prlb-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q


			(Mark One)

þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2023


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

Commission File Number: 001-35435

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)


Minnesota			41-1939628
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5540 Pioneer Creek Drive
Maple Plain, Minnesota			55359
(Address of principal executive offices)			(Zip Code)

(763) 479-3680

(Registrant’s telephone number, including area code)

Not Applicable

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

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


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

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 26,095,434 shares of Common Stock, par value $0.001 per share, were outstanding at August 1, 2023.

Table of Contents

Proto Labs, Inc.

TABLE OF CONTENTS


Item	Description	Page

PART I
1.	Financial Statements	2
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
3.	Quantitative and Qualitative Disclosures about Market Risk	27
4.	Controls and Procedures	28
PART II
1.	Legal Proceedings	29
1A.	Risk Factors	29
2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
3.	Defaults Upon Senior Securities	29
4.	Mine Safety Disclosures	29
5.	Other Information	30
6.	Exhibits	30

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)



	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	66,493	$	56,558
Short-term marketable securities	19,945		23,568
Accounts receivable, net of allowance for doubtful accounts of $2,209 and $1,706 as of June 30, 2023, and December 31, 2022, respectively	75,034		76,225
Inventory	14,311		13,578
Income taxes receivable	868		4,042
Prepaid expenses and other current assets	8,501		12,597
Total current assets	185,152		186,568
Property and equipment, net	248,614		257,785
Goodwill	273,991		273,991
Other intangible assets, net	28,353		31,250
Long-term marketable securities	16,344		26,419
Operating lease assets	3,084		3,844
Finance lease assets	16,934		17,532
Other long-term assets	4,738		4,779
Total assets	$	777,210	$	802,168

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	16,474	$	17,356
Accrued compensation	12,486		12,743
Accrued liabilities and other	19,155		22,384
Current operating lease liabilities	1,209		1,561
Current finance lease liabilities	16,549		17,537
Income taxes payable	348		-
Total current liabilities	66,221		71,581
Long-term operating lease liabilities	1,833		2,255
Long-term finance lease liabilities	745		—
Long-term deferred tax liabilities	20,790		26,322
Other long-term liabilities	4,936		4,362
Total liabilities	94,525		104,520

Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of June 30, 2023, and December 31, 2022	-		-
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,095,434 and 26,888,425 shares as of June 30, 2023, and December 31, 2022, respectively	26		27
Additional paid-in capital	464,950		473,740
Retained earnings	246,930		258,236
Accumulated other comprehensive loss	(29,221)		(34,355)
Total shareholders' equity	682,685		697,648
Total liabilities and shareholders' equity	$	777,210	$	802,168

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

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Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Statements of Operations:
Revenue	$	122,265	$	126,902	$	248,124	$	251,070
Cost of revenue	69,142		69,480		141,225		137,844
Gross profit	53,123		57,422		106,899		113,226
Operating expenses
Marketing and sales	21,730		21,055		44,181		41,641
Research and development	9,865		9,450		20,542		20,007
General and administrative	15,822		16,522		32,655		33,293
Closure of Japan business	98		5,194		164		5,194
Total operating expenses	47,515		52,221		97,542		100,135
Income from operations	5,608		5,201		9,357		13,091
Other (loss) income, net	(3,368)		1		(2,078)		(299)
Income before income taxes	2,240		5,202		7,279		12,792
Provision for income taxes	2,623		2,645		5,003		5,140
Net (loss) income	$	(383)	$	2,557	$	2,276	$	7,652

Net (loss) income per share:
Basic	$	(0.01)	$	0.09	$	0.09	$	0.28
Diluted	$	(0.01)	$	0.09	$	0.09	$	0.28

Shares used to compute net (loss) income per share:
Basic	26,210,478		27,530,739		26,414,467		27,515,583
Diluted	26,210,478		27,536,823		26,445,427		27,524,019

Comprehensive Income (Loss) (net of tax)
Comprehensive income (loss)	$	3,890	$	(11,287)	$	7,410	$	(11,680)

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

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Proto Labs, Inc.

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)



	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount

Balance at December 31, 2022	26,888,425	27		473,740		258,236		(34,355)		697,648
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	26,798	-		(401)		-		-		(401)
Stock-based compensation expense	-	-		3,695		-		-		3,695
Repurchases of common stock and other	(712,500)	(1)		(11,849)		(9,475)		-		(21,325)
Net income	-	-		-		2,659		-		2,659
Other comprehensive income
Foreign currency translation adjustment	-	-		-		-		527		527
Net unrealized gains (losses) on investments in securities	-	-		-		-		334		334
Comprehensive income										3,520
Balance at March 31, 2023	26,202,723	$	26	$	465,185	$	251,420	$	(33,494)	$	683,137
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	169,229	-		962		-		-		962
Stock-based compensation expense	-	-		3,675		-		-		3,675
Repurchases of common stock and other	(276,518)	-		(4,872)		(4,107)		-		(8,979)
Net loss	-	-		-		(383)		-		(383)
Other comprehensive income
Foreign currency translation adjustment	-	-		-		-		4,254		4,254
Net unrealized gains (losses) on investments in securities	-	-		-		-		19		19
Comprehensive income										3,890
Balance at June 30, 2023	26,095,434	$	26	$	464,950	$	246,930	$	(29,221)	$	682,685


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount

Balance at December 31, 2021	27,465,945	28		468,548		376,734		(16,817)		828,493
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	27,716	-		(462)		-		-		(462)
Stock-based compensation expense	-	-		4,397		-		-		4,397
Repurchases of common stock	-	-		-		-		-		-
Net income	-	-		-		5,095		-		5,095
Other comprehensive loss
Foreign currency translation adjustment	-	-		-		-		(4,972)		(4,972)
Net unrealized gains (losses) on investments in securities	-	-		-		-		(516)		(516)
Comprehensive loss										(393)
Balance at March 31, 2022	27,493,661	$	28	$	472,483	$	381,829	$	(22,305)	$	832,035
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	122,705	-		1,158		-		-		1,158
Stock-based compensation expense	-	-		4,031		-		-		4,031
Repurchases of common stock	(113,266)	-		(1,932)		(3,307)		-		(5,239)
Net income	-			-		2,557		-		2,557
Other comprehensive loss
Foreign currency translation adjustment	-	-		-		-		(13,515)		(13,515)
Net unrealized gains (losses) on investments in securities	-	-		-		-		(329)		(329)
Comprehensive loss										(11,287)
Balance at June 30, 2022	27,503,100	$	28	$	475,740	$	381,079	$	(36,149)	$	820,698

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

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Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



	Six Months Ended June 30,
	2023		2022

Operating activities
Net income	$	2,276	$	7,652
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	18,883		20,274
Stock-based compensation expense	7,370		8,428
Deferred taxes	(5,605)		(5,653)
Interest on finance lease obligations	568		-
Loss on foreign currency translation	3,906		-
Impairments related to closure of Japan business	-		1,792
Gain on disposal of property and equipment	(428)		-
Other	215		32
Changes in operating assets and liabilities:
Accounts receivable	1,106		(5,748)
Inventories	(551)		(1,783)
Prepaid expenses and other	4,193		(298)
Income taxes	3,524		(1,250)
Accounts payable	(961)		(521)
Accrued liabilities and other	(

SEC Form 10-Q filed by Proto Labs Inc.