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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 001-33155
IPG PHOTONICS CORPORATION
(Exact name of registrant as specified in its charter) | | | | | |
Delaware | 04-3444218 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification Number) |
| |
50 Old Webster Road, Oxford, Massachusetts | 01540 |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (508) 373-1100
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | IPGP | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large Accelerated Filer | ☑ | | Accelerated Filer | ☐ |
Non-Accelerated Filer | ☐ | | Smaller Reporting Company | ☐ |
Emerging Growth Company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of August 2, 2022, there were 50,207,950 shares of the registrant's common stock outstanding.
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
| June 30, | | December 31, |
| 2022 | | 2021 |
| (In thousands, except share and per share data) |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 771,788 | | | $ | 709,105 | |
Short-term investments | 462,865 | | | 805,400 | |
Accounts receivable, net | 246,877 | | | 262,121 | |
Inventories | 556,747 | | | 460,747 | |
Prepaid income taxes | 52,912 | | | 36,990 | |
Prepaid expenses and other current assets | 79,662 | | | 73,320 | |
| | | |
Total current assets | 2,170,851 | | | 2,347,683 | |
Deferred income taxes, net | 60,563 | | | 47,761 | |
Goodwill | 39,285 | | | 38,609 | |
Intangible assets, net | 46,866 | | | 52,678 | |
Property, plant and equipment, net | 680,321 | | | 635,302 | |
Other assets | 50,883 | | | 48,507 | |
Total assets | $ | 3,048,769 | | | $ | 3,170,540 | |
LIABILITIES AND EQUITY |
Current liabilities: | | | |
| | | |
| | | |
Current portion of long-term debt | $ | 32,225 | | | $ | 18,126 | |
Accounts payable | 57,276 | | | 55,839 | |
Accrued expenses and other current liabilities | 210,813 | | | 230,826 | |
| | | |
Income taxes payable | 15,588 | | | 8,642 | |
Total current liabilities | 315,902 | | | 313,433 | |
Other long-term liabilities and deferred income taxes | 92,516 | | | 93,855 | |
Long-term debt, net of current portion | — | | | 16,031 | |
Total liabilities | 408,418 | | | 423,319 | |
| | | |
Commitments and contingencies (Note 11) | | | |
IPG Photonics Corporation equity: | | | |
Common stock, $0.0001 par value, 175,000,000 shares authorized; 55,967,254 and 50,206,255 shares issued and outstanding, respectively, at June 30, 2022; 55,788,246 and 53,010,265 shares issued and outstanding, respectively, at December 31, 2021. | 6 | | | 6 | |
Treasury stock, at cost, 5,760,999 and 2,777,981 shares held at June 30, 2022 and December 31, 2021, respectively. | (750,109) | | | (438,503) | |
Additional paid-in capital | 930,950 | | | 908,423 | |
Retained earnings | 2,593,147 | | | 2,466,607 | |
Accumulated other comprehensive loss | (134,778) | | | (189,951) | |
Total IPG Photonics Corporation equity | 2,639,216 | | | 2,746,582 | |
Non-controlling interests | 1,135 | | | 639 | |
Total equity | 2,640,351 | | | 2,747,221 | |
Total liabilities and equity | $ | 3,048,769 | | | $ | 3,170,540 | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands, except per share data) |
Net sales | $ | 377,023 | | | $ | 371,658 | | | $ | 747,002 | | | $ | 717,243 | |
Cost of sales | 204,679 | | | 191,130 | | | 402,837 | | | 372,724 | |
Gross profit | 172,344 | | | 180,528 | | | 344,165 | | | 344,519 | |
Operating expenses: | | | | | | | |
Sales and marketing | 19,010 | | | 19,193 | | | 39,384 | | | 38,076 | |
Research and development | 30,608 | | | 35,191 | | | 64,058 | | | 68,530 | |
General and administrative | 33,411 | | | 31,066 | | | 64,075 | | | 61,158 | |
| | | | | | | |
| | | | | | | |
Loss (gain) on foreign exchange | 17,640 | | | 2,826 | | | 11,830 | | | (4,339) | |
Total operating expenses | 100,669 | | | 88,276 | | | 179,347 | | | 163,425 | |
Operating income | 71,675 | | | 92,252 | | | 164,818 | | | 181,094 | |
Other income (expense), net: | | | | | | | |
Interest income (expense), net | 1,177 | | | (407) | | | 1,107 | | | (902) | |
Other income, net | 618 | | | 28 | | | 382 | | | 281 | |
Total other income (expense) | 1,795 | | | (379) | | | 1,489 | | | (621) | |
Income before provision for income taxes | 73,470 | | | 91,873 | | | 166,307 | | | 180,473 | |
Provision for income taxes | 16,139 | | | 22,196 | | | 39,348 | | | 42,574 | |
Net income | 57,331 | | | 69,677 | | | 126,959 | | | 137,899 | |
Less: net income (loss) attributable to non-controlling interests | 363 | | | (123) | | | 419 | | | (28) | |
Net income attributable to IPG Photonics Corporation common stockholders | $ | 56,968 | | | $ | 69,800 | | | $ | 126,540 | | | $ | 137,927 | |
Net income attributable to IPG Photonics Corporation per common share: | | | | | | | |
Basic | $ | 1.10 | | | $ | 1.31 | | | $ | 2.42 | | | $ | 2.58 | |
Diluted | $ | 1.10 | | | $ | 1.29 | | | $ | 2.41 | | | $ | 2.55 | |
Weighted average common shares outstanding: | | | | | | | |
Basic | 51,687 | | | 53,472 | | | 52,111 | | | 53,548 | |
Diluted | 51,795 | | | 53,999 | | | 52,311 | | | 54,145 | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands) |
Net income | $ | 57,331 | | | $ | 69,677 | | | $ | 126,959 | | | $ | 137,899 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation adjustments and other | 94,244 | | | 19,116 | | | 54,918 | | | (13,363) | |
| | | | | | | |
Unrealized gain on derivatives | 119 | | | 51 | | | 332 | | | 119 | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income (loss) | 94,363 | | | 19,167 | | | 55,250 | | | (13,244) | |
Comprehensive income | 151,694 | | | 88,844 | | | 182,209 | | | 124,655 | |
Less: comprehensive income attributable to non-controlling interests | 135 | | | 194 | | | 496 | | | 70 | |
Comprehensive income attributable to IPG Photonics Corporation | $ | 151,559 | | | $ | 88,650 | | | $ | 181,713 | | | $ | 124,585 | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| (In thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 126,959 | | | $ | 137,899 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 47,104 | | | 47,976 | |
Deferred income taxes | (11,204) | | | (1,856) | |
Stock-based compensation | 20,439 | | | 18,678 | |
| | | |
| | | |
Unrealized loss (gain) on foreign currency transactions | 12,584 | | | (1,728) | |
Other | 3,760 | | | 3,571 | |
Provisions for inventory, warranty and bad debt | 38,644 | | | 32,654 | |
Changes in assets and liabilities that provided (used) cash, net of acquisitions: | | | |
Accounts receivable | 1,560 | | | 12,525 | |
Inventories | (99,233) | | | (61,220) | |
Prepaid expenses and other assets | 4,922 | | | (2,187) | |
Accounts payable | 3,131 | | | 24,879 | |
Accrued expenses and other liabilities | (35,842) | | | 595 | |
Income and other taxes payable | (17,663) | | | (8,596) | |
| | | |
Net cash provided by operating activities | 95,161 | | | 203,190 | |
Cash flows from investing activities: | | | |
Purchases of and deposits on property, plant and equipment | (59,903) | | | (54,344) | |
| | | |
Proceeds from sales of property, plant and equipment | 645 | | | 258 | |
Purchases of short-term investments | (583,828) | | | (1,014,033) | |
Proceeds from short-term investments | 925,657 | | | 785,023 | |
Acquisitions of businesses, net of cash acquired | (2,000) | | | — | |
Other | (350) | | | (547) | |
Net cash provided by (used in) investing activities | 280,221 | | | (283,643) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Principal payments on long-term borrowings | (1,932) | | | (1,896) | |
Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards | 2,088 | | | 10,567 | |
| | | |
| | | |
Purchase of treasury stock, at cost | (311,606) | | | (41,731) | |
Payment of purchase price holdback from business combination | — | | | (2,624) | |
Net cash used in financing activities | (311,450) | | | (35,684) | |
Effect of changes in exchange rates on cash, cash equivalents and restricted cash | (1,249) | | | (8,217) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 62,683 | | | (124,354) | |
Cash, cash equivalents and restricted cash — Beginning of period | 709,105 | | | 878,553 | |
Cash and cash equivalents — End of period | $ | 771,788 | | | $ | 754,199 | |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 1,600 | | | $ | 1,388 | |
Cash paid for income taxes | $ | 61,715 | | | $ | 41,809 | |
Non-cash transactions: | | | |
Demonstration units transferred from inventory to other assets | $ | 2,204 | | | $ | 2,704 | |
Inventory transferred to machinery and equipment | $ | 1,764 | | | $ | 1,353 | |
Changes in accounts payable related to property, plant and equipment | $ | 92 | | | $ | 416 | |
Leased assets obtained in exchange for new operating lease liabilities | $ | 5,697 | | | $ | 1,258 | |
See Note 3 for reconciliation of cash, cash equivalents and restricted cash between the condensed consolidated balance sheets and condensed consolidated statements of cash flows.
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| Common Stock | | Treasury Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Non- controlling Interest | | Total Stockholders' Equity |
(In thousands, except share data) | Shares | | Amount | | Shares | | Amount | | | | | |
Balance, April 1, 2022 | 52,542,466 | | | $ | 6 | | | (3,379,096) | | | $ | (517,260) | | | $ | 917,693 | | | $ | 2,536,179 | | | $ | (229,369) | | | $ | 1,000 | | | $ | 2,708,249 | |
Exercise of stock options and vesting of RSUs and PSUs | 16,515 | | | — | | | — | | | — | | | 478 | | | — | | | — | | | — | | | 478 | |
Common stock issued under employee stock purchase plan | 29,177 | | | — | | | — | | | — | | | 2,334 | | | — | | | — | | | — | | | 2,334 | |
Purchased common stock | (2,381,903) | | | — | | | (2,381,903) | | | (232,849) | | | — | | | — | | | — | | | — | | | (232,849) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 10,445 | | | — | | | — | | | — | | | 10,445 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 56,968 | | | — | | | 363 | | | 57,331 | |
Foreign currency translation adjustments and other | — | | | — | | | — | | | — | | | — | | | — | | | 94,472 | | | (228) | | | 94,244 | |
Unrealized gain on derivatives, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 119 | | | — | | | 119 | |
| | | | | | | | | | | | | | | | | |
Balance, June 30, 2022 | 50,206,255 | | | $ | 6 | | | (5,760,999) | | | $ | (750,109) | | | $ | 930,950 | | | $ | 2,593,147 | | | $ | (134,778) | | | $ | 1,135 | | | $ | 2,640,351 | |
| | | | | | | | | | | | | | | | | |
Balance, April 1, 2021 | 53,623,865 | | | $ | 6 | | | (2,048,918) | | | $ | (306,662) | | | $ | 868,097 | | | $ | 2,256,318 | | | $ | (178,257) | | | $ | 1,168 | | | $ | 2,640,670 | |
Exercise of stock options and vesting of RSUs and PSUs | 37,824 | | | — | | | — | | | — | | | 2,886 | | | — | | | — | | | — | | | 2,886 | |
Common stock issued under employee stock purchase plan | 15,071 | | | — | | | — | | | — | | | 2,700 | | | — | | | — | | | — | | | 2,700 | |
Purchased common stock | (184,871) | | | — | | | (184,871) | | | (38,683) | | | — | | | — | | | — | | | — | | | (38,683) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 9,863 | | | — | | | — | | | — | | | 9,863 | |
| | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 69,800 | | | — | | | (123) | | | 69,677 | |
Foreign currency translation adjustments and other | — | | | — | | | — | | | — | | | — | | | — | | | 18,799 | | | 317 | | | 19,116 | |
Unrealized gain on derivatives, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 51 | | | — | | | 51 | |
| | | | | | | | | | | | | | | | | |
Balance, June 30, 2021 | 53,491,889 | | | $ | 6 | | | (2,233,789) | | | $ | (345,345) | | | $ | 883,546 | | | $ | 2,326,118 | | | $ | (159,407) | | | $ | 1,362 | | | $ | 2,706,280 | |
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| Common Stock | | Treasury Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Non- controlling Interest | | Total Stockholders' Equity |
(In thousands, except share data) | Shares | | Amount | | Shares | | Amount | | | | | |
Balance, January 1, 2022 | 53,010,265 | | | $ | 6 | | | (2,777,981) | | | $ | (438,503) | | | $ | 908,423 | | | $ | 2,466,607 | | | $ | (189,951) | | | $ | 639 | | | $ | 2,747,221 | |
Exercise of stock options and vesting of RSUs and PSUs | 149,831 | | | — | | | — | | | — | | | (246) | | | — | | | — | | | — | | | (246) | |
Common stock issued under employee stock purchase plan | 29,177 | | | — | | | — | | | — | | | 2,334 | | | — | | | — | | | — | | | 2,334 | |
Purchased common stock | (2,983,018) | | | — | | | (2,983,018) | | | (311,606) | | | — | | | — | | | — | | | — | | | (311,606) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 20,439 | | | — | | | — | | | — | | | 20,439 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 126,540 | | | — | | | 419 | | | 126,959 | |
Foreign currency translation adjustments and other | — | | | — | | | — | | | — | | | — | | | — | | | 54,841 | | | 77 | | | 54,918 | |
Unrealized gain on derivatives, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 332 | | | — | | | 332 | |
| | | | | | | | | | | | | | | | | |
Balance, June 30, 2022 | 50,206,255 | | | $ | 6 | | | (5,760,999) | | | $ | (750,109) | | | $ | 930,950 | | | $ | 2,593,147 | | | $ | (134,778) | | | $ | 1,135 | | | $ | 2,640,351 | |
| | | | | | | | | | | | | | | | | |
Balance, January 1, 2021 | 53,427,234 | | | $ | 6 | | | (2,034,012) | | | $ | (303,614) | | | $ | 854,301 | | | $ | 2,188,191 | | | $ | (146,065) | | | $ | 1,292 | | | $ | 2,594,111 | |
Exercise of stock options and vesting of RSUs and PSUs | 249,361 | | | — | | | — | | | — | | | 7,867 | | | — | | | — | | | — | | | 7,867 | |
Common stock issued under employee stock purchase plan | 15,071 | | | — | | | — | | | — | | | 2,700 | | | — | | | — | | | — | | | 2,700 | |
Purchased common stock | (199,777) | | | — | | | (199,777) | | | (41,731) | | | — | | | — | | | — | | | — | | | (41,731) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 18,678 | | | — | | | — | | | — | | | 18,678 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 137,927 | | | — | | | (28) | | | 137,899 | |
Foreign currency translation adjustments and other | — | | | — | | | — | | | — | | | — | | | — | | | (13,461) | | | 98 | | | (13,363) | |
Unrealized gain on derivatives, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 119 | | | — | | | 119 | |
| | | | | | | | | | | | | | | | | |
Balance, June 30, 2021 | 53,491,889 | | | $ | 6 | | | (2,233,789) | | | $ | (345,345) | | | $ | 883,546 | | | $ | 2,326,118 | | | $ | (159,407) | | | $ | 1,362 | | | $ | 2,706,280 | |
| | | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared by IPG Photonics Corporation, or "IPG", "its" or the "Company". Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
In the opinion of the Company's management, the financial information for the interim periods presented reflects all adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Accounts Receivable and Allowance for Doubtful Accounts — The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected. The allowance is based upon an estimate of expected credit losses over the life of outstanding receivables. The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables.
Activity related to the allowance for doubtful accounts was as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Balance, beginning of period | $ | 1,937 | | | $ | 2,307 | | | $ | 2,108 | | | $ | 2,156 | |
Provision for bad debts, net of (recoveries) | (15) | | | (47) | | | (161) | | | 141 | |
Uncollectable accounts written off | (78) | | | (59) | | | (79) | | | (59) | |
Foreign currency translation | 28 | | | 50 | | | 4 | | | 13 | |
Balance, end of period | $ | 1,872 | | | $ | 2,251 | | | $ | 1,872 | | | $ | 2,251 | |
Comprehensive Income — Comprehensive income includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive income is the cumulative foreign currency translation adjustment and unrealized gains or losses on derivatives. These adjustments are accumulated within the consolidated statements of comprehensive income.
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
Total components of accumulated other comprehensive loss were as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | Foreign currency translation adjustments | | Unrealized gain (loss) on derivatives, net of tax | | | | Total |
Balance, April 1, 2022 | | $ | (229,398) | | | $ | 29 | | | | | $ | (229,369) | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation adjustments and other | | 94,472 | | | — | | | | | 94,472 | |
Unrealized gain on derivatives, net of tax expense of $37 | | — | | | 119 | | | | | 119 | |
Total other comprehensive income (loss) | | 94,472 | | | 119 | | | | | 94,591 | |
Balance, June 30, 2022 | | $ | (134,926) | | | $ | 148 | | | | | $ | (134,778) | |
| | | | | | | | |
Balance, April 1, 2021 | | $ | (177,863) | | | $ | (394) | | | | | $ | (178,257) | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation adjustments and other | | 18,799 | | | — | | | | | 18,799 | |
Unrealized gain on derivatives, net of tax expense of $15 | | — | | | 51 | | | | | 51 | |
Total other comprehensive income (loss) | | 18,799 | | | 51 | | | | | 18,850 | |
Balance, June 30, 2021 | | $ | (159,064) | | | $ | (343) | | | | | $ | (159,407) | |
| | | | | | | | |
| | Foreign currency translation adjustments | | Unrealized gain (loss) on derivatives, net of tax | | | | Total |
Balance, January 1, 2022 | | $ | (189,767) | | | $ | (184) | | | | | $ | (189,951) | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation adjustments and other | | 54,841 | | | — | | | | | 54,841 | |
Unrealized gain on derivatives, net of tax expense of $103 | | — | | | 332 | | | | | 332 | |
Total other comprehensive (loss) income | | 54,841 | | | 332 | | | | | 55,173 | |
Balance, June 30, 2022 | | $ | (134,926) | | | $ | 148 | | | | | $ | (134,778) | |
| | | | | | | | |
Balance, January 1, 2021 | | $ | (145,603) | | | $ | (462) | | | | | $ | (146,065) | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation adjustments and other | | (13,461) | | | — | | | | | (13,461) | |
Unrealized gain on derivatives, net of tax expense of $36 | | — | | | 119 | | | | | 119 | |
Total other comprehensive (loss) income | | (13,461) | | | 119 | | | | | (13,342) | |
Balance, June 30, 2021 | | $ | (159,064) | | | $ | (343) | | | | | $ | (159,407) | |
| | | | | | | | |
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Sales are derived from products for different applications: fiber lasers, diode lasers, systems and accessories for materials processing; fiber lasers, diodes and amplifiers for advanced applications; fiber amplifiers and transceivers for communications applications; and fiber lasers, systems and fibers for medical applications.
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:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Sales by Application | | | | | | | |
Materials processing | $ | 343,357 | | | $ | 345,653 | | | $ | 682,320 | | | $ | 662,894 | |
Other applications | 33,666 | | | 26,005 | | | 64,682 | | | 54,349 | |
Total | $ | 377,023 | | | $ | 371,658 | | | $ | 747,002 | | | $ | 717,243 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | | | | | |
Sales by Product | | | | | | | |
High Power Continuous Wave ("CW") Lasers | $ | 162,997 | | | $ | 189,744 | | | $ | 330,688 | | | $ | 360,226 | |
Medium Power CW Lasers | 18,923 | | | 18,177 | | | 42,591 | | | 34,059 | |
Pulsed Lasers | 69,852 | | | 61,773 | | | 136,784 | | | 117,168 | |
Quasi-Continuous Wave ("QCW") Lasers | 14,079 | | | 15,525 | | | 26,859 | | | 29,191 | |
Laser and Non-Laser Systems | 38,443 | | | 29,597 | | | 73,040 | | | 56,713 | |
Other Revenue including Amplifiers, Service, Parts, Accessories and Change in Deferred Revenue | 72,729 | | | 56,842 | | | 137,040 | | | 119,886 | |
Total | $ | 377,023 | | | $ | 371,658 | | | $ | 747,002 | | | $ | 717,243 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Sales by Geography | | | | | | | |
North America | $ | 88,151 | | | $ | 66,134 | | | $ | 165,376 | | | $ | 139,518 | |
Europe: | | | | | | | |
Germany | 22,792 | | | 21,748 | | | 50,209 | | | 48,008 | |
Other including Eastern Europe/CIS | 75,407 | | | 74,339 | | | 155,407 | | | 132,932 | |
Asia and Australia: | | | | | | | |
China | 137,380 | | | 159,075 | | | 267,128 | | | 298,908 | |
Japan | 14,741 | | | 10,322 | | | 27,627 | | | 21,199 | |
Other | 33,695 | | | 37,654 | | | 72,370 | | | 70,764 | |
Rest of World | 4,857 | | | 2,386 | | | 8,885 | | | 5,914 | |
Total | $ | 377,023 | | | $ | 371,658 | | | $ | 747,002 | | | $ | 717,243 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | | | |
Timing of Revenue Recognition | | | | | | | |
Goods and services transferred at a point in time | $ | 363,255 | | | $ | 357,345 | | | $ | 718,670 | | | $ | 689,877 | |
Goods and services transferred over time | 13,768 | | | 14,313 | | | 28,332 | | | 27,366 | |
Total | $ | 377,023 | | | $ | 371,658 | | | $ | 747,002 | | | $ | 717,243 | |
One of the Company's customers accounted for 24% and 22% of the Company's net accounts receivable as of June 30, 2022 and December 31, 2021, respectively.
The Company enters into contracts to sell lasers and spare parts, for which revenue is generally recognized upon shipment or delivery, depending on the terms of the contract. The Company also provides installation services and extended warranties. The Company frequently receives consideration from a customer prior to transferring goods to the customer under the terms of a sales contract. The Company records customer deposits related to these prepayments, which represent a contract liability. The Company also records deferred revenue related to installation services when consideration is received before the services have been performed. The standalone selling price for installation services is determined based on the estimated number of days of service technician time required for installation at standard service rates. The Company recognizes customer deposits and deferred revenue as net sales after control of the goods or services has been transferred to the customer and all revenue recognition criteria are met. The Company bills customers for extended warranties upon entering into the agreement with the customer, resulting in deferred revenue that is recognized over the period of the extended warranty contract. The Company
IPG PHOTONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share and per share data)
recognizes revenue over time on contracts for the sale of large scale materials processing systems. The timing of customer payments on these contracts generally differs from the timing of revenue recognized. If revenue recognized exceeds customer payments, a contract asset is recorded and if customer payments exceed revenue recognized, a contract liability is recorded. Contract assets are included within prepaid expense and other current assets on the condensed consolidated balance sheets. Contract liabilities are included within accrued expenses and other current liabilities on the condensed consolidated balance sheets. Certain deferred revenues related to extended warranties in excess one year from the balance sheet date are included within other long-term liabilities and deferred income taxes on the condensed consolidated balance sheets.
The following table reflects the changes in the Company's contract assets and liabilities for the six months ended June 30, 2022 and 2021: