IPG PHOTONICS CORP

Previous wording

We develop, manufacture and sell high-performance fiber lasers and diode lasers that are used for diverse applications, primarily in materials processing. We also 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. In addition, we offer laser-based and non-laser based systems for certain markets and applications. Our portfolio of laser solutions is used in materials processing, medical, and advanced applications. 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, we 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. In addition, we have ceased new investment in our Belarusian operations and have outsourced the supply laser cabinets and mechanical components that were supplied by that operation. We have sales and service offices and applications laboratories worldwide.

Current wording

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.

Previous wording

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. The impact to gross margin related to higher tariffs for the three and nine months ended September 30, 2025 was approximately 140 and 90 basis points, respectively, as compared to the three and nine months ended September 30, 2024.

Current wording

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.

Previous wording

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 our Condensed Consolidated Statements of Operations. At September 30, 2025, the remaining value of the long-lived assets in Belarus was $4.2 million. Net working capital deficit excluding cash was $0.4 million and cash on hand was $0.7 million. The net asset value of our Belarus subsidiary has been reduced by $17.6 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.

Current wording

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 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.

Previous wording

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.

Current wording

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.

Previous wording

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 for the first three quarters of 2025, and 88% for the full fiscal year of 2024 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

We also regularly review our inventory for items that are slow-moving, have been rendered obsolete or are determined to be excess. Any provision for such slow-moving, obsolete or excess inventory affects our gross margins. For example, we recorded provisions for slow-moving, obsolete or excess inventory totaling $5.7 million and $43.4 million for the three months ended September 30, 2025 and 2024, respectively and $23.0 million and $70.3 million for the nine months ended September 30, 2025 and 2024, respectively. For the three months ended September 30, 2024, we recorded additional inventory provisions of $29.5 million attributed to items previously considered safety stock and items that became technologically obsolete.

Current wording

We also regularly review our inventory for items that are slow-moving, have been rendered obsolete or are determined to be excess. Any provision for such slow-moving, obsolete or excess inventory affects our gross margins. For example, we recorded provisions for slow-moving, obsolete or excess inventory totaling $4.9 million and $9.5 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Foreign exchange. Because we are a U.S.-based company doing business globally, we have both translational and transactional exposure to fluctuations in foreign currency exchange rates. Changes in the relative exchange rate between the U.S. dollar and the foreign currencies in which our subsidiaries operate directly affects our sales, costs and earnings. Differences in the relative exchange rates between where we sell our products and where we incur manufacturing and other operating costs (primarily in the U.S. and Germany) also affects our costs and earnings. Certain currencies experiencing significant exchange rate fluctuations like the euro, the Chinese yuan and Japanese yen have had and could have an additional significant impact on our sales, costs and earnings. For the quarter ended September 30, 2025, the foreign exchange loss was primarily attributable to the depreciation of the Korean won and Indian rupee as compared to the U.S. dollar. Our Korean and Indian subsidiaries both have certain net liabilities denominated in U.S. dollars. 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.

Current wording

Foreign exchange. Because we are a U.S.-based company doing business globally, we have both translational and transactional exposure to fluctuations in foreign currency exchange rates. Changes in the relative exchange rate between the U.S. dollar and the foreign currencies in which our subsidiaries operate directly affects our sales, costs and earnings. Differences in the relative exchange rates between where we sell our products and where we incur manufacturing and other operating costs (primarily in the U.S. and Germany) also affects our costs and earnings. Certain currencies experiencing significant exchange rate fluctuations like the euro, the Chinese yuan and Japanese yen have had and could have an additional significant impact on our sales, costs and earnings. For the quarter ended March 31, 2026, the foreign exchange gain was primarily attributable to the depreciation and appreciation of the Euro and Chinese yuan, respectively, as compared to the U.S. dollar, partially offset by the depreciation of the Indian rupee, as compared to the U.S. dollar. Our ability to adjust the foreign currency selling prices of products in response to changes in exchange rates is limited and may not offset the impact of the changes in exchange rates on the translated value of sales or costs. In addition, if we increase the selling price of our products in local currencies, this could have a negative impact on the demand for our products.

Previous wording

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 for the nine months ended September 30, 2025 was not material. We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.

Current wording

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 U.S. has withdrawn support for Pillar Two and proposed a “side-by-side” solution under which U.S.-parented groups may be exempt from certain provisions of Pillar Two, subject to international agreement and local implementation. The impact of the Pillar Two Framework on our income tax provisions for the three months ended March 31, 2026 and 2025, respectively, was not material. We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.

Previous wording

Major customers. While we have historically depended on a few customers for a large percentage of our annual net sales, the composition of this group can change from period to period. Net sales derived from our five largest customers as a percentage of our net sales was 15% for the nine months ended September 30, 2025 and 13% for the full years ended December 31, 2024 and 2023, respectively. One of our customers accounted for 13% and 12% of our net accounts receivable as of September 30, 2025 and December 31, 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.

Current wording

Major customers. While we have historically depended on a few customers for a large percentage of our annual net sales, the composition of this group can change from period to period. Net sales derived from our five largest customers as a percentage of our net sales was 20% for the three months ended March 31, 2026, and 16% and 13% for the full years ended December 31, 2025 and 2024, respectively. One of our customers accounted for 12% and 11% of our net accounts receivable as of March 31, 2026 and December 31, 2025, respectively. We seek to add new customers and to expand our relationships with existing customers. We anticipate that the composition of our significant customers will continue to change. We generally do not enter into agreements with our customers obligating them to purchase a fixed number or large volume of our products. If any of our significant customers substantially reduced their purchases from us, our results would be adversely affected.

Previous wording

Net sales. Net sales increased by $17.7 million, or 7.6%, to $250.8 million for the three months ended September 30, 2025 from $233.1 million for the three months ended September 30, 2024.

Current wording

Net sales. Net sales increased by $37.7 million, or 16.6%, to $265.5 million for the three months ended March 31, 2026 from $227.8 million for the three months ended March 31, 2025.

Previous wording

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

Current wording

The table below sets forth sales by type of product:

Previous wording

Materials processing sales accounted for 86.0% of total revenue and decreased 4.8% year over year, as a result of lower sales in cutting, welding, and marking applications, partially offset by higher revenue in cleaning, additive manufacturing, and micromachining. Other applications sales increased 21.9% year over year driven by higher revenue in medical procedures and advanced applications.

Current wording

Industrial Solutions sales accounted for 85.7% of total revenue and increased 21.0% year over year, as a result of higher sales in cutting, welding, cleaning and marking, partially offset by lower sales in additive manufacturing, custom applications, drilling and cladding. Advanced Solutions sales decreased 4.7% year over year driven by lower sales in micromachining and advanced applications, partially offset by higher sales due to increased demand of laser equipment used in medical procedures.

Previous wording

Sales and marketing expense. Sales and marketing expense increased by $1.6 million, or 7.2%, to $23.8 million for the three months ended September 30, 2025 from $22.2 million for the three months ended September 30, 2024. This change was primarily the result of an increase of $0.8 million in amortization expense, an increase of $0.8 million in personnel and related expenses, and an increase of $0.7 million in costs related to trade fairs and exhibits, partially offset by a decrease of $0.6 million in premises expense. As a percentage of sales, sales and marketing expense was 9.5% for both the three months ended September 30, 2025 and 2024, respectively.

Current wording

Sales and marketing expense. Sales and marketing expense increased by $0.1 million, or 0.4%, to $24.5 million for the three months ended March 31, 2026 from $24.4 million for the three months ended March 31, 2025. This change was primarily the result of an increase of $0.5 million in personnel and related expenses, an increase of $0.3 million in costs related to trade fairs and exhibits, and an increase of $0.1 million in depreciation expense, partially offset by a decrease of $0.5 million in amortization expense, a decrease of $0.2 million in premises expense, and a decrease of $0.1 million in advertising expense. As a percentage of sales, sales and marketing expense was 9.2% and 10.7% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Research and development expense. Research and development expense increased by $3.2 million, or 11.8%, to $30.4 million for the three months ended September 30, 2025, compared to $27.2 million for the three months ended September 30, 2024. This change was primarily the result of an increase of $1.8 million in consultant fees, an increase of $0.9 million in personnel and related expenses, and an increase of $0.6 million in materials expense. As a percentage of sales, research and development expense increased to 12.1% from 11.7% for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Research and development expense. Research and development expense increased by $5.0 million, or 17.7%, to $33.3 million for the three months ended March 31, 2026, compared to $28.3 million for the three months ended March 31, 2025. This change was primarily the result of an increase of $3.8 million in personnel and related expenses, an increase of $0.7 million in lease expense, and an increase of $0.5 million in consultant fees. As a percentage of sales, research and development expense increased to 12.5% from 12.4% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

General and administrative expense. General and administrative expense increased by $2.4 million, or 7.3%, to $35.1 million for the three months ended September 30, 2025 from $32.7 million for the three months ended September 30, 2024. The change was primarily the result of an increase of $3.9 million in personnel and related expenses, partially offset by a decrease of $0.8 million in bad debt expense, and a decrease of $0.4 million in premises expense. As a percentage of sales, general and administrative expense was 14.0% for both the three months ended September 30, 2025 and 2024, respectively.

Current wording

General and administrative expense. General and administrative expense increased by $3.3 million, or 10.1%, to $36.1 million for the three months ended March 31, 2026 from $32.8 million for the three months ended March 31, 2025. The change was primarily the result of an increase of $2.5 million in personnel and related expenses, an increase of $0.7 million in information systems expense, and an increase of $0.5 million in legal expense partially offset by an increase of $0.6 million of gain on sale of fixed assets and a decrease of $0.5 million of bad debt expense. As a percentage of sales, general and administrative expense was 13.6% and 14.4% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Effect of exchange rates on net sales, gross profit and operating expenses. If exchange rates relative to the U.S. dollar had been the same as the comparable quarter one year ago, which were on average euro 0.91, Japanese yen 149 and Chinese yuan 7.16, respectively, we estimate that net sales for the three months ended September 30, 2025 would have been $3.4 million lower, gross profit would have been $1.1 million lower and total sales and marketing, research and development, and general and administrative expenses would have been $1.1 million lower.

Current wording

Effect of exchange rates on net sales, gross profit and operating expenses. If exchange rates relative to the U.S. dollar had been the same as the comparable quarter one year ago, which were on average euro 0.95, Japanese yen 153 and Chinese yuan

Previous wording

Loss on foreign exchange. We incurred a foreign exchange transaction loss of $7.0 million for the nine months ended September 30, 2025 as compared to a loss of $6.1 million for the nine months ended September 30, 2024. Our European subsidiaries have certain net assets denominated in U.S. dollars, and our Chinese and Indian subsidiaries have certain net liabilities denominated in U.S. dollars. The loss for the nine months ended September 30, 2025 was primarily attributable to loss from the appreciation of the euro as compared to the U.S. dollar, and loss from the depreciation of the Chinese yuan and Indian rupee as compared to the U.S. Dollar.

Current wording

Gain on foreign exchange. We incurred a foreign exchange transaction gain of $0.2 million for the three months ended March 31, 2026 as compared to a $2.4 million loss for the three months ended March 31, 2025. Our European subsidiaries have certain net assets denominated in U.S. dollars, and our Indian, and Chinese subsidiaries have certain net liabilities denominated in U.S. dollars. The foreign exchange gain for the three months ended March 31, 2026 was primarily attributable to the depreciation and appreciation of the Euro and Chinese yuan, respectively, as compared to the U.S. dollar, partially offset by the depreciation of the Indian rupee, as compared to the U.S. dollar.

Previous wording

Interest income, net. Interest income, net was $7.3 million for the three months ended September 30, 2025 as compared to $11.1 million of income for three months ended September 30, 2024. The change in interest income, net was due to a reduction in total cash and investments, lower weighted average interest rates across our investment portfolio and geographic mix in the current period as compared to the prior year.

Current wording

Interest income, net. Interest income, net was $6.9 million for the three months ended March 31, 2026 as compared to $7.4 million for the three months ended March 31, 2025. The change in interest income, net was primarily due to lower weighted average interest rates across our investment portfolio in the current period as compared to the prior year.

Previous wording

Provision for income taxes. The provision for income taxes was an expense and benefit of $8.2 million and $8.9 million, for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate was 52.3% for the three months ended September 30, 2025. This compares to the effective tax rate for the three months ended September 30, 2024 of 3.7%. The increase in tax expense in 2025 was primarily due to higher income before provision for income taxes for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. There was a net tax detriment in the three months ended September 30, 2025 of $3.8 million primarily due to increases in uncertain tax positions resulting from tax audit activity. This compares to a net discrete tax detriment of $41.5 million for the three months ended September 30, 2024, which is primarily related to losses on the divestiture of Russian operations. The other discrete items for the three months ended September 30, 2024 did not have a significant impact on our tax rate.

Current wording

Provision for income taxes. The provision for income taxes was a benefit of $0.6 million and an expense of $6.9 million, for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate was (55.4)% for the three months ended March 31, 2026. This compares to the effective tax rate for the three months ended March 31, 2025 of 64.6%. The income tax benefit for the three months ended March 31, 2026 was primarily due to a discrete tax benefit related to equity-based compensation. In addition, a decrease of income before provision for income taxes in the three months ended March 31, 2026 as compared to March 31, 2025 also lead to the decrease in tax expense. Other discrete items for the three months ended March 2026 did not have a significant impact on our tax rate.

Previous wording

Net income (loss). Net income (loss) increased by $241.1 million to a net income of $7.5 million for the three months ended September 30, 2025 compared to a net loss of $233.6 million for the three months ended September 30, 2024 due to the factors described above.

Current wording

Net income. Net income decreased by $2.2 million to a net income of $1.6 million for the three months ended March 31, 2026 compared to a net income of $3.8 million for the three months ended March 31, 2025 due to the factors described above.

Previous wording

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, assess 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 September 30, 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.

Current wording

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 in Germany.

Previous wording

Included in cash and cash equivalents is $0.7 million of cash located in Belarus, as of September 30, 2025.

Current wording

Included in cash and cash equivalents is $0.6 million of cash located in Belarus, as of March 31, 2026.

Previous wording

(2) Other lines of credit available to certain foreign subsidiaries in U.S. dollars and their respective local currencies. At September 30, 2025, there was $2.0 million drawn on these lines; and there were $2.2 million of guarantees issued against the lines which reduces total availability.

Current wording

(2) Other lines of credit available to certain foreign subsidiaries in U.S. dollars and their respective local currencies. At March 31, 2026, there were no amounts drawn on these lines; however, there were $1.8 million of guarantees issued against the lines which reduced total availability.

Previous wording

(3) The facilities are available to certain foreign subsidiaries in their respective local currencies. At September 30, 2025, there were no amounts drawn on this line; however, there were $3.7 million of guarantees issued against the lines which reduces total availability.

Current wording

(3) The facilities are available to certain foreign subsidiaries in their respective local currencies. At March 31, 2026, there were no amounts drawn on these lines; however, there were $1.8 million of guarantees issued against the lines which reduced total availability.

Previous wording

Operating activities. Net cash provided by operating activities decreased by $127.6 million to $46.5 million for the nine months ended September 30, 2025 from $174.1 million for the nine months ended September 30, 2024, primarily due to an increase in cash used by working capital and a decrease in cash provided by net income after adding back non-cash expenses. Our largest working capital items typically are inventory and accounts receivable. Items such as accounts payable to third parties, prepaid expenses and other current assets and accrued expenses and other 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.

Current wording

Operating activities. Net cash used in operating activities increased by $18.9 million to an outflow of $5.5 million for the three months ended March 31, 2026 vs. an inflow of $13.4 million for the three months ended March 31, 2025, primarily due to an increase in cash incentive bonus payments as well as the impact of increases in working capital and a decrease in cash provided by net income after adding back non-cash expenses. Our largest working capital items typically are inventory and accounts receivable. Items such as accounts payable to third parties, prepaid expenses and other current assets and accrued expenses and other current liabilities are typically not as significant as our working capital investment in accounts receivable and inventory because of the amount of value added within IPG due to our vertically integrated structure. Accruals and payables for personnel costs including bonuses and income and other taxes payable are largely dependent on the timing of payments for those items.

Previous wording

The decrease in cash flow from operating activities in first three quarters of 2025 when compared to the first three quarters of 2024 primarily resulted from:

Current wording

The increase in cash used in operating activities in the first quarter of 2026 when compared to the first quarter of 2025 primarily resulted from:

Previous wording

•an increase in cash used by inventory as we manufactured more in the first three quarters of 2025 compared to the first three quarters of 2024 when we moderated our investments in inventory;

Current wording

•an increase in cash used by inventory as we manufactured more in the first quarter of 2026 compared to the first quarter of 2025 when we moderated our investments in inventory;

Previous wording

•a decrease in cash provided by accounts receivable due to higher sales at the end of the first three quarters of 2025 and timing of collections;

Current wording

•an increase in cash used by accounts receivable due to higher sales at the end of the first quarter of 2026 and timing of collections;

Previous wording

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

Current wording

•an increase in cash used by prepaid expenses and other assets due to higher prepayments made to vendors and timing of bank acceptance drafts; and

Previous wording

•an increase in cash used by income and other taxes payable due to the timing of estimated tax payments made and refunds received from filing tax returns.

Current wording

•an increase in net cash used by income and other taxes payable due to the timing of estimated tax payments made and refunds received from filing tax returns.

Previous wording

The decreases in cash provided by operating activities in the first three quarters of 2025 when compared to the first three quarters of 2024 were partially offset by:

Current wording

The increase in cash used in operating activities in the first quarter of 2026 when compared to the first quarter of 2025 was partially offset by:

Previous wording

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

Current wording

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

Previous wording

Investing activities. Net cash used in investing activities was $292.9 million for the nine months ended September 30, 2025 as compared to cash provided by investing activities of $471.3 million in 2024. The cash used in investing activities in 2025 related to $232.7 million of net purchases of investments and $60.9 million of cash used for capital expenditures. The cash provided by investing activities in 2024 related to $543.0 million of net proceeds from short-term investments and $28.5 million of cash provided by sales of property, plant and equipment; partially offset by $75.4 million of cash used for capital expenditures, 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.

Current wording

Investing activities. Net cash provided by investing activities was $95.2 million for the three months ended March 31, 2026 as compared to cash used in investing activities of $274.4 million in 2025. The cash provided by investing activities in 2026 related to $110.7 million of net proceeds from the maturities of investments, and $0.8 million in proceeds from the sale of property, plant, and equipment, partially offset by $16.3 million of cash used for capital expenditures. The cash used in investing activities in 2025 primarily related to $249.8 million of net purchases of short-term investments and $24.8 million of cash used for capital expenditures.

Previous wording

Financing activities. Net cash used in financing activities was $50.9 million for the nine months ended September 30, 2025 as compared to net cash used of $284.6 million in 2024. The cash used in financing activities in 2025 primarily related to the purchase of treasury stock of $46.6 million and the net cash outflow from amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units of $4.3 million. The cash used in financing activities in 2024 primarily related to the purchase of treasury stock of $286.5 million.

Current wording

Financing activities. Net cash used in financing activities was $11.7 million for the three months ended March 31, 2026 as compared to net cash used of $5.7 million in 2025. The cash used in financing activities in both years related to amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units. The amount disbursed to withhold these shares increased in 2026 compared to 2025 due to the vesting of restricted stock units at substantially higher stock prices.

Previous wording

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to accurately predict and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 1, "Business" and Item 1A, "Risk Factors" of Part I of the Form 10-K filed with the SEC for the year ended December 31, 2024 (the "Annual Report") and in Item 1A, "Risk Factors" of Part II of the Form 10-Q filed with the SEC for the quarter ended March 31, 2025. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to rely on such forward-looking information. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Current wording

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to accurately predict and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 1, "Business" and Item 1A, "Risk Factors" of Part I of the Form 10-K filed with the SEC for the year ended December 31, 2025 (the "Annual Report") and in Item 1A, "Risk Factors" of Part II of this quarterly report. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to rely on such forward-looking information. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.