3% | 11.0% | 14.1% | 15.0% | 0.9% |
| SBC, % of revenue | 2.2% | 1.6% | 1.9% | | |
| Net Income Margin | 25.9% | 24.7% | 27.7% | 13.7% | 13.3% | -0.4% |
| CAPEX, % of revenue | 12.6% | 9.0% | 11.0% | 10.2% | 7.3% | -2.9% |
|
|---|
| ROIC | 25.1% | 29.9% | 22.9% | 10.2% | 7.3% | -3.0% |
| ROE | 18.5% | 19.4% | 19.1% | 7.8% | 6.4% | -1.4% |
| Net Debt/EBITDA | -1.4x | -1.4x | -0.8x | -1.7x | -2.8x | -1.1x |
People
|
|---|
| Insider ownership | 2.6% | 2.6% | 2.6% | | | |
| Employees | 4,230 | 5,030 | 6,220 | | | |
| Revenue/Employee, th. $ | 238 | 280 | 235 | | | |
IPG Photonics Corporation ($IPGP) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 249 | 296 | 318 | 337 | | -20.9% | -18.5% | -3.3% | 9.8% |
| EBITDA | 49 | 83 | 54 | 94 | | -47.7% | -32.7% | -47.2% | 197.9% |
| Net Income | 36 | 38 | 36 | 49 | | -34.0% | -47.1% | -37.8% | - |
Balance Sheet
|
|---|
| Cash | 570 | 748 | 764 | 876 | | 3.8% | 41.1% | 31.6% | 28.8% |
| Short Term Debt | 9 | 9 | 9 | 10 | | 0.4% | -4.7% | 3.6% | 6.1% |
| Long Term Debt | 37 | 36 | 35 | 53 | | -38.2% | -41.1% | -41.5% | -9.9% |
Ratios
|
|---|
| Gross Margin | 41.3% | 46.0% | 48.0% | 43.6% | | -6.0% | -3.5% | 1.5% | 3.1% |
| EBITDA Margin | 19.8% | 28.1% | 16.9% | 27.9% | | -10.2% | -5.9% | -14.1% | 17.6% |
| Net Income Margin | 14.6% | 12.9% | 11.2% | 14.7% | | -2.9% | -7.0% | -6.2% | 16.1% |
Peers in Electronic Manufacturing Services
Below we provide IPG Photonics Corporation benchmarking against other companies in Electronic Manufacturing Services 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Netlist Inc ($NLST) | - | 95.0% | -12.5% | -22.1% | 81.0% |
| IEC Electronics Corp. ($IEC) | - | -24.1% | 21.2% | 34.3% | 16.4% |
| eMagin Corporation ($EMAN) | - | 3.0% | 19.1% | 1.9% | 10.1% |
| Jabil Inc. ($JBL) | - | 3.9% | 15.9% | 14.4% | 7.8% |
| Plexus Corp. ($PLXS) | - | -1.1% | 13.7% | 10.1% | 7.1% |
| |
|---|
| Median (13 companies) | 4.6% | 1.9% | 9.8% | 9.7% | -1.3% |
|---|
| IPG Photonics Corporation ($IPGP) | - | 40.0% | 3.6% | -10.0% | -8.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Neonode Inc. ($NEON) | 86.9% | 77.1% | 89.2% | 89.7% | 82.0% |
| CTS Corporation ($CTS) | 35.4% | 33.2% | 35.1% | 33.6% | 32.8% |
| TE Connectivity Ltd. ($TEL) | 33.7% | 34.3% | 33.9% | 32.7% | 30.7% |
| RF Industries, Ltd. ($RFIL) | 28.0% | 30.4% | 34.1% | 28.3% | 26.9% |
| eMagin Corporation ($EMAN) | 30.1% | 23.3% | 15.2% | 25.2% | 21.6% |
| |
|---|
| Median (13 companies) | 16.7% | 13.8% | 12.1% | 13.8% | 14.3% |
|---|
| IPG Photonics Corporation ($IPGP) | 54.9% | 56.6% | 54.8% | 46.1% | 44.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CTS Corporation ($CTS) | 20.7% | 14.0% | 17.8% | 17.6% | 18.1% |
| TE Connectivity Ltd. ($TEL) | 20.9% | 20.4% | 21.4% | 19.8% | 11.1% |
| TTM Technologies, Inc. ($TTMI) | 14.0% | 14.6% | 13.5% | 15.8% | 9.7% |
| IEC Electronics Corp. ($IEC) | 7.4% | 3.8% | 4.3% | 6.6% | 7.5% |
| Plexus Corp. ($PLXS) | 5.7% | 6.9% | 5.8% | 6.1% | 6.5% |
| |
|---|
| Median (12 companies) | 4.8% | 4.5% | 4.7% | 5.8% | 5.3% |
|---|
| IPG Photonics Corporation ($IPGP) | 41.8% | 44.7% | 40.9% | 26.8% | 24.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| eMagin Corporation ($EMAN) | 6.7% | 6.2% | 8.8% | 4.2% | 8.5% |
| TTM Technologies, Inc. ($TTMI) | 3.4% | 5.7% | 5.3% | 6.7% | 4.9% |
| TE Connectivity Ltd. ($TEL) | 5.3% | 5.6% | 6.7% | 5.6% | 4.6% |
| Jabil Inc. ($JBL) | 5.0% | 3.8% | 4.7% | 4.0% | 3.6% |
| CTS Corporation ($CTS) | 5.2% | 4.3% | 6.1% | 4.6% | 3.5% |
| |
|---|
| Median (12 companies) | 2.8% | 2.7% | 2.4% | 1.4% | 2.6% |
|---|
| IPG Photonics Corporation ($IPGP) | 12.6% | 9.0% | 11.0% | 10.2% | 7.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| IEC Electronics Corp. ($IEC) | 16.9% | 3.1% | 6.4% | 12.7% | 14.8% |
| Sanmina Corporation ($SANM) | 14.2% | 13.9% | 7.0% | 16.2% | 13.0% |
| Plexus Corp. ($PLXS) | 8.7% | 10.3% | 9.6% | 12.6% | 12.4% |
| Jabil Inc. ($JBL) | 12.3% | 9.3% | 12.5% | 16.1% | 10.8% |
| CTS Corporation ($CTS) | 18.1% | 9.8% | 14.8% | 11.8% | 9.2% |
| |
|---|
| Median (13 companies) | 6.2% | 4.2% | 6.4% | 11.8% | 4.5% |
|---|
| IPG Photonics Corporation ($IPGP) | 25.1% | 29.9% | 22.9% | 10.2% | 7.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SMTC Corporation ($SMTX) | 1.0x | - | 11.3x | 3.8x | 4.2x |
| TE Connectivity Ltd. ($TEL) | 1.4x | 1.3x | 1.1x | 1.1x | 2.7x |
| IEC Electronics Corp. ($IEC) | 2.0x | 5.6x | 4.9x | 3.6x | 2.1x |
| TTM Technologies, Inc. ($TTMI) | 2.2x | 1.5x | 3.2x | 3.3x | 2.0x |
| Jabil Inc. ($JBL) | 1.0x | 0.8x | 1.0x | 0.9x | 1.4x |
| |
|---|
| Median (10 companies) | 0.6x | 0.5x | 0.5x | 0.3x | 0.7x |
|---|
| IPG Photonics Corporation ($IPGP) | -1.4x | -1.4x | -0.8x | -1.7x | -2.8x |
