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What changed in Proto Labs Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Proto Labs Inc's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+210 added−196 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-16)

Top changes in Proto Labs Inc's 2024 10-K

210 paragraphs added · 196 removed · 158 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFrom July 2013 to January 2015, Dr. Bodor served as our Chief Technology Officer. From December 2012 to June 2013, Dr. Bodor served as our Director of Business Development. Prior to joining Proto Labs, from January 2011 to December 2012, Dr. Bodor held several roles at Honeywell, most recently leading SaaS business offerings for Honeywell’s Life Safety Division.
Biggest changePrior to joining Proto Labs, from January 2011 to December 2012, Dr. Bodor held several roles at Honeywell, most recently leading SaaS business offerings for Honeywell’s Life Safety Division. Daniel Schumacher . Mr. Schumacher has served as our Chief Financial Officer and principal financial and accounting officer since June 2022. Prior to his current role, Mr.
Our customers typically partner with us for a variety of reasons, including: • they need a prototype to confirm the form, fit and function of one or more components of a product under development; • they need an initial supply of parts to support pilot production for testing of a product; 5 Table of Contents • they need an initial supply of parts to support production while their tools for a high-volume production mold are prepared; • they need to meet their customers' variable demand for parts in a competitive timeframe; • their product will only be produced in a limited quantity and/or is highly customized; • they need to support end-of-life production in a cost-effective manner; • they want to avoid minimum order quantities or costs related to storing excess inventory; • they need access to diverse, cost competitive manufacturing capabilities and value the convenience of working with a single supplier to match parts to the best producer; or • they need low- to mid-volumes of parts on an irregular schedule and prefer to order on-demand.
Our customers typically partner with us for a variety of reasons, including: • they need a prototype to confirm the form, fit and function of one or more components of a product under development; • they need an initial supply of parts to support pilot production for testing of a product; • they need an initial supply of parts to support production while their tools for a high-volume production mold are prepared; • they need to meet their customers' variable demand for parts in a competitive timeframe; • their product will only be produced in a limited quantity and/or is highly customized; • they need to support end-of-life production in a cost-effective manner; • they want to avoid minimum order quantities or costs related to storing excess inventory; • they need access to diverse, cost competitive manufacturing capabilities and value the convenience of working with a single supplier to match parts to the best producer; or • they need low- to mid-volumes of parts on an irregular schedule and prefer to order on-demand.
In 2023, we again hosted InspirON in Europe, an online knowledge sharing event to focus on what design engineers need to consider when developing sustainable products for manufacturing. The event was designed to provide insight into designing more sustainable products and to explore how design can help make the manufacturing process greener and more efficient.
In 2024, we again hosted InspirON in Europe, an online knowledge sharing event to focus on what design engineers need to consider when developing sustainable products for manufacturing. The event was designed to provide insight into designing more sustainable products and to explore how design can help make the manufacturing process greener and more efficient.
In determining employee compensation, our executive leadership team reviews and considers several factors, including individual and corporate performance, input from managers, competitor market data from third party compensation surveys, our compensation philosophy and key principles, and the leadership’s collective experience and knowledge.
In determining employee compensation, our executive leadership team reviews and considers several factors, including individual and corporate performance, input from managers, competitive market data from third party compensation surveys, our compensation philosophy and key principles, and the leadership’s collective experience and knowledge.
ProtoGivers, our employee led community involvement team, organizes a wide variety of charitable activities, including blood drives, working for Habitat for Humanity projects, volunteering for Feed My Starving Children, and making financial contributions to charitable causes, many of which are matched through the Protolabs Foundation Employee Giving Program.
Through our Foundation and employee led community involvement team, a wide variety of charitable activities are organized, including blood drives, working for Habitat for Humanity projects, volunteering for Feed My Starving Children, and making financial contributions to charitable causes, many of which are matched through the Protolabs Foundation Employee Giving Program.
We support several charitable causes with our Employee Matching, Cool Ideas, and Major Gifts Programs. The Foundation’s efforts serve as a sustaining investment in the future of the communities where our employees live and work, and a commitment to build talent to support the future employment needs of the manufacturing industry.
We support several charitable causes with our Employee Matching, Good Ideas Grants, and Major Gifts Programs. The Foundation’s efforts serve as a sustaining investment in the future of the communities where our employees live and work, and a commitment to build talent to support the future employment needs of the manufacturing industry.
We have established a Human Rights Policy which is available on the Investor Relations section of our website. 12 Table of Contents • Supply Chain We are committed to conducting our business in accordance with the highest ethical standards and in compliance with all applicable laws, rules, and regulations.
We have established a Human Rights Policy which is available on the Investor Relations section of our website. • Supply Chain We are committed to conducting our business in accordance with the highest ethical standards and in compliance with all applicable laws, rules, and regulations.
Ryaboy held several roles at Digital River, a global e-commerce platform and software-as-a-service company providing online storefronts, from 2010 to 2022, most recently as Chief Technology Officer and Senior Vice President from 2015 to 2022. Prior to his role of Chief Technology Officer at Digital River, Mr.
Prior to joining Proto Labs, Mr. Ryaboy held several roles at Digital River, a global e-commerce platform and software-as-a-service company providing online storefronts, from 2010 to 2022, most recently as Chief Technology Officer and Senior Vice President from 2015 to 2022. Prior to his role of Chief Technology Officer at Digital River, Mr.
We believe our use of advanced technology enables us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts. We have established our operations in the United States and Europe. Previously we had established operations in Japan.
We believe our use of advanced technology enables us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts. We have established our operations in the United States and Europe.
We also believe that there are a multitude of factors that are valuable to our customers that our offer uniquely provides, including speed to market, supply chain stability, access to a broad range of manufacturing capabilities, reduced supply chain waste, and efficient sourcing of custom parts.
We also believe that there are a multitude of factors that are valuable to our customers that our offer uniquely provides, including speed to market, supply chain stability, access to a broad range of 5 Table of Contents manufacturing capabilities, reduced supply chain waste, and efficient sourcing of custom parts.
We have further expanded our offering through the Protolabs Network to be able to serve our customers more holistically, augmenting our in-house manufacturing capabilities with a network of premium manufacturing partners to serve our customer needs that currently reside outside of our internal manufacturing capabilities.
We have further expanded our offering through the 7 Table of Contents Protolabs Network to be able to serve our customers more holistically, augmenting our in-house manufacturing capabilities with a network of premium manufacturing partners to serve our customer needs that currently reside outside of our internal manufacturing capabilities.
All overtime is performed and compensated in accordance with the law and the individual’s employment contract or other applicable contract or collective agreement. 11 Table of Contents • Education We firmly believe that investing in the education of our employees is critical to our success.
All overtime is performed and compensated in accordance with the law and the individual’s employment contract or other applicable contract or collective agreement. • Education We firmly believe that investing in the education of our employees is critical to our success.
We also owned approximately 30 registered United States trademarks or service marks as of December 31, 2023, with corresponding registered protection in Europe and Japan for the most important of these marks such as PROTO LABS, HUBS, PROTOMOLD, FIRSTCUT, PROTOQUOTE, FIRSTQUOTE, PROTOFLOW and FINELINE, corresponding approved protection in Canada for PROTO LABS, FIRSTCUT and FINELINE, and corresponding registered protection in Australia, Canada and Mexico for PROTOMOLD.
We also owned approximately 26 registered United States trademarks or service marks as of December 31, 2024, with corresponding registered protection in Europe and Japan for the most important of these marks such as PROTO LABS, HUBS, PROTOMOLD, FIRSTCUT, PROTOQUOTE, FIRSTQUOTE, PROTOFLOW and FINELINE, corresponding approved protection in Canada for PROTO LABS, FIRSTCUT and FINELINE, and corresponding registered protection in Australia, Canada and Mexico for PROTOMOLD.
Our employees are provided access to a robust learning management system that offers hundreds of courses on various topics ranging from compliance to leadership to job-specific skills. In 2023 and 2022, employees spent an average of 35 and 36 hours, respectively, per employee in training sessions.
Our employees are provided access to a robust learning management system that offers hundreds of courses on various topics ranging from compliance to leadership to job-specific skills. In 2024 and 2023, employees spent an average of 35 hours per employee in training sessions.
Since our inception, we have manufactured over 450 million parts for 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. Using our technology, we have analyzed over 13 million unique part designs since inception.
Since our inception, we have manufactured over 617 million parts for 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. Using our technology, we have analyzed over 16 million unique part designs since inception.
Our technology-enabled digital engineering and manufacturing applications enable us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. Our customers engage with us throughout the lifecycle of their product, from early-stage prototyping through end-use production to end-of-life replacement and other parts needs.
Our technology-enabled digital engineering and manufacturing applications enable us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. Our customers engage with us throughout the lifecycle of their product, from early-stage prototyping through end-use production to end-of-life replacement and other parts needs that we fulfill through a combination of factories and manufacturing partners.
We also regularly use independent contractors and other temporary employees across the organization to augment our regular staff. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified, diverse and inclusive personnel.
We also regularly use independent contractors and other temporary employees across the organization to augment our regular staff. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified, diverse and inclusive personnel. We believe our employees are critical to our success and continually seek employee feedback to enhance employee engagement.
As of December 31, 2023, we owned and had applications pending for patents relating to various aspects of our quoting and manufacturing processes as follows: Jurisdiction Issued Patents Applications Pending United States 46 15 United Kingdom 3 0 Netherlands 1 0 Our patents have expiration dates ranging from 2025 to 2043.
As of December 31, 2024, we owned and had applications pending for patents relating to various aspects of our quoting and manufacturing processes as follows: Jurisdiction Issued Patents Applications Pending United States 56 10 United Kingdom 3 0 Netherlands 1 0 Our patents have expiration dates ranging from 2025 to 2044.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file information electronically with the SEC.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file information electronically with the SEC. The SEC’s website is www.sec.gov.
We believe this program is the basis for our excellent safety compliance record. We believe that our employees are our most valuable asset, and their safety and health is among our top priorities. In addition to concentrating on employee safety in the workplace, we also focus on the overall wellbeing of our employees.
We believe that our employees are our most valuable asset, and their safety and health is among our top priorities. In addition to concentrating on employee safety in the workplace, we also focus on the overall wellbeing of our employees.
We register our patents, trademarks and service marks in the United States and other jurisdictions as we deem appropriate.
We register our patents, trademarks and service marks in the United States and other jurisdictions as we deem 11 Table of Contents appropriate.
We believe there are three significant trends disrupting the manufacturing industry today: • SKU Proliferation – The increase in the number of products launched has been dramatic across many sectors. • Shorter Product Life Cycles – New products are launching faster and more frequently than ever before, partially driven by the "internet of things" and other connected device trends, resulting in shorter lives in the market. • Shift to E-commerce Sourcing – The first two trends, SKU proliferation and shorter product life cycles, put pressure on traditional supply chains causing many to adopt digital solutions and begin to invest in digital supply ecosystems.
We believe there are three significant trends disrupting the manufacturing industry today: • SKU Proliferation – The increase in the number of products launched has been dramatic across many sectors. • Shorter Product Life Cycles – New products are launching faster and more frequently than ever before, partially driven by the "internet of things" and other connected device trends, resulting in shorter lives in the market. • Shift to E-commerce Sourcing – The first two trends, SKU proliferation and shorter product life cycles, put pressure on traditional supply chains causing many to adopt digital solutions and begin to invest in digital supply ecosystems. 6 Table of Contents The impacts of these trends include increased volatility, reduced development time, increased variety to manage, higher pressure on development costs, shorter payback period in the market and reduced capital investment per product.
We believe sustainability in product development, and in manufacturing, is the future and we will continue to support our customers in their own sustainability journeys. • Environmental Initiatives We are committed to having a positive impact on the environment.
We believe sustainability in product development, and in manufacturing, is the future and we will continue to support our customers in their own sustainability journeys. • Environmental Priorities We are committed to having a positive impact on the environment. Our environmental key priorities include: nonrenewable energy use reduction and environmental compliance.
There are no arrangements or understandings between any of the executive officers and any other persons pursuant to which they were selected as an officer. Robert Bodor . Dr. Bodor has served as our President and Chief Executive Officer since March 2021. Prior to his current position, Dr. Bodor served as Vice President/General Manager - Americas since 2015.
There are no family relationships between or among any of the executive officers or directors of the Company. There are no arrangements or understandings between any of the executive officers and any other persons pursuant to which they were selected as an officer. Robert Bodor . Dr. Bodor has served as our President and Chief Executive Officer since March 2021.
Our digital thread makes us ideally suited to solve these challenges for many manufacturing companies by offering world-class speed, low upfront investment, no minimum order quantities, broad manufacturing capabilities, and flexibility to adapt to demand volatility. 6 Table of Contents Our Process Our digital thread, which is the virtual representation of the part created by our proprietary software and mirrors the physical manufacturing process, has enabled us to reinvent manufacturing.
Our digital thread makes us ideally suited to solve these challenges for many manufacturing companies by offering world-class speed, low upfront investment, no minimum order quantities, broad manufacturing capabilities, and flexibility to adapt to demand volatility.
We believe that our digital end-to-end manufacturing capabilities position us favorably and has enabled us to become a leader in our markets.
We believe that our digital end-to-end manufacturing capabilities position us favorably and has enabled us to become a leader in our markets. Corporate Responsibility and Sustainability Our corporate responsibility and sustainability practices are built on a foundation of shared fundamental values.
Schumacher also led investor communication, forecasting and planning, and business intelligence for the Company as Vice President of Investor Relations and FP&A from April 2017 to December 2021. From 2015 to 2017, Mr. Schumacher served as finance director in the Americas Finance & Operations organization of Stratasys, Inc, a 3D Printing OEM. From 2001 to 2015, Mr.
Schumacher served as our Interim Chief Financial Officer since December 2021. Mr. Schumacher also led investor communication, forecasting and planning, and business intelligence for the Company as Vice President of Investor Relations and FP&A from April 2017 to December 2021. From 2015 to 2017, Mr.
Schumacher was in finance leadership roles of increasing responsibility for Rockwell Automation, an industrial automation company. Oleg Ryaboy . Mr. Ryaboy has served as our Chief Technology Officer since September 2022. Prior to joining Proto Labs, Mr.
Schumacher served as finance director in the Americas Finance & Operations organization of Stratasys, Inc, a 3D Printing OEM. From 2001 to 2015, Mr. Schumacher was in finance leadership roles of increasing responsibility for Rockwell Automation, an industrial automation company. Oleg Ryaboy . Mr. Ryaboy has served as our Chief Technology Officer since September 2022.
Finally, the Green Team, an employee-led organization, educates our employees on how they can positively impact the environment, both at work and at home.
Finally, the Green Team, an employee-led organization, educates our employees on how they can positively impact the environment, 9 Table of Contents both at work and at home. The Green Team also provides opportunities for employees to positively impact the environment, including activities like roadside cleanup and tree planting.
Combining our unprecedented in-house manufacturing with the broad capabilities and wide variety of price and lead time options through our manufacturing network expands our ability to provide value to our customers and differentiates us from competitors. 7 Table of Contents Competition The market for custom parts manufacturing is fragmented, highly competitive and subject to rapid and significant technological change.
Our goal is to be the fastest, most reliable, and most comprehensive provider of custom parts in our four services. Combining our unprecedented in-house manufacturing with the broad capabilities and wide variety of price and lead time options through our manufacturing network expands our ability to provide value to our customers and differentiates us from competitors.
Our attrition rates for the years ended December 31, 2023 were 20.4% and 23.9% in the United States and Europe, respectively. • Compensation and Benefits We believe our success depends in large measure on our ability to attract, retain and motivate a broad range of employees to be successful in a dynamic and changing business environment, and that a competitive compensation program is essential.
Our 2024 attrition rates were impacted by actions we took during the year to reduce our workforce in areas of the business that experienced lower volumes. • Compensation and Benefits We believe our success depends in large measure on our ability to attract, retain and motivate a broad range of employees to be successful in a dynamic and changing business environment, and that a competitive compensation program is essential.
In addition, we partner with schools, colleges, and universities to provide various outreach opportunities and sponsorships. • Health, Safety and Wellness We are committed to providing a safe and healthy working environment that minimizes health and safety risks. Our processes support accident prevention and prioritizes the health and safety of all our employees and all others affected by their activities.
Through the Protolabs Foundation, we provide STEM education grants to eligible organizations. In addition, we partner with schools, colleges, and universities to provide various outreach opportunities and sponsorships. • Health, Safety and Wellness We are committed to providing a safe and healthy working environment that minimizes health and safety risks.
Corporate Responsibility and Sustainability Our corporate responsibility and sustainability practices are built on a foundation of shared fundamental values of teamwork, trust and achievement, and help us to deliver strong financial results that create value for our Company and our shareholders in a way that respects our communities and the environments in which we operate. • Teamwork – We are dedicated to the idea that a diversity of minds is better than one.
These values help us to deliver strong financial results that create value for our Company and our shareholders in a way that respects our communities and the environments in which we operate. • We are one Team – We are one global team.
Our potential competitors include: • Other custom parts manufacturers. There are thousands of alternative manufacturing machine shops, injection molding suppliers, sheet metal fabricators, and 3D printing service bureaus and vendors worldwide. The size and scale of these businesses range from very small specialty shops to large, high-volume production manufacturers. • Brokers.
Competition The market for custom parts manufacturing is fragmented, highly competitive and subject to rapid and significant technological change. Our potential competitors include: • Other custom parts manufacturers. There are thousands of alternative manufacturing machine shops, injection molding suppliers, sheet metal fabricators, and 3D printing service bureaus and vendors worldwide.
Ryaboy served as its Vice President of Software Development and Architecture from 2011 to 2015. Michael Kenison . Mr. Kenison has served as our Vice President/General Manager - Americas since June 2021. Prior to his current position, Mr. Kenison led various teams at the Company, including as Vice President of Manufacturing, a role he held since 2013.
Ryaboy served as its Vice President of Software Development and Architecture from 2011 to 2015. Michael Kenison . Mr. Kenison has served as our Chief Operations Officer since July 2024. Prior to his current position, Mr.
We provide and require our employees to use personal protective equipment at all times. To ensure our employees understand the importance of safety, we provide regular, mandatory training. We strive to continuously improve our employees’ health, safety, and wellness. Our “I Am” safety program teaches that safety is the responsibility of every individual in our organization.
We strive to continuously improve our employees’ health, safety, and wellness. Our “I Am” safety program teaches that safety is the responsibility of every individual in our organization. We believe this program is the basis for our excellent safety compliance record.
Before his tenure at Protolabs, Mr. Kenison served in several leadership roles within the industry, including as Vice President of Manufacturing at Cardiac Science, Inc. - a medical device provider of defibrillator technology. Bjoern Klaas . Mr. Klaas has led our Company’s business in Europe, Middle East and Africa as the Vice President and Managing Director since December 2017.
Kenison served in several leadership roles within the industry, including as Vice President of Manufacturing at Cardiac Science, Inc. - a medical device provider of defibrillator technology. 13 Table of Contents
The program provides training on topics that are aligned with our Leadership Principles and our Core Values. In 2023, we completed the first year of our mentorship program to provide opportunity for mentors and mentees to accelerate their personal and professional development through a one-on-one guided relationship.
In 2024, we completed the second year of our mentorship program to provide opportunity for mentors and mentees to accelerate their personal and professional development through a one-on-one guided relationship. 10 Table of Contents To ensure our industry remains robust, we are committed to supporting Science, Technology, Engineering and Mathematics (STEM) programs in the cities where we have facilities.
Our social key priorities include: • Ethics and integrity • Employee health and well being • Diversity, equity and inclusion In 2023, our global human resources leadership advanced our social initiatives as we continue to integrate operations of the factory and network.
Social • Leadership In 2024, our global human resources leadership advanced our initiatives to identify untapped talent as we continue to integrate operations of the factory and network. This work includes engaging employees throughout the global organization to define our values and culture, which we deployed in 2024.
The figure below shows our ESG priorities in terms of both importance to shareholders and our Company’s success. Our environmental key priorities include: • Environmental compliance • Energy use reduction • Waste management/recycling In 2023, we devoted resources to manage increasing costs of energy, particularly in the European region, and seek opportunities to reduce our consumption of energy resources.
In 2024, we devoted resources to manage increasing costs of energy, particularly in the European region, and sought opportunities to reduce our consumption of energy resources. We also embraced opportunities to shift our energy consumption to renewable resources.
The SEC’s website is www.sec.gov. 13 Table of Contents Executive Officers of the Registrant Set forth below are the names of our current executive officers, their ages, titles, the year first appointed as an executive officer, and employment for the past five years: Robert Bodor 51 President, Chief Executive Officer and Director Daniel Schumacher 49 Chief Financial Officer Oleg Ryaboy 48 Chief Technology Officer Michael R.
Information about our Executive Officers Set forth below are the names of our current executive officers, their ages, titles, the year first appointed as an executive officer, and employment for the past five years. Unless otherwise noted, the positions described are positions held within the Company or its subsidiaries.
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The impacts of these trends include increased volatility, reduced development time, increased variety to manage, higher pressure on development costs, shorter payback period in the market and reduced capital investment per product.
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On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany.
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Our goal is to be the fastest, most reliable, and most comprehensive provider of custom parts in our four services.
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The Company expects to substantially complete the plan within fiscal year 2025. The Company intends to continue offering all of its manufacturing services to customers across Europe, including injection molding and metal 3D printing. These services will be fulfilled through internal manufacturing facilities and a network of manufacturing partners. Previously, we had established operations in Japan.
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Through open communication, we strive to collaborate with and include all of our colleagues to maximize our creativity and to make our good ideas great. We respect each other’s opinions. We help colleagues who are struggling to improve, so our success is everyone’s success. • Trust – Our integrity is built on honest answers to our customers and colleagues.
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Our Process Our digital thread, which is the virtual representation of the part created by our proprietary software and mirrors the physical manufacturing process, has enabled us to reinvent manufacturing.
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It is okay to make mistakes if we use them to learn. We navigate difficult situations with compassion. The success of our Company depends on the success of our people. • Achievement – Speed and innovation are the cornerstones of our success.
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The size and scale of these businesses range from very small specialty shops to large, high-volume production manufacturers. • Brokers.
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We are committed to being a solution for getting things done quickly and sustainably and a catalyst for great ideas for our shareholders, customers, the environment and each other.
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In 2024, we updated our value statements to: We are one Team, We are Kind, We are Makers, We Win or We Learn and We Take Ownership.
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We are responsible for our performance, our results and our future. 8 Table of Contents 2023 Environmental, Social and Governance Strategy and Risk Assessment Process Our board of directors, executives and leaders throughout the organization have identified our top environmental, social and governance (ESG) priorities.
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We're successful when we work together, challenge one and other, and make decisions that support our common goals. We are authentic in our interactions. 8 Table of Contents • We are Kind – We are clear with our words and actions. We seek and give thoughtful and constructive feedback delivered with respect.
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In addition, our teams continue to evaluate opportunities to increase recycling of scrap or other waste material in our manufacturing operations, and reduce our waste impact on landfills.
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We're open to other's opinions and support decisions made. • We are Makers – Whether we manufacture a part or provide a customer experience, we demonstrate excitement in our work. We embrace change and create space for experimentation and calculated risks. • We Win or We Learn - We're dedicated to achieving our goals.
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This work includes acknowledging the vast and growing diversity we have in our global organization and engaging employees throughout the organization to define our values and culture, which we will deploy in 2024. 9 Table of Contents Our governance key priorities include: • Ethics, compliance and transparency • Regulatory management • Risk and crisis management In 2023, we expanded our enterprise risk management (ERM) program by embedding ERM into our strategic goal-setting processes.
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When we fail, we learn and respond with resiliency. When we win, we share in celebration. • We Take Ownership - We take pride in our work. We are enthusiastic about the impact we make on our employees, our customers, and the communities we serve.
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This included in-depth risk-based conversations regarding strategic alternatives and defining actions to mitigate risk. The results of the enterprise risk management program will be used to drive governance key priorities and company strategy in 2024 and beyond. In addition, we established policies and identified leaders to comply with the new cybersecurity regulations effective in 2023.
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We periodically conduct employee engagement surveys to identify and drive improvements in the Protolabs work place where employees are engaged and can do their best work. • Workforce Demographics As of December 31, 2024, we had 2,357 full-time employees, including 1,643 full-time employees in the United States and 714 full-time employees in Europe.
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The Green Team also provides opportunities for employees to positively impact the environment, including activities like roadside cleanup and tree planting. 10 Table of Contents Social • Diversity, Equity and Inclusion At Protolabs, diversity, equity and inclusion matters. We are committed to nurturing a culture where we celebrate diversity, equity and inclusivity as a way of life.
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In 2024, our attrition rates were 12.2% and 12.9% in the United States and Europe, respectively, a decline from 2023.
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Our diversity and inclusion efforts start at the top with our board regularly reviewing initiatives. Our Diversity, Equity and Inclusion (DEI) Leadership Council was established to promote honest conversations, influence best practices and educate our employees.
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The program provides training on topics that are aligned with our Leadership Principles and our Core Values.
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Our DEI Leadership Council members are employee representatives chosen from various functions and locations to work directly with our leadership team to drive change in our work environment. We also require certain employees to participate in annual unconscious bias training to further foster a work environment of fairness and sensitivity.
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Our processes support accident prevention and prioritizes the health and safety of all our employees and all others affected by their activities. We provide and require our employees to use personal protective equipment at all times. To ensure our employees understand the importance of safety, we provide regular, mandatory training.
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As we continue to grow, we will continue to emphasize employee safety and having an inclusive work environment as top priorities. Our goal is to build diverse teams throughout the global organization and be a role model for the communities where we work and live. Uniqueness defines us as a company, from our custom products to our employees.
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Name Age Position Robert Bodor 52 President, Chief Executive Officer and Director Daniel Schumacher 50 Chief Financial Officer Oleg Ryaboy 49 Chief Technology Officer Michael R. Kenison 53 Chief Operations Officer Executive officers of the Company are elected at the discretion of the board of directors with no fixed terms.
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Our pledge is to promote a global culture that invites, recognizes and embraces each individuals' contributions to make a stronger “US”. • Workforce Demographics As of December 31, 2023, we had 2,415 full-time employees, including 1,672 full-time employees in the United States and 743 full-time employees in Europe.
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Prior to his current position, Dr. Bodor served as Vice President/General Manager - Americas since 2015. From July 2013 to January 2015, Dr. Bodor served as our Chief Technology Officer. From December 2012 to June 2013, Dr. Bodor served as our 12 Table of Contents Director of Business Development.
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We are an equal opportunity employer, and we believe that a diverse workforce made up of people with different ideas, strengths, interests and cultural backgrounds drives employee and business success. Our workforce is composed of a diverse group of engineers, technicians and business professionals from around the world and every walk of life.
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Kenison led various teams at the Company, including as Vice President/General Manager - Americas, between June 2021 through June 2024, and Vice President of Manufacturing, between 2013 through June 2021. Before his tenure at Protolabs, Mr.
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We believe our employees are critical to our success and continually seek employee feedback to enhance employee engagement. In 2023, our attrition rates were higher than historical averages and were impacted by actions we took during the year to reduce our workforce in areas of the business that experienced lower volumes.
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To ensure our industry remains robust, we are committed to supporting Science, Technology, Engineering and Mathematics (STEM) programs in the cities where we have facilities. Through the Protolabs Foundation, we provide STEM education grants to eligible organizations.
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Kenison 52 Vice President/General Manager – Americas Bjoern Klaas 54 Vice President/General Manager and Managing Director – Europe, Middle East and Africa Executive officers of the Company are elected at the discretion of the board of directors with no fixed terms. There are no family relationships between or among any of the executive officers or directors of the Company.
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Daniel Schumacher . Mr. Schumacher has served as our Chief Financial Officer and principal financial and accounting officer since June 2022. Prior to his current role, Mr. Schumacher served as our Interim Chief Financial Officer since December 2021. Mr.
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Prior to joining Proto Labs, Mr. Klaas held key positions with global polymer supplier PolyOne from 2012 to 2017, most recently as its Vice President and General Manager for its ColorMatrix Group headquartered in the United States. From 2008 to 2012, Mr.
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Klaas worked at Colorant-Chromatics, a global leader for high temperature polymer formulations, as the General Manager for the global business. 14 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to meet our customers’ specifications in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer. 20 Table of Contents The strength of our brand is important to our business, and any failure to maintain and enhance our brand would hurt our ability to retain and expand our customer base as well as further penetrate existing customers.
Biggest changeIf we fail to meet our customers’ specifications in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer.
Many of the following factors have adversely affected our international operations and sales to customers located outside of the United States and may again in the future: • difficulties in staffing and managing foreign operations, particularly in new geographic locations; • challenges in providing solutions across a significant distance, in different languages and among different cultures; • rapid changes in government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics, and other similar outbreaks or events; • fluctuations in foreign currency exchange rates; 17 Table of Contents • compliance with and changes in foreign laws and regulations, as well as U.S. laws affecting the activities of U.S. companies abroad, including those associated with export controls, tariffs and embargoes, other trade restrictions and antitrust and data privacy concerns; • different, complex and changing laws governing intellectual property rights, sometimes affording companies lesser protection in certain areas; • seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and holiday season; • higher costs of doing business internationally; • interruptions resulting from any events affecting raw material supply or manufacturing capabilities abroad; • protectionist laws and business practices that favor local producers and service providers; • taxation; • energy costs; • restrictions imposed by local labor practices and laws on our business and operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • transportation delays; and • increased payment risk and higher levels of payment fraud.
Many of the following factors have adversely affected our international operations and sales to customers located outside of the United States and may again in the future: • difficulties in staffing and managing foreign operations, particularly in new geographic locations; • challenges in providing solutions across a significant distance, in different languages and among different cultures; • rapid changes in government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics, and other similar outbreaks or events; • fluctuations in foreign currency exchange rates; 16 Table of Contents • compliance with and changes in foreign laws and regulations, as well as U.S. laws affecting the activities of U.S. companies abroad, including those associated with export controls, tariffs and embargoes, other trade restrictions and antitrust and data privacy concerns; • different, complex and changing laws governing intellectual property rights, sometimes affording companies lesser protection in certain areas; • seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and holiday season; • higher costs of doing business internationally; • interruptions resulting from any events affecting raw material supply or manufacturing capabilities abroad; • protectionist laws and business practices that favor local producers and service providers; • taxation; • energy costs; • restrictions imposed by local labor practices and laws on our business and operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • transportation delays; and • increased payment risk and higher levels of payment fraud.
Such transactions may be complex, time consuming and expensive, and may present numerous challenges and risks including: • an acquired company, asset or technology not furthering our business strategy as anticipated; • difficulties entering and competing in new product or geographic markets and increased competition, including price competition; • integration challenges; • challenges in working with strategic partners and resolving any related disagreements or disputes; • high valuation for a company, asset or technology, or changes in the economic or market conditions or assumptions underlying our decision to acquire; • significant problems or liabilities associated with acquired businesses, assets or technologies, including increased intellectual property and employment related litigation exposure; • an acquisition that results in a significant amount of goodwill being recognized, which could result in future impairment charges that would reduce our earnings; and • requirements to record substantial charges and amortization expenses related to certain purchased intangible assets, deferred stock compensation and other items, as well as other charges or expenses. 19 Table of Contents Any one of these challenges or risks could impair our ability to realize any benefit from our acquisitions, strategic relationships, joint ventures or investments after we have expended resources on them, as well as divert our management’s attention.
Such transactions may be complex, time consuming and expensive, and may present numerous challenges and risks including: • an acquired company, asset or technology not furthering our business strategy as anticipated; • difficulties entering and competing in new product or geographic markets and increased competition, including price competition; • integration challenges; • challenges in working with strategic partners and resolving any related disagreements or disputes; • high valuation for a company, asset or technology, or changes in the economic or market conditions or assumptions underlying our decision to acquire; • significant problems or liabilities associated with acquired businesses, assets or technologies, including increased intellectual property and employment related litigation exposure; • an acquisition that results in a significant amount of goodwill being recognized, which could result in future impairment charges that would reduce our earnings; and • requirements to record substantial charges and amortization expenses related to certain purchased intangible assets, deferred stock compensation and other items, as well as other charges or expenses. 18 Table of Contents Any one of these challenges or risks could impair our ability to realize any benefit from our acquisitions, strategic relationships, joint ventures or investments after we have expended resources on them, as well as divert our management’s attention.
Any compromise of our information security could damage our reputation and brand and expose us to a risk of loss, costly litigation and liability that would substantially harm our business and operating results. The rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Any compromise of our information security could damage our reputation and brand and expose us to a risk of loss, costly litigation and liability that would substantially harm our business and operating results. The rapid evolution and increased adoption of Artificial Intelligence (AI) technologies may intensify our cybersecurity risks.
Moreover, the business interruption insurance that we carry may not be sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business that may result from interruptions in our product lines as a result of system failures. 16 Table of Contents We store confidential customer information in our systems that, if breached or otherwise subjected to unauthorized access, may harm our reputation or brand or expose us to liability.
Moreover, the business interruption insurance that we carry may not be sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business that may result from interruptions in our product lines as a result of system failures. 15 Table of Contents We store confidential customer information in our systems that, if breached or otherwise subjected to unauthorized access, may harm our reputation or brand or expose us to liability.
Any failure in our ability to timely and effectively scale and adapt our existing technology, processes and infrastructure could negatively impact our ability to retain existing customers and attract new customers, damage our reputation and brand, result in lost revenue, and otherwise substantially harm our business and results of operations. 15 Table of Contents Numerous factors may cause us not to maintain the revenue growth that we have historically experienced.
Any failure in our ability to timely and effectively scale and adapt our existing technology, processes and infrastructure could negatively impact our ability to retain existing customers and attract new customers, damage our reputation and brand, result in lost revenue, and otherwise substantially harm our business and results of operations. 14 Table of Contents Numerous factors may cause us not to maintain the revenue growth that we have historically experienced.
Should any of our present single or limited source suppliers for manufacturing equipment or materials become unavailable or inadequate, or impose terms unacceptable to us such as increased pricing terms, we could be required to spend a significant amount of time and expense to develop alternate sources of supply, and we may not be successful in doing so on terms acceptable to us, or at all.
Should any of our present single or limited source suppliers for manufacturing equipment or materials become unavailable 20 Table of Contents or inadequate, or impose terms unacceptable to us such as increased pricing terms, we could be required to spend a significant amount of time and expense to develop alternate sources of supply, and we may not be successful in doing so on terms acceptable to us, or at all.
We have established our operations in the United States and Europe and are seeking to further expand our international operations. Our international revenue accounted for approximately 21% of our total revenue in each of the years ended December 31, 2023, 2022 and 2021.
We have established our operations in the United States and Europe and are seeking to further expand our international operations. Our international revenue accounted for approximately 21% of our total revenue in each of the years ended December 31, 2024, 2023 and 2022.
These facilities and the 18 Table of Contents manufacturing equipment we use would be costly to replace and could require substantial lead time to repair or replace. Our facilities may be harmed by natural or man-made disasters, including, without limitation, earthquakes, floods, tornadoes, fires, hurricanes, tsunamis and nuclear disasters.
These facilities and the 17 Table of Contents manufacturing equipment we use would be costly to replace and could require substantial lead time to repair or replace. Our facilities may be harmed by natural or man-made disasters, including, without limitation, earthquakes, floods, tornadoes, fires, hurricanes and nuclear disasters.
In particular, we are required to perform annual system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.
In particular, we are required to perform annual system and process evaluation and 24 Table of Contents testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.
If we fail to meet our customers’ price expectations in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer. Our failure to meet our customers' quality specifications would adversely affect our business and results of operations.
If we fail to meet our customers’ price expectations in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer. 19 Table of Contents Our failure to meet our customers' quality specifications would adversely affect our business and results of operations.
In addition, if we were unable to find a suitable supplier for a particular type of manufacturing equipment or material, we could be required to 21 Table of Contents modify our existing business processes and offerings to accommodate the situation.
In addition, if we were unable to find a suitable supplier for a particular type of manufacturing equipment or material, we could be required to modify our existing business processes and offerings to accommodate the situation.
We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards or electronic checks, and it could disrupt our business if these companies become unwilling or unable to provide these services to us.
We rely on third parties 23 Table of Contents to provide payment processing services, including the processing of credit cards, debit cards or electronic checks, and it could disrupt our business if these companies become unwilling or unable to provide these services to us.
This could result in claims from customers or others, damage to our business and reputation and brand, or significant costs to correct the defect or error. We attempt to include provisions in our agreements with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products.
This could result in claims from customers or others, damage to our business and reputation and brand, or significant costs to correct the defect or error. 21 Table of Contents We attempt to include provisions in our agreements with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed. Our operating results and financial condition may fluctuate on a quarterly and annual basis.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed. 22 Table of Contents Our operating results and financial condition may fluctuate on a quarterly and annual basis.
The ISO standards to which we comply include the following: Location 9001:2015 AS9100D 13485:2016 14001:2015 Headquarters, Minnesota, USA Yes Yes No No Injection Molding, Minnesota, USA Yes No No No CNC Machining, Minnesota, USA Yes Yes No No 3D Printing, North Carolina, USA Yes Yes No No Sheet Metal, New Hampshire, USA Yes No No No CNC Machining, New Hampshire, USA Yes Yes No No Putzbrunn, DE Yes No Yes Yes Eschenlohe, DE Yes No No No Telford, UK Yes No No Yes Hubs, Chicago, USA and Amsterdam, NL Yes No No No If any system inspection reveals that we are not in compliance with applicable standards, registrars may take action against us, including issuing a corrective action request or discontinuing our certifications.
The ISO standards to which we comply include the following: Location 9001:2015 AS9100D 14001:2015 45001:2018 Headquarters, Minnesota, USA Yes Yes No No Injection Molding, Minnesota, USA Yes No No No CNC Machining, Minnesota, USA Yes Yes No No 3D Printing, North Carolina, USA Yes Yes No No Sheet Metal, New Hampshire, USA Yes No No No CNC Machining, New Hampshire, USA Yes Yes No No Putzbrunn, DE Yes No Yes No Eschenlohe, DE Yes No No No Telford, UK Yes No Yes Yes Protolabs Network, Chicago, USA and Amsterdam, NL Yes No No No If any system inspection reveals that we are not in compliance with applicable standards, registrars may take action against us, including issuing a corrective action request or discontinuing our certifications.
If any of these actions were to occur, it could harm our reputation as well as our business, financial condition and operating results. We are subject to payment-related risks. We accept payments using a variety of methods, including credit card, customer invoicing, physical bank check and payment upon delivery.
If discontinuation of our certifications were to occur, it could harm our reputation as well as our business, financial condition and operating results. We are subject to payment-related risks. We accept payments using a variety of methods, including credit card, customer invoicing, physical bank check and payment upon delivery.
Our research and development costs were approximately $40.1 million, $38.2 million and $44.2 million for the years ended December 31, 2023, 2022 and 2021, respectively, and there is no guarantee that these costs will enable us to maintain or grow our revenue profitability. Refer to Item 7.
Our research and development costs were approximately $41.3 million, $40.1 million and $38.2 million for the years ended December 31, 2024, 2023 and 2022, respectively, and there is no guarantee that these costs will enable us to maintain or grow our revenue profitability. Refer to Item 7.
We are dependent upon our facilities through which we satisfy all of our production demands, as well as managerial, customer service, sales, marketing and other similar functions, and we have not identified alternatives to these facilities or established fully redundant systems in multiple locations. However, we have redundant computing systems for each of our United States and European operations.
We are dependent upon our manufacturing facilities, as well as managerial, customer service, sales, marketing and other similar functions, and we have not identified alternatives to these facilities or established fully redundant systems in multiple locations. However, we have redundant computing systems for each of our United States and European operations.
The satisfactory performance, reliability, consistency, security and availability of our websites and interactive user interface, information technology systems, manufacturing processes and other operations are critical to our reputation and brand, and to our ability to effectively service product developers and engineers.
The satisfactory performance, reliability, consistency, security and availability of our websites and interactive user interface, information technology systems, manufacturing processes and other operations are critical to our reputation and brand, and to our ability to effectively serve our customers.
We mitigate this risk through products offered by our manufacturing partner network via our acquisition of Hubs in 2021. If we do not keep pace with technological change and introduce new technologies, processes and product lines, the demand for our products and product lines may decline and our operating results may suffer.
With the acquisition of Hubs in 2021, we are able to expand our products offered through the Protolabs Network, our manufacturing partner network. If we do not keep pace with technological change and introduce new technologies, processes and product lines, the demand for our products and product lines may decline and our operating results may suffer.
If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected. 24 Table of Contents Risks Relating to Ownership of Our Common Stock Our stock price has been and may continue to be volatile.
If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.
If we are not able to comply with the requirements of Section 404 in the future, or if we fail to prevent or detect misstatements in the financial statements we include in our reports filed with the SEC, our business could be harmed and the market price of our common stock could decline. 25 Table of Contents Anti-takeover provisions in our charter documents and Minnesota law might discourage or delay acquisition attempts for us that you might consider favorable.
If we are not able to comply with the requirements of Section 404 in the future, or if we fail to prevent or detect misstatements in the financial statements we include in our reports filed with the SEC, our business could be harmed and the market price of our common stock could decline.
Any product liability claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, damage to our business, reputation, and brand, and cause us to fail to retain existing customers or to fail to attract new customers. 22 Table of Contents Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.
Any product liability claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, damage to our business, reputation, and brand, and cause us to fail to retain existing customers or to fail to attract new customers.
Our Third Amended and Restated Articles of Incorporation, as amended, and Third Amended and Restated By-Laws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors.
Anti-takeover provisions in our charter documents and Minnesota law might discourage or delay acquisition attempts for us that you might consider favorable. Our Third Amended and Restated Articles of Incorporation, as amended, and Third Amended and Restated By-Laws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors.
In the year ended December 31, 2023, our common stock traded as high as $40.47 and as low as $23.01. The market for our common stock may become less active, liquid or orderly, which could depress the trading price of our common stock.
The market for our common stock may become less active, liquid or orderly, which could depress the trading price of our common stock.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet or other online services.
Existing and future laws and regulations may impede the growth of the Internet or other online services.
If our operating results do not meet the expectations of securities analysts or investors, who may derive their expectations by extrapolating data from recent historical operating results, the market price of our common stock will likely decline. 23 Table of Contents Due to this and the other risks discussed in this “Risk Factors” section, you should not rely on quarter-to-quarter or year-to-year comparisons of our operating results as an indicator of future performance.
Due to this and the other risks discussed in this “Risk Factors” section, you should not rely on quarter-to-quarter or year-to-year comparisons of our operating results as an indicator of future performance.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for additional discussion related to research and development costs. Our failure to meet our customers' expectations regarding quick turnaround time would adversely affect our business and results of operations.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for additional discussion related to research and development costs. Our business is also subject to risks from emerging technologies such as AI and Machine Learning (ML) to enhance our internal processes and customer applications.
These events could in turn cause the market price of our common stock to fluctuate.
These events could in turn cause the market price of our common stock to fluctuate. If our operating results do not meet the expectations of securities analysts or investors, who may derive their expectations by extrapolating data from recent historical operating results, the market price of our common stock will likely decline.
Removed
We mitigate such risks through the addition of access to a network of manufacturing partners via our acquisition of Hubs in 2021.
Added
While AI and ML offer significant opportunities, potential risks include unintended release of proprietary information and proprietary data, compliance with emerging AI regulations, and unintended outcomes from AI/ML applications. There is no guarantee that AI/ML will benefit our business operations or produce products and services that are preferred by our customers.
Added
Our competitors may be more successful in their use of AI/ML and our failure to properly anticipate and timely respond to AI-related developments could adversely affect our business, financial condition, and results of operations. Our failure to meet our customers' expectations regarding quick turnaround time would adversely affect our business and results of operations.
Added
The strength of our brand is important to our business, and any failure to maintain and enhance our brand would hurt our ability to retain and expand our customer base as well as further penetrate existing customers.
Added
Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations. We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce.
Added
Risks Relating to Ownership of Our Common Stock Our stock price has been and may continue to be volatile. In the year ended December 31, 2024, our common stock traded as high as $45.15 and as low as $25.76.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity We have an enterprise-wide information security program designed to identify, protect, detect and respond to and manage reasonably foreseeable cybersecurity risks and threats. To protect our information systems from cybersecurity threats, we use various security tools that help prevent, identify, escalate, investigate, resolve and recover from identified vulnerabilities and security incidents in a timely manner.
Biggest changeTo protect our information systems from cybersecurity threats, we use various security tools that help prevent, identify, escalate, investigate, resolve and recover from identified 25 Table of Contents vulnerabilities and security incidents in a timely manner.
Leadership for our information security team, including our Chief Technology Officer, consist of professionals with cybersecurity expertise across multiple industries. 26 Table of Contents We also maintain a third party security program to identify, prioritize, assess, mitigate and remediate third party risks; however, we rely on the third parties we use to implement security programs commensurate with their risk, and we cannot ensure in all circumstances that their efforts will be successful.
We also maintain a third party security program to identify, prioritize, assess, mitigate and remediate third party risks; however, we rely on the third parties we use to implement security programs commensurate with their risk, and we cannot ensure in all circumstances that their efforts will be successful.
Added
Item 1C. Cybersecurity We have an enterprise-wide information security program designed to identify, protect, detect and respond to and manage reasonably foreseeable cybersecurity risks and threats.
Added
Our information security activities are overseen by our Chief Technology Officer, who has over 25 years of experience in information technology, including security, encryption, system design, programming and compliance, and leaders from Information Technology, Legal and Finance teams, who have an average of 20 years of experience in information technology, security, compliance and auditing.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own a facility in Putzbrunn, Germany which encompasses approximately 70,000 square feet of office and manufacturing space. 27 Table of Contents We also lease office space in Mosbach, Germany; Le Bourget du Lac, France; Novara, Italy and Nacka, Sweden for sales, customer service and technical support staff. The leases expire at various times from 2024 to 2025.
Biggest changeWe also lease office space in Mosbach, Germany; Le Bourget du Lac, France; Novara, Italy and Nacka, Sweden for sales, customer service and technical support staff. The leases expire at various times from 2024 to 2025. We also lease a manufacturing and office facility encompassing approximately 21,000 square feet in Eschenlohe, Germany. The lease expires in 2029.
We also lease a manufacturing and office facility encompassing approximately 21,000 square feet in Eschenlohe, Germany. The lease expires in 2029. We lease a facility in Amsterdam, Netherlands that encompasses approximately 12,000 square feet of office space utilized to support our outsourced manufacturing operations. The lease expires in 2025.
We lease a facility in Amsterdam, Netherlands that encompasses approximately 12,000 square feet of office space utilized to support our outsourced manufacturing operations. The lease expires in 2025.
We lease a facility in Chicago, Illinois that encompasses approximately 10,000 square feet of office space utilized to support our outsourced manufacturing operations. The lease expires in 2026. Europe Our European operations are headquartered in Telford, United Kingdom in a facility we own encompassing approximately 163,000 square feet of office and manufacturing space.
We lease a facility in Chicago, Illinois that encompasses approximately 10,000 square feet of office space utilized to support our outsourced manufacturing operations. The lease expires in 2026.
In 2021, we consolidated facilities in Nashua, New Hampshire reducing our total footprint by approximately 18,000 square feet. In May 2021, we purchased one of our previously leased facilities and continue to lease a second facility. The lease expires in 2026. The New Hampshire facilities provide a total of approximately 128,000 square feet of manufacturing and office space.
We own two facilities in Cary, North Carolina that encompasses approximately 197,000 square feet of manufacturing and office space. We own a facility in Nashua, New Hampshire and lease a second facility. The lease expires in 2026. The New Hampshire facilities provide a total of approximately 128,000 square feet of manufacturing and office space.
Removed
We own a facility in Cary, North Carolina that encompasses approximately 77,000 square feet of manufacturing and office space. In 2021, we entered into a lease agreement to expand our additive manufacturing footprint at a second location, which added approximately 120,000 square feet in 2023. The lease contained a right to purchase option that we exercised in 2023.
Added
Europe Our European operations are headquartered in Telford, United Kingdom in a facility we own encompassing approximately 163,000 square feet of office and manufacturing space. 26 Table of Contents We own a facility in Putzbrunn, Germany which encompasses approximately 70,000 square feet of office and manufacturing space.
Added
On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIndex 12/31/2018 6/30/2019 12/31/2019 6/30/2020 12/31/2020 6/30/2021 12/31/2021 6/30/2022 12/31/2022 6/30/2023 12/31/2023 Proto Labs, Inc. 100.00 102.86 90.03 99.72 136.00 81.39 45.53 42.42 22.63 31.00 34.54 S&P 500 100.00 117.35 128.88 123.67 149.83 171.43 190.13 151.00 153.16 177.53 190.27 Russell 2000 100.00 116.17 123.72 106.88 146.44 171.33 166.50 126.65 130.60 140.06 150.31 Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities 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.
Biggest changeIndex 12/31/2019 6/30/2020 12/31/2020 6/30/2021 12/31/2021 6/30/2022 12/31/2022 6/30/2023 12/31/2023 6/30/2024 12/31/2024 Proto Labs, Inc. 100.00 110.75 151.06 90.40 50.57 47.11 25.14 34.43 38.37 30.42 38.49 S&P 500 100.00 95.96 116.26 133.02 147.52 117.17 118.84 137.75 147.64 169.01 182.83 Russell 2000 100.00 86.39 118.36 138.48 134.57 102.37 105.56 113.20 121.49 122.73 133.66 Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities On February 7, 2023, our board of directors approved a $50 million increase to our previously authorized stock repurchase program, which increased the total stock repurchase authorized to up to $250 million.
We have selected the Russell 2000 Index because the Russell 2000 Index measures the performance of the small market capitalization segment of U.S. equity instruments and we are a member company included in the Russell 2000 Index. Such returns are based on historical results 28 Table of Contents and are not intended to suggest future performance.
We have selected the Russell 2000 Index because the Russell 2000 Index measures the performance of the small market capitalization segment of U.S. equity instruments and we are a member company included in the Russell 2000 Index. Such returns are based on historical results and are not intended to suggest future performance.
As of January 25, 2024 , we had 11 holders of record of our common stock. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
As of February 5, 2025 we had 11 holders of record of our common stock. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. 27 Table of Contents Performance Graph The following graph shows a comparison from December 31, 2019 through December 31, 2024 of the cumulative total return for our common stock, the S&P 500 Index and the Russell 2000 Index.
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) October 1, 2023 through October 31, 2023 — $ — — $ 93,258 November 1, 2023 through November 30, 2023 74,658 $ 36.62 74,658 $ 90,524 December 1, 2023 through December 31, 2023 58,677 $ 36.81 58,677 $ 88,364 133,335 $ 36.70 133,335 $ 88,364 Item 6. [Reserved]
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) October 1, 2024 through October 31, 2024 — $ — — $ 42,450 November 1, 2024 through November 30, 2024 243,034 $ 39.30 243,034 $ 32,898 December 1, 2024 through December 31, 2024 112,389 $ 46.76 112,389 $ 27,643 355,423 $ 41.66 355,423 $ 27,643 Item 6. [Reserved]
The timing and amount of any share repurchases will be determined by our management based on market conditions and other factors. 29 Table of Contents During the year ended December 31, 2023, we repurchased 1,392,921 shares at an average price of $31.52 per share for an aggregate purchase price of $43.9 million.
The actual timing, manner, number and value of shares repurchased under the February 2025 Program will be determined by our management in its discretion and will depend on several factors, including the market price of the Company's common stock, general market and economic conditions, applicable requirements, and other considerations. 28 Table of Contents During the year ended December 31, 2024, we repurchased 1,774,058 shares at an average price of $33.95 per share for an aggregate purchase price of $60.2 million under the Prior Repurchase Program.
On November 17, 2022, our board of directors approved $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.
Our stock repurchase program was first approved on February 9, 2017 and was extended from time to time at the discretion of our board of directors and expired on December 31, 2024 (the Prior Repurchase Program). On February 4, 2025, our board of directors authorized a new share repurchase program (February 2025 Program).
Removed
Performance Graph The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return for our common stock, the S&P 500 Index and the Russell 2000 Index.
Added
The February 2025 Program is open-ended and authorizes repurchases of shares of our common stock from time to time on the open market or in privately negotiated purchases, with a total stock repurchase authorized of up to $100 million.
Removed
On May 16, 2019, we announced that our board of directors approved a $50 million increase in our authorized stock repurchase program and extended the term of the program through December 31, 2023, which increased the stock repurchase program to $100 million.
Added
The February 2025 Program does not obligate us to acquire any particular amount of shares of our common stock and remains in effect until the total authorized amount is expended or until further action by our board of directors.
Removed
On December 8, 2021, our board of directors approved another $50 million increase in our authorized stock repurchase program, which increased the total repurchases authorized to $150 million.
Removed
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 $88.4 million remaining under this authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, Change Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % 2022 2021 $ % Revenue $ 503,877 100.0 % $ 488,398 100.0 % $ 15,479 3.2 $ 488,398 100.0 % $ 488,098 100.0 % $ 300 0.1 Cost of revenue 281,884 55.9 272,933 55.9 8,951 3.3 272,933 55.9 265,407 54.4 7,526 2.8 Gross profit 221,993 44.1 215,465 44.1 6,528 3.0 215,465 44.1 222,691 45.6 (7,226) (3.2) Operating expenses: Marketing and sales 87,688 17.4 82,752 17.0 4,936 6.0 82,752 17.0 82,175 16.8 577 0.7 Research and development 40,135 8.0 38,222 7.8 1,913 5.0 38,222 7.8 44,241 9.1 (6,019) (13.6) General and administrative 65,788 13.1 67,544 13.8 (1,756) (2.6) 67,544 13.8 68,436 14.0 (892) (1.3) Goodwill impairment - - 118,008 24.2 (118,008) * 118,008 24.2 — — 118,008 * Closure of Japan business 215 - 6,922 1.4 (6,707) * 6,922 1.4 — — 6,922 * Changes in fair value of contingent consideration — — — — — * — — (12,503) (2.6) 12,503 * Total operating expenses 193,826 38.5 313,448 64.2 (119,622) (38.2) 313,448 64.2 182,349 37.3 131,099 71.9 Income (loss) from operations 28,167 5.6 (97,983) (20.1) 126,150 128.7 (97,983) (20.1) 40,342 8.3 (138,325) (342.9) Other (expense) income, net (215) (0.1) 106 - (321) (302.8) 106 - (158) — 264 (167.1) Income (loss) before income taxes 27,952 5.5 (97,877) (20.1) 125,829 128.6 (97,877) (20.1) 40,184 8.2 (138,061) (343.6) Provision for income taxes 10,732 2.1 5,585 1.1 5,147 92.2 5,585 1.1 6,812 1.4 (1,227) (18.0) Net income (loss) $ 17,220 3.4 % $ (103,462) (21.2 %) $ 120,682 116.6 % $ (103,462) (21.2 %) $ 33,372 6.8 % $ (136,834) (410.0 %) * Percentage change not meaningful Stock-based compensation expense included in the statements of comprehensive income data above is as follows: Year Ended December 31, (in thousands) 2023 2022 2021 Stock options and other $ 14,550 $ 16,103 $ 17,553 Employee stock purchase plan 1,439 1,442 1,542 Total stock-based compensation expense $ 15,989 $ 17,545 $ 19,095 Cost of revenue $ 1,840 $ 2,172 $ 2,595 Operating expenses: Marketing and sales 3,426 3,295 3,736 Research and development 2,556 2,189 2,833 General and administrative 8,167 9,889 9,931 Total stock-based compensation expense $ 15,989 $ 17,545 $ 19,095 34 Table of Contents Comparison of Years Ended December 31, 2023 and 2022 Revenue Revenue by reportable segment and the related changes for 2023 and 2022 is summarized as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % of Total Revenue $ % of Total Revenue $ % Revenue United States $ 396,821 78.8 % $ 387,399 79.3 % $ 9,422 2.4 % Europe 107,056 21.2 92,770 19.0 14,286 15.4 Japan — — 8,229 1.7 (8,229) (100.0) Total revenue $ 503,877 100.0 % $ 488,398 100.0 % $ 15,479 3.2 % Our revenue increased $15.5 million, or 3.2%, for 2023 compared with 2022.
Biggest changeYear Ended December 31, Change Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % 2023 2022 $ % Revenue $ 500,890 100.0 % $ 503,877 100.0 % $ (2,987) (0.6) $ 503,877 100.0 % $ 488,398 100.0 % $ 15,479 3.2 Cost of revenue 277,690 55.4 281,884 55.9 (4,194) (1.5) 281,884 55.9 272,933 55.9 8,951 3.3 Gross profit 223,200 44.6 221,993 44.1 1,207 0.5 221,993 44.1 215,465 44.1 6,528 3.0 Operating expenses: Marketing and sales 92,073 18.4 87,688 17.4 4,385 5.0 87,688 17.4 82,752 17.0 4,936 6.0 Research and development 41,298 8.2 40,135 8.0 1,163 2.9 40,135 8.0 38,222 7.8 1,913 5.0 General and administrative 64,333 12.8 65,788 13.1 (1,455) (2.2) 65,788 13.1 67,544 13.8 (1,756) (2.6) Goodwill impairment - - - - - - - - 118,008 24.2 (118,008) * Costs related to disposal and exit activities 5,585 1.1 215 - 5,370 * 215 - 6,922 1.4 (6,707) * Total operating expenses 203,289 40.6 193,826 38.5 9,463 4.9 193,826 38.5 313,448 64.2 (119,622) (38.2) Income (loss) from operations 19,911 4.0 28,167 5.6 (8,256) (29.3) 28,167 5.6 (97,983) (20.1) 126,150 128.7 Other (expense) income, net 4,761 0.9 (215) (0.1) 4,976 * (215) (0.1) 106 - (321) (302.8) Income (loss) before income taxes 24,672 4.9 27,952 5.5 (3,280) (11.7) 27,952 5.5 (97,877) (20.1) 125,829 128.6 Provision for income taxes 8,079 1.6 10,732 2.1 (2,653) (24.7) 10,732 2.1 5,585 1.1 5,147 92.2 Net income (loss) $ 16,593 3.3 % $ 17,220 3.4 % $ (627) (3.6 %) $ 17,220 3.4 % $ (103,462) (21.2 %) $ 120,682 116.6 % * Percentage change not meaningful 33 Table of Contents Stock-based compensation expense included in the statements of comprehensive income data above is as follows: Year Ended December 31, (in thousands) 2024 2023 2022 Stock options and other $ 15,691 $ 14,550 $ 16,103 Employee stock purchase plan 1,308 1,439 1,442 Total stock-based compensation expense $ 16,999 $ 15,989 $ 17,545 Cost of revenue $ 1,935 $ 1,840 $ 2,172 Operating expenses: Marketing and sales 3,112 3,426 3,295 Research and development 2,721 2,556 2,189 General and administrative 9,231 8,167 9,889 Total stock-based compensation expense $ 16,999 $ 15,989 $ 17,545 Comparison of Years Ended December 31, 2024 and 2023 Revenue Revenue by reportable segment and the related changes for 2024 and 2023 is summarized as follows: Year Ended December 31, 2024 2023 Change (dollars in thousands) $ % of Total Revenue $ % of Total Revenue $ % Revenue United States $ 396,192 79.1 % $ 396,821 78.8 % $ (629) (0.2 %) Europe 104,698 20.9 107,056 21.2 (2,358) (2.2) Total revenue $ 500,890 100.0 % $ 503,877 100.0 % $ (2,987) (0.6 %) Our revenue decreased $3.0 million, or 0.6%, for 2024 compared with 2023.
The increase in our cash was primarily due to cash generated through operations of $73.3 million, which was partially offset by cash used in investing activities of $4.6 million, consisting primarily of net purchases of property, equipment and other capital assets of $27.4 million partly offset by proceeds from the maturity of marketable securities of $23.9 million, and cash used in financing activities of $41.9 million, primarily for repurchases of common stock of $44.0 million.
The increase in our cash was primarily due to cash generated through operations of $73.3 million, which was partially offset by cash used in investing activities $4.6 million, consisting primarily of net purchases of property, equipment and other capital assets of $27.4 million, partially offset by proceeds from the maturity of marketable securities of $23.9 million, and cash used in financing activities of $41.9 million, primarily for repurchases of common stock of $44.0 million.
Cash Flows from Investing Activities Cash used in investing activities was $4.6 million for the year ended December 31, 2023, consisting of $27.4 million for the net purchases of property, equipment and other capital assets, $1.0 in other investing activities, which were partially offset by $23.9 million in proceeds from maturities of marketable securities.
Cash used in investing activities was $4.6 million for the year ended December 31, 2023, consisting of $27.4 million for the net purchases of property, equipment and other capital assets, $1.0 million in other investing activities, which were partially offset by $23.9 million of net proceeds from maturities of marketable securities.
Our revenue is generated from a diverse customer base and our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including: • expanding the breadth and scope of our products by adding more sizes and materials to our offerings; • the introduction of our 3D Printing product line through our acquisition of FineLine in 2014; • expanding 3D printing to Europe through our acquisition of Alphaform in October 2015; • the introduction of our Sheet Metal product line through our acquisition of RAPID in 2017; • continuously improving the usability of our product lines such as our web-centric applications; and 31 Table of Contents • providing customers with on-demand access to a global network of premium manufacturing partners through our acquisition of Hubs in January 2021.
Our revenue is generated from a diverse customer base and our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including: • expanding the breadth and scope of our products by adding more sizes and materials to our offerings; • the introduction of our 3D Printing product line through our acquisition of FineLine in 2014; • expanding 3D printing to Europe through our acquisition of Alphaform in October 2015; • the introduction of our Sheet Metal product line through our acquisition of RAPID 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 January 2021.
Our actual results may differ materially from those anticipated in these forward- looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This Management's Discussion and Analysis (MD&A) generally discusses fiscal years 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Our actual results may differ materially from those anticipated in these forward- looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This Management's Discussion and Analysis (MD&A) generally discusses fiscal years 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Cash Flows from Operating Activities Cash flow from operating activities of $73.3 million during 2023 primarily consisted of net income of $17.2 million, adjusted for certain non-cash items, including depreciation and amortization of $37.5 million, stock-based compensation expense of $16.0 million, foreign currency translation losses of $3.9 million, interest on finance lease obligations of $1.1 million and changes in operating assets and liabilities and other items totaling $5.2 million, which were partially offset by changes in deferred taxes of $7.7 million.
Cash flow from operating activities of $73.3 million during 2023 primarily consisted of net income of $17.2 million, adjusted for certain non-cash items, including depreciation and amortization of $37.5 million, stock-based compensation expense of $16.0 million, foreign currency translation losses of $3.9 million, interest on finance lease obligations of $1.1 million and changes in operating asset and liabilities and other items totaling $5.2 million, which were partially offset by changes in deferred taxes of $7.7 million.
Our revenue outside of the United States accounted for approximately 21% of our consolidated revenue in each of the years ended December 31, 2023 and 2022. We intend to continue to expand our international sales efforts and believe opportunities exist to serve the needs of customers in select new geographic regions.
Our revenue outside of the United States accounted for approximately 21% of our consolidated revenue in each of the years ended December 31, 2024 and 2023. We intend to continue to expand our international sales efforts and believe opportunities exist to serve the needs of customers in select new geographic regions.
An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. In applying the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.
An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. In performing the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.
Other expense, net for 2023 primarily consisted of $3.9 million foreign currency translation loss from the completion on the closure of our Japan business and $1.1 million of interest expense, which was partially offset by a $3.3 million of interest income on investments and $1.5 of other income and gains on foreign currency.
Other income, net for 2023 primarily consisted of $3.9 million foreign currency translation loss from the completion on the closure of our Japan business and $1.1 million of interest expense, which was partially offset by a $3.3 million of interest income on investments and $1.5 of other income and gains on foreign currency. Provision for Income Taxes.
We have added product lines and expanded those product lines to meet the needs of our customers, which has ultimately driven our growth. In 2022, we launched the first iteration of our integrated offer in Europe and followed with the launch in the United States in early 2023.
We have added product lines and expanded those product lines to meet the needs of our customers, which has historically driven our growth. In 2022, we launched the first iteration of our integrated offer in Europe and followed with the launch in the United States in early 2023.
As a result of the fiscal year 2022 analysis, which used the quantitative assessment, a $118.0 million impairment related to the Europe reporting unit was identified, which represents a write-off of all Europe goodwill, and recorded during the year ended December 31, 2022.
As a result of the fiscal year 2022 analysis, which used the quantitative assessment, a $118.0 million impairment related to the Europe reporting unit was identified, which represented a write-off of all Europe goodwill, and recorded during the year ended December 31, 2022.
We intend to continue to invest significantly to enhance our technology and 30 Table of Contents manufacturing processes and expand the range of our existing capabilities with the aim of meeting the needs of a broader set of customers.
We intend to continue to invest significantly to enhance our technology and 29 Table of Contents manufacturing processes and expand the range of our existing capabilities with the aim of meeting the needs of a broader set of customers.
An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows generated by the asset. As of December 31, 2023, no impairment charges for intangible assets have been recognized.
An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows generated by the asset. As of December 31, 2024, no impairment charges for intangible assets have been recognized.
Our actual results may differ significantly from these estimates under different assumptions or conditions. We believe the following critical accounting policies and estimates affect our more significant judgments used in the preparation of our consolidated financial statements. See the Notes to Consolidated Financial Statements included in Item 8.
Our actual results may differ significantly from these estimates under different assumptions or conditions. 38 Table of Contents We believe the following critical accounting policies and estimates affect our more significant judgments used in the preparation of our consolidated financial statements. See the Notes to Consolidated Financial Statements included in Item 8.
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 32 Table of Contents overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization. Goodwill impairment.
General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal and other related overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization. Goodwill impairment.
Cash Flows from Financing Activities Cash used in financing activities was $41.9 million for the year ended December 31, 2023, consisting of $44.0 million in repurchases of common stock, $1.4 million in shares withheld for tax obligations associated with equity transactions, and $0.3 million for repayments of finance lease obligations, which were partially offset by $3.8 million in proceeds from issuance of common stock from equity plans.
Cash used in financing activities was $41.9 million for the year ended December 31, 2023, consisting of $44.0 million in repurchases of common stock, $1.4 million in shares withheld for tax obligations associated with equity 37 Table of Contents transactions, and $0.3 million for repayments of finance lease obligations, which were partially offset by $3.8 million in proceeds from issuance of common stock from equity plans.
If different estimates and assumptions had been used, our common stock valuations could be significantly different and related stock-based compensation expense may be materially impacted. 40 Table of Contents The Black-Scholes option pricing model requires inputs such as the risk-free interest rate, expected term, expected volatility and expected dividend yield.
If different estimates and assumptions had been used, our common stock valuations could be significantly different and related stock-based compensation expense may be materially impacted. The Black-Scholes option pricing model requires inputs such as the risk-free interest rate, expected term, expected volatility and expected dividend yield.
The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. The Company records penalties and interest related to unrecognized tax benefits in income taxes in the Company’s Consolidated Statements of Income.
The Company recognizes the effect of income tax positions only if 41 Table of Contents sustaining those positions is more likely than not. The Company records penalties and interest related to unrecognized tax benefits in income taxes in the Company’s Consolidated Statements of Income.
As of December 31, 2023, the amount of cash and cash equivalents held by foreign subsidiaries was $18.1 million. Our intent is to continue to reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations.
As of December 31, 2024, the amount of cash and cash equivalents held by foreign subsidiaries was $12.1 million. Our intent is to continue to reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations.
Discussions of fiscal year 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this MD&A, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7. of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023.
Discussions of fiscal year 2022 items and year-to-year comparisons between 2023 and 2022 are generally not included in this MD&A, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7. of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024.
In 2021, the significant assumptions used to estimate the value of the software platform included forecasted annual revenue growth, gross margin rates, operating expenses as a percentage of sales and the weighted-average cost of capital, which are affected by our business plans and expectations about future market or economic conditions.
The significant assumptions used to estimate the value of the software platform included forecasted annual revenue growth, gross margin rates, operating expenses as a percentage of sales and the weighted- 39 Table of Contents average cost of capital, which are affected by our business plans and expectations about future market or economic conditions.
The fair value of each new employee option awarded was estimated on the date of grant for the periods below using the Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2023 2022 2021 Risk-free interest rate 3.55 - 4.55% 1.94 - 3.40% 0.80 - 1.12% Expected life (years) 2 - 6.25 6.25 6.25 Expected volatility 49.23 -55.92% 45.95 - 46.03% 45.28 - 45.53% Expected dividend yield 0% 0% 0% Weighted average grant date fair value $16.36 $23.11 $128.14 Our 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of our common stock during each offering period at a discount through payroll deductions of up to 15% of their eligible compensation, subject to plan limitations.
The fair value of each new employee option awarded was estimated on the date of grant for the periods below using the Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2024 2023 2022 Risk-free interest rate 4.28 - 4.30% 3.55 - 4.55% 1.94 - 3.40% Expected life (years) 6.25 2.00 - 6.25 6.25 Expected volatility 50.62 -53.17% 49.23 -55.92% 45.95 - 46.03% Expected dividend yield 0% 0% 0% Weighted average grant date fair value $18.17 $16.36 $23.11 Our 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of our common stock during each offering period at a discount through payroll deductions of up to 15% of their eligible compensation, subject to plan limitations.
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 custom 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal custom parts and assemblies.
Injection Molding revenue consists of sales of custom injection molds and injection-molded parts. CNC Machining 30 Table of Contents revenue consists of sales of CNC-machined custom parts. 3D Printing revenue consists of sales of custom 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal custom parts and assemblies.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024.
Our future capital requirements will depend on many factors, including the following: • the revenue growth in Injection Molding, CNC Machining, 3D Printing and Sheet Metal product lines; • costs of operations, including costs relating to expansion and growth; • the emergence of competing or complementary technological developments; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual product rights, or participating in litigation-related activities; and • the acquisition of businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions. 38 Table of Contents Our recent annual capital expenditures have varied between 4% and 8% of annual revenue.
Our future capital requirements will depend on many factors, including the following: • the revenue growth in Injection Molding, CNC Machining, 3D Printing and Sheet Metal product lines; • costs of operations, including costs relating to expansion and growth; • the emergence of competing or complementary technological developments; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual product rights, or participating in litigation-related activities; and • the acquisition of businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.
We recognize stock-based compensation expense on a straight-line basis over the requisite service period. We recorded stock-based compensation expense relating to stock options, restricted stock awards, performance stock units and our ESPP of $16.0 million, $17.5 million and $19.1 million during the years ended December 31, 2023, 2022 and 2021, 41 Table of Contents respectively.
We recognize stock-based compensation expense on a straight-line basis over the requisite service period. We recorded stock-based compensation expense relating to stock options, restricted stock awards, performance stock units and our ESPP of $17.0 million, $16.0 million and $17.5 million during the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2023, we had $3.8 million of unrecognized stock-based compensation costs related to unvested stock options that are expected to be recognized over a weighted average period of 2.5 years. We issued options to purchase 186,804, 118,434 and 57,901 shares of our common stock during the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2024, we had $3.6 million of unrecognized stock-based compensation costs related to unvested stock options that are expected to be recognized over a weighted average period of 2.5 years. We issued options to purchase 140,405, 186,804 and 118,434 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively.
We believe future growth capital expenditures, excluding any expenditures for buildings and maintenance capital we might purchase for our operations, are likely to vary between approximately 4% and 7% of annual revenue.
Our recent annual capital expenditures have varied between 2% and 7% of annual revenue. We believe future growth capital expenditures, excluding any expenditures for buildings and maintenance capital we might purchase for our operations, are likely to vary between approximately 2% and 7% of annual revenue.
As of December 31, 2023, we had $18.5 million of unrecognized stock-based compensation costs related to unvested restricted stock, which is expected to be recognized over a weighted average period of 2.5 years. We issued restricted stock awards of 410,682, 315,432 and 205,996 shares of our common stock during the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2024, we had $18.4 million of unrecognized stock-based compensation costs related to unvested restricted stock, which is expected to be recognized over a weighted average period of 2.6 years. We issued restricted stock awards of 377,961, 410,682 and 315,432 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2023, we had $4.1 million of unrecognized stock-based compensation costs related to unvested performance stock, which is expected to be recognized over a weighted average period of 1.8 years. We issued performance stock awards of 71,295, 35,697 and 15,078 shares of our common stock during the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2024, we had $4.2 million of unrecognized stock-based compensation costs related to unvested performance stock, which is expected to be recognized over a weighted average period of 1.7 years. We issued performance stock awards of 79,436, 71,295 and 35,697 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively.
Contractual Obligations As of December 31, 2023, our contractual obligations are $5.5 million related to current and long-term operating and finance lease liabilities and $9.5 million related to unsatisfied performance obligations for contracts with an original expected length of one year or less. Financing Arrangements We had no financing arrangements as of December 31, 2023 and 2022.
Contractual Obligations As of December 31, 2024, our contractual obligations are $3.5 million related to current and long-term operating and finance lease liabilities and $8.7 million related to unsatisfied performance obligations for revenue generating contracts with an original expected length of one year or less. Financing Arrangements We had no financing arrangements as of December 31, 2024 and 2023.
Our researc h and development expense increased $1.9 million, or 5.0%, for 2023 compared to 2022 primarily due to increases in personnel and related costs of $2.8 million, partially offset by decreases in other operating costs of $0.5 million and professional services of $0.4 million for 2023 compared with 2022. General and Administrative.
Our researc h and development expense increased $1.2 million, or 2.9%, for 2024 compared to 2023 p rimarily due to increases of $1.1 million in other operating costs, $0.4 million in professional services and $0.3 million in administrative costs, partially offset by decreases in personnel and related costs of $0.6 million for 2024 compared with 2023. General and Administrative.
Goodwill is tested for impairment annually as of the first day of the fourth quarter, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
Our reporting units are the United States and Europe. Goodwill is not amortized. Goodwill is tested for impairment annually as of the first day of the fourth quarter, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
Goodwill is tested for impairment annually as of the first day of the fourth quarter. An impairment charge for goodwill was recognized for our Europe reporting unit in the fourth quarter of 2022, as it was determined the estimated fair value of the reporting unit, including goodwill, was less than its carrying amount. Closure of Japan business.
Goodwill is tested for impairment annually as of the first day of the fourth quarter. An impairment charge for goodwill was recognized for our Europe reporting unit in the fourth quarter of 2022, as it was determined the estimated fair value of the reporting unit, including goodwill, was less than its carrying amount. Costs related to disposal and exit activities.
Overall, our effective tax rate for 2023 and beyond may differ from historical effective tax rates due to changes 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 the effective tax rate. 33 Table of Contents Results of Operations The following table summarizes our results of operations and the related changes for the periods indicated.
Overall, our effective tax rate for 2024 and beyond may differ from historical effective tax rates due to changes 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 the effective tax rate.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net cash provided by operating activities $ 73,274 $ 62,079 $ 55,242 Net cash used in investing activities (4,552) (43,092) (94,664) Net cash used in financing activities (41,858) (27,922) (22,198) Effect of exchange rates on cash and cash equivalents 368 (436) (54) Net (decrease) increase in cash and cash equivalents $ 27,232 $ (9,371) $ (61,674) Sources of Liquidity We finance our operations and capital expenditures through cash flow from operations.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (dollars in thousands) 2024 2023 2022 Net cash provided by operating activities $ 77,829 $ 73,274 $ 62,079 Net cash used in investing activities (13,580) (4,552) (43,092) Net cash used in financing activities (58,550) (41,858) (27,922) Effect of exchange rates on cash and cash equivalents (418) 368 (436) Net (decrease) increase in cash and cash equivalents $ 5,281 $ 27,232 $ (9,371) Sources of Liquidity We finance our operations and capital expenditures through cash flow from operations.
Including interest and penalties, we have established a liability for uncertain tax positions of $5.0 million as of December 31, 2023.
Including interest and penalties, we have established a liability for uncertain tax positions of $4.6 million as of December 31, 2024.
Cash used in financing activities was $27.9 million for the year ended December 31, 2022, consisting of $29.7 million in repurchases of common stock, $1.7 million in shares withheld for tax obligations associated with equity transactions, and $0.5 million for repayments of finance lease obligations, which were partially offset by $4.0 million in proceeds from issuance of common stock from equity plans.
Cash Flows from Financing Activities Cash used in financing activities was $58.6 million for the year ended December 31, 2024, consisting of $60.3 million in repurchases of common stock, $2.0 million in shares withheld for tax obligations associated with equity transactions, and $0.3 million for repayments of finance lease obligations, which were partially offset by $4.0 million in proceeds from issuance of common stock from equity plans.
Our general and administrative expense decreased $1.8 million, or 2.6%, fo r 2023 compared to 2022 primarily due to a decrease of $1.7 million in stock-based compensation and a decrease of $0.7 million in personnel and related costs, which were partially offset by an increase in professional services and other administrative costs of $0.6 million. Goodwill impairment.
Our general and administrative expense decreased $1.5 million, or 2.2%, for 2024 compared to 2023 primarily due to a decrease in intangible amortization costs of $2.2 million, other operating costs of $1.7 million and administrative costs of $0.3 million, which were partially offset by an increase in stock-based compensation of $1.1 million, personnel and related costs of $1.0 million and professional services of $0.6 million.
The fair value of each offering period was estimated using the Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2023 2022 2021 Risk-free interest rate 4.60 - 5.16% 0.17 - 4.60% 0.06 - 0.17% Expected life (months) 6.00 6.00 6.00 Expected volatility 47.38 - 67.84% 47.05 - 67.84% 53.44 - 65.53% Expected dividend yield 0% 0% 0% There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions.
We determine the fair value stock-based compensation related to our ESPP in accordance with ASC 718 using the component measurement approach and the Black-Scholes standard option pricing model. 40 Table of Contents The fair value of each offering period was estimated using the Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2024 2023 2022 Risk-free interest rate 4.29 - 5.16% 4.60 - 5.16% 0.17 - 4.60% Expected life (months) 6.00 6.00 6.00 Expected volatility 30.97 - 65.60% 47.38 - 67.84% 47.05 - 67.84% Expected dividend yield 0% 0% 0% There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions.
For example, we believe that many of our target customers are facing three mega trends, which are disrupting long-term product growth models. We believe our customers are facing increased pressure to shorten product life-cycles, to embed products with connectivity driven by the "internet of things" technology, and to deliver products that are personalized and customized to unique customer specifications.
We believe our customers are facing increased pressure to shorten product life-cycles, to embed products with connectivity driven by the "internet of things" technology, and to deliver products that are personalized and customized to unique customer specifications.
Cash used in investing activities was $43.1 million for the year ended December 31, 2022, consisting of $17.6 million for the net purchases of property, equipment and other capital assets and $25.5 million of net purchases of marketable securities.
Cash Flows from Investing Activities Cash used in investing activities was $13.6 million for the year ended December 31, 2024, consisting of $9.1 million for the net purchases of property, equipment and other capital assets and $4.4 million in net purchases of marketable securities.
International revenue w as negatively impacted by $0.2 million during 2023 compared to the same period in 2022 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar. During 2023, we served 53,464 unique customer contacts, a decrease of 5.1% over 2022.
International revenue w as positively impacted by $1.9 million during 2024 compared to the same period in 2023 as a result of foreign currency movements, primarily the strengthening of the British Pound and Euro relative to the United States Dollar. During 2024, we served 51,552 unique customer contacts, a decrease of 3.6% over 2023.
As a result of the fiscal year 2023 analysis, which used the qualitative assessment, there were no impairments recorded during the year ended December 31, 2023. Other Intangible Assets We recognize other intangibles assets in accordance with ASC 350, Intangibles—Goodwill and Other . Other intangible assets include software technology, customer relationships and other intangible assets acquired from independent parties.
As a result of the fiscal years 2024 and 2023 analyses, which used the qualitative assessment, there were no impairments recorded during the years ended December 31, 2024 and 2023. Other Intangible Assets We recognize other intangibles assets in accordance with ASC 350, Intangibles—Goodwill and Other .
We expect to continue to grow in future periods, which will result in the need for additional investments in factory space and equipment. We expect that these additional costs for factory and equipment expansion can be absorbed by revenue growth, and allow gross margins by product line to remain relatively consistent over time.
We expect that these additional costs for factory and equipment expansion can be absorbed by revenue growth, and allow gross margins by product line to remain relatively consistent over time.
The cash flow from operating activities during 2023 compared to 2022 increased $11.2 million primarily due to changes in operating assets and liabilities of $7.2 million, increases in deferred taxes of $1.8 million, increases in interest on finance lease obligations of $1.1 million and increases in net income of $120.7 million, which were partially offset by decreases in stock-based compensation of $1.6 million and loss on impairment of goodwill of $118.0 million. 37 Table of Contents Cash flow from operating activities of $62.1 million during 2022 primarily consisted of net loss of $103.5 million, adjusted for certain non-cash items, including depreciation and amortization of $39.4 million and stock-based compensation expense of $17.5 million, loss on goodwill impairment of $118.0 million and impairments related to closure of Japan business of $2.8 million, which were partially offset by changes in deferred taxes of $9.5 million and changes in operating asset and liabilities and other items totaling $2.8 million.
The cash flow from operating activities during 2023 compared to 2022 increased $11.2 million primarily due to changes in operating assets and liabilities and other items of $7.2 million, increases in deferred taxes of $1.8 million, increases in interest on finance lease obligations of $1.1 million and increases in net income of $120.7 million, which were partially offset by decreases in stock-based compensation of $1.6 million and loss on impairment of goodwill of $118.0 million.
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. Changes in fair value of contingent consideration.
Costs related to disposal and exit activities is driven by our decision to close certain manufacturing facilities in Germany and Japan and further to exit the Japan market. The expenses consist primarily of operating expenses, including employee severance, write-down of fixed assets, facility-related charges and goodwill impairment charges.
During 2023, we served 53,464 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 5.1% over the same period in 2022. During 2022, we served 56,333 unique customer contacts who purchased our products through our web-based customer interface, an increase of 1.8% over the same period in 2021.
Our revenue per customer contact grew 3.1% as compared to 2023. During 2023, we served 53,464 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 5.1% over the same period in 2022.
We used a multi-period excess earnings method under the income approach to measure the software platform when acquired through an acquisition.
Other intangible assets include software technology, customer relationships and other intangible assets acquired from independent parties. We used a multi-period excess earnings method under the income approach to measure the software platform when acquired through an acquisition.
Other (Expense) Income, Net and Provision for Income Taxes Other (Expense) Income, Net. We recognized other expense, net of $0.2 million in 2023, a decrease of $0.3 million compared to other income, n et of $0.1 million for 2022.
Other (Expense) Income, Net and Provision for Income Taxes Other (Expense) Income, Net. We recognized other expense, net of $4.8 million in 2024, an increase of $5.0 million compared to other income, n et of $0.2 million for 2023.
As a result of the factors described above, many of our customers tend to return to Proto Labs to meet their ongoing needs. We have established our operations in the United States and Europe. Previously we had established operations in Japan.
As a result of the factors described above, many of our customers tend to return to Proto Labs to meet their ongoing needs. We have established our operations in the United States and Europe. On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany.
By reportable segment, revenue in the United States increased $9.4 million, or 2.4%, for 2023 compared with 2022. Revenue in Europe increased $14.3 million, or 15.4%, for 2023 compared with 2022. Revenue in Japan decreased $8.2 million, or 100.0%, for 2023 compared with 2022.
By reportable segment, revenue in the United States decreased $0.6 million, or 0.2%, for 2024 compared with 2023. Revenue in Europe decreased $2.4 million, or 2.2%, for 2024 compared with 2023.
Our recent growth in revenue has been accompanied by increased cost of revenues and operating expenses. We expect to increase investment in our operations to support anticipated future growth as discussed more fully below. In addition, we believe that a number of trends affecting our industry have affected our results of operations and may continue to do so.
Historically, our growth in revenue has been accompanied by increased cost of revenues and operating expenses. We expect to increase investment in our operations to support anticipated future growth as discussed more fully below.
Revenue by product line and the related changes for 2023 and 2022 is summarized as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % of Total Revenue $ % of Total Revenue $ % Revenue Injection Molding $ 203,941 40.5 % $ 200,578 41.1 % $ 3,363 1.7 % CNC Machining 198,222 39.3 188,372 38.5 9,850 5.2 3D Printing 84,291 16.7 78,988 16.2 5,303 6.7 Sheet Metal 16,540 3.3 19,498 4.0 (2,958) (15.2) Other Revenue 883 0.2 962 0.2 (79) (8.2) Total revenue $ 503,877 100.0 % $ 488,398 100.0 % $ 15,479 3.2 % By product line, our revenue increase was driven by a 5.2% increase in CNC Machining revenue, a 6.7% increase in 3D Printing revenue and a 1.7% increase in Injection Molding revenue, which was partially offset by a 15.2% decrease in Sheet Metal revenue, and a 8.2% decrease in Other Revenue, in each case for 2023 compared with 2022. 35 Table of Contents Cost of Revenue, Gross Profit and Gross Margin Cost of Revenue.
Our revenue per customer grew 3.1% as compared to 2023. 34 Table of Contents Revenue by product line and the related changes for 2024 and 2023 is summarized as follows: Year Ended December 31, 2024 2023 Change (dollars in thousands) $ % of Total Revenue $ % of Total Revenue $ % Revenue Injection Molding $ 194,215 38.8 % $ 203,941 40.5 % $ (9,726) (4.8 %) CNC Machining 206,887 41.3 198,222 39.3 8,665 4.4 3D Printing 83,767 16.7 84,291 16.7 (524) (0.6) Sheet Metal 15,265 3.0 16,540 3.3 (1,275) (7.7) Other Revenue 756 0.2 883 0.2 (127) (14.4) Total revenue $ 500,890 100.0 % $ 503,877 100.0 % $ (2,987) (0.6 %) By product line, our revenue decrease was driven by a 4.8% decrease in Injection Molding revenue, a 7.7% decrease in Sheet Metal revenue, a 0.6% decrease in 3D Printing revenue and a 14.4% decrease in Other Revenue, which was partially offset by a 4.4% increase in CNC Machining revenue, in each case for 2024 compared with 2023.
Marketing and sales expense increased $4.9 million, or 6.0%, for 2023 compared to 2022, primarily due to increases in personnel and related costs of $4.3 million and marketing program costs increases of $0.6 million for 2023 compared with 2022. Research and Development.
Marketing and sales expense increased $4.4 million, or 5.0%, for 2024 compared to 2023, primarily due to increases in personnel and related c osts of $2.7 million, marketing demand generation costs increases of $0.7 million and other operating costs of $1.0 million for 2024 compared with 2023. Research and Development.
Our foreign currency-related gains and losses will vary depending upon movements in underlying 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.
Other Income, Net Other income, net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments. Our foreign currency-related gains and losses will vary depending upon movements in underlying exchange rates.
Our business model requires that we invest in our capacity well in advance of demand to ensure we can fulfill the expectations for quick delivery of our products to our customers. Therefore, over the last several years, we have made significant investments in additional factory space, equipment and infrastructure across our geographic segments.
Our quick-turn factory business model requires that we invest in our capacity well in advance of demand to ensure we can fulfill the expectations for quick delivery of products manufactured in house to our customers.
The decrease in our cash was primarily due to cash used in investing activities for net purchases of, and proceeds of, marketable securities of $25.5 million, purchases of property, equipment and other capital assets of $17.6 million, and cash used in financing activities for repurchases of common stock of $29.7 million, which were partially offset by cash generated through operations of $62.1 million.
The increase in our cash was primarily due to cash generated through operations of $77.8 million, which was partially offset by cash used in investing activities of $13.6 million, consisting primarily of net purchases of property, equipment and other capital 36 Table of Contents assets of $9.1 million and net purchases of marketable securities of $4.4 million, and cash used in financing activities of $58.6 million, primarily for repurchases of common stock of $60.3 million and purchases of shares withheld for tax obligations of $2.0 million, which was partially offset by cash proceeds from the issuance of common stock from equity plans of $4.0 million.
The results below are not necessarily indicative of the results for future periods.
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.
The cash flow from operating activities during 2022 compared to 2021 increased $6.8 million primarily due to changes in operating assets and liabilities and other items of $22.0 million, loss on impairment of goodwill of $118.0 million, changes in fair value of contingent consideration of $13.3 million and impairments related to closure of Japan business of $2.8 million, which were partially offset by decreases in net income of $136.8 million, decreases in deferred taxes of $9.8 million, decreases in depreciation and amortization of $1.1 million and decreases in stock-based compensation of $1.6 million.
The cash flow from operating activities during 2024 compared to 2023 increased $4.6 million primarily due to changes in operating assets and liabilities of $5.4 million, non-cash fixed impairment charges primarily related to certain operations in Germany of $2.6 million, increases in deferred taxes of $2.5 million, increases in stock-based compensation of $1.0 million and other items of $0.3 million, which were partially offset by decreases in foreign currency translation losses of $3.9 million, depreciation and amortization of $1.7 million, interest on finance lease obligations of $1.0 million and net income of $0.6 million.
Goodwill is allocated to our reporting units, which are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management. Our reporting units are the United States and Europe. Goodwill is not amortized.
Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is allocated to our reporting units, which are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management.
The majority of our injection molding contracts have multiple performance obligations including one obligation to produce the mold and a second obligation to produce parts. For injection molding contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price.
The majority of our CNC machining, 3D printing, and sheet metal contracts have a single performance obligation. The majority of our injection molding contracts have multiple performance obligations including one obligation to produce the mold and a second obligation to produce parts.
By reportable segment, income from operations for the United States increased $1.5 million. Income from operations for Europe increased $117.9 million for 2023 compared with 2022, which was primarily driven by a $118.0 goodwill impairment charge in 2022. Loss from operations included in Corporate Unallocated and Japan decreased $6.8 million for 2023 compared with 2022.
Loss from operations for Europe increased $3.0 million for 2024 compared with 2023, which was primarily driven by $5.6 million in operating expenses associated with our decision to exit and close certain operations in Germany. Loss from operations included in Corporate Unallocated and Japan increased $8.9 million for 2024 compared with 2023.
The increase in the cost of revenue of $9.0 million was primarily driven by higher revenue volumes in the Protolabs Network, partly offset by reductions in contract labor, headcount and overtime leading to lower personnel and related costs of $8.0 million and lower raw material and product costs of $3.9 million in our digital manufacturing factory offering for 2023 compared with 2022 .
The decrease in the cost of revenue of $4.2 million was driven by reductions in headcount and overtime leading to lower personnel and related costs of $4.1 million in our digital factory business and $0.1 million in other operating costs in 2024 compared with 2023.
Cost of revenue increased $9.0 million, or 3.3%, for 2023 compared to 2022, which was less than the rate of revenue increase of 3.2% for 2023 compared to 2022.
Cost of Revenue, Gross Profit and Gross Margin Cost of Revenue. Cost of revenue decreased $4.2 million, or 1.5%, for 2024 compared to 2023, which was more than the rate of revenue decrease of 0.6% for 2024 compared to 2023.
Other income, net for 2022 primarily consisted of $1.0 million in interest income, which was partially offset by a $0.9 million loss on foreign currency and other losses. Provision for Income Taxes. Our income tax provision increased by $5.1 million for 2023 compared to 2022.
Other expense, net for 2024 primarily consisted of $5.4 million of interest income on investments and other income, partially offset by $0.4 million of foreign currency losses and $0.2 million of interest expense and other expenses.
We have grown our total revenue from $488.1 million in the year December 31, 2021 to $503.9 million in the year ended December 31, 2023. During this period, our operating expenses increased from $182.3 million in the year ended December 31, 2021 to $193.8 million in the year ended December 31, 2023.
Total revenue decreased to $500.9 million in the year December 31, 2024 from $503.9 million in the year ended December 31, 2023.
Provision for Income Taxes Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income.
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. 32 Table of Contents Provision for Income Taxes Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income.
We had cash and cash equivalents of $56.6 million as of December 31, 2022, a decrease of $9.4 million from December 31, 2021.
We had cash and cash equivalents of $89.1 million as of December 31, 2024, an increase of $5.3 million from December 31, 2023.
We generally determine standalone selling price based on the price charged to customers. 39 Table of Contents Goodwill We recognize goodwill in accordance with ASC 350, Intangibles—Goodwill and Other . Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination.
For injection molding contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling price based on the price charged to customers. Goodwill We recognize goodwill in accordance with ASC 350, Intangibles—Goodwill and Other .
During 2022 we recognized $2.3 million of employee severance, $2.4 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.7 million in other closure related charges. Income (Loss) from Operations Income from operations increased $126.2 million, or 128.6%, for 2023 compared with 2022.
During 2023 we recognized $0.2 million in professional services expenses related to the closure of the Japan business. 35 Table of Contents Income (Loss) from Operations Income from operations decreased $8.3 million, or 29.3%, for 2024 compared with 2023. By reportable segment, income from operations for the United States increased $3.6 million for 2024 compared with 2023.
Gross Profit and Gross Margin. Gross profit increased from $215.5 million in 2022 to $222.0 million in 2023. Gross margin was 44.1% of revenue in 2023, unchanged compared to 2022 . Operating Expenses Marketing and Sales.
Gross margin increased to 44.6% of revenue in 2024 from 44.1% in 2023, primarily due to focused management of resources aligned to order volumes, partially supported by increased automation . Operating Expenses Marketing and Sales.
Our effective tax rate of 38.4% for 2023 increased 44.1% compared to (5.7)% for the same period in 2022 primarily due to the tax rate impact of the goodwill impairment recorded during the year ended December 31, 2022 as well as the overall change from a loss to income position in 2023. 36 Table of Contents Comparison of Years Ended December 31, 2022 and 2021 For a comparison of our results of operations for fiscal years ended December 31, 2022 and December 31, 2021, see Part II, Item 7.
Comparison of Years Ended December 31, 2023 and 2022 For a comparison of our results of operations for fiscal years ended December 31, 2023 and December 31, 2022, see Part II, Item 7.
Removed
Our contingent consideration liability is related to our acquisition of Hubs in 2021, was evaluated quarterly for changes in fair value, and was written off in 2021. Other Income, Net Other income, net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments.
Added
The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany. The Company expects to substantially complete the plan within fiscal year 2025.
Removed
The decrease in Japan revenue was driven by our decision in the second quarter of 2022 to close our Japan operations.
Added
The Company will continue offering all its manufacturing services to customers across Europe, including injection molding and metal 3D printing. These services will be fulfilled through internal manufacturing facilities and a network of manufacturing partners. Previously we had established operations in Japan.
Removed
Our decline in customer contacts served decreased compared to an increase in revenue, which is primarily due to a larger portion of our business shifting to larger orders and improvements in average order values in the Protolabs Network.
Added
During this period, our operating expenses increased to $203.3 million in the year ended December 31, 2024 from $193.8 million in the year ended December 31, 2023 primarily due to $5.6 million of costs related to disposal and exit activities in the year ended December 31, 2024 related our decision to exit and close certain operations in Germany.
Removed
We had no goodwill impairment charges recorded during 2023. A goodwill impairment charge of $118.0 million was recognized in the fourth quarter of 2022, as it was determined the estimated fair value of our Europe reporting unit, including goodwill, was less than its carrying amount. Closure of Japan business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed6 unchanged
Biggest changeDuring the year ended December 31, 2023, we recognized a foreign currency translation loss of $3.9 million in connection with completing the closure of our Japan business. We recognized net foreign currency gains (losses) of $0.2 million an d ($0.1) million for the years ended December 31, 2023 and 2022, respectively. 43 Table of Contents
Biggest changeDuring the year ended December 31, 2023, we recognized a foreign currency translation loss of $3.9 million in connection with completing the closure of our Japan business. We recognized net foreign currency losses of $0.4 million and gains of $0.2 million for the years ended December 31, 2024 and 2023, respectively. 43 Table of Contents

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