IPG Photonics Reports Record Revenue on 27% Sales Growth and 34% Increase in Net...

IPG Photonics Reports Record Revenue on 27% Sales Growth and 34% Increase in Net Income in Second Quarter of 2008

IPG Agrees to Purchase of Minority Interests in Russian Subsidiary
OXFORD, Mass.--(Business Wire)--
IPG Photonics Corporation (Nasdaq: IPGP), the world leader in
high-power fiber lasers and amplifiers, today 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.

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Three Months Six Months
Ended Ended
June 30, June 30,
------------- -------------
(In millions, except per
share data) 2008 2007 % Change 2008 2007 % Change
------ ------ -------- ------ ------ --------
Revenue $ 56.0 $ 44.0 27% $108.9 $ 85.7 27%
Gross margin 48.1% 46.2% 47.2% 46.3%
Operating income $ 12.8 $ 10.1 26% $ 25.3 $ 21.2 20%
Operating margin 22.8% 23.0% 23.3% 24.7%
Net income $ 8.6 $ 6.4 34% $ 16.7 $ 13.0 28%
Earnings per diluted
share $ 0.19 $ 0.14 36% $ 0.36 $ 0.29 24%
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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.

Conference Call Reminder

The Company will hold a conference call to review its financial
results and business highlights today, August 5, 2008 at 10:00 a.m.
ET. The conference call will be webcast live over the Internet 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 (877) 741-4249 or (719) 325-4831. Interested parties that are
unable to listen to the live call may access an archived version of
the webcast 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
applications, telecommunications and medical applications. 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, those
relating to increasing demand for the Company's products from existing
and new customers, improved gross margins, growth rates in Europe and
Asia, increased orders in the U.S. and elsewhere, expected shipment
dates for new orders, and the Company's revenue and EPS guidance for
the third quarter of 2008. Factors that could cause actual results to
differ materially include risks and uncertainties, including risks
associated with 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, contract cancellations, manufacturing risks, 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 13, 2008) 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.

IPGP-G

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IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------

2008 2007 2008 2007
-------- -------- -------- --------

(in thousands, except per share data)
NET SALES $ 55,994 $ 43,952 $108,870 $ 85,705
COST OF SALES 29,047 23,633 57,523 46,055
-------- -------- -------- --------

GROSS
PROFIT 26,947 20,319 51,347 39,650
-------- -------- -------- --------

OPERATING EXPENSES:
Sales and marketing 3,703 2,836 6,850 4,745
Research and development 4,447 2,388 7,321 4,517
General and administrative 6,024 4,989 11,863 9,230
-------- -------- -------- --------

Total operating expenses 14,174 10,213 26,034 18,492
-------- -------- -------- --------

OPERATING INCOME 12,773 10,106 25,313 21,158
-------- -------- -------- --------

OTHER INCOME, Net:
Interest (expense) income, net (183) 117 (278) 513
Other income (expense), net 489 (8) 536 36
-------- -------- -------- --------

Total other income 306 109 258 549
-------- -------- -------- --------

INCOME BEFORE PROVISION FOR
INCOME TAXES AND MINORITY
INTERESTS IN CONSOLIDATED
SUBSIDIARIES 13,079 10,215 25,571 21,707
PROVISION FOR INCOME TAXES (4,058) (3,611) (8,055) (8,118)
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES (469) (216) (815) (588)
---------------------------------------- -------- -------- --------

NET
INCOME $ 8,552 $ 6,388 $ 16,701 $ 13,001
======== ======== ======== ========

NET INCOME PER SHARE:
Basic $ 0.19 $ 0.15 $ 0.38 $ 0.30
Diluted $ 0.19 $ 0.14 $ 0.36 $ 0.29
WEIGHTED AVERAGE SHARES:
Basic 44,355 42,974 44,225 42,942
Diluted 46,132 45,631 46,087 45,616
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IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS

June 30, December
31,
---------- ---------
2008 2007
---------- ---------
ASSETS (in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 44,926 $ 37,972
Marketable securities, at fair value - 6,950
Accounts receivable, net 37,747 33,946
Inventories, net 76,574 60,412
Income taxes receivable 935 3,145
Prepaid expenses and other current assets 7,759 7,071
Deferred income taxes 8,065 6,195
---------- ---------

Total current assets 176,006 155,691
DEFERRED INCOME TAXES 2,654 2,795
PROPERTY, PLANT, AND EQUIPMENT, Net 111,207 96,369
OTHER ASSETS 13,164 8,466
---------- ---------

TOTAL $ 303,031 $ 263,321
========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities $ 19,850 $ 11,218
Current portion of long-term debt 1,333 -
Accounts payable 9,613 9,444
Accrued expenses and other liabilities 17,313 13,160
Deferred income taxes 940 564
Income taxes payable 1,875 96
---------- ---------

Total current liabilities 50,924 34,482
---------- ---------

DEFERRED INCOME
TAXES 2,645 4,204
---------- ---------

LONG-TERM DEBT 18,710 20,000
---------- ---------

COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 5,270 4,455
---------- ---------

STOCKHOLDERS'
EQUITY:
Common stock 4 4
Additional paid-in capital 277,875 275,506
Accumulated deficit (73,796) (90,497)
Accumulated other comprehensive income 21,399 15,167
---------- ---------

Total stockholders' equity 225,482 200,180
---------- ---------

TOTAL $ 303,031 $ 263,321
========== =========
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IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief Financial Officer
or
Sharon Merrill Associates, Inc.
David Calusdian, 617-542-5300
Executive Vice President

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