Stock-Based Compensation

9 Months Ended

Sep. 30, 2025

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

On July 8, 2022, the board of directors approved the Proto Labs, Inc. 2022 Long-Term Incentive Plan, which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022, and subsequently amended and restated by the Company's shareholders at the Annual Meeting of Shareholders on May 23, 2024 (as amended and restated, and subsequently further amended, the 2022 Plan) to increase the number of shares available for issuance pursuant to awards under the 2022 Plan by an additional 430,000 shares, add a minimum vesting requirement, and extend the expiration date so that the term of the 2022 Plan runs for ten years from the date of the shareholder approval. On May 20, 2025, the Company's shareholders approved an amendment to the 2022 Plan to increase the number of shares available for issuance pursuant to awards under the 2022 Plan by an additional 296,000 shares. Under the 2022 Plan, the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2022 Plan have a maximum term of ten years from the date of grant. The compensation and talent committee may provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation and talent committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the 2022 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

The Company also has outstanding awards under the 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), although the plan expired in February 2022 and no additional awards have since been or will be made under the 2012 Plan. The 2012 Plan provided the Company the ability to grant stock options, SARs, restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan that subsequently expired, were forfeited or cancelled, or settled in cash after August 29, 2022 became available for awards under the 2022 Plan.

On May 23, 2025, the Company granted one-time inducement awards (the Inducement Awards) within the meaning of the New York Stock Exchange Listed Company Manual Section 303A.08 to the Company's incoming Chief Executive Officer.

The Inducement Awards were not granted under the 2022 Plan, but have the same terms and conditions as equity awards granted under the 2022 Plan, except as otherwise provided in the award agreements.

Employee Stock Purchase Plan

The Company’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of the Company’s common stock each offering period at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods with a single purchase period ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was $3.7 million and $4.2 million for the three months ended September 30, 2025 and 2024, respectively, and $11.9 million and $12.7 million for the nine months ended September 30, 2025 and 2024, respectively.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2025:

	Stock Options	Weighted- Average Exercise Price
Options outstanding at December 31, 2024	445,136	$	51.34
Granted	139,872	39.32
Exercised	(70,307)	34.27
Forfeited	(103,013)	37.68
Expired	(16,354)	87.74
Options outstanding at September 30, 2025	395,334	$	52.18
Exercisable at September 30, 2025	191,882	$	68.62

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a period of four years, beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company.

The weighted-average grant date fair value of options that were granted during the nine months ended September 30, 2025 was $21.81.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30,
	2025	2024
Risk-free interest rate	4.13% - 4.17%	4.28% - 4.30%
Expected life (years)	6.25	6.25
Expected volatility	52.12% - 52.99%	50.62% - 50.72%
Expected dividend yield	0%	0%

As of September 30, 2025, there was $3.3 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.9 years.

Restricted Stock Units

Restricted stock unit (RSU) awards are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a period from three to four years, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For the board of directors, restrictions generally lapse in full on the first anniversary of the grant date.

The following table summarizes restricted stock units activity during the nine months ended September 30, 2025:

	Restricted Stock Units	Weighted- Average Grant Date Fair Value Per Share
Restricted stock units at December 31, 2024	763,261	$	38.25
Granted	278,500	39.95
Restrictions lapsed	(212,526)	40.55
Forfeited	(103,268)	36.40
Restricted stock units at September 30, 2025	725,967	$	38.49

As of September 30, 2025, there was $18.8 million of unrecognized compensation expense related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.7 years.

Performance Stock Units

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 200 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s three-year cumulative total shareholder return performance relative to an index and the award recipient’s continued employment. The Company’s PSUs are based on market conditions and the related compensation cost is based on the fair value at grant date calculated using a Monte Carlo pricing model.

The following table summarizes performance stock units activity during the nine months ended September 30, 2025:

	Performance Stock Units	Weighted- Average Grant Date Fair Value Per Share
Performance stock units at December 31, 2024	180,173	$	60.75
Granted1	153,503	59.71
Restrictions lapsed	(32,977)	96.41
Performance change	—	—
Forfeited	(68,887)	57
Performance stock units at September 30, 2025	231,812	$	56.17
1 Includes a target number of 54,320 PSUs granted as part of the May 23, 2025, Inducement Awards, 27,160 of which have the same market condition as the PSUs granted under the 2022 Plan as described above, and 27,160 of which also include a performance condition with anywhere between 0 percent and 100 percent of the target number capable of being achieved during two six-month performance periods depending on revenue and then anywhere between 0 percent and 200 percent of such achieved PSUs capable of being earned and vesting during a three-year performance period depending on the Company's three-year cumulative total shareholder return performance relative to an index and the award recipient's continued employment.

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30,
	2025	2024
Risk-free interest rate	3.98% - 4.08%	4.37%
Expected life (years)	2.61 - 2.85	2.88
Expected volatility	52.40% - 53.20%	51.40%
Expected dividend yield	0%	0%

As of September 30, 2025, there was $7.5 million of unrecognized compensation expense related to non-vested performance stock units, which is expected to be recognized over a weighted-average period of 2.1 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30,
	2025	2024
Risk-free interest rate	4.09% - 4.29%	5.07% - 5.16%
Expected life (months)	6.00	6.00
Expected volatility	41.89% - 65.60%	30.97% - 47.92%
Expected dividend yield	0%	0%