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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, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 001-33155
ipgp-20210930_g1.jpg
IPG PHOTONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
04-3444218
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)
Identification Number)
50 Old Webster Road, Oxford, Massachusetts
01540
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (508373-1100
Securities registered pursuant to Section 12(b) of the Act: 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareIPGPThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 2, 2021, there were 53,308,856 shares of the registrant's common stock outstanding.



TABLE OF CONTENTS
 
Page



PART I—FINANCIAL INFORMATION
ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,December 31,
20212020
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents$794,904 $876,231 
Short-term investments724,103 514,835 
Accounts receivable, net272,699 264,321 
Inventories435,070 364,993 
Prepaid income taxes34,482 69,893 
Prepaid expenses and other current assets63,917 57,804 
Total current assets2,325,175 2,148,077 
Deferred income taxes, net49,008 43,197 
Goodwill38,705 41,366 
Intangible assets, net55,786 62,114 
Property, plant and equipment, net624,576 597,527 
Other assets50,660 43,419 
Total assets$3,143,910 $2,935,700 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt$18,788 $3,810 
Accounts payable52,428 25,748 
Accrued expenses and other current liabilities208,915 176,740 
Income taxes payable12,709 8,280 
Total current liabilities292,840 214,578 
Deferred income taxes and other long-term liabilities94,897 92,854 
Long-term debt, net of current portion16,328 34,157 
Total liabilities404,065 341,589 
Commitments and contingencies (Note 12)
IPG Photonics Corporation equity:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,738,779 and 53,305,485 shares issued and outstanding, respectively, at September 30, 2021; 55,461,246 and 53,427,234 shares issued and outstanding, respectively, at December 31, 2020.
6 6 
Treasury stock, at cost, 2,433,294 and 2,034,012 shares held at September 30, 2021 and December 31, 2020, respectively.
(381,685)(303,614)
Additional paid-in capital894,264 854,301 
Retained earnings2,401,520 2,188,191 
Accumulated other comprehensive loss(174,753)(146,065)
Total IPG Photonics Corporation equity2,739,352 2,592,819 
Non-controlling interests493 1,292 
Total equity2,739,845 2,594,111 
Total liabilities and equity$3,143,910 $2,935,700 
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,
2021202020212020
(In thousands, except per share data)
Net sales$379,150 $318,441 $1,096,393 $864,094 
Cost of sales193,276 165,649 566,000 471,977 
Gross profit185,874 152,792 530,393 392,117 
Operating expenses:
Sales and marketing20,688 17,332 58,764 53,341 
Research and development34,277 31,710 102,807 95,132 
General and administrative32,557 29,038 93,715 82,561 
Goodwill impairment 44,589  44,589 
Impairment of long-lived assets and other restructuring charges 12  1,177 
Gain on foreign exchange(3,634)(11,302)(7,973)(18,101)
Total operating expenses83,888 111,379 247,313 258,699 
Operating income101,986 41,413 283,080 133,418 
Other (expense) income, net:
Interest (expense) income, net(288)1,168 (1,190)6,097 
Other (expense) income, net(211)(59)70 581 
Total other (expense) income(499)1,109 (1,120)6,678 
Income before provision for income taxes 101,487 42,522 281,960 140,096 
Provision for income taxes26,788 6,992 69,362 29,434 
Net income74,699 35,530 212,598 110,662 
Less: net (loss) income attributable to non-controlling interests (703)(74)(731)429 
Net income attributable to IPG Photonics Corporation common stockholders$75,402 $35,604 $213,329 $110,233 
Net income attributable to IPG Photonics Corporation per common share:
Basic$1.41 $0.67 $3.99 $2.07 
Diluted$1.40 $0.66 $3.95 $2.05 
Weighted average common shares outstanding:
Basic53,387 53,098 53,501 53,136 
Diluted53,834 53,664 54,053 53,691 
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,
2021202020212020
(In thousands)
Net income$74,699 $35,530 $212,598 $110,662 
Other comprehensive income, net of tax:
Translation adjustments(15,558)(8,562)(28,921)(46,445)
Adjustment for net gain realized and included in net income (232) (232)
Unrealized gain (loss) on derivatives46 (551)165 (516)
Total other comprehensive loss(15,512)(9,345)(28,756)(47,193)
Comprehensive income59,187 26,185 183,842 63,469 
Less: comprehensive (loss) income attributable to non-controlling interests(869)(93)(799)144 
Comprehensive income attributable to IPG Photonics Corporation$60,056 $26,278 $184,641 $63,325 
See notes to condensed consolidated financial statements.

3

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
20212020
(In thousands)
Cash flows from operating activities:
Net income$212,598 $110,662 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization72,127 71,188 
Deferred income taxes(4,757)(10,122)
Stock-based compensation28,536 26,394 
Goodwill impairment 44,589 
Impairment of long-lived assets 671 
Unrealized gain on foreign currency transactions(4,313)(21,759)
Other5,828 6,823 
Provisions for inventory, warranty and bad debt50,364 42,559 
Changes in assets and liabilities that provided (used) cash, net of acquisitions:
Accounts receivable(12,281)2,308 
Inventories(105,384)(34,213)
Prepaid expenses and other assets(8,823)(2,065)
Accounts payable26,296 8,819 
Accrued expenses and other liabilities7,963 (17,492)
Income and other taxes payable37,002 (28,345)
Net cash provided by operating activities305,156 200,017 
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment(93,857)(61,871)
Proceeds from sales of property, plant and equipment859 689 
Purchases of short-term investments(1,437,193)(732,729)
Proceeds from short-term investments1,226,445 697,816 
Other(1,078)17 
Net cash used in investing activities(304,824)(96,078)
Cash flows from financing activities:
Principal payments on long-term borrowings(2,851)(2,798)
Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards11,427 16,767 
Purchase of treasury stock, at cost(78,071)(37,884)
Payment of purchase price holdback from business combination(2,624)(1,650)
Net cash used in financing activities(72,119)(25,565)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash(11,862)4,692 
Net (decrease) increase in cash, cash equivalents and restricted cash(83,649)83,066 
Cash, cash equivalents and restricted cash — Beginning of period878,553 682,984 
Cash and cash equivalents — End of period$794,904 $766,050 
Supplemental disclosure of cash flow information:
Cash paid for interest$1,932 $1,650 
Cash paid for income taxes$35,982 $65,895 
Non-cash transactions:
Demonstration units transferred from inventory to other assets$4,245 $6,724 
Inventory transferred to machinery and equipment$1,965 $2,362 
Changes in accounts payable related to property, plant and equipment$1,461 $1,248 
Leased assets obtained in exchange for new operating lease liabilities$2,500 $2,764 
See Note 4 for reconciliation of cash, cash equivalents and restricted cash between the condensed consolidated balance sheets and condensed consolidated statements of cash flows.
See notes to condensed consolidated financial statements.
4

IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended September 30,
Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeNon-
controlling Interest
Total Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, July 1, 202153,491,889 $6 (2,233,789)$(345,345)$883,546 $2,326,118 $(159,407)$1,362 $2,706,280 
Exercise of stock options and vesting of RSUs and PSUs13,101 — — — 860 — — — 860 
Purchased common stock(199,505)— (199,505)(36,340)— — — — (36,340)
Stock-based compensation— — — — 9,858 — — — 9,858 
Net income— — — — — 75,402 — (703)74,699 
Foreign currency translation adjustments— — — — — — (15,392)(166)(15,558)
Unrealized gain on derivatives, net of tax— — — — — — 46 — 46 
Balance, September 30, 202153,305,485 $6 (2,433,294)$(381,685)$894,264 $2,401,520 $(174,753)$493 $2,739,845 
Balance, July 1, 202053,182,148 $6 (1,972,540)$(293,960)$811,559 $2,103,248 $(184,501)$954 $2,437,306 
Exercise of stock options and vesting of RSUs and PSUs123,740 — — — 8,497 — — — 8,497 
Purchased common stock(61,472)— (61,472)(9,654)— — — — (9,654)
Stock-based compensation— — — — 8,740 — — — 8,740 
Net income— — — — — 35,604 — (74)35,530 
Foreign currency translation adjustments— — — — — — (8,543)(19)(8,562)
Unrealized (loss) on derivatives, net of tax— — — — — — (551)— (551)
Adjustment for net gain realized and included in net income— — — — — — (232)— (232)
Balance, September 30, 202053,244,416 $6 (2,034,012)$(303,614)$828,796 $2,138,852 $(193,827)$861 $2,471,074 
Nine Months Ended September 30,
Common StockTreasury StockAdditional Paid In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeNon-
controlling Interest
Total Stockholders' Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance, January 1, 202153,427,234 $6 (2,034,012)$(303,614)$854,301 $2,188,191 $(146,065)$1,292 $2,594,111 
Exercise of stock options and vesting of RSUs and PSUs262,462 — — — 8,727 — — — 8,727 
Common stock issued under employee stock purchase plan15,071 — — — 2,700 — — — 2,700 
Purchased common stock(399,282)— (399,282)(78,071)— — — — (78,071)
Stock-based compensation— — — — 28,536 — — — 28,536 
Net income— — — — — 213,329 — (731)212,598 
Foreign currency translation adjustments— — — — — — (28,853)(68)(28,921)
Unrealized gain on derivatives, net of tax— — — — — — 165 — 165 
Balance, September 30, 202153,305,485 $6 (2,433,294)$(381,685)$894,264 $2,401,520 $(174,753)$493 $2,739,845 
Balance, January 1, 202053,010,875 $5 (1,732,352)$(265,730)$785,636 $2,028,734 $(146,919)$717 $2,402,443 
Exercise of stock options and vesting of RSUs and PSUs514,717 1 — — 14,216 — — — 14,217 
Common stock issued under employee stock purchase plan20,484 — — — 2,550 — — — 2,550 
Purchased common stock(301,660)— (301,660)(37,884)— — — — (37,884)
Stock-based compensation— — — — 26,394 — — — 26,394 
Recently adopted accounting standards— — — — — (115)— — (115)
Net income— — — — — 110,233 — 429 110,662 
Foreign currency translation adjustments— — — — — — (46,160)(285)(46,445)
Unrealized (loss) on derivatives, net of tax— — — — — — (516)— (516)
Adjustment for net gain realized and included in net income— — — — — — (232)— (232)
Balance, September 30, 202053,244,416 $6 (2,034,012)$(303,614)$828,796 $2,138,852 $(193,827)$861 $2,471,074 
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, 2020.
In the opinion of the Company's management, the financial information for the interim periods presented reflects all adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Accounts Receivable and Allowance for Doubtful Accounts — The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected. The allowance is based upon an estimate of expected credit losses over the life of outstanding receivables. The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables.
Activity related to the allowance for doubtful accounts was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Balance, beginning of period$2,251 $1,999 $2,156 $2,547 
Provision for bad debts, net of (recoveries)(295)143 (154)(206)
Uncollectable accounts written off (1)(59)(72)
Foreign currency translation(15)(80)(2)(208)
Balance, end of period$1,941 $2,061 $1,941 $2,061 
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 December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which modifies ASC 740 to simplify the accounting for income taxes. The Company adopted ASU 2019-12 as of January 1, 2021. The impact from adopting this standard was immaterial.
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which adds an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance for its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity by decreasing the number of credit impairment models that entities use to account for debt instruments. The Company adopted ASU 2016-03, along with
6

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
its subsequent clarifications, as of January 1, 2020. The cumulative effect of the changes made to the Company's condensed consolidated January 1, 2020 balance sheet for the adoption of ASU 2016-13 was as follows:
Balance atAdoption ofBalance at
December 31, 2019ASU 2016-13January 1, 2020
Balance Sheet
Accounts receivable, net$238,479 $(148)$238,331 
Deferred income taxes, net31,395 33 31,428 
Retained earnings2,028,734 (115)2,028,619 
Other Pronouncements Currently Under Evaluation —
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848)" ("ASU 2020-04"), which offers optional expedients related to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04, along with its subsequent clarifications, is effective from March 12, 2020 through December 31, 2022. The Company is currently evaluating the standard but does not expect that it will have a material effect on its condensed consolidated financial statements, if adopted.
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; fiber amplifiers and transceivers for communications applications; and fiber lasers, systems and fibers for medical applications.
The following tables represent a disaggregation of revenue from contracts with customers:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Sales by Application
Materials processing$346,045 $290,028 $1,008,939 $779,810 
Other applications33,105 28,413 87,454 84,284 
Total$379,150 $318,441 $1,096,393 $864,094 
Sales by Product
 High Power Continuous Wave ("CW") Lasers $177,787 $184,387 $538,013 $461,181 
 Medium Power CW Lasers 24,520 11,756 58,579 33,701 
 Pulsed Lasers 59,051 34,975 176,219 109,391 
 Quasi-Continuous Wave ("QCW") Lasers 16,312 15,079 45,503 38,660 
 Laser and Non-Laser Systems 32,523 20,841 89,236 64,417 
 Other Revenue including Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue 68,957 51,403 188,843 156,744 
Total$379,150 $318,441 $1,096,393 $864,094 

7

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Sales by Geography
North America$81,605 $52,732 $221,123 $173,972 
Europe:
Germany26,832 16,163 74,840 51,208 
Other including Eastern Europe/CIS79,777 54,907 212,709 158,686 
Asia and Australia:
China137,211 148,049 436,119 361,864 
Japan14,286 12,884 35,485 41,241 
Other35,844 31,227 106,608 70,924 
Rest of World3,595 2,479 9,509 6,199 
Total$379,150 $318,441 $1,096,393 $864,094 
Timing of Revenue Recognition
Goods and services transferred at a point in time$364,677 $308,474 $1,054,554 $824,069 
Goods and services transferred over time14,473 9,967 41,839 40,025 
Total$379,150 $318,441 $1,096,393 $864,094 
One of the Company's customers accounted for 23% and 21% of the Company's net accounts receivable as of September 30, 2021 and December 31, 2020, 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 robotics systems. The timing of customer payments on these contracts generally differs from the timing of revenue recognized. If revenue recognized exceeds customer payments, a contract asset is recorded and if customer payments exceed revenue recognized, a contract liability is recorded. Contract assets are included within prepaid expense and other current assets on the condensed consolidated balance sheets. Contract liabilities are included within accrued expenses and other current liabilities on the condensed consolidated balance sheets. Certain deferred revenues related to extended warranties in excess one year from the balance sheet date are included within deferred income taxes and other long-term liabilities on the condensed consolidated balance sheets.
8

IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table reflects the changes in the Company's contract assets and liabilities for the nine months ended September 30, 2021 and 2020:
September 30,December 31, September 30,December 31,
20212020Change20202019Change
Contract assets
Contract assets$7,510 $8,999 $(1,489)$6,771 $9,645 $(2,874)
Contract liabilities
Contract liabilities - current80,694 71,246 9,448 57,034 59,531 (2,497)
Contract liabilities - long-term2,737 2,189 548 2,121 1,820 301 
During the three months ended September 30, 2021 and 2020 the Company recognized revenue of $10,172 and $10,179, respectively, that was included in contract liabilities at the beginning of each period. During the nine months ended September 30, 2021 and 2020 the Company recognized revenue of $58,069 and $41,622, respectively, that was included in contract liabilities at the beginning of each period.
The Company has elected the practical expedient in ASC 606-10-50-14, whereby the performance obligations for contracts with an original expected duration of one year or less are not disclosed. The following table represents the Company's remaining performance obligations from contracts that are recognized over time as of September 30, 2021: