Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022March 31, 2023

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                     to                      

Commission File Number: 001-35435

 

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.  ☑Yes ☐No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☑Yes ☐No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

Accelerated filer     

Non-accelerated filer

☐    

 

Smaller reporting company

Emerging growth company

    

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☑No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 27,503,10026,202,723 shares of Common Stock, par value $0.001 per share, were outstanding at July 29, 2022.May 2, 2023.

 

 

 

 
 

Proto Labs, Inc.

TABLE OF CONTENTS

 

Item

 

Description

 

Page

 

Description

 

Page

 

 

 

 

 

 

 

 

PART I

PART I

PART I

1.

 

Financial Statements

 

2

 

Financial Statements

 

2

2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

15

3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

26

 

Quantitative and Qualitative Disclosures about Market Risk

 

23

4.

 

Controls and Procedures

 

27

 

Controls and Procedures

 

24

PART II

PART II

PART II

1.

 

Legal Proceedings

 

28

 

Legal Proceedings

 

25

1A.

 

Risk Factors

 

28

 

Risk Factors

 

25

2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

3.

 

Defaults Upon Senior Securities

 

28

 

Defaults Upon Senior Securities

 

25

4.

 

Mine Safety Disclosures

 

28

 

Mine Safety Disclosures

 

25

5.

 

Other Information

 

28

 

Other Information

 

25

6.

 

Exhibits

 

29

 

Exhibits

 

26

 

1

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 


 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 
 2022  2021  2023  2022 
 

(Unaudited)

    

(Unaudited)

   

Assets

            

Current assets

          

Cash and cash equivalents

 $54,666 $65,929  $62,051 $56,558 

Short-term marketable securities

 24,379 11,580  22,851 23,568 

Accounts receivable, net of allowance for doubtful accounts of $2,130 and $1,948 as of June 30, 2022, and December 31, 2021, respectively

 82,469 80,051 

Accounts receivable, net of allowance for doubtful accounts of $1,932 and $1,706 as of March 31, 2023, and December 31, 2022, respectively

 77,619 76,225 

Inventory

 15,051 13,161  14,273 13,578 

Income taxes receivable

 2,627 1,321  821 4,042 

Prepaid expenses and other current assets

  11,484   11,450   11,101   12,597 

Total current assets

 190,676  183,492  188,716  186,568 

Property and equipment, net

 260,631 280,346  253,616 257,785 

Goodwill

 390,354 400,610  273,991 273,991 

Other intangible assets, net

 34,026 37,998  29,869 31,250 

Long-term marketable securities

 31,068 14,340  19,824 26,419 

Operating lease assets

 4,037 5,578  3,315 3,844 

Finance lease assets

 1,649 1,898  17,266 17,532 

Long-term assets held for sale

 1,985 0 

Other long-term assets

  4,223   4,320   4,776   4,779 

Total assets

 $918,649  $928,582  $791,373  $802,168 
          

Liabilities and shareholders' equity

            

Current liabilities

          

Accounts payable

 $15,642 $25,364  $19,854 $17,356 

Accrued compensation

 16,687 13,704  14,695 12,743 

Accrued liabilities and other

 24,011 11,980  23,156 22,384 

Current operating lease liabilities

 2,140 3,298  1,295 1,561 

Current finance lease liabilities

  436   550  17,452 17,537 

Income taxes payable

  1,928   - 

Total current liabilities

 58,916  54,896  78,380  71,581 

Long-term operating lease liabilities

 1,886 2,245  1,983 2,255 

Long-term finance lease liabilities

 1,188 1,351 

Long-term deferred tax liabilities

 30,177 35,892  23,258 26,322 

Other long-term liabilities

  5,784   5,705   4,615   4,362 

Total liabilities

 97,951  100,089  108,236  104,520 
          

Shareholders' equity

          

Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of June 30, 2022, and December 31, 2021

 0  0 

Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 27,503,100 and 27,465,945 shares as of June 30, 2022, and December 31, 2021, respectively

 28 28 

Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2023, and December 31, 2022

 -  - 

Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,202,723 and 26,888,425 shares as of March 31, 2023, and December 31, 2022, respectively

 26 27 

Additional paid-in capital

 475,740 468,548  465,185 473,740 

Retained earnings

 381,079 376,734  251,420 258,236 

Accumulated other comprehensive loss

  (36,149)  (16,817)  (33,494)  (34,355)

Total shareholders' equity

  820,698   828,493   683,137   697,648 

Total liabilities and shareholders' equity

 $918,649  $928,582  $791,373  $802,168 

 


 

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

 

2

 

 

Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

 


 

 

Three Months Ended

 

Six Months Ended

  

Three Months Ended

 
 

June 30,

  

June 30,

  

March 31,

 
 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 
  

Statements of Operations:

            

Revenue

 $126,902 $123,048 $251,070 $239,174  $125,859  $124,168 

Cost of revenue

  69,480  66,423  137,844  127,219   72,083   68,364 

Gross profit

 57,422  56,625  113,226  111,955  53,776  55,804 

Operating expenses

  

Marketing and sales

 21,055 21,044 41,641 40,524  22,451  20,586 

Research and development

 9,450 11,060 20,007 23,241  10,677  10,557 

General and administrative

 16,522 8,417 33,293 27,825  16,833  16,771 

Closure of Japan business

  5,194  0  5,194  0   66   - 

Total operating expenses

  52,221   40,521   100,135   91,590   50,027   47,914 

Income from operations

 5,201  16,104  13,091  20,365  3,749  7,890 

Other income (loss), net

  1  137  (299)  (176)  1,290   (300)

Income before income taxes

 5,202  16,241  12,792  20,189  5,039  7,590 

Provision for income taxes

  2,645  3,326  5,140  3,562   2,380   2,495 

Net income

 $2,557  $12,915  $7,652  $16,627  $2,659  $5,095 
  

Net income per share:

  

Basic

 $0.09  $0.47  $0.28  $0.60  $0.10  $0.19 

Diluted

 $0.09  $0.47  $0.28  $0.60  $0.10  $0.19 
  

Shares used to compute net income per share:

  

Basic

 27,530,739 27,735,732 27,515,583 27,600,684  26,580,279  27,502,941 

Diluted

 27,536,823 27,744,870 27,524,019 27,741,464  26,605,787  27,510,477 
  

Comprehensive Income (Loss) (net of tax)

            

Comprehensive income (loss)

 $(11,287) $14,896 $(11,680) $11,932  $3,520  $(393)

 


 

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

 

3

 

 

Proto Labs, Inc.

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)

 


 

 

Common Stock

  

Additional

    

Accumulated Other

    

Common Stock

  

Additional

    

Accumulated Other

   
       

Paid-In

 

Retained

 

Comprehensive

          

Paid-In

 

Retained

 

Comprehensive

   
 

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Total

  

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Total

 
              

Balance at January 1, 2022

 27,465,945 28 468,548 376,734 (16,817) 828,493 

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

 27,716 - (462) - - (462) 26,798 - (401) - - (401)

Stock-based compensation expense

 - - 4,397 - - 4,397  - - 3,695 - - 3,695 

Repurchases of common stock

 0  -  -  -  -  - 

Repurchases of common stock and other

 (712,500) (1) (11,849) (9,475) -  (21,325)

Net income

 - - - 5,095 - 5,095  - - - 2,659 - 2,659 

Other comprehensive loss

                              

Foreign currency translation adjustment

 - - - - (4,972) (4,972) - - - - 527 527 

Net unrealized gains (losses) on investments in securities

 - - - - (516)  (516) - - - - 334 334 

Comprehensive loss

      0   0   0   0   (393)                  3,520 

Balance at March 31, 2022

  27,493,661  $28  $472,483  $381,829  $(22,305) $832,035 

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

 122,705 0 1,158 0 0 1,158 

Stock-based compensation expense

  - 0 4,031 0 0 4,031 

Repurchases of common stock

 (113,266) 0 (1,932) (3,307) 0 (5,239)

Net income

 - 0 0 2,557 0 2,557 

Other comprehensive loss

             

Foreign currency translation adjustment

 - 0 0 0 (13,515) (13,515)

Net unrealized gains (losses) on investments in securities

 - 0 0 0 (329)  (329)

Comprehensive loss

      0   0   0   0   (11,287)

Balance at June 30, 2022

  27,503,100  $28  $475,740  $381,079  $(36,149) $820,698 

Balance at March 31, 2023

  26,202,723  $26  $465,185  $251,420  $(33,494) $683,137 

 

 

Common Stock

  

Additional

    

Accumulated Other

    

Common Stock

  

Additional

    

Accumulated Other

   
       

Paid-In

 

Retained

 

Comprehensive

          

Paid-In

 

Retained

 

Comprehensive

   
 

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Total

  

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Total

 
  

Balance at January 1, 2021

 26,776,796  27  284,848  362,901  (3,420) 644,356 

Balance at December 31, 2021

 27,465,945  28  468,548  376,734  (16,817) 828,493 

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

 48,955  -  (290) -  -  (290) 27,716  -  (462) -  -  (462)

Common shares issued for Hubs acquisition

 863,995  1  166,708  0  0  166,709 

Stock-based compensation expense

 -  -  5,620  -  -  5,620  -  -  4,397  -  -  4,397 

Repurchases of common stock

 0  -  -  -  -  -  -  -  -  -  -  - 

Net income

 -  -  -  3,712  -  3,712  -  -  -  5,095  -  5,095 

Other comprehensive loss

                          

Foreign currency translation adjustment

 -  -  -  -  (6,842) (6,842) -  -  -  -  (4,972) (4,972)

Net unrealized gains (losses) on investments in securities

 -  -  -  -  166   166  -  -  -  -  (516)  (516)

Comprehensive loss

      0   0   0   0   (2,964)                  (393)

Balance at March 31, 2021

  27,689,746  $28  $456,886  $366,613  $(10,096) $813,431 

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

 85,317 0 (81) 0 0 (81)

Stock-based compensation expense

 - 0 4,941 0 0 4,941 

Repurchases of common stock

 (14,000) 0 (149) (1,061) 0 (1,210)

Net income

 - 0 0 12,915 0 12,915 

Other comprehensive income

              

Foreign currency translation adjustment

 - 0 0 0 2,030 2,030 

Net unrealized gains (losses) on investments in securities

 - 0 0 0 (49) (49)

Comprehensive income

      0   0   0   0   14,896 

Balance at June 30, 2021

  27,761,063  $28  $461,597  $378,467  $(8,115) $831,977 

Balance at March 31, 2022

  27,493,661  $28  $472,483  $381,829  $(22,305) $832,035 

 


 

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

 

4

 

 

Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 


 

 

Six Months Ended

  

Three Months Ended

 
 

June 30,

  

March 31,

 
 

2022

  

2021

  

2023

  

2022

 
  

Operating activities

        

Net income

 $7,652  $16,627  $2,659  $5,095 

Adjustments to reconcile net income to net cash provided by operating activities:

  

Depreciation and amortization

  20,274 20,127  9,388 10,232 

Stock-based compensation expense

 8,428 10,561  3,695 4,397 

Deferred taxes

 (5,653) 419  (3,096) (3,213)

Fair value of contingent consideration

 0 (7,763)

Impairments related to closure of Japan business

 1,792 0 

Interest on finance lease obligations

 287 - 

Other

 32 269  (46) 79 

Changes in operating assets and liabilities:

  

Accounts receivable

 (5,748) (23,296) (2,328) (6,329)

Inventories

 (1,783) 1,727  (641) (675)

Prepaid expenses and other

 (298) 1,810  1,464 1,110 

Income taxes

 (1,250) (4,015) 5,160 4,519 

Accounts payable

 (521) 5,011  2,536 (326)

Accrued liabilities and other

  8,115   (748)  3,500   2,894 

Net cash provided by operating activities

  31,040   20,729   22,578   17,783 
  

Investing activities

        

Purchases of property, equipment and other capital assets

  (6,030) (23,929) (3,441) (3,069)

Cash used for acquisitions, net of cash acquired

 0 (127,413)

Proceeds from sales of property, equipment and other capital assets

 194 - 

Purchases of marketable securities

 (38,882) (15,159) - (29,366)

Proceeds from sales of marketable securities

 1,000 47,694 

Proceeds from call redemptions and maturities of marketable securities

  7,396   13,725   7,630   6,600 

Net cash used in investing activities

  (36,516)  (105,082)

Net cash provided by (used in) investing activities

  4,383   (25,835)
  

Financing activities

        

Proceeds from exercises of stock options

 2,311 3,838  - 6 

Purchases of shares withheld for tax obligations

 (1,615) (4,209) (401) (468)

Repurchases of common stock

 (5,239) (1,210) (21,119) - 

Principal repayments of finance lease obligations

  (278) (275)  (82)  (139)

Net cash used in financing activities

  (4,821)  (1,856)  (21,602)  (601)

Effect of exchange rate changes on cash and cash equivalents

  (966)  515  134 (37)

Net decrease in cash and cash equivalents

  (11,263)  (85,694)

Net increase (decrease) in cash and cash equivalents

  5,493   (8,690)

Cash and cash equivalents, beginning of period

  65,929   127,603   56,558   65,929 

Cash and cash equivalents, end of period

 $54,666  $41,909  $62,051  $57,239 

 


 

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

 

5

 

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, 20212022, as filed with the Securities and Exchange Commission (SEC) on February 18, 2022.21, 2023.

 

The accompanying Consolidated Balance Sheet as of December 31, 20212022 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 18, 202221, 2023 as referenced above.

On May 27, 2022, the Company's board of directors approved a plan for the closure of the Company's manufacturing facility in Japan and announced an intention to cease operations in the region. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. The Company expects to substantially complete the closure plan within the next year. The Company's decision to close the Japan business resulted in $5.2 million in operating expenses during the three and six months ended June 30, 2022. Operating expenses included $2.2 million of employee severance, $1.2 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the three and six months ended June 30, 2022. 

 

 

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.  There are no pending accounting pronouncements that are expected to have a material impact on the Company's Consolidated Financial Statements.

 

 

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. For the three and sixmonths ended June 30, 2022,March 31, 2023 220,776 and 208,8402022, 382,906 and 233,380 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding.outstanding, respectively. 

 

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

 


 

 

Three Months Ended

 

Six Months Ended

  

Three Months Ended

 
 

June 30,

  

June 30,

  

March 31,

 

(in thousands, except share and per share amounts)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 

Net income

 $2,557  $12,915  $7,652  $16,627  $2,659  $5,095 
  

Basic - weighted-average shares outstanding:

 27,530,739  27,735,732  27,515,583  27,600,684  26,580,279  27,502,941 

Effect of dilutive securities:

  

Employee stock options and other

  6,084   9,138   8,436   140,780   25,508   7,536 

Diluted - weighted-average shares outstanding:

  27,536,823   27,744,870   27,524,019   27,741,464   26,605,787   27,510,477 

Net income per share:

  

Basic

 $0.09  $0.47  $0.28  $0.60  $0.10  $0.19 

Diluted

 $0.09  $0.47  $0.28  $0.60  $0.10  $0.19 

 


 

6

 

 

Note 4 – Business Combinations

On January 22, 2021, the Company acquired all of the outstanding shares of 3D Hubs, Inc. (Hubs), for $294.1 million, consisting of $127.4 million in cash and 863,995 shares of the Company's common stock valued at $166.7 million on the closing date. The purchase agreement included additional contingent consideration of up to $52.8 million subject to the achievement of performance-based targets during fiscal 2021 and fiscal 2022. The contingent consideration consisted of up to $25.0 million in cash and up to 143,983 shares of the Company's common stock valued at $27.8 million on the closing date. The Company initially recorded a liability of $13.6 million related to the contingent consideration, which was subsequently reversed when it was determined the performance based targets would not be met in 2021 and the expectation that those targets would not be met in fiscal 2022. The reversal of the contingent consideration was recorded as a decrease in general and administrative expense in the Consolidated Statements of Comprehensive Income.

Hubs is based in Amsterdam, Netherlands and is a leading online manufacturing platform that provides customers with on-demand access to a global network of premium manufacturing partners. The acquisition enhances the Company’s value proposition by expanding the customer offerings, enabling the Company to more holistically serve its customers.

The fair value of the consideration paid for this acquisition has been allocated to the assets purchased and liabilities assumed based on their fair values as of the acquisition date, with any excess recorded as goodwill.  The goodwill associated with the acquisition represents both the strategic and growth opportunities by significantly expanding the customer offering with a network of premium manufacturing partners. The goodwill related to the acquisition is not deductible for tax purposes. 

The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805,Business Combinations. The final purchase price allocation was as follows:


(in thousands)

 Acquisition 

Assets acquired:

    

Current assets

 $2,497 

Intangible assets

  30,770 

Goodwill

  280,925 

Other long-term assets

  1,139 

Total assets acquired

  315,331 
     

Liabilities assumed:

    

Current contingent consideration

  7,093 

Current liabilities

  5,666 

Long-term contingent consideration

  6,507 

Long-term deferred tax liabilities

  1,688 

Other long-term liabilities

  255 

Total liabilities assumed

  21,209 

Net assets acquired

  294,122 
     

Cash paid

  133,847 

Cash acquired

  (6,434)

Net cash consideration

  127,413 

Equity portion of purchase price

  166,709 

Total purchase consideration

 $294,122 


7

Note 5 – Goodwill and Other Intangible Assets

 

TheThere were no changes in the carrying amount of goodwill during the sixthree months ended June 30, 2022March 31, 2023 were as follows:


(in thousands)

 Six Months Ended June 30, 2022 

Balance as of the beginning of the period

 $400,610 

Goodwill acquired during the period

  0 

Goodwill written off during the period

  (630)

Foreign currency translation adjustments

  (9,626)

Balance as of the end of the period

 $390,354 


Goodwill of $0.6 million was written off as of June 30, 2022, as a result of the Company's decision to close the Japan manufacturing facility and exit the Japan market. The Japan business was in operations through the second quarter of 2022 and the assets are expected to be available for sale during the second half of 2022. Goodwill has been allocated to the acquired Hubs entities consisting of goodwill of €106.5 million in Europe and $151.3 million in the United States as of the date of the acquisition. The Euro denominated goodwill is 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..

 

Intangible assets other than goodwill at June 30, 2022March 31, 2023 and December 31, 20212022 were as follows:

 


 

 

June 30, 2022

  

December 31, 2021

  

Useful

  

Weighted Average

  

March 31, 2023

  

December 31, 2022

  

Useful

  

Weighted Average

 

(in thousands)

 

Gross

  

Accumulated Amortization

  

Net

  

Gross

  

Accumulated Amortization

  

Net

  

Life (in years)

  

Useful Life Remaining (in years)

  

Gross

  

Accumulated Amortization

  

Net

  

Gross

  

Accumulated Amortization

  

Net

  

Life (in years)

  

Useful Life Remaining (in years)

 

Intangible assets with finite lives:

                                  

Marketing assets

 $

930

 $

(759

) $

171

 $

930

 $

(713

) $

217

 10.0 1.8  

$ 930

 

$ (829)

  

$ 101

 

$ 930

 

$ (806)

  

$ 124

 10.0 1.1 

Non-compete agreement

 822 (423) 399 842 (363) 479 2.0 - 5.0 2.5  831 (516) 315 828 (487) 341 2.0 - 5.0 1.9 

Software technology

 13,229 (5,699) 7,530 13,229 (5,014) 8,215 10.0 6.0  13,229 (6,725) 6,504 13,229 (6,383) 6,846 10.0 4.8 

Software platform

 25,777 (3,239) 22,538 26,725 (2,262) 24,463 12.0 10.6  26,200 (4,886) 21,314 26,054 (4,337) 21,717 12.0 9.8 

Tradenames

 346 (167) 179 359 (114) 245 3.0 1.6  352 (256) 96 350 (227) 123 3.0 0.8 

Customer relationships

 12,174  (8,965) 3,209  12,252  (7,873) 4,379  3.0 - 9.0 1.3  12,209  (10,670) 1,539  12,197  (10,098) 2,099  3.0 - 9.0 0.6 

Total intangible assets

 $53,278  $(19,252) $34,026  $54,337  $(16,339) $37,998       $53,751  $(23,882) $29,869  $53,588  $(22,338) $31,250      

 


 

Intangible assets have been allocated to the acquired Hubs entities consistingconsisted 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 $2.0$1.5 million and $0.9$1.7 million as of June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Amortization expense for intangible assets was $1.5 million for each of the three months ended June 30, 2022March 31, 2023 and 20212022, and $3.1 million and $3.0 million for the six months ended June 30, 2022 and 2021, 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

  

Estimated Amortization Expense

 

Remaining 2022

 $3,029 

2023

 5,855 

Remaining 2023

 $4,376 

2024

 3,706  3,746 

2025

 3,608  3,648 

2026

 3,508  3,546 

2027

 3,537 

Thereafter

  14,320   11,016 

Total estimated amortization expense

 $34,026  $29,869 

 


 

87

 
 

Note 6 Assets Held for Sale

Assets are classified as held for sale and presented separately on the Consolidated Balance Sheet when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the assets; (2) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (3) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (4) the sale of the assets is probable and is expected to be completed within one year; (5) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. The assets are then recorded at the lower of their current carrying value or the fair market value, less costs to sell.

During the first quarter of 2022, a facility the Company owns in Maple Plain, Minnesota, encompassing approximately 35,000 square feet of manufacturing and office space, met the criteria to be held for sale. The assets held for sale were $2.0 million as of June 30, 2022 and are presented on the Company's Consolidated Balance Sheet as Long-term assets held for sale.  The assets held for sale had no impact on the Company’s Consolidated Statements of Operations during the three or six months ended June 30, 2022. 

Note 7 – 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.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 June 30, 2022March 31, 2023 and December 31, 20212022 measured at fair value on a recurring basis: 

 


 

 

June 30, 2022

  

December 31, 2021

  

March 31, 2023

  

December 31, 2022

 

(in thousands)

 

Level 1

  

Level 2

  

Level 3

  

Level 1

  

Level 2

  

Level 3

  

Level 1

  

Level 2

  

Level 3

  

Level 1

  

Level 2

  

Level 3

 

Financial Assets:

                                    

Cash

 $44,886 $0 $0 $65,637 $0 $0  $50,165 $- $- $38,862 $- $- 

Money market mutual fund

 9,780 0 0 292 0 0  11,886 - - 17,696 - - 

Marketable securities

  15,851   39,596   0   7,602   18,318   0   11,344   31,331   -   9,881   40,106   - 

Total

 $70,517  $39,596  $0  $73,531  $18,318  $0  $73,395  $31,331  $-  $66,439  $40,106  $- 


 

 

Note 86 – 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 June 30, 2022March 31, 2023 and December 31, 20212022:

 


 

 

June 30, 2022

  

March 31, 2023

 

(in thousands)

 

Cost

  

Unrealized Gains

  

Unrealized Losses

  

Fair Value

  

Cost

  

Unrealized Gains

  

Unrealized Losses

  

Fair Value

 

U.S. municipal securities

 $17,893 $0 $(365) $17,528  $14,377 $- $(330) $14,047 

Corporate debt securities

 12,299 0 (234) 12,065  6,567 - (153) 6,414 

U.S. government agency securities

 22,284 2 (355) 21,931  22,282 - (558) 21,724 

Certificates of deposit/time deposits

 941 0 (6) 935   494   -   (4)  490 

Commercial paper

  2,994   0   (6)  2,988 

Total marketable securities

 $56,411  $2  $(966) $55,447  $43,720  $-  $(1,045) $42,675 

 


 

98

 

 

 

December 31, 2021

  

December 31, 2022

 

(in thousands)

 

Cost

  

Unrealized Gains

  

Unrealized Losses

  

Fair Value

  

Cost

  

Unrealized Gains

  

Unrealized Losses

  

Fair Value

 

U.S. municipal securities

 $12,549  $0  $(70) $12,479  $15,574  $-  $(417) $15,157 

Corporate debt securities

 9,303  0  (44) 9,259  9,578  -  (205) 9,373 

U.S. government agency securities

 2,500  0  (12) 2,488  25,275  -  (750) 24,525 

Certificates of deposit/time deposits

 1,687  7  0  1,694  939  -  (7) 932 

Commercial paper

  0   0   0   0 

Total marketable securities

 $26,039  $7  $(126) $25,920  $51,366  $-  $(1,379) $49,987 

 


 

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 June 30, 2022March 31, 2023 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.

 


 

 

June 30,

  

March 31,

 

(in thousands)

 2022  2023 

Due in one year or less

 $24,379  $22,851 

Due after one year through five years

  31,068   19,824 

Total marketable securities

 $55,447  $42,675 

 


 

 

Note 97 – 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:

 


 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 

(in thousands)

 2022  2021  2023  2022 

Total inventory

 $15,817 $13,474  $14,692 $13,965 

Allowance for obsolescence

  (766)  (313)  (419)  (387)

Inventory, net of allowance

 $15,051  $13,161  $14,273  $13,578 

 


 

109

 
 

Note 108 – Stock-Based Compensation

 

Under the Company’s 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), the Company had the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards through February 23, 2022. On July 8, 2022, the board of directors approved the Proto Labs, Inc. 2022 Long-Term Incentive Plan (the 2022 Plan), which will take effect on August 29, 2022 subject to approvalwas approved by the Company's shareholders at our previously noticeda Special Meeting of Shareholders on August 29, 2022. No awards have beenwere granted sincefrom February 23, 2022 or will be grantedto August 29, 2022. Awards outstanding under the 2012 Plan until a new long-termas of August 29, 2022 will continue to be subject to the terms of the 2012 Plan, but if those awards subsequently expire, are forfeited or cancelled or are settled in cash, the shares subject to those awards will become available for awards under the 2022 Plan. Under the 2022 Plan, the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive plan is approved by shareholders.awards. Awards under the 20122022 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 20122022 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

 

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 $4.0$3.7 million and $4.9$4.4 million for the three months ended June 30, 2022March 31, 2023 and 20212022, respectively, and $8.4 and $10.6 million for the six months ended June 30, 2022 and 2021, respectively.

 

Stock Options

 

The following table summarizes stock option activity during the sixthree months ended June 30, 2022March 31, 2023:

 


 

    

Weighted-

     

Weighted-

 
    

Average

     

Average

 
 

Stock Options

  

Exercise Price

  

Stock Options

  

Exercise Price

 

Options outstanding at December 31, 2021

 233,384  $97.78 

Options outstanding at December 31, 2022

 263,992  $79.07 

Granted

 52,992 59.40  134,647 33.84 

Exercised

 (3,114) 30.58  - - 

Forfeited

 (34,075) 90.61  (15,061) 73.17 

Expired

  (28,411) 84.92   (672) 108.33 

Options outstanding at June 30, 2022

  220,776  $92.28 

Options outstanding at March 31, 2023

  382,906  $63.34 
  

Exercisable at June 30, 2022

  113,652  $92.57 

Exercisable at March 31, 2023

  120,344  $89.42 

 


 

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 to fiveyears, beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For the board of directors, options generally become exercisable in full on the first anniversary of the grant date.

 

The weighted-average grant date fair value of options that were granted during the sixthree months ended June 30, 2022March 31, 2023 was $27.84.$16.21.

 

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the sixthree months ended June 30, 2022March 31, 2023 and 20212022:

 


 

 

Six Months Ended June 30,

  

Three Months Ended March 31,

 
 

2022

  

2021

  

2023

  

2022

 

Risk-free interest rate

 

1.94%

  

0.80% - 1.12%

  

3.90% - 4.55%

  

1.94%

 

Expected life (years)

 6.25  6.25  2.00 - 6.25  6.25 

Expected volatility

 

45.95%

  

45.28 - 45.35%

  

49.23% - 55.92%

  

45.95%

 

Expected dividend yield

 

0%

  

0%

  

0%

  

0%

 

 


 

As of June 30, 2022March 31, 2023, there was $4.0$5.3 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.72.8 years.

 

1110

 

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 fivefour 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 sixthree months ended June 30, 2022March 31, 2023:

 


 

    

Weighted-

     

Weighted-

 
    

Average

     

Average

 
    

Grant Date

     

Grant Date

 
 

Restricted

 

Fair Value

  

Restricted

 

Fair Value

 
 

Stock

  

Per Share

  

Stock

  

Per Share

 

Restricted stock at December 31, 2021

 343,782  $111.79 

Restricted stock at December 31, 2022

 478,596  $70.36 

Granted

 44,782 59.40  88,658 33.84 

Restrictions lapsed

 (119,315) 105.06  (37,528) 111.56 

Forfeited

  (32,814) 107.48   (23,807) 75.18 

Restricted stock at June 30, 2022

  236,435  $105.90 

Restricted stock at March 31, 2023

  505,919  $60.57 

 


 

As of June 30, 2022March 31, 2023, there was $18.8$20.0 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.32.5 years. 

 

1211

 

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. The Company’sCertain PSUs granted from 2017 to 2019 and certain PSUs grantedby 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 2020, and 2022,2023 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 sixthree months ended June 30, 2022March 31, 2023:

 


 

    

Weighted-

     

Weighted-

 
    

Average

     

Average

 
    

Grant Date

     

Grant Date

 
 

Performance

 

Fair Value

  

Performance

 

Fair Value

 
 

Stock

  

Per Share

  

Stock

  

Per Share

 

Performance stock at December 31, 2021

 16,839  $115.56 

Performance stock at December 31, 2022

 35,802  $77.91 

Granted

 32,620 100.33  71,295 57.79 

Restrictions lapsed

 0  0  -  - 

Performance change

 0  0  -  - 

Forfeited

  (3,578) 121.79   -  - 

Performance stock at June 30, 2022

  45,881  $113.25 

Performance stock at March 31, 2023

  107,097  $74.08 

 


 

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the sixthree months ended June 30, 2022March 31, 2023 and 20212022

 


 

 

Six Months Ended June 30,

  

Three Months Ended March 31,

 
 

2022

  

2021

  

2023

  

2022

 

Risk-free interest rate

 

1.76%

  

0.22%

  

4.35%

  

1.76%

 

Expected life (years)

 2.87  2.87  2.88  2.87 

Expected volatility

 

53.50%

  

51.40%

  

58.00%

  

53.50%

 

Expected dividend yield

 

0%

  

0%

  

0%

  

0%

 

 


 

As of June 30, 2022March 31, 2023, there was $3.0$6.1 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.5 years. 

 

Employee Stock Purchase Plan

 

The following table presents the assumptions used to estimate the fair value of the ESPP during the sixthree months ended June 30, 2022March 31, 2023 and 20212022

 


 

 

Six Months Ended June 30,

  

Three Months Ended March 31,

 
 

2022

  

2021

  

2023

  

2022

 

Risk-free interest rate

 

0.17 - 2.06%

  

0.06 - 0.12%

  

4.60%

  

0.17%

 

Expected life (months)

 6.00  6.00  6.00  6.00 

Expected volatility

 

47.05 - 53.44%

  

50.85 - 65.53%

  

67.84%

  

53.44%

 

Expected dividend yield

 

0%

  

0%

  

0%

  

0%

 

 


 

1312

 
 

 Note 119 – 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 and sixmonths ended June 30, 2022March 31, 2023 and 20212022:

 


 

 

Three Months Ended

 

Six Months Ended

  

Three Months Ended

 
 

June 30,

  

June 30,

  

March 31,

 

(in thousands)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 
  

Balance at beginning of period

 $(22,305) $(10,096) $(16,817) $(3,420) $(34,355) $(16,817)

Foreign currency translation adjustments

            

Other comprehensive income (loss) before reclassifications

 (13,515) 2,030 (18,487) (4,812) 527 (4,972)

Amounts reclassified from accumulated other comprehensive loss

 0 0 0 0   -   - 

Net current-period other comprehensive income (loss)

  (13,515)  2,030   (18,487)  (4,812)  527   (4,972)

Net unrealized gains (losses) on investments in securities

            

Other comprehensive income (loss) before reclassifications

 (329) (49) (845) 117  334 (516)

Amounts reclassified from accumulated other comprehensive loss

 0 0 0 0   -   - 

Net current-period other comprehensive income (loss)

  (329)  (49)  (845)  117   334   (516)

Balance at end of period

 $(36,149) $(8,115) $(36,149) $(8,115) $(33,494) $(22,305)

 


 

 

Note 1210 – 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 June 30, 2022March 31, 2023 and 20212022, the Company recorded an income tax provision of $2.6$2.4 million and $3.3 million, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded an income tax provision of $5.1 million and $3.6$2.5 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 June 30, 2022March 31, 2023 was 50.847.2 percent compared to 20.532.9 percent in the same period of the prior year. The effective tax rate increased by 30.314.3 percent for the three months ended June 30, 2022March 31, 2023 when compared to the same period in 20212022, primarily due to a decrease in tax benefits from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as an increase in the rate impact of losses in jurisdictions primarily Japan, that are not eligible for tax benefits due to valuation allowances. The effective income tax rate for the six months ended June 30, 2022 was 40.2 percent compared to 17.6 percent in the same period of the prior year. The effective tax rate increased by 22.6 percent for the six months ended June 30, 2022 when compared to the same period in 2021, primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as an increase in losses in jurisdictions, primarily Japan, that are not eligible for tax benefits due to valuation allowances. 

 

The effective income tax rate for the sixthree months ended June 30, 2022March 31, 2023 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 $4.3$4.7 million as of June 30, 2022March 31, 2023 and $4.4$4.5 million as of December 31, 20212022, 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. 

 

1413

 
 

Note 1311 – 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 and sixmonths ended June 30, 2022March 31, 2023 and 20212022 were as follows:

 


 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 

(in thousands)

 

2022

  

2021

  

2022

  

2021

 

Revenue:

                

United States

 $100,655  $95,344  $196,151  $186,397 

Europe

  23,391   24,655   47,977   46,104 

Japan

  2,856   3,049   6,942   6,673 

Total revenue

 $126,902  $123,048  $251,070  $239,174 

  

Three Months Ended March 31,

 

(in thousands)

 

2023

  

2022

 

Revenue:

        

United States

 $97,746  $95,496 

Europe

  28,113   24,586 

Japan

  -   4,086 

Total revenue

 $125,859  $124,168 

 


 

 

Three Months Ended June 30,

  

Six Months Ended June 30,

  

Three Months Ended March 31,

 

(in thousands)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 

Income (Loss) from Operations:

            

United States

 $26,168  $26,280  $48,691  $48,783  $20,481  $22,524 

Europe

 (2,249) 5,063 (3,928) 3,692  (2,483) (1,679)

Corporate Unallocated and Japan

  (18,718)  (15,239)  (31,672)  (32,110)  (14,249)  (12,955)

Total Income from Operations

 $5,201  $16,104  $13,091  $20,365  $3,749  $7,890 

 


 

Total long-lived assets at June 30, 2022March 31, 2023 and December 31, 20212022 were as follows:

 


 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 

(in thousands)

 2022  2021  2023  2022 

Total long-lived assets:

            

United States

 $205,090 $215,701  $199,381 $203,816 

Europe

 52,880 59,388  54,101 53,835 

Japan

  2,661   5,257   134   134 

Total Long-lived Assets

 $260,631  $280,346  $253,616  $257,785 

 


The Company's decision to exit Japan resulted in a $1.2 million impairment of fixed assets during the three and six months ended June 30, 2022. The Japan business was in operations through the second quarter of 2022 and the fixed assets are expected to be available for sale during the second half of 2022.

 

Revenue by product line for the three and sixmonths ended June 30, 2022March 31, 2023 and 20212022 were as follows:

 


 

 

Three Months Ended June 30,

  

Six Months Ended June 30,

  

Three Months Ended March 31,

 

(in thousands)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 

Revenue:

            

Injection Molding

 $53,355  $58,168  $106,753  $114,527  $51,948  $53,398 

CNC Machining

 48,222 41,592 94,320 78,295  48,104  46,098 

3D Printing

 19,963 18,170 39,635 35,405  21,325  19,672 

Sheet Metal

 5,160 4,717 9,847 9,936  4,248  4,687 

Other Revenue

  202   401   515   1,011   234   313 

Total revenue

 $126,902  $123,048  $251,070  $239,174  $125,859  $124,168 

 


 

1514

 
 

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, 2021.2022.

 

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 and fastest digital manufacturers of custom prototypes and on-demand production parts. 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. Our automated quoting and manufacturing systems allow us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. We manufacture prototype and low volume production parts for companies worldwide, who are under increasing pressure to bring their finished products to market faster than their competition. We utilize injection molding, computer numerical control (CNC) machining, 3D printing and sheet metal fabrication to manufacture custom parts for our customers. For most of our offerings, our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. 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. In addition, we serve procurement and supply chain professionals seeking to manufacture custom parts on-demand. Through the acquisition of Hubs (formerly 3D Hubs, Inc.) (Hubs) in 2021, we are able to provide our customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia, complementing our in-house manufacturing. 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.

 

On May 27, 2022, our 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. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. We expect to substantially complete the closure plan within the next year. Our decision to close the Japan business resulted in $5.2 million in operating expenses during the three and six months ended June 30, 2022. Operating expenses included $2.2 million of employee severance, $1.2 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the three and six months ended June 30, 2022. 

 

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 in order to better serve the evolving preferences and needs of product developers and engineers. In 2021, we augmented our internal manufacturing operations through our acquisition of Hubs to expand the envelope of custom parts we can provide to our customers through a network of premium manufacturing partners in each of our product lines.

 

Injection Molding

 

Our Injection Molding product line uses our 3D CAD-to-CNC machining technology for the automated design and manufacture of molds, which are then used to produce custom plastic and liquid silicone rubber injection-molded parts and over-molded and insert-molded injection-molded parts on commercially available equipment. Our Injection Molding product line works best for on-demand production, bridge tooling, pilot runs and functional prototyping. Our affordable molds and quick turnaround times help reduce design risk and limit overall production costs for product developers and engineers. Because we retain possession of the molds, customers who need short-run production often come back to Proto Labs’ Injection Molding product line for additional quantities. They do so to support pilot production for product testing, while their tooling for high-volume production is being prepared, because they need on-demand manufacturing due to disruptions in their manufacturing process, because their product requires limited annual quantity or because they need end-of-life production support. In 2017, we launched an on-demand manufacturing injection molding service. This service utilizes our existing processes, but is designed to fulfill the needs of customers with on-going production needs.

 

CNC Machining

 

Our CNC Machining product line uses commercially available CNC machines to offer milling and turning. CNC milling is a manufacturing process that cuts plastic and metal blocks into one or more custom parts based on the 3D CAD model uploaded by the customer. CNC turning is a subtractive manufacturing process that rotates a metal rod while a cutting tool is used to remove material and create final parts. Quick-turn CNC machining works best for prototyping, form and fit testing, jigs and fixtures and functional components for end-use applications.

 

1615

 

Industrial 3D Printing

 

Our Industrial 3D Printing product line includes SL, SLS, DMLS, MJF, PolyJet, Carbon DLS and fused deposition modeling (FDM) processes, which offers customers a wide-variety of high-quality, precision rapid prototyping and low volume production. These processes create parts with a high level of accuracy, detail, strength and durability. Industrial 3D Printing is best suited for functional prototypes, complex designs and end-use applications.

 

Sheet Metal

 

Our Sheet Metal product line includes quick-turn and e-commerce-enabled custom sheet metal parts, providing customers with prototype and low-volume production parts. The rapid prototype sheet metal process is most often used when form, fit and function are all a priority. Our manufacturing process uses customer 3D CAD models uploaded by the customer to fabricate rapid prototyping sheet metal or end-use production parts and assemblies.

 

 

Key Financial Measures and Trends

 

Revenue

 

Our operations are comprised of three geographic operating segments in the United States, Europe and Japan. On May 27, 2022, our 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. 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 sales of fabricated sheet metal custom parts. 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.

 

During the three months ended June 30, 2022,March 31, 2023, we served 24,05823,287 unique product developers and engineers who purchased our products through our web-based customer interface, an increase of 3.4% overwhich is consistent with the same period in 2021. During the six months ended June 30, 2022, we served 36,878 unique product developers and engineers who purchased our products through our web-based customer interface, an increase of 5.2% over the same period in 2021.2022. 

 

Cost of Revenue, Gross Profit and Gross Margin

 

Cost of revenue consists primarily of raw materials, equipment depreciation, employee compensation, benefits, 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, the mix between premium expedited manufacturing and longer lead times, and foreign currency exchange rates.

 

1716

 

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.

 

The launch of our Protolabs 2.0 project, an internal business systems initiative impacting both external customer-facing and internal back-end systems, in the United States in the first quarter of 2021, and our acquisition of Hubs in January 2021, led to higher operating expenses in the first six months of 2021. 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, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. 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, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

 

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 (Loss), net

 

Other income (loss), 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 20222023 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.

 

1817

 

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 June 30,

 

Change

 

Six Months Ended June 30,

 

Change

 

Three Months Ended March 31,

  

Change

 

(dollars in thousands)

2022

 

2021

 

$

 

%

 

2022

 

2021

  

$

 

%

 

2023

  

2022

     

$%

 

Revenue

$126,902 100.0 $123,048 100.0 $3,854 3.1  

$ 251,070

 100.0 $239,174 100.0 $11,896 5.0 $125,859  100.0  $124,168  100.0  $1,691  1.4 

Cost of revenue

 69,480 54.8  66,423 54.0  3,057 4.6  

137,844

 54.9  127,219 53.2  10,625 8.4  72,083   57.3   68,364   55.1   3,719   5.4 

Gross profit

 57,422 45.2 56,625 46.0 797 1.4  

113,226

 45.1 111,955 46.8 1,271 1.1 53,776  42.7  55,804  44.9  (2,028) (3.6)

Operating expenses:

                         

Marketing and sales

 21,055 16.6  21,044 17.1  11 0.1  41,641 16.6  40,524 16.9 1,117 

2.8

 22,451  17.8  20,586  16.6  1,865  9.1 

Research and development

 9,450 7.4 11,060 9.0 (1,610)(14.6) 

20,007

 8.0 23,241 9.7 (3,234)(13.9) 10,677  8.5  10,557  8.5  120  1.1 

General and administrative

 16,522 13.0  16,180 13.1  342 2.1  

33,293

 13.2  35,588 14.9 

(2,295

)

(6.4)

 16,833  13.4  16,771  13.5  62  0.4 

Closure of Japan business

 5,194 4.1 - - 5,194 100.0  

5,194

 2.1 - - 5,194 100.0  66   0.1   -   -   66   100.0 

Changes in fair value of contingent consideration

 - (0.0) (7,763)(6.3) 7,763 (100.0) 

-

 -  (7,763)(3.2)  7,763 (100.0)

Total operating expenses

 52,221 41.1  40,521 32.9  11,700 28.9  

100,135

 39.9  91,590 38.3  8,545 9.3  50,027   39.7   47,914   38.6   2,113   4.4 

Income from operations

 5,201 4.1 16,104 13.1 (10,903)(67.7) 

13,091

 5.2 20,365 8.5 (7,274)(35.7) 3,749  3.0  7,890  6.3  (4,141) (52.5)

Other income (loss), net

 1 0.0  137 0.1  (136)(99.3) 

(299)

 (0.1) (176)(0.1)  (123)69.9  1,290   1.0   (300)  (0.2)  1,590   (530.0)

Income before income taxes

 5,202 4.1 16,241 13.2 (11,039)(68.0) 

12,792

 5.1 20,189 8.4 (7,397)(36.6) 5,039  4.0  7,590  6.1  (2,551) (33.6)

Provision for income taxes

 2,645 2.1  3,326 2.7  (681)(20.5) 

5,140

 2.1  3,562 1.5  1,578 44.3  2,380   1.9   2,495   2.0   (115)  (4.6)

Net income

$2,557 2.0%$12,915 10.5%$(10,358)(80.2)% 

$ 7,652

 3.0%$16,627 7.0%  $(8,975)(54.0)% $2,659   2.1% $5,095   4.1% $(2,436)  (47.8)%

 


 

Stock-based compensation expense included in the statements of operations data above for the three and six months ended June 30,March 31, 2023 and 2022 and 2021 were as follows:

 


 

 

Three Months Ended June 30,

  

Six Months Ended June 30,

  

Three Months Ended March 31,

 

(dollars in thousands)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

 

Stock options, restricted stock and performance stock

 $3,668 $4,563 $7,674 $9,854  $3,321  $4,006 

Employee stock purchase plan

  363  378  754  707   374   391 

Total stock-based compensation expense

 $4,031  $4,941  $8,428  $10,561  $3,695  $4,397 
  

Cost of revenue

 $528 $668 $1,115 $1,303  $466  $587 

Operating expenses:

  

Marketing and sales

 813 929 1,550 1,782  693  737 

Research and development

 471 744 1,100 1,368  572  629 

General and administrative

  2,219  2,600  4,663  6,108   1,964   2,444 

Total stock-based compensation expense

 $4,031  $4,941  $8,428  $10,561  $3,695  $4,397 

 


 

1918

 

Comparison of Three Months Ended June 30,March 31, 2023 and 2022 and 2021

 

Revenue

 

Revenue by reportable segment and the related changes for the three months ended June 30,March 31, 2023 and 2022 and 2021 were as follows:

 


 

 

Three Months Ended June 30,

        

Three Months Ended March 31,

       
 

2022

  

2021

  

Change

  

2023

  

2022

  

Change

 

(dollars in thousands)

 

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

  

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

 

Revenue

                          

United States

 $100,655  79.3% $95,344  77.5% $5,311  5.6% $97,746  77.7% $95,496  76.9% $2,250  2.4%

Europe

 23,391  18.4  24,655  20.0  (1,264) (5.1) 28,113  22.3  24,586  19.8  3,527  14.3 

Japan

  2,856   2.3   3,049   2.5   (193)  (6.3)  -   -   4,086   3.3   (4,086)  (100.0)

Total revenue

 $126,902   100.0% $123,048   100.0% $3,854   3.1% $125,859   100.0% $124,168   100.0% $1,691   1.4%

 


 

Our revenue increased $3.9$1.7 million, or 3.1%1.4%, for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021.2022. By reportable segment, revenue in the United States increased $5.3$2.3 million, or 5.6%2.4%, for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021.2022. Revenue in Europe decreased $1.3increased $3.5 million, or 5.1%14.3%, and revenue in Japan decreased $0.2$4.1 million, or 6.3%100.0%, in each case for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021.2022. The decrease in Japan revenue was driven by our decision in the second quarter of 2022 to close our Japan operations. Our acquisition of Hubs provided revenue of $5.9$9.4 million and $4.6$4.8 million in the United States, and $5.4$7.8 million and $4.3$5.5 million in Europe, for each of the three months ended June 30, 2022March 31, 2023 and 2021, respectively.2022. International revenue was negatively impacted by $2.7$2.5 million during the three months ended June 30, 2022March 31, 2023 compared to the same period in 20212022 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.

 

During the three months ended June 30, 2022,March 31, 2023, we served 24,05823,287 unique product developers and engineers, an increase of 3.4% overwhich is consistent with the same period in 2021.2022. Our growth in product developers and engineers served increased at a lesser rate consistent withthan our revenue growth.growth, resulting in an increase in the average spend per product developer and engineer. 

 

Revenue by product line and the related changes for the three months ended June 30,March 31, 2023 and 2022 and 2021 were as follows:

 


 

 

Three Months Ended June 30,

        

Three Months Ended March 31,

       
 

2022

  

2021

  

Change

  

2023

  

2022

  

Change

 

(dollars in thousands)

 

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

  

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

 

Revenue

                          

Injection Molding

 $53,355 42.0% $58,168 47.3% $(4,813) (8.3)% $51,948 41.3% $53,398 43.0% $(1,450) (2.7)%

CNC Machining

 48,222 38.0 41,592 33.8 6,630 15.9  48,104 38.2 46,098 37.1 2,006 4.4 

3D Printing

 19,963 15.7 18,170 14.8 1,793 9.9  21,325 16.9 19,672 15.8 1,653 8.4 

Sheet Metal

 5,160 4.1 4,717 3.8 443 9.4  4,248 3.4 4,687 3.8 (439) (9.4)

Other Revenue

  202   0.2   401   0.3   (199)  (49.6)  234   0.2   313   0.3   (79)  (25.2)

Total revenue

 $126,902   100.0% $123,048   100.0% $3,854   3.1% $125,859   100.0% $124,168   100.0% $1,691   1.4%

 


 

By product line, our revenue increase was driven by a 15.9%4.4% increase in CNC Machining revenue a 9.9%and an 8.4% increase in 3D Printing revenue, and a 9.4% increase in Sheet Metal revenue, which was partially offset by an 8.3%a 2.7% decrease in Injection Molding revenue, a 9.4% decrease in Sheet Metal revenue and a 49.6%25.2% decrease in Other Revenue, in each case for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021.2022.

 

2019

 

Cost of Revenue, Gross Profit and Gross Margin

 

Cost of Revenue. Cost of revenue increased $3.1$3.7 million, or 4.6%5.4%, for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021,2022, which was greaterhigher than the rate of revenue increase of 3.1%1.4% for the three months ended June 30, 2022March 31, 2023 compared to the same period in 2021.2022. Cost of revenue increased $2.6decreased $1.9 million in our digital manufacturing business, which was driven by increased volumesdecreases in overtime and contract labor shortages resulting in wage inflation, drivingexpense and led to lower personnel and related cost increasescosts of $0.7$2.1 million, and an increase in raw material and product costs of $1.8 million driven by materials cost inflation and higher logistics costs, and an increase in equipment and facility related costs of $0.1$0.2 million. Hubs provided a $0.5$5.6 million increase in cost of revenue due to higher revenue volume for the three months ended June 30, 2022 whenMarch 31, 2023 compared to the same period in 2021.2022.

 

Gross Profit and Gross Margin. Gross profit increaseddecreased from $56.6$55.8 million in the three months ended June 30, 2021March 31, 2022 to $57.4$53.8 million in the three months ended June 30, 2022.March 31, 2023. Gross margin decreased from 46.0%44.9% in the three months ended June 30, 2021March 31, 2022 to 45.2%42.7% in the three months ended June 30, 2022, primarily due to labor and materials cost inflation as described above and the mix of revenue.

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

Marketing and Sales. Marketing and sales expenses remained consistent during the three months ended June 30, 2022 compared to the same period in 2021. Personnel and related cost decreases in our digital manufacturing business of $0.5 million and marketing program cost decreases in our digital manufacturing business of $0.1 million were offset by increases in Hubs' marketing and sales expense of $0.6 million during the three months ended June 30, 2022 when compared to the same period in 2021.

Research and Development. Our research and development expenses decreased $1.6 million, or 14.6%, during the three months ended June 30, 2022 compared to the same period in 2021 primarily due to personnel and related cost decreases of $1.6 million driven by personnel and contractor resources dedicated to the launch of our Protolabs 2.0 system in the first quarter of 2021. 

General and Administrative. Our general and administrative expenses increased $0.3 million, or 2.1%, during the three months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in personnel and related costs of $0.2 million and an increase of professional services of $0.1 million.

Closure of Japan business. Our decision to close our Japan business resulted in $5.2 million in operating expenses during the three months ended June 30, 2022. Operating expenses included $2.2 million of employee severance, $1.2 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges. We had no expenses related to the closure of our Japan business in 2021.

Changes in fair value of contingent consideration. We had no contingent consideration liabilities recorded during 2022. The change in fair value of contingent consideration associated with the acquisition of Hubs was $7.8 million during the three months ended June 30, 2021. 

Other income (loss), net. We recognized no other income, net for the three months ended June 30, 2022, a decrease of $0.1 million compared to other income, net of $0.1 million for the three months ended June 30, 2021. Other income, net for the three months ended June 30, 2022 primarily consisted of a $0.3 million loss on foreign currency, which was offset by interest income on investments and other income. Other income, net for the three months ended June 30, 2021 primarily consisted of a $0.1 million gain on foreign currency and interest income on investments.

Provision for Income Taxes. Our effective tax rate of 50.8% for the three months ended June 30, 2022 increased 30.3% compared to 20.5% for the same period in 2021. The increase in the effective tax rate is primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as an increase in losses in jurisdictions, primarily Japan, that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $2.6 million for the three months ended June 30, 2022 decreased $0.7 million compared to our income tax provision of $3.3 million for the three months ended June 30, 2021.

21

Comparison of Six Months Ended June 30, 2022 and 2021

Revenue

Revenue by reportable segment and the related changes for the six months ended June 30, 2022 and 2021 were as follows:


  

Six Months Ended June 30,

         
  

2022

  

2021

  

Change

 

(dollars in thousands)

 

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

 

Revenue

                        

United States

 $196,151   78.1% $186,397   77.9% $9,754   5.2%

Europe

  47,977   19.1   46,104   19.3   1,873   4.1 

Japan

  6,942   2.8   6,673   2.8   269   4.0 

Total revenue

 $251,070   100.0% $239,174   100.0% $11,896   5.0%


Our revenue increased $11.9 million, or 5.0%, for the six months ended June 30, 2022 compared to the same period in 2021. By reportable segment, revenue in the United States increased $9.8 million, or 5.2%, for the six months ended June 30, 2022 compared to the same period in 2021. Revenue in Europe increased $1.9 million, or 4.1%, and revenue in Japan increased $0.3 million, or 4.0%, in each case for the six months ended June 30, 2022 compared to the same period in 2021. Our acquisition of Hubs provided revenue of $10.6 million and $7.8 million in the United States and $10.9 million and $6.9 million in Europe for each of the six months ended June 30, 2022 and 2021, respectively. Hubs revenue in 2021 represents the period from January 22, 2021, the date of acquisition, through June 30, 2021. International revenue was negatively impacted by $4.3 million during the six months ended June 30, 2022 compared to the same period in 2021 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.

During the six months ended June 30, 2022, we served 36,878 unique product developers and engineers, an increase of 5.2% over the same period in 2021. Our growth in product developers and engineers served increased at a rate consistent with our revenue growth.

Revenue by product line and the related changes for the six months ended June 30, 2022 and 2021 were as follows:


  

Six Months Ended June 30,

         
  

2022

  

2021

  

Change

 

(dollars in thousands)

 

$

  

% of Total Revenue

  

$

  

% of Total Revenue

  

$

  

%

 

Revenue

                        

Injection Molding

 $106,753   42.5% $114,527   47.9% $(7,774)  (6.8)%

CNC Machining

  94,320   37.6   78,295   32.7   16,025   20.5 

3D Printing

  39,635   15.8   35,405   14.8   4,230   11.9 

Sheet Metal

  9,847   3.9   9,936   4.2   (89)  (0.9)

Other Revenue

  515   0.2   1,011   0.4   (496)  (49.1)

Total revenue

 $251,070   100.0% $239,174   100.0% $11,896   5.0%


By product line, our revenue increase was driven by a 20.5% increase in CNC Machining revenue and an 11.9% increase in 3D Printing revenue, which was partially offset by a 6.8% decrease in Injection Molding revenue, a 0.9% decrease in Sheet Metal revenue and a 49.1% decrease in Other Revenue, in each case for the six months ended June 30, 2022 compared to the same period in 2021.

22

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue. Cost of revenue increased $10.6 million, or 8.4%, for the six months ended June 30, 2022 compared to the same period in 2021, which was greater than the rate of revenue increase of 5.0% for the six months ended June 30, 2022 compared to the same period in 2021. Cost of revenue increased $7.5 million in our digital manufacturing business, which was driven by increased volumes and labor shortages resulting in wage inflation driving personnel and related cost increases of $3.2 million, an increase in raw material and product costs of $3.9 million driven by materials cost inflation and higher logistics costs, and an increase in equipment and facility related costs of $0.4 million. Our acquisition of Hubs provided a $3.1 million increase in cost of revenue for the six months ended June 30, 2022 when compared to the same period in 2021.

Gross Profit and Gross Margin. Gross profit increased from $112.0 million in the six months ended June 30, 2021 to $113.2 million in the six months ended June 30, 2022. Gross margin decreased from 46.8% in the six months ended June 30, 2021 to 45.1% in the six months ended June 30, 2022, primarily due to labor and materials cost inflation as described above and the mix of revenue.March 31, 2023.

 

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

 

Marketing and Sales. Marketing and sales expenses increased $1.1$1.9 million, or 2.8%9.1%, during the sixthree months ended June 30, 2022March 31, 2023 compared to the same period in 2021. Hubs provided a $1.22022. The increase was driven by marketing program cost increases in our digital manufacturing business of $0.2 million increaseand increases in Hubs' marketing and sales expenses and our digital manufacturing business provided marketing program cost increases of $0.2$1.7 million during the sixthree months ended June 30, 2022March 31, 2023 when compared to the same period in 2021, which was partially offset by a decrease in our digital manufacturing business personnel and related costs of $0.3 million.2022.

 

Research and Development. Our research and development expenses decreased $3.2increased $0.1 million, or 13.9%1.1%, during the sixthree months ended June 30, 2022March 31, 2023 compared to the same period in 20212022 primarily due to increases of $0.7 million in Hubs' research and development expenses, which were partially offset by personnel and related cost decreases of $3.8$0.2 million driven by personnel and contractor resources dedicated to the launchdecreases in professional services and supportother operating costs of  $0.4 million in our Protolabs 2.0 system in the first quarter of 2021. The decrease was partially offset by a $0.6 million increase in Hubs' research and development expenses during the six months ended June 30, 2022 when compared to the same period in 2021.digital manufacturing business.

 

General and Administrative. Our general and administrative expenses decreased $2.3increased $0.1 million, or 6.4%0.4%, during the sixthree months ended June 30, 2022March 31, 2023 compared to the same period in 20212022 primarily due to an increase of $0.3 million in personnel and related costs, an increase of professional services of $0.4 million, an increase in stock based compensation costs of $0.1 million, which were partially offset by a decrease of $2.3$0.5 million in professional serviceadministrative costs primarily driven by increased transaction costs in 2021 related to our acquisitionand decreases of Hubs and a decrease of $1.3$0.2 million in stock-based compensation expense primarily driven by increased stock-based compensation expense in 2021 related to the retirement of our CEO. In addition, our acquisition of Hubs provided an increase of $1.3 million inHubs' general and administrative expense during the six months ended June 30, 2022 when compared to the same period in 2021.expenses.

 

Closure of Japan business. Our decision to close our Japan business resulted in $5.2$0.1 million in operating expenses during the sixthree months ended June 30, 2022. Operating expenses included $2.2 million of employee severance, $1.2 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges.March 31, 2023. We had no expenses related to the closure of our Japan business in 2021.

Changes in fair value of contingent consideration. We had no contingent consideration liabilities recorded during 2022. The change in fair value of contingent consideration associated with the acquisition of Hubs was $7.8 million during the sixthree months ended June 30, 2021. March 31, 2022.

 

Other Loss,income (loss), net. We recognized other income, net of $1.3 million for the three months ended March 31, 2023, an increase of $1.6 million compared to other loss, net of $0.3 million for the sixthree months ended June 30, 2022, a decrease of $0.1 million compared to other loss, net of $0.2 million for the six months ended June 30, 2021.March 31, 2022. Other loss,income, net for the sixthree months ended June 30, 2022March 31, 2023 primarily consisted of a $0.4$0.1 million lossgain on foreign currency which was partially offset by $0.1and $1.2 million in interest income on investments and other income. Other loss,income, net for the sixthree months ended June 30, 2021March 31, 2022 primarily consisted of a $0.5$0.3 million loss on foreign currency, which was partially offset by $0.2 million in interest income on investments and $0.1 million in other income.currency.

 

Provision for Income Taxes. Our effective tax rate of 40.2%47.2% for the sixthree months ended June 30, 2022March 31, 2023 increased 22.6%14.3% compared to 17.6%32.9% for the same period in 2021.2022. The increase in the effective tax rate is primarily due to a decrease in tax benefits from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as an increase in the rate impact of losses in jurisdictions primarily Japan, that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $5.1$2.4 million for the sixthree months ended June 30, 2022 increased $1.5March 31, 2023 decreased $0.1 million compared to our income tax provision of $3.6$2.5 million for the sixthree months ended June 30, 2021.March 31, 2022.

 

2320

 

Liquidity and Capital Resources

 

Cash Flows

 

The following table summarizes our cash flows during the sixthree months ended June 30, 2022March 31, 2023 and 2021:2022:

 


 

 

Six Months Ended June 30,

  

Three Months Ended March 31,

 

(dollars in thousands)

 2022  2021  2023  2022 

Net cash provided by operating activities

 $31,040  $20,729  $22,578  $17,783 

Net cash used in investing activities

 (36,516) (105,082)

Net cash provided by (used in) investing activities

 4,383  (25,835)

Net cash used in financing activities

 (4,821) (1,856) (21,602) (601)

Effect of exchange rates on cash and cash equivalents

  (966)  515   134   (37)

Net decrease in cash and cash equivalents

 $(11,263) $(85,694)

Net increase (decrease) in cash and cash equivalents

 $5,493  $(8,690)

 


 

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 $54.7$62.1 million as of June 30, 2022, a decreaseMarch 31, 2023, an increase of $11.3$5.5 million from December 31, 2021.2022. The decreaseincrease in our cash was primarily due to cash used in investing activity for purchasesprovided by operating activities of $22.6 million and proceeds from call redemptions and maturities of marketable securities net, of $30.5$7.7 million, which were partially offset by $3.4 million for purchases of property, equipment and other capital assets, and $21.1 million in repurchases of $6.0 million,common stock.

We believe that our existing cash and cash used in financing activities of $4.8 million, which were partially offset byequivalents together with cash generated throughfrom operations of $31.0 million.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 $31.0$22.6 million during the sixthree months ended June 30, 2022March 31, 2023 and primarily consisted of net income of $7.7$2.7 million, adjusted for certain non-cash items, including depreciation and amortization of $20.3$9.4 million, stock-based compensation expense of $8.4$3.7 million, and impairments related to the closureinterest on finance lease obligations of our Japan business of $1.8 million, which were partially offset by deferred taxes of $5.7$0.3 million and changes in operating assets and liabilities and other items totaling $1.5$9.6 million, which were partially offset by deferred taxes of $3.1 million. Cash flows from operating activities were $20.7$17.8 million during the sixthree months ended June 30, 2021March 31, 2022 and primarily consisted of net income of $16.6$5.1 million, adjusted for certain non-cash items, including depreciation and amortization of $20.1$10.2 million and stock-based compensation expense of $10.6$4.4 million, which were partially offset by a decrease in the fair value of contingent consideration of $7.8 million and changes in operating assets and liabilities and other items totaling $18.8$1.9 million.

 

Cash flows from operating activities increased $10.3$4.8 million during the sixthree months ended June 30, 2022March 31, 2023 compared to the same period in 2021,2022, primarily due to increases in interest on finance lease obligations of $0.3 million and changes in operating assets and liabilities totaling $17.7 million, changes in fair value of contingent consideration of $7.8 million, costs related to the closure of our Japan business of $1.8 million, and increases of depreciation and amortization of $0.2$8.4 million, which were partially offset by decreases in net income of $9.0$2.4 million, stock-based compensation of $2.1$0.7 million, and deferred taxesdepreciation and amortization of $6.1$0.8 million.

 

Cash Flows from Investing Activities

 

Cash used inprovided by investing activities was $36.5$4.4 million during the sixthree months ended June 30, 2022,March 31, 2023, consisting of $30.5$7.7 million for net purchasesin proceeds from call redemptions and maturities of marketable securities, and $6.0which were partially offset by $3.3 million for thenet purchases of property, equipment and other capital assets.

 

Cash used in investing activities was $105.1$25.8 million during the sixthree months ended June 30, 2021,March 31, 2022, consisting of $127.4$22.7 million in cash used for acquisitions, net purchases of cash acquiredmarketable securities and $23.9$3.1 million for the purchases of property, equipment and other capital assets, which were partially offset by $46.2 million for net proceeds from investments in marketable securities.assets.

 

2421

 

Cash Flows from Financing Activities

 

Cash used in financing activities was $4.8$21.6 million during the sixthree months ended June 30, 2022,March 31, 2023, consisting of $5.2$21.1 million in repurchases of common stock, $1.6$0.4 million in purchases of shares withheld for tax obligations associated with equity transactions, and $0.3$0.1 million for repayments of finance lease obligations, which were partially offset by $2.3 million in proceeds from exercises of stock options.obligations.

 

Cash used in financing activities was $1.9$0.6 million during the sixthree months ended June 30, 2021,March 31, 2022, consisting of $4.2$0.5 million in purchases of shares withheld for tax obligations associated with equity transactions, $1.2 million in repurchases of common stock and $0.3$0.1 million for repayments of finance lease obligations, which were partially offset by $3.8 million in proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.obligations.

 

Critical Accounting Policies and Use of 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, 2021.2022. There were no material changes to our critical accounting policies and estimates during the sixthree months ended June 30, 2022.March 31, 2023.

 

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.

 

2522

 

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, Euros and Japanese Yen.

 

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 lossesgains of $0.3$0.1 million and foreign currency gainslosses of $0.1$0.3 million during the three months ended June 30,March 31, 2023 and 2022, and 2021, respectively.  We recognized foreign currency losses of $0.4 million and $0.5 million during the six months ended June 30, 2022 and 2021, respectively.  The changes in foreign exchange rates had a negative impact on consolidated revenue of $2.7$2.5 million for the three months ended June 30, 2022 and $4.3 million for the six months ended June 30, 2022March 31, 2023 as compared to the same periodsperiod in 2021.2022.

 

2623

 

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.

 

2724

 

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, 20212022 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 9, 2017, our board of directors authorized the repurchase of shares of our common stock from time to time on the open market or in privately negotiated purchases, at an aggregate purchase price of up to $50 million. On May 16, 2019, we announced that our board of directors approved a $50 million increase in itsour authorized stock repurchase program and extended the term of the program through December 31, 2023, which increased the stock repurchase program to $100 million. On December 8, 2021, our board of directors approved aanother $50 million increase in itsour authorized stock repurchase program, which increased the total expenditurerepurchases authorized to $150 million. On November 17, 2022, our board of directors approved a $50 million increase in our authorized stock repurchase program, which increased the total repurchases authorized to $200 million and extended the term of the program through December 31, 2024. On February 7, 2023 our board of directors approved a $50 million increase in our authorized stock repurchase program, which increased the stock repurchase authorized to $250 million. We have $56.7$111.2 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 June 30, 2022,March 31, 2023, we repurchased 113,266672,500 shares of our common stock at a total purchase price of $5.2$21.1 million under this program.  Common stock repurchase activity through June 30, 2022March 31, 2023 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)

 

April 1, 2022 through April 30, 2022

 -  $-  -  $61,905 

May 1, 2022 through May 31, 2022

 79,236  $45.22  79,236  $58,322 

June 1, 2022 through June 30, 2022

 34,030  $48.58  34,030  $56,669 
  113,266  $46.23  113,266  $56,669 

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, 2023 through January 31, 2023

  200,000  $27.58   200,000  $76,757 

February 1, 2023 through February 28, 2023

  292,500  $32.59   292,500  $117,224 

March 1, 2023 through March 31, 2023

  180,000  $33.60   180,000  $111,176 
   672,500  $31.37   672,500  $111,176 

 

Item 3. Defaults Upon Senior Securities

 

No matters to disclose.

 

Item 4. Mine Safety Disclosures

 

No matters to disclose.

 

Item 5. Other Information

 

No matters to disclose.

 

2825

 

Item 6. Exhibits

 

The following documents are filed as part of this report:

 

Exhibit Number

 

Description of Exhibit

3.1(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(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(3)

 

SecondThird Amended and Restated By-Laws of Proto Labs, Inc., as amended through November 8, 201615, 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*

99.1(4)Form of Severance Agreement
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)

 

(1)

*     Filed herewith.

Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed with the Commission on February 13, 2012, and incorporated by reference herein.

(2)

Previously filed as Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on May 21, 2015 and incorporated by reference herein.

(3)

Previously filed as Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on November 8, 2016 and incorporated by reference herein.
(4)Previously filed as Exhibit 99.2 to the Company's Form 8-K, filed with the Commission on June 6, 2022 and incorporated by reference herein.
*Filed herewith.

 

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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: AugustMay 5, 20222023

 

/s/ Robert Bodor

 

 

 

Robert Bodor

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

Date: AugustMay 5, 20222023

 

/s/ Daniel Schumacher

 

 

 

Daniel Schumacher

 

 

 

Chief Financial Officer

(Principal Financial Officer)

 

 

 

3027