10-Q 1 ipgp-20240630.htm 10-Q ipgp-20240630
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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 June 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: (508) 373-1100
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 July 29, 2024, there were 44,226,115 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
June 30,December 31,
20242023
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents$720,540 $514,674 
Short-term investments343,363 662,807 
Accounts receivable, net176,153 219,053 
Inventories400,839 453,874 
Prepaid income taxes30,208 26,038 
Prepaid expenses and other current assets46,849 38,208 
Total current assets1,717,952 1,914,654 
Deferred income taxes, net88,865 88,788 
Goodwill38,278 38,540 
Intangible assets, net23,423 26,234 
Property, plant and equipment, net593,136 602,257 
Other assets33,777 28,425 
Total assets$2,495,431 $2,698,898 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$26,232 $28,618 
Accrued expenses and other current liabilities161,229 181,350 
Income taxes payable3,022 4,893 
Total current liabilities190,483 214,861 
Other long-term liabilities and deferred income taxes51,578 68,652 
Total liabilities242,061 283,513 
Commitments and contingencies (Note 10)
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 56,584,223 and 44,225,282 shares issued and outstanding, respectively, at June 30, 2024; 56,317,438 and 46,320,671 shares issued and outstanding, respectively, at December 31, 2023.
6 6 
Treasury stock, at cost, 12,358,941 and 9,996,767 shares held at June 30, 2024 and December 31, 2023, respectively.
(1,373,525)(1,161,505)
Additional paid-in capital1,014,094 994,020 
Retained earnings2,839,647 2,795,394 
Accumulated other comprehensive loss(226,852)(212,530)
Total IPG Photonics Corporation equity2,253,370 2,415,385 
Total liabilities and equity$2,495,431 $2,698,898 
See notes to condensed consolidated financial statements.
1
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands, except per share data)
Net sales$257,645 $339,971 $509,654 $687,145 
Cost of sales161,459 192,280 315,932 392,516 
Gross profit96,186 147,691 193,722 294,629 
Operating expenses:
Sales and marketing22,487 20,187 45,485 41,275 
Research and development27,487 23,512 56,868 46,282 
General and administrative31,602 29,660 62,760 59,788 
Gain on sale of assets(674)— (7,450)— 
Restructuring charges, net
— 963 — 1,144 
Loss (gain) on foreign exchange3,244 1,306 4,919 (1,349)
Total operating expenses84,146 75,628 162,582 147,140 
Operating income12,040 72,063 31,140 147,489 
Other income, net:
Interest income, net12,778 9,264 26,955 16,797 
Other income, net194 285 519 616 
Total other income12,972 9,549 27,474 17,413 
Income before provision for income taxes 25,012 81,612 58,614 164,902 
Provision for income taxes4,858 19,291 14,361 42,446 
Net income attributable to IPG Photonics Corporation common stockholders$20,154 $62,321 $44,253 $122,456 
Net income attributable to IPG Photonics Corporation per common share:
Basic$0.45 $1.32 $0.97 $2.58 
Diluted$0.45 $1.31 $0.97 $2.57 
Weighted average common shares outstanding:
Basic44,918 47,316 45,439 47,429 
Diluted45,012 47,453 45,601 47,618 
See notes to condensed consolidated financial statements.

2
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Net income$20,154 $62,321 $44,253 $122,456 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments and other3,406 (15,082)(14,322)(14,601)
Unrealized loss on derivatives— (63)— (152)
Total other comprehensive income (loss)3,406 (15,145)(14,322)(14,753)
Comprehensive income attributable to IPG Photonics Corporation$23,560 $47,176 $29,931 $107,703 

See notes to condensed consolidated financial statements.

3
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
20242023
(In thousands)
Cash flows from operating activities:
Net income$44,253 $122,456 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization31,506 35,343 
Deferred income taxes720 5,065 
Stock-based compensation18,282 19,249 
Unrealized gain on foreign currency transactions(487)(1,816)
Provisions for inventory, warranty and bad debt30,365 31,846 
Amortization of premium/discount on investments(13,007)(11,037)
Other(5,516)2,154 
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable38,460 (23,876)
Inventories17,041 (12,103)
Prepaid expenses and other assets(7,143)(15,480)
Accounts payable1,276 (7,472)
Accrued expenses and other liabilities(28,265)(27,736)
Income and other taxes payable(19,431)(12,647)
Net cash provided by operating activities108,054 103,946 
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment(52,270)(59,139)
Proceeds from sales of property, plant and equipment28,274 1,740 
Purchases of short-term investments(301,541)(583,347)
Proceeds from short-term investments633,993 549,879 
Other188 326 
Net cash provided by (used in) investing activities308,644 (90,541)
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 awards1,792 (731)
Purchase of treasury stock, at cost(212,020)(113,031)
Net cash used in financing activities(210,228)(129,793)
Effect of changes in exchange rates on cash and cash equivalents(604)(8,750)
Net increase (decrease) in cash and cash equivalents205,866 (125,138)
Cash and cash equivalents — Beginning of period514,674 698,209 
Cash and cash equivalents — End of period$720,540 $573,071 
Supplemental disclosure of cash flow information:
Cash paid for interest$94 $947 
Cash paid for income taxes$34,165 $58,178 
Non-cash transactions:
Demonstration units transferred from inventory to other assets$2,998 $2,737 
Inventory transferred to machinery and equipment$914 $1,731 
Additions to property, plant and equipment included in accounts payable
$811 $1,189 
Leased assets obtained in exchange for new operating lease liabilities$2,745 $788 
See notes to condensed consolidated financial statements.
4
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended June 30,
Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, April 1, 202445,566,746 $6 (10,954,692)$(1,251,121)$1,002,600 $2,819,493 $(230,258)$2,340,720 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options27,943 — — — 451 — — 451 
Common stock issued under employee stock purchase plan34,842 — — — 2,499 — — 2,499 
Purchased common stock(1,404,249)— (1,404,249)(122,404)— — — (122,404)
Stock-based compensation— — — — 8,544 — — 8,544 
Net income— — — — — 20,154 — 20,154 
Foreign currency translation adjustments and other— — — — — — 3,406 3,406 
Balance, June 30, 202444,225,282 $6 (12,358,941)$(1,373,525)$1,014,094 $2,839,647 $(226,852)$2,253,370 
Balance, April 1, 202347,305,551 $6 (8,878,184)$(1,051,103)$957,103 $2,636,651 $(204,132)$2,338,525 
Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options28,366 — — — 620 — — 620 
Common stock issued under employee stock purchase plan30,403 — — — 2,494 — — 2,494 
Purchased common stock— — — 63 — — — 63 
Stock-based compensation— — — — 9,672 — — 9,672 
Net income— — — — — 62,321 — 62,321 
Foreign currency translation adjustments and other— — — — — — (15,082)(15,082)
Unrealized loss on derivatives, net of tax— — — — — — (63)(63)
Balance, June 30, 202347,364,320 $6 (8,878,184)$(1,051,040)$969,889 $2,698,972 $(219,277)$2,398,550 
Six Months Ended June 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 options231,943 — — — (707)— — (707)
Common stock issued under employee stock purchase plan34,842 — — — 2,499 — — 2,499 
Purchased common stock(2,362,174)— (2,362,174)(212,020)— — — (212,020)
Stock-based compensation— — — — 18,282 — — 18,282 
Net income— — — — — 44,253 — 44,253 
Foreign currency translation adjustments and other— — — — — — (14,322)(14,322)
Balance, June 30, 202444,225,282 $6 (12,358,941)$(1,373,525)$1,014,094 $2,839,647 $(226,852)$2,253,370 
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 options194,429 — — — (3,224)— — (3,224)
Common stock issued under employee stock purchase plan30,403 — — — 2,493 — — 2,493 
Purchased common stock(998,769)— (998,769)(113,031)— — — (113,031)
Stock-based compensation— — — — 19,249 — — 19,249 
Net income— — — — — 122,456 — 122,456 
Foreign currency translation adjustments and other— — — — — — (14,601)(14,601)
Unrealized loss on derivatives, net of tax— — — — — — (152)(152)
Balance, June 30, 202347,364,320 $6 (8,878,184)$(1,051,040)$969,889 $2,698,972 $(219,277)$2,398,550 
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.
Accounts Receivable and Allowance for Credit Losses — The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected. The allowance is based upon an estimate of expected credit losses over the life of outstanding receivables. The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables.
Activity related to the allowance for doubtful accounts was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Balance, beginning of period$1,817 $2,363 $1,763 $2,639 
Provision for bad debts, net of (recoveries)298 58 391 (151)
Uncollectible accounts written off
(16)(191)(41)(241)
Foreign currency translation(4)(61)(18)(78)
Balance, end of period$2,095 $2,169 $2,095 $2,169 
Comprehensive Income — Comprehensive income includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive income is the cumulative foreign currency translation adjustments. These adjustments are accumulated within the condensed consolidated statements of comprehensive income.
6
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Total components of accumulated other comprehensive loss were as follows:
Foreign currency translation adjustments and otherUnrealized gain (loss) on derivatives, net of taxTotal
Balance, April 1, 2024$(230,258)$— $(230,258)
Other comprehensive income, net of tax:
Foreign currency translation adjustments and other, net of tax benefit of $92
3,406 — 3,406 
Total other comprehensive income3,406 — 3,406 
Balance, June 30, 2024$(226,852)$— $(226,852)
Balance, April 1, 2023$(204,195)$63 $(204,132)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments and other, net of tax expense of $69
(15,082)— (15,082)
Unrealized loss on derivatives, net of tax benefit of $20
— (63)(63)
Total other comprehensive loss(15,082)(63)(15,145)
Balance, June 30, 2023$(219,277)$— $(219,277)
Foreign currency translation adjustments and otherUnrealized gain (loss) on derivatives, net of taxTotal
Balance, January 1, 2024$(212,530)$— $(212,530)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments and other, net of tax benefit of $125
(14,322)— (14,322)
Total other comprehensive loss(14,322)— (14,322)
Balance,June 30, 2024$(226,852)$— $(226,852)
Balance, January 1, 2023$(204,676)$152 $(204,524)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments and other, net of tax expense of $104
(14,601)— (14,601)
Unrealized loss on derivatives, net of tax benefit of $46
— (152)(152)
Total other comprehensive loss(14,601)(152)(14,753)
Balance, June 30, 2023$(219,277)$— $(219,277)
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
7
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
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 June 30,Six Months Ended June 30,
2024202320242023
Sales by Application
Materials processing$225,773 $314,184 $452,138 $627,153 
Other applications31,872 25,787 57,516 59,992 
Total$257,645 $339,971 $509,654 $687,145 
Sales by Product
 High Power Continuous Wave ("CW") Lasers $82,225 $145,992 $173,018 $300,026 
 Medium Power CW Lasers 15,758 22,370 31,972 36,209 
 Pulsed Lasers 42,536 53,002 77,355 109,149 
 Quasi-Continuous Wave ("QCW") Lasers 10,549 13,840 26,340 25,122 
 Laser and Non-Laser Systems 38,668 38,187 76,171 79,571 
 Other Revenue including Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue 67,909 66,580 124,798 137,068 
Total$257,645 $339,971 $509,654 $687,145 
Sales by Geography
North America$76,905 $78,220 $140,869 $154,300 
Europe:
Germany20,809 28,962 40,828 48,795 
Other Europe53,722 72,865 113,219 153,285 
Asia:
China64,875 98,567 127,605 199,854 
Japan10,215 16,749 26,913 38,367 
Other Asia27,643 38,062 52,621 81,716 
Rest of World3,476 6,546 7,599 10,828 
Total$257,645 $339,971 $509,654 $687,145 
8
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Timing of Revenue Recognition
Goods and services transferred at a point in time$248,117 $329,571 $490,644 $662,696 
Goods and services transferred over time9,528 10,400 19,010 24,449 
Total$257,645 $339,971 $509,654 $687,145 
One of the Company's customers accounted for 17% and 14% of the Company's net accounts receivable as of June 30, 2024 and December 31, 2023, respectively.
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.
The following table reflects the changes in the Company's contract assets and liabilities for the six months ended June 30, 2024 and 2023:
June 30,January 1,June 30,January 1,
20242024Change20232023Change
Contract assets
Contract assets$13,194 $9,383 $3,811 $17,460 $8,620 $8,840 
Contract liabilities
Contract liabilities - current57,452 69,219 (11,767)75,785 80,068 (4,283)
Contract liabilities - long-term2,593 2,851 (258)3,054 3,142 (88)
During the three months ended June 30, 2024 and 2023 the Company recognized revenue of $12,716 and $14,431, respectively, that was included in contract liabilities at the beginning of each year. During the six months ended June 30, 2024 and 2023 the Company recognized revenue of $43,216 and $43,443 respectively, that was included in contract liabilities at the beginning of each year.
9
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table represents the Company's remaining performance obligations from contracts that are recognized over time as of June 30, 2024:
Remaining Performance Obligations
2024 (a)
2025202620272028ThereafterTotal
Revenue expected to be recognized for extended warranty agreements$1,799 $1,624 $954 $642 $185 $129 $5,333 
Revenue to be earned over time from contracts to sell large scale materials processing systems
14,199 2,462 — — — — 16,661 
Total$15,998 $4,086 $954 $642 $185 $129 $21,994 
(a) For the six-month period beginning July 1, 2024.
4. FAIR VALUE MEASUREMENTS
The Company's financial instruments consist of cash equivalents, short-term investments, accounts receivable, accounts payable, and revolving lines of credit.
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 June 30, 2024
TotalLevel 1Level 2Level 3
Assets
Cash equivalents:
Money market fund deposits$255,715 $255,715 $— $— 
Commercial paper39,566 — 39,566 — 
Term deposits27,904 — 27,904 — 
Corporate bonds22,938 — 22,938 — 
Total cash equivalents
346,123 255,715 90,408 — 
Short-term investments:
Commercial paper170,030 — 170,030 — 
Corporate bonds103,773 — 103,773 — 
U.S. Treasury and agency obligations66,319 — 66,319 — 
Term deposits3,048 — 3,048 — 
Total short-term investments
343,170 — 343,170 — 
Total
$689,293 $255,715 $433,578 $— 
10
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
 Fair Value Measurements at December 31, 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 June 30, 2024 and 2023. There were no current expected credit loss allowances for the investments considered held-to-maturity at June 30, 2024 and 2023. The Company holds highly-rated held-to-maturity instruments that are within one year of maturity.
The following table presents the effective maturity dates of debt investments, which are held-to-maturity:
June 30, 2024December 31, 2023
Book ValueFair ValueBook ValueFair Value
Investment maturity
Less than 1 year$343,363 $343,170 $662,807 $662,811 
5. INVENTORIES
Inventories consist of the following:
June 30,December 31,
20242023
Components and raw materials$226,305 $263,652 
Work-in-process44,051 47,997 
Finished goods130,483 142,225 
Total$400,839 $453,874 
The Company recorded inventory provisions totaling $14,009 and $11,218 for the three months ended June 30, 2024 and 2023, respectively, and $26,851 and $23,314 for the six months ended June 30, 2024 and 2023. These provisions relate to the recoverability of the value of inventories due to technological changes and excess quantities. These provisions are reported as a reduction to components and raw materials, work-in-process and finished goods.
11
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
6. GOODWILL AND INTANGIBLES
The following table sets forth the changes in the carrying amount of goodwill:
Six Months Ended June 30,
20242023
Balance, beginning of period$38,540 $38,325 
Foreign exchange adjustment(262)169 
Balance, end of period$38,278 $38,494 
Intangible assets, subject to amortization, consisted of the following:
June 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$48,140 $(27,778)$20,362 11 years$48,216 $(25,973)$22,243 11 years
Technology, trademark and trade name29,903 (26,842)3,061 7 years29,903 (25,960)3,943 7 years
Production know-how9,111 (9,111)— 7 years9,155 (9,155)— 7 years
Patents8,034 (8,034)— 8 years8,035 (7,987)48 8 years
Total$95,188 $(71,765)$23,423 $95,309 $(69,075)$26,234 
Amortization expense for the three months ended June 30, 2024 and 2023 was $1,377 and $2,021, respectively. Amortization expense for the six months ended June 30, 2024 and 2023 was $2,802 and $4,042, respectively. The estimated future amortization expense for intangibles for the remainder of 2024 and subsequent years is as follows:
2024 (a)
2025202620272028ThereafterTotal
$2,751 $4,977 $4,216 $4,004 $3,633 $3,842 $23,423 
(a) For the six-month period beginning July 1, 2024.
7. OTHER LIABILITIES
Accrued expenses and other current liabilities consist of the following:
June 30,December 31,
20242023
Accrued compensation$60,722 $67,053 
Contract liabilities57,452 69,219 
Current portion of accrued warranty24,754 27,283 
Short-term lease liabilities4,454 4,597 
Other13,847 13,198 
Total$161,229 $181,350 
12
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Other long-term liabilities and deferred income taxes consist of the following:
June 30,December 31,
20242023
Accrued warranty$16,320 $19,926 
Unrecognized tax benefits15,527 17,176 
Long-term lease liabilities12,964 13,664 
Deferred income taxes1,506 1,508 
Transition tax related to 2017 U.S. tax reform act— 11,009 
Other5,261 5,369 
Total$51,578 $68,652 
8. 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:
Six Months Ended June 30,
20242023
Balance, beginning of period$47,209 $52,862 
Provision for warranty accrual2,853 7,089 
Warranty claims(8,268)(8,533)
Foreign currency translation(720)216 
Balance, end of period$41,074 $51,634 
Accrued warranty reported in the accompanying condensed consolidated financial statements as of June 30, 2024 and December 31, 2023 consist of $24,754 and $27,283 in accrued expenses and other current liabilities, respectively, and $16,320 and $19,926 in other long-term liabilities and deferred income taxes, respectively.
9. 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 June 30, 2024 and December 31, 2023, there were no amounts drawn on the U.S. line-of-credit, and there were $2,153 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 $72,847 at June 30, 2024. In addition, the Company maintains Euro lines of credit facilities with a total principal amount of €6,500 ($6,964 as of June 30, 2024), which are available to certain European subsidiaries.
10. 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 June 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.
11. INCOME TAXES
The effective tax rates were 19.4% and 23.6% for the three months ended June 30, 2024 and 2023, respectively, and 24.5% and 25.7% for the six months ended June 30, 2024 and 2023 respectively. There was a net discrete tax benefit of $85 for
13
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
the three months ended June 30, 2024 and a net discrete tax benefit of $1,751 for the three months ended June 30, 2023. There was a net discrete tax detriment of $1,912 for the six months ended June 30, 2024 and a net discrete tax detriment of $221 for the six months ended June 30, 2023. The detriment in 2024 and 2023 relates primarily to the increase in tax expense for equity-based compensation expense reflected in financial statement income in excess of the deductions allowed for tax purposes as well as reductions in tax reserves for the expiration of the statute of limitations and for agreements with tax authorities for prior year audits. Excluding discrete items, the overall effective tax rate in 2024 decreased as compared to 2023 due to an increase in US tax benefits and credits, as well as an increase in tax benefits from the use of foreign tax benefits that previously were offset by a full valuation allowance.
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. The following is a summary of the activity of the Company’s unrecognized tax benefits for the six months ended June 30, 2024 and 2023:
Six Months Ended June 30,
20242023
Balance, beginning of period$17,176 $15,841 
Change in prior period positions(1,759)(1,273)
Additions for tax positions in current period170 950 
Foreign currency translation(60)(482)
Balance, end of period$15,527 $15,036 
The liability for uncertain tax benefits is included in other long-term liabilities and deferred income taxes at June 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.
12. 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 June 30,Six Months Ended June 30,
2024202320242023
Net income attributable to IPG Photonics Corporation common stockholders$20,154 $62,321 $44,253 $122,456 
Basic weighted average common shares44,917,696 47,316,342 45,439,126 47,428,639 
Dilutive effect of common stock equivalents94,778 136,918 162,313 189,523 
Diluted weighted average common shares45,012,474 47,453,260 45,601,439 47,618,162 
Basic net income attributable to IPG Photonics Corporation per common share$0.45 $1.32 $0.97 $2.58 
Diluted net income attributable to IPG Photonics Corporation per common share$0.45 $1.31 $0.97 $2.57 
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 six months ended June 30, 2024 and 2023 were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Non-qualified stock options603,281 538,442 598,073