10-Q 1 ipgp-20220331.htm 10-Q ipgp-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 001-33155
ipgp-20220331_g1.jpg
IPG PHOTONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
04-3444218
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)
Identification Number)
50 Old Webster Road, Oxford, Massachusetts
01540
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (508373-1100
Securities registered pursuant to Section 12(b) of the Act: 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareIPGPThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
As of May 3, 2022, there were 51,872,637 shares of the registrant's common stock outstanding.



TABLE OF CONTENTS
 



PART I—FINANCIAL INFORMATION
ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,December 31,
20222021
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents$642,517 $709,105 
Short-term investments774,161 805,400 
Accounts receivable, net257,464 262,121 
Inventories484,971 460,747 
Prepaid income taxes40,888 36,990 
Prepaid expenses and other current assets82,833 73,320 
Total current assets2,282,834 2,347,683 
Deferred income taxes, net49,942 47,761 
Goodwill39,741 38,609 
Intangible assets, net50,017 52,678 
Property, plant and equipment, net625,366 635,302 
Other assets50,569 48,507 
Total assets$3,098,469 $3,170,540 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt$17,459 $18,126 
Accounts payable46,481 55,839 
Accrued expenses and other current liabilities203,579 230,826 
Income taxes payable12,317 8,642 
Total current liabilities279,836 313,433 
Other long-term liabilities and deferred income taxes94,650 93,855 
Long-term debt, net of current portion15,734 16,031 
Total liabilities390,220 423,319 
Commitments and contingencies (Note 11)
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,921,562 and 52,542,466 shares issued and outstanding, respectively, at March 31, 2022; 55,788,246 and 53,010,265 shares issued and outstanding, respectively, at December 31, 2021.
6 6 
Treasury stock, at cost, 3,379,096 and 2,777,981 shares held at March 31, 2022 and December 31, 2021, respectively.
(517,260)(438,503)
Additional paid-in capital917,693 908,423 
Retained earnings2,536,179 2,466,607 
Accumulated other comprehensive loss(229,369)(189,951)
Total IPG Photonics Corporation equity2,707,249 2,746,582 
Non-controlling interests1,000 639 
Total equity2,708,249 2,747,221 
Total liabilities and equity$3,098,469 $3,170,540 
See notes to condensed consolidated financial statements.
1

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
20222021
(In thousands, except per share data)
Net sales$369,979 $345,585 
Cost of sales198,158 181,594 
Gross profit171,821 163,991 
Operating expenses:
Sales and marketing20,374 18,883 
Research and development33,450 33,339 
General and administrative30,664 30,092 
Gain on foreign exchange(5,810)(7,165)
Total operating expenses78,678 75,149 
Operating income93,143 88,842 
Other (expense) income, net:
Interest expense, net(70)(495)
Other (expense) income, net(236)253 
Total other expense(306)(242)
Income before provision for income taxes 92,837 88,600 
Provision for income taxes23,209 20,378 
Net income69,628 68,222 
Less: net income attributable to non-controlling interests 56 95 
Net income attributable to IPG Photonics Corporation common stockholders$69,572 $68,127 
Net income attributable to IPG Photonics Corporation per common share:
Basic$1.32 $1.27 
Diluted$1.31 $1.26 
Weighted average common shares outstanding:
Basic52,810 53,541 
Diluted53,100 54,201 
See notes to condensed consolidated financial statements.

2

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31,
20222021
(In thousands)
Net income$69,628 $68,222 
Other comprehensive income, net of tax:
Foreign currency translation adjustments and other(39,326)(32,479)
Unrealized gain on derivatives213 68 
Total other comprehensive loss(39,113)(32,411)
Comprehensive income30,515 35,811 
Less: comprehensive income (loss) attributable to non-controlling interests361 (124)
Comprehensive income attributable to IPG Photonics Corporation$30,154 $35,935 
See notes to condensed consolidated financial statements.

3

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
20222021
(In thousands)
Cash flows from operating activities:
Net income$69,628 $68,222 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization23,435 23,819 
Deferred income taxes(3,397)3,944 
Stock-based compensation9,994 8,815 
Unrealized gain on foreign currency transactions(2,393)(7,800)
Other2,368 1,462 
Provisions for inventory, warranty and bad debt16,142 16,685 
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable2,621 7,360 
Inventories(50,951)(20,084)
Prepaid expenses and other assets3,052 (1,052)
Accounts payable(8,448)18,980 
Accrued expenses and other liabilities(31,448)(17,961)
Income and other taxes payable(14,180)(14,847)
Net cash provided by operating activities16,423 87,543 
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment(25,177)(27,421)
Proceeds from sales of property, plant and equipment428 130 
Purchases of short-term investments(475,435)(513,564)
Proceeds from short-term investments505,818 480,163 
Acquisitions of businesses, net of cash acquired(2,000) 
Other(1,164)(2)
Net cash provided by (used in) investing activities2,470 (60,694)
Cash flows from financing activities:
Principal payments on long-term borrowings(964)(946)
Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards(724)4,981 
Purchase of treasury stock, at cost(78,757)(3,048)
Payment of purchase price holdback from business combination (2,624)
Net cash used in financing activities(80,445)(1,637)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash(5,036)(7,024)
Net (decrease) increase in cash, cash equivalents and restricted cash(66,588)18,188 
Cash, cash equivalents and restricted cash — Beginning of period709,105 878,553 
Cash and cash equivalents — End of period$642,517 $896,741 
Supplemental disclosure of cash flow information:
Cash paid for interest$857 $703 
Cash paid for income taxes$25,423 $21,340 
Non-cash transactions:
Demonstration units transferred from inventory to other assets$917 $1,109 
Inventory transferred to machinery and equipment$780 $727 
Changes in accounts payable related to property, plant and equipment$(646)$863 
Leased assets obtained in exchange for new operating lease liabilities$4,229 $409 
See Note 3 for reconciliation of cash, cash equivalents and restricted cash between the condensed consolidated balance sheets and condensed consolidated statements of cash flows.
See notes to condensed consolidated financial statements.
4

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended March 31,
Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeNon-
controlling Interest
Total Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, January 1, 202253,010,265 $6 (2,777,981)$(438,503)$908,423 $2,466,607 $(189,951)$639 $2,747,221 
Exercise of stock options and vesting of RSUs and PSUs133,316 — — — (724)— — — (724)
Purchased common stock(601,115)— (601,115)(78,757)— — — — (78,757)
Stock-based compensation— — — — 9,994 — — — 9,994 
Net income— — — — — 69,572 — 56 69,628 
Foreign currency translation adjustments and other— — — — — — (39,631)305 (39,326)
Unrealized gain on derivatives, net of tax— — — — — — 213 — 213 
Balance, March 31, 202252,542,466 $6 (3,379,096)$(517,260)$917,693 $2,536,179 $(229,369)$1,000 $2,708,249 
Balance, January 1, 202153,427,234 $6 (2,034,012)$(303,614)$854,301 $2,188,191 $(146,065)$1,292 $2,594,111 
Exercise of stock options and vesting of RSUs and PSUs211,537 — — — 4,981 — — — 4,981 
Purchased common stock(14,906)— (14,906)(3,048)— — — — (3,048)
Stock-based compensation— — — — 8,815 — — — 8,815 
Net income— — — — — 68,127 — 95 68,222 
Foreign currency translation adjustments and other— — — — — — (32,260)(219)(32,479)
Unrealized gain on derivatives, net of tax— — — — — — 68 — 68 
Balance, March 31, 202153,623,865 $6 (2,048,918)$(306,662)$868,097 $2,256,318 $(178,257)$1,168 $2,640,670 
See notes to condensed consolidated financial statements.
5

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared by IPG Photonics Corporation, or "IPG", "its" or the "Company". Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
In the opinion of the Company's management, the financial information for the interim periods presented reflects all adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Accounts Receivable and Allowance for Doubtful Accounts — The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected. The allowance is based upon an estimate of expected credit losses over the life of outstanding receivables. The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables.
Activity related to the allowance for doubtful accounts was as follows:
Three Months Ended March 31,
20222021
Balance, beginning of period$2,108 $2,156 
Provision for bad debts, net of (recoveries)(146)188 
Uncollectable accounts written off(1) 
Foreign currency translation(24)(37)
Balance, end of period$1,937 $2,307 
Comprehensive Income — Comprehensive income includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive income is the cumulative foreign currency translation adjustment and unrealized gains or losses on derivatives. These adjustments are accumulated within the consolidated statements of comprehensive income.
6

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Total components of accumulated other comprehensive loss were as follows:
Foreign currency translation adjustmentsUnrealized (loss) gain on derivatives, net of taxTotal
Balance, January 1, 2022$(189,767)$(184)$(189,951)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments and other(39,631)(39,631)
Unrealized gain on derivatives, net of tax expense of $66
213 213 
Total other comprehensive (loss) income(39,631)213 (39,418)
Balance, March 31, 2022$(229,398)$29 $(229,369)
Balance, January 1, 2021$(145,603)$(462)$(146,065)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments and other(32,260)(32,260)
Unrealized gain on derivatives, net of tax expense of $21
68 68 
Total other comprehensive (loss) income(32,260)68 (32,192)
Balance, March 31, 2021$(177,863)$(394)$(178,257)
Subsequent Events — The Company has considered the impact of subsequent events through the filing date of these financial statements. There were no events through the filing date of these financial statements required to be disclosed.
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Sales are derived from products for different applications: fiber lasers, diode lasers, systems and accessories for materials processing; fiber lasers, diodes and amplifiers for advanced applications; fiber amplifiers and transceivers for communications applications; and fiber lasers, systems and fibers for medical applications.
The following tables represent a disaggregation of revenue from contracts with customers:
Three Months Ended March 31,
20222021
Sales by Application
Materials processing$338,963 $317,241 
Other applications31,016 28,344 
Total$369,979 $345,585 
Sales by Product
 High Power Continuous Wave ("CW") Lasers $167,691 $170,482 
 Medium Power CW Lasers 23,668 15,882 
 Pulsed Lasers 66,932 55,395 
 Quasi-Continuous Wave ("QCW") Lasers 12,780 13,666 
 Laser and Non-Laser Systems 34,597 27,116 
 Other Revenue including Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue 64,311 63,044 
Total$369,979 $345,585 

7

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Three Months Ended March 31,
20222021
Sales by Geography
North America$77,225 $73,384 
Europe:
Germany27,417 26,260 
Other including Eastern Europe/CIS80,000 58,593 
Asia and Australia:
China129,748 139,833 
Japan12,886 10,877 
Other38,675 33,110 
Rest of World4,028 3,528 
Total$369,979 $345,585 
Timing of Revenue Recognition
Goods and services transferred at a point in time$355,415 $332,532 
Goods and services transferred over time14,564 13,053 
Total$369,979 $345,585 
One of the Company's customers accounted for 22% of the Company's net accounts receivable as of both March 31, 2022 and December 31, 2021.
The Company enters into contracts to sell lasers and spare parts, for which revenue is generally recognized upon shipment or delivery, depending on the terms of the contract. The Company also provides installation services and extended warranties. The Company frequently receives consideration from a customer prior to transferring goods to the customer under the terms of a sales contract. The Company records customer deposits related to these prepayments, which represent a contract liability. The Company also records deferred revenue related to installation services when consideration is received before the services have been performed. The standalone selling price for installation services is determined based on the estimated number of days of service technician time required for installation at standard service rates. The Company recognizes customer deposits and deferred revenue as net sales after control of the goods or services has been transferred to the customer and all revenue recognition criteria are met. The Company bills customers for extended warranties upon entering into the agreement with the customer, resulting in deferred revenue that is recognized over the period of the extended warranty contract. The Company recognizes revenue over time on contracts for the sale of robotics systems. The timing of customer payments on these contracts generally differs from the timing of revenue recognized. If revenue recognized exceeds customer payments, a contract asset is recorded and if customer payments exceed revenue recognized, a contract liability is recorded. Contract assets are included within prepaid expense and other current assets on the condensed consolidated balance sheets. Contract liabilities are included within accrued expenses and other current liabilities on the condensed consolidated balance sheets. Certain deferred revenues related to extended warranties in excess one year from the balance sheet date are included within other long-term liabilities and deferred income taxes on the condensed consolidated balance sheets.
8

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table reflects the changes in the Company's contract assets and liabilities for the three months ended March 31, 2022 and 2021:
March 31,December 31, March 31,December 31,
20222021Change20212020Change
Contract assets
Contract assets$9,842 $9,345 $497 $7,670 $8,999 $(1,329)
Contract liabilities
Contract liabilities - current94,418 89,659 4,759 69,526 71,246 (1,720)
Contract liabilities - long-term2,770 2,691 79 2,549 2,189 360 
During the three months ended March 31, 2022 and 2021 the Company recognized revenue of $21,024 and $30,378, respectively, that was included in contract liabilities at the beginning of each period.
The Company has elected the practical expedient in ASC 606-10-50-14, whereby the performance obligations for contracts with an original expected duration of one year or less are not disclosed. The following table represents the Company's remaining performance obligations from contracts that are recognized over time as of March 31, 2022:
Remaining Performance Obligations
2022 (a)
2023202420252026ThereafterTotal
Revenue expected to be recognized for extended warranty agreements$3,030 $1,448 $992 $603 $166 $71 $6,310 
Revenue to be earned over time from contracts to sell robotic systems18,834 10,775     29,609 
Total$21,864 $12,223 $992 $603 $166 $71 $35,919 
(a) For the nine-month period beginning April 1, 2022.
3. RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows.
March 31,December 31,
2022202120212020
Cash and cash equivalents$642,517 $896,741 $709,105 $876,231 
Restricted cash included in prepaid expenses and other current assets   2,322 
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows$642,517 $896,741 $709,105 $878,553 
During the first quarter of 2021, the Company released $2,127 of restricted cash held back related to the Company's acquisition of the submarine networks division (SND) of Padtec SA, for indemnities provided by the seller.
4. FAIR VALUE MEASUREMENTS
The Company's financial instruments consist of cash equivalents, short-term investments, accounts receivable, accounts payable, drawings on revolving lines of credit, long-term debt, interest rate swaps and contingent purchase consideration.
The valuation techniques used to measure fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company classifies its financial instruments according to the prescribed criteria.
9

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The carrying amounts of money market fund deposits, term deposits, accounts receivable, accounts payable and drawings on revolving lines of credit are considered reasonable estimates of their fair market value due to the short maturity of most of these instruments or as a result of the competitive market interest rates, which have been negotiated. The fair value of the Company's bond securities is based upon quoted prices for instruments with identical terms in active markets. The Company's commercial paper securities reported at fair value are based upon model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2.
The following table presents fair value information related to the Company's assets and liabilities measured at amortized cost on the condensed consolidated balance sheets with the exception of the interest rate swap and contingent purchase consideration, which are measured at fair value:
 Fair Value Measurements at March 31, 2022
TotalLevel 1Level 2Level 3
Assets
Cash equivalents:
Money market fund deposits and term deposits$183,749 $183,749 $ $ 
Commercial paper170,251  170,251  
Corporate bonds4,518  4,518  
Municipal bonds3,122  3,122  
Short-term investments:
Commercial paper468,493  468,493  
Corporate bonds182,898  182,898  
Municipal bonds22,125  22,125  
Certificates of deposit3,004  3,004  
U.S. Treasury and agency obligations95,007  95,007  
Foreign government bonds2,003  2,003  
Other assets:
Interest rate swap37  37  
Total$1,135,207 $183,749 $951,458 $ 
Liabilities
Term notes$33,162 $ $33,162 $ 
Contingent purchase consideration1,615   1,615 
Total$34,777 $ $33,162 $1,615 
10

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
 Fair Value Measurements at December 31, 2021
TotalLevel 1Level 2Level 3
Assets
Cash equivalents:
Money market fund deposits and term deposits$279,066 $279,066 $ $ 
Commercial paper117,663  117,663  
Corporate bonds11,459  11,459  
Municipal bonds3,220  3,220  
Short-term investments:
Commercial paper557,955  557,955  
Corporate bonds215,754  215,754  
U.S. Treasury and agency obligations21,980  21,980  
Municipal bonds4,546  4,546  
Certificate of deposit3,000  3,000  
Foreign government bonds2,015  2,015  
Total$1,216,658 $279,066 $937,592 $ 
Liabilities
Term notes$34,226 $ $34,226 $ 
Contingent purchase consideration1,371   1,371 
Interest rate swap242  242  
Total$35,839 $ $34,468 $1,371 
Short-term investments consist of liquid investments with original maturities of greater than three months but less than one year and are recorded at amortized cost. There were no impairments for the investments considered held-to-maturity during the quarters ended March 31, 2022 and 2021. There were no current expected credit loss allowances for the investments considered held-to-maturity at March 31, 2022 and 2021. The Company holds highly-rated held-to-maturity instruments that are within one year of maturity.
The following table presents the effective maturity dates of debt investments, which are held-to-maturity:
March 31, 2022December 31, 2021
Book ValueFair ValueBook ValueFair Value
Investment maturity
Less than 1 year$774,161 $773,530 $805,400 $805,250 
The Company entered into an interest rate swap that is designated as a cash flow hedge associated with a long-term note issued during the second quarter of 2016 that will terminate with the long-term note in May 2023. The fair value at March 31, 2022 for the interest rate swap considered pricing models whose inputs are observable for the securities held by the Company.
At March 31, 2022 and December 31, 2021, the Company's long-term notes consisted of a variable rate note and a fixed rate note, and are reported at amortized cost on the condensed consolidated balance sheets. For disclosure purposes, the fair value of the long-term notes was estimated using a discounted cash flow model using observable market interest rates and is classified as Level 2. Based on the discounted cash flow model, the fair values of the long-term notes, including the current portion, at March 31, 2022 and December 31, 2021 were $33,162 and $34,226 respectively, as compared to the book value of $33,193 and $34,157, respectively.
The fair values of contingent purchase consideration at March 31, 2022 and December 31, 2021 were determined using an income approach at the respective business combination date and at the reporting date. The approach is based on significant inputs that are not observable in the market and include key assumptions such as assessing the probability of meeting certain milestones required to earn the contingent purchase consideration.
11

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table presents information about the Company's movement in Level 3 assets and liabilities measured at fair value:
Three Months Ended March 31,
20222021
Contingent purchase consideration
Balance, beginning of period$1,371 $1,963 
Cash payments (466)
Foreign exchange adjustment244 (154)
Balance, end of period$1,615 $1,343 
5. INVENTORIES
Inventories consist of the following:
March 31,December 31,
20222021
Components and raw materials$288,752 $270,146 
Work-in-process36,806 32,506 
Finished goods159,413 158,095 
Total$484,971 $460,747 
The Company recorded inventory provisions totaling $10,781 and $8,027 for the three months ended March 31, 2022 and 2021, respectively. These provisions relate to the recoverability of the value of inventories due to technological changes and excess quantities. These provisions are reported as a reduction to components and raw materials, work-in-process and finished goods.
6.