What changed in this filing

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Item 1A. Risk Factors

2025-02-20 compared with 2024-02-21 · 67 added, 115 removed, 362 unchanged (33% of the section changed)

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Slowing economic growth or recession, tariff-trade wars or other adverse economic developments or uncertainty in any of our key markets, including in China, may result in a decrease in our sales.

In addition, the new presidential administration has articulated that it may impose substantial new or increased tariffs on foreign imports into the U.S.

Adverse changes have occurred and may occur in the future as a result of declining or flat global or regional economic conditions, fluctuations in currency and commodity prices, wavering confidence, capital expenditure reductions, unemployment, declines in stock markets, contraction of credit availability, declines in real estate values, or other factors affecting economic conditions generally.

These changes may negatively affect the sales of

our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, increase the risk of loss on investments, or increase costs associated with manufacturing and distributing products.

These changes may negatively affect the sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, increase the risk of loss on investments, or increase costs associated with manufacturing and distributing products.

An economic downturn could have a material adverse effect on our business, financial condition and results of operations.

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Although applications in this market are broad, sales for these applications are cyclical and have historically experienced sudden and severe downturns and periods of oversupply, resulting in significantly reduced demand for capital equipment, including the products that we manufacture and market.

For example, our sales decreased by 25% in the materials processing market in 2009 as a result of the global economic recession, our material processing sales declined 10% in the second half of 2018 and 11% in the 2019 fiscal year, in part due to decreased capital equipment demand stemming from adverse changes to U.S.-China relations, including rounds of tariff increases and retaliations and declined 12% in the 2020 fiscal year, in part due to decreased capital equipment demand attributed to the COVID-19 pandemic.

For the foreseeable future, our operations will continue to depend upon capital expenditures by customers in these industries or markets, which, in turn, depend upon the demand, as well as forecasted demand, for their products or services.

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The markets for our products are highly competitive and currently subject to significant price and technological competition, and if we are unable to compete successfully, it could result in reduced sales, reduced gross margins or the loss of market share.

The industries in which we operate are characterized by significant price and technological competition.

We operate in industries that are characterized by significant price and technological competition.

We compete with makers of fiber lasers, solid-state lasers, direct diode lasers, high power CO 2, YAG and disc lasers.

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Many of our fiber laser competitors are increasing the output powers, improving the quality of their fiber lasers and decreasing prices to compete with our products.

Our current or potential customers may determine to develop and produce products for their own use which are competitive to our products.

Many of our competitors in Asia are beginning to export their fiber lasers and fiber laser-based systems to non-Asia markets, which may impact our pricing and sales in such markets.

Our current or potential customers may decide to develop and produce products for their own use which are competitive to our products.

Such vertical integration could reduce the market opportunity for our products.

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Market participants, particularly in China, have reduced and may continue to reduce, prices of competing products to gain market share.

If the ASPs of our products decline further and we are unable to increase our unit

volumes, introduce new or enhanced products with higher margins or reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our operating results may be adversely affected.

If the ASPs of our products decline further and we are unable to increase our unit volumes, introduce new or enhanced products with higher margins or reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our operating results may be adversely affected.

In addition, because of our significant fixed costs, we are limited in our ability to reduce total costs quickly in response to any revenue shortfalls.

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Our ability to maintain or increase sales depends upon our ability to develop new products, penetrate new applications and end markets for fiber lasers and maintain or increase our market share in existing applications.

Our level of sales will depend on our ability to generate sales of fiber lasers in new and developing markets including applications for lasers where they have not been used previously and in applications in which other lasers, such as CO 2 and YAG lasers, have been used.

To date, a significant portion of our revenue growth has been derived from sales of fiber lasers primarily for applications where CO 2 and YAG lasers historically have been used.

Our level of sales will depend on our ability to generate sales of fiber lasers in new and developing markets including applications for lasers where they have not been used previously and in applications that use other lasers, such as CO 2 and YAG lasers.

Historically, a significant portion of our revenue growth has been derived from sales of fiber lasers primarily for applications where CO 2 and YAG lasers historically have been used.

We have made significant sales into the cutting, welding and marking and engraving applications, large applications where the use of other laser technologies was well established.

As fiber lasers increase penetration in core materials processing applications and there is more competition in these core material processing applications, the development of new applications, end markets and products outside our core applications becomes more important to our ability to generate sales.

In order to maintain or increase market demand for our products, we will need to devote substantial resources to:

• demonstrate the effectiveness of fiber lasers in new applications for materials processing, medical, communications and advanced applications;

• demonstrate the effectiveness of fiber lasers in new applications for materials processing, medical and advanced applications;

• successfully develop new product lines, such as the handheld welder, UV, visible and ultrafast fiber lasers with competitive features that extend our product line;

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• continue to reduce our manufacturing costs and enhance our competitive position.

Potential customers may have substantial investments and know-how related to their existing laser and non-laser technologies.

Potential customers may have substantial investments and know-how related to their existing laser and non-laser technologies and processes.

They may perceive risks relating to the reliability, quality, usefulness and profitability of integrating fiber lasers in their systems when compared to other laser or non-laser technologies available in the market or that they manufacture themselves.

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If OEM customers or integrators are not able to adapt existing tools or develop new systems to take advantage of the features and benefits of fiber lasers or if they perceive us to be an actual or potential competitor, then the opportunities to increase our revenues and profitability may be severely limited or delayed.

In addition, some of our OEM customers are developing their own fiber laser sources.

If they are successful, this may reduce our sales to these customers.

Furthermore, if our OEM customers or third-party system integrators experience financial or other difficulties that adversely affect their operations, our financial condition or results of operations may also be adversely affected.

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We may not adjust these fixed costs quickly enough or sufficiently to adapt to rapidly changing market conditions.

Our gross profit, in absolute dollars and as a percentage of net sales, is impacted by our sales volume, the corresponding absorption of fixed manufacturing overhead expenses and manufacturing yields.

Our gross profit, in absolute dollars and as

a percentage of net sales, is impacted by our sales volume, the corresponding absorption of fixed manufacturing overhead expenses and manufacturing yields.

In addition, because we are a vertically integrated manufacturer and design and manufacture our key specialty components, insufficient demand for our products may subject us to the risks of high inventory carrying costs and increased inventory obsolescence.

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We have added and are continuing to add substantial manufacturing capacity at our facilities in the United States, Germany, Italy and Poland.

We are adding manufacturing capabilities and capacity outside of Russia in response to trade sanctions imposed on Russia, where we have large production facilities.

The trade restrictions impose limits on our ability to purchase components and other items from our subsidiary in Russia.

A significant portion of our manufacturing facilities and production equipment, such as our semiconductor production and processing equipment, diode packaging equipment and diode burn-in stations, are special-purpose in nature and cannot be adapted easily to make other products.

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To maintain our competitive position and to meet anticipated demand for our products, we invest significantly in the expansion of our manufacturing and operations throughout the world and may do so in the future.

We had capital expenditures of $110 million in both 2023 and 2022, and we expect to incur approximately $120 million to $130 million in capital expenditures in 2024, net of asset divestitures.

Recent expansions of capacity were required to offset the loss of capacity at our factories in Russia and Belarus due to sanctions.

In connection with these projects, we may incur cost overruns, construction delays, project cancellations, labor difficulties or regulatory issues which could cause our capital expenditures to be higher than what we currently anticipate, possibly by a material amount, which would in turn adversely impact our operating results.

Moreover, we may experience higher costs due to yield loss, production inefficiencies, equipment problems and lower margins until any operational issues associated with the opening of new manufacturing facilities are resolved.

A few customers account for a significant portion of our sales, and if we lose any of these customers or they significantly curtail their purchases of our products, our results of operations could be adversely affected.

We rely on a few customers for a significant portion of our sales.

In the aggregate, our top five customers accounted for 13%, 15% and 19% of our consolidated net sales in 2023, 2022 and 2021, respectively.

A few of our larger customers, including our largest customer, are making fiber lasers or announced plans to develop fiber lasers.

We generally do not enter into agreements with our customers obligating them to purchase our fiber lasers or amplifiers.

Our business is characterized by short-term purchase orders and shipment schedules.

If any of our principal customers discontinues its relationship with us, replaces us as a vendor for certain products or suffers downturns in its business, our business and results of operations could be adversely affected.

Because we lack long-term purchase commitments from our customers, our sales can be difficult to predict, which could lead to excess or obsolete inventory and adversely affect our operating results.

We generally do not enter into long-term agreements with our customers obligating them to purchase our fiber lasers or amplifiers.

Our business is characterized by short-term purchase orders and shipment schedules and, in some cases, orders may

be canceled or delayed without significant penalty or any penalty.

Our business is characterized by short-term purchase orders and shipment schedules and, in some cases, orders may be canceled or delayed without significant penalty or any penalty.

As a result, it is difficult to forecast our revenues and to determine the appropriate levels of inventory required to meet future demand.

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In addition, provisions have been recorded as a result of changes in market prices of certain components, the value of those inventories that was realizable through finished product sales due to declines in certain end market demand and uncertainties related to the recoverability of the value of inventories due to technological and product changes, and excess quantities.

In 2022, approximately $74 million was related to inventory provision and related charges at our Russian operations.

If our OEM customers, end users or distributors fail to accurately forecast the demand for our products, fail to accurately forecast the timing of such demand, or are unable to consistently negotiate acceptable purchase order terms with customers, our results of operations may be adversely affected.

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These are not readily available from other sources at our current costs and may not be available at all.

If our manufacturing activities were obstructed or hampered significantly, it could take a considerable length of time, or it could increase our costs, to resume manufacturing or find alternative sources of supply.

If our manufacturing activities were obstructed or hampered significantly, it could take a considerable length of time and capital investment, or it could increase our costs, to resume manufacturing or find alternative sources of supply.

Many of the tools and equipment we use are custom-designed, and it could take a significant period of time to repair or replace them.

Our primary manufacturing facilities are located in the United States and Germany, and we have added production in Italy and Poland.

Our primary manufacturing facilities are

located in the United States and Germany, and we have added production in Italy and Poland.

Despite our efforts to mitigate the impact of any flood, fire, natural disaster, political unrest, act of terrorism, war, trade sanctions, outbreak of disease or other similar event, our business could be adversely affected to the extent that we do not have redundant production capabilities if any of our major manufacturing facilities or equipment should become inoperable, inaccessible, damaged or destroyed.

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Some of our suppliers are also our competitors.

Some of our suppliers may not be able to meet demand from our growing business or because of global demand for their components.

Some of our suppliers may not be able to meet demand from our because of global demand for their components.

As a result, we experienced and may in the future experience longer lead times or delays in fulfillment of our orders.

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If our suppliers face financial or other difficulties, if our suppliers do not maintain sufficient inventory on hand or if there are significant changes in demand for the components and materials we obtain from them, they could limit the availability of these components and materials to us, which in turn could adversely affect our business.

The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.

In the first quarter of 2022, Russian military forces invaded Ukraine.

This military action had significant and immediate adverse economic impacts globally.

Given the nature of our business and our global operations, particularly those in Russia and Belarus, the current conflict between Russia and Ukraine has affected and may adversely affect our business and results of operations.

Historically we have manufactured a variety of components, including proprietary fiber-based components, and sub-assemblies at our facility in Russia and mechanical components at our facility in Belarus.

Our operations worldwide are subject to additional regulatory and political constraints and additional compliance costs in connection with sanctions, other trade controls and higher tariffs imposed by the United States, the European Union and other governments in response to Russia’s military operations in Ukraine.

The United States and the European Union have enacted numerous sanctions packages and may enact additional sanctions until the conflict has been resolved.

These sanctions restrict our ability to import components in Europe from Russia, and provide or receive services from our Russian subsidiary.

While certain components can be exported

from Russia to the United States, the United States imposed significant import tariffs that make it commercially undesirable.

Further, transfer of funds to and from Russia and Belarus are difficult or slow because of bank compliance with sanctions.

In addition, we are not able to access cash held by or receive dividends from our Russian and Belarus subsidiaries because of various sanctions.

We continue to implement steps to mitigate the impacts of the Russia-Ukraine conflict on our business and reduce reliance on our facilities in Russia and Belarus, such as migrating the production of a number of our components that had been manufactured in Russia and Belarus into other countries.

The current conflict between Russia and Ukraine and our continued operations in Russia and Belarus may also have the effect of heightening many other risks disclosed in our public filings, any of which could adversely affect our business and results of operations.

Such risks include, but are not limited to, increases in tariffs;

adverse effects on global macroeconomic conditions;

increased exposure to cyberattacks;

impact of export controls and economic sanctions;

limitations in our ability to implement and execute our business strategy;

risks to employees, assets and operations we have in Russia and Belarus;

disruptions in global supply chains;

asset write-downs;

exposure to foreign currency fluctuations and potential nationalizations and asset seizures in Russia;

constraints or disruption in the capital markets and our sources of liquidity;

and potential contractual breaches and litigation.

Additionally, many of our scientists and managers were born in Russia and now reside in Europe and the United States.

Such persons have had, and may continue to have, difficulties or delays in obtaining or renewing the necessary visas to enter the United States and other countries in which we operate.

Such difficulties or delays have and may further adversely impact our ability to effectively manage operations, oversee existing projects, develop new business relationships, and conduct product research and development.

We must comply with and could be impacted by various export controls and trade and economic sanctions laws and regulations that could negatively affect our business and may change due to diplomatic and political considerations outside of our control.

A significant part of our business involves the export and import of components and products among many countries, including the U.S., Germany and China.

We also export and import a limited number of components and products in Russia and Belarus.

Historically, we also exported and imported a limited number of components and products in Russia and Belarus with entities we operated in those regions, and our subsidiary in India imports a limited number of medical devices from our former Russian subsidiary pursuant to an agreement entered into in connection with the disposition of such subsidiary in 2024.

government and governments of other countries in which we do business have Trade Controls that impact our ability to export, re-export or transfer products, software and technology originating in those countries.

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BIS issued warning letters to the Company in response to the self-disclosures.

Following the submission of the self-disclosures, the Company received subpoenas from the U.S.

Department of Justice (“DOJ”) and BIS in October 2021 and October 2022, respectively, with respect to exports by the Company.

The Company has been informed by the DOJ and BIS that the Company has satisfied its obligations under the subpoenas.

The Company believes that those investigations are concluded.

Our failure to comply with these laws and regulations could result in costly government investigations, government sanctions, including substantial monetary penalties, civil or criminal penalties, denial of export privileges, debarment from government contracts, and a loss of revenues and reputational harm.

Our manufacturing facilities in the U.S., Germany and Russia provide finished products to China, our largest market.

Should the United States, the European Union or Russia implement new or broad-based Trade Controls directed at each other or China, our production and/or deliveries as well as results of operations and/or financial condition could be affected.

In connection with the Russia-Ukraine conflict, broad-based sanctions (including asset-freeze/blocking sanctions) have been imposed by the U.S., UK, EU, and numerous other governments targeting Russia, including but not limited to major Russian banks.

In the U.S., these sanctions are administered by the Office of Foreign Assets Control (“OFAC”) and are typically known as the OFAC regulations.

These regulations are extensive and complex, and they differ from one sanctions regime to another.

Failure to comply with these regulations could subject us to legal and reputational consequences, including civil and criminal penalties.

Our manufacturing facilities in the U.S.

and Germany provide finished products to China, our largest market.

Should the United States or the European Union implement targeted or broad-based Trade Controls, our production and/or deliveries as well as results of operations and/or financial condition could be affected.

In addition, Trade Controls and their implementation are fluid and may change due to diplomatic and political considerations outside of our control.

The United States, the European Union and Russia have imposed numerous additional trade restrictions and sanctions in response to the Russia-Ukraine conflict.

Such changes, including the potential expansion of sanctions and sanctions designations, as well as public statements by government officials, could be significant.

While the Company has a trade compliance program, there is a risk that IPG may not be able to comply due to the number, complexity and fast-changing nature of sanctions being added in response to the Russia-Ukraine conflict.

Trade Controls and governmental responses to the conflict may require us to take certain actions, including increasing costs and abandoning operations or writing-down asset values, or respond to nationalization or expropriation of assets abroad, adversely affect prevailing market prices of our common stock, have a reputational impact, or otherwise have a material adverse impact on us, our business and financial results.

While the Company has a trade compliance program, there is a risk that IPG may not be able to comply due to the number, complexity and fast-changing nature of sanctions.

Trade Controls and other governmental responses to political escalations may require us to take certain actions, including increasing costs and abandoning operations or writing-down asset values, or respond to nationalization or expropriation of assets abroad, adversely affect prevailing market prices of our common stock, have a reputational impact, or otherwise have a material adverse impact on us, our business and financial results.

We may experience lower than expected manufacturing yields, which would adversely affect our gross margins.

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Risks Relating to Intellectual Property, Litigation, Information Systems and Regulations

In the past, we were subject to litigation alleging that we infringed third-party intellectual property rights.

We are subject to litigation alleging that we infringe third-party intellectual property rights.

Intellectual property claims could result in costly litigation and harm our business.

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We have defended against several patent infringement claims in the past and we engage in patent office opposition proceedings internationally for patents owned by others.

There can be no assurance that, in the future, we will be able to dispose of any claims or other allegations made or asserted against us without them having a material impact on our results of operations.

In December 2024, affiliates of Trumpf SE & Co.

KG filed two different patent lawsuits in two different Unified Patent Courts located in Germany against IPG Laser GmbH & Co.

KG, our German subsidiary, alleging infringement of two patents granted by the European Patent Office by our adjustable mode beam lasers.

There can be no assurance that we will be able to dispose of any claims or other allegations made or asserted against us without them having a material impact on our results of operations.

Even if we ultimately are successful on the merits of any such litigation or re-examination, legal and administrative proceedings related to intellectual property are typically expensive and time-consuming, generate negative publicity and divert financial and managerial resources.

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These developments could adversely affect our ability to compete for customers and increase our revenues.

Plaintiffs in intellectual property cases often seek, and sometimes

obtain, injunctive relief.

Plaintiffs in intellectual property cases often seek, and sometimes obtain, injunctive relief.

Intellectual property litigation commenced against us could force us to take actions that could be harmful to our business, including the following:

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In addition, intellectual property lawsuits can be brought by third parties against OEMs and end users that incorporate our products into their systems or processes.

In some cases, we indemnify OEMs against third-party infringement claims relating to our products and we often make representations affirming, among other things, that our products do not infringe the intellectual property rights of others.

In some cases, we indemnify OEMs against third-party infringement claims relating to

our products and we often make representations affirming, among other things, that our products do not infringe the intellectual property rights of others.

As a result, we may incur liabilities in connection with lawsuits against our customers.

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While our system is designed with access security, if a third party gains unauthorized access to our data or technology, including information regarding our customers, employees and service providers, such security breach could expose us to a risk of loss of this information, loss of business, litigation and possible liability.

Our security measures may be breached as a result of third-party action, including intentional misconduct by computer

hackers, employee error, malfeasance or otherwise.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers' data or our data, including our intellectual property and other confidential business information, employee information or our information technology systems.

Our security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers' data or our data, including our intellectual property and other confidential business information, employee information or our information technology systems.

Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate or detect these techniques or to implement adequate preventative measures.

Any unauthorized access could negatively impact our customers' products, result in a loss of confidence by our customers, damage our reputation, disrupt our business, result in a misappropriation of our assets (including cash), lead to legal liability and negatively impact our future sales.

Additionally, such actions could result in significant costs associated with loss of our intellectual property, impairment of our ability to conduct our operations, rebuilding our network and systems, prosecuting and defending litigation, responding to regulatory inquiries or actions, paying damages or taking other remedial steps.

Additionally, such actions could result in significant costs associated with loss of our intellectual property, impairment of our ability to conduct our

operations, rebuilding our network and systems, prosecuting and defending litigation, responding to regulatory inquiries or actions, paying damages or taking other remedial steps.

In addition, we may incur significant costs designed to prevent or mitigate the damage related to cybersecurity incidents.

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We are evaluating these requirements and taking measures to ensure compliance with all applicable privacy and data protection-related laws and regulations.

Due to the lack of experience with the interpretation and enforcement of many of these laws and regulations, some measures initially might not satisfy standard or best practices that will be established in the coming years.

Because there is limited interpretation and enforcement of many of these laws and regulations, some measures initially might not satisfy standard or best practices that will be established in the coming years.

Changes in tax rates, tax liabilities or tax accounting rules could affect future results.

As a global company, we are subject to taxation in the United States and various other countries and jurisdictions.

Significant judgment is required to determine worldwide tax liabilities.

Significant judgment is required to determine worldwide tax liabilities, particularly related to intercompany pricing we apply to products shipped between various tax jurisdictions, commonly referred to as transfer pricing.

Our future tax rates could be affected by changes in the composition of earnings in countries or states with differing tax rates, transfer pricing rules, changes in the valuation of our deferred tax assets and liabilities, or changes in the tax laws.

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Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our operating results and financial condition.

If we or our third-party vendors fail to comply with FDA regulations or similar legal requirements in foreign jurisdictions relating to the manufacturing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be negatively impacted.

If we or our third-party vendors fail to comply with FDA regulations or similar legal requirements in foreign jurisdictions relating to the manufacturing, labeling or marketing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be negatively impacted.

We now make fiber laser systems and accessories targeted at specific medical applications.

In addition, we sell our commercial fiber and diode laser modules, subassemblies and systems to OEMs that incorporate them into their medical products.

With respect to such products, some of our manufacturing facilities, and the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, are required to comply with the FDA’s Quality System Regulation and those of other countries (“QSR”), which sets forth minimum standards for the procedures, execution and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of the products we sell in the medical industry, and related regulations, including Medical Device Reporting (“MDR”) regulations regarding reporting of certain malfunctions and adverse events potentially associated with our products.

The FDA and other regulatory agencies may evaluate our compliance with the QSR, MDR and other regulations, among other ways, through periodic announced or unannounced inspections which could disrupt our operations and interrupt our manufacturing.

If in conducting an inspection of our manufacturing facilities, or the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, an investigator from the FDA observes conditions or practices believed to violate the QSR, the investigator may document their observations on a Form FDA 483 that is issued at the conclusion of the inspection.

products we sell in the medical industry, and related regulations, including Medical Device Reporting (“MDR”) regulations regarding reporting of certain malfunctions and adverse events potentially associated with our products.

If in conducting an inspection of our manufacturing facilities, or the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, an investigator from the FDA or another regulatory agency observes conditions or practices believed to violate the QSR, the investigator may document their observations on a Form FDA 483 that is issued at the conclusion of the inspection.

A manufacturer that receives an FDA 483 may respond in writing and explain any corrective actions taken in response to the inspectional observations.

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The development and sale of medical devices and component products involves an inherent risk of product liability claims.

acceptance of our products and result in significant product liability claims being brought against us .

Defects, integration issues or other performance problems in our fiber laser and other products could also result in personal injury or financial or other damages to our customers, which in turn could damage market acceptance of our products and result in significant product liability claims being brought against us .

A product liability claim brought against us, even if unsuccessful, could be time-consumin g and costly to defend.

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In recent years, the U.S.

instituted changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, including, in particular, on Russian and Chinese-made goods, economic sanctions on individuals, corporations or countries and other government regulations affecting trade between the United States and other countries where we conduct our business.

changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, including, in particular, on Russian and Chinese-made goods, economic sanctions on individuals, corporations or countries and other government regulations affecting trade between the United States and other countries where we conduct our business.

Policy changes and proposals could require time-consuming and expensive alterations to our business operations and may result in greater restrictions and economic uncertainty and disincentives on international trade, which could negatively impact our competitiveness in jurisdictions around the world as well as lead to an increase in costs in our supply chain.

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Gapontsev, beneficially own approximately 37% of our common stock.

Scherbakov, our CEO, is the sole managing director of IPFD.

Trustees of the trusts are officers of the Company and a third-party corporate trustee.

These trustees and Dr.

Scherbakov, as managing director of IPFD, have significant influence on the outcome of matters requiring stockholder approval, including election of our directors, stockholder proposals and approval of significant corporate transactions.

Scherbakov, our former CEO and current director, is the sole managing director of IPFD.

Trustees of the trusts include an executive officer of the Company, a third-party corporate trustee, and Dr.

Scherbakov, as managing director of IPFD, and the other trustees have significant influence on the outcome of matters requiring stockholder approval, including election of our directors, stockholder proposals and approval of significant corporate transactions.

IPFD and the trusts may vote their shares of our common stock in ways that other stockholders may consider would be adverse to the interests of the other stockholders.

These significant ownership interests could delay, prevent or cause a change in control of the Company and might affect the market price of our common stock.

Future sales of our common stock by our existing shareholders could cause our stock price to decline.

Sales of a substantial number of shares of our common stock by our existing stockholders (including the trusts established by Dr.

Gapontsev and IPFD) in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities or other securities convertible into or exchangeable for equity securities, regardless of whether there is any relationship between such sales and the performance of our business.

Provisions in our charter documents and Delaware law, and our severance arrangements, could prevent or delay a change in control of our company, even if a change in control would be beneficial to our stockholders.

Provisions of our certificate of incorporation and by-laws, including certain provisions that will take effect when founder of the Company, the late Dr.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an aggregate of 25% or more of our outstanding voting securities, may discourage, delay or prevent a merger, acquisition or change of control, even if it would be beneficial to our stockholders.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an

aggregate of 25% or more of our outstanding voting securities, may discourage, delay or prevent a merger, acquisition or change of control, even if it would be beneficial to our stockholders.

The existence of these provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

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Any interruption or delay in the supply of our required components, products, materials or services, or our inability to obtain these components, materials, products or services from alternate sources at acceptable prices and within a reasonable amount of time, could impair our ability to meet scheduled product deliveries to our customers and could cause customers to cancel orders.

We are subject to risks of doing business in Russia through our subsidiary, NTO-IRE Polus, which sells finished lasers to customers in Russia and supplies our Chinese subsidiary with a portion of the finished lasers they sell to customers in China.

We are also subject to risks of doing business in Belarus, which provides mechanical parts to our German and Russian operations.

We are subject to risks of doing business in Belarus, which historically provided mechanical parts to our German subsidiary and former Russian subsidiary and which does not currently provide parts to our affiliates outside of Belarus.

We are also subject to risks of doing business in China, as approximately 25% of our sales in 2024 were to Chinese customers.

The results of our operations, business prospects and facilities in Russia, China and Belarus are subject to the economic and political environment there and global geopolitical conditions.

The results of our operations, business prospects and facilities in China and Belarus are subject to the economic and political

environment there and global geopolitical conditions.

The future economic direction of these emerging market countries remains largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the government, together with tax, legal, regulatory and political developments.

As a result of the conflict involving Russia and Ukraine, the U.S.

and certain allies in Europe imposed severe economic and trade sanctions on Russia and could impose further sanctions against it.

Russia has responded in kind.

Sanctions imposed by any of these countries has and could disrupt our supply of critical components among our manufacturing facilities in the U.S., Germany, Italy, Poland, Russia or Belarus, and cause us to shift all or portions of work occurring in Russia or Belarus to other countries.

In addition, sanctions targeting the banking sector have impacted the transfer of cash to and from Russia to fund operations or repatriate surplus liquidity.

At December 31, 2023, we had $76.4 million of cash and cash equivalents in Russia and $5.5 million cash in Belarus.

Sanctions imposed by or on countries in which we have operations or do business has and could disrupt our supply of critical components, including among our manufacturing facilities in the U.S., Germany, Italy, Poland, and Belarus, and has caused us to shift all work occurring in Belarus to other countries.

In addition, sanctions targeting the banking sector have and may impact the transfer of cash to and from countries in which we operate, including our ability to fund operations or repatriate surplus liquidity.

At December 31, 2024, we had $4.7 million cash in Belarus.

Such disruptions could negatively affect our ability to provide critical components to affiliates or produce finished goods for customers, which could increase our costs, require capital expenditures and harm our results of operations and financial condition.

Further, Russia and Belarus adopted rules that impose conditions on sale of assets by U.S.

and western companies and decreasing the values of assets realized, as well as payments to owners of entities there.

Our failure to manage the risks associated with our operations in Russia, China and Belarus and our other existing and potential future international business operations could have a material adverse effect upon our results of operations.

Further, Belarus adopted rules that impose conditions on sale of assets by U.S.

and western companies that could decrease the value of assets, as well as limit payments to sellers.

Our failure to manage the risks associated with our operations in China and Belarus and our other existing and potential future international business operations could have a material adverse effect upon our results of operations.

Foreign currency risk may negatively affect our net sales, cost of sales and operating margins and could result in exchange losses.

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Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or increase the manufacturing cost of our products, which may have an adverse effect on our financial condition, cash flows and profitability.

We incurred a foreign exchange gain of $1.4 million in 2023 and a loss of $4.1 million in 2022.

We incurred a foreign exchange loss of $5.5 million in 2024 and a gain of $1.4 million in 2023.

We pursue acquisitions and investments in new businesses, products, patents or technologies.

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Also, the process of evaluating the potential impairment of long-lived assets is subjective.

We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual results.

We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual

Additionally, if our analysis indicates potential impairment to long-lived assets in one or more of our reporting units, we may be required to record additional charges to earnings in our financial statements, which could negatively affect our results of operations.

In 2022, long-lived asset impairments related to our Russian operations were $79.0 million.

At December 31, 2023, the net asset value of our Russian subsidiary was $103.9 million.

The net value of assets in Russia was reduced by $138.5 million due to the cumulative translation effect of the Russian ruble compared to the U.S.

Depending upon the outcome of our review of our Russian operations, we may incur additional asset impairment charges and the cumulative translation effect of foreign exchange fluctuations that is currently included in accumulated other comprehensive loss on our consolidated balance sheets may be charged to our consolidated statements of income.

In 2024, long-lived asset impairments related to our Belarusian operations were $26.6 million.

We are exposed to credit risk and fluctuations in the market values of our cash, cash equivalents and marketable securities.

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We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile.

These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by unusual events, such as the COVID-19 pandemic, the Eurozone crisis and the U.S.

debt ceiling crisis, which affected various sectors of the financial markets and led to global credit and liquidity issues.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors