10-Q 1 ipgp-20240930.htm 10-Q ipgp-20240930
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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 September 30, 2024
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
image.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)
377 Simarano Drive, Marlborough, Massachusetts
01752
(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 October 28, 2024, there were 43,248,080 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
September 30,December 31,
20242023
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents$883,871 $514,674 
Short-term investments135,444 662,807 
Accounts receivable, net163,541 219,053 
Inventories320,723 453,874 
Prepaid income taxes27,115 26,038 
Prepaid expenses and other current assets39,720 38,208 
Total current assets1,570,414 1,914,654 
Deferred income taxes, net106,254 88,788 
Goodwill38,484 38,540 
Intangible assets, net22,054 26,234 
Property, plant and equipment, net589,559 602,257 
Other assets28,365 28,425 
Total assets$2,355,130 $2,698,898 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$39,578 $28,618 
Accrued expenses and other current liabilities150,788 181,350 
Income taxes payable3,816 4,893 
Total current liabilities194,182 214,861 
Other long-term liabilities and deferred income taxes46,336 68,652 
Total liabilities240,518 283,513 
Commitments and contingencies (Note 11)
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,591,081 and 43,248,080 shares issued and outstanding, respectively, at September 30, 2024; 56,317,438 and 46,320,671 shares issued and outstanding, respectively, at December 31, 2023.
6 6 
Treasury stock, at cost, 13,343,001 and 9,996,767 shares held at September 30, 2024 and December 31, 2023, respectively.
(1,447,984)(1,161,505)
Additional paid-in capital1,025,268 994,020 
Retained earnings2,606,053 2,795,394 
Accumulated other comprehensive loss(68,731)(212,530)
Total IPG Photonics Corporation equity2,114,612 2,415,385 
Total liabilities and equity$2,355,130 $2,698,898 
See notes to condensed consolidated financial statements.
1

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(In thousands, except per share data)
Net sales$233,143 $301,401 $742,797 $988,546 
Cost of sales179,054 168,499 494,986 561,015 
Gross profit54,089 132,902 247,811 427,531 
Operating expenses:
Sales and marketing22,233 22,243 67,718 63,518 
Research and development27,177 24,708 84,045 70,990 
General and administrative32,660 30,958 95,420 90,746 
Net loss from divestiture and sale of assets197,651  190,201  
Impairment of long-lived assets
26,566 1,237 26,566 1,237 
Restructuring charges (recoveries), net
 (1,501) (357)
Loss (gain) on foreign exchange1,148 (449)6,067 (1,798)
Total operating expenses307,435 77,196 470,017 224,336 
Operating (loss) income
(253,346)55,706 (222,206)203,195 
Other income, net:
Interest income, net11,103 11,569 38,058 28,366 
Other (loss) income, net(271)545 248 1,161 
Total other income10,832 12,114 38,306 29,527 
(Loss) income before provision for income taxes (242,514)67,820 (183,900)232,722 
Income tax (benefit) expense(8,920)12,826 5,441 55,272 
Net (loss) income attributable to IPG Photonics Corporation common stockholders$(233,594)$54,994 $(189,341)$177,450 
Net (loss) income attributable to IPG Photonics Corporation per common share:
Basic$(5.33)$1.16 $(4.22)$3.75 
Diluted$(5.33)$1.16 $(4.22)$3.73 
Weighted average common shares outstanding:
Basic43,837 47,237 44,901 47,364 
Diluted43,837 47,388 44,901 47,536 
See notes to condensed consolidated financial statements.

2

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(In thousands)
Net (loss) income$(233,594)$54,994 $(189,341)$177,450 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments and other158,121 (31,538)143,799 (46,139)
Unrealized loss on derivatives   (152)
Total other comprehensive income (loss)158,121 (31,538)143,799 (46,291)
Comprehensive (loss) income attributable to IPG Photonics Corporation$(75,473)$23,456 $(45,542)$131,159 

See notes to condensed consolidated financial statements.

3

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
20242023
(In thousands)
Cash flows from operating activities:
Net (loss) income$(189,341)$177,450 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization46,623 52,678 
Deferred income taxes(18,763)(4,835)
Stock-based compensation29,378 27,392 
Impairment of long-lived assets and restructuring charges (recoveries), net
26,566 (486)
Unrealized gain on foreign currency transactions(118)(4,322)
Net loss from divestiture and sale of assets
190,201  
Provisions for inventory, warranty and bad debt76,434 43,889 
Amortization of premium/discount on investments(15,676)(17,761)
Other2,841 4,764 
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable51,884 (25,026)
Inventories29,760 (20,736)
Prepaid expenses and other assets(4,501)(5,504)
Accounts payable4,272 (10,231)
Accrued expenses and other liabilities(36,743)(39,646)
Income and other taxes payable(18,705)12,298 
Net cash provided by operating activities174,112 189,924 
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment(75,358)(85,256)
Proceeds from sales of property, plant and equipment28,538 30,425 
Purchases of short-term investments(423,176)(898,455)
Proceeds from short-term investments966,214 789,844 
Net cash outflow from divestiture(25,324) 
Other385 446 
Net cash provided by (used in) investing activities471,279 (162,996)
Cash flows from financing activities:
Principal payments on long-term borrowings (16,031)
Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards1,870 (432)
Purchase of treasury stock, at cost(286,479)(159,528)
Net cash used in financing activities(284,609)(175,991)
Effect of changes in exchange rates on cash and cash equivalents8,415 (20,862)
Net increase (decrease) in cash and cash equivalents369,197 (169,925)
Cash and cash equivalents — Beginning of period514,674 698,209 
Cash and cash equivalents — End of period$883,871 $528,284 
Supplemental disclosure of cash flow information:
Cash paid for interest$95 $1,110 
Cash paid for income taxes$38,905 $55,001 
Non-cash transactions:
Demonstration units transferred from inventory to other assets$4,384 $3,872 
Inventory transferred to machinery and equipment$1,816 $2,215 
Additions to property, plant and equipment included in accounts payable
$3,037 $1,692 
Leased assets obtained in exchange for new operating lease liabilities$3,077 $2,053 
See notes to condensed consolidated financial statements.
4

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended September 30,
Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, July 1, 202444,225,282 $6 (12,358,941)$(1,373,525)$1,014,094 $2,839,647 $(226,852)$2,253,370 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options6,858 — — — 78 — — 78 
Purchased common stock(984,060)— (984,060)(74,459)— — — (74,459)
Stock-based compensation— — — — 11,096 — — 11,096 
Net loss— — — — — (233,594)— (233,594)
Foreign currency translation adjustments and other— — — — — — 158,121 158,121 
Balance, September 30, 202443,248,080 $6 (13,343,001)$(1,447,984)$1,025,268 $2,606,053 $(68,731)$2,114,612 
Balance, July 1, 202347,364,320 $6 (8,878,184)$(1,051,040)$969,889 $2,698,972 $(219,277)$2,398,550 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options7,122 — — — 300 — — 300 
Purchased common stock(449,688)— (449,688)(46,497)— — — (46,497)
Stock-based compensation— — — — 8,142 — — 8,142 
Net income— — — — — 54,994 — 54,994 
Foreign currency translation adjustments and other— — — — — — (31,538)(31,538)
Balance, September 30, 202346,921,754 $6 (9,327,872)$(1,097,537)$978,331 $2,753,966 $(250,815)$2,383,951 
Nine Months Ended September 30,
Common StockTreasury StockAdditional Paid In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, January 1, 202446,320,671 $6 (9,996,767)$(1,161,505)$994,020 $2,795,394 $(212,530)$2,415,385 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options238,801 — — — (629)— — (629)
Common stock issued under employee stock purchase plan34,842 — — — 2,499 — — 2,499 
Purchased common stock(3,346,234)— (3,346,234)(286,479)— — — (286,479)
Stock-based compensation— — — — 29,378 — — 29,378 
Net loss— — — — — (189,341)— (189,341)
Foreign currency translation adjustments and other— — — — — — 143,799 143,799 
Balance, September 30, 202443,248,080 $6 (13,343,001)$(1,447,984)$1,025,268 $2,606,053 $(68,731)$2,114,612 
Balance, January 1, 202348,138,257 $6 (7,879,415)$(938,009)$951,371 $2,576,516 $(204,524)$2,385,360 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options201,551 — — — (2,925)— — (2,925)
Common stock issued under employee stock purchase plan30,403 — — — 2,493 — — 2,493 
Purchased common stock(1,448,457)— (1,448,457)(159,528)— — — (159,528)
Stock-based compensation— — — — 27,392 — — 27,392 
Net income— — — — — 177,450 — 177,450 
Foreign currency translation adjustments and other— — — — — — (46,139)(46,139)
Unrealized loss on derivatives, net of tax— — — — — — (152)(152)
Balance, September 30, 202346,921,754 $6 (9,327,872)$(1,097,537)$978,331 $2,753,966 $(250,815)$2,383,951 
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, 2023.
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.
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. RECENT ACCOUNTING PRONOUNCEMENTS
Adopted Pronouncements — In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis. Under the new guidance an entity is required to disclose the title and position of the chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The ASU also requires that an entity that has a single reportable segment provide all the disclosures required by this ASU and all existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard during fiscal year 2024, and will start disclosing the required information in fiscal year ending December 31, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.
Pronouncements Currently Under Evaluation — In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires an entity on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance also requires an entity to disclose on an annual basis information about income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of this ASU. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.
3. 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; and fiber lasers, systems and fibers for medical applications.
The following tables represent a disaggregation of revenue from contracts with customers:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Sales by Application
Materials processing$207,063 $265,226 $659,201 $892,379 
Other applications26,080 36,175 83,596 96,167 
Total$233,143 $301,401 $742,797 $988,546 
6

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Sales by Product
 High Power Continuous Wave ("CW") Lasers $81,325 $119,512 $254,343 $419,538 
 Medium Power CW Lasers 15,110 20,937 47,082 57,146 
 Pulsed Lasers 33,470 41,420 110,825 150,569 
 Quasi-Continuous Wave ("QCW") Lasers 10,180 10,856 36,520 35,978 
 Laser and Non-Laser Systems 35,265 37,493 111,436 117,064 
 Other Revenue including Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue 57,793 71,183 182,591 208,251 
Total$233,143 $301,401 $742,797 $988,546 
Sales by Geography
North America$57,294 $71,349 $198,163 $225,649 
Europe:
Germany25,787 23,423 66,615 72,218 
Other Europe41,485 71,946 154,704 225,231 
Asia:
China61,769 84,408 189,374 284,262 
Japan14,495 15,829 41,408 54,196 
Other Asia29,470 29,741 82,091 111,457 
Rest of World2,843 4,705 10,442 15,533 
Total$233,143 $301,401 $742,797 $988,546 
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Timing of Revenue Recognition
Goods and services transferred at a point in time$223,269 $289,477 $713,913 $952,173 
Goods and services transferred over time9,874 11,924 28,884 36,373 
Total$233,143 $301,401 $742,797 $988,546 
One of the Company's customers accounted for 14% of the Company's net accounts receivable as of both September 30, 2024 and December 31, 2023.
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 large scale materials processing 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 of one year from the balance sheet date are included within other long-term liabilities and deferred income taxes on the condensed consolidated balance sheets.
7

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 nine months ended September 30, 2024 and 2023:
September 30,January 1,September 30,January 1,
20242024Change20232023Change
Contract assets
Contract assets$10,835 $9,383 $1,452 $5,623 $8,620 $(2,997)
Contract liabilities
Contract liabilities - current52,271 69,219 (16,948)66,961 80,068 (13,107)
Contract liabilities - long-term3,015 2,851 164 2,851 3,142 (291)
During the three months ended September 30, 2024 and 2023 the Company recognized revenue of $6,366 and $7,730, respectively, that was included in contract liabilities at the beginning of each year. During the nine months ended September 30, 2024 and 2023 the Company recognized revenue of $49,582 and $51,173 respectively, that was included in contract liabilities at the beginning of each year.
The following table represents the Company's remaining performance obligations from contracts that are recognized over time as of September 30, 2024:
Remaining Performance Obligations
2024 (a)
2025202620272028ThereafterTotal
Revenue expected to be recognized for extended warranty agreements$1,003 $2,184 $1,166 $866 $316 $145 $5,680 
Revenue to be earned over time from contracts to sell large scale materials processing systems
6,538 8,168 1,586    16,292 
Total$7,541 $10,352 $2,752 $866 $316 $145 $21,972 
(a) For the three-month period beginning October 1, 2024.
4. LOSS ON DIVESTITURE AND IMPAIRMENT OF LONG-LIVED ASSETS
The Company recorded a loss on divestiture of $197,651 for the quarter ended September 30, 2024, which was included in Net loss from divestiture and sale of assets in the Company's Condensed Consolidated Statements of Income. As a result of the Russia-Ukraine conflict and related sanctions, the Company's ability to ship and receive components from its Russian operations was significantly curtailed. On August 29, 2024, the Company completed the sale of its Russian subsidiary, Scientific and Technical Association “IRE-Polus”, pursuant to a share purchase agreement with a purchaser entity associated with Softline Projects LLC and existing management of IRE-Polus for $51,096. The loss mainly consisted of $59,293 related to the carrying value of net assets of the Russian subsidiary that was in excess of net proceeds received on the sale and $135,346 related to the cumulative translation adjustment component of other comprehensive income that was previously included in stockholders' equity of the Company's Condensed Consolidated Balance Sheets.
Evaluation of Belarusian Operations — On June 29, 2024, the European Union (“EU”) issued new sanctions for Belarus. The sanctions, effective July 1 2024, allow shipments to our German operations related to existing contracts to continue through October 2, 2024. The Company completed fulfillment of existing contracts in September 2024. The Company is no longer able to continue to supply laser cabinets and other mechanical components from our factory in Belarus. As a result, the Company completed an impairment analysis of the assets in Belarus during the third quarter of 2024. The Company recorded $26,566 of impairment of long-lived assets, primarily fixed assets in the Company's Condensed Consolidated Statements of Income. The long-lived asset impairment charge was based on a probability-weighted average of valuations using the discounted cash flow method under the income approach to estimate the fair value of the long-lived assets in Belarus.
5. FAIR VALUE MEASUREMENTS
The Company's financial instruments consist of cash equivalents, short-term investments, accounts receivable, accounts payable, and revolving lines of credit.
8

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
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.
The fair value of money market fund deposits, cash equivalent term deposits, accounts receivable, accounts payable and drawings on revolving lines of credit is reasonably close to their carrying amounts 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 commercial paper, corporate bonds, U.S. Treasury and agency obligations and term deposits are based on Level 2 inputs.
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:
 Fair Value Measurements at September 30, 2024
TotalLevel 1Level 2Level 3
Assets
Cash equivalents:
Money market fund deposits$185,862 $185,862 $ $ 
Commercial paper156,412  156,412  
U.S. Treasury and agency obligations88,610  88,610  
Term deposits22,145  22,145  
Corporate bonds13,416  13,416  
Total cash equivalents
466,445 185,862 280,583  
Short-term investments:
Commercial paper75,523  75,523  
U.S. Treasury and agency obligations56,887  56,887  
Term deposits3,048  3,048  
Total short-term investments
135,458  135,458  
Total
$601,903 $185,862 $416,041 $ 
 Fair Value Measurements at December 31, 2023
TotalLevel 1Level 2Level 3
Assets
Cash equivalents:
Money market fund deposits$171,632 $171,632 $ $ 
Term deposits83,965  83,965  
Corporate bonds23,516  23,516  
Commercial paper6,369  6,369  
Total cash equivalents
285,482 171,632 113,850  
Short-term investments:
Commercial paper244,571  244,571  
Corporate bonds243,915  243,915  
U.S. Treasury and agency obligations171,316  171,316  
Term deposits3,009  3,009  
Total short-term investments
662,811  662,811  
Total
$948,293 $171,632 $776,661 $ 
There were no impairments for the investments considered held-to-maturity during the quarters ended September 30, 2024 and 2023. There were no current expected credit loss allowances for the investments considered held-to-maturity at
9

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
September 30, 2024 and 2023. The Company holds highly-rated held-to-maturity instruments that are within one year of maturity.
The Company did not have any allowance for credit losses other than the allowance for uncollectible accounts receivable. As of September 30, 2024 and 2023, the allowance for credit losses on the trade receivables was $2,329 and $1,587, respectively.
The following table presents the effective maturity dates of debt investments, which are held-to-maturity:
September 30, 2024December 31, 2023
Book ValueFair ValueBook ValueFair Value
Investment maturity
Less than 1 year$135,444 $135,458 $662,807 $662,811 
6. INVENTORIES
Inventories consist of the following:
September 30,December 31,
20242023
Components and raw materials$170,905 $263,652 
Work-in-process30,013 47,997 
Finished goods119,805 142,225 
Total$320,723 $453,874 
The Company recorded inventory provisions totaling $43,408 and $9,119 for the three months ended September 30, 2024 and 2023, respectively, and $70,259 and $32,434 for the nine months ended September 30, 2024 and 2023. These provisions relate to the recoverability of the value of inventories due to technological changes and excess quantities. For the three and nine months ended September 30, 2024, the Company recorded additional inventory provisions of $29,487 attributed to items previously considered safety stock and items that became technologically obsolete. These provisions are reported as a reduction to components and raw materials, work-in-process and finished goods.
7. GOODWILL AND INTANGIBLES
The following table sets forth the changes in the carrying amount of goodwill:
Nine Months Ended September 30,
2024
Balance, beginning of period$38,540 
Foreign exchange adjustment(56)
Balance, end of period$38,484 
Intangible assets, subject to amortization, consisted of the following:
September 30, 2024December 31, 2023
Gross Carrying AmountAccumulated
Amortization
Net 
Carrying
Amount
Weighted-
Average  Lives
Gross Carrying AmountAccumulated
Amortization
Net 
Carrying
Amount
Weighted-
Average  Lives
Customer relationships$48,219 $(28,787)$19,432 11 years$48,216 $(25,973)$22,243 11 years
Technology, trademark and trade name26,990 (24,368)2,622 7 years29,903 (25,960)3,943 7 years
Production know-how9,172 (9,172) 7 years9,155 (9,155) 7 years
Patents8,034 (8,034) 8 years8,035 (7,987)48 8 years
Total$92,415 $(70,361)$22,054 $95,309 $(69,075)$26,234 
10

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Amortization expense for the three months ended September 30, 2024 and 2023 was $1,377 and $2,020, respectively. Amortization expense for the nine months ended September 30, 2024 and 2023 was $4,180 and $6,062, respectively. The estimated future amortization expense for intangibles for the remainder of 2024 and subsequent years is as follows:
2024 (a)
2025202620272028ThereafterTotal
$1,374 $4,979 $4,218 $4,006 $3,635 $3,842 $22,054 
(a) For the three-month period beginning October 1, 2024.
8. OTHER LIABILITIES
Accrued expenses and other current liabilities consist of the following:
September 30,December 31,
20242023
Accrued compensation$55,814 $67,053 
Contract liabilities52,271 69,219 
Current portion of accrued warranty23,261 27,283 
Short-term lease liabilities4,436 4,597 
Other15,006 13,198 
Total$150,788 $181,350 
Other long-term liabilities and deferred income taxes consist of the following:
September 30,December 31,
20242023
Accrued warranty$14,164 $19,926 
Unrecognized tax benefits14,389 17,176 
Long-term lease liabilities12,026 13,664 
Deferred income taxes4 1,508 
Transition tax related to 2017 U.S. tax reform act 11,009 
Other5,753 5,369 
Total$46,336 $68,652 
9. PRODUCT WARRANTIES
The Company typically provides one to five years parts and service warranties on lasers, laser and non-laser systems, and amplifiers. Most of the Company's sales offices provide support to customers in their respective geographic areas. Warranty reserves have generally been sufficient to cover product warranty repair and replacement costs.
Activity related to the warranty accrual was as follows:
Nine Months Ended September 30,
20242023
Balance, beginning of period$47,209 $52,862 
Provision for warranty accrual4,603 9,874 
Warranty claims(12,902)(13,792)
Warranty related to business divested
(1,603) 
Foreign currency translation118 (850)
Balance, end of period$37,425 $48,094 
Accrued warranty reported in the accompanying condensed consolidated financial statements as of September 30, 2024 and December 31, 2023 consist of $23,261 and $27,283 in accrued expenses and other current liabilities, respectively, and $14,164 and $19,926 in other long-term liabilities and deferred income taxes, respectively.
11

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
10. FINANCING ARRANGEMENTS
Revolving Line of Credit Facilities:
The Company maintains a $75,000 U.S. revolving line of credit, which is available to certain foreign subsidiaries and allows for borrowings in the local currencies of those subsidiaries. At September 30, 2024 and December 31, 2023, there were no amounts drawn on the U.S. line-of-credit, and there were $1,888 and $2,487, respectively, of guarantees issued against the facility, which reduce the amount of the facility available to draw. After providing for the guarantees used, the remaining availability under this line was $73,112 at September 30, 2024. In addition, the Company maintains Euro lines of credit facilities with a total principal amount of €6,500 ($7,254 and $7,173 as of September 30, 2024 and December 31, 2023, respectively), which are available to certain European subsidiaries. At September 30, 2024 and December 31, 2023, there were no amounts drawn on the Euro lines of credit, and there were $1,611 and $1,180, respectively, of guarantees issued against the facility, which reduce the amount of the facility available to draw.
11. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in legal disputes and other proceedings in the ordinary course of its business. These matters may include allegations of infringement of intellectual property, commercial disputes and employment matters. As of September 30, 2024 and through the filing date of these condensed consolidated financial statements, the Company is aware of no ongoing legal proceedings that management estimates could have a material effect on the Company's condensed consolidated financial statements.
The Company provides product warranties on its lasers, laser and non-laser systems, and amplifiers. Refer to Note 9, "Product Warranties" for information related to the Company's warranty accrual.
12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive income is the cumulative foreign currency translation adjustments. These adjustments are accumulated within the condensed consolidated statements of comprehensive income.
Total components of accumulated other comprehensive loss were as follows:
Foreign currency translation adjustments and otherUnrealized gain (loss) on derivatives, net of taxTotal
Balance, July 1, 2024$(226,852)$ $(226,852)
Other comprehensive income, net of tax:
Foreign currency translation adjustments and other before reclassification, net of tax expense of $237
21,451 — 21,451 
Reclassification of foreign currency translation adjustments related to the divestiture of Russian operations to net loss, net of tax expense of $1,324
136,670 — 136,670 
Total other comprehensive income158,121  158,121 
Balance, September 30, 2024$(68,731)$ $(68,731)
Balance, July 1, 2023$(219,277)$ $(219,277)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments and other, net of tax benefit of $94
(31,538)— (31,538)
Total other comprehensive loss(31,538) (31,538)
Balance, September 30, 2023$(250,815)$ $(250,815)
12

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Foreign currency translation adjustments and otherUnrealized gain (loss) on derivatives, net of taxTotal
Balance, January 1, 2024$(212,530)$ $(212,530)
Other comprehensive income, net of tax:
Foreign currency translation adjustments and other before reclassification, net of tax expense of $112
7,129 — 7,129 
Reclassification of foreign currency translation adjustments related to the divestiture of Russian operations to net loss, net of tax expense of $1,324
136,670 — 136,670 
Total other comprehensive income
143,799  143,799 
Balance, September 30, 2024$(68,731)$ $(68,731)
Balance, January 1, 2023$(204,676)$152 $(204,524)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments and other, net of tax expense of $10
(46,139)— (46,139)
Unrealized loss on derivatives, net of tax benefit of $46
— (152)(152)
Total other comprehensive loss(46,139)(152)(46,291)
Balance, September 30, 2023$(250,815)$ $(250,815)
13. INCOME TAXES
The provision for income taxes was a benefit of $8,920 and a tax expense of $5,441, for the three and nine months ended September 30, 2024, respectively. The effective tax rate was 3.7% for the three months ended September 30, 2024. For the nine months ended September 30, 2024, there was tax expense provided on the Loss before provision for income taxes.
This compares to the three and nine months ended September 30, 2023, where the provisions for income taxes were tax expenses of $12,826 and $55,272, respectively. The effective tax rates for the three and nine months ended September 30, 2023, were a tax expense of 18.9% and 23.8%, respectively.
There was a tax detriment for both periods in 2024 related primarily to $41,482 of losses not benefitted from the loss on divestiture of Russian operations, which occurred in the three months ended September 30, 2024. Excluding the divestiture of Russian operations, the other discrete tax items for the three months ended September 30, 2024 did not have a significant effect on the Company's tax rate. Excluding the divestiture of Russian operations, the other discrete tax detriment of $1,435 for the nine months ended September 30, 2024, related primarily to equity-based compensation which was partially offset by a benefit related to reductions of tax reserves.
There were net discrete tax detriments of $169 and $390 for the three and nine months ended September 30, 2023, respectively. The discrete detriments in 2023 did not have a significant effect on the Company's tax rate. Excluding discrete items, the overall effective tax rate in 2024 decreased as compared to 2023 due the decrease of income before provision for income taxes in 2024 as compared to 2023.
The Company accounts for its uncertain tax positions in accordance with the accounting standards for income taxes. The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
13

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following is a summary of the activity of the Company’s unrecognized tax benefits for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30,
20242023
Balance, beginning of period$17,176 $15,841 
Change in prior period positions(3,130)(1,274)
Additions for tax positions in current period249 3,738 
Foreign currency translation94 (527)
Balance, end of period$14,389 $17,778 
The liability for uncertain tax benefits is included in other long-term liabilities and deferred income taxes at September 30, 2024 and December 31, 2023. Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters would benefit the Company's effective tax rate, if the tax benefits are recognized.
14. NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER COMMON SHARE
The following table sets forth the computation of diluted net income attributable to IPG Photonics Corporation per common share following the treasury stock method:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net (loss) income attributable to IPG Photonics Corporation common stockholders$(233,594)$54,994 $(189,341)$177,450 
Basic weighted average common shares43,837,357 47,236,901 44,901,247 47,363,974 
Dilutive effect of common stock equivalents 151,218  171,661 
Diluted weighted average common shares43,837,357 47,388,119 44,901,247 47,535,635 
Basic net (loss) income attributable to IPG Photonics Corporation per common share$(5.33)$1.16 $(4.22)$3.75 
Diluted net (loss) income attributable to IPG Photonics Corporation per common share$(5.33)$1.16 $(4.22)$3.73 
The computation of diluted weighted average common shares excludes common stock equivalents including non-qualified stock options, performance stock units ("PSUs"), restricted stock units ("RSUs") and employee stock purchase plan ("ESPP") because the effect of including them would be anti-dilutive. The weighted average anti-dilutive shares outstanding for the three and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Non-qualified stock options672,225 529,228 603,058 537,065 
Restricted stock units202,368 55,201 232,622 376,382