IPG PHOTONICS CORP (IPGP)

CIK: 0001111928. SIC: 3674 Semiconductors & Related Devices. Latest 10-K as of: 2026-02-23.

SIC breadcrumb: Manufacturing > Electronic And Other Electrical Equipment And Components, Except Computer Equipment > SIC 3674 Semiconductors & Related Devices

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1111928. Latest filing source: 0001111928-26-000040.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001111928.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001111928.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001111928-26-000098.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-05. Report date: 2026-03-31.

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 rendered a decision invalidating certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). While the decision may create a pathway for potential refunds of previously paid IEEPA tariffs, significant uncertainties remain, including the scope of eligible claims, administrative procedures, documentation requirements, timing of claim processing, the effect of any further governmental or judicial actions, and the ultimate collectability of any potential claims.

As of March 31, 2026, we have not recognized any benefit related to potential IEEPA tariff refunds due to the significant uncertainties surrounding the recovery process and ultimate realization of any potential IEEPA tariff refunds. We will continue to evaluate developments and will recognize any related amounts only when realization is considered probable and reasonably estimable under applicable accounting guidance.

The Supreme Court’s ruling has no direct impact on tariffs imposed under Section 232, including tariffs on steel and aluminum. The impact to gross margin from higher tariffs for the three months ended March 31, 2026 was approximately 160 basis points, as compared to the three months ended March 31, 2025.

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. We manufacture laser cabinets and other mechanical components in Belarus. 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. As a result of the sanctions and their impact on our Belarusian operations, we completed an impairment analysis of our Belarus assets during the third quarter of 2024 and recorded $26.6 million of impairment of long-lived asset in

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our Condensed Consolidated Statements of Operations. At March 31, 2026, the remaining value of the long-lived assets in Belarus was $4.3 million. The net working capital deficit excluding cash was $0.7 million and cash on hand was $0.6 million. The net asset value of our Belarus subsidiary has been reduced by $17.4 million due to the cumulative translation effect of the Belarusian ruble compared to the U.S. dollar, which is included in the accumulated other comprehensive loss component of stockholders' equity. We may incur additional asset impairment charges related to the Belarusian operations and the other comprehensive loss that is currently in the equity section of our Condensed Consolidated Balance Sheets could be charged to our Condensed Consolidated Statements of Operations.

We continue to review our operations in Belarus including potential strategic alternatives. We have qualified third party vendors to supply components previously supplied from Belarus and continue to purchase from them. Our Board of Directors monitors and continues to assess risks associated with our Belarusian operations.

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"), other transportation, aerospace, heavy industry, but also may include consumer, semiconductor and electronics. Approximately 86% of our revenues for the first quarter 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:

•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;

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•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;

•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;

•Gross margin on systems can be lower than gross margin for our la

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-23. Report date: 2025-12-31.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed under Item 1A, "Risk Factors." The following analysis generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 20, 2025.

Overview

We develop, manufacture and sell high-performance fiber lasers, fiber amplifiers, diode lasers and laser-based systems that are used for diverse applications, primarily in materials processing, medical and advanced applications. We also

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manufacture and sell complementary products used with our lasers 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 major manufacturing facilities are located in the United States and Germany. In response to the risks from the Russia-Ukraine conflict and related sanctions, we have ceased new investment in our Belarusian operations and expanded our manufacturing operations in Germany, the United States and Italy, and have added manufacturing capacity in Poland to meet the demand for our products and our sales and support needs. 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.

Description of Our Net Sales, Costs and Expenses

Net sales. We derive net sales primarily from the sale of fiber lasers, fiber amplifiers, diode lasers, laser and non-laser based systems and complementary products. We sell our products to OEMs that supply materials processing laser systems, medical laser systems and other laser systems to end users. We also sell our laser products and laser and non-laser based systems to end users. Our scientists and engineers work closely with OEMs, systems integrators and end users to analyze their system requirements and match appropriate fiber laser, amplifier or system specifications to those requirements. 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.

Sales of our products are generally recognized upon shipment, provided that no obligations remain and collection of the receivable is reasonably assured. Sales of customized large scale material processing systems are recognized over time. Our sales typically are made on a purchase order basis rather than through long-term purchase commitments.

We develop our products to standard specifications and use a common set of components within our product architectures. Our major products are based upon a common technology platform. We continually enhance these and other products by improving their components and developing new components and new product designs.

Cost of sales. Our cost of sales consists primarily of the cost of raw materials and components, direct labor expenses and manufacturing overhead. We are vertically integrated and currently manufacture all critical components for our products and assemble finished products. We believe our vertical integration allows us to increase efficiencies, leverage our scale and lower our cost of sales. Cost of sales also includes personnel costs and overhead related to our manufacturing, engineering and service operations, related occupancy and equipment costs, shipping costs and reserves for inventory obsolescence and for warranty obligations. Inventories are written off and charged to cost of sales when identified as excess or obsolete.

Due to our vertical integration strategy and ongoing investment in plant and machinery, we maintain a relatively high fixed manufacturing overhead. We may not be able to or choose not to adjust these fixed costs to adapt to rapidly changing market conditions. Our gross margin is therefore significantly affected by our sales volume and the corresponding utilization of capacity and absorption of fixed manufacturing overhead expenses.

Sales and marketing. Our sales and marketing expense consists primarily of costs related to compensation, trade shows, professional and technical conferences, travel, facilities, amortization of intangible assets identified from acquisitions, depreciation of equipment used for demonstration purposes and other marketing costs.

Research and development. Our research and development expense consists primarily of compensation, development expenses related to the design of our products and certain components, the cost of materials and components to build prototype devices for testing, facilities costs and depreciation of equipment and facilities used for research and development purposes. Costs related to product development are recorded as research and development expenses in the period in which they are incurred.

General and administrative. Our general and administrative expense consists primarily of compensation and associated costs for executive management, finance, legal, human resources, information technology and other administrative personnel, outside legal and professional fees, insurance premiums and fees, allocated facilities costs, depreciation of facilities and other corporate expenses such as charges and benefits related to the change in allowance for credit losses.

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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.

Recently announced U.S. Government Tariffs. We continue to closely monitor changes in international trade relations and economic and monetary policies, including recently announced 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 rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. This decision introduces uncertainty regarding potential refund processes and future trade policy actions. We continue to monitor developments around the Supreme Court’s decision and evaluate its potential impact on our future financial results and business. The Supreme Court's ruling has no direct impact on the tariffs in place under Section 232, including tariffs on steel and aluminum. The impact to gross margin related to higher tariffs for the year ended December 31, 2025 was approximately 120 basis points, respectively, as compared to the year ended December 31, 2024.

Sale of our Russian Operations. On August 29, 2024, we completed the sale of our Russian subsidiary, Scientific and Technical Association “IRE-Polus”, pursuant to a share purchase agreement with a purchaser entity associated with Softline Projects LLC and existing management of IRE-Polus for $51.1 million. We recorded a loss on divestiture of $197.7 million for the quarter ended September 30, 2024, which was included in Net loss from divestiture and sale of assets in our Consolidated Statements of Operations. The loss included $59.3 million related to the carrying value of net assets of our Russian subsidiary that was in excess of net proceeds received on the sale. Included in the net assets sold was cash and cash equivalents of $74.0 million. Also included in the loss was $135.3 million related to the cumulative translation adjustment component of other comprehensive loss that was previously included in stockholders' equity of our Consolidated Balance Sheets. As a result of the Russia-Ukraine conflict and related sanctions, our ability to ship and receive components from our Russian operations was significantly curtailed. In response, we expanded our manufacturing capacity in Germany, the United States and Italy, and added new manufacturing capacity in Poland which effectively offset our inability to utilize the Russian operations.

Belarusian Operations. We manufacture laser cabinets and other mechanical components in Belarus. 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. As a result of the sanctions and their impact on our Belarus operations, we completed an impairment analysis of our Belarus assets during the third quarter of 2024 and recorded $26.6 million of impairment of long-lived assets in our Consolidated Statements of Operations. At December 31, 2025, the remaining value of the long-lived assets in Belarus was $4.4 million, net working capital deficit excluding cash was $0.8 million and cash on hand was $1.5 million. The net asset value of our Belarus subsidiary has been reduced by $17.4 million due to the cumulative translation effect of the Belarusian ruble compared to the U.S. dollar, which is included in the accumulated other comprehensive loss component of stockholders' equity. We may incur additional asset impairment charges related to the Belarus operations and the other comprehensive loss that is currently in the equity section of our Consolidated Balance Sheets could be charged to our Consolidated Statements of Operations.

We continue to review our operations in Belarus including potential strategic alternatives. We have qualified third party vendors to supply components previously supplied from Belarus and have begun purchasing from them. Our Board of Directors monitors and continues to assess risks associated with our Belarusian operations.

Net sales.  Net sales increased by 3% in 2025, decreased by 24% in 2024, and decreased by 10% in 2023. Our growth rates are subject to several factors, many of which are not under our control.

Our business depends substantially upon capital expenditures by end users, particularly by manufacturers using our products for materials processing, which includes general manufacturing, automotive including electric vehicles ("EV"), other transportation, aerospace, heavy industry, consumer, semiconductor and electronics. Approximately 86% of our revenues in 2025 were from customers using our products for materials processing. Although applications within materials processing 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 materials processing 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. New 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.

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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 materials 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:

•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, higher technical complexity or demanding performance parameters. 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;

•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;

•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;

•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, lower yields 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.

We invested $78.8 million, $98.5 million and $110.5 million in capital expenditures in 2025, 2024 and 2023, respectively. Most of this investment relates to the expansion of our manufacturing capacity and, to a lesser extent, research and development and sales-related facilities. We received $0.9 million, $28.6 million and $31.2 million in proceeds from the sale of property, plant and equipment in 2025, 2024 and 2023, respectively.

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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 would 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 cannot reduce fixed costs 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 and other inventory related charges totaling $30.1 million, $82.5 million and $45.5 million in 2025, 2024 and 2023, respectively. Inventory provisions of $29.5 million in 2024 were attributed to items previously considered safety stock and items that became technologically obsolete.

Selling and general and administrative expenses. In the past, we invested in selling and 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 and 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 of acquisitions, litigation and project related consulting expenses.

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.

Goodwill and long-lived assets impairments. 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.

As noted above, during the year ended December 31, 2024, we completed an impairment analysis of the assets located in Belarus as a result of new EU sanctions that limited our ability to supply laser cabinets and other mechanical components from that facility. Based on this analysis, we recorded a $26.6 million impairment of long-lived assets included in Impairment of long-lived assets in our Consolidated Statements of Operations. At December 31, 2025, the remaining carrying value of the long-lived assets in Belarus is $4.4 million.

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 at many points during the analysis. 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 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.

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 the Japanese yen have had and could have an additional significant impact on our sales, costs and earnings. 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.

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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. The EU effective dates were January 1, 2024, and January 1, 2025, for different aspects of the directive. The impact of the Pillar Two Framework on our income tax provision in 2024 and 2025 was not material.

On January 5, 2026, the OECD released a comprehensive package introducing a “side-by-side arrangement” in relation to Pillar Two. Importantly, once implemented, this guidance is intended to prevent other jurisdictions from imposing tax on the U.S. profits of American companies. We will continue to monitor U.S. and international legislative developments, including additional guidance related to the Side-by-Side package, in order to evaluate any potential impact on our operations

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 year to year. Net sales derived from our five largest customers as a percentage of our annual net sales were 16%, 13% and 13% in 2025, 2024 and 2023, respectively. One of our customers accounted for 11% and 12% of our net accounts receivable as of December 31, 2025 and 2024, 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.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses. Refer to Note 1, "Nature of Business and Summary of Significant Accounting Policies," in our consolidated financial statements for additional information. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We base our estimates and judgments on our historical experience and on other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, which may materially affect our operating results and financial position. We have identified the following items that require the most significant judgment and often involve complex estimation:

Revenue Recognition. Revenue is recognized when transfer of control to the customer occurs (i.e., when our performance obligation is satisfied) in an amount reflecting the consideration that we expect to be entitled. For the majority of our revenue, this typically occurs at a point in time such as shipment or delivery date, but can occur over time for certain of our customized large scale materials processing systems contracts. We also recognize revenue over time for sales of extended warranties. When goods or services have been delivered to the customer, but all conditions for revenue recognition have not been met, deferred revenue and deferred costs are recorded on our Consolidated Balance Sheets.

Judgments and Uncertainties: Recognizing revenue at shipment or delivery involves some judgment, particularly when we receive orders with multiple delivery dates. We allocate the transaction price of the contract to each delivery date based upon the standalone selling price of each distinct product in the contract. We invoice for each scheduled delivery upon shipment and recognize revenue for such delivery when transfer of control has occurred. Recognizing revenue over time for customized large scale materials processing systems contracts is based on our judgment that these systems do not have an alternative use and we have an enforceable right to payment for performance completed to date. Recognizing revenue over time also requires estimation of the progress towards completion based on the projected costs of the contract.

Sensitivity of Estimate to Change: Recognizing revenue at a point in time is sensitive to changes in shipping or delivery dates. Revenue recognition over time is sensitive to the actual costs incurred as compared to the projected total cost of the project. We monitor the actual and projected costs of these contracts closely. A change in the projected cost of a project will affect the estimated percentage of completion, the amount of revenue recognized and estimated gross margin.

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Inventory. We maintain a reserve for excess or obsolete inventory items. The reserve is based upon a review of inventory materials on hand, which we compare with historic usage, estimated future usage and age. In addition, we review the inventory and compare recorded costs with estimates of current market value. Write-downs are recorded to reduce the carrying value to the net realizable value with respect to any part with costs in excess of current market value. In the third quarter of 2024, we recorded $29.5 million of additional inventory provision that was attributed to items previously considered safety stock and items that became technologically obsolete.

Judgments and Uncertainties: Estimating demand and net realizable value is inherently difficult, particularly given that we make highly specialized components and products. We determine the valuation of excess and obsolete inventory by making our best estimate considering the current quantities of inventory on hand and our forecast of the need for this inventory to support future sales of our products. We often have limited information on which to base our forecasts. If future sales differ from these forecasts, the valuation of excess and obsolete inventory may change and additional inventory provisions may be required.

Sensitivity of Estimate to Change: Because of our vertical integration, a significant or sudden decrease in sales could result in a significant change in the estimates of excess or obsolete inventory valuation. Because our calculation of slow-moving, excess or obsolete inventory is based on historical and estimated future use of inventory items, the calculation is affected by sales trends. In 2025, we recorded an inventory provision of $30.1 million to reflect changes in our estimates of future usage and recoverability of inventory items. In 2024, we recorded inventory provision of $29.5 million for items previously considered safety stock and items that became technologically obsolete. In 2023, as sales decreased from prior year, the inventory provision related to slow-moving, excess or obsolete inventory increased.

Long-lived Asset Impairment. Long-lived assets including definite-lived intangible assets are depreciated or amortized on a straight-line basis over the estimated useful life. We review these assets for impairment when conditions exist that indicate the carrying amount of the assets may not be recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of long-lived assets held for use, we group assets at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value based on a probability-weighted average of valuations using the discounted cash flow method under the income approach. We recorded long-lived asset impairment charges of $27.0 million, and $1.2 million in 2024 and 2023, respectively. Impairment charges in 2024 primarily related to the impairment of our Belarus long-lived assets as a result of new sanctions that impacted our business there. The 2023 impairment related to the right‑of‑use asset for a leased building associated with our Submarine Network Division that was previously divested. There was no impairment during the year ended December 31, 2025.

Judgments and Uncertainties: 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 at many points during the analysis. Estimating undiscounted operating cash flow used to determine if there is indication of impairment of a long-lived asset requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. Fair value estimates performed to determine impairment charge amounts are subject to underlying changes in estimates and market conditions. Assumptions used in long-lived asset impairment are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each impairment test date.

Sensitivity of Estimate to Change: Undiscounted cash flows and fair value are sensitive to changes in underlying assumptions, estimates, and market factors. 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.

Income Taxes and Deferred Taxes. Our annual tax rate is based on the income generated in the jurisdictions in which we operate, the statutory tax rates in those jurisdictions and tax planning opportunities available to the Company. We file federal and state income tax returns in the United States and income tax returns in all the foreign jurisdictions in which we operate.

Judgments and Uncertainties: We estimate our income tax expense in each jurisdiction we operate in after considering, among other factors, the pricing of inter-company transactions on an arm’s length basis, the differing tax rates between jurisdictions, allocation factors, tax credits, nondeductible items and changes in enacted tax rates. Significant judgment is required in determining the pricing of inter-company transactions, our annual tax expense and in evaluating our tax positions in the various jurisdictions in which we operate. As we continue to expand globally, there is a risk that, due to complexity within

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and diversity among the various jurisdictions in which we do business, a governmental agency may disagree with the manner in which we have computed our taxes. Additionally, due to the lack of uniformity among all of the foreign and domestic taxing authorities, there may be situations where the tax treatment of an item in one jurisdiction is different from the tax treatment in another jurisdiction or that the transaction causes a tax liability to arise in another jurisdiction.

In addition, we review the deferred tax assets in each jurisdiction and the positive and negative evidence that would support a conclusion that a valuation allowance is or is not needed. Where it is more likely than not that some portion of the deferred tax assets will not be realized, we record a valuation allowance against the deferred tax assets. The decision to establish a valuation allowance or reverse it is based on management’s judgment, which considers the weight of available evidence, including forecasts of future taxable income and the future reversal of existing taxable temporary differences.

Sensitivity of Estimate to Change: We provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves recorded are based on a determination of tax benefits claimed in our tax filings and whether these positions are more likely than not to be realized following the resolution of any potential tax audits related to the tax benefit, assuming that the matter in question will be reviewed by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2025, we had $15.1 million of unrecognized tax benefits, excluding interest and penalties, recorded in other long-term liabilities and deferred income taxes on our Consolidated Balance Sheets. This tax liability increased by $0.2 million for tax positions taken in the current year and $1.4 million for changes in prior period positions.

Results of Operations

The following table sets forth selected statement of operations data for the periods indicated in dollar amounts and expressed as a percentage of net sales: 

Year Ended December 31,

2025

2024

2023

(In thousands, except percentages and per share data)

Net sales

$

1,003,777 

100.0 

%

$

977,134 

100.0 

%

$

1,287,439 

100.0 

%

Cost of sales

622,314 

62.0 

638,979 

65.4 

745,741 

57.9 

Gross profit

381,463 

38.0 

338,155 

34.6 

541,698 

42.1 

Operating expenses:

Sales and marketing

97,862 

9.7 

89,582 

9.2 

85,679 

6.7 

Research and development

117,402 

11.7 

109,783 

11.2 

98,704 

7.7 

General and administrative

143,140 

14.3 

124,313 

12.7 

125,749 

9.7 

Net loss from divestitures and sale of assets

— 

— 

190,201 

19.5 

— 

— 

Impairment of long-lived assets

— 

— 

27,006 

2.7 

1,237 

0.1 

Restructuring charges (recoveries), net

601 

0.1 

— 

— 

(288)

— 

Loss (gain) on foreign exchange

9,354 

0.9 

5,524 

0.6 

(1,356)

(0.1)

Total operating expenses

368,359 

36.7 

546,409 

55.9 

309,725 

24.1 

Operating income (loss)

13,104 

1.3 

(208,254)

(21.3)

231,973 

18.0 

Interest income, net

29,857 

3.0 

45,467 

4.7 

41,735 

3.2 

Other income, net

2,135 

0.2 

899 

0.1 

1,167 

0.1 

Income (loss) before provision for income taxes

45,096 

4.5 

(161,888)

(16.5)

274,875 

21.3 

Provision for income taxes

14,000 

1.4 

19,638 

2.0 

55,997 

4.3 

Net income (loss)

31,096 

3.1 

%

$

(181,526)

(18.5)

%

$

218,878 

17.0 

%

Net income (loss) per common share:

Basic

$

0.73 

$

(4.09)

$

4.64 

Diluted

$

0.73 

$

(4.09)

$

4.63 

Weighted average common shares outstanding:

Basic

42,345 

44,336 

47,154 

Diluted

42,650 

44,336 

47,320 

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Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024

Net sales. Net sales increased by $26.7 million, or 2.7%, to $1,003.8 million in 2025 from $977.1 million in 2024. The table below sets forth sales by application: 

Year Ended December 31,

2025

2024

Change

(In thousands, except for percentages)

Sales by Application

% of Total

% of Total

Materials Processing

$

860,191 

85.7 

%

$

857,336 

87.7 

%

$

2,855 

0.3 

%

Other Applications

143,586 

14.3 

%

119,798 

12.3 

%

23,788 

19.9 

%

Total

$

1,003,777 

100.0 

%

$

977,134 

100.0 

%

$

26,643 

2.7 

%

The table below sets forth sales by type of product and other revenue:

Year Ended December 31,

2025

2024

Change

(In thousands, except for percentages)

Sales by Product

% of Total

% of Total

High Power Continuous Wave ("CW") Lasers

$

308,825 

30.8 

%

$

332,743 

34.1 

%

$

(23,918)

(7.2)

%

Medium Power CW Lasers

88,178 

8.8 

%

63,685 

6.5 

%

24,493 

38.5 

%

Pulsed Lasers

143,251 

14.3 

%

146,759 

15.0 

%

(3,508)

(2.4)

%

Quasi-Continuous Wave ("QCW") Lasers

51,772 

5.2 

%

48,016 

4.9 

%

3,756 

7.8 

%

Laser and Non-Laser Systems

147,243 

14.6 

%

139,145 

14.3 

%

8,098 

5.8 

%

Other Revenue including Other Lasers, Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue

264,508 

26.3 

%

246,786 

25.2 

%

17,722 

7.2 

%

Total

$

1,003,777 

100.0 

%

$

977,134 

100.0 

%

$

26,643 

2.7 

%

Our net sales were derived from customers in the following geographic regions:

Year Ended December 31,

2025

2024

Change

(In thousands, except for percentages)

Sales by Geography

% of Total

% of Total

North America (1)

$

267,183 

26.6 

%

$

258,888 

26.5 

%

$

8,295 

3.2 

%

Europe:

Germany

105,160 

10.5 

%

87,800 

9.0 

%

17,360 

19.8 

%

Other Europe

138,543 

13.8 

%

197,152 

20.1 

%

(58,609)

(29.7)

%

Total Europe (2)

243,703 

24.3 

%

284,952 

29.1 

%

(41,249)

(14.5)

%

Asia:

China

291,905 

29.1 

%

244,996 

25.1 

%

46,909 

19.1 

%

Japan

66,369 

6.6 

%

62,352 

6.4 

%

4,017 

6.4 

%

Other Asia

121,805 

12.1 

%

113,232 

11.6 

%

8,573 

7.6 

%

Total Asia

480,079 

47.8 

%

420,580 

43.1 

%

59,499 

14.1 

%

Rest of World

12,812 

1.3 

%

12,714 

1.3 

%

98 

0.8 

%

Total

$

1,003,777 

100.0 

%

$

977,134 

100.0 

%

$

26,643 

2.7 

%

(1)The substantial majority of sales in North America are to customers in the United States.

(2)Revenue in Europe declined year over year primarily due to lower sales in cutting and welding applications and the impact of the divestiture of our Russian operations, partially offset by increased sales in cleaning applications, driven largely by the cleanLASER acquisition, as well as increased sales in additive manufacturing.

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Materials processing sales accounted for 85.7% of total revenue and increased 0.3% year over year, as a result of increased sales in cleaning, mainly due to the cleanLASER acquisition, additive manufacturing, micromachining, drilling, and annealing, partially offset by decreased sales in cutting, service and parts, and other material processing applications. Other applications sales increased 19.9% year over year driven by higher revenue in advanced applications and medical procedures.

Cost of sales and gross margin. Cost of sales decreased by $16.7 million, or 2.6%, to $622.3 million in 2025 from $639.0 million in 2024. Our gross margin increased to 38.0% in 2025 from 34.6% in 2024. The prior year costs of sales included additional inventory provisions of $29.5 million attributed to items previously considered safety stock and items that became technologically obsolete. Additionally, the increase in gross margin was due to a decrease in unabsorbed manufacturing costs of $20.9 million, partially offset by an increase in cost of products sold of $4.3 million, primarily as a result of higher product costs due to product and geographic mix, and import duties driven by tariffs, partially offset by lower inventory provisions. Expenses related to provisions for excess or obsolete inventory and other valuation adjustments decreased by $52.4 million to $30.1 million, or 3.0% of sales, for the year ended December 31, 2025, as compared to $82.5 million, or 8.4% of sales, for the year ended December 31, 2024.

Sales and marketing expense. Sales and marketing expense increased by $8.3 million, or 9.3%, to $97.9 million in 2025 from $89.6 million in 2024. This change was primarily a result of an increase of $5.8 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financials results. In addition, the increase in sales and marketing expense was also due to an increase of $3.2 million in amortization expense, primarily related to cleanLASER, and an increase of $0.5 million in trade fairs and exhibits expense, partially offset by a decrease of $1.2 million in premises expense. As a percentage of sales, sales and marketing expense was 9.7% and 9.2% of sales in 2025 and 2024, respectively.

Research and development expense. Research and development expense increased by $7.6 million, or 6.9%, to $117.4 million in 2025 from $109.8 million in 2024. This change was primarily a result of an increase of $5.5 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financials results. In addition, the increase in research and development expense was also due to an increase of $3.3 million in consultant fees, and an increase of $1.4 million in materials expense, partially offset by a decrease of $0.9 million in premises expense, a decrease of $0.7 million in lease expense, a decrease of $0.6 million in other R&D expenses, and an increase of $0.4 million in grant income. As a percentage of sales, research and development expense increased to 11.7% in 2025 from 11.2% in 2024. We expect to continue investing in research and development efforts to support new product initiatives and enhancements to existing products, including those targeted for medical, micromachining, and advanced applications.

General and administrative expense. General and administrative expense increased by $18.8 million, or 15.1%, to $143.1 million in 2025 from $124.3 million in 2024. This change was primarily a result of an increase of $14.5 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financial results and increased compensation expense from the addition of new leadership positions. In addition, the increase in general and administrative expense was also due to an increase of $6.9 million in acquisition and integration charges, an increase of $1.2 million in information systems expense, an increase of $0.6 million in accounting expense, and an increase of $0.5 million in travel expense, partially offset by a decrease of $1.4 million in other G&A expense, a decrease of $1.2 million in bad debt expense, a decrease of $1.0 million in premises expense, a decrease of $0.6 million in insurance expense, a decrease of $0.6 million in legal expense, and a decrease of $0.6 million in consultant fees. As a percentage of sales, general and administrative expense increased to 14.3% in 2025 from 12.7% in 2024.

Effect of exchange rates on sales, gross margin and operating expenses. We estimate that if exchange rates had been the same as one year ago, sales in 2025 would have been $8.1 million lower, gross margin would have been $1.5 million lower and sales and marketing, research and development and general and administrative expenses would have been $2.7 million lower. These estimates assume constant exchange rates between fiscal year 2025 and fiscal year 2024 and are calculated using the average exchange rates for the twelve-month period ended December 31, 2024 for the respective currencies, which were US$1=euro 0.92, US$1=Japanese yen 151, and US$1=Chinese yuan 7.19.

Net loss from divestiture and sale of assets. We incurred a net loss of $190.2 million in 2024 as compared to no loss or gain in 2025. The loss primarily related to a loss of $197.7 million upon the divestiture of our Russian operations, partially offset by a gain on sale of assets of $7.5 million related to the sales of a building and land in the U.S. and a building in the U.K.

Impairment of long-lived assets. During the during the year ended December 31, 2024, we completed an impairment analysis of the assets located in Belarus as a result of new EU sanctions that limited our ability to supply laser cabinets and other mechanical components from that facility. Based on this analysis, we recorded $26.6 million of impairment of long-lived assets. There was no impairment during the year ended December 31, 2025.

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Restructuring charges (recoveries), net. We incurred $0.6 million in restructuring charges during the year ended December 31, 2025, related to an assessment and further oversight of our Belarusian operations. There were no restructuring charges during the year ended December 31, 2024.

Loss (gain) on foreign exchange. We incurred a foreign exchange loss of $9.4 million in 2025 as compared to a loss of $5.5 million in 2024. The loss in 2025 was primarily driven by unfavorable foreign currency movements relative to the U.S. dollar, including appreciation of the euro, depreciation of the Chinese yuan at certain points during the year and depreciation of the Indian rupee. These movements impacted the remeasurement and settlement of foreign currency-denominated monetary assets and liabilities.

Interest income, net. Interest income, net was $29.9 million in 2025 compared to $45.5 million in 2024. The change in interest income, net was primarily due to a reduction in average cash and investment balances, lower weighted average interest rates across our investment portfolio and geographic mix in the current period as compared to the prior year.

Provision for income taxes. Provision for income taxes was $14.0 million in 2025 compared to $19.6 million in 2024, representing an effective tax rate of 31.0% in 2025 and (12.1)% in 2024. The decrease in tax expense was due primarily to a reduction in taxable income. In 2025, discrete items resulted in a $6.0 million increase in tax primarily due to equity-based compensation deductions reflected in book income in excess of deductions allowed for tax purposes. In 2024 we had tax expense on a loss before income due to the effect of discrete items. Total discrete adjustments in 2024 increased tax expense by $46.0 million. Discrete items include an increase in tax expense of $43.2 million related to the loss on divestiture of Russian operations that had no tax benefit. Other discrete items for 2024 included a $3.2 million benefit related to a decrease in uncertain tax positions and the results of tax audits. This benefit was offset by an increase in tax expense of $5.4 million for equity-based compensation deductions reflected in book income in excess of the deductions allowed for tax purposes.

Net income (loss). Net income (loss) increased by $212.6 million to a net income of $31.1 million in 2025 from a net loss of $181.5 million in 2024. Net income (loss) as a percentage of our net sales increased by 21.6% to 3.1% in 2025 from (18.5)% in 2024 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. In the near term, we will incur capital expenditures related to the expansion of capacity outside of Russia and Belarus.

As of December 31, 2025, 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:

As of December 31,

2025

2024

(In thousands)

Cash and cash equivalents

$

403,790 

$

620,040 

Short-term investments

435,538 

310,152 

Unused credit lines and overdraft facilities

224,432 

78,115 

Working capital (defined as current assets, excluding cash and cash equivalents and short-term investments, minus current liabilities)

350,075 

295,784 

Included in cash and cash equivalents is $1.5 million of cash located in Belarus, as of December 31, 2025.

Short-term investments at December 31, 2025 consist of liquid investments including commercial paper, corporate bonds, U.S. Treasury and agency obligations, and term deposits with original maturities of greater than three months but less than one

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year. See Note 3, "Fair Value Measurements" in the notes to the consolidated financial statements for further information about our short-term investments.

The following table details our line-of-credit facilities as of December 31, 2025: 

Description

Total Facility/ Note

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)

$21.7 million

Various

Various

Unsecured

Euro Credit Facilities (Germany) (3)

Euro 5.9 million ($6.9 million)

Various

Various

Unsecured, guaranteed by parent company

Euro Facility (4)

Euro 1.5 million

($1.8 million)

3M EURIBOR plus 1.25% (5)

N/A (5)

Common pool of assets of Italian subsidiary

(1) At December 31, 2025, there were no drawings and no guarantees issued.

(2) Other lines of credit available to certain foreign subsidiaries in U.S. dollars and their respective local currencies. At December 31, 2025, there was $1.1 million drawn on these lines; and there were $1.8 million of guarantees issued against the lines which reduces total availability.

(3) The facilities are available to certain foreign subsidiaries in their respective local currencies. At December 31, 2025, there were no amounts drawn on this line; however, there were $3.1 million of guarantees issued against the lines which reduces total availability.

(4) At December 31, 2025, there were no drawings and no guarantees issued.

(5) The facility does not have a stated maturity date. The interest rate in effect as of December 31, 2025 is fixed through September 2026. After that date, the interest rate may be renegotiated and availability may be terminated in accordance with the terms of the facility.

At December 31, 2025, our committed credit line is with Bank of America N.A. in the amount of $200 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 December 31, 2025.

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 11, "Financing Arrangements" in the notes to the consolidated financial statements for further information about our facilities.

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The following table summarizes our material cash commitments at December 31, 2025 and the effect such commitments are expected to have on our liquidity and cash flows in future periods. We intend to use our existing cash, cash equivalents and investments as well as cash generated from operations as sources of funds for these material commitments.

Payments Due in

Total

Less Than 1 Year

(In thousands)

Operating lease obligations

$

18,994 

$

5,692 

Purchase obligations

65,245 

64,026 

Total (1)

$

84,239 

$

69,718 

(1)Excludes obligations related to ASC 740, reserves for uncertain tax positions, because we are unable to provide a reasonable estimate of the timing of future payments relating to the remainder of these obligations. See Note 16, "Income Taxes" to the consolidated financial statements.

The following table presents cash flow activities:

As of December 31,

2025

2024

(In thousands)

Cash provided by operating activities

$

75,344 

$

247,896 

Cash (used in) provided by investing activities

(265,230)

208,732 

Cash used in financing activities

(54,192)

(339,621)

Operating activities. Net cash provided by operating activities decreased by $172.6 million to $75.3 million in 2025 from $247.9 million in 2024 primarily due to a decrease in net income after adding back non-cash expenses and an increase in cash used by working capital. Our largest working capital items 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 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 decrease in cash flow from operating activities in 2025 primarily resulted from:

•an increase in cash used by inventory as we manufactured more in 2025 compared to 2024 when we reduced our investments in inventory;

•an increase in cash used by accounts receivable due to higher sales at the end of 2025 not yet collected as compared to 2024;

•an increase in cash used by income and other taxes payable due to the timing of estimated tax payments made; and

•an increase in cash used by prepaid expenses and other assets due to timing of bank acceptance drafts and interest received.

The decrease in cash provided by operating activities were partially offset by:

•an increase in cash provided by accrued expenses and other current liabilities due to timing of payments for accrued personnel costs, increase in cash provided by customer deposits, and an increase in billings in excess of cost and estimated earnings on customized systems under contract, partially offset by an increase in lease payments and other activities; and

•an increase in cash provided by accounts payable due to timing of payments.

Investing activities. Net cash used in investing activities was $265.2 million in 2025 as compared to cash provided by investing activities of $208.7 million in 2024. The cash used in investing activities in 2025 primarily related to $187.9 million of net purchases of investments and $78.8 million of cash used for property, plant and equipment, partially offset by $0.9 million of proceeds from the sale of property, plant and equipment, and a $0.5 million inflow from the final net working capital settlement in connection with the cleanLASER acquisition. The cash provided by investing activities in 2024 primarily related to $370.3 million of net proceeds from the net maturities of short-term investments and $28.6 million of proceeds from the sale of property, plant and equipment, partially offset by $98.5 million of cash used for property, plant and equipment, $66.7 million of cash used for the acquisition of cleanLASER and $25.3 million of net cash outflow from the divestiture of our Russian operation. The cash proceeds from the sale of our Russian operation were lower than the cash and cash equivalents on hand, resulting in a cash outflow from divestiture.

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Financing activities. Net cash used in financing activities was $54.2 million and $339.6 million in 2025 and 2024, respectively. The cash used in financing activities in 2025 was primarily related to the purchase of $53.1 million of treasury stock 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 $1.1 million. The cash used in financing activities in 2024 was primarily related to the purchase of $343.8 million of treasury stock, partially offset by net proceeds of $4.2 million from the exercise of stock options net of amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units and shares issued under our employee stock purchase plan.

Recent Accounting Pronouncements

See Note 1, "Nature of Business and Summary of Significant Accounting Policies" in the notes to the consolidated financial statements for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our consolidated financial statements contained in Part IV of this Annual Report.