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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
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: (508) 373-1100
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | IPGP | The 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, |
| 2024 | | 2023 |
| (In thousands, except share and per share data) |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 883,871 | | | $ | 514,674 | |
Short-term investments | 135,444 | | | 662,807 | |
Accounts receivable, net | 163,541 | | | 219,053 | |
Inventories | 320,723 | | | 453,874 | |
Prepaid income taxes | 27,115 | | | 26,038 | |
Prepaid expenses and other current assets | 39,720 | | | 38,208 | |
| | | |
Total current assets | 1,570,414 | | | 1,914,654 | |
Deferred income taxes, net | 106,254 | | | 88,788 | |
Goodwill | 38,484 | | | 38,540 | |
Intangible assets, net | 22,054 | | | 26,234 | |
Property, plant and equipment, net | 589,559 | | | 602,257 | |
Other assets | 28,365 | | | 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 liabilities | 150,788 | | | 181,350 | |
| | | |
Income taxes payable | 3,816 | | | 4,893 | |
Total current liabilities | 194,182 | | | 214,861 | |
Other long-term liabilities and deferred income taxes | 46,336 | | | 68,652 | |
| | | |
Total liabilities | 240,518 | | | 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 capital | 1,025,268 | | | 994,020 | |
Retained earnings | 2,606,053 | | | 2,795,394 | |
Accumulated other comprehensive loss | (68,731) | | | (212,530) | |
Total IPG Photonics Corporation equity | 2,114,612 | | | 2,415,385 | |
| | | |
| | | |
Total liabilities and equity | $ | 2,355,130 | | | $ | 2,698,898 | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| (In thousands, except per share data) |
Net sales | $ | 233,143 | | | $ | 301,401 | | | $ | 742,797 | | | $ | 988,546 | |
Cost of sales | 179,054 | | | 168,499 | | | 494,986 | | | 561,015 | |
Gross profit | 54,089 | | | 132,902 | | | 247,811 | | | 427,531 | |
Operating expenses: | | | | | | | |
Sales and marketing | 22,233 | | | 22,243 | | | 67,718 | | | 63,518 | |
Research and development | 27,177 | | | 24,708 | | | 84,045 | | | 70,990 | |
General and administrative | 32,660 | | | 30,958 | | | 95,420 | | | 90,746 | |
| | | | | | | |
Net loss from divestiture and sale of assets | 197,651 | | | — | | | 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 exchange | 1,148 | | | (449) | | | 6,067 | | | (1,798) | |
Total operating expenses | 307,435 | | | 77,196 | | | 470,017 | | | 224,336 | |
Operating (loss) income | (253,346) | | | 55,706 | | | (222,206) | | | 203,195 | |
Other income, net: | | | | | | | |
Interest income, net | 11,103 | | | 11,569 | | | 38,058 | | | 28,366 | |
Other (loss) income, net | (271) | | | 545 | | | 248 | | | 1,161 | |
Total other income | 10,832 | | | 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: | | | | | | | |
Basic | 43,837 | | | 47,237 | | | 44,901 | | | 47,364 | |
Diluted | 43,837 | | | 47,388 | | | 44,901 | | | 47,536 | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| (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 other | 158,121 | | | (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.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
| (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 amortization | 46,623 | | | 52,678 | |
Deferred income taxes | (18,763) | | | (4,835) | |
Stock-based compensation | 29,378 | | | 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 debt | 76,434 | | | 43,889 | |
Amortization of premium/discount on investments | (15,676) | | | (17,761) | |
Other | 2,841 | | | 4,764 | |
Changes in assets and liabilities that provided (used) cash, net of acquisitions: | | | |
Accounts receivable | 51,884 | | | (25,026) | |
Inventories | 29,760 | | | (20,736) | |
Prepaid expenses and other assets | (4,501) | | | (5,504) | |
Accounts payable | 4,272 | | | (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 activities | 174,112 | | | 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 equipment | 28,538 | | | 30,425 | |
Purchases of short-term investments | (423,176) | | | (898,455) | |
Proceeds from short-term investments | 966,214 | | | 789,844 | |
| | | |
Net cash outflow from divestiture | (25,324) | | | — | |
Other | 385 | | | 446 | |
Net cash provided by (used in) investing activities | 471,279 | | | (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 awards | 1,870 | | | (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 equivalents | 8,415 | | | (20,862) | |
Net increase (decrease) in cash and cash equivalents | 369,197 | | | (169,925) | |
Cash and cash equivalents — Beginning of period | 514,674 | | | 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.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| Common Stock | | Treasury Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | | | Total Stockholders' Equity |
(In thousands, except share data) | Shares | | Amount | | Shares | | Amount | | | | | |
Balance, July 1, 2024 | 44,225,282 | | | $ | 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 options | 6,858 | | | — | | | — | | | — | | | 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, 2024 | 43,248,080 | | | $ | 6 | | | (13,343,001) | | | $ | (1,447,984) | | | $ | 1,025,268 | | | $ | 2,606,053 | | | $ | (68,731) | | | | | $ | 2,114,612 | |
| | | | | | | | | | | | | | | | | |
Balance, July 1, 2023 | 47,364,320 | | | $ | 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 options | 7,122 | | | — | | | — | | | — | | | 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, 2023 | 46,921,754 | | | $ | 6 | | | (9,327,872) | | | $ | (1,097,537) | | | $ | 978,331 | | | $ | 2,753,966 | | | $ | (250,815) | | | | | $ | 2,383,951 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| Common Stock | | Treasury Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | | | Total Stockholders' Equity |
(In thousands, except share data) | Shares | | Amount | | Shares | | Amount | | | | | |
Balance, January 1, 2024 | 46,320,671 | | | $ | 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 options | 238,801 | | | — | | | — | | | — | | | (629) | | | — | | | — | | | | | (629) | |
Common stock issued under employee stock purchase plan | 34,842 | | | — | | | — | | | — | | | 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, 2024 | 43,248,080 | | | $ | 6 | | | (13,343,001) | | | $ | (1,447,984) | | | $ | 1,025,268 | | | $ | 2,606,053 | | | $ | (68,731) | | | | | $ | 2,114,612 | |
| | | | | | | | | | | | | | | | | |
Balance, January 1, 2023 | 48,138,257 | | | $ | 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 options | 201,551 | | | — | | | — | | | — | | | (2,925) | | | — | | | — | | | | | (2,925) | |
Common stock issued under employee stock purchase plan | 30,403 | | | — | | | — | | | — | | | 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, 2023 | 46,921,754 | | | $ | 6 | | | (9,327,872) | | | $ | (1,097,537) | | | $ | 978,331 | | | $ | 2,753,966 | | | $ | (250,815) | | | | | $ | 2,383,951 | |
| | | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
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, |
| 2024 | | 2023 | | 2024 | | 2023 |
Sales by Application | | | | | | | |
Materials processing | $ | 207,063 | | | $ | 265,226 | | | $ | 659,201 | | | $ | 892,379 | |
Other applications | 26,080 | | | 36,175 | | | 83,596 | | | 96,167 | |
Total | $ | 233,143 | | | $ | 301,401 | | | $ | 742,797 | | | $ | 988,546 | |
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: | | | | | | | |
Germany | 25,787 | | | 23,423 | | | 66,615 | | | 72,218 | |
Other Europe | 41,485 | | | 71,946 | | | 154,704 | | | 225,231 | |
Asia: | | | | | | | |
China | 61,769 | | | 84,408 | | | 189,374 | | | 284,262 | |
Japan | 14,495 | | | 15,829 | | | 41,408 | | | 54,196 | |
Other Asia | 29,470 | | | 29,741 | | | 82,091 | | | 111,457 | |
Rest of World | 2,843 | | | 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, |
| 2024 | | 2023 | | 2024 | | 2023 |
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 time | 9,874 | | | 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.
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, | | | |
| 2024 | | 2024 | | Change | | 2023 | | 2023 | | Change | |
| | | | | | | | | | | | |
Contract assets | | | | | | | | | | | | |
Contract assets | $ | 10,835 | | | $ | 9,383 | | | $ | 1,452 | | | $ | 5,623 | | | $ | 8,620 | | | $ | (2,997) | | |
Contract liabilities | | | | | | | | | | | | |
Contract liabilities - current | 52,271 | | | 69,219 | | | (16,948) | | | 66,961 | | | 80,068 | | | (13,107) | | |
Contract liabilities - long-term | 3,015 | | | 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) | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total |
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.
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 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
Money market fund deposits | $ | 185,862 | | | $ | 185,862 | | | $ | — | | | $ | — | |
Commercial paper | 156,412 | | | — | | | 156,412 | | | — | |
U.S. Treasury and agency obligations | 88,610 | | | — | | | 88,610 | | | — | |
Term deposits | 22,145 | | | — | | | 22,145 | | | — | |
Corporate bonds | 13,416 | | | — | | | 13,416 | | | — | |
Total cash equivalents | 466,445 | | | 185,862 | | | 280,583 | | | — | |
Short-term investments: | | | | | | | |
Commercial paper | 75,523 | | | — | | | 75,523 | | | — | |
| | | | | | | |
U.S. Treasury and agency obligations | 56,887 | | | — | | | 56,887 | | | — | |
Term deposits | 3,048 | | | — | | | 3,048 | | | — | |
| | | | | | | |
| | | | | | | |
Total short-term investments | 135,458 | | | — | | | 135,458 | | | — | |
Total | $ | 601,903 | | | $ | 185,862 | | | $ | 416,041 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at December 31, 2023 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
Money market fund deposits | $ | 171,632 | | | $ | 171,632 | | | $ | — | | | $ | — | |
Term deposits | 83,965 | | | — | | | 83,965 | | | — | |
Corporate bonds | 23,516 | | | — | | | 23,516 | | | — | |
Commercial paper | 6,369 | | | — | | | 6,369 | | | — | |
| | | | | | | |
Total cash equivalents | 285,482 | | | 171,632 | | | 113,850 | | | — | |
Short-term investments: | | | | | | | |
Commercial paper | 244,571 | | | — | | | 244,571 | | | — | |
Corporate bonds | 243,915 | | | — | | | 243,915 | | | — | |
U.S. Treasury and agency obligations | 171,316 | | | — | | | 171,316 | | | — | |
| | | | | | | |
Term deposits | 3,009 | | | — | | | 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
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, 2024 | | December 31, 2023 |
| Book Value | | Fair Value | | Book Value | | Fair 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, |
| 2024 | | 2023 |
Components and raw materials | $ | 170,905 | | | $ | 263,652 | |
Work-in-process | 30,013 | | | 47,997 | |
Finished goods | 119,805 | | | 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, 2024 | | December 31, 2023 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted- Average Lives | | Gross Carrying Amount | | Accumulated 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 name | 26,990 | | | (24,368) | | | 2,622 | | | 7 years | | 29,903 | | | (25,960) | | | 3,943 | | | 7 years |
Production know-how | 9,172 | | | (9,172) | | | — | | | 7 years | | 9,155 | | | (9,155) | | | — | | | 7 years |
Patents | 8,034 | | | (8,034) | | | — | | | 8 years | | 8,035 | | | (7,987) | | | 48 | | | 8 years |
Total | $ | 92,415 | | | $ | (70,361) | | | $ | 22,054 | | | | | $ | 95,309 | | | $ | (69,075) | | | $ | 26,234 | | | |
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) | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total |
$ | 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, |
| 2024 | | 2023 |
Accrued compensation | $ | 55,814 | | | $ | 67,053 | |
Contract liabilities | 52,271 | | | 69,219 | |
Current portion of accrued warranty | 23,261 | | | 27,283 | |
| | | |
Short-term lease liabilities | 4,436 | | | 4,597 | |
Other | 15,006 | | | 13,198 | |
Total | $ | 150,788 | | | $ | 181,350 | |
Other long-term liabilities and deferred income taxes consist of the following:
| | | | | | | | | | | |
| September 30, | | December 31, |
| 2024 | | 2023 |
Accrued warranty | $ | 14,164 | | | $ | 19,926 | |
Unrecognized tax benefits | 14,389 | | | 17,176 | |
Long-term lease liabilities | 12,026 | | | 13,664 | |
Deferred income taxes | 4 | | | 1,508 | |
Transition tax related to 2017 U.S. tax reform act | — | | | 11,009 | |
Other | 5,753 | | | 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, |
| 2024 | | 2023 |
Balance, beginning of period | $ | 47,209 | | | $ | 52,862 | |
Provision for warranty accrual | 4,603 | | | 9,874 | |
Warranty claims | (12,902) | | | (13,792) | |
Warranty related to business divested | (1,603) | | | — | |
Foreign currency translation | 118 | | | (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.
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 other | | Unrealized gain (loss) on derivatives, net of tax | | | | Total |
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 income | | 158,121 | | | — | | | | | 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) | |
| | | | | | | | |
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | |
| | Foreign currency translation adjustments and other | | Unrealized gain (loss) on derivatives, net of tax | | | | Total |
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.
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, |
| 2024 | | 2023 |
Balance, beginning of period | $ | 17,176 | | | $ | 15,841 | |
Change in prior period positions | (3,130) | | | (1,274) | |
Additions for tax positions in current period | 249 | | | 3,738 | |
Foreign currency translation | 94 | | | (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, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net (loss) income attributable to IPG Photonics Corporation common stockholders | $ | (233,594) | | | $ | 54,994 | | | $ | (189,341) | | | $ | 177,450 | |
| | | | | | | |
| | | | | | | |
Basic weighted average common shares | 43,837,357 | | | 47,236,901 | | | 44,901,247 | | | 47,363,974 | |
Dilutive effect of common stock equivalents | — | | | 151,218 | | | — | | | 171,661 | |
Diluted weighted average common shares | 43,837,357 | | | 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, |
| 2024 | | 2023 | | 2024 | | 2023 |
Non-qualified stock options | 672,225 | | | 529,228 | | | 603,058 | | | 537,065 | |
Restricted stock units | 202,368 | | | 55,201 | | | 232,622 | | | 376,382 | |