Ipg Photonics Corp 10-Q for FY2026 Q3
Ipg Photonics Corp (IPGP)
10-Q
2026-11-03
For: 2026-09-30
View Original
Added on
November 04, 2026
About this 10-Q
Ipg Photonics Corp filed this 10-Q on November 3, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
IPG Photonics reported Q3 net sales of $287.5 million, up 14.6%, gross margin of 40.7% and net income of $20.3 million. Nine-month sales reached $831.6 million, while Belarus operations generated $17.8 million in impairment charges. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $287.5M
- up 14.6% from $250.79M a year earlier
- Net income
- $20.27M
- up 171.6% from net income of $7.46M a year earlier
- Diluted EPS
- $0.47
- up 161.1% from $0.18 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2026
OR
For the transition period from to .
Commission File Number 001-33155
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||
incorporation or organization) | Identification Number) | ||||
| (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 | ||||||
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.
☑ | 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, 2026, there were 42,508,140 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
(UNAUDITED)
| September 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands, except share and per share data) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid income taxes | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Long-term investments | |||||||||||
| Deferred income taxes, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Other long-term liabilities and deferred income taxes | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ | |||||||||
See notes to Condensed Consolidated Financial Statements.
1
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Impairment charges | |||||||||||||||||||||||
Settlement of litigation matters | |||||||||||||||||||||||
Restructuring charges | |||||||||||||||||||||||
| Loss on foreign exchange | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Other income, net: | |||||||||||||||||||||||
| Interest income, net | |||||||||||||||||||||||
| Other (expense) income, net | ( | ||||||||||||||||||||||
| Total other income | |||||||||||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Net income per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See notes to Condensed Consolidated Financial Statements.
2
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments and other | ( | ( | ( | ||||||||||||||||||||
Total other comprehensive (loss) income | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See notes to Condensed Consolidated Financial Statements.
3
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| Impairment charges | |||||||||||
Unrealized (gain) loss on foreign currency transactions | ( | ||||||||||
| Provisions for inventory, warranty and bad debt | |||||||||||
| Amortization of premium/discount on investments | ( | ( | |||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities that (used) provided cash: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | ( | ( | |||||||||
| Income and other taxes payable | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of and deposits on property, plant and equipment | ( | ( | |||||||||
| Proceeds from sales of property, plant and equipment | |||||||||||
| Purchases of investments | ( | ( | |||||||||
| Purchases of equity investment | ( | ||||||||||
| Proceeds from maturities of investments | |||||||||||
| Deposit received from buyer for assets and liabilities held for sale | |||||||||||
| Other | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Payments for taxes related to net share settlement of equity awards less proceeds from issuance of common stock under employee stock option and purchase plans | ( | ( | |||||||||
| Purchase of treasury stock net of excise tax, at cost | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of changes in exchange rates on cash, cash equivalents and cash held for sale | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents and cash held for sale | ( | ||||||||||
| Cash and cash equivalents — Beginning of period | |||||||||||
| Cash, cash equivalents and cash held for sale — End of period (Note 16) | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | $ | $ | |||||||||
| Non-cash transactions: | |||||||||||
| Demonstration units transferred from inventory to other assets | $ | $ | |||||||||
| Inventory transferred to machinery and equipment | $ | $ | |||||||||
Additions to property, plant and equipment included in accounts payable | $ | $ | |||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
| Excise tax on net share repurchases accrued in period | $ | $ | |||||||||
See notes to Condensed Consolidated Financial Statements.
4
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, July 1, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of RSUs, net of shares withheld for taxes, and exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchased common stock | ( | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments and other | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, July 1, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchased common stock | ( | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments and other | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of RSUs, net of shares withheld for taxes, and exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased common stock | ( | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments and other | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased common stock | ( | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments and other | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
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, 2025.
In February 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). Subsequent to the ruling, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEEPA duties previously collected. The Company accounts for IEEPA tariff refunds as well as refunds claimed under other tariff recovery programs when they are deemed to be probable, in accordance with the loss recovery model provided in ASC 410-30 "Environmental Obligations". The Company recorded tariff refund benefits of $5,813 and $10,863 in Cost of Sales for the three and nine months ended September 30, 2026. Partially offsetting these recoveries were charges of $802 550
The Company accounts for disposal and impairment charges in accordance with ASC 360-10 "Property, Plant and Equipment" which specifies that a disposal group should be classified as held for sale when management with approval authority has committed to a sale, the sale is deemed probable and is expected to be complete within one year, and it is unlikely that significant changes will be made to the plan, amongst other criteria. The disposal group that is held for sale is measured at the lower of its fair value less cost to sell or its carrying value. In the second quarter of 2026, the Company entered into an agreement to sell its operations in Belarus. The Company expects the sale to be completed within the next twelve months subject to regulatory approvals and other customary closing conditions. Therefore, the Company has reclassified the assets and liabilities of its Belarusian operations to Assets held for sale and Liabilities held for sale, respectively, as of June 30, 2026 and recorded impairment charges of $17,805 through September 30, 2026 to adjust the carrying value of the disposal group to its fair value less costs to sell. The impairment charge is primarily attributed to the inclusion of cumulative currency translation adjustments in the carrying value of the disposal group's net assets. Refer to Note 16 "Assets and Liabilities Held for Sale" for further details.
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.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Adopted Pronouncement — In July 2025, the FASB issued ASU No. 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"), which provides a practical expedient to apply ASC 326 to current accounts receivable and current contract assets. The practical expedient allows the Company to make a policy election to assume that current conditions as of the balance sheet date will not change for the remaining lives of the assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim
6
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
reporting periods within those years. The Company adopted ASU No. 2025-05 in the first quarter of fiscal year 2026 and it did not have a material impact on the Condensed Consolidated Financial Statements and disclosures as a result of the adoption.
Pronouncements Currently Under Evaluation — In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Aggregation Disclosures (Subtopic 220-40)" ("ASU 2024-03"), which requires more detailed disaggregated disclosure of income statement expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is evaluating the impact of this ASU on its Condensed Consolidated Financial Statements.
In September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)" ("ASU 2025-06"), which updates guidance regarding the requirements to begin capitalizing internal-use software. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is evaluating the impact of this ASU on its Condensed Consolidated Financial Statements.
In December 2025, the FASB issued ASU No. 2025‑10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities” (“ASU 2025‑10”), which establishes authoritative guidance on the accounting for government grants received by business entities, including guidance for a grant related to an asset and a grant related to income. The new standard allows for a number of accounting policy elections to be made upon adoption and be applied to the subsequent grants received on a prospective basis. ASU 2025‑10 is effective for annual reporting periods beginning after December 15, 2028, and interim periods within those annual reporting periods. The Company does not expect the adoption of this ASU to have a material impact on its Condensed Consolidated Financial Statements.
In December 2025, the FASB issued ASU No. 2025‑11, “Interim Reporting (Topic 270): Narrow‑Scope Improvements” (“ASU 2025‑11”), which improves the navigability of the required interim disclosures and clarifies when that guidance is applicable. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of the adoption of this ASU on its Condensed Consolidated Financial Statements.
In December 2025, the FASB issued ASU No. 2025‑12, “Codification Improvements” (“ASU 2025‑12”), as part of its ongoing project to enhance the clarity and usability of the FASB Codification. The amendments address a broad range of topics and include technical corrections, clarifications, updates for unintended application issues, and other minor improvements. ASU 2025‑12 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of this ASU on its Condensed Consolidated Financial Statements.
In May 2026, the FASB issued ASU No. 2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818)” (“ASU 2026‑02”), which establishes authoritative guidance on the accounting for environmental credits and environmental credit obligations. ASU 2026-02 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company does not expect the adoption of this ASU to have a material impact on its Condensed Consolidated Financial Statements.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Sales are derived from products for different applications: lasers, systems, and components are sold into industrial solutions and advanced solutions which includes medical, defense, micromachining, scientific, instrumentation and other advanced solutions.
Effective in the first quarter of fiscal 2026, the Company revised its sales by application presentation to better reflect the Company's strategic growth initiatives and provides a clearer separation between the Company's industrial and non-industrial businesses, giving better visibility into the distinct performance and growth profiles of each. Under the revised presentation, sales are presented in two application categories: Industrial Solutions and Advanced Solutions, and prior-period amounts have been reclassified to conform to the current-period presentation. The revised categories substantially correspond to the Company’s historical application categories, with sales previously classified as materials processing generally presented within Industrial Solutions and sales previously classified as other applications generally presented within Advanced Solutions. The only quantitative reclassification in conforming prior-period amounts was the reclassification of micromachining sales from Industrial Solutions to Advanced Solutions, which increased Advanced Solutions sales and decreased Industrial Solutions sales
7
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
by $4,730 19,804 The following table presents the disaggregation of revenue under the new application framework:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales by Application | |||||||||||||||||||||||
Industrial Solutions | $ | $ | $ | $ | |||||||||||||||||||
Advanced Solutions | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Additionally, beginning in the first quarter of fiscal 2026, the Company updated its sales by product presentation to align with its current product reporting framework. Sales by product are now presented in two categories: Lasers and Components and Systems, and prior-period amounts have been conformed to the current-period presentation. Under the historical presentation, sales were disaggregated into High Power Continuous Wave (“CW”) Lasers, Medium Power CW Lasers, Pulsed Lasers, Quasi-Continuous Wave (“QCW”) Lasers, Laser and Non-Laser Systems, and Other Revenue including Other Lasers, Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue ("Other Revenue"). Under the updated presentation, the historical non-system laser categories, including High and Medium Power CW, QCW and Pulsed lasers, are included within Lasers and Components, while Laser and Non-Laser Systems are included within Systems. Amounts historically presented within Other Revenue have been allocated between Lasers and Components and Systems based on the nature of the underlying products. For the three months ended September 30, 2025, $55,564 13,020 151,211 35,209 The following table presents revenue disaggregated under the new product framework:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales by Product | |||||||||||||||||||||||
Lasers and Components | $ | $ | $ | $ | |||||||||||||||||||
Systems | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
8
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following tables represent a disaggregation of revenue from contracts with customers by geography:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales by Geography | |||||||||||||||||||||||
North America (1) | $ | $ | $ | $ | |||||||||||||||||||
| Europe: | |||||||||||||||||||||||
| Germany | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Europe | |||||||||||||||||||||||
| Asia: | |||||||||||||||||||||||
| China | |||||||||||||||||||||||
| Japan | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
| Total Asia | |||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(1) The substantial majority of sales in North America are to customers in the United States.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Timing of Revenue Recognition | |||||||||||||||||||||||
| Goods and services transferred at a point in time | $ | $ | $ | $ | |||||||||||||||||||
| Goods and services transferred over time | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The Company recognizes revenue over time on contracts for the sale of large scale industrial solutions systems. Revenue is recognized over time for these contracts because the Company's performance generally does not create an asset with an alternative use and the Company has an enforceable right to payment for performance completed to date. The timing of customer payments on these contracts generally differs from the timing of revenue recognized. If revenue recognized over time exceeds customer payments, a contract asset is recorded. If customer payments for any arrangements 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 nine months ended September 30, 2026 and 2025:
| September 30, | January 1, | September 30, | January 1, | |||||||||||||||||||||||||||||||||||
| 2026 | 2026 | Change | 2025 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Contract assets | ||||||||||||||||||||||||||||||||||||||
| Contract assets | $ | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||||||
| Contract liabilities | ||||||||||||||||||||||||||||||||||||||
| Contract liabilities - current | ( | ( | ||||||||||||||||||||||||||||||||||||
| Contract liabilities - long-term | ( | |||||||||||||||||||||||||||||||||||||
During the three months ended September 30, 2026 and 2025, the Company recognized revenue of $5,219 and $3,321 , respectively, that was included in contract liabilities at the beginning of each year. During the nine months ended September 30,
9
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
2026 and 2025, the Company recognized revenue of $40,154 and $37,360 , respectively, that was included in contract liabilities at the beginning of each year.
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, 2026:
| Remaining Performance Obligations | |||||||||||||||||||||||||||||||||||||||||
2026 (a) | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Revenue expected to be recognized for extended warranty agreements | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Revenue to be earned over time from contracts to sell large scale materials processing systems | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
(a) For the three-month period beginning October 1, 2026.
4. FAIR VALUE MEASUREMENTS
The Company's financial instruments consist of cash equivalents, short-term and long-term investments, accounts receivable, accounts payable, foreign currency forward contracts 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, term deposits and foreign currency forward contracts 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 with the exception of foreign currency forward contracts, which are measured at fair value:
10
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
| Fair Value Measurements at September 30, 2026 | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market fund deposits | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| U.S. Treasury and agency obligations | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| U.S. Treasury and agency obligations | |||||||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| Total short-term investments | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Foreign currency forward contracts | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Fair Value Measurements at December 31, 2025 | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market fund deposits | $ | $ | $ | $ | |||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| U.S. Treasury and agency obligations | |||||||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| Total short-term investments | |||||||||||||||||||||||
| Long-term investments: | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| U.S. Treasury and agency obligations | |||||||||||||||||||||||
| Total long-term investments | |||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||
There were no no
The Company did not have any allowance for credit losses other than the allowance for uncollectible accounts receivable. As of September 30, 2026 and December 31, 2025, the allowance for credit losses on trade receivables was $2,906 and $2,189 , respectively.
11
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table presents the effective maturity dates of debt investments, which are held-to-maturity:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Book Value | Fair Value | Book Value | Fair Value | ||||||||||||||||||||
| Investment maturity | |||||||||||||||||||||||
| Less than 1 year | $ | $ | $ | $ | |||||||||||||||||||
| 1 - 5 years | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
In addition to the above, we hold certain equity investments that do not have readily determinable fair values for which we use the measurement alternative prescribed in FASB ASC Topic 321. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. As of September 30, 2026, we held equity investments under the measurement alternative of $8,000 , which are presented in Other assets in the Condensed Consolidated Balance Sheets. There were no equity investments under the measurement alternative as of December 31, 2025.
5. DERIVATIVES
During the three months ended September 30, 2026, the Company entered into foreign exchange forward contracts, to mitigate the potential fluctuations of the purchase price of a foreign acquisition denominated in euros. The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The Company has not designated any derivatives as hedging instruments.
Foreign Currency Derivatives
As of September 30, 2026, we had the following outstanding currency forward contracts.
| Notional (in thousands) | Effective Date | Maturity Date | Index (Exchange Rates) | Weighted-Average Strike Rate | Hedge Designation | |||||||||||||||||||||||||||
| € | August 2026 | October 2026 | Euro ("EUR") to USD | USD | Not designated | |||||||||||||||||||||||||||
Financial Instrument Presentation
The Company recognizes all derivative financial instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The fair value amounts in the Consolidated Balance Sheets were:
| Prepaid expenses and other current assets | Accrued Expenses and other current liabilities | |||||||||||||||||||
| September 30, | December 31, | September 30, | December 31, | |||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
12
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
6. INVENTORIES
Inventories consist of the following:
| September 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| Components and raw materials | $ | $ | |||||||||
Work-in-process | |||||||||||
Finished goods | |||||||||||
| Total | $ | $ | |||||||||
The Company recorded inventory provisions totaling $6,663 and $5,705 for the three months ended September 30, 2026 and 2025, respectively, and $17,236 and $23,014 for the nine months ended September 30, 2026 and 2025, respectively. These provisions relate to the recoverability of the value of inventories due to technological changes and excess quantities. These provisions are reported as a reduction to components and raw materials, work-in-process and finished goods.
7. GOODWILL AND INTANGIBLES
The following table sets forth the changes in the carrying amount of goodwill:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance, beginning of period | $ | $ | |||||||||
Foreign currency translation adjustment | ( | ||||||||||
| Balance, end of period | $ | $ | |||||||||
Intangible assets, subject to amortization, consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted- Average Lives | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted- Average Lives | ||||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Technology, and Production know-how | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Trademark and trade name | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Patents | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
Amortization expense related to intangible assets for the three months ended September 30, 2026 and 2025 was $1,951 and $2,402 , respectively. Amortization expense for the nine months ended September 30, 2026 and 2025 was $6,061 and $7,498 , respectively. The estimated future amortization expense for intangible assets for the remainder of 2026 and subsequent years is as follows:
2026 (a) | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
(a) For the three-month period beginning October 1, 2026.
13
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
8. OTHER LIABILITIES
Accrued expenses and other current liabilities consist of the following:
| September 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| Accrued compensation | $ | $ | |||||||||
| Contract liabilities | |||||||||||
| Current portion of accrued warranty | |||||||||||
| Liabilities held for sale (See Note 16 "Assets and Liabilities Held for Sale") | |||||||||||
| Foreign exchange forward contracts (See Note 5 "Derivatives") | |||||||||||
| Short-term lease liabilities | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
Other long-term liabilities and deferred income taxes consist of the following:
| September 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| Unrecognized tax benefits | $ | $ | |||||||||
Accrued warranty | |||||||||||
| Long-term lease liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
During the fourth quarter of 2024, the Company acquired 100 % of the shares of Clean‐Lasersysteme GmbH ("cleanLASER"). The Company has a continued employment arrangement with one of the sellers subject to a potential earn-out payment based upon the achievement of certain financial and non-financial milestones. The Company has treated this potential payment as compensation expense that will be recorded pro-ratably over the employment arrangement period of 24 months. The Company has accrued $2,688 and $2,966 related to this arrangement within Accrued expenses and other current liabilities on the Company's Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025, respectively.
9. PRODUCT WARRANTIES
The Company typically provides to five years parts and service warranties on lasers, 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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance, beginning of period | $ | $ | |||||||||
| Provision for warranty accrual | |||||||||||
| Warranty claims | ( | ( | |||||||||
| Foreign currency translation | ( | ||||||||||
| Balance, end of period | $ | $ | |||||||||
Accrued warranty reported in the accompanying Condensed Consolidated Financial Statements as of September 30, 2026 and December 31, 2025 consist of $16,752 and $17,348 in Accrued expenses and other current liabilities, respectively, and $14,662 and $14,116 in Other long-term liabilities and deferred income taxes, respectively.
14
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:
On June 24, 2025, the Company entered into a credit agreement with Bank of America, N.A. which matures on June 24, 2030. The credit agreement provides a $200,000 unsecured, revolving credit facility, of which $25,000 may be used for the issuance of letters of credit. The facility replaced the previous $75,000 U.S. revolving line of credit with a scheduled maturity date of June 30, 2025.
At September 30, 2026, there were no amounts drawn and $433 of guarantees issued on the credit facility. The remaining availability under the new line was $199,567 at September 30, 2026. At December 31, 2025, there were no
Under the credit agreement, the Company is required to meet certain financial covenants, which are tested quarterly and include an interest coverage ratio and a net leverage ratio. The interest coverage covenant requires the Company maintain a trailing twelve-month ratio of consolidated EBITDA to consolidated interest expense on all obligations that is at least 3.0 times. The net leverage covenant requires the Company maintain a trailing twelve-month ratio, which is the sum of all indebtedness for borrowed money on a consolidated basis, less cash and available marketable securities not classified as long-term investments in the U.S. in excess of $50,000 up to a maximum of $500,000 , to consolidated EBITDA that is less than 3.0 times. The Company was in compliance with the financial covenants as of September 30, 2026.
In addition to the financial covenants, the Company's credit agreement contains additional customary events of default, including non-payment of principal, interest or fees, violation of covenants, cross default to certain other indebtedness, invalidity of any loan document, material judgments, bankruptcy and insolvency events and change of control, subject, in certain instances, to cure periods. Upon the occurrence of an event of default, the lenders may elect to declare amounts outstanding under the credit agreement immediately due and payable.
In addition, the Company maintains euro lines of credit with a total principal amount of €7,400 8,393 and $8,687 as of September 30, 2026 and December 31, 2025, respectively), which are available to certain European subsidiaries. At September 30, 2026 and December 31, 2025, there were no 2,570 and $3,123 , respectively, of guarantees issued against the facilities, which reduced the amount of the availability under the facilities.
Additionally, the Company has lines of credit totaling $21,347 in various countries, which are used for the issuance of letters of credit, guarantees, and overdrafts. As of September 30, 2026, guarantees and overdrafts totaling $1,962 were issued against these facilities. As of December 31, 2025, amounts drawn under these facilities totaled $1,059 , and guarantees totaling $1,797 were issued against these facilities.
11. COMMITMENTS AND CONTINGENCIES
In December 2024, affiliates of Trumpf SE & Co. KG (“Trumpf”) filed patent lawsuits in two different Unified Patent Courts (UPC) located in Germany against IPG Laser GmbH & Co. KG alleging infringement of two patents granted by the European Patent Office by the Company's adjustable mode beam (AMB) lasers. In January 2026, the Company filed a complaint against Trumpf in the U.S. District Court for the Eastern District of Texas alleging infringement of one U.S. Patent which covers IPG’s safety‑control electronics invention.
On February 25, 2026 and March 16, 2026, the UPC courts upheld the validity of the Trumpf patents and ruled that the Company’s AMB lasers infringed the two patents asserted in the UPC cases. IPG and Trumpf entered into a settlement agreement effective May 1, 2026 under which IPG made a lump sum payment of $13,334 , net of the favorable impact of foreign currency changes, to Trumpf and licensed from Trumpf the two patents worldwide in exchange for a royalty. Also under the settlement, Trumpf agreed to withdraw the judgments, and the Company agreed to dismiss its complaint against Trumpf in the Texas matter and withdraw challenges to the two Trumpf patents.
The cost of the settlement is reflected in Settlement of litigation matters in the Company's Condensed Consolidated Statements of Operations whereas the royalty charges are reflected in Cost of sales.
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
15
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
matters. As of September 30, 2026 and through the filing date of these Condensed Consolidated Financial Statements, the Company is aware of no additional ongoing legal proceedings that management estimates could have a material effect on the Company's Condensed Consolidated Financial Statements.
Effective January 1, 2025, the Company is self-insured for employee medical benefits in the United States. The employee medical obligations are managed by a third-party provider and the Company has accrued $1,511 and $3,024 related to this arrangement in Accrued expenses and other current liabilities within the Consolidated Balance Sheet as of September 30, 2026 and December 31, 2025, respectively. To limit the Company’s potential liabilities for these risks, the Company purchases insurance from a third party that provides stop-loss protection for medical costs in the United States that exceed $225 per person per annum.
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.
16
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
12. ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive (loss) income includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive (loss) 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 | ||||||||||||||||||||||||||
| Balance, July 1, 2026 | $ | ( | ||||||||||||||||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||||||||||||
Foreign currency translation adjustments and other, net of tax benefit of $ | ( | |||||||||||||||||||||||||
Total other comprehensive loss | ( | |||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | ( | ||||||||||||||||||||||||
| Balance, July 1, 2025 | $ | ( | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax: | ||||||||||||||||||||||||||
Foreign currency translation adjustments and other, net of tax benefit of $ | ( | |||||||||||||||||||||||||
| Total other comprehensive loss | ( | |||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | ( | ||||||||||||||||||||||||
| Foreign currency translation adjustments and other | ||||||||||||||||||||||||||
| Balance, January 1, 2026 | $ | ( | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax: | ||||||||||||||||||||||||||
Foreign currency translation adjustments and other, net of tax benefit of $ | ( | |||||||||||||||||||||||||
| Total other comprehensive loss | ( | |||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | ( | ||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | ( | ||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||
Foreign currency translation adjustments and other, net of tax expense of $ | ||||||||||||||||||||||||||
Total other comprehensive income | ||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | ( | ||||||||||||||||||||||||
13. INCOME TAXES
The Provision for income taxes was a tax expense of $8,142 and $8,191 , for the three months ended September 30, 2026 and 2025, respectively and $14,876 and $16,714 for the nine months ended September 30, 2026 and 2025 respectively. The effective tax rate was 28.7 % and 52.3 % for the three months ended September 30, 2026 and 2025, respectively and 35.4 % and 48.4 % for the nine months ended September 30, 2026 and 2025, respectively.
The decrease in tax expense for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 was primarily due to a decrease in adjustments for uncertain tax positions which was mostly offset by an increase in income before provision for income taxes.
17
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The decrease in tax expense for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 was primarily due to equity-based compensation expenses allowed for tax purposes in excess of the deductions reflected for financial statement income which were mostly offset by an increase in income before provision for income taxes.
The net discrete tax detriment was $949 for the three months ended September 30, 2026 as compared to a net discrete tax detriment of $3,803 for the three months ended September 30, 2025. The difference in the discrete tax detriment was primarily from a decrease in the amounts provided for uncertain tax positions in the three months ended September 30, 2026.
For the nine months ended September 30, 2026, the Company recorded net discrete tax detriments of $84 related primarily to adjustments for uncertain tax positions, mostly offset by equity-based compensation tax deductions in excess of the amount recognized for financial statement income. This compares to a net discrete tax detriment of $8,692 for the nine months ended September 30, 2025, related primarily to equity-based compensation expense reflected in financial statement income in excess of the deductions allowed for tax purposes and adjustments for uncertain tax positions.
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 nine months ended September 30, 2026 and 2025:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance, beginning of period | $ | $ | |||||||||
| Change in prior period positions | |||||||||||
| Additions for tax positions in current period | |||||||||||
| Foreign currency translation | ( | ||||||||||
| Balance, end of period | $ | $ | |||||||||
14. NET INCOME PER COMMON SHARE
The following table sets forth the computation of diluted net income per common share following the treasury stock method:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
| Basic weighted average common shares | |||||||||||||||||||||||
| Dilutive effect of common stock equivalents | |||||||||||||||||||||||
| Diluted weighted average common shares | |||||||||||||||||||||||
Basic net income per common share | $ | $ | $ | $ | |||||||||||||||||||
Diluted net income per common share | $ | $ | $ | $ | |||||||||||||||||||
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
18
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
("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, 2026 and 2025 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Non-qualified stock options | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Performance stock units | |||||||||||||||||||||||
| Employee stock purchase plan | |||||||||||||||||||||||
| Total weighted average anti-dilutive shares outstanding | |||||||||||||||||||||||
On February 12, 2026, the Company announced that its Board of Directors has authorized the purchase of up to $100,000 of IPG common stock. This authorization is in addition to the Company's previously authorized stock repurchase programs.
For the three and nine months ended September 30, 2026 the Company repurchased 34,656 76.38 8,066 and 2,718 shares, respectively. For the three and nine months ended September 30, 2025 the Company repurchased 214,408 and 705,390 shares under the February 2024 authorization with a weighted average price of $75.99 and $65.63 per share in the open market, respectively. The impact on the reduction of weighted average shares for the three and nine months ended September 30, 2025 was 133,128 and 298,476 shares, respectively. As of September 30, 2026, the Company had $97,353 remaining under the February 2026 authorization. There are no amounts remaining under any other previously authorized stock repurchase programs as of September 30, 2026.
15. SEGMENT REPORTING
The Company operates in one segment which involves the design, development, production and distribution of fiber lasers, laser and non-laser systems, fiber amplifiers, and related optical components. The Company has a single, company-wide management team that administers the enterprise as a whole rather than as discrete operating segments. The chief operating decision maker ("CODM"), who is the Company's chief executive officer, also measures financial performance as a single enterprise, and not on geography, legal entity, or end market basis. Throughout the year, the CODM allocates capital resources on a project-by-project basis across the Company's entire asset base, as reflected in the Company's Condensed Consolidated Balance Sheets, to maximize profitability without regard to geography, legal entity, or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines. Information regarding product lines and geographic financial information is provided in Note 3, "Revenue from Contracts with Customers."
The CODM primarily utilizes "Net income" as well as "Net income per common share” included in the Company's Condensed Consolidated Statements of Operations as the key indicators in assessing the enterprise’s performance and allocating resources. In evaluating Net income, the CODM also reviews gross profit as well the Company's income before foreign exchange and other segment items to set and evaluate performance targets.
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IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
The following table presents the break-down of Net income, including significant segment expenses.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
Cost of product sold and other expenses (a) | |||||||||||||||||||||||
| Manufacturing, service and other operations salaries, bonus, and benefits, including contractor costs | |||||||||||||||||||||||
Other manufacturing expenses (b) | |||||||||||||||||||||||
| Capitalized labor and overhead | ( | ( | ( | ( | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
Sales and marketing, research and development and general and administrative (c) | |||||||||||||||||||||||
| Income before Loss on foreign exchange, Interest income, net, Provision for income taxes and Other segment items | |||||||||||||||||||||||
| Loss on foreign exchange | ( | ( | ( | ( | |||||||||||||||||||
Interest income, net | |||||||||||||||||||||||
Provision for income taxes | ( | ( | ( | ( | |||||||||||||||||||
Other segment items (d) | ( | ( | |||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
(a) Includes cost of materials, labor and overhead related to inventory sold, shipping costs, duties and tariffs, scrap, and inventory provisions.
(b) Includes depreciation and amortization, service, warranty, and other manufacturing expenses incurred in production.
(c) Sales and marketing, research and development and general and administrative expenses are disclosed by period in the Company's Condensed Consolidated Statements of Operations.
(d) Other segment items include settlement of litigation matters, impairment charges and other (expense) income, net.
16. ASSETS AND LIABILITIES HELD FOR SALE
In May 2026, the Company entered into an agreement to sell its Belarus operation as European Union sanctions restricted the supply of laser cabinets and other mechanical components from its factory in Belarus to its Germany operations. As a result, the Company classified its Belarus operation as held for sale during the second quarter of 2026. The Company is working with the buyer to complete the transaction and, subject to regulatory approvals and other customary closing conditions, expects the sale to be completed within the next twelve months.
Prior to measuring the disposal group at fair value less costs to sell, the Company assessed the carrying value of the individual assets and liabilities included in the disposal group and as a result, the Company recorded impairment charges of $231 and $17,805 for the three and nine months ended September 30, 2026, primarily attributed to the inclusion of cumulative currency translation adjustments in the carrying value of the subsidiary's net assets.
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IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Assets and liabilities held for sale consist of the following:
| September 30, | |||||
| 2026 | |||||
| Cash and cash equivalents | $ | ||||
| Other assets | |||||
| Assets held for sale | $ | ||||
| Accounts payable, accrued expenses and other current liabilities | $ | ||||
Unallocated impairment charges (1) | |||||
| Liabilities held for sale | $ | ||||
(1) Includes approximately $16,152 of unfavorable cumulative foreign currency translation adjustments (CTA), net of $3,897 recorded as a reduction of long-lived assets. The translation adjustments are currently reflected in Accumulated Other Comprehensive Loss.
As of September 30, 2026, the assets and liabilities classified as held for sale are included within Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, on the Condensed Consolidated Balance Sheets.
The reconciliation of the Company's cash and cash equivalents in the Condensed Consolidated Balance Sheets to cash, cash equivalents, and cash held for sale in the Consolidated Statement of Cash Flows is as follows:
| September 30, | |||||
| 2026 | |||||
| Cash and cash equivalents | $ | ||||
| Cash held for sale | |||||
| Cash, cash equivalents, and cash held for sale | $ | ||||
17. PENDING BUSINESS COMBINATION
On July 16, 2026, the Company announced that it had entered into a put option agreement with Lumibird S.A. relating to the proposed acquisition of Lumibird Medical, a French société par actions simplifiée. Following completion of the information and consultation process with Lumibird Medical’s works council in accordance with French law, Lumibird S.A. exercised the put option, and on September 8, 2026, the Company and Lumibird S.A. entered into a share purchase agreement pursuant to which the Company agreed to acquire 100 % of the outstanding shares of Lumibird Medical for €300,000 in cash on a cash-free, debt-free basis, subject to customary adjustments, plus a contingent earn-out of up to €50,000 based on the achievement of certain financial performance targets in 2026 and 2027. The transaction is subject to customary closing conditions and regulatory approvals, including authorization by the French Minister of the Economy under the French foreign direct investment regime, and is expected to close in the fourth quarter of 2026.
18. SUBSEQUENT EVENTS
On October 14, 2026, the government of Belarus approved the sale of the Company's Belarusian operations to a third-party that previously signed a purchase and sale agreement with the Company. The Company currently expects the transaction to close in the fourth quarter of 2026, subject to the satisfaction of the remaining closing conditions. Future changes in estimated fair value less costs to sell, foreign currency exchange rates, or other developments related to the planned disposition through the closing date could result in additional charges or adjustments, however, the Company does not expect any such charges or adjustments to be material to the consolidated financial statements.
On October 30, 2026, the Company’s Board of Directors approved the sale of certain properties as part of the Company’s ongoing efforts to optimize its real estate footprint. As a result of the Board’s approval, the properties satisfy the assets held for sale criteria in the fourth quarter of 2026 resulting in an estimated pre-tax impairment charge of approximately $25,000 to adjust the carrying value of the properties to their estimated fair value less costs to sell. The estimate is preliminary and may change based on the Company’s final costs to sell and other factors. The sales of these properties are expected to be completed in 2027.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements."
Overview
We develop, manufacture and sell high-performance fiber lasers that are used for diverse end markets and applications, primarily in industrial manufacturing, medical, defense and other advanced applications. We also manufacture and sell complete laser-based systems for certain markets and applications. Additionally, we manufacture complementary products used with our lasers and laser-based systems, including optical delivery cables, fiber couplers, beam switches, optical processing heads, in-line sensors and chillers. We sell our products globally to original equipment manufacturers ("OEMs"), system integrators and end users. We market our products internationally, primarily through our direct sales force. Our manufacturing facilities are located in the United States, Germany, Italy, and Poland. We have sales and service offices and applications laboratories worldwide.
We are vertically integrated such that we design and manufacture most of the key components used in our finished products, from semiconductor diodes to optical fiber preforms, finished fiber lasers and complementary products. Our vertically integrated operations allow us to reduce manufacturing costs, control quality, rapidly develop and integrate advanced products and protect our proprietary technology.
Factors and Trends That Affect Our Operations and Financial Results
In reading our financial statements, you should be aware of the following factors and trends that our management believes are important in understanding our financial performance.
U.S. Government Tariffs. We continue to closely monitor changes in international trade relations and economic and monetary policies, including tariffs on imports into the U.S. from China, Germany and other countries, as well as retaliatory tariffs in affected countries, which could adversely impact the global economy and our operating results.
On February 20, 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs. The decision did not affect tariffs imposed under Section 232, including tariffs on steel and aluminum. We subsequently applied for refunds of tariffs assessed under IEEPA in accordance with processes established by U.S. Customs.
We account for IEEPA tariff refunds, and claims made under other tariff relief mechanisms, as recoveries of previously incurred tariff costs when such refunds are deemed probable of recovery. During the three and nine months ended September 30, 2026, we recognized $5.8 million and $10.9 million, respectively, of tariff recoveries as a reduction of Cost of sales related to these programs. Partially offsetting these recoveries were charges of $0.8 million in Cost of sales during the third quarter of 2026 for tariffs and duties adjustments, primarily related to aluminum imports in prior periods. The net benefit to gross margin from this tariff activity for the three and nine months ended September 30, 2026, was approximately 170 and 120 basis points, respectively. We will continue to evaluate developments and recognize additional recoveries when the applicable recognition criteria are met.
Middle East Conflict. The ongoing conflict involving Iran and related instability in the Middle East has contributed to volatility in global transportation markets, including periodic increases in ocean freight, air cargo, fuel, insurance, and other shipping-related costs, as well as the potential for longer transit times on certain international routes. We continue to monitor these developments and work with logistics providers and suppliers to manage sourcing and distribution activities, including evaluating alternative routing and supply chain strategies where appropriate. Based on information currently available, we have not experienced material disruption to our operations and do not presently expect the related impact on freight and shipping costs to have a material effect on our business, results of operations, liquidity, or financial condition. However, the extent and duration of these conditions remain uncertain and could change in future periods.
Belarusian Operations. In response to the Russia-Ukraine conflict, the EU issued additional sanctions impacting commerce with Belarus on June 29, 2024, which restricted the supply of laser cabinets and other mechanical components from our factory in Belarus to our Germany operations after October 2, 2024. Because of these sanctions, we completed an
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impairment analysis of our Belarus assets during the third quarter of 2024 and recorded an impairment charge of $26.6 million in our Condensed Consolidated Statements of Operations.
During the second quarter of 2026, we entered into an agreement to sell our Belarusian operations and concluded that the related assets and liabilities of the business met the criteria to be classified as held for sale. Accordingly, the disposal group was remeasured at the lower of carrying value or estimated fair value less costs to sell, resulting in an impairment charge of $17.6 million in the second quarter of 2026, primarily attributed to the inclusion of cumulative currency translation adjustments in the carrying value of the subsidiary's net assets. The disposal group remained classified as held for sale as of September 30, 2026, and upon remeasurement of the disposal group we recorded an additional impairment charge of $0.2 million in the third quarter. Total impairment charges recognized during the first three quarters of 2026 were $17.8 million.
On October 14, 2026, subsequent to the end of the third quarter, the government of Belarus approved the sale of our Belarusian operations to a third-party that previously signed a purchase and sale agreement with us. We currently expect the transaction to close in the fourth quarter of 2026, subject to the satisfaction of the remaining closing conditions. Future changes in estimated fair value less costs to sell, foreign currency exchange rates, or other developments related to the planned disposition through the closing date could result in additional charges or adjustments, however, we do not expect any such charges or adjustments to be material to the consolidated financial statements.
Net sales. Our net sales have historically fluctuated from quarter to quarter. The increase or decrease in sales from a prior quarter can be affected by the timing of orders received from customers, the timing of shipments, the mix of OEM orders and one-time orders for products with large purchase prices, competitive pressures, acquisitions, economic and political conditions in a certain country or region and seasonal factors such as the purchasing patterns and levels of activity throughout the year in the regions where we operate. Net sales can be affected by the time taken to qualify our products for use in new applications in the end markets that we serve. Our sales cycle varies substantially, ranging from a period of a few weeks to as long as one year or more, but is typically several months. The adoption of our products by a new customer or qualification in a new application can lead to an increase in net sales for a period, which may then slow until we penetrate new markets or obtain new customers. Foreign exchange rates also affect our net sales, due to changes in the U.S. dollar value of sales made in foreign currencies.
Our business depends substantially upon capital expenditures by end users, particularly by manufacturers using our products for industrial manufacturing, which includes general industrial manufacturing, automotive including electric vehicles ("EV"), battery energy storage systems ("BESS"), aerospace, heavy industry, but also may include consumer, semiconductor and electronics. Approximately 85% of our revenues for the first three quarters of 2026, and 84% for the full fiscal year of 2025 were in Industrial Solutions and used in industrial applications, mostly for materials processing. Although applications within Industrial Solutions are broad, the capital equipment market in general is cyclical and historically has experienced sudden and severe downturns. For the foreseeable future, our operations will continue to depend upon capital expenditures by end users of industrial equipment and will be subject to the broader fluctuations of capital equipment spending.
In recent years, our net sales and margins have been negatively impacted by tariffs and trade policy. Tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and certain foreign governments. We are also susceptible to global or regional disruptions such as political instability, geopolitical conflicts, acts of terrorism, significant fluctuations in currency values, natural disasters and pandemics to the extent that they affect macroeconomic conditions, global supply chains or individual IPG locations.
The average selling prices of our products generally decrease as the products mature. These decreases result from factors such as increased competition, decreased manufacturing costs and increased unit volumes. We may also reduce selling prices in order to penetrate new markets and applications. Furthermore, we may negotiate discounted selling prices from time to time with certain customers that place high unit-volume orders.
The secular shift to fiber laser technology in large industrial processing applications, such as welding and cutting applications, had a positive effect on our sales trends in the past such that our sales trends were often better than other capital equipment manufacturers in both positive and negative economic cycles. As the secular shift to fiber laser technology matures in such applications, our sales trends are more susceptible to economic cycles, which can broadly affect the demand for capital equipment including machine tools and industrial lasers, and competition from other fiber laser manufacturers. Additionally, as our technology matures, we become subject to more competition which can affect sales trends.
Gross margin. Our total gross margin in any period can be significantly affected by a number of factors, including net sales, production volumes, competitive factors, product mix, and by other factors such as changes in foreign exchange rates relative to the U.S. dollar, tariffs and shipping costs. Many of these factors are not under our control. The following are examples of factors affecting gross margin:
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•As our products mature, we can experience additional competition which tends to decrease average selling prices and affects gross margin;
•Our gross margin can be significantly affected by product mix. Within each of our product categories, the gross margin is generally higher for devices with greater average power. These higher power products often have better performance, more difficult specifications to attain and fewer competing products in the marketplace;
•Higher power lasers also use a greater number of optical components, improving absorption of fixed overhead costs and enabling economies of scale in manufacturing;
•The gross margin for certain specialty products may be higher because there are fewer or sometimes no equivalent competing products;
•Gross margin on systems can be lower than gross margin for our lasers and sub-systems, depending on the configuration, volume and competitive forces, among other factors;
•Customers that purchase devices in greater unit volumes generally are provided lower prices per device than customers that purchase fewer units. In general, lower selling prices to high unit volume customers reduce gross margin although this may be partially offset by improved absorption of fixed overhead costs associated with larger product volumes, which drive economies of scale;
•Persistent inflation leading to increases in average manufacturing salaries as well as an increase in the purchase price of components including, but not limited to, electronic components and metal parts could negatively impact gross margin if we are not able to pass those increases on to customers by increasing the selling price of our products;
•Tariffs and counter-tariffs added, increased, reduced or eliminated in any period;
•Changes in relative exchange rates between currencies we receive when selling our products and currencies we use to pay our manufacturing expenses; and finally,
•Our gross margin from products on new manufacturing lines can be lower due to production inefficiencies and high scrap costs.
We expect that some new technologies, products and systems will have returns above our cost of capital but may have gross margins below our corporate average. If we are able to develop opportunities that are significant in size, competitively advantageous or leverage our existing technology base and leadership, our current gross margin levels may not be maintained. Instead, we aim to deliver industry-leading levels of gross margins by growing sales, by taking market share in existing markets, or by developing new applications and markets we address, by reducing the cost of our products and by optimizing the efficiency of our manufacturing operations.
A high proportion of our costs is fixed so costs are generally difficult to adjust or may take time to adjust in response to changes in demand. In addition, our fixed costs increase as we expand our capacity. If we expand capacity faster than is required by sales growth, gross margins could be negatively affected. Gross margins generally decline if production volumes are lower as a result of a decrease in sales or a reduction in inventory because the absorption of fixed manufacturing costs will be reduced. Gross margins generally improve when the opposite occurs. If both sales and inventory decrease in the same period, the decline in gross margin may be greater if we are unable or choose not to reduce fixed costs to match the decrease in the level of production. If we experience a decline in sales that reduces absorption of our fixed costs, or if we have production issues, our gross margins will be negatively affected.
We also regularly review our inventory for items that are slow-moving, have been rendered obsolete or are determined to be excess. Any provision for such slow-moving, obsolete or excess inventory affects our gross margins. For example, we recorded provisions for slow-moving, obsolete or excess inventory totaling $6.7 million and $5.7 million for the three months ended September 30, 2026 and 2025, respectively and $17.2 million and $23.0 million for the nine months ended September 30, 2026 and 2025, respectively.
Selling, general and administrative expenses. In the past, we invested in selling, general and administrative costs in order to support continued growth in the Company. As the secular shift to fiber laser technology matures, our sales growth becomes more susceptible to the cyclical trends typical of capital equipment manufacturers. Accordingly, our future management of and investments in selling, general and administrative expenses will also be influenced by these trends, although we may still invest in selling or general and administrative functions to support certain initiatives even in economic down cycles. Certain general and administrative expenses are not related to the level of sales and may vary quarter to quarter based primarily upon the level
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of acquisitions, litigation and project-related consulting expenses. Additionally, selling, general and administrative expenses will also be influenced by accruals for variable compensation and performance stock unit expense both of which are dependent upon our performance relative to preestablished targets.
Research and development expenses. We plan to continue to invest in research and development to improve our existing components and products and develop new components, products, systems and applications technology. We believe that these investments will sustain our position as a leader in the fiber laser industry and will support development of new products that can address new markets and growth opportunities. The amount of research and development expense we incur may vary from period to period.
Impairment charges. We review our intangible assets and property, plant and equipment for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Negative industry or economic trends, including reduced estimates of future cash flows, disruptions to our business, slower growth rates, lack of growth in our relevant business units, differences in the estimated product acceptance rates, or market prices below the carrying value of long-lived assets evaluated for sale could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets.
Our valuation methodology for assessing impairment requires management to make significant judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance and future strategic use of our asset footprint. Also, the process of evaluating the potential impairment of goodwill is subjective. We operate in a highly competitive environment and projections of future operating results, asset usage and cash flows may vary significantly from actual results. If our analysis indicates potential impairment to goodwill in one or more of our reporting units, we may be required to record charges to earnings in our financial statements, which could negatively affect our results of operations.
Real estate footprint optimization. We periodically evaluate our global property portfolio and facility utilization to identify opportunities to improve operational efficiency, optimize capacity, consolidate operations and reduce operating costs. As these evaluations progress, we may determine that certain properties or other long-lived assets should be marketed for sale, leased or abandoned. Such actions could result in the recognition of material impairment charges, accelerated depreciation, disposal-related costs or other such charges in future reporting periods.
On October 30, 2026, our Board of Directors approved the sale of certain properties as part of our ongoing efforts to optimize our real estate footprint. As a result of the Board’s approval, the properties satisfy the assets held for sale criteria in the fourth quarter of 2026 resulting in a pre-tax impairment charge of approximately $25 million to adjust the carrying value of the properties to their estimated fair value less costs to sell. The estimate is preliminary and may change based on our final costs to sell and other factors. The sales of these properties are expected to be completed in 2027.
Foreign exchange. Because we are a U.S.-based company doing business globally, we have both translational and transactional exposure to fluctuations in foreign currency exchange rates. Changes in the relative exchange rate between the U.S. dollar and the foreign currencies in which our subsidiaries operate directly affects our sales, costs and earnings. Differences in the relative exchange rates between where we sell our products and where we incur manufacturing and other operating costs (primarily in the U.S. and Germany) also affects our costs and earnings. Certain currencies experiencing significant exchange rate fluctuations like the euro, the Chinese yuan and Japanese yen have had and could have an additional significant impact on our sales, costs and earnings. For the quarter ended September 30, 2026, the foreign exchange loss was primarily attributable to a loss on foreign exchange forward contracts, partially offset by gains from the appreciation of the Chinese yuan and the depreciation of the euro as compared to the U.S. dollar. Our ability to adjust the foreign currency selling prices of products in response to changes in exchange rates is limited and may not offset the impact of the changes in exchange rates on the translated value of sales or costs. In addition, if we increase the selling price of our products in local currencies, this could have a negative impact on the demand for our products.
Income taxes. On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development ("OECD") Pillar Two Framework that was supported by over 130 countries worldwide. On January 5, 2026, the OECD issued administrative guidance introducing a side-by-side system that would exempt U.S.-parented multinational groups from certain Pillar Two rules beginning in fiscal years starting on or after January 1, 2026. The impact of the Pillar Two Framework on our income tax provisions for the nine months ended September 30, 2026 and 2025, respectively, was not material. We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.
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On July 4, 2025, the U.S. enacted H.R. 1 "A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14", commonly referred to as the One Big Beautiful Bill Act ("OBBBA"). OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future. The legislation does not have a material impact on our financial statements.
Major customers. While we have historically depended on a few customers for a large percentage of our annual net sales, the composition of this group can change from period to period. Net sales derived from our five largest customers as a percentage of our net sales was 20% for the nine months ended September 30, 2026, and 16% and 13% for the full years ended December 31, 2025 and 2024, respectively. One of the Company's customers accounted for 12% and 11% of the Company's net accounts receivable at September 30, 2026 and December 31, 2025, respectively. We seek to add new customers and to expand our relationships with existing customers. We anticipate that the composition of our significant customers will continue to change. We generally do not enter into agreements with our customers obligating them to purchase a fixed number or large volume of our products. If any of our significant customers substantially reduced their purchases from us, our results would be adversely affected.
Results of Operations for the Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
Net sales. Net sales increased by $36.7 million, or 14.6%, to $287.5 million for the three months ended September 30, 2026 from $250.8 million for the three months ended September 30, 2025.
The table below sets forth sales by application:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| (In thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| Sales by Application | % of Total | % of Total | |||||||||||||||||||||||||||||||||
| Industrial Solutions | $ | 239,548 | 83.3 | % | $ | 214,697 | 85.6 | % | $ | 24,851 | 11.6 | % | |||||||||||||||||||||||
| Advanced Solutions | 47,952 | 16.7 | % | 36,095 | 14.4 | % | 11,857 | 32.8 | % | ||||||||||||||||||||||||||
| Total | $ | 287,500 | 100.0 | % | $ | 250,792 | 100.0 | % | $ | 36,708 | 14.6 | % | |||||||||||||||||||||||
The table below sets forth sales by type of product:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| (In thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| Sales by Product | % of Total | % of Total | |||||||||||||||||||||||||||||||||
| Lasers and Components | $ | 226,037 | 78.6 | % | $ | 202,182 | 80.6 | % | $ | 23,855 | 11.8 | % | |||||||||||||||||||||||
| Systems | 61,463 | 21.4 | % | 48,610 | 19.4 | % | 12,853 | 26.4 | % | ||||||||||||||||||||||||||
| Total | $ | 287,500 | 100.0 | % | $ | 250,792 | 100.0 | % | $ | 36,708 | 14.6 | % | |||||||||||||||||||||||
Industrial Solutions sales accounted for 83.3% of total revenue and increased 11.6% year over year, as a result of higher sales in welding and additive manufacturing. Advanced Solutions sales increased 32.8% year over year, driven by higher sales in semiconductor and defense applications, partially offset by lower sales in micromachining.
Cost of sales and gross margin. Cost of sales increased by $18.6 million, or 12.3%, to $170.4 million for the three months ended September 30, 2026 from $151.8 million for the three months ended September 30, 2025, representing 59.3% of net sales in 2026 vs. 60.5% of net sales in 2025, resulting in a gross margin of 40.7% in 2026 vs. 39.5% in 2025. The increase in cost of sales was primarily due to an increase in product costs and other direct cost of sales of $7.5 million including $4.4 million of tariff refunds recognized, net of claims activity related to prior periods, and an increase of $11.1 million in unabsorbed manufacturing expenses. The increase in gross margin was mainly driven by a decrease in product costs and other direct costs as a percentage of sales as well as tariff refunds recognized in the quarter, partially offset by an increase in unabsorbed manufacturing costs as a percentage of sales.
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Sales and marketing expense. Sales and marketing expense increased by $0.1 million, or 0.4%, to $23.9 million for the three months ended September 30, 2026 from $23.8 million for the three months ended September 30, 2025. This change was primarily the result of higher personnel related expenses, partially offset by lower trade fair and exhibition costs. As a percentage of sales, sales and marketing expense decreased to 8.3% from 9.5% for the three months ended September 30, 2026 and 2025, respectively.
Research and development expense. Research and development expense increased by $0.9 million, or 3.0%, to $31.3 million for the three months ended September 30, 2026, compared to $30.4 million for the three months ended September 30, 2025. This change was primarily the result of higher personnel related expenses supporting product development activities, partially offset by lower consulting fees. As a percentage of sales, research and development expense decreased to 10.9% from 12.1% for the three months ended September 30, 2026 and 2025, respectively.
General and administrative expense. General and administrative expense increased by $2.4 million, or 6.8%, to $37.5 million for the three months ended September 30, 2026 from $35.1 million for the three months ended September 30, 2025. This change was primarily the result of higher personnel costs and related expenses due to strategic investments in strengthening our leadership team and adding key support resources to enhance organizational capabilities. In addition, there was an increase in integration costs and information systems expense as we continue to invest in our IT applications and infrastructure, partially offset by higher gains on sales of fixed assets. As a percentage of sales, general and administrative expense decreased to 13.0% from 14.0% for the three months ended September 30, 2026 and 2025, respectively.
Effect of exchange rates on net sales, gross profit and operating expenses. If exchange rates relative to the U.S. dollar had been the same as the comparable quarter one year ago, which were on average euro 0.86, Japanese yen 147 and Chinese yuan 7.16, respectively, we estimate that net sales for the three months ended September 30, 2026 would have been $3.3 million lower, gross profit would have been $2.2 million lower, and total sales and marketing, research and development, general and administrative expenses and other operating expenses would have been $0.3 million higher.
Loss on foreign exchange. We incurred a foreign exchange transaction loss of $3.3 million for the three months ended September 30, 2026 as compared to a $1.5 million loss for the three months ended September 30, 2025. Our European subsidiaries have certain net assets denominated in U.S. dollars, and our Chinese subsidiary has certain net liabilities denominated in U.S. dollars. The foreign exchange loss for the three months ended September 30, 2026 was primarily attributable to a loss on foreign exchange forward contracts entered into to hedge the purchase price of the Lumibird Medical acquisition, partially offset by the gain from the appreciation of the Chinese yuan and the depreciation of the euro as compared to the U.S. dollar.
Interest income, net. Interest income, net was $7.7 million for the three months ended September 30, 2026 as compared to $7.3 million for the three months ended September 30, 2025. The change in interest income, net was primarily due to higher interest rates and value in our investment portfolio in the current period as compared to the prior year.
Provision for income taxes. The provision for income taxes was an expense of $8.1 million and an expense of $8.2 million, for the three months ended September 30, 2026 and 2025, respectively. The effective tax rate was 28.7% for the three months ended September 30, 2026. This compares to the effective tax rate for the three months ended September 30, 2025 of 52.3%. The decrease in income taxes for the three months ended September 30, 2026 as compared to September 30, 2025 was primarily due to a reduction in uncertain tax positions mostly offset by an increase of income before provision for income taxes for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
The discrete tax detriment was $0.9 million for the three months ended September 30, 2026 as compared to a discrete tax detriment of $3.8 million for the three months ended September 30, 2025. The difference in the discrete tax detriment was primarily from a decrease in provisions for uncertain tax positions in the three months ended September 30, 2026.
Net income. Net income increased by $12.8 million to a net income of $20.3 million for the three months ended September 30, 2026 compared to a net income of $7.5 million for the three months ended September 30, 2025 due to the factors described above.
Results of Operations for the Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Net sales. Net sales increased by $102.3 million, or 14.0% to $831.6 million for the nine months ended September 30, 2026 from $729.3 million for the nine months ended September 30, 2025.
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The table below sets forth sales by application:
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| (In thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| Sales by Application | % of Total | % of Total | |||||||||||||||||||||||||||||||||
| Industrial Solutions | $ | 704,181 | 84.7 | % | $ | 607,593 | 83.3 | % | $ | 96,588 | 15.9 | % | |||||||||||||||||||||||
| Advanced Solutions | 127,396 | 15.3 | % | 121,713 | 16.7 | % | 5,683 | 4.7 | % | ||||||||||||||||||||||||||
| Total | $ | 831,577 | 100.0 | % | $ | 729,306 | 100.0 | % | $ | 102,271 | 14.0 | % | |||||||||||||||||||||||
The table below sets forth sales by type of product and other revenue:
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| (In thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| Sales by Product | % of Total | % of Total | |||||||||||||||||||||||||||||||||
| Lasers and Components | $ | 659,503 | 79.3 | % | $ | 585,699 | 80.3 | % | $ | 73,804 | 12.6 | % | |||||||||||||||||||||||
| Systems | 172,074 | 20.7 | % | 143,607 | 19.7 | % | 28,467 | 19.8 | % | ||||||||||||||||||||||||||
| Total | $ | 831,577 | 100.0 | % | $ | 729,306 | 100.0 | % | $ | 102,271 | 14.0 | % | |||||||||||||||||||||||
Industrial solutions accounted for 84.7% of total revenue and increased 15.9% year over year, as a result of higher sales in welding, cleaning, cutting, and marking applications. Advanced solutions sales increased 4.7% year over year driven by higher revenue in semiconductor and medical procedures, partially offset by lower revenue in micromachining.
Cost of sales and gross margin. Cost of sales increased by $55.6 million or 12.4%, to $502.5 million for the nine months ended September 30, 2026 from $446.9 million for the nine months ended September 30, 2025. The increase in cost of sales was primarily due to an increase in product costs and other direct cost of sales of $40.0 million including $9.6 million of tariff refunds recognized, net of claims activity related to prior periods, and an increase of $23.0 million in unabsorbed manufacturing expenses, partially offset by a reduction of $7.5 million in provisions for excess and obsolete inventory. Our gross margin increased to 39.6% for the nine months ended September 30, 2026 from 38.7% for the nine months ended September 30, 2025. The increase in gross margin was mainly driven by reductions in net tariff costs and provisions for excess and obsolete inventory, partially offset by higher unabsorbed manufacturing expenses as a percentage of sales.
Sales and marketing expense. Sales and marketing expense decreased by $1.5 million, or 2.0%, to $72.3 million for the nine months ended September 30, 2026 compared with $73.8 million for the nine months ended September 30, 2025. This change was primarily the result of lower amortization expense related to intangible assets and demo units that became fully amortized and lower trade fair and exhibition costs. As a percentage of sales, sales and marketing expense decreased to 8.7% from 10.1% for the nine months ended September 30, 2026 and 2025, respectively.
Research and development expense. Research and development expense increased by $7.0 million, or 7.9%, to $95.6 million for the nine months ended September 30, 2026, compared to $88.6 million for the nine months ended September 30, 2025. This change was primarily the result of higher personnel and related expenses, partially offset by increased grant income and lower consulting fees. As a percentage of sales, research and development expense decreased to 11.5% from 12.2% for the nine months ended September 30, 2026 and 2025, respectively.
General and administrative expense. General and administrative expense increased by $7.3 million, or 7.1%, to $110.1 million for the nine months ended September 30, 2026 from $102.8 million for the nine months ended September 30, 2025. This change was primarily the result of higher personnel costs and related expenses due to strategic investments in strengthening our leadership team and adding key support resources to enhance organizational capabilities. In addition, there was an increase in integration costs, and information systems expense as we continue to invest in our IT applications and infrastructure, partially offset by higher gains on sales of fixed assets. As a percentage of sales, general and administrative expense decreased to 13.2% from 14.1% for the nine months ended September 30, 2026 and 2025, respectively.
Impairment charges. During the nine months ended September 30, 2026, the assets and liabilities of our Belarus subsidiary are reflected as assets and liabilities held for sale following the execution of definitive agreements to divest the business. Based on our assessment of fair value less costs to sell compared to the carrying value of the business, we recorded
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total impairment charges of $17.8 million, including an initial impairment charge of $17.6 million recorded during the second quarter of 2026 primarily attributed to the inclusion of cumulative currency translation adjustments in the carrying value of the subsidiary's net assets and an additional impairment charge of $0.2 million recorded upon subsequent remeasurement of the disposal group during the third quarter of 2026. As of September 30, 2026, the disposal group is classified as held for sale on our Condensed Consolidated Balance Sheets. There were no impairment charges recorded during the nine months ended September 30, 2025.
Settlement of litigation matters. During the nine months ended September 30, 2026, we recorded $13.5 million of legal settlement charges ($13.3 million net of the impact of change in foreign exchange rates) related to patent litigation with affiliates of Trumpf SE & Co. KG ("Trumpf"). The charge was recorded in operating expenses and reflects an agreed-upon settlement for past damages associated with sales of certain adjustable mode beam ("AMB") laser products. There were no settlement charges recorded during the nine months ended September 30, 2025.
Effect of exchange rates on net sales, gross profit and operating expenses. We estimate that, if exchange rates relative to the U.S. dollar had been the same as the comparable nine-month period one year ago, which were on average euro 0.90, Japanese yen 148 and Chinese yuan 7.22, respectively, we would have expected net sales for the nine months ended September 30, 2026 to be $17.1 million lower, gross profit to be $7.9 million lower, and total sales and marketing, research and development, general and administrative expenses and other operating expenses would have been $4.5 million lower.
Loss on foreign exchange. We incurred a foreign exchange transaction loss of $2.3 million for the nine months ended September 30, 2026 as compared to a loss of $7.0 million for the nine months ended September 30, 2025. Our European subsidiaries have certain net assets denominated in U.S. dollars, and our Chinese and Indian subsidiaries have certain net liabilities denominated in U.S. dollars. The loss for the nine months ended September 30, 2026 was primarily attributable to a loss on foreign exchange forward contracts entered into to hedge the purchase price of the Lumibird Medical acquisition, as well as the loss from the depreciation of the Indian rupee as compared to the U.S. dollar, partially offset by the gain from the depreciation of the euro and the appreciation of the Chinese yuan as compared to the U.S. dollar.
Interest income, net. Interest income, net, was $21.7 million for the nine months ended September 30, 2026 as compared to $22.7 million of income for the nine months ended September 30, 2025. The change in interest income, net was primarily due to lower weighted average interest rates across our investment portfolio in the current period as compared to the prior year.
Provision for income taxes. Provision for income taxes was $14.9 million for the nine months ended September 30, 2026 compared to $16.7 million for the nine months ended September 30, 2025. The effective tax rate was 35.4% for the nine months ended September 30, 2026 as compared to 48.4% for the nine months ended September 30, 2025. The decrease in tax expense for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 was primarily due to equity-based compensation expenses allowed for tax purposes in excess of the deductions reflected for financial statement income which were mostly offset by an increase in income before provision for income taxes.
For the nine months ended September 30, 2026, we recorded net discrete tax detriments of $0.1 million related primarily to adjustments for uncertain tax positions, partially offset by equity-based compensation tax deductions in excess of the amount recognized for financial statement income. This compares to net discrete tax detriments of $8.7 million for the nine months ended September 30, 2025, related primarily to equity-based compensation expense reflected in financial statement income in excess of the deductions allowed for tax purposes and provisions for uncertain tax positions.
Net income. Net income increased by $9.3 million to a net income of $27.1 million for the nine months ended September 30, 2026 compared to net income of $17.8 million for the nine months ended September 30, 2025, due to the factors described above.
Liquidity and Capital Resources
We believe that our existing cash and cash equivalents, short and long-term investments, our cash flows from operations and our existing lines of credit provide us with the financial flexibility to meet our liquidity and capital needs. We expect to continue making investments in capital expenditures, evaluate acquisition opportunities, repurchase shares of our stock in accordance with our repurchase program, carry out research and development and invest in resources to strengthen our organization. The extent and timing of such expenditures may vary from period to period. Our future long-term capital requirements will depend on many factors including our level of sales, the impact of the economic environment on our growth, the timing and extent of spending to support development efforts, expansion of global sales and marketing activities, government regulation including trade sanctions and tariffs, the timing and introductions of new products, the need to ensure access to adequate manufacturing capacity and the continuing market acceptance of our products.
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On September 8, 2026, we entered into a definitive agreement with Lumibird S.A., a French société anonyme ("the Seller"), to acquire 100% of the outstanding shares of Lumibird Medical, a French société par actions simplifiée and wholly-owned subsidiary of the Seller, for a purchase price of €300 million (approximately $340.3 million) on a cash-free, debt-free basis, payable in cash at closing and subject to customary adjustments as set forth in the agreement. The agreement also provides for contingent earn-out consideration of up to €50 million (approximately $56.7 million) in additional cash based on the achievement of certain 2026 and 2027 performance metrics. U.S. dollar equivalents of euro-denominated amounts are presented for convenience and are based on the exchange rate in effect on September 30, 2026. The Company has entered into foreign currency hedging arrangements with respect to a portion of the purchase price; accordingly, the ultimate U.S. dollar cash cost may differ from the amounts presented above.
Upon closing, this transaction will result in a material expected cash outflow of €300 million (approximately $340.3 million) to the Seller in the fourth quarter of 2026, plus potential additional cash payments to the Seller up to €50 million (approximately $56.7 million) in total related to contingent consideration in the second quarters of 2027 and 2028, which will significantly reduce our near-term cash balances.
As of September 30, 2026, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
The following table presents our principal sources of liquidity:
| September 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Cash and cash equivalents | $ | 710,688 | $ | 403,790 | |||||||
| Short-term investments | 215,304 | 435,538 | |||||||||
| Unused credit lines and overdraft facilities | 224,775 | 224,432 | |||||||||
| Working capital (defined as current assets excluding cash, cash equivalents and short-term investments, minus current liabilities) | 359,131 | 350,075 | |||||||||
Short-term investments at September 30, 2026 consist of liquid investments including corporate bonds, commercial paper, U.S. Treasury and agency obligations and term deposits with original maturities of greater than three months but less than one year. See Note 4, "Fair Value Measurements" in the notes to the Condensed Consolidated Financial Statements for further information about our short-term investments.
The following table details our Credit Facilities as of September 30, 2026:
| Description | Total Facility | Interest Rate | Maturity | Security | ||||||||||||||||||||||
U.S. Revolving Line of Credit (1) | $200.0 million | SOFR plus 1.25% to 1.45%, depending on our performance | June 2030 | Unsecured | ||||||||||||||||||||||
Other Lines of Credit (2) | $21.3 million | Various | Various | Unsecured | ||||||||||||||||||||||
Euro Credit Facilities (Germany) (3) | Euro 5.9 million ($6.7 million) | Various | Various | Unsecured, guaranteed by parent company | ||||||||||||||||||||||
Euro Facility (4) | Euro 1.5 million ($1.7 million) | 3M EURIBOR plus 1.25%(5) | N/A(5) | Common pool of assets of Italian subsidiary | ||||||||||||||||||||||
(1) At September 30, 2026, there were no amounts drawn on this line; however, there were $0.4 million of guarantees issued against the line which reduced total availability.
(2) Other lines of credit available to certain foreign subsidiaries in U.S. dollars and their respective local currencies. At September 30, 2026, there were no amounts drawn on these lines; however, there were $2.0 million of guarantees issued against the lines which reduced total availability.
(3) The facilities are available to certain foreign subsidiaries in their respective local currencies. At September 30, 2026, there were no amounts drawn on these lines; however, there were $2.6 million of guarantees issued against the lines which reduced total availability.
(4) At September 30, 2026, there were no drawings and no guarantees issued.
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(5) The facility does not have a stated maturity date. The interest rate in effect as of September 30, 2026 is fixed through January 2027. After that date, the interest rate may be renegotiated and availability may be terminated in accordance with the terms of the facility.
At September 30, 2026, our committed credit line is with Bank of America N.A. in the amount of $200.0 million. Under the credit agreement, we are required to meet certain financial covenants, which are tested quarterly and include an interest coverage ratio and a net leverage ratio. The interest coverage covenant requires we maintain a trailing twelve-month ratio of consolidated EBITDA to consolidated interest expense on all obligations that is at least 3.0 times. The net leverage covenant requires we maintain a trailing twelve-month ratio, which is the sum of all indebtedness for borrowed money on a consolidated basis, less cash and available marketable securities not classified as long-term investments in the U.S. in excess of $50 million up to a maximum of $500 million, to consolidated EBITDA that is less than 3.0 times. We were in compliance with the financial covenants as of September 30, 2026.
In addition to the financial covenants, the credit facility includes additional customary events of default, including non-payment of principal, interest or fees, violation of covenants, cross default to certain other indebtedness, invalidity of any loan document, material judgments, bankruptcy and insolvency events and change of control, subject, in certain instances, to cure periods. Upon the occurrence of an event of default, the lenders may elect to declare amounts outstanding under the Credit Agreement immediately due and payable.
The financial covenants in our loan documents may cause us to not make or to delay investments and actions that we might otherwise undertake because of limits on capital expenditures and amounts that we can borrow or lease. In the event that we do not comply with any one of these covenants, we would be in default under the loan agreement or loan agreements, which may result in acceleration of the debt, cross-defaults on other debt or a reduction in available liquidity, any of which could harm our results of operations and financial condition.
See Note 10, "Financing Arrangements" in the notes to the Condensed Consolidated Financial Statements for further information about our facilities.
The following table presents cash flow activities:
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (In thousands) | ||||||||||||||
| Cash provided by operating activities | $ | 78,531 | $ | 46,535 | ||||||||||
| Cash provided by (used in) investing activities | 244,270 | (292,904) | ||||||||||||
| Cash used in financing activities | (13,701) | (50,919) | ||||||||||||
Operating activities. Net cash provided by operating activities increase by $32.0 million to an inflow of $78.5 million for the nine months ended September 30, 2026 vs. an inflow of $46.5 million for the nine months ended September 30, 2025, primarily due to cash provided by net income after adding back non-cash expenses and increase in tax refunds, partially offset by an increase in cash bonus payments made in the first quarter of 2026 based on improved financial performance, cash paid for the Trumpf legal settlement, higher accounts receivable, and an increase in inventory levels. Our largest working capital items typically are inventory and accounts receivable. Items such as accounts payable to third parties, prepaid expenses and other current assets and accrued expenses and other current liabilities are typically not as significant as our working capital investment in accounts receivable and inventory because of the amount of value added within IPG due to our vertically integrated structure. Accruals and payables for personnel costs including bonuses and income and other taxes payable are largely dependent on the timing of payments for those items.
The increase in cash provided by operating activities in the first three quarters of 2026 when compared to the first three quarters of 2025 primarily resulted from:
•an increase in cash provided by net income after adjusting for non-cash operating activities, mainly due to higher revenues;
•an increase in cash provided by income and other taxes, primarily due to increased tax refunds received from the filing of tax returns and lower cash tax payments resulting from the timing of payments, compared to the first three quarters of 2025;
•a decrease in cash used by prepaid and other current assets due to the timing of interest receivable collections and timing of bank acceptance drafts, partially offset by an increase in costs and estimated earnings in excess of billings on customized systems under contract; and
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•an increase in cash provided by accounts payable due to timing of payments.
The increase in cash provided by operating activities in the first three quarters of 2026 when compared to the first three quarters of 2025 was partially offset by:
•an increase in cash used by accounts receivable due to the timing of collections;
•an increase in cash used by accrued expenses and other current liabilities, primarily due to an increase in cash bonus payments made in 2026 compared to 2025 based on improved financial performance, a decrease in billings in excess of cost and estimated earnings on customized systems under contract, higher warranty payments, and a reduction in customer deposits, partially offset by increases in cash due to the timing of payments for non-performance-based accrued personnel costs, lower lease payments, and an increase in deferred revenue;
•the payment of the Trumpf settlement in April 2026; and
•an increase in cash used by inventory.
Investing activities. Net cash provided by investing activities was $244.3 million for the nine months ended September 30, 2026 as compared to cash used in investing activities of $292.9 million in 2025. The cash provided by investing activities in 2026 related to $302.4 million of net proceeds from maturities of investments, $2.2 million of proceeds from the sale of property, plant and equipment, and a $2.0 million deposit received from the prospective purchaser under the pending agreement to sell our Belarus operation, partially offset by $54.4 million of capital expenditures and an $8.0 million purchase of an equity investment. The cash used in investing activities in 2025 related to $232.7 million of net purchases of investments and $60.9 million of cash used for capital expenditures.
Financing activities. Net cash used in financing activities was $13.7 million for the nine months ended September 30, 2026 as compared to net cash used of $50.9 million in 2025. Cash used in financing activities in the first three quarters of 2026 included amounts disbursed for shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units of $11.1 million and the purchase of treasury stock of $2.6 million. The cash used in financing activities in 2025 primarily related to the purchase of treasury stock of $46.6 million and the net cash outflow from amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units of $4.3 million. The amount disbursed to withhold these shares increased in 2026 compared to 2025 due to the vesting of restricted stock units at substantially higher stock prices.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report on Form 10-Q except for historical information are forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements.
The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to accurately predict and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 1, "Business" and Item 1A, "Risk Factors" of Part I of the Form 10-K filed with the SEC for the year ended December 31, 2025 (the "Annual Report") and in Item 1A, "Risk Factors" of Part II of this quarterly report. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to rely on such forward-looking information. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Recent Accounting Pronouncements
See Note 2 in the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our Condensed Consolidated Financial Statements contained in Item 1 of this Quarterly Report.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents and foreign exchange rate risk.
Interest rate risk. Certain financial instruments of ours are subject to interest rate risk due to variable interest rates that fluctuate with market conditions. However, our exposure to market risk from interest rate fluctuations is limited. We maintain a portfolio of cash, cash equivalents, and short-term and long-term investments, which primarily includes bank deposits, money market funds, certificates of deposit, commercial paper, corporate bonds, and U.S. Treasury and agency securities. The majority of these investments mature within one year. Due to the short to intermediate-term nature of these instruments, we do not expect that a sudden change in market interest rates would have a material impact on our financial condition or results of operations.
We are also exposed to market risk as a result of increases or decreases in the amount of interest expense we must pay on our borrowings on our bank credit facilities. Although our U.S. revolving line of credit and euro credit facilities have variable rates, we do not believe that a 10% change in market interest rates would have a material impact on our financial position or results of operations.
Exchange rates. Due to our international operations, a significant portion of our net sales, cost of sales and operating expenses are denominated in currencies other than the U.S. dollar, principally the euro and the Chinese yuan. Changes in the exchange rate of the U.S. dollar versus the functional currencies of our subsidiaries affect the translated value and relative level of sales and net income that we report from one period to the next. In addition, our subsidiaries may have assets or liabilities denominated in a currency other than their functional currency which results in foreign exchange transaction gains and losses due to changes in the value of the functional currency versus the currency the assets and liabilities are denominated in. The loss on foreign exchange transactions totaled $3.3 million for the three months ended September 30, 2026 compared to a loss of $1.5 million for the three months ended September 30, 2025. Management attempts to minimize these exposures by partially or fully off-setting foreign currency denominated assets and liabilities at our subsidiaries that operate in different functional currencies. The effectiveness of this strategy can be limited by the volume of underlying transactions at various subsidiaries and by our ability to accelerate or delay inter-company cash settlements. As a result, we are unable to create a perfect offset of the foreign currency denominated assets and liabilities. Furthermore, if we expect a currency movement to be beneficial to us in the short or medium term, we have, on occasions, chosen not to hedge or otherwise offset the underlying assets or liabilities. However, it is difficult to predict foreign currency movements accurately.
At September 30, 2026, our material foreign currency exposure is net U.S. dollar denominated assets at subsidiaries where the euro is the functional currency and U.S. dollar denominated liabilities where the Chinese yuan is the functional currency. The net U.S. dollar denominated assets are comprised of cash, third party receivables and inter-company receivables offset by third party and inter-company payables denominated in U.S. dollar. The U.S. dollar denominated liabilities are comprised of inter-company payables.
A 5% change in the relative exchange rate of the U.S. dollar to the euro as of September 30, 2026 applied to the net U.S. dollar asset balances (excluding the foreign exchange forward contracts discussed below), would result in a foreign exchange gain of $2.4 million if the U.S. dollar appreciated and a $2.5 million foreign exchange loss if the U.S. dollar depreciated. A 5% change in the relative exchange rate of the U.S. dollar to the Chinese yuan as of September 30, 2026 applied to the net U.S. dollar liabilities balances, would result in a foreign exchange loss of $2.3 million if the U.S. dollar appreciated and a $2.4 million foreign exchange gain if the U.S. dollar depreciated.
In addition, we are exposed to foreign currency translation risk for those subsidiaries whose functional currency is not the U.S. dollar as changes in the value of their functional currency relative to the U.S. dollar affect the translated amounts of our assets and liabilities. Changes in the translated value of assets and liabilities due to changes in functional currency exchange rates relative to the U.S. dollar result in foreign currency translation adjustments that are a component of other comprehensive income or loss on the Condensed Consolidated Statements of Comprehensive Income.
Foreign currency derivative instruments can also be used to hedge exposures and reduce the risks of certain foreign currency transactions; however, these instruments provide only limited protection and can carry significant cost. During the three months ended September 30, 2026, we entered into foreign exchange forward contracts to mitigate our exposure to fluctuations in the euro to U.S. dollar exchange rate on the purchase price of a pending acquisition. As of September 30, 2026, these contracts had an aggregate notional amount of €150.0 million and a weighted-average strike rate of 1.17 U.S. dollars per euro, and they mature in October 2026. Because these contracts are not designated as hedging instruments, changes in their fair value resulting from exchange rate movements are recognized in earnings. A 5% change in the exchange rate of the U.S. dollar to the euro as of September 30, 2026 would have resulted in an incremental foreign exchange loss of $8.5 million on these
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contracts if the U.S. dollar appreciated and an incremental foreign exchange gain of $8.5 million if the U.S. dollar depreciated. We will continue to analyze our exposure to currency exchange rate fluctuations and may engage in additional financial hedging techniques in the future to attempt to minimize the effect of these potential fluctuations. Exchange rate fluctuations may adversely affect our financial results in the future.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision of our chief executive officer and our chief financial officer, our management has evaluated the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"). Based upon that evaluation, our chief executive officer and our chief financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
Changes in Internal Controls
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) that occurred during the quarter ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item may be found in Note 11, "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and is incorporated herein by reference.
ITEM 1A. RISK FACTORS
In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, and in Item 1A "Risk Factors" of Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, which could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified in our Annual Report or Quarterly Reports because they are common to all businesses.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
There have been no sales of unregistered securities for the three months ended September 30, 2026.
Issuer Purchases of Equity Securities
The following table reflects issuer purchases of equity securities for the three months ended September 30, 2026:
| (In thousands, except share and per share data) | Total Number of Shares (or Units) Purchased (1) | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||||||||
| July 1, 2026 — July 31, 2026 | 128 | $ | 79.98 | 128 | $ | 99,990 | ||||||||||||||||||||||||||
| August 1, 2026 — August 31, 2026 | 15,664 | 78.53 | 11,400 | 99,143 | ||||||||||||||||||||||||||||
| September 1, 2026 — September 30, 2026 | 23,128 | 77.38 | 23,128 | 97,353 | ||||||||||||||||||||||||||||
| Total | 38,920 | $ | 77.85 | 34,656 | $ | 97,353 | ||||||||||||||||||||||||||
(1) Total number of shares (or units) purchased includes "withhold to cover" tax liabilities upon vesting of restricted stock awards. For the three months ended September 30, 2026, a total of 4,264 shares were withheld to cover at an average price of $89.82.
(2) On February 12, 2026, we announced that our Board of Directors authorized the purchase of up to $100 million of IPG common stock (the "February 2026 authorization"), exclusive of any fees, commissions or other expenses. Share repurchases under this purchase authorization were made periodically in open-market transactions using our working capital, and were subject to market conditions, legal requirements and other factors. The share purchase program authorizations did not obligate us to repurchase any dollar amount or number of our shares, and repurchases could be commenced or suspended from time to time without prior notice.
There were 34,656 share repurchases in the third quarter of 2026 under the February 2026 authorization.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
During the Registrant's last fiscal quarter ended September 30, 2026, the following director and executive officer of the Registrant adopted Rule 10b5-1 trading arrangements:
•on August 27, 2026, Mr. Paulus Bucher , Senior Vice President, Global Operations of the Registrant, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 2,604 shares, including shares acquired upon vesting of restricted stock units. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until May 10, 2027 , or earlier if all transactions under the trading arrangement are completed.
•on September 14, 2026 , Ms. Mary Buttarazzi , Vice President, Corporate Controller and Chief Accounting Officer of the Registrant, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 2,257 shares, including shares acquired upon vesting of restricted stock units. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until December 31, 2027 , or earlier if all transactions under the trading arrangement are completed.
Other than those disclosed above, none of our directors or executive officers adopted , modified, or terminated
ITEM 6. EXHIBITS
(a) Exhibits
Exhibit No. | Description | ||||||||||
| 2.1* | |||||||||||
| 2.2* | |||||||||||
| 31.1 | |||||||||||
| 31.2 | |||||||||||
| 32 | |||||||||||
| 101.INS | Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema | ||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | ||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | ||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | ||||||||||
* Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish a copy of any omitted schedule or attachment to the U.S. Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| IPG PHOTONICS CORPORATION | |||||||||||
| Date: November 3, 2026 | By: | /s/ Mark M. Gitin | |||||||||
Mark M. Gitin | |||||||||||
| Chief Executive Officer (Principal Executive Officer) | |||||||||||
| Date: November 3, 2026 | By: | /s/ Timothy P.V. Mammen | |||||||||
Timothy P.V. Mammen | |||||||||||
| Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
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Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a – 14(a) or Rule 15d – 14(a) of the Securities Exchange Act of 1934
I, Mark M. Gitin, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of IPG Photonics Corporation; | ||||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be signed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | ||||
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 3, 2026
By: | /s/ Mark M. Gitin | |||||||
Mark M. Gitin | ||||||||
| Chief Executive Officer (Principal Executive Officer) | ||||||||
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a – 14(a) or Rule 15d – 14(a) of the Securities Exchange Act of 1934
I, Timothy P.V. Mammen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of IPG Photonics Corporation; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
| 4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | ||||
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 3, 2026
By: | /s/ Timothy P.V. Mammen | |||||||
Timothy P.V. Mammen | ||||||||
| Senior Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2026 (the "Report") by IPG Photonics Corporation (the "Company"), Mark M. Gitin, as the Chief Executive Officer of the Company, and Timothy P.V. Mammen, as the Chief Financial Officer of the Company, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
| 1 | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | ||||
| 2 | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | ||||
Date: November 3, 2026
| /s/ Mark M. Gitin | ||
Mark M. Gitin | ||
| Chief Executive Officer | ||
| /s/ Timothy P.V. Mammen | ||
| Timothy P.V. Mammen | ||
| Senior Vice President and Chief Financial Officer | ||
A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to IPG Photonics Corporation and will be retained by IPG Photonics Corporation and furnished to the Securities and Exchange Commission or its staff upon request.