10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

	(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2024

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________

Commission File Number: 001-35435

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	41-1939628
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5540 Pioneer Creek Drive
Maple Plain, Minnesota	55359
(Address of principal executive offices)	(Zip Code)

(763) 479-3680

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	PRLB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes oNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þYes oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	Accelerated filer	o
Non-accelerated filer	o
Smaller reporting company	o	Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes þNo

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 25,316,070 shares of Common Stock, par value $0.001 per share, were outstanding at April 30, 2024.

Table of Contents

Proto Labs, Inc.

TABLE OF CONTENTS

Item	Description	Page
PART I
1.	Financial Statements	2
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
3.	Quantitative and Qualitative Disclosures about Market Risk	24
4.	Controls and Procedures	24
PART II
1.	Legal Proceedings	25
1A.	Risk Factors	25
2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
3.	Defaults Upon Senior Securities	25
4.	Mine Safety Disclosures	25
5.	Other Information	25
6.	Exhibits	26

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	March 31, 2024		December 31, 2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	92,804	$	83,790
Short-term marketable securities	16,875		19,013
Accounts receivable, net of allowance for doubtful accounts of $2,588 and $2,499 as of March 31, 2024, and December 31, 2023, respectively	77,849		72,848
Inventory	12,823		13,657
Income taxes receivable	644		2,228
Prepaid expenses and other current assets	9,425		9,124
Total current assets	210,420		200,660
Property and equipment, net	247,798		253,655
Goodwill	273,991		273,991
Other intangible assets, net	24,407		25,584
Long-term marketable securities	3,257		8,019
Operating lease assets	4,185		4,628
Finance lease assets	893		960
Other long-term assets	4,852		4,856
Total assets	$	769,803	$	772,353
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	15,256	$	15,636
Accrued compensation	16,239		15,292
Accrued liabilities and other	21,216		16,872
Current operating lease liabilities	1,549		1,585
Current finance lease liabilities	299		296
Income taxes payable	3,877		-
Total current liabilities	58,436		49,681
Long-term operating lease liabilities	2,588		3,008
Long-term finance lease liabilities	519		595
Long-term deferred tax liabilities	16,482		18,742
Other long-term liabilities	4,468		5,032
Total liabilities	82,493		77,058
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2024, and December 31, 2023	-		-
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 25,316,070 and 25,721,957 shares as of March 31, 2024, and December 31, 2023, respectively	26		26
Additional paid-in capital	462,715		466,884
Retained earnings	253,414		256,398
Accumulated other comprehensive loss	(28,845)		(28,013)
Total shareholders' equity	687,310		695,295
Total liabilities and shareholders' equity	$	769,803	$	772,353

The accompanying notes are an integral part of these consolidated financial statements.

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Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2024		2023
Statements of Operations:
Revenue	$	127,890	$	125,859
Cost of revenue	70,423		72,083
Gross profit	57,467		53,776
Operating expenses
Marketing and sales	23,160		22,451
Research and development	11,167		10,677
General and administrative	16,313		16,833
Closure of Japan business	—		66
Total operating expenses	50,640		50,027
Income from operations	6,827		3,749
Other income, net	899		1,290
Income before income taxes	7,726		5,039
Provision for income taxes	2,458		2,380
Net income	$	5,268	$	2,659
Net income per share:
Basic	$	0.21	$	0.10
Diluted	$	0.20	$	0.10
Shares used to compute net income per share:
Basic	25,624,949		26,580,279
Diluted	25,784,987		26,605,787
Comprehensive Income (net of tax)
Comprehensive income	$	4,436	$	3,520

The accompanying notes are an integral part of these consolidated financial statements.

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Proto Labs, Inc.

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)

	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance at December 31, 2023	25,721,957	26		466,884		256,398		(28,013)		695,295
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	29,974	—		(533)		—		—		(533)
Stock-based compensation expense	—	—		4,276		—		—		4,276
Repurchases of common stock and other	(435,861)	—		(7,912)		(8,252)		—		(16,164)
Net income	—	—		—		5,268		—		5,268
Other comprehensive income
Foreign currency translation adjustment	—	—		—		—		(925)		(925)
Net unrealized gains (losses) on investments in securities	—	—		—		—		93		93
Comprehensive income										4,436
Balance at March 31, 2024	25,316,070	$	26	$	462,715	$	253,414	$	(28,845)	$	687,310

	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance at December 31, 2022	26,888,425	27		473,740		258,236		(34,355)		697,648
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	26,798	—		(401)		—		—		(401)
Stock-based compensation expense	—	—		3,695		—		—		3,695
Repurchases of common stock	(712,500)	(1)		(11,849)		(9,475)		—		(21,325)
Net income	—	—		—		2,659		—		2,659
Other comprehensive income
Foreign currency translation adjustment	—	—		—		—		527		527
Net unrealized gains (losses) on investments in securities	—	—		—		—		334		334
Comprehensive income										3,520
Balance at March 31, 2023	26,202,723	$	26	$	465,185	$	251,420	$	(33,494)	$	683,137

The accompanying notes are an integral part of these consolidated financial statements.

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Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2024		2023
Operating activities
Net income	$	5,268	$	2,659
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,103		9,388
Stock-based compensation expense	4,276		3,695
Deferred taxes	(2,247)		(3,096)
Interest on finance lease obligations	10		287
Gain on disposal of property and equipment	(22)		—
Other	63		(46)
Changes in operating assets and liabilities:
Accounts receivable	(5,654)		(2,328)
Inventories	802		(641)
Prepaid expenses and other	(359)		1,464
Income taxes	5,457		5,160
Accounts payable	(138)		2,536
Accrued liabilities and other	4,779		3,500
Net cash provided by operating activities	21,338		22,578
Investing activities
Purchases of property, equipment and other capital assets	(2,587)		(3,441)
Proceeds from sales of property, equipment and other capital assets	22		194
Proceeds from call redemptions and maturities of marketable securities	6,984		7,630
Net cash provided by investing activities	4,419		4,383
Financing activities
Purchases of shares withheld for tax obligations	(533)		(401)
Repurchases of common stock	(16,013)		(21,119)
Principal repayments of finance lease obligations	(73)		(82)
Net cash used in financing activities	(16,619)		(21,602)
Effect of exchange rate changes on cash and cash equivalents	(124)		134
Net increase in cash and cash equivalents	9,014		5,493
Cash and cash equivalents, beginning of period	83,790		56,558
Cash and cash equivalents, end of period	$	92,804	$	62,051

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Protolabs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying financial statements reflect all adjustments necessary for a fair presentation of the Company’s statements of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (SEC) on February 16, 2024.

The accompanying Consolidated Balance Sheet as of December 31, 2023 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K filed on February 16, 2024 as referenced above.

Note 2 – Recent Accounting Pronouncements

The Company did not recently adopt any accounting pronouncements that had a material impact on the Company's Consolidated Financial Statements.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The Company is required to adopt this guidance for its annual year ending December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, that updates reportable segment disclosure requirements primarily through enhanced disclosures about significant expenses and information used to assess segment performance on an annual and interim basis. The Company is required to adopt this guidance for its annual year ending December 31, 2024 and all interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

Note 3 – Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied. Anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding and were 421,937 and 382,906 for the three months ended March 31, 2024 and 2023, respectively.

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The table below sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2024		2023
Net income	$	5,268	$	2,659
Basic - weighted-average shares outstanding:	25,624,949		26,580,279
Effect of dilutive securities:
Employee stock options and other	160,038		25,508
Diluted - weighted-average shares outstanding:	25,784,987		26,605,787
Net income per share:
Basic	$	0.21	$	0.10
Diluted	$	0.20	$	0.10

Note 4 – Goodwill and Other Intangible Assets

There were no changes in the carrying amount of goodwill during the three months ended March 31, 2024.

Intangible assets other than goodwill at March 31, 2024 and December 31, 2023 were as follows:

	March 31, 2024						December 31, 2023						Useful Life (in years)	Weighted Average Useful Life Remaining (in years)
(in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Intangible assets with finite lives:
Marketing assets	$	930	$	(923)	$	7	$	930	$	(900)	$	30	10.0	0.1
Non-compete agreement	830		(628)		202		835		(603)		232		2.0 - 5.0	1.3
Software technology	13,229		(8,096)		5,133		13,229		(7,752)		5,477		10.0	3.8
Software platform	26,136		(7,071)		19,065		26,373		(6,575)		19,798		12.0	8.8
Tradenames	351		(351)		—		354		(347)		7		3.0	0.0
Customer relationships	12,204		(12,204)		—		12,223		(12,183)		40		3.0 - 9.0	0.0
Total intangible assets	$	53,680	$	(29,273)	$	24,407	$	53,944	$	(28,360)	$	25,584

Intangible assets allocated to the Protolabs Network entities consisted of intangible assets of €11.6 million in Europe and $16.6 million in the United States as of the date of the acquisition. The Euro denominated intangible assets are translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income. Foreign currency losses related to intangible assets were $1.6 million and $1.3 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for intangible assets was $1.0 million and $1.5 million for each of the three months ended March 31, 2024 and 2023, respectively.

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Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets and current exchange rates is as follows:

(in thousands)	Estimated Amortization Expense
Remaining 2024	$	2,736
2025	3,638
2026	3,537
2027	3,527
2028	2,158
Thereafter	8,811
Total estimated amortization expense	$	24,407

Note 5 – Fair Value Measurements

Accounting Standards Codification, Fair Value Measurement (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company's assets and liabilities that are required to be measured or disclosed at fair value on a recurring basis include cash and cash equivalents and marketable securities. The Company’s cash consists of bank deposits and cash equivalents consist primarily of money market mutual funds. The Company determines the fair value of these investments using Level 1 inputs. The Company's marketable securities consist of short-term and long-term agency, municipal, corporate and other debt securities. Fair value for the corporate debt securities is primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and U.S. treasury securities are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

The following table summarizes financial assets as of March 31, 2024 and December 31, 2023 measured at fair value on a recurring basis:

	March 31, 2024						December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	90,951	$	-	$	-	$	77,423	$	-	$	-
Money market mutual fund	1,853		-		-		6,367		-		-
Marketable securities	1,889		18,243		-		4,482		22,550		-
Total	$	94,693	$	18,243	$	-	$	88,272	$	22,550	$	-

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Note 6 – Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as available-for-sale and are recorded at fair value. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of March 31, 2024 and December 31, 2023:

	March 31, 2024
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	15,803	$	—	$	(244)	$	15,559
U.S. municipal securities	4,636		—		(63)		4,573
Total marketable securities	$	20,439	$	—	$	(307)	$	20,132

	December 31, 2023
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	16,798	$	—	$	(278)	$	16,520
Corporate debt securities	2,511		—		(19)		2,492
U.S. municipal securities	7,876		—		(105)		7,771
Certificates of deposit/time deposits	249		—		—		249
Total marketable securities	$	27,434	$	—	$	(402)	$	27,032

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and U.S. treasury securities are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

Classification of marketable securities as current or non-current is based upon the security’s maturity date as of the date of these financial statements.

The March 31, 2024 balance of available-for-sale debt securities by contractual maturity is shown in the following table at fair value. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in thousands)	March 31, 2024
Due in one year or less	$	16,875
Due after one year through five years	3,257
Total marketable securities	$	20,132

Note 7 – Inventory

Inventory consists primarily of raw materials, which are recorded at the lower of cost and net realizable value using the standard cost method, which approximates first-in, first-out (FIFO) cost. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts.

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The Company’s inventory consisted of the following as of the dates indicated:

(in thousands)	March 31, 2024		December 31, 2023
Total inventory	$	13,539	$	14,319
Allowance for obsolescence	(716)		(662)
Inventory, net of allowance	$	12,823	$	13,657

Note 8 – Stock-Based Compensation

Under the Company's 2022 Long-Term Incentive 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, which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022 (as amended, the 2022 Plan). Awards under the 2022 Plan have a maximum term of ten years from the date of grant. The compensation 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 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 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.

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 $4.3 million and $3.7 million for the three months ended March 31, 2024 and 2023, respectively.

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Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2024:

	Stock Options	Weighted- Average Exercise Price
Options outstanding at December 31, 2023	371,313	$	59.92
Granted	95,470	33.52
Exercised	-	-
Forfeited	(12,912)	73.73
Expired	(1,632)	78.59
Options outstanding at March 31, 2024	452,239	$	53.89
Exercisable at March 31, 2024	183,461	$	73.15

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 three months ended March 31, 2024 was $18.20.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.28%	3.90% - 4.55%
Expected life (years)	6.25	2.00 - 6.25
Expected volatility	50.62%	49.23% - 55.92%
Expected dividend yield	0%	0%

As of March 31, 2024, there was $4.8 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

Restricted stock 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.

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The following table summarizes restricted stock activity during the three months ended March 31, 2024:

	Restricted Stock	Weighted- Average Grant Date Fair Value Per Share
Restricted stock at December 31, 2023	653,465	$	45.89
Granted	76,078	33.52
Restrictions lapsed	(45,886)	76.14
Forfeited	(13,390)	47.78
Restricted stock at March 31, 2024	670,267	$	42.37

As of March 31, 2024, there was $17.8 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years.

Performance Stock

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 performance in the final year of the performance period and the award recipient’s continued employment. Certain PSUs granted by the Company in 2021 are based on performance conditions and the related compensation cost is based on the probability that the performance conditions will be achieved. The Company’s PSUs granted in 2022, 2023, 2024 and certain PSUs granted in 2021 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 activity during the three months ended March 31, 2024:

	Performance Stock	Weighted- Average Grant Date Fair Value Per Share
Performance stock at December 31, 2023	107,097	$	74.08
Granted	79,436	48.20
Restrictions lapsed	-	-
Performance change	(2,772)	227.14
Forfeited	-
Performance stock at March 31, 2024	183,761	$	60.58

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The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.37%	4.35%
Expected life (years)	2.88	2.88
Expected volatility	51.40%	58.00%
Expected dividend yield	0%	0%

As of March 31, 2024, there was $7.2 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.3 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	5.16%	4.60%
Expected life (months)	6.00	6.00
Expected volatility	47.92%	67.84%
Expected dividend yield	0%	0%

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Note 9 – Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities.

The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands)	2024		2023
Balance at beginning of period	$	(28,013)	$	(34,355)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications	(925)		527
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	(925)		527
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications	93		334
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	93		334
Balance at end of period	$	(28,845)	$	(33,494)

Note 10 – Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2024 and 2023, the Company recorded an income tax provision of $2.5 million and $2.4 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2024 was 31.8 percent compared to 47.2 percent in the same period of the prior year. The effective tax rate decreased by 15.4 percent for the three months ended March 31, 2024 when compared to the same period in 2023, primarily due to a decrease in tax expense from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as a decrease in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances.

The effective income tax rate for the three months ended March 31, 2024 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions and tax credits for which the Company qualifies.

The Company had unrecognized tax benefits totaling $3.4 million as of March 31, 2024 and $3.6 million as of December 31, 2023, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate.

Note 11 – Segment Reporting

The Company’s reportable segments are based on the internal reporting used by the Company’s Chief Executive Officer, who is the chief operating decision maker (CODM), to assess operating performance and make decisions about the allocation of resources. The Corporate Unallocated and Japan category includes non-reportable segments, as well as research and development and general and administrative costs, that the Company does not allocate directly to its operating segments.

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Intercompany transactions primarily relate to intercontinental activity and have been eliminated and are excluded from the reported amounts. The difference between income from operations and pre-tax income relates to foreign currency-related gains and losses and interest income on cash balances and investments, which are not allocated to business segments.

Revenue and income from operations by reportable segment for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
United States	$	101,481	$	97,746
Europe	26,409		28,113
Total revenue	$	127,890	$	125,859

	Three Months Ended March 31,
(in thousands)	2024		2023
Income (Loss) from Operations:
United States	$	26,332	$	20,481
Europe	(2,444)		(2,483)
Corporate Unallocated and Japan	(17,061)		(14,249)
Total Income from Operations	$	6,827	$	3,749

Total long-lived assets at March 31, 2024 and December 31, 2023 were as follows:

(in thousands)	March 31, 2024		December 31, 2023
Total long-lived assets:
United States	$	195,944	$	201,388
Europe	51,854		52,267
Total Long-lived Assets	$	247,798	$	253,655

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Revenue by product line for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
Injection Molding	$	52,663	$	51,948
CNC Machining	49,932		48,104
3D Printing	21,582		21,325
Sheet Metal	3,553		4,248
Other Revenue	160		234
Total Revenue	$	127,890	$	125,859

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023.

Forward-Looking Statements

Statements contained in this report regarding matters that are not historical or current facts are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our results to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in Item 1A. “Risk Factors” of this Form 10-Q, as well as our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC). Other unknown or unpredictable factors also could have material adverse effects on our future results. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, we expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

Overview

We are one of the world’s largest, fastest and most comprehensive digital manufacturers of custom parts. Our vision is accelerating innovation by revolutionizing manufacturing. Our mission is to empower companies to bring new ideas to market by offering the fastest and most comprehensive digital manufacturing service in the world. We accomplish this by offering a variety of manufacturing capabilities fulfilled through a combination of owned manufacturing factories and a worldwide network of premium manufacturing partners. Our automated quoting and manufacturing systems are highly integrated with our manufacturing and fulfillment systems, which allow us to offer a vast array of manufacturing technologies in a variety of materials across a continuum of lead times and prices. Our technology-enabled digital engineering and manufacturing applications enable us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. We utilize injection molding, computer numerical control (CNC) machining, 3D printing and sheet metal fabrication to manufacture custom parts for our customers.

Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets, to the procurement and supply chain professionals seeking to easily and efficiently source custom parts, and to a wide variety of customers seeking to purchase custom made parts. We believe our use of advanced technology enables us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts.

We have established our operations in the United States and Europe. Our primary manufacturing product lines currently include Injection Molding, CNC Machining, 3D Printing and Sheet Metal. We continually seek to expand the range of sizes and geometric complexity of the parts we can make with these processes, to extend the variety of materials we are able to support, and to identify additional manufacturing processes to which we can apply our technology or incorporate into our manufacturing network in order to better serve the evolving preferences and needs of our customers. With the addition of the Protolabs Network in 2021, our global network of premium manufacturing partners significantly expands the breadth and depth of our manufacturing capabilities, enabling us to offer customers a wider variety of lead times and pricing options, and an expanded envelope of parts (complexity, size, etc.).

Key Financial Measures and Trends

Revenue

Our operations are comprised of two geographic operating segments in the United States and Europe. On May 27, 2022, the Company's board of directors approved a plan for the closure of our manufacturing facility in Japan and announced an intention to cease operations in the region. The Company dissolved its Japan operations in December 2023. Revenue is derived from our Injection Molding, CNC Machining, 3D Printing and Sheet Metal product lines. Injection Molding revenue consists of sales of custom injection molds and injection-molded parts. CNC Machining revenue consists of sales of CNC-machined custom parts. 3D Printing revenue consists of sales of 3D-printed parts. Sheet Metal revenue consists of

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sales of fabricated sheet metal custom parts. Our revenue is generated from a diverse customer base and our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including:

•expanding the breadth and scope of our products by adding more sizes and materials to our offerings;

•the introduction of our 3D Printing product line through our acquisition of FineLine in 2014;

•expanding 3D Printing to Europe through our acquisition of Alphaform in 2015;

•the introduction of our Sheet Metal product line through our acquisition of Rapid Manufacturing Group, LLC in 2017;

•continuously improving the usability of our product lines such as our web-centric applications; and

•providing customers with on-demand access to a global network of premium manufacturing partners through our acquisition of Hubs in 2021.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue consists primarily of raw materials, equipment depreciation, employee compensation including benefits and stock-based compensation, facilities costs and overhead allocations associated with the manufacturing process for molds and customer parts. We expect our personnel-related costs to increase in order to retain and attract top talent and remain competitive in the market. Overall, we expect cost of revenue to increase in absolute dollars.

We define gross profit as our revenue less our cost of revenue, and we define gross margin as gross profit expressed as a percentage of revenue. Our gross profit and gross margin are affected by many factors, including our mix of revenue by product line, pricing, sales volume, manufacturing costs, the costs associated with increasing production capacity, the mix between domestic and foreign revenue sources, the mix between revenue produced in our internal manufacturing operations and outsourced to our external manufacturing partners, and foreign currency exchange rates.

Operating Expenses

Operating expenses consist of marketing and sales, research and development and general and administrative expenses. Personnel-related costs are the most significant component in each of these categories.

Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand injection-molded, CNC-machined, 3D-printed and sheet metal custom parts for prototyping and low-volume production. In order to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses in the future.

Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as electronic, print and pay-per-click advertising, trade shows and other related overhead. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base and grow revenue.

Research and development. Research and development expense consists primarily of personnel and outside service costs related to the development of new processes and product lines, enhancement of existing product lines, development of software for internal use, maintenance of internally developed software, quality assurance and testing. Costs for internal use software are evaluated by project and capitalized where appropriate under ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software. We expect research and development expense to increase in the future as we seek to enhance our e-commerce interface technology, internal software and supporting business systems, and continue to expand our product lines.

General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal, and other related overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

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Closure of Japan business. Closure of Japan business expense is driven by our decision to close the Japan manufacturing facility and exit the Japan market. The expenses consist primarily of operating expense, including employee severance, write-down of fixed assets, facility-related charges and goodwill impairment charges.

Other Income, net

Other income, net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments. Our foreign currency-related gains and losses will vary depending upon movements in underlying foreign currency exchange rates. Our interest income will vary each reporting period depending on our average cash balances during the period, composition of our marketable security portfolio and the current level of interest rates.

Provision for Income Taxes

Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. Overall, our effective tax rate for 2024 and beyond may differ from historical effective tax rates due to increases in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as any future tax law changes that may impact our effective tax rate.

Results of Operations

The following table summarizes our results of operations and the related changes for the periods indicated. The results below are not necessarily indicative of the results for future periods.

	Three Months Ended March 31,								Change
(dollars in thousands)	2024				2023				$		%
Revenue	$	127,890	100.0		$	125,859	100.0		$	2,031	1.6
Cost of revenue	70,423		55.1		72,083		57.3		(1,660)		(2.3)
Gross profit	57,467		44.9		53,776		42.7		3,691		6.9
Operating expenses
Marketing and sales	23,160		18.1		22,451		17.8		709		3.2
Research and development	11,167		8.7		10,677		8.5		490		4.6
General and administrative	16,313		12.8		16,833		13.4		(520)		(3.1)
Closure of Japan business	—		—		66		0.1		(66)		(100.0)
Total operating expenses	50,640		39.6		50,027		39.7		613		1.2
Income from operations	6,827		5.3		3,749		3.0		3,078		82.1
Other income, net	899		0.7		1,290		1.0		(391)		(30.3)
Income before income taxes	7,726		6.0		5,039		4.0		2,687		53.3
Provision for income taxes	2,458		1.9		2,380		1.9		78		3.3
Net income	$	5,268	4.1	%	$	2,659	2.1	%	$	2,609	98.1	%

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Stock-based compensation expense included in the statements of operations data above for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Stock options, restricted stock and performance stock	$	3,955	$	3,321
Employee stock purchase plan	321		374
Total stock-based compensation expense	$	4,276	$	3,695
Cost of revenue	$	459	$	466
Operating expenses:
Marketing and sales	832		693
Research and development	693		572
General and administrative	2,292		1,964
Total stock-based compensation expense	$	4,276	$	3,695

Comparison of Three Months Ended March 31, 2024 and 2023

Revenue

Revenue by reportable segment and the related changes for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
	2024				2023				Change
(dollars in thousands)	$		% of Total Revenue		$		% of Total Revenue		$		%
Revenue:
United States	$	101,481	79.4	%	$	97,746	77.7	%	$	3,735	3.8	%
Europe	26,409		20.6	%	28,113		22.3	%	(1,704)		(6.1)
Total revenue	$	127,890	100.0	%	$	125,859	100.0	%	$	2,031	1.6	%

Our revenue increased $2.0 million, or 1.6%, for the three months ended March 31, 2024 compared to the same period in 2023. By reportable segment, revenue in the United States increased $3.7 million, or 3.8%, for the three months ended March 31, 2024 compared to the same period in 2023. Revenue in Europe decreased $1.7 million, or 6.1%, for the three months ended March 31, 2024 compared to the same period in 2023. Revenue generated from the Protolabs Network was $23.9 million and $17.2 million for the three months ended March 31, 2024 and 2023, respectively. International revenue was positively impacted by $0.9 million during three months ended March 31, 2024 compared to the same period in 2023 as a result of foreign currency movements, primarily the strengthening of the British Pound and Euro relative to the United States Dollar.

During the three months ended March 31, 2024, we served 22,466 unique customer contacts, which is a decrease of 3.5% from the same period in 2023. Our customer contacts served decreased compared to an increase in revenue. This is primarily due to our strategic focus to earn larger orders from our customers as we strive to be their supplier of choice by serving their custom parts needs through the comprehensive offer our factory and the Protolabs Network provide.

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Revenue by product line and the related changes for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
	2024				2023				Change
(dollars in thousands)	$		% of Total Revenue		$		% of Total Revenue		$		%
Revenue:
Injection Molding	$	52,663	41.2	%	$	51,948	41.3	%	$	715	1.4	%
CNC Machining	49,932		39.0		48,104		38.2		1,828		3.8
3D Printing	21,582		16.9		21,325		16.9		257		1.2
Sheet Metal	3,553		2.8		4,248		3.4		(695)		(16.4)
Other Revenue	160		0.1		234		0.2		(74)		(31.6)
Total Revenue	$	127,890	100.0	%	$	125,859	100.0	%	$	2,031	1.6	%

By product line, our revenue increase was driven by a 3.8% increase in CNC Machining revenue, a 1.2% increase in 3D Printing revenue and a 1.4% increase in Injection Molding revenue, which was partially offset by a 16.4% decrease in Sheet Metal revenue and a 31.6% decrease in Other Revenue, in each case for the three months ended March 31, 2024 compared to the same period in 2023.

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue. Cost of revenue decreased $1.7 million, or 2.3%, for the three months ended March 31, 2024 compared to the same period in 2023, while revenue increased 1.6% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease in the cost of revenue of $1.7 million was primarily driven by reductions in contract labor, headcount and overtime leading to lower personnel and related costs of $1.6 million primarily in our digital manufacturing factory business during the three months ended March 31, 2024 compared to the same period in 2023. The cost reductions in our digital factories were the result of focused management of resources aligned to order volumes, partially supported by increased automation.

Gross Profit and Gross Margin. Gross profit increased from $53.8 million in the three months ended March 31, 2023 to $57.5 million in the three months ended March 31, 2024. Gross margin increased from 42.7% in the three months ended March 31, 2023 to 44.9% in the three months ended March 31, 2024.

Operating Expenses, Other (Loss) Income, net and Provision for Income Taxes

Marketing and Sales. Marketing and sales expenses increased $0.7 million, or 3.2%, during the three months ended March 31, 2024 compared to the same period in 2023. The increase in marketing and sales expenses was primarily driven by increases in personnel and related costs of $0.3 million and marketing program cost of $0.4 million during the three months ended March 31, 2024 when compared to the same period in 2023.

Research and Development. Our research and development expenses increased $0.5 million, or 4.6%, during the three months ended March 31, 2024 compared to the same period in 2023 primarily due to increases of $0.2 million in professional services and $0.3 million of other operating costs.

General and Administrative. Our general and administrative expenses decreased $0.5 million, or 3.1%, during the three months ended March 31, 2024 compared to the same period in 2023 primarily due to decreases of $0.6 million in administrative costs and professional services, $0.4 million in intangible amortization expense and $0.1 million of other operating costs. These decreases were partially offset by increases of personnel and related costs of $0.3 million and $0.3 million stock based compensation costs in the current period.

Closure of Japan business. We had no expenses related to the closure of our Japan business during the three months ended March 31, 2024. Our decision to close our Japan business resulted in $0.1 million in operating expenses during the three months ended March 31, 2023.

Other income, net. We recognized other income, net of $0.9 million for the three months ended March 31, 2024, a decline of $0.4 million compared to other income, net of $1.3 million for the three months ended March 31, 2023. Other income,

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net for the three months ended March 31, 2024 primarily consisted of $1.1 million in interest income on investments and other income, partially offset by $0.2 million of foreign currency losses. Other income, net for the three months ended March 31, 2023 primarily consisted of a $0.1 million gain on foreign currency and $1.2 million in interest income on investments and other income.

Provision for Income Taxes. Our effective tax rate of 31.8% for the three months ended March 31, 2024 decreased 15.4% compared to 47.2% for the same period in 2023. The decrease in the effective tax rate is primarily due to a decrease in tax expense from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as a decrease in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $2.5 million for the three months ended March 31, 2024 increased $0.1 million as compared our income tax provision of $2.4 million to the same period in 2023.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Net cash provided by operating activities	$	21,338	$	22,578
Net cash provided by investing activities	4,419		4,383
Net cash used in financing activities	(16,619)		(21,602)
Effect of exchange rate changes on cash and cash equivalents	(124)		134
Net increase in cash and cash equivalents	$	9,014	$	5,493

Sources of Liquidity

Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $92.8 million as of March 31, 2024, an increase of $9.0 million from December 31, 2023. The increase in our cash was primarily due to cash provided by operating activities of $21.3 million and proceeds from call redemptions and maturities of marketable securities of $7.0 million, which were partially offset by $2.6 million for purchases of property, equipment and other capital assets, and $16.0 million in repurchases of common stock.

We believe that our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Cash Flows from Operating Activities

Cash flows from operating activities were $21.3 million during the three months ended March 31, 2024 and primarily consisted of net income of $5.3 million, adjusted for certain non-cash items, including depreciation and amortization of $9.1 million, stock-based compensation expense of $4.3 million and changes in operating assets and liabilities and other items totaling $4.9 million, which were partially offset by deferred taxes of $2.2 million. Cash flows from operating activities were $22.6 million during the three months ended March 31, 2023 and primarily consisted of net income of $2.7 million, adjusted for certain non-cash items, including depreciation and amortization of $9.4 million and stock-based compensation expense of $3.7 million, interest on finance lease obligations of $0.3 million and changes in operating assets and liabilities and other items totaling $9.7 million, which were partially offset by deferred taxes of $3.1 million.

Cash flows from operating activities decreased $1.2 million during the three months ended March 31, 2024 compared to the same period in 2023, primarily due to decreases in changes in operating assets and liabilities totaling $4.8 million, interest on finance lease obligations of $0.3 million and depreciation and amortization of $0.3 million, which were partially offset by increases in net income of $2.6 million, stock-based compensation of $0.6 million and deferred taxes of $0.8 million.

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Cash Flows from Investing Activities

Cash provided by investing activities was $4.4 million during the three months ended March 31, 2024, consisting of $7.0 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $2.6 million for net purchases of property, equipment and other capital assets.

Cash provided by investing activities was $4.4 million during the three months ended March 31, 2023, consisting of $7.6 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $3.2 million for net purchases of property, equipment and other capital assets.

Cash Flows from Financing Activities

Cash used in financing activities was $16.6 million during the three months ended March 31, 2024, consisting of $16.0 million in repurchases of common stock, $0.5 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.1 million for repayments of finance lease obligations.

Cash used in financing activities was $21.6 million during the three months ended March 31, 2023, consisting of $21.1 million in repurchases of common stock, $0.4 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.1 million for repayments of finance lease obligations.

Critical Accounting Estimates

We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgements and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the Consolidated Financial Statements included Pat II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2 to the Consolidated Financial Statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

As a result of our foreign operations, we have revenue, expenses, assets and liabilities that are denominated in foreign currencies. We generate revenue and incur production costs and operating expenses in British Pounds and Euros.

Our operating results and cash flows are adversely impacted when the United States Dollar appreciates relative to foreign currencies. Additionally, our operating results and cash flows are adversely impacted when the British Pound appreciates relative to the Euro. As we expand internationally, our results of operations and cash flows will become increasingly subject to changes in foreign currency exchange rates.

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be assessed by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. We recognized foreign currency losses of $0.2 million and foreign currency gains of $0.1 million during the three months ended March 31, 2024 and 2023, respectively. The changes in foreign exchange rates had a positive impact on consolidated revenue of $0.9 million for the three months ended March 31, 2024 as compared to the same period in 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time frames specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of these financial statements, we do not believe we are party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business.

Item 1A. Risk Factors

Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 includes a discussion of our risk factors. There have been no material changes from the risk factors described in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 7, 2023 our board of directors approved a new stock repurchase program that added $50 million to our previous stock repurchase authorization, which increased the total stock repurchase authorized to $250 million. We have $72.4 million remaining under this authorization. The timing and amount of any share repurchases will be determined by our management based on market conditions and other factors.

During the three months ended March 31, 2024, we repurchased 435,861 shares of our common stock at a total purchase price of $16.0 million under this program. Common stock repurchase activity through March 31, 2024 was as follows:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1)
January 1, 2024 through January 31, 2024	—	$	—	—	$	88,364
February 1, 2024 through February 29, 2024	272,224	$	36.73	272,224	$	78,364
March 1, 2024 through March 31, 2024	163,637	$	36.67	163,637	$	72,365
	435,861	$	36.71	435,861	$	72,365

Item 3. Defaults Upon Senior Securities

No matters to disclose.

Item 4. Mine Safety Disclosures

No matters to disclose.

Item 5. Other Information

During the three months ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

25

Table of Contents

Item 6. Exhibits

The following documents are filed as part of this report:

Exhibit Number	Description of Exhibit
3.1	Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed on February 13, 2012).
3.2	Articles of Amendment to Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. dated May 20, 2015 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on May 21, 2015).
3.3	Third Amended and Restated By-Laws of Proto Labs, Inc., as amended through November 15, 2022 (incorporated by reference to Exhibit 3.2 to the Company's Form 8-K, filed on November 15, 2022).
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
32.1	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)*
101.SCH	Inline XBRL Taxonomy Extension Schema Document*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

*Filed herewith.

26

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Proto Labs, Inc.
Date: May 3, 2024	/s/ Robert Bodor
	Robert Bodor
	President and Chief Executive Officer (Principal Executive Officer)
Date: May 3, 2024	/s/ Daniel Schumacher
	Daniel Schumacher
	Chief Financial Officer (Principal Financial Officer)

27

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert Bodor, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Proto Labs, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2024	By:	/s/ Robert Bodor
		Robert Bodor
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Daniel Schumacher, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Proto Labs, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2024	By:	/s/ Daniel Schumacher
		Daniel Schumacher
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Bodor, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2024 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: May 3, 2024	By:	/s/ Robert Bodor
	Name:	Robert Bodor
	Title:	President and Chief Executive Officer

I, Daniel Schumacher, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2024 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: May 3, 2024	By:	/s/ Daniel Schumacher
	Name:	Daniel Schumacher
	Title:	Chief Financial Officer

XML

Cover - shares	3 Months Ended
	Mar. 31, 2024	Apr. 30, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-35435
Entity Registrant Name	Proto Labs, Inc.
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-1939628
Entity Address, Address Line One	5540 Pioneer Creek Drive
Entity Address, City or Town	Maple Plain
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55359
City Area Code	763
Local Phone Number	479-3680
Title of 12(b) Security	Common Stock, Par Value $0.001 Per Share
Trading Symbol	PRLB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		25,316,070
Entity Central Index Key	0001443669
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 92,804	$ 83,790
Short-term marketable securities	16,875	19,013
Accounts receivable, net of allowance for doubtful accounts of $2,588 and $2,499 as of March 31, 2024, and December 31, 2023, respectively	77,849	72,848
Inventory	12,823	13,657
Income taxes receivable	644	2,228
Prepaid expenses and other current assets	9,425	9,124
Total current assets	210,420	200,660
Property and equipment, net	247,798	253,655
Goodwill	273,991	273,991
Other intangible assets, net	24,407	25,584
Long-term marketable securities	3,257	8,019
Operating lease assets	4,185	4,628
Finance lease assets	893	960
Other long-term assets	4,852	4,856
Total assets	769,803	772,353
Current liabilities
Accounts payable	15,256	15,636
Accrued compensation	16,239	15,292
Accrued liabilities and other	21,216	16,872
Current operating lease liabilities	1,549	1,585
Current finance lease liabilities	299	296
Income taxes payable	3,877	0
Total current liabilities	58,436	49,681
Long-term operating lease liabilities	2,588	3,008
Long-term finance lease liabilities	519	595
Long-term deferred tax liabilities	16,482	18,742
Other long-term liabilities	4,468	5,032
Total liabilities	82,493	77,058
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2024, and December 31, 2023	0	0
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 25,316,070 and 25,721,957 shares as of March 31, 2024, and December 31, 2023, respectively	26	26
Additional paid-in capital	462,715	466,884
Retained earnings	253,414	256,398
Accumulated other comprehensive loss	(28,845)	(28,013)
Total shareholders' equity	687,310	695,295
Total liabilities and shareholders' equity	$ 769,803	$ 772,353

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Allowance for credit loss, current	$ 2,588	$ 2,499
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	150,000,000	150,000,000
Common stock, issued (in shares)	25,316,070	25,721,957
Common stock, outstanding (in shares)	25,316,070	25,721,957

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Statements of Operations:
Revenue	$ 127,890	$ 125,859
Cost of revenue	70,423	72,083
Gross profit	57,467	53,776
Operating expenses
Marketing and sales	23,160	22,451
Research and development	11,167	10,677
General and administrative	16,313	16,833
Closure of Japan business	0	66
Total operating expenses	50,640	50,027
Income from operations	6,827	3,749
Other income, net	899	1,290
Income before income taxes	7,726	5,039
Provision for income taxes	2,458	2,380
Net income	$ 5,268	$ 2,659
Net income per share:
Basic (in dollars per share)	$ 0.21	$ 0.10
Diluted (in dollars per share)	$ 0.20	$ 0.10
Shares used to compute net income per share:
Basic (in shares)	25,624,949	26,580,279
Diluted (in shares)	25,784,987	26,605,787
Comprehensive Income (net of tax)
Comprehensive income	$ 4,436	$ 3,520

XML

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning balance (in shares) at Dec. 31, 2022		26,888,425
Beginning balance at Dec. 31, 2022	$ 697,648	$ 27	$ 473,740	$ 258,236	$ (34,355)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)		26,798
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	(401)		(401)
Stock-based compensation expense	3,695		3,695
Repurchases of common stock (in shares)		(712,500)
Repurchases of common stock	(21,325)	$ (1)	(11,849)	(9,475)
Net income	2,659			2,659
Other comprehensive income (loss)
Foreign currency translation adjustment	527				527
Net unrealized gains (losses) on investments in securities	334				334
Comprehensive income	3,520
Ending balance (in shares) at Mar. 31, 2023		26,202,723
Ending balance at Mar. 31, 2023	$ 683,137	$ 26	465,185	251,420	(33,494)
Beginning balance (in shares) at Dec. 31, 2023	25,721,957	25,721,957
Beginning balance at Dec. 31, 2023	$ 695,295	$ 26	466,884	256,398	(28,013)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)		29,974
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	(533)		(533)
Stock-based compensation expense	4,276		4,276
Repurchases of common stock and other (in shares)		(435,861)
Repurchases of common stock and other	(16,164)		(7,912)	(8,252)
Net income	5,268			5,268
Other comprehensive income (loss)
Foreign currency translation adjustment	(925)				(925)
Net unrealized gains (losses) on investments in securities	93				93
Comprehensive income	$ 4,436
Ending balance (in shares) at Mar. 31, 2024	25,316,070	25,316,070
Ending balance at Mar. 31, 2024	$ 687,310	$ 26	$ 462,715	$ 253,414	$ (28,845)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Operating activities
Net income	$ 5,268	$ 2,659
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,103	9,388
Stock-based compensation expense	4,276	3,695
Deferred taxes	(2,247)	(3,096)
Interest on finance lease obligations	10	287
Gain on disposal of property and equipment	(22)	0
Other	63	(46)
Changes in operating assets and liabilities:
Accounts receivable	(5,654)	(2,328)
Inventories	802	(641)
Prepaid expenses and other	(359)	1,464
Income taxes	5,457	5,160
Accounts payable	(138)	2,536
Accrued liabilities and other	4,779	3,500
Net cash provided by operating activities	21,338	22,578
Investing activities
Purchases of property, equipment and other capital assets	(2,587)	(3,441)
Proceeds from sales of property, equipment and other capital assets	22	194
Proceeds from call redemptions and maturities of marketable securities	6,984	7,630
Net cash provided by investing activities	4,419	4,383
Financing activities
Purchases of shares withheld for tax obligations	(533)	(401)
Repurchases of common stock	(16,013)	(21,119)
Principal repayments of finance lease obligations	(73)	(82)
Net cash used in financing activities	(16,619)	(21,602)
Effect of exchange rate changes on cash and cash equivalents	(124)	134
Net increase in cash and cash equivalents	9,014	5,493
Cash and cash equivalents, beginning of period	83,790	56,558
Cash and cash equivalents, end of period	$ 92,804	$ 62,051

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Protolabs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying financial statements reflect all adjustments necessary for a fair presentation of the Company’s statements of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (SEC) on February 16, 2024.

The accompanying Consolidated Balance Sheet as of December 31, 2023 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K filed on February 16, 2024 as referenced above.

XML

Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company did not recently adopt any accounting pronouncements that had a material impact on the Company's Consolidated Financial Statements.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The Company is required to adopt this guidance for its annual year ending December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, that updates reportable segment disclosure requirements primarily through enhanced disclosures about significant expenses and information used to assess segment performance on an annual and interim basis. The Company is required to adopt this guidance for its annual year ending December 31, 2024 and all interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

XML

Net Income per Common Share

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Net Income per Common Share

Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied. Anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding and were 421,937 and 382,906 for the three months ended March 31, 2024 and 2023, respectively.

The table below sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2024		2023
Net income	$	5,268	$	2,659
Basic - weighted-average shares outstanding:	25,624,949		26,580,279
Effect of dilutive securities:
Employee stock options and other	160,038		25,508
Diluted - weighted-average shares outstanding:	25,784,987		26,605,787
Net income per share:
Basic	$	0.21	$	0.10
Diluted	$	0.20	$	0.10

XML

Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

There were no changes in the carrying amount of goodwill during the three months ended March 31, 2024.

Intangible assets other than goodwill at March 31, 2024 and December 31, 2023 were as follows:

	March 31, 2024						December 31, 2023						Useful Life (in years)	Weighted Average Useful Life Remaining (in years)
(in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Intangible assets with finite lives:
Marketing assets	$	930	$	(923)	$	7	$	930	$	(900)	$	30	10.0	0.1
Non-compete agreement	830		(628)		202		835		(603)		232		2.0 - 5.0	1.3
Software technology	13,229		(8,096)		5,133		13,229		(7,752)		5,477		10.0	3.8
Software platform	26,136		(7,071)		19,065		26,373		(6,575)		19,798		12.0	8.8
Tradenames	351		(351)		—		354		(347)		7		3.0	0.0
Customer relationships	12,204		(12,204)		—		12,223		(12,183)		40		3.0 - 9.0	0.0
Total intangible assets	$	53,680	$	(29,273)	$	24,407	$	53,944	$	(28,360)	$	25,584

Intangible assets allocated to the Protolabs Network entities consisted of intangible assets of €11.6 million in Europe and $16.6 million in the United States as of the date of the acquisition. The Euro denominated intangible assets are translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income. Foreign currency losses related to intangible assets were $1.6 million and $1.3 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for intangible assets was $1.0 million and $1.5 million for each of the three months ended March 31, 2024 and 2023, respectively.

Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets and current exchange rates is as follows:

(in thousands)	Estimated Amortization Expense
Remaining 2024	$	2,736
2025	3,638
2026	3,537
2027	3,527
2028	2,158
Thereafter	8,811
Total estimated amortization expense	$	24,407

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting Standards Codification, Fair Value Measurement (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company's assets and liabilities that are required to be measured or disclosed at fair value on a recurring basis include cash and cash equivalents and marketable securities. The Company’s cash consists of bank deposits and cash equivalents consist primarily of money market mutual funds. The Company determines the fair value of these investments using Level 1 inputs. The Company's marketable securities consist of short-term and long-term agency, municipal, corporate and other debt securities. Fair value for the corporate debt securities is primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and U.S. treasury securities are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

The following table summarizes financial assets as of March 31, 2024 and December 31, 2023 measured at fair value on a recurring basis:

	March 31, 2024						December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	90,951	$	-	$	-	$	77,423	$	-	$	-
Money market mutual fund	1,853		-		-		6,367		-		-
Marketable securities	1,889		18,243		-		4,482		22,550		-
Total	$	94,693	$	18,243	$	-	$	88,272	$	22,550	$	-

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Marketable Securities

3 Months Ended

Mar. 31, 2024

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as available-for-sale and are recorded at fair value. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of March 31, 2024 and December 31, 2023:

	March 31, 2024
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	15,803	$	—	$	(244)	$	15,559
U.S. municipal securities	4,636		—		(63)		4,573
Total marketable securities	$	20,439	$	—	$	(307)	$	20,132

	December 31, 2023
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	16,798	$	—	$	(278)	$	16,520
Corporate debt securities	2,511		—		(19)		2,492
U.S. municipal securities	7,876		—		(105)		7,771
Certificates of deposit/time deposits	249		—		—		249
Total marketable securities	$	27,434	$	—	$	(402)	$	27,032

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and U.S. treasury securities are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

Classification of marketable securities as current or non-current is based upon the security’s maturity date as of the date of these financial statements.

The March 31, 2024 balance of available-for-sale debt securities by contractual maturity is shown in the following table at fair value. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in thousands)	March 31, 2024
Due in one year or less	$	16,875
Due after one year through five years	3,257
Total marketable securities	$	20,132

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Inventory

3 Months Ended

Mar. 31, 2024

Inventory Disclosure [Abstract]

Inventory

Inventory

Inventory consists primarily of raw materials, which are recorded at the lower of cost and net realizable value using the standard cost method, which approximates first-in, first-out (FIFO) cost. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts.

The Company’s inventory consisted of the following as of the dates indicated:

(in thousands)	March 31, 2024		December 31, 2023
Total inventory	$	13,539	$	14,319
Allowance for obsolescence	(716)		(662)
Inventory, net of allowance	$	12,823	$	13,657

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Under the Company's 2022 Long-Term Incentive 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, which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022 (as amended, the 2022 Plan). Awards under the 2022 Plan have a maximum term of ten years from the date of grant. The compensation 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 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 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.

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 $4.3 million and $3.7 million for the three months ended March 31, 2024 and 2023, respectively.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2024:

	Stock Options	Weighted- Average Exercise Price
Options outstanding at December 31, 2023	371,313	$	59.92
Granted	95,470	33.52
Exercised	-	-
Forfeited	(12,912)	73.73
Expired	(1,632)	78.59
Options outstanding at March 31, 2024	452,239	$	53.89
Exercisable at March 31, 2024	183,461	$	73.15

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 three months ended March 31, 2024 was $18.20.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.28%	3.90% - 4.55%
Expected life (years)	6.25	2.00 - 6.25
Expected volatility	50.62%	49.23% - 55.92%
Expected dividend yield	0%	0%

As of March 31, 2024, there was $4.8 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

Restricted stock 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 activity during the three months ended March 31, 2024:

	Restricted Stock	Weighted- Average Grant Date Fair Value Per Share
Restricted stock at December 31, 2023	653,465	$	45.89
Granted	76,078	33.52
Restrictions lapsed	(45,886)	76.14
Forfeited	(13,390)	47.78
Restricted stock at March 31, 2024	670,267	$	42.37

As of March 31, 2024, there was $17.8 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years.

Performance Stock

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 performance in the final year of the performance period and the award recipient’s continued employment. Certain PSUs granted by the Company in 2021 are based on performance conditions and the related compensation cost is based on the probability that the performance conditions will be achieved. The Company’s PSUs granted in 2022, 2023, 2024 and certain PSUs granted in 2021 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 activity during the three months ended March 31, 2024:

	Performance Stock	Weighted- Average Grant Date Fair Value Per Share
Performance stock at December 31, 2023	107,097	$	74.08
Granted	79,436	48.20
Restrictions lapsed	-	-
Performance change	(2,772)	227.14
Forfeited	-
Performance stock at March 31, 2024	183,761	$	60.58

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.37%	4.35%
Expected life (years)	2.88	2.88
Expected volatility	51.40%	58.00%
Expected dividend yield	0%	0%

As of March 31, 2024, there was $7.2 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.3 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	5.16%	4.60%
Expected life (months)	6.00	6.00
Expected volatility	47.92%	67.84%
Expected dividend yield	0%	0%

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2024

Regulated Operations [Abstract]

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities.

The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands)	2024		2023
Balance at beginning of period	$	(28,013)	$	(34,355)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications	(925)		527
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	(925)		527
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications	93		334
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	93		334
Balance at end of period	$	(28,845)	$	(33,494)

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Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2024 and 2023, the Company recorded an income tax provision of $2.5 million and $2.4 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2024 was 31.8 percent compared to 47.2 percent in the same period of the prior year. The effective tax rate decreased by 15.4 percent for the three months ended March 31, 2024 when compared to the same period in 2023, primarily due to a decrease in tax expense from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as a decrease in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances.

The effective income tax rate for the three months ended March 31, 2024 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions and tax credits for which the Company qualifies.

The Company had unrecognized tax benefits totaling $3.4 million as of March 31, 2024 and $3.6 million as of December 31, 2023, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate.

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Segment Reporting

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s reportable segments are based on the internal reporting used by the Company’s Chief Executive Officer, who is the chief operating decision maker (CODM), to assess operating performance and make decisions about the allocation of resources. The Corporate Unallocated and Japan category includes non-reportable segments, as well as research and development and general and administrative costs, that the Company does not allocate directly to its operating segments.

Intercompany transactions primarily relate to intercontinental activity and have been eliminated and are excluded from the reported amounts. The difference between income from operations and pre-tax income relates to foreign currency-related gains and losses and interest income on cash balances and investments, which are not allocated to business segments.

Revenue and income from operations by reportable segment for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
United States	$	101,481	$	97,746
Europe	26,409		28,113
Total revenue	$	127,890	$	125,859

	Three Months Ended March 31,
(in thousands)	2024		2023
Income (Loss) from Operations:
United States	$	26,332	$	20,481
Europe	(2,444)		(2,483)
Corporate Unallocated and Japan	(17,061)		(14,249)
Total Income from Operations	$	6,827	$	3,749

Total long-lived assets at March 31, 2024 and December 31, 2023 were as follows:

(in thousands)	March 31, 2024		December 31, 2023
Total long-lived assets:
United States	$	195,944	$	201,388
Europe	51,854		52,267
Total Long-lived Assets	$	247,798	$	253,655

Revenue by product line for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
Injection Molding	$	52,663	$	51,948
CNC Machining	49,932		48,104
3D Printing	21,582		21,325
Sheet Metal	3,553		4,248
Other Revenue	160		234
Total Revenue	$	127,890	$	125,859

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net income	$ 5,268	$ 2,659

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Net Income per Common Share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The table below sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2024		2023
Net income	$	5,268	$	2,659
Basic - weighted-average shares outstanding:	25,624,949		26,580,279
Effect of dilutive securities:
Employee stock options and other	160,038		25,508
Diluted - weighted-average shares outstanding:	25,784,987		26,605,787
Net income per share:
Basic	$	0.21	$	0.10
Diluted	$	0.20	$	0.10

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Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

Intangible assets other than goodwill at March 31, 2024 and December 31, 2023 were as follows:

	March 31, 2024						December 31, 2023						Useful Life (in years)	Weighted Average Useful Life Remaining (in years)
(in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Intangible assets with finite lives:
Marketing assets	$	930	$	(923)	$	7	$	930	$	(900)	$	30	10.0	0.1
Non-compete agreement	830		(628)		202		835		(603)		232		2.0 - 5.0	1.3
Software technology	13,229		(8,096)		5,133		13,229		(7,752)		5,477		10.0	3.8
Software platform	26,136		(7,071)		19,065		26,373		(6,575)		19,798		12.0	8.8
Tradenames	351		(351)		—		354		(347)		7		3.0	0.0
Customer relationships	12,204		(12,204)		—		12,223		(12,183)		40		3.0 - 9.0	0.0
Total intangible assets	$	53,680	$	(29,273)	$	24,407	$	53,944	$	(28,360)	$	25,584

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets and current exchange rates is as follows:

(in thousands)	Estimated Amortization Expense
Remaining 2024	$	2,736
2025	3,638
2026	3,537
2027	3,527
2028	2,158
Thereafter	8,811
Total estimated amortization expense	$	24,407

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis

The following table summarizes financial assets as of March 31, 2024 and December 31, 2023 measured at fair value on a recurring basis:

	March 31, 2024						December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	90,951	$	-	$	-	$	77,423	$	-	$	-
Money market mutual fund	1,853		-		-		6,367		-		-
Marketable securities	1,889		18,243		-		4,482		22,550		-
Total	$	94,693	$	18,243	$	-	$	88,272	$	22,550	$	-

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Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2024

Investments, Debt and Equity Securities [Abstract]

Debt Securities, Available-for-Sale

The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of March 31, 2024 and December 31, 2023:

	March 31, 2024
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	15,803	$	—	$	(244)	$	15,559
U.S. municipal securities	4,636		—		(63)		4,573
Total marketable securities	$	20,439	$	—	$	(307)	$	20,132

	December 31, 2023
(in thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agency securities	$	16,798	$	—	$	(278)	$	16,520
Corporate debt securities	2,511		—		(19)		2,492
U.S. municipal securities	7,876		—		(105)		7,771
Certificates of deposit/time deposits	249		—		—		249
Total marketable securities	$	27,434	$	—	$	(402)	$	27,032

Investments Classified by Contractual Maturity Date

The March 31, 2024 balance of available-for-sale debt securities by contractual maturity is shown in the following table at fair value. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in thousands)	March 31, 2024
Due in one year or less	$	16,875
Due after one year through five years	3,257
Total marketable securities	$	20,132

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Inventory (Tables)

3 Months Ended

Mar. 31, 2024

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

The Company’s inventory consisted of the following as of the dates indicated:

(in thousands)	March 31, 2024		December 31, 2023
Total inventory	$	13,539	$	14,319
Allowance for obsolescence	(716)		(662)
Inventory, net of allowance	$	12,823	$	13,657

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Share-Based Payment Arrangement, Option, Activity

The following table summarizes stock option activity during the three months ended March 31, 2024:

	Stock Options	Weighted- Average Exercise Price
Options outstanding at December 31, 2023	371,313	$	59.92
Granted	95,470	33.52
Exercised	-	-
Forfeited	(12,912)	73.73
Expired	(1,632)	78.59
Options outstanding at March 31, 2024	452,239	$	53.89
Exercisable at March 31, 2024	183,461	$	73.15

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.28%	3.90% - 4.55%
Expected life (years)	6.25	2.00 - 6.25
Expected volatility	50.62%	49.23% - 55.92%
Expected dividend yield	0%	0%

Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity

The following table summarizes restricted stock activity during the three months ended March 31, 2024:

	Restricted Stock	Weighted- Average Grant Date Fair Value Per Share
Restricted stock at December 31, 2023	653,465	$	45.89
Granted	76,078	33.52
Restrictions lapsed	(45,886)	76.14
Forfeited	(13,390)	47.78
Restricted stock at March 31, 2024	670,267	$	42.37

Schedule of Nonvested Performance-Based Units Activity

The following table summarizes performance stock activity during the three months ended March 31, 2024:

	Performance Stock	Weighted- Average Grant Date Fair Value Per Share
Performance stock at December 31, 2023	107,097	$	74.08
Granted	79,436	48.20
Restrictions lapsed	-	-
Performance change	(2,772)	227.14
Forfeited	-
Performance stock at March 31, 2024	183,761	$	60.58

Schedule of Share-based Payment Award, Awards Other Than Stock Options, Valuation Assumptions

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	4.37%	4.35%
Expected life (years)	2.88	2.88
Expected volatility	51.40%	58.00%
Expected dividend yield	0%	0%

Schedule of Share-Based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024	2023
Risk-free interest rate	5.16%	4.60%
Expected life (months)	6.00	6.00
Expected volatility	47.92%	67.84%
Expected dividend yield	0%	0%

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2024

Regulated Operations [Abstract]

Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands)	2024		2023
Balance at beginning of period	$	(28,013)	$	(34,355)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications	(925)		527
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	(925)		527
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications	93		334
Amounts reclassified from accumulated other comprehensive loss	—		—
Net current-period other comprehensive income (loss)	93		334
Balance at end of period	$	(28,845)	$	(33,494)

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Revenue from External Customers by Geographic Areas

Revenue and income from operations by reportable segment for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
United States	$	101,481	$	97,746
Europe	26,409		28,113
Total revenue	$	127,890	$	125,859

Income from Operations by Geographic Area

	Three Months Ended March 31,
(in thousands)	2024		2023
Income (Loss) from Operations:
United States	$	26,332	$	20,481
Europe	(2,444)		(2,483)
Corporate Unallocated and Japan	(17,061)		(14,249)
Total Income from Operations	$	6,827	$	3,749

Long-Lived Assets by Geographic Areas

Total long-lived assets at March 31, 2024 and December 31, 2023 were as follows:

(in thousands)	March 31, 2024		December 31, 2023
Total long-lived assets:
United States	$	195,944	$	201,388
Europe	51,854		52,267
Total Long-lived Assets	$	247,798	$	253,655

Disaggregation of Revenue

Revenue by product line for the three months ended March 31, 2024 and 2023 were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Revenue:
Injection Molding	$	52,663	$	51,948
CNC Machining	49,932		48,104
3D Printing	21,582		21,325
Sheet Metal	3,553		4,248
Other Revenue	160		234
Total Revenue	$	127,890	$	125,859

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Net Income per Common Share - Narrative (Details) - shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Earnings Per Share [Abstract]
Anti-dilutive options excluded from calculation of diluted weighted average shares outstanding (in shares)	421,937	382,906

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Net Income per Common Share -Schedule of Computation Of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Earnings Per Share [Abstract]
Net income	$ 5,268	$ 2,659
Basic - weighted-average shares outstanding (in shares)	25,624,949	26,580,279
Effect of dilutive securities:
Employee stock options and other (in shares)	160,038	25,508
Diluted - weighted-average shares outstanding (in shares)	25,784,987	26,605,787
Net income per share:
Basic (in dollars per share)	$ 0.21	$ 0.10
Diluted (in dollars per share)	$ 0.20	$ 0.10

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Goodwill and Other Intangible Assets - Schedule of Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 53,680	$ 53,944
Accumulated Amortization	(29,273)	(28,360)
Net	24,407	25,584
Marketing assets
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	930	930
Accumulated Amortization	(923)	(900)
Net	$ 7	30
Useful Life (in years)	10 years
Weighted Average Useful Life Remaining (in years)	1 month 6 days
Non-compete agreement
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 830	835
Accumulated Amortization	(628)	(603)
Net	$ 202	232
Weighted Average Useful Life Remaining (in years)	1 year 3 months 18 days
Non-compete agreement | Minimum
Acquired Finite-Lived Intangible Assets [Line Items]
Useful Life (in years)	2 years
Non-compete agreement | Maximum
Acquired Finite-Lived Intangible Assets [Line Items]
Useful Life (in years)	5 years
Software technology
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 13,229	13,229
Accumulated Amortization	(8,096)	(7,752)
Net	$ 5,133	5,477
Useful Life (in years)	10 years
Weighted Average Useful Life Remaining (in years)	3 years 9 months 18 days
Software platform
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 26,136	26,373
Accumulated Amortization	(7,071)	(6,575)
Net	$ 19,065	19,798
Useful Life (in years)	12 years
Weighted Average Useful Life Remaining (in years)	8 years 9 months 18 days
Tradenames
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 351	354
Accumulated Amortization	(351)	(347)
Net	$ 0	7
Useful Life (in years)	3 years
Weighted Average Useful Life Remaining (in years)	0 years
Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Gross	$ 12,204	12,223
Accumulated Amortization	(12,204)	(12,183)
Net	$ 0	$ 40
Weighted Average Useful Life Remaining (in years)	0 years
Customer relationships | Minimum
Acquired Finite-Lived Intangible Assets [Line Items]
Useful Life (in years)	3 years
Customer relationships | Maximum
Acquired Finite-Lived Intangible Assets [Line Items]
Useful Life (in years)	9 years

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Goodwill and Other Intangible Assets - Narrative (Details) € in Millions, $ in Millions			3 Months Ended		12 Months Ended
	Jan. 22, 2021 EUR (€)	Jan. 22, 2021 USD ($)	Mar. 31, 2024 USD ($)	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Foreign currency losses			$ 1.6		$ 1.3
Amortization expense for intangible assets			$ 1.0	$ 1.5
UNITED STATES | 3D Hubs, Inc. (Hubs)
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired		$ 16.6
Europe | 3D Hubs, Inc. (Hubs)
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired | €	€ 11.6

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Goodwill and Other Intangible Assets - Future Amortization Expense (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remaining 2024	$ 2,736
2025	3,638
2026	3,537
2027	3,527
2028	2,158
Thereafter	8,811
Net	$ 24,407	$ 25,584

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Fair Value Measurements - Financial Assets Measured At Fair Value On A Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Financial Assets:
Debt securities, available-for-sale	$ 20,132	$ 27,032
Level 1 | Fair Value, Recurring
Financial Assets:
Debt securities, available-for-sale	1,889	4,482
Total	94,693	88,272
Level 2 | Fair Value, Recurring
Financial Assets:
Debt securities, available-for-sale	18,243	22,550
Total	18,243	22,550
Level 3 | Fair Value, Recurring
Financial Assets:
Debt securities, available-for-sale	0	0
Total	0	0
Cash | Level 1 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	90,951	77,423
Cash | Level 2 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	0	0
Cash | Level 3 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	0	0
Money market mutual fund | Level 1 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	1,853	6,367
Money market mutual fund | Level 2 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	0	0
Money market mutual fund | Level 3 | Fair Value, Recurring
Financial Assets:
Cash and cash equivalents	$ 0	$ 0

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Marketable Securities - Short-Term and Long-Term Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Debt Securities, Available-for-Sale [Line Items]
Cost	$ 20,439	$ 27,434
Unrealized Gains	0	0
Unrealized Losses	(307)	(402)
Fair Value	20,132	27,032
U.S. government agency securities
Debt Securities, Available-for-Sale [Line Items]
Cost	15,803	16,798
Unrealized Gains	0	0
Unrealized Losses	(244)	(278)
Fair Value	15,559	16,520
Corporate debt securities
Debt Securities, Available-for-Sale [Line Items]
Cost		2,511
Unrealized Gains		0
Unrealized Losses		(19)
Fair Value		2,492
U.S. municipal securities
Debt Securities, Available-for-Sale [Line Items]
Cost	4,636	7,876
Unrealized Gains	0	0
Unrealized Losses	(63)	(105)
Fair Value	$ 4,573	7,771
Certificates of deposit/time deposits
Debt Securities, Available-for-Sale [Line Items]
Cost		249
Unrealized Gains		0
Unrealized Losses		0
Fair Value		$ 249

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Marketable Securities - Maturities of Available-For-Sale Debt Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Debt Securities, Available-for-Sale, Fair Value, Fiscal Year Maturity [Abstract]
Due in one year or less	$ 16,875
Due after one year through five years	3,257
Total marketable securities	$ 20,132	$ 27,032

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Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Inventory Disclosure [Abstract]
Total inventory	$ 13,539	$ 14,319
Allowance for obsolescence	(716)	(662)
Inventory, net of allowance	$ 12,823	$ 13,657

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Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based compensation expense	$ 4.3	$ 3.7
Stock-based award, weighted-average grant date fair value (in dollars per share)	$ 18.20
ESPP
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Discount from market price (in percent)	15.00%
Offering period (in months)	6 months
Purchase price of common stock (in percent)	85.00%
Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based award, term (in years)	10 years
Stock-based award, vesting period (in years)	4 years
Stock based award, unrecognized compensation expense	$ 4.8
Stock based award, unrecognized compensation expense, period for recognition (in years)	2 years 10 months 24 days
Restricted Stock
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock based award, unrecognized compensation expense	$ 17.8
Stock based award, unrecognized compensation expense, period for recognition (in years)	2 years 7 months 6 days
Restricted Stock | Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based award, vesting period (in years)	3 years
Restricted Stock | Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based award, vesting period (in years)	4 years
Performance Shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based award, vesting period (in years)	3 years
Stock based award, unrecognized compensation expense	$ 7.2
Stock based award, unrecognized compensation expense, period for recognition (in years)	2 years 3 months 18 days
Percentage of target, capable of being earned and vesting, lower limit	0.00%
Percentage of target, capable of being earned and vesting, upper limit	200.00%
Long-Term Incentive Plan 2012
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based award, term (in years)	10 years

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Stock-Based Compensation - Option Activity (Details)	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Stock Options
Options outstanding, beginning balance (in shares) | shares	371,313
Granted (in shares) | shares	95,470
Exercised (in shares) | shares	0
Forfeited (in shares) | shares	(12,912)
Expired (in shares) | shares	(1,632)
Options outstanding, ending balance (in shares) | shares	452,239
Weighted- Average Exercise Price
Options outstanding, beginning balance, weighted-average exercise price (in dollars per share) | $ / shares	$ 59.92
Granted, weighted-average exercise price (in dollars per share) | $ / shares	33.52
Exercised, weighted-average exercise price (in dollars per share) | $ / shares	0
Forfeited, weighted-average exercise price (in dollars per share) | $ / shares	73.73
Expired, weighted-average exercise price (in dollars per share) | $ / shares	78.59
Options outstanding, ending balance, weighted-average exercise price (in dollars per share) | $ / shares	$ 53.89
Additional Disclosures
Option exercisable (in shares) | shares	183,461
Options exercisable, weighted-average exercise price (in dollars per share) | $ / shares	$ 73.15

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Stock-Based Compensation - Weighted Average Assumptions (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Employee Stock Purchase Plan
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Risk-free interest rate	5.16%	4.60%
Expected life (years)	6 years	6 years
Expected volatility	47.92%	67.84%
Expected dividend yield	0.00%	0.00%
Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Risk-free interest rate	4.28%
Expected life (years)	6 years 3 months
Expected volatility	50.62%
Expected dividend yield	0.00%	0.00%
Performance Shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Risk-free interest rate	4.37%	4.35%
Expected life (years)	2 years 10 months 17 days	2 years 10 months 17 days
Expected volatility	51.40%	58.00%
Expected dividend yield	0.00%	0.00%
Minimum | Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Risk-free interest rate		3.90%
Expected life (years)		2 years
Expected volatility		49.23%
Maximum | Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Risk-free interest rate		4.55%
Expected life (years)		6 years 3 months
Expected volatility		55.92%

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Stock-Based Compensation - Stock Activity (Details)	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Restricted Stock
Stock
Beginning balance (in shares) | shares	653,465
Granted (in shares) | shares	76,078
Restrictions lapsed (in shares) | shares	(45,886)
Forfeited (in shares) | shares	(13,390)
Ending balance (in shares) | shares	670,267
Weighted- Average Grant Date Fair Value Per Share
Beginning balance, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 45.89
Granted, weighted-average grant date fair value (in dollars per share) | $ / shares	33.52
Restrictions lapsed, weighted-average grant date fair value (in dollars per share) | $ / shares	76.14
Forfeited, weighted-average grant date fair value (in dollars per share) | $ / shares	47.78
Ending balance, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 42.37
Performance Shares
Stock
Beginning balance (in shares) | shares	107,097
Granted (in shares) | shares	79,436
Restrictions lapsed (in shares) | shares	0
Performance change (in shares) | shares	(2,772)
Forfeited (in shares) | shares	0
Ending balance (in shares) | shares	183,761
Weighted- Average Grant Date Fair Value Per Share
Beginning balance, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 74.08
Granted, weighted-average grant date fair value (in dollars per share) | $ / shares	48.20
Restrictions lapsed, weighted-average grant date fair value (in dollars per share) | $ / shares	0
Performance change, weighted-average grant date fair value (in dollars per share) | $ / shares	227.14
Forfeited, weighted-average grant date fair value (in dollars per share) | $ / shares
Ending balance, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 60.58

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Accumulated Other Comprehensive Income (Loss) - Changes In Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 695,295	$ 697,648
Net unrealized gains (losses) on investments in securities
Ending balance	687,310	683,137
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(28,013)	(34,355)
Net unrealized gains (losses) on investments in securities
Ending balance	(28,845)	(33,494)
Foreign currency translation adjustments
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications	(925)	527
Amounts reclassified from accumulated other comprehensive loss	0	0
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications	(925)	527
Amounts reclassified from accumulated other comprehensive loss	0	0
Net current-period other comprehensive income (loss)	(925)	527
Net unrealized gains (losses) on investments in securities
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications	93	334
Amounts reclassified from accumulated other comprehensive loss	0	0
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications	93	334
Amounts reclassified from accumulated other comprehensive loss	0	0
Net current-period other comprehensive income (loss)	$ 93	$ 334

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 2,458	$ 2,380
Effective income tax rate (in percent)	31.80%	47.20%
Effective income tax rate, increase (decrease) during period (in percent)	(15.40%)
Federal statutory rate (in percent)	21.00%
Unrecognized tax benefits	$ 3,400		$ 3,600

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Segment Reporting - Revenue by Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Segment Reporting Information [Line Items]
Total revenue	$ 127,890	$ 125,859
Operating Segments
Segment Reporting Information [Line Items]
Total revenue	127,890	125,859
Operating Segments | United States
Segment Reporting Information [Line Items]
Total revenue	101,481	97,746
Operating Segments | Europe
Segment Reporting Information [Line Items]
Total revenue	$ 26,409	$ 28,113

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Segment Reporting - Income From Operation by Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Segment Reporting Information [Line Items]
Total Income from Operations	$ 6,827	$ 3,749
Operating Segments
Segment Reporting Information [Line Items]
Total Income from Operations	6,827	3,749
Operating Segments | United States
Segment Reporting Information [Line Items]
Total Income from Operations	26,332	20,481
Operating Segments | Europe
Segment Reporting Information [Line Items]
Total Income from Operations	(2,444)	(2,483)
Operating Segments | Corporate Unallocated and Japan
Segment Reporting Information [Line Items]
Total Income from Operations	$ (17,061)	$ (14,249)

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Segment Reporting - Long-Lived Assets by Geographic Areas (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Segment Reporting Information [Line Items]
Total Long-lived Assets	$ 247,798	$ 253,655
Operating Segments
Segment Reporting Information [Line Items]
Total Long-lived Assets	247,798	253,655
Operating Segments | United States
Segment Reporting Information [Line Items]
Total Long-lived Assets	195,944	201,388
Operating Segments | Europe
Segment Reporting Information [Line Items]
Total Long-lived Assets	$ 51,854	$ 52,267

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Segment Reporting - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Segment Reporting Information [Line Items]
Total revenue	$ 127,890	$ 125,859
Injection Molding
Segment Reporting Information [Line Items]
Total revenue	52,663	51,948
CNC Machining
Segment Reporting Information [Line Items]
Total revenue	49,932	48,104
3D Printing
Segment Reporting Information [Line Items]
Total revenue	21,582	21,325
Sheet Metal
Segment Reporting Information [Line Items]
Total revenue	3,553	4,248
Other Revenue
Segment Reporting Information [Line Items]
Total revenue	$ 160	$ 234