10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2022

or

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

Commission File Number: 001-35435

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)

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

(763) 479-3680

(Registrant’s telephone number, including area code)

Not Applicable

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☑Yes ☐No

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

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

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 27,116,891 shares of Common Stock, par value $0.001 per share, were outstanding at November 1, 2022.

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	16
3.	Quantitative and Qualitative Disclosures about Market Risk	26
4.	Controls and Procedures	27
PART II
1.	Legal Proceedings	28
1A.	Risk Factors	28
2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
3.	Defaults Upon Senior Securities	28
4.	Mine Safety Disclosures	28
5.	Other Information	28
6.	Exhibits	29

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	September 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	59,361		$	65,929
Short-term marketable securities		25,253			11,580
Accounts receivable, net of allowance for doubtful accounts of $1,821 and $1,948 as of September 30, 2022, and December 31, 2021, respectively		80,611			80,051
Inventory		14,617			13,161
Income taxes receivable		763			1,321
Prepaid expenses and other current assets		11,752			11,450
Total current assets		192,357			183,492
Property and equipment, net		259,856			280,346
Goodwill		383,558			400,610
Other intangible assets, net		31,907			37,998
Long-term marketable securities		29,257			14,340
Operating lease assets		4,293			5,578
Finance lease assets		1,524			1,898
Other long-term assets		4,186			4,320
Total assets	$	906,938		$	928,582
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	16,893		$	25,364
Accrued compensation		15,087			13,704
Accrued liabilities and other		25,478			11,980
Current operating lease liabilities		1,773			3,298
Current finance lease liabilities		1,484			550
Income taxes payable		5			-
Total current liabilities		60,720			54,896
Long-term operating lease liabilities		2,477			2,245
Long-term finance lease liabilities		-			1,351
Long-term deferred tax liabilities		26,864			35,892
Other long-term liabilities		6,031			5,705
Total liabilities		96,092			100,089
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of September 30, 2022, and December 31, 2021		-			-
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 27,326,750 and 27,465,945 shares as of September 30, 2022, and December 31, 2021, respectively		28			28
Additional paid-in capital		477,107			468,548
Retained earnings		380,735			376,734
Accumulated other comprehensive loss		(47,024	)		(16,817	)
Total shareholders' equity		810,846			828,493
Total liabilities and shareholders' equity	$	906,938		$	928,582

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

2

Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Statements of Operations:
Revenue	$	121,721		$	125,342		$	372,791		$	364,516
Cost of revenue		68,089			70,018			205,933			197,237
Gross profit		53,632			55,324			166,858			167,279
Operating expenses
Marketing and sales		20,594			21,422			62,235			61,946
Research and development		9,309			10,614			29,316			33,855
General and administrative		16,477			16,361			49,770			44,186
Closure of Japan business		1,194			-			6,388			-
Total operating expenses		47,574			48,397			147,709			139,987
Income from operations		6,058			6,927			19,149			27,292
Other income (loss), net		(24	)		136			(323	)		(40	)
Income before income taxes		6,034			7,063			18,826			27,252
Provision for income taxes		2,083			2,228			7,223			5,790
Net income	$	3,951		$	4,835		$	11,603		$	21,462
Net income per share:
Basic	$	0.14		$	0.17		$	0.42		$	0.78
Diluted	$	0.14		$	0.17		$	0.42		$	0.77
Shares used to compute net income per share:
Basic		27,505,097			27,713,229			27,512,057			27,638,611
Diluted		27,508,217			27,730,105			27,522,734			27,707,784
Comprehensive Income (Loss) (net of tax)
Comprehensive income (loss)	$	(6,924	)	$	(508	)	$	(18,604	)	$	11,424

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

3

Proto Labs, Inc.

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)

	Common Stock					Additional						Accumulated Other
						Paid-In			Retained			Comprehensive
	Shares			Amount		Capital			Earnings			Loss			Total
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
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		31,150			-		-			-			-			-
Stock-based compensation expense		-			-		4,907			-			-			4,907
Repurchases of common stock		(207,500	)		-		(3,540	)		(4,295	)		-			(7,835	)
Net income		-			-					3,951			-			3,951
Other comprehensive loss
Foreign currency translation adjustment		-			-		-			-			(10,287	)		(10,287	)
Net unrealized gains (losses) on investments in securities		-			-		-			-			(588	)		(588	)
Comprehensive loss																(6,924	)
Balance at September 30, 2022		27,326,750		$	28	$	477,107		$	380,735		$	(47,024	)	$	810,846

	Common Stock					Additional						Accumulated Other
						Paid-In			Retained			Comprehensive
	Shares			Amount		Capital			Earnings			Loss			Total
Balance at December 31, 2020		26,776,796			27		284,848			362,901			(3,420	)		644,356
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		48,955			-		(290	)		-			-			(290	)
Common shares issued for Hubs acquisition		863,995			1		166,708			-						166,709
Stock-based compensation expense		-			-		5,620			-			-			5,620
Repurchases of common stock		-			-		-			-			-			-
Net income		-			-		-			3,712			-			3,712
Other comprehensive loss
Foreign currency translation adjustment		-			-		-			-			(6,842	)		(6,842	)
Net unrealized gains (losses) on investments in securities		-			-		-			-			166			166
Comprehensive loss																(2,964	)
Balance at March 31, 2021		27,689,746		$	28	$	456,886		$	366,613		$	(10,096	)	$	813,431
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		85,317			-		(81	)		-			-			(81	)
Stock-based compensation expense		-			-		4,941			-			-			4,941
Repurchases of common stock		(14,000	)		-		(149	)		(1,061	)		-			(1,210	)
Net income		-			-		-			12,915			-			12,915
Other comprehensive income
Foreign currency translation adjustment		-			-		-			-			2,030			2,030
Net unrealized gains (losses) on investments in securities		-			-		-			-			(49	)		(49	)
Comprehensive income																14,896
Balance at June 30, 2021		27,761,063		$	28	$	461,597		$	378,467		$	(8,115	)	$	831,977
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		-			-		-			-			-			-
Stock-based compensation expense		-			-		4,978			-			-			4,978
Repurchases of common stock		(157,414	)		-		(1,675	)		(10,151	)		-			(11,826	)
Net income		-			-		-			4,835			-			4,835
Other comprehensive loss
Foreign currency translation adjustment		-			-		-			-			(5,298	)		(5,298	)
Net unrealized gains (losses) on investments in securities		-			-		-			-			(45	)		(45	)
Comprehensive loss																(508	)
Balance at September 30, 2021		27,603,649		$	28	$	464,900		$	373,151		$	(13,458	)	$	824,621

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

4

Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2022			2021
Operating activities
Net income	$	11,603		$	21,462
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,981			30,231
Stock-based compensation expense		13,335			15,539
Deferred taxes		(8,920	)		(139	)
Fair value of contingent consideration		-			(8,513	)
Impairments related to closure of Japan business		2,842			-
Gain on disposal of property and equipment		(1,174	)		-
Other		11			442
Changes in operating assets and liabilities:
Accounts receivable		(3,909	)		(25,615	)
Inventories		(1,613	)		950
Prepaid expenses and other		(920	)		1,009
Income taxes		670			(1,226	)
Accounts payable		1,292			1,978
Accrued liabilities and other		8,366			(3,893	)
Net cash provided by operating activities		51,564			32,225
Investing activities
Purchases of property, equipment and other capital assets		(16,414	)		(27,956	)
Proceeds from sales of property, equipment and other capital assets		3,227			-
Cash used for acquisitions, net of cash acquired		-			(127,413	)
Purchases of marketable securities		(45,872	)		(15,159	)
Proceeds from sales of marketable securities		1,998			57,089
Proceeds from call redemptions and maturities of marketable securities		13,696			15,114
Net cash used in investing activities		(43,365	)		(98,325	)
Financing activities
Proceeds from exercises of stock options		2,311			3,838
Purchases of shares withheld for tax obligations		(1,615	)		(4,209	)
Repurchases of common stock		(13,074	)		(13,036	)
Principal repayments of finance lease obligations		(417	)		(413	)
Net cash used in financing activities		(12,795	)		(13,820	)
Effect of exchange rate changes on cash and cash equivalents		(1,972	)		119
Net decrease in cash and cash equivalents		(6,568	)		(79,801	)
Cash and cash equivalents, beginning of period		65,929			127,603
Cash and cash equivalents, end of period	$	59,361		$	47,802

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

5

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

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

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended  December 31, 2021, as filed with the Securities and Exchange Commission (SEC) on February 18, 2022.

The accompanying Consolidated Balance Sheet as of December 31, 2021 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K filed on February 18, 2022 as referenced above.

On May 27, 2022, the Company's board of directors approved a plan for the closure of the Company's manufacturing facility in Japan and announced an intention to cease operations in the region. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. The Company expects to substantially complete the closure plan within the next year. The Company's decision to close the Japan business resulted in $1.2 million and $6.4 million in operating expenses during the three and nine months ended September 30, 2022, respectively. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets for the three months ended September 30, 2022.  Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the nine months ended September 30, 2022. 

Note 2 – Recent Accounting Pronouncements

The Company did not recently adopt any accounting pronouncements that had a material impact on the Company's Consolidated Financial Statements.  There are no pending accounting pronouncements that are expected to have a material impact on the Company's Consolidated Financial Statements.

Note 3 – Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied. For the three months ended September 30, 2022 and 2021, 210,443 and 184,920 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding, respectively. For the nine months ended September 30, 2022 and 2021, 202,901 and 61,400 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding, respectively.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income	$	3,951	$	4,835	$	11,603	$	21,462
Basic - weighted-average shares outstanding:		27,505,097		27,713,229		27,512,057		27,638,611
Effect of dilutive securities:
Employee stock options and other		3,120		16,876		10,677		69,173
Diluted - weighted-average shares outstanding:		27,508,217		27,730,105		27,522,734		27,707,784
Net income per share:
Basic	$	0.14	$	0.17	$	0.42	$	0.78
Diluted	$	0.14	$	0.17	$	0.42	$	0.77

6

 

Note 4 – Business Combinations

On  January 22, 2021, the Company acquired all of the outstanding shares of 3D Hubs, Inc. (Hubs), for $294.1 million, consisting of $127.4 million in cash and 863,995 shares of the Company's common stock valued at $166.7 million on the closing date. The purchase agreement included additional contingent consideration of up to $52.8 million subject to the achievement of performance-based targets during fiscal 2021 and fiscal 2022. The contingent consideration consisted of up to $25.0 million in cash and up to 143,983 shares of the Company's common stock valued at $27.8 million on the closing date. 

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

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

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

(in thousands)	Acquisition
Assets acquired:
Current assets	$	2,497
Intangible assets		30,770
Goodwill		280,925
Other long-term assets		1,139
Total assets acquired		315,331
Liabilities assumed:
Current contingent consideration		7,093
Current liabilities		5,666
Long-term contingent consideration		6,507
Long-term deferred tax liabilities		1,688
Other long-term liabilities		255
Total liabilities assumed		21,209
Net assets acquired		294,122
Cash paid		133,847
Cash acquired		(6,434	)
Net cash consideration		127,413
Equity portion of purchase price		166,709
Total purchase consideration	$	294,122

7

 

Note 5 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill during the nine months ended September 30, 2022 were as follows:

(in thousands)	Nine Months Ended September 30, 2022
Balance as of the beginning of the period	$	400,610
Goodwill acquired during the period		-
Goodwill written off during the period		(630	)
Foreign currency translation adjustments		(16,422	)
Balance as of the end of the period	$	383,558

Goodwill of $0.6 million was written off as of  September 30, 2022, as a result of the Company's decision to close the Japan manufacturing facility and exit the Japan market. The Japan business was in operations through the third quarter of 2022 and the assets are expected to be available for sale in the fourth quarter of 2022. The Euro denominated goodwill is translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income.

Intangible assets other than goodwill at  September 30, 2022 and December 31, 2021 were as follows:

	September 30, 2022							December 31, 2021							Useful	Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)	Useful Life Remaining (in years)
Intangible assets with finite lives:
Marketing assets		$ 930		$ (783)			$ 147		$ 930		$ (713)			$ 217	10.0	1.5
Non-compete agreement	807		(448		)	359		842		(363		)	479		2.0 - 5.0	2.3
Software technology	13,229		(6,041		)	7,188		13,229		(5,014		)	8,215		10.0	5.8
Software platform	25,071		(3,631		)	21,440		26,725		(2,262		)	24,463		12.0	10.3
Tradenames	337		(190		)	147		359		(114		)	245		3.0	1.3
Customer relationships	12,117		(9,491		)	2,626		12,252		(7,873		)	4,379		3.0 - 9.0	1.1
Total intangible assets	$	52,491	$	(20,584	)	$	31,907	$	54,337	$	(16,339	)	$	37,998

Intangible assets have been allocated to the acquired Hubs entities consisting of intangible assets of €11.6 million in Europe and $16.6 million in the United States as of the date of the acquisition. The Euro denominated intangible assets are translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income. Foreign currency losses related to intangible assets were $2.8 million and $0.9 million as of September 30, 2022 and December 31, 2021, respectively. Amortization expense for intangible assets was $1.5 million and $1.6 million for the three months ended  September 30, 2022 and 2021, respectively, and $4.6 million in each of the nine months ended September 30, 2022 and 2021.

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

(in thousands)	Estimated Amortization Expense
Remaining 2022	$	1,491
2023		5,774
2024		3,647
2025		3,551
2026		3,453
Thereafter		13,991
Total estimated amortization expense	$	31,907

8

 

 Note 6 – Assets Held for Sale

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

During the first quarter of 2022, a facility the Company owns in Maple Plain, Minnesota, encompassing approximately 35,000 square feet of manufacturing and office space, met the criteria to be held for sale. The assets held for sale were $2.0 million as of June 30, 2022 and were presented on the Company's Consolidated Balance Sheet as Long-term assets held for sale. The Company closed on the sale of the facility in the third quarter of 2022 for a net purchase price of $3.2 million, which resulted in a gain of $1.2 million recorded in general and administrative expense on the Company's Consolidated Statements of Operations.

Note 7 – Fair Value Measurements

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

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

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

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

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

The following table summarizes financial assets as of  September 30, 2022 and December 31, 2021 measured at fair value on a recurring basis: 

	September 30, 2022						December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	36,813	$	-	$	-	$	65,637	$	-	$	-
Money market mutual fund		22,548		-		-		292		-		-
Marketable securities		17,096		37,414		-		7,602		18,318		-
Total	$	76,457	$	37,414	$	-	$	73,531	$	18,318	$	-

Note 8 – Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as available-for-sale and are recorded at fair value. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of  September 30, 2022 and December 31, 2021:

	September 30, 2022
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	17,991	$	-	$	(494	)	$	17,497
Corporate debt securities		9,602		-		(259	)		9,343
U.S. government agency securities		25,780		-		(787	)		24,993
Certificates of deposit/time deposits		1,189		-		(11	)		1,178
Commercial paper		1,500		-		(1	)		1,499
Total marketable securities	$	56,062	$	-	$	(1,552	)	$	54,510

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	December 31, 2021
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	12,549	$	-	$	(70	)	$	12,479
Corporate debt securities		9,303		-		(44	)		9,259
U.S. government agency securities		2,500		-		(12	)		2,488
Certificates of deposit/time deposits		1,687		7		-			1,694
Commercial paper		-		-		-			-
Total marketable securities	$	26,039	$	7	$	(126	)	$	25,920

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

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

The  September 30, 2022 balance of available-for-sale debt securities by contractual maturity is shown in the following table at fair value. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

	September 30,
(in thousands)	2022
Due in one year or less	$	25,253
Due after one year through five years		29,257
Total marketable securities	$	54,510

Note 9 – Inventory

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

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

	September 30,			December 31,
(in thousands)	2022			2021
Total inventory	$	14,953		$	13,474
Allowance for obsolescence		(336	)		(313	)
Inventory, net of allowance	$	14,617		$	13,161

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Note 10 – Stock-Based Compensation

Under the Company’s 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), the Company had the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards through February 23, 2022. On July 8, 2022, the board of directors approved the Proto Labs, Inc. 2022 Long-Term Incentive Plan (the 2022 Plan), which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022. No awards were granted from February 23, 2022 to August 29, 2022. Awards outstanding under the 2012 Plan as of August 29, 2022 will continue to be subject to the terms of the 2012 Plan, but if those awards subsequently expire, are forfeited or cancelled or are settled in cash, the shares subject to those awards will become available for awards under the 2022 Plan. Under the 2022 Plan, the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2022 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the 2022 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

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

Stock-Based Compensation Expense

Stock-based compensation expense was $4.9 million and $5.0 million for the three months ended  September 30, 2022 and 2021, respectively, and $13.3 and $15.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2022:

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2021		233,384		$	97.78
Granted		118,434			48.24
Exercised		(3,114	)		30.58
Forfeited		(38,618	)		91.27
Expired		(34,201	)		89.71
Options outstanding at September 30, 2022		275,885		$	79.19
Exercisable at September 30, 2022		108,659		$	91.50

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

The weighted-average grant date fair value of options that were granted during the nine months ended September 30, 2022 was $23.11.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the nine months ended September 30, 2022 and 2021:

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.94% - 3.40%		0.80% - 1.12%
Expected life (years)		6.25		6.25
Expected volatility		45.95% - 46.03%		45.28 - 45.35%
Expected dividend yield		0%		0%

As of September 30, 2022, there was $4.5 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

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Restricted Stock

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

The following table summarizes restricted stock activity during the nine months ended September 30, 2022:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2021		343,782		$	111.79
Granted		312,270			42.05
Restrictions lapsed		(120,606	)		104.99
Forfeited		(39,480	)		106.64
Restricted stock at September 30, 2022		495,966		$	69.95

As of September 30, 2022, there was $24.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years. 

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Performance Stock

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 200 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment. The Company’s PSUs granted from 2017 to 2019 and certain PSUs granted in 2021 are based on performance conditions and the related compensation cost is based on the probability that the performance conditions will be achieved. The Company’s PSUs granted in 2020 and 2022 and certain PSUs granted in 2021 are based on market conditions and the related compensation cost is based on the fair value at grant date calculated using a Monte Carlo pricing model.

The following table summarizes performance stock activity during the nine months ended September 30, 2022:

				Weighted-
				Average
				Grant Date
	Performance			Fair Value
	Stock			Per Share
Performance stock at December 31, 2021		16,839		$	115.56
Granted		35,697			96.71
Restrictions lapsed		-			-
Performance change		-			-
Forfeited		(3,578	)		121.79
Performance stock at September 30, 2022		48,958		$	109.80

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the nine months ended September 30, 2022 and 2021: 

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.76% - 3.40%		0.22%
Expected life (years)		2.34 - 2.87		2.87
Expected volatility		53.5% - 53.6%		51.40%
Expected dividend yield		0%		0%

As of September 30, 2022, there was $2.8 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.2 years. 

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the nine months ended September 30, 2022 and 2021: 

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		0.17 - 2.06%		0.06 - 0.12%
Expected life (months)		6.00		6.00
Expected volatility		47.05 - 53.44%		50.85 - 65.53%
Expected dividend yield		0%		0%

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 Note 11 – Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities. The following table presents the changes in accumulated other comprehensive income (loss) balances during the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2022			2021			2022			2021
Balance at beginning of period	$	(36,149	)	$	(8,115	)	$	(16,817	)	$	(3,420	)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications		(588	)		(45	)		(1,433	)		72
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(588	)		(45	)		(1,433	)		72
Balance at end of period	$	(47,024	)	$	(13,458	)	$	(47,024	)	$	(13,458	)

Note 12 – Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended  September 30, 2022 and 2021, the Company recorded an income tax provision of $2.1 million and $2.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded an income tax provision of $7.2 million and $5.8 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended  September 30, 2022 was 34.5 percent compared to 31.5 percent in the same period of the prior year. The effective tax rate increased by 3.0 percent for the three months ended  September 30, 2022 when compared to the same period in 2021, primarily due to an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. The effective income tax rate for the nine months ended  September 30, 2022 was 38.4 percent compared to 21.2 percent in the same period of the prior year. The effective tax rate increased by 17.2 percent for the nine months ended  September 30, 2022 when compared to the same period in 2021, primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. 

The effective income tax rate for the nine months ended September 30, 2022 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions and tax credits for which the Company qualifies.

The Company had unrecognized tax benefits totaling $4.5 million as of September 30, 2022 and $4.4 million as of  December 31, 2021, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate. 

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Note 13 – Segment Reporting

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

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

Revenue and income from operations by reportable segment for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
United States	$	98,970	$	100,127	$	295,121	$	286,524
Europe		21,464		22,155		69,441		68,259
Japan		1,287		3,060		8,229		9,733
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2022			2021			2022			2021
Income (Loss) from Operations:
United States	$	25,293		$	23,475		$	73,984		$	72,258
Europe		(3,581	)		(2,223	)		(7,509	)		1,469
Corporate Unallocated and Japan		(15,654	)		(14,325	)		(47,326	)		(46,435	)
Total Income from Operations	$	6,058		$	6,927		$	19,149		$	27,292

Total long-lived assets at  September 30, 2022 and December 31, 2021 were as follows:

	September 30,		December 31,
(in thousands)	2022		2021
Total long-lived assets:
United States	$	206,965	$	215,701
Europe		51,636		59,388
Japan		1,255		5,257
Total Long-lived Assets	$	259,856	$	280,346

The Company's decision to close the Japan business resulted in operating expenses of $1.2 million and $6.4 million during the three and nine months ended September 30, 2022, respectively. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets for the three months ended September 30, 2022. Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the nine months ended September 30, 2022. 

Revenue by product line for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
Injection Molding	$	48,940	$	57,685	$	155,693	$	172,212
CNC Machining		47,489		43,658		141,809		121,953
3D Printing		19,823		18,589		59,458		53,994
Sheet Metal		5,219		4,854		15,066		14,790
Other Revenue		250		556		765		1,567
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021.

Forward-Looking Statements

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

Overview

We are one of the world’s largest and fastest digital manufacturers of custom prototypes and on-demand production parts. Our mission is to empower companies to bring new ideas to market by offering the fastest and most comprehensive digital manufacturing service in the world. Our automated quoting and manufacturing systems allow us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. We manufacture prototype and low volume production parts for companies worldwide, who are under increasing pressure to bring their finished products to market faster than their competition. We utilize injection molding, computer numerical control (CNC) machining, 3D printing and sheet metal fabrication to manufacture custom parts for our customers. For most of our offerings, our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets. In addition, we serve procurement and supply chain professionals seeking to manufacture custom parts on-demand. Through the acquisition of Hubs (formerly 3D Hubs, Inc.) (Hubs) in 2021, we are able to provide our customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia, complementing our in-house manufacturing. We believe our use of advanced technology enables us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts.

On May 27, 2022, our board of directors approved a plan for the closure of our manufacturing facility in Japan and announced an intention to cease operations in the region. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. We expect to substantially complete the closure plan within the next year. Our decision to close the Japan business resulted in operating expenses of $1.2 million and $6.4 million during the three and nine months ended September 30, 2022, respectively. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets for the three months ended September 30, 2022.  Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the nine months ended September 30, 2022.  

Our primary manufacturing product lines currently include Injection Molding, CNC Machining, 3D Printing and Sheet Metal. We continually seek to expand the range of sizes and geometric complexity of the parts we can make with these processes, to extend the variety of materials we are able to support, and to identify additional manufacturing processes to which we can apply our technology in order to better serve the evolving preferences and needs of product developers and engineers. In 2021, we augmented our internal manufacturing operations through our acquisition of Hubs to expand the envelope of custom parts we can provide to our customers through a network of premium manufacturing partners in each of our product lines.

Injection Molding

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

CNC Machining

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

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Industrial 3D Printing

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

Sheet Metal

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

Key Financial Measures and Trends

Revenue

Our operations are comprised of three geographic operating segments in the United States, Europe and Japan. On May 27, 2022, our board of directors approved a plan for the closure of our manufacturing facility in Japan and announced an intention to cease operations in the region. Revenue is derived from our Injection Molding, CNC Machining, 3D Printing and Sheet Metal product lines. Injection Molding revenue consists of sales of custom injection molds and injection-molded parts. CNC Machining revenue consists of sales of CNC-machined custom parts. 3D Printing revenue consists of sales of 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal custom parts. Our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including:

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

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

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

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

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

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

During the three months ended September 30, 2022, we served 23,816 unique product developers and engineers who purchased our products through our web-based customer interface, an increase of 1.5% over the same period in 2021. During the nine months ended September 30, 2022, we served 47,793 unique product developers and engineers who purchased our products through our web-based customer interface, an increase of 2.4% over the same period in 2021. 

Cost of Revenue, Gross Profit and Gross Margin

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

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

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Operating Expenses

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

The launch of our Protolabs 2.0 project, an internal business systems initiative impacting both external customer-facing and internal back-end systems, in the United States in the first quarter of 2021, and our acquisition of Hubs in January 2021, led to higher operating expenses in the first nine months of 2021. Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand injection-molded, CNC-machined, 3D-printed and sheet metal custom parts for prototyping and low-volume production. In order to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses in the future.

Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as electronic, print and pay-per-click advertising, trade shows and other related overhead, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base and grow revenue.

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

General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal, and other related overhead, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

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

Other Income (Loss), net

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

Provision for Income Taxes

Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. Overall, our effective tax rate for 2022 and beyond may differ from historical effective tax rates due to increases in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as any future tax law changes that may impact our effective tax rate.

18

Results of Operations

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

	Three Months Ended September 30,										Change						Nine Months Ended September 30,										Change
(dollars in thousands)	2022					2021					$			%			2022					2021					$			%
Revenue	$	121,721		100.0		$	125,342		100.0		$	(3,621	)		(2.9	)	$	372,791		100.0		$	364,516		100.0		$	8,275			2.3
Cost of revenue		68,089		55.9			70,018		55.9			(1,929	)		(2.8	)		205,933		55.2			197,237		54.1			8,696			4.4
Gross profit		53,632		44.1			55,324		44.1			(1,692	)		(3.1	)		166,858		44.8			167,279		45.9			(421	)		(0.3	)
Operating expenses:
Marketing and sales		20,594		16.9			21,422		17.1			(828	)		(3.9	)		62,235		16.7			61,946		17.0			289			0.5
Research and development		9,309		7.7			10,614		8.5			(1,305	)		(12.3	)		29,316		7.9			33,855		9.3			(4,539	)		(13.4	)
General and administrative		16,477		13.5			17,111		13.6			(634	)		(3.7	)		49,770		13.3			52,699		14.4			(2,929	)		(5.6	)
Closure of Japan business		1,194		1.0			-		-			1,194			100.0			6,388		1.7			-		-			6,388			100.0
Changes in fair value of contingent consideration		-		(0.0	)		(750	)	(0.6	)		750			(100.0	)		-		-			(8,513	)	(2.3	)		8,513			(100.0	)
Total operating expenses		47,574		39.1			48,397		38.6			(823	)		(1.7	)		147,709		39.6			139,987		38.4			7,722			5.5
Income from operations		6,058		5.0			6,927		5.5			(869	)		(12.5	)		19,149		5.2			27,292		7.5			(8,143	)		(29.8	)
Other income (loss), net		(24	)	(0.0	)		136		0.1			(160	)		(117.6	)		(323	)	(0.1	)		(40	)	-			(283	)		707.5
Income before income taxes		6,034		5.0			7,063		5.6			(1,029	)		(14.6	)		18,826		5.1			27,252		7.5			(8,426	)		(30.9	)
Provision for income taxes		2,083		1.7			2,228		1.7			(145	)		(6.5	)		7,223		2.0			5,790		1.6			1,433			24.7
Net income	$	3,951		3.3	%	$	4,835		3.9	%	$	(884	)		(18.3	)%	$	11,603		3.1	%	$	21,462		5.9	%	$	(9,859	)		(45.9	)%

Stock-based compensation expense included in the statements of operations data above for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Stock options, restricted stock and performance stock	$	4,573	$	4,551	$	12,247	$	14,405
Employee stock purchase plan		334		427		1,088		1,134
Total stock-based compensation expense	$	4,907	$	4,978	$	13,335	$	15,539
Cost of revenue	$	560	$	644	$	1,674	$	1,947
Operating expenses:
Marketing and sales		929		1,059		2,479		2,841
Research and development		602		776		1,702		2,144
General and administrative		2,816		2,499		7,480		8,607
Total stock-based compensation expense	$	4,907	$	4,978	$	13,335	$	15,539

19

Comparison of Three Months Ended September 30, 2022 and 2021

Revenue

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

	Three Months Ended September 30,
	2022					2021					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
United States	$	98,970		81.3	%	$	100,127		79.9	%	$	(1,157	)		(1.2	)%
Europe		21,464		17.6			22,155		17.7			(691	)		(3.1	)
Japan		1,287		1.1			3,060		2.4			(1,773	)		(57.9	)
Total revenue	$	121,721		100.0	%	$	125,342		100.0	%	$	(3,621	)		(2.9	)%

Our revenue decreased $3.6 million, or 2.9%, for the three months ended September 30, 2022 compared to the same period in 2021. By reportable segment, revenue in the United States decreased $1.2 million, or 1.2%, for the three months ended September 30, 2022 compared to the same period in 2021. Revenue in Europe decreased $0.7 million, or 3.1%, and revenue in Japan decreased $1.8 million, or 57.9%, in each case for the three months ended September 30, 2022 compared to the same period in 2021. The decrease in Japan revenue was driven by our decision in the second quarter of 2022 to close our Japan operations. Our acquisition of Hubs provided revenue of $6.9 million and $4.7 million in the United States, and $5.3 million and $4.1 million in Europe, for each of the three months ended September 30, 2022 and 2021. International revenue was negatively impacted by $4.1 million during the three months ended September 30, 2022 compared to the same period in 2021 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.

During the three months ended September 30, 2022, we served 23,816 unique product developers and engineers, an increase of 1.5% over the same period in 2021. Our growth in product developers and engineers served increased at a greater rate than our revenue growth, resulting in a decrease in the average spend per product developer and engineer. The decrease in average spend per product developer and engineer was driven by the impact of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar. 

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

	Three Months Ended September 30,
	2022					2021					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
Injection Molding	$	48,940		40.2	%	$	57,685		46.0	%	$	(8,745	)		(15.2	)%
CNC Machining		47,489		39.0			43,658		34.8			3,831			8.8
3D Printing		19,823		16.3			18,589		14.8			1,234			6.6
Sheet Metal		5,219		4.3			4,854		3.9			365			7.5
Other Revenue		250		0.2			556		0.5			(306	)		(55.0	)
Total revenue	$	121,721		100.0	%	$	125,342		100.0	%	$	(3,621	)		(2.9	)%

By product line, our revenue decrease was driven by a 15.2% decrease in Injection Molding revenue and a 55.0% decrease in Other Revenue, which was partially offset by an 8.8% increase in CNC Machining revenue, a 6.6% increase in 3D Printing revenue and a 7.5% increase in Sheet Metal revenue, in each case for the three months ended September 30, 2022 compared to the same period in 2021.

20

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue. Cost of revenue decreased $1.9 million, or 2.8%, for the three months ended September 30, 2022 compared to the same period in 2021, which was consistent with the rate of revenue decrease of 2.9% for the three months ended September 30, 2022 compared to the same period in 2021. Cost of revenue decreased $3.7 million in our digital manufacturing business, which was driven by decreases in overtime and contract labor expense and led to lower personnel and related costs of $3.6 million, and a decrease in raw material and product costs of $0.1 million. Hubs provided a $1.8 million increase in cost of revenue due to higher revenue volume for the three months ended September 30, 2022 when compared to the same period in 2021.

Gross Profit and Gross Margin. Gross profit decreased from $55.3 million in the three months ended September 30, 2021 to $53.6 million in the three months ended September 30, 2022. Gross margin remained consistent from 44.1% in the three months ended September 30, 2021 to 44.1% in the three months ended September 30, 2022.

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

Marketing and Sales. Marketing and sales expenses decreased $0.8 million, or 3.9%, during the three months ended September 30, 2022 compared to the same period in 2021. Personnel and related cost decreases in our digital manufacturing business of $0.9 million and marketing program cost decreases in our digital manufacturing business of $0.3 million were offset by increases in Hubs' marketing and sales expenses of $0.4 million during the three months ended September 30, 2022 when compared to the same period in 2021.

Research and Development. Our research and development expenses decreased $1.3 million, or 12.3%, during the three months ended September 30, 2022 compared to the same period in 2021 primarily due to personnel and related cost decreases of $1.2 million driven by personnel and contractor resources dedicated to the launch of our Protolabs 2.0 system in 2021 and a $0.2 million decrease in professional services and other operating costs, which were partially offset by increases of $0.1 million in Hubs' research and development expenses. 

General and Administrative. Our general and administrative expenses decreased $0.6 million, or 3.7%, during the three months ended September 30, 2022 compared to the same period in 2021 primarily due to a benefit of $1.2 million resulting from the sale of a facility, a decrease of $0.9 million in administrative costs and a decrease of $0.5 million in personnel and related costs, which were partially offset by an increase of professional services of $0.6 million, an increase in stock based compensation costs of $0.3 million, and increases of $1.1 million in Hubs' general and administrative expenses.

Closure of Japan business. Our decision to close our Japan business resulted in $1.2 million in operating expenses during the three months ended September 30, 2022. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets. We had no expenses related to the closure of our Japan business in 2021.

Changes in fair value of contingent consideration. We had no contingent consideration liabilities recorded during 2022. The change in fair value of contingent consideration associated with the acquisition of Hubs was $0.8 million during the three months ended September 30, 2021. 

Other income (loss), net. We recognized no other income, net for the three months ended September 30, 2022, a decrease of $0.1 million compared to other income, net of $0.1 million for the three months ended September 30, 2021. Other income, net for the three months ended September 30, 2022 primarily consisted of a $0.4 million loss on foreign currency, which was offset by $0.4 million in interest income on investments and other income. Other income, net for the three months ended September 30, 2021 primarily consisted of a $0.3 million in interest income on investments and other income, which were partially offset by a $0.2 million loss on foreign currency.

Provision for Income Taxes. Our effective tax rate of 34.5% for the three months ended September 30, 2022 increased 3.0% compared to 31.5% for the same period in 2021. The increase in the effective tax rate is primarily due to an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $2.1 million for the three months ended September 30, 2022 decreased $0.1 million compared to our income tax provision of $2.2 million for the three months ended September 30, 2021.

21

Comparison of Nine Months Ended September 30, 2022 and 2021

Revenue

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

	Nine Months Ended September 30,
	2022					2021					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
United States	$	295,121		79.2	%	$	286,524		78.6	%	$	8,597			3.0	%
Europe		69,441		18.6			68,259		18.7			1,182			1.7
Japan		8,229		2.2			9,733		2.7			(1,504	)		(15.5	)
Total revenue	$	372,791		100.0	%	$	364,516		100.0	%	$	8,275			2.3	%

Our revenue increased $8.3 million, or 2.3%, for the nine months ended September 30, 2022 compared to the same period in 2021. By reportable segment, revenue in the United States increased $8.6 million, or 3.0%, for the nine months ended September 30, 2022 compared to the same period in 2021. Revenue in Europe increased $1.2 million, or 1.7%, and revenue in Japan decreased $1.5 million, or 15.5%, in each case for the nine months ended September 30, 2022 compared to the same period in 2021. The decrease in Japan revenue was driven by our decision in the second quarter of 2022 to close our Japan operations. Our acquisition of Hubs provided revenue of $17.5 million and $12.5 million in the United States and $16.2 million, and $10.9 million in Europe, for each of the nine months ended September 30, 2022 and 2021. Hubs revenue in 2021 represents the period from January 22, 2021, the date of acquisition, through September 30, 2021. International revenue was negatively impacted by $8.4 million during the nine months ended September 30, 2022 compared to the same period in 2021 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.

During the nine months ended September 30, 2022, we served 47,793 unique product developers and engineers, an increase of 2.4% over the same period in 2021. Our growth in product developers and engineers served increased at a rate consistent with our revenue growth. The average spend per product developer and engineer was impacted by the impact of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar. 

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

	Nine Months Ended September 30,
	2022					2021					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
Injection Molding	$	155,693		41.8	%	$	172,212		47.2	%	$	(16,519	)		(9.6	)%
CNC Machining		141,809		38.0			121,953		33.5			19,856			16.3
3D Printing		59,458		15.9			53,994		14.8			5,464			10.1
Sheet Metal		15,066		4.1			14,790		4.1			276			1.9
Other Revenue		765		0.2			1,567		0.4			(802	)		(51.2	)
Total revenue	$	372,791		100.0	%	$	364,516		100.0	%	$	8,275			2.3	%

By product line, our revenue increase was driven by a 16.3% increase in CNC Machining revenue, a 10.1% increase in 3D Printing revenue, and a 1.9% increase in Sheet Metal revenue, which was partially offset by a 9.6% decrease in Injection Molding revenue and a 51.2% decrease in Other Revenue, in each case for the nine months ended September 30, 2022 compared to the same period in 2021.

22

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue. Cost of revenue increased $8.7 million, or 4.4%, for the nine months ended September 30, 2022 compared to the same period in 2021, which was greater than the rate of revenue increase of 2.3% for the nine months ended September 30, 2022 compared to the same period in 2021. Cost of revenue increased $3.8 million in our digital manufacturing business, which was driven by an increase in raw material and product costs of $3.7 million resulting from materials cost inflation and higher logistics costs and an increase in equipment and facility related costs of $0.4 million, which were partially offset by a decrease in our personnel and labor costs of $0.3 million. Our acquisition of Hubs provided a $4.9 million increase in cost of revenue for the nine months ended September 30, 2022 when compared to the same period in 2021.

Gross Profit and Gross Margin. Gross profit decreased from $167.3 million in the nine months ended September 30, 2021 to $166.9 million in the nine months ended September 30, 2022. Gross margin decreased from 45.9% in the nine months ended September 30, 2021 to 44.8% in the nine months ended September 30, 2022, primarily due to materials cost inflation as described above and the mix of revenue.

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

Marketing and Sales. Marketing and sales expenses increased $0.3 million, or 0.5%, during the nine months ended September 30, 2022 compared to the same period in 2021. Hubs provided a $1.7 million increase in marketing and sales expenses, which was partially offset by a decrease in our digital manufacturing business personnel and related costs of $1.2 million and marketing program cost decreases of $0.2 million during the nine months ended September 30, 2022 when compared to the same period in 2021.

Research and Development. Our research and development expenses decreased $4.5 million, or 13.4%, during the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to personnel and related cost decreases of $5.1 million driven by personnel and contractor resources dedicated to the launch and support of our Protolabs 2.0 system in 2021 and decreases in professional services and other operating costs of $0.2 million. The decrease was partially offset by a $0.8 million increase in Hubs' research and development expenses during the nine months ended September 30, 2022 when compared to the same period in 2021.

General and Administrative. Our general and administrative expenses decreased $2.9 million, or 5.6%, during the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to a decrease of $1.8 million in professional service costs primarily driven by increased transaction costs in 2021 related to our acquisition of Hubs, a decrease of $1.1 million in stock-based compensation expense primarily driven by increased stock-based compensation expense in 2021 related to the retirement of our CEO, a decrease of $2.2 million in administrative costs, which includes a benefit of $1.2 million resulting from the sale of a facility, and a decrease of $0.4 million in personnel and related costs, which was partially offset by our acquisition of Hubs, which provided an increase of $2.6 million in general and administrative expenses during the nine months ended September 30, 2022 when compared to the same period in 2021.

Closure of Japan business. Our decision to close our Japan business resulted in $6.4 million in operating expenses during the nine months ended September 30, 2022. Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges. We had no expenses related to the closure of our Japan business in 2021.

Changes in fair value of contingent consideration. We had no contingent consideration liabilities recorded during 2022. The change in fair value of contingent consideration associated with the acquisition of Hubs was $8.5 million during the nine months ended September 30, 2021. 

Other Loss, net. We recognized other loss, net of $0.3 million for the nine months ended September 30, 2022, an increase of $0.3 million compared to no other loss, net for the nine months ended September 30, 2021. Other loss, net for the nine months ended September 30, 2022 primarily consisted of a $0.8 million loss on foreign currency, which was partially offset by $0.5 million in interest income on investments and other income. Other loss, net for the nine months ended September 30, 2021 primarily consisted of a $0.6 million loss on foreign currency, which was offset by $0.6 million in interest income on investments and other income.

Provision for Income Taxes. Our effective tax rate of 38.4% for the nine months ended September 30, 2022 increased 17.2% compared to 21.2% for the same period in 2021. The increase in the effective tax rate is primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $7.2 million for the nine months ended September 30, 2022 increased $1.4 million compared to our income tax provision of $5.8 million for the nine months ended September 30, 2021.

23

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows during the nine months ended September 30, 2022 and 2021:

	Nine Months Ended September 30,
(dollars in thousands)	2022			2021
Net cash provided by operating activities	$	51,564		$	32,225
Net cash used in investing activities		(43,365	)		(98,325	)
Net cash used in financing activities		(12,795	)		(13,820	)
Effect of exchange rates on cash and cash equivalents		(1,972	)		119
Net decrease in cash and cash equivalents	$	(6,568	)	$	(79,801	)

Sources of Liquidity

Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $59.4 million as of September 30, 2022, a decrease of $6.6 million from December 31, 2021. The decrease in our cash was primarily due to cash used in investing activity for net purchases of marketable securities of $30.2 million, net purchases of property, equipment and other capital assets of $13.2 million, and cash used in financing activities of $12.8 million, which were partially offset by cash generated through operations of $51.5 million.

Cash Flows from Operating Activities

Cash flows from operating activities were $51.5 million during the nine months ended September 30, 2022 and primarily consisted of net income of $11.6 million, adjusted for certain non-cash items, including depreciation and amortization of $30.0 million, stock-based compensation expense of $13.3 million, and impairments related to the closure of our Japan business of $2.8 million, and changes in operating assets and liabilities and other items totaling $3.9 million, which were partially offset by deferred taxes of $8.9 million and a gain on disposal of property and equipment of $1.2 million. Cash flows from operating activities were $32.2 million during the nine months ended September 30, 2021 and primarily consisted of net income of $21.5 million, adjusted for certain non-cash items, including depreciation and amortization of $30.2 million and stock-based compensation expense of $15.5 million, which were partially offset by a decrease in the fair value of contingent consideration of $8.5 million and changes in operating assets and liabilities and other items totaling $26.5 million.

Cash flows from operating activities increased $19.3 million during the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to changes in operating assets and liabilities totaling $30.7 million, changes in fair value of contingent consideration of $8.5 million, and costs related to the closure of our Japan business of $2.8 million, which were partially offset by decreases in net income of $9.9 million, stock-based compensation of $2.2 million, deferred taxes of $8.8 million, gain on disposal of property and equipment of $1.2 million, depreciation and amortization of $0.3 million and $0.3 million in other items.

Cash Flows from Investing Activities

Cash used in investing activities was $43.4 million during the nine months ended September 30, 2022, consisting of $30.2 million for net purchases of marketable securities and $13.2 million for net purchases of property, equipment and other capital assets.

Cash used in investing activities was $98.3 million during the nine months ended September 30, 2021, consisting of $127.4 million in cash used for acquisitions, net of cash acquired and $27.9 million for the purchases of property, equipment and other capital assets, which were partially offset by $57.0 million for net proceeds from investments in marketable securities.

24

Cash Flows from Financing Activities

Cash used in financing activities was $12.8 million during the nine months ended September 30, 2022, consisting of $13.1 million in repurchases of common stock, $1.6 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.4 million for repayments of finance lease obligations, which were partially offset by $2.3 million in proceeds from exercises of stock options.

Cash used in financing activities was $13.8 million during the nine months ended September 30, 2021, consisting of $13.0 million in repurchases of common stock, $4.2 million in purchases of shares withheld for tax obligations associated with equity transactions, and $0.4 million for repayments of finance lease obligations, which were partially offset by $3.8 million in proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Use of Estimates

We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Our significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. There were no material changes to our critical accounting policies during the nine months ended September 30, 2022.

Recent Accounting Pronouncements

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

25

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

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

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

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be assessed by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. We recognized foreign currency losses of $0.4 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively.  We recognized foreign currency losses of $0.8 million and $0.6 million during the nine months ended September 30, 2022 and 2021, respectively. The changes in foreign exchange rates had a negative impact on consolidated revenue of $4.1 million for the three months ended September 30, 2022 and $8.4 million for the nine months ended September 30, 2022 as compared to the same periods in 2021.

26

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 includes a discussion of our risk factors. There have been no material changes from the risk factors described in our Form 10-K.

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

On February 9, 2017, our board of directors authorized the repurchase of shares of our common stock from time to time on the open market or in privately negotiated purchases, at an aggregate purchase price of up to $50 million. On May 16, 2019, we announced that our board of directors approved a $50 million increase in its authorized stock repurchase program and extended the term of the program through December 31, 2023, which increased the stock repurchase program to $100 million. On December 8, 2021, our board of directors approved a $50 million increase in its authorized stock repurchase program, which increased the total expenditure authorized to $150 million. We have $48.8 million remaining under this authorization. The timing and amount of any share repurchases will be determined by our management based on market conditions and other factors.

During the three months ended September 30, 2022, we repurchased 207,500 shares of our common stock at a total purchase price of $7.8 million under this program.  Common stock repurchase activity through September 30, 2022 was as follows:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1)
July 1, 2022 through July 31, 2022		-	$	-		-	$	56,669
August 1, 2022 through August 31, 2022		-	$	-		-	$	56,669
September 1, 2022 through September 30, 2022		207,500	$	37.73		207,500	$	48,841
		207,500	$	37.73		207,500	$	48,841

Item 3. Defaults Upon Senior Securities

No matters to disclose.

Item 4. Mine Safety Disclosures

No matters to disclose.

Item 5. Other Information

No matters to disclose.

28

Item 6. Exhibits

The following documents are filed as part of this report:

Exhibit Number	Description of Exhibit
3.1(1)	Third Amended and Restated Articles of Incorporation of Proto Labs, Inc.
3.2(2)	Articles of Amendment to Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. dated May 20, 2015
3.3(3)	Second Amended and Restated By-Laws of Proto Labs, Inc., as amended through November 8, 2016
10.1(4)	Proto Labs, Inc. 2022 Long-Term Incentive Plan
10.2(5)	Form of Incentive Stock Option Agreement under the 2022 Long-Term Incentive Plan
10.3(6)	Form of Non-Statutory Stock Option Agreement (Directors) under the 2022 Long-Term Incentive Plan
10.4(7)	Form of Non-Statutory Stock Option Agreement (U.S. Employees) under the 2022 Long-Term Incentive Plan
10.5(8)	Form of Non-Statutory Stock Option Agreement (U.K. Employees) under the 2022 Long-Term Incentive Plan
10.6(9)	Form of Restricted Stock Unit Award Agreement under the 2022 Long-Term Incentive Plan (U.S. Employees)
10.7(10)	Form of Restricted Stock Unit Award Agreement under the 2022 Long-Term Incentive Plan (U.K. Employees)
10.8(11)	Form of Restricted Stock Unit Award Agreement under the 2022 Long-Term Incentive Plan (Directors)
10.9(12)	Form of Performance Stock Unit Award Agreement under the 2022 Long-Term Incentive Plan
10.10(13)	Form of Deferred Stock Unit Award Agreement under the 2022 Long-Term Incentive Plan
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
32.1	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)	Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed with the Commission on February 13, 2012, and incorporated by reference herein.
(2)	Previously filed as Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on May 21, 2015 and incorporated by reference herein.
(3)	Previously filed as Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on November 8, 2016 and incorporated by reference herein.
(4)	Previously filed as Exhibit 10.1 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(5)	Previously filed as Exhibit 10.2 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(6)	Previously filed as Exhibit 10.3 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(7)	Previously filed as Exhibit 10.4 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(8)	Previously filed as Exhibit 10.5 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(9)	Previously filed as Exhibit 10.6 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(10)	Previously filed as Exhibit 10.7 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(11)	Previously filed as Exhibit 10.8 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(12)	Previously filed as Exhibit 10.9 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
(13)	Previously filed as Exhibit 10.10 to the Company's Form 8-K, filed with the Commission on August 30, 2022 and incorporated by reference herein.
*	Filed herewith.

29

SIGNATURE

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

	Proto Labs, Inc.
Date: November 4, 2022	/s/ Robert Bodor
	Robert Bodor
	President and Chief Executive Officer (Principal Executive Officer)

Date: November 4, 2022	/s/ Daniel Schumacher
	Daniel Schumacher
	Chief Financial Officer (Principal Financial Officer)

30

EX-31.1

Exhibit 31.1

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

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert Bodor, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 4, 2022	By:	/s/ Robert Bodor
		Robert Bodor
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

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

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002 

I, Daniel Schumacher, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 4, 2022	By:	/s/ Daniel Schumacher
		Daniel Schumacher
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Bodor, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: November 4, 2022

By:	/s/ Robert Bodor
Name:	Robert Bodor
Title:	President and Chief Executive Officer

I, Daniel Schumacher, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: November 4, 2022

By:	/s/ Daniel Schumacher
Name:	Daniel Schumacher
Title:	Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Nov. 01, 2022
Document Information [Line Items]
Entity Central Index Key	0001443669
Entity Registrant Name	Proto Labs Inc
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-35435
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-1939628
Entity Address, Address Line One	5540 Pioneer Creek Drive
Entity Address, City or Town	Maple Plain
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55359
City Area Code	763
Local Phone Number	479-3680
Title of 12(b) Security	Common Stock, Par Value $0.001 Per Share
Trading Symbol	PRLB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		27,116,891

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 59,361	$ 65,929
Short-term marketable securities	25,253	11,580
Accounts receivable, net of allowance for doubtful accounts of $1,821 and $1,948 as of September 30, 2022, and December 31, 2021, respectively	80,611	80,051
Inventory	14,617	13,161
Income taxes receivable	763	1,321
Prepaid expenses and other current assets	11,752	11,450
Total current assets	192,357	183,492
Property and equipment, net	259,856	280,346
Goodwill	383,558	400,610
Other intangible assets, net	31,907	37,998
Long-term marketable securities	29,257	14,340
Operating lease assets	4,293	5,578
Finance lease assets	1,524	1,898
Other long-term assets	4,186	4,320
Total assets	906,938	928,582
Current liabilities
Accounts payable	16,893	25,364
Accrued compensation	15,087	13,704
Accrued liabilities and other	25,478	11,980
Current operating lease liabilities	1,773	3,298
Current finance lease liabilities	1,484	550
Income taxes payable	5	0
Total current liabilities	60,720	54,896
Long-term operating lease liabilities	2,477	2,245
Long-term finance lease liabilities	0	1,351
Long-term deferred tax liabilities	26,864	35,892
Other long-term liabilities	6,031	5,705
Total liabilities	96,092	100,089
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of September 30, 2022, and December 31, 2021	0	0
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 27,326,750 and 27,465,945 shares as of September 30, 2022, and December 31, 2021, respectively	28	28
Additional paid-in capital	477,107	468,548
Retained earnings	380,735	376,734
Accumulated other comprehensive loss	(47,024)	(16,817)
Total shareholders' equity	810,846	828,493
Total liabilities and shareholders' equity	$ 906,938	$ 928,582

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Allowance for doubtful accounts	$ 1,821	$ 1,948
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	150,000,000	150,000,000
Common stock, shares issued (in shares)	27,326,750	27,465,945
Common stock, shares outstanding (in shares)	27,326,750	27,465,945

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statements of Operations:
Revenue	$ 121,721	$ 125,342	$ 372,791	$ 364,516
Cost of revenue	68,089	70,018	205,933	197,237
Gross profit	53,632	55,324	166,858	167,279
Operating expenses
Marketing and sales	20,594	21,422	62,235	61,946
Research and development	9,309	10,614	29,316	33,855
General and administrative	16,477	16,361	49,770	44,186
Closure of Japan business	1,194	0	6,388	0
Total operating expenses	47,574	48,397	147,709	139,987
Income from operations	6,058	6,927	19,149	27,292
Other income (loss), net	(24)	136	(323)	(40)
Income before income taxes	6,034	7,063	18,826	27,252
Provision for income taxes	2,083	2,228	7,223	5,790
Net income	$ 3,951	$ 4,835	$ 11,603	$ 21,462
Net income per share:
Basic (in dollars per share)	$ 0.14	$ 0.17	$ 0.42	$ 0.78
Diluted (in dollars per share)	$ 0.14	$ 0.17	$ 0.42	$ 0.77
Shares used to compute net income per share:
Basic (in shares)	27,505,097	27,713,229	27,512,057	27,638,611
Diluted (in shares)	27,508,217	27,730,105	27,522,734	27,707,784
Comprehensive Income (Loss) (net of tax)
Comprehensive income (loss)	$ (6,924)	$ (508)	$ (18,604)	$ 11,424

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2020	26,776,796
Balance at Dec. 31, 2020	$ 27	$ 284,848	$ 362,901	$ (3,420)	$ 644,356
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	48,955
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		(290)			(290)
Stock-based compensation expense		5,620			5,620
Repurchases of common stock (in shares)	0
Net income			3,712		3,712
Other comprehensive loss
Foreign currency translation adjustment				(6,842)	(6,842)
Net unrealized gains (losses) on investments in securities				166	166
Comprehensive income (loss)					(2,964)
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	48,955
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		(290)			(290)
Stock-based compensation expense		5,620			5,620
Repurchases of common stock (in shares)	0
Net income			3,712		3,712
Balance (in shares) at Dec. 31, 2020	26,776,796
Balance at Dec. 31, 2020	$ 27	284,848	362,901	(3,420)	644,356
Other comprehensive loss
Common shares issued for Hubs acquisition (in shares)	863,995
Common shares issued for Hubs acquisition	$ 1	166,708	0		166,709
Balance (in shares) at Mar. 31, 2021	27,689,746
Balance at Mar. 31, 2021	$ 28	456,886	366,613	(10,096)	813,431
Balance (in shares) at Dec. 31, 2020	26,776,796
Balance at Dec. 31, 2020	$ 27	284,848	362,901	(3,420)	644,356
Net income					21,462
Other comprehensive loss
Comprehensive income (loss)					11,424
Net income					21,462
Balance (in shares) at Dec. 31, 2020	26,776,796
Balance at Dec. 31, 2020	$ 27	284,848	362,901	(3,420)	644,356
Balance (in shares) at Sep. 30, 2021	27,603,649
Balance at Sep. 30, 2021	$ 28	464,900	373,151	(13,458)	824,621
Balance (in shares) at Mar. 31, 2021	27,689,746
Balance at Mar. 31, 2021	$ 28	456,886	366,613	(10,096)	813,431
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	85,317
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	(81)	0	0	(81)
Stock-based compensation expense	$ 0	4,941	0	0	4,941
Repurchases of common stock (in shares)	(14,000)
Net income	$ 0	0	12,915	0	12,915
Other comprehensive loss
Foreign currency translation adjustment	0	0	0	2,030	2,030
Net unrealized gains (losses) on investments in securities	0	0	0	(49)	(49)
Comprehensive income (loss)					14,896
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	85,317
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	(81)	0	0	(81)
Stock-based compensation expense	$ 0	4,941	0	0	4,941
Repurchases of common stock (in shares)	(14,000)
Repurchases of common stock	$ 0	(149)	(1,061)	0	(1,210)
Net income	$ 0	0	12,915	0	12,915
Balance (in shares) at Mar. 31, 2021	27,689,746
Balance at Mar. 31, 2021	$ 28	456,886	366,613	(10,096)	813,431
Balance (in shares) at Jun. 30, 2021	27,761,063
Balance at Jun. 30, 2021	$ 28	461,597	378,467	(8,115)	831,977
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	0	0	0	0	0
Stock-based compensation expense	$ 0	4,978	0	0	4,978
Repurchases of common stock (in shares)	(157,414)
Net income	$ 0	0	4,835	0	4,835
Other comprehensive loss
Foreign currency translation adjustment	0	0	0	(5,298)	(5,298)
Net unrealized gains (losses) on investments in securities	0	0	0	(45)	(45)
Comprehensive income (loss)					(508)
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	0	0	0	0	0
Stock-based compensation expense	$ 0	4,978	0	0	4,978
Repurchases of common stock (in shares)	(157,414)
Repurchases of common stock	$ 0	(1,675)	(10,151)	0	(11,826)
Net income	$ 0	0	4,835	0	4,835
Balance (in shares) at Jun. 30, 2021	27,761,063
Balance at Jun. 30, 2021	$ 28	461,597	378,467	(8,115)	831,977
Balance (in shares) at Sep. 30, 2021	27,603,649
Balance at Sep. 30, 2021	$ 28	464,900	373,151	(13,458)	$ 824,621
Balance (in shares) at Dec. 31, 2021	27,465,945				27,465,945
Balance at Dec. 31, 2021	$ 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 (in shares)	27,716
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		(462)			(462)
Stock-based compensation expense		4,397			4,397
Repurchases of common stock (in shares)	0
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 income (loss)					(393)
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	27,716
Common shares issued on exercise of options and other, net of shares withheld for tax obligations		(462)			(462)
Stock-based compensation expense		4,397			4,397
Repurchases of common stock (in shares)	0
Net income			5,095		$ 5,095
Balance (in shares) at Dec. 31, 2021	27,465,945				27,465,945
Balance at Dec. 31, 2021	$ 28	468,548	376,734	(16,817)	$ 828,493
Balance (in shares) at Mar. 31, 2022	27,493,661
Balance at Mar. 31, 2022	$ 28	472,483	381,829	(22,305)	$ 832,035
Balance (in shares) at Dec. 31, 2021	27,465,945				27,465,945
Balance at Dec. 31, 2021	$ 28	468,548	376,734	(16,817)	$ 828,493
Net income					11,603
Other comprehensive loss
Comprehensive income (loss)					(18,604)
Net income					$ 11,603
Balance (in shares) at Dec. 31, 2021	27,465,945				27,465,945
Balance at Dec. 31, 2021	$ 28	468,548	376,734	(16,817)	$ 828,493
Balance (in shares) at Sep. 30, 2022	27,326,750				27,326,750
Balance at Sep. 30, 2022	$ 28	477,107	380,735	(47,024)	$ 810,846
Balance (in shares) at Mar. 31, 2022	27,493,661
Balance at Mar. 31, 2022	$ 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 (in shares)	122,705
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	1,158	0	0	1,158
Stock-based compensation expense	$ 0	4,031	0	0	4,031
Repurchases of common stock (in shares)	(113,266)
Net income	$ 0	0	2,557	0	2,557
Other comprehensive loss
Foreign currency translation adjustment	0	0	0	(13,515)	(13,515)
Net unrealized gains (losses) on investments in securities	0	0	0	(329)	(329)
Comprehensive income (loss)					(11,287)
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	122,705
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	1,158	0	0	1,158
Stock-based compensation expense	$ 0	4,031	0	0	4,031
Repurchases of common stock (in shares)	(113,266)
Repurchases of common stock	$ 0	(1,932)	(3,307)	0	(5,239)
Net income	$ 0	0	2,557	0	2,557
Balance (in shares) at Mar. 31, 2022	27,493,661
Balance at Mar. 31, 2022	$ 28	472,483	381,829	(22,305)	832,035
Balance (in shares) at Jun. 30, 2022	27,503,100
Balance at Jun. 30, 2022	$ 28	475,740	381,079	(36,149)	820,698
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	31,150
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	0	0	0	0
Stock-based compensation expense	$ 0	4,907	0	0	4,907
Repurchases of common stock (in shares)	(207,500)
Net income	$ 0		3,951	0	3,951
Other comprehensive loss
Foreign currency translation adjustment	0	0	0	(10,287)	(10,287)
Net unrealized gains (losses) on investments in securities	0	0	0	(588)	(588)
Comprehensive income (loss)					(6,924)
Common shares issued on exercise of options and other, net of shares withheld for tax obligations (in shares)	31,150
Common shares issued on exercise of options and other, net of shares withheld for tax obligations	$ 0	0	0	0	0
Stock-based compensation expense	$ 0	4,907	0	0	4,907
Repurchases of common stock (in shares)	(207,500)
Repurchases of common stock	$ 0	(3,540)	(4,295)	0	(7,835)
Net income	$ 0		3,951	0	3,951
Balance (in shares) at Jun. 30, 2022	27,503,100
Balance at Jun. 30, 2022	$ 28	475,740	381,079	(36,149)	$ 820,698
Balance (in shares) at Sep. 30, 2022	27,326,750				27,326,750
Balance at Sep. 30, 2022	$ 28	$ 477,107	$ 380,735	$ (47,024)	$ 810,846

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Operating activities
Net income	$ 11,603	$ 21,462
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	29,981	30,231
Stock-based compensation expense	13,335	15,539
Deferred taxes	(8,920)	(139)
Fair value of contingent consideration	0	(8,513)
Impairments related to closure of Japan business	2,842	0
Gain on disposal of property and equipment	(1,174)	0
Other	11	442
Changes in operating assets and liabilities:
Accounts receivable	(3,909)	(25,615)
Inventories	(1,613)	950
Prepaid expenses and other	(920)	1,009
Income taxes	670	(1,226)
Accounts payable	1,292	1,978
Accrued liabilities and other	8,366	(3,893)
Net cash provided by operating activities	51,564	32,225
Investing activities
Purchases of property, equipment and other capital assets	(16,414)	(27,956)
Proceeds from sales of property, equipment and other capital assets	3,227	0
Cash used for acquisitions, net of cash acquired	0	(127,413)
Purchases of marketable securities	(45,872)	(15,159)
Proceeds from sales of marketable securities	1,998	57,089
Proceeds from call redemptions and maturities of marketable securities	13,696	15,114
Net cash used in investing activities	(43,365)	(98,325)
Financing activities
Proceeds from exercises of stock options	2,311	3,838
Purchases of shares withheld for tax obligations	(1,615)	(4,209)
Repurchases of common stock	(13,074)	(13,036)
Principal repayments of finance lease obligations	(417)	(413)
Net cash used in financing activities	(12,795)	(13,820)
Effect of exchange rate changes on cash and cash equivalents	(1,972)	119
Net decrease in cash and cash equivalents	(6,568)	(79,801)
Cash and cash equivalents, beginning of period	65,929	127,603
Cash and cash equivalents, end of period	$ 59,361	$ 47,802

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Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

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

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended  December 31, 2021, as filed with the Securities and Exchange Commission (SEC) on February 18, 2022.

The accompanying Consolidated Balance Sheet as of December 31, 2021 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K filed on February 18, 2022 as referenced above.

On May 27, 2022, the Company's board of directors approved a plan for the closure of the Company's manufacturing facility in Japan and announced an intention to cease operations in the region. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. The Company expects to substantially complete the closure plan within the next year. The Company's decision to close the Japan business resulted in $1.2 million and $6.4 million in operating expenses during the three and nine months ended September 30, 2022, respectively. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets for the three months ended September 30, 2022.  Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the nine months ended September 30, 2022. 

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Note 2 - Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note 2 – Recent Accounting Pronouncements

The Company did not recently adopt any accounting pronouncements that had a material impact on the Company's Consolidated Financial Statements.  There are no pending accounting pronouncements that are expected to have a material impact on the Company's Consolidated Financial Statements.

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Note 3 - Net Income Per Common Share

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 3 – Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied. For the three months ended September 30, 2022 and 2021, 210,443 and 184,920 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding, respectively. For the nine months ended September 30, 2022 and 2021, 202,901 and 61,400 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding, respectively.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income	$	3,951	$	4,835	$	11,603	$	21,462
Basic - weighted-average shares outstanding:		27,505,097		27,713,229		27,512,057		27,638,611
Effect of dilutive securities:
Employee stock options and other		3,120		16,876		10,677		69,173
Diluted - weighted-average shares outstanding:		27,508,217		27,730,105		27,522,734		27,707,784
Net income per share:
Basic	$	0.14	$	0.17	$	0.42	$	0.78
Diluted	$	0.14	$	0.17	$	0.42	$	0.77

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Note 4 - Business Combinations

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 4 – Business Combinations

On  January 22, 2021, the Company acquired all of the outstanding shares of 3D Hubs, Inc. (Hubs), for $294.1 million, consisting of $127.4 million in cash and 863,995 shares of the Company's common stock valued at $166.7 million on the closing date. The purchase agreement included additional contingent consideration of up to $52.8 million subject to the achievement of performance-based targets during fiscal 2021 and fiscal 2022. The contingent consideration consisted of up to $25.0 million in cash and up to 143,983 shares of the Company's common stock valued at $27.8 million on the closing date. 

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

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

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

(in thousands)	Acquisition
Assets acquired:
Current assets	$	2,497
Intangible assets		30,770
Goodwill		280,925
Other long-term assets		1,139
Total assets acquired		315,331
Liabilities assumed:
Current contingent consideration		7,093
Current liabilities		5,666
Long-term contingent consideration		6,507
Long-term deferred tax liabilities		1,688
Other long-term liabilities		255
Total liabilities assumed		21,209
Net assets acquired		294,122
Cash paid		133,847
Cash acquired		(6,434	)
Net cash consideration		127,413
Equity portion of purchase price		166,709
Total purchase consideration	$	294,122

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Note 5 - Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note 5 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill during the nine months ended September 30, 2022 were as follows:

(in thousands)	Nine Months Ended September 30, 2022
Balance as of the beginning of the period	$	400,610
Goodwill acquired during the period		-
Goodwill written off during the period		(630	)
Foreign currency translation adjustments		(16,422	)
Balance as of the end of the period	$	383,558

Goodwill of $0.6 million was written off as of  September 30, 2022, as a result of the Company's decision to close the Japan manufacturing facility and exit the Japan market. The Japan business was in operations through the third quarter of 2022 and the assets are expected to be available for sale in the fourth quarter of 2022. The Euro denominated goodwill is translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income.

Intangible assets other than goodwill at  September 30, 2022 and December 31, 2021 were as follows:

	September 30, 2022							December 31, 2021							Useful	Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)	Useful Life Remaining (in years)
Intangible assets with finite lives:
Marketing assets		$ 930		$ (783)			$ 147		$ 930		$ (713)			$ 217	10.0	1.5
Non-compete agreement	807		(448		)	359		842		(363		)	479		2.0 - 5.0	2.3
Software technology	13,229		(6,041		)	7,188		13,229		(5,014		)	8,215		10.0	5.8
Software platform	25,071		(3,631		)	21,440		26,725		(2,262		)	24,463		12.0	10.3
Tradenames	337		(190		)	147		359		(114		)	245		3.0	1.3
Customer relationships	12,117		(9,491		)	2,626		12,252		(7,873		)	4,379		3.0 - 9.0	1.1
Total intangible assets	$	52,491	$	(20,584	)	$	31,907	$	54,337	$	(16,339	)	$	37,998

Intangible assets have been allocated to the acquired Hubs entities consisting of intangible assets of €11.6 million in Europe and $16.6 million in the United States as of the date of the acquisition. The Euro denominated intangible assets are translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income. Foreign currency losses related to intangible assets were $2.8 million and $0.9 million as of September 30, 2022 and December 31, 2021, respectively. Amortization expense for intangible assets was $1.5 million and $1.6 million for the three months ended  September 30, 2022 and 2021, respectively, and $4.6 million in each of the nine months ended September 30, 2022 and 2021.

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

(in thousands)	Estimated Amortization Expense
Remaining 2022	$	1,491
2023		5,774
2024		3,647
2025		3,551
2026		3,453
Thereafter		13,991
Total estimated amortization expense	$	31,907

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Note 6 - Assets Held for Sale

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Disclosure of Assets Held-for-sale [Text Block]

 Note 6 – Assets Held for Sale

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

During the first quarter of 2022, a facility the Company owns in Maple Plain, Minnesota, encompassing approximately 35,000 square feet of manufacturing and office space, met the criteria to be held for sale. The assets held for sale were $2.0 million as of June 30, 2022 and were presented on the Company's Consolidated Balance Sheet as Long-term assets held for sale. The Company closed on the sale of the facility in the third quarter of 2022 for a net purchase price of $3.2 million, which resulted in a gain of $1.2 million recorded in general and administrative expense on the Company's Consolidated Statements of Operations.

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Note 7 - Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 7 – Fair Value Measurements

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

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

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

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

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

The following table summarizes financial assets as of  September 30, 2022 and December 31, 2021 measured at fair value on a recurring basis: 

	September 30, 2022						December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	36,813	$	-	$	-	$	65,637	$	-	$	-
Money market mutual fund		22,548		-		-		292		-		-
Marketable securities		17,096		37,414		-		7,602		18,318		-
Total	$	76,457	$	37,414	$	-	$	73,531	$	18,318	$	-

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Note 8 - Marketable Securities

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Investment [Text Block]

Note 8 – Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as available-for-sale and are recorded at fair value. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of  September 30, 2022 and December 31, 2021:

	September 30, 2022
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	17,991	$	-	$	(494	)	$	17,497
Corporate debt securities		9,602		-		(259	)		9,343
U.S. government agency securities		25,780		-		(787	)		24,993
Certificates of deposit/time deposits		1,189		-		(11	)		1,178
Commercial paper		1,500		-		(1	)		1,499
Total marketable securities	$	56,062	$	-	$	(1,552	)	$	54,510

	December 31, 2021
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	12,549	$	-	$	(70	)	$	12,479
Corporate debt securities		9,303		-		(44	)		9,259
U.S. government agency securities		2,500		-		(12	)		2,488
Certificates of deposit/time deposits		1,687		7		-			1,694
Commercial paper		-		-		-			-
Total marketable securities	$	26,039	$	7	$	(126	)	$	25,920

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

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

The  September 30, 2022 balance of available-for-sale debt securities by contractual maturity is shown in the following table at fair value. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

	September 30,
(in thousands)	2022
Due in one year or less	$	25,253
Due after one year through five years		29,257
Total marketable securities	$	54,510

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Note 9 - Inventory

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note 9 – Inventory

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

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

	September 30,			December 31,
(in thousands)	2022			2021
Total inventory	$	14,953		$	13,474
Allowance for obsolescence		(336	)		(313	)
Inventory, net of allowance	$	14,617		$	13,161

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Note 10 - Stock-based Compensation

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 10 – Stock-Based Compensation

Under the Company’s 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), the Company had the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards through February 23, 2022. On July 8, 2022, the board of directors approved the Proto Labs, Inc. 2022 Long-Term Incentive Plan (the 2022 Plan), which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022. No awards were granted from February 23, 2022 to August 29, 2022. Awards outstanding under the 2012 Plan as of August 29, 2022 will continue to be subject to the terms of the 2012 Plan, but if those awards subsequently expire, are forfeited or cancelled or are settled in cash, the shares subject to those awards will become available for awards under the 2022 Plan. Under the 2022 Plan, the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2022 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the 2022 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

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

Stock-Based Compensation Expense

Stock-based compensation expense was $4.9 million and $5.0 million for the three months ended  September 30, 2022 and 2021, respectively, and $13.3 and $15.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2022:

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2021		233,384		$	97.78
Granted		118,434			48.24
Exercised		(3,114	)		30.58
Forfeited		(38,618	)		91.27
Expired		(34,201	)		89.71
Options outstanding at September 30, 2022		275,885		$	79.19
Exercisable at September 30, 2022		108,659		$	91.50

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

The weighted-average grant date fair value of options that were granted during the nine months ended September 30, 2022 was $23.11.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the nine months ended September 30, 2022 and 2021:

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.94% - 3.40%		0.80% - 1.12%
Expected life (years)		6.25		6.25
Expected volatility		45.95% - 46.03%		45.28 - 45.35%
Expected dividend yield		0%		0%

As of September 30, 2022, there was $4.5 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock

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

The following table summarizes restricted stock activity during the nine months ended September 30, 2022:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2021		343,782		$	111.79
Granted		312,270			42.05
Restrictions lapsed		(120,606	)		104.99
Forfeited		(39,480	)		106.64
Restricted stock at September 30, 2022		495,966		$	69.95

As of September 30, 2022, there was $24.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years. 

Performance Stock

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 200 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment. The Company’s PSUs granted from 2017 to 2019 and certain PSUs granted in 2021 are based on performance conditions and the related compensation cost is based on the probability that the performance conditions will be achieved. The Company’s PSUs granted in 2020 and 2022 and certain PSUs granted in 2021 are based on market conditions and the related compensation cost is based on the fair value at grant date calculated using a Monte Carlo pricing model.

The following table summarizes performance stock activity during the nine months ended September 30, 2022:

				Weighted-
				Average
				Grant Date
	Performance			Fair Value
	Stock			Per Share
Performance stock at December 31, 2021		16,839		$	115.56
Granted		35,697			96.71
Restrictions lapsed		-			-
Performance change		-			-
Forfeited		(3,578	)		121.79
Performance stock at September 30, 2022		48,958		$	109.80

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the nine months ended September 30, 2022 and 2021: 

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.76% - 3.40%		0.22%
Expected life (years)		2.34 - 2.87		2.87
Expected volatility		53.5% - 53.6%		51.40%
Expected dividend yield		0%		0%

As of September 30, 2022, there was $2.8 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.2 years. 

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the nine months ended September 30, 2022 and 2021: 

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		0.17 - 2.06%		0.06 - 0.12%
Expected life (months)		6.00		6.00
Expected volatility		47.05 - 53.44%		50.85 - 65.53%
Expected dividend yield		0%		0%

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Note 11 - Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Disclosure of Reclassification Amount [Text Block]

 Note 11 – Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities. The following table presents the changes in accumulated other comprehensive income (loss) balances during the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2022			2021			2022			2021
Balance at beginning of period	$	(36,149	)	$	(8,115	)	$	(16,817	)	$	(3,420	)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications		(588	)		(45	)		(1,433	)		72
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(588	)		(45	)		(1,433	)		72
Balance at end of period	$	(47,024	)	$	(13,458	)	$	(47,024	)	$	(13,458	)

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Note 12 - Income Taxes

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 12 – Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended  September 30, 2022 and 2021, the Company recorded an income tax provision of $2.1 million and $2.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded an income tax provision of $7.2 million and $5.8 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended  September 30, 2022 was 34.5 percent compared to 31.5 percent in the same period of the prior year. The effective tax rate increased by 3.0 percent for the three months ended  September 30, 2022 when compared to the same period in 2021, primarily due to an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. The effective income tax rate for the nine months ended  September 30, 2022 was 38.4 percent compared to 21.2 percent in the same period of the prior year. The effective tax rate increased by 17.2 percent for the nine months ended  September 30, 2022 when compared to the same period in 2021, primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as an increase in losses in jurisdictions, mainly Japan, that are not eligible for tax benefits due to valuation allowances. 

The effective income tax rate for the nine months ended September 30, 2022 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions and tax credits for which the Company qualifies.

The Company had unrecognized tax benefits totaling $4.5 million as of September 30, 2022 and $4.4 million as of  December 31, 2021, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate. 

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Note 13 - Segment Reporting

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note 13 – Segment Reporting

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

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

Revenue and income from operations by reportable segment for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
United States	$	98,970	$	100,127	$	295,121	$	286,524
Europe		21,464		22,155		69,441		68,259
Japan		1,287		3,060		8,229		9,733
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2022			2021			2022			2021
Income (Loss) from Operations:
United States	$	25,293		$	23,475		$	73,984		$	72,258
Europe		(3,581	)		(2,223	)		(7,509	)		1,469
Corporate Unallocated and Japan		(15,654	)		(14,325	)		(47,326	)		(46,435	)
Total Income from Operations	$	6,058		$	6,927		$	19,149		$	27,292

Total long-lived assets at  September 30, 2022 and December 31, 2021 were as follows:

	September 30,		December 31,
(in thousands)	2022		2021
Total long-lived assets:
United States	$	206,965	$	215,701
Europe		51,636		59,388
Japan		1,255		5,257
Total Long-lived Assets	$	259,856	$	280,346

The Company's decision to close the Japan business resulted in operating expenses of $1.2 million and $6.4 million during the three and nine months ended September 30, 2022, respectively. Operating expenses included $0.1 million of employee severance and $1.1 million related to the write-down of fixed assets for the three months ended September 30, 2022. Operating expenses included $2.3 million of employee severance, $2.3 million related to the write-down of fixed assets, $0.9 million of facility-related charges, $0.6 million in goodwill impairment charges and $0.3 million in other closure related charges for the nine months ended September 30, 2022. 

Revenue by product line for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
Injection Molding	$	48,940	$	57,685	$	155,693	$	172,212
CNC Machining		47,489		43,658		141,809		121,953
3D Printing		19,823		18,589		59,458		53,994
Sheet Metal		5,219		4,854		15,066		14,790
Other Revenue		250		556		765		1,567
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

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Note 3 - Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income	$	3,951	$	4,835	$	11,603	$	21,462
Basic - weighted-average shares outstanding:		27,505,097		27,713,229		27,512,057		27,638,611
Effect of dilutive securities:
Employee stock options and other		3,120		16,876		10,677		69,173
Diluted - weighted-average shares outstanding:		27,508,217		27,730,105		27,522,734		27,707,784
Net income per share:
Basic	$	0.14	$	0.17	$	0.42	$	0.78
Diluted	$	0.14	$	0.17	$	0.42	$	0.77

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Note 4 - Business Combinations (Tables)

9 Months Ended

Sep. 30, 2022

Acquired 3D Hubs [Member]

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

(in thousands)	Acquisition
Assets acquired:
Current assets	$	2,497
Intangible assets		30,770
Goodwill		280,925
Other long-term assets		1,139
Total assets acquired		315,331
Liabilities assumed:
Current contingent consideration		7,093
Current liabilities		5,666
Long-term contingent consideration		6,507
Long-term deferred tax liabilities		1,688
Other long-term liabilities		255
Total liabilities assumed		21,209
Net assets acquired		294,122
Cash paid		133,847
Cash acquired		(6,434	)
Net cash consideration		127,413
Equity portion of purchase price		166,709
Total purchase consideration	$	294,122

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Note 5 - Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Schedule of Goodwill [Table Text Block]

(in thousands)	Nine Months Ended September 30, 2022
Balance as of the beginning of the period	$	400,610
Goodwill acquired during the period		-
Goodwill written off during the period		(630	)
Foreign currency translation adjustments		(16,422	)
Balance as of the end of the period	$	383,558

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	September 30, 2022							December 31, 2021							Useful	Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)	Useful Life Remaining (in years)
Intangible assets with finite lives:
Marketing assets		$ 930		$ (783)			$ 147		$ 930		$ (713)			$ 217	10.0	1.5
Non-compete agreement	807		(448		)	359		842		(363		)	479		2.0 - 5.0	2.3
Software technology	13,229		(6,041		)	7,188		13,229		(5,014		)	8,215		10.0	5.8
Software platform	25,071		(3,631		)	21,440		26,725		(2,262		)	24,463		12.0	10.3
Tradenames	337		(190		)	147		359		(114		)	245		3.0	1.3
Customer relationships	12,117		(9,491		)	2,626		12,252		(7,873		)	4,379		3.0 - 9.0	1.1
Total intangible assets	$	52,491	$	(20,584	)	$	31,907	$	54,337	$	(16,339	)	$	37,998

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(in thousands)	Estimated Amortization Expense
Remaining 2022	$	1,491
2023		5,774
2024		3,647
2025		3,551
2026		3,453
Thereafter		13,991
Total estimated amortization expense	$	31,907

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Note 7 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	September 30, 2022						December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash	$	36,813	$	-	$	-	$	65,637	$	-	$	-
Money market mutual fund		22,548		-		-		292		-		-
Marketable securities		17,096		37,414		-		7,602		18,318		-
Total	$	76,457	$	37,414	$	-	$	73,531	$	18,318	$	-

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Note 8 - Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Debt Securities, Available-for-Sale [Table Text Block]

	September 30, 2022
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	17,991	$	-	$	(494	)	$	17,497
Corporate debt securities		9,602		-		(259	)		9,343
U.S. government agency securities		25,780		-		(787	)		24,993
Certificates of deposit/time deposits		1,189		-		(11	)		1,178
Commercial paper		1,500		-		(1	)		1,499
Total marketable securities	$	56,062	$	-	$	(1,552	)	$	54,510

Debt Securities, Held-to-Maturity [Table Text Block]

	December 31, 2021
(in thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	12,549	$	-	$	(70	)	$	12,479
Corporate debt securities		9,303		-		(44	)		9,259
U.S. government agency securities		2,500		-		(12	)		2,488
Certificates of deposit/time deposits		1,687		7		-			1,694
Commercial paper		-		-		-			-
Total marketable securities	$	26,039	$	7	$	(126	)	$	25,920

Investments Classified by Contractual Maturity Date [Table Text Block]

	September 30,
(in thousands)	2022
Due in one year or less	$	25,253
Due after one year through five years		29,257
Total marketable securities	$	54,510

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Note 9 - Inventory (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,			December 31,
(in thousands)	2022			2021
Total inventory	$	14,953		$	13,474
Allowance for obsolescence		(336	)		(313	)
Inventory, net of allowance	$	14,617		$	13,161

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Note 10 - Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Share-Based Payment Arrangement, Option, Activity [Table Text Block]

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2021		233,384		$	97.78
Granted		118,434			48.24
Exercised		(3,114	)		30.58
Forfeited		(38,618	)		91.27
Expired		(34,201	)		89.71
Options outstanding at September 30, 2022		275,885		$	79.19
Exercisable at September 30, 2022		108,659		$	91.50

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.94% - 3.40%		0.80% - 1.12%
Expected life (years)		6.25		6.25
Expected volatility		45.95% - 46.03%		45.28 - 45.35%
Expected dividend yield		0%		0%

Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2021		343,782		$	111.79
Granted		312,270			42.05
Restrictions lapsed		(120,606	)		104.99
Forfeited		(39,480	)		106.64
Restricted stock at September 30, 2022		495,966		$	69.95

Schedule of Nonvested Performance-Based Units Activity [Table Text Block]

				Weighted-
				Average
				Grant Date
	Performance			Fair Value
	Stock			Per Share
Performance stock at December 31, 2021		16,839		$	115.56
Granted		35,697			96.71
Restrictions lapsed		-			-
Performance change		-			-
Forfeited		(3,578	)		121.79
Performance stock at September 30, 2022		48,958		$	109.80

Schedule of Share-based Payment Award, Awards Other Than Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		1.76% - 3.40%		0.22%
Expected life (years)		2.34 - 2.87		2.87
Expected volatility		53.5% - 53.6%		51.40%
Expected dividend yield		0%		0%

Schedule of Share-Based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block]

	Nine Months Ended September 30,
	2022		2021
Risk-free interest rate		0.17 - 2.06%		0.06 - 0.12%
Expected life (months)		6.00		6.00
Expected volatility		47.05 - 53.44%		50.85 - 65.53%
Expected dividend yield		0%		0%

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Note 11 - Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2022			2021			2022			2021
Balance at beginning of period	$	(36,149	)	$	(8,115	)	$	(16,817	)	$	(3,420	)
Foreign currency translation adjustments
Other comprehensive income (loss) before reclassifications		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(10,287	)		(5,298	)		(28,774	)		(10,110	)
Net unrealized gains (losses) on investments in securities
Other comprehensive income (loss) before reclassifications		(588	)		(45	)		(1,433	)		72
Amounts reclassified from accumulated other comprehensive loss		-			-			-			-
Net current-period other comprehensive income (loss)		(588	)		(45	)		(1,433	)		72
Balance at end of period	$	(47,024	)	$	(13,458	)	$	(47,024	)	$	(13,458	)

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Note 13 - Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2022

Notes Tables

Income from Operations by Geographic Area [Table Text Block]

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2022			2021			2022			2021
Income (Loss) from Operations:
United States	$	25,293		$	23,475		$	73,984		$	72,258
Europe		(3,581	)		(2,223	)		(7,509	)		1,469
Corporate Unallocated and Japan		(15,654	)		(14,325	)		(47,326	)		(46,435	)
Total Income from Operations	$	6,058		$	6,927		$	19,149		$	27,292

Long-Lived Assets by Geographic Areas [Table Text Block]

	September 30,		December 31,
(in thousands)	2022		2021
Total long-lived assets:
United States	$	206,965	$	215,701
Europe		51,636		59,388
Japan		1,255		5,257
Total Long-lived Assets	$	259,856	$	280,346

Disaggregation of Revenue [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
Injection Molding	$	48,940	$	57,685	$	155,693	$	172,212
CNC Machining		47,489		43,658		141,809		121,953
3D Printing		19,823		18,589		59,458		53,994
Sheet Metal		5,219		4,854		15,066		14,790
Other Revenue		250		556		765		1,567
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

Operating Segments [Member]

Notes Tables

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Revenue:
United States	$	98,970	$	100,127	$	295,121	$	286,524
Europe		21,464		22,155		69,441		68,259
Japan		1,287		3,060		8,229		9,733
Total revenue	$	121,721	$	125,342	$	372,791	$	364,516

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Note 1 - Basis of Presentation (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disposal Group, Operating Expense	$ 1,194	$ 0	$ 6,388	$ 0
Goodwill, Written Off			630
Disposal Group, Disposed of by Means Other than Sale, Not Discontinued Operations [Member] | Manufacturing Facility in Japan [Member]
Disposal Group, Operating Expense	1,200		6,400
Disposal Group, Employee Severance, Operating Expense	100		2,300
Disposal Group, Write-down of Fixed Assets, Operating Expense	$ 1,100		2,300
Disposal Group, Facility-related Charges, Operating Expense			900
Goodwill, Written Off			600
Disposal Group, Other Closure Related Charges, Operating Expense			$ 300

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Note 3 - Net Income Per Common Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	210,443	184,920	202,901	61,400

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Note 3 - Net Income Per Common Share - Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Net income	$ 3,951	$ 2,557	$ 5,095	$ 4,835	$ 12,915	$ 3,712	$ 11,603	$ 21,462
Basic - weighted-average shares outstanding: (in shares)	27,505,097			27,713,229			27,512,057	27,638,611
Employee stock options and other (in shares)	3,120			16,876			10,677	69,173
Diluted - weighted-average shares outstanding: (in shares)	27,508,217			27,730,105			27,522,734	27,707,784
Basic (in dollars per share)	$ 0.14			$ 0.17			$ 0.42	$ 0.78
Diluted (in dollars per share)	$ 0.14			$ 0.17			$ 0.42	$ 0.77

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Note 4 - Business Combinations (Details Textual) - USD ($) $ in Thousands		9 Months Ended		11 Months Ended
	Jan. 22, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Payments to Acquire Businesses, Net of Cash Acquired, Total		$ (0)	$ 127,413
Acquired 3D Hubs [Member]
Business Combination, Consideration Transferred, Total	$ 294,122
Payments to Acquire Businesses, Net of Cash Acquired, Total	$ 127,413
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares)	863,995
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 166,709
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	52,800
Payments to Acquire Businesses, Gross	$ 133,847
Acquired 3D Hubs [Member] | Cash [Member]
Payments to Acquire Businesses, Gross				$ 25,000
Acquired 3D Hubs [Member] | Common Stock [Member] | Maximum [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares)	143,983
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 27,800

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Note 4 - Business Combinations - Allocation of Purchase Price for the Acquisition of Rapid (Details) - USD ($) $ in Thousands		9 Months Ended
	Jan. 22, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Assets acquired:
Goodwill		$ 383,558		$ 400,610
Liabilities assumed:
Net cash consideration		$ (0)	$ 127,413
Acquired 3D Hubs [Member]
Assets acquired:
Current assets	$ 2,497
Intangible assets	30,770
Goodwill	280,925
Other long-term assets	1,139
Total assets acquired	315,331
Liabilities assumed:
Current contingent consideration	7,093
Current liabilities	5,666
Long-term contingent consideration	6,507
Long-term deferred tax liabilities	1,688
Other long-term liabilities	255
Total liabilities assumed	21,209
Net assets acquired	294,122
Payments to Acquire Businesses, Gross	133,847
Cash acquired	(6,434)
Net cash consideration	127,413
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	166,709
Total purchase consideration	$ 294,122

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Note 5 - Goodwill and Other Intangible Assets (Details Textual) $ in Thousands, € in Millions			3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 22, 2021 USD ($)	Jan. 22, 2021 EUR (€)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Goodwill, Written Off					$ 630
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax, Total					2,800		$ 900
Amortization of Intangible Assets			$ 1,500	$ 1,600	4,600	$ 4,600
Acquired 3D Hubs [Member] | UNITED STATES
Finite-Lived Intangible Assets Acquired	$ 16,600	€ 11.6
Disposal Group, Disposed of by Means Other than Sale, Not Discontinued Operations [Member] | Manufacturing Facility in Japan [Member]
Goodwill, Written Off					$ 600

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Note 5 - Goodwill and Other Intangible Assets - Changes in the Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Goodwill	$ 400,610
Goodwill acquired during the period	0
Goodwill written off during the period	(630)
Foreign currency translation adjustments	(16,422)
Goodwill	$ 383,558

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Note 5 - Goodwill and Other Intangible Assets - Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Gross	$ 52,491	$ 54,337
Accumulated Amortization	(20,584)	(16,339)
Net	31,907	37,998
Marketing-Related Intangible Assets [Member]
Gross	930	930
Accumulated Amortization	(783)	(713)
Net	$ 147	217
Useful Life (Year)	10 years
Weighted average useful life remaining (Year)	1 year 6 months
Noncompete Agreements [Member]
Gross	$ 807	842
Accumulated Amortization	(448)	(363)
Net	$ 359	479
Weighted average useful life remaining (Year)	2 years 3 months 18 days
Noncompete Agreements [Member] | Minimum [Member]
Useful Life (Year)	2 years
Noncompete Agreements [Member] | Maximum [Member]
Useful Life (Year)	5 years
Computer Software, Intangible Asset [Member]
Gross	$ 13,229	13,229
Accumulated Amortization	(6,041)	(5,014)
Net	$ 7,188	8,215
Useful Life (Year)	10 years
Weighted average useful life remaining (Year)	5 years 9 months 18 days
Software Platform [Member]
Gross	$ 25,071	26,725
Accumulated Amortization	(3,631)	(2,262)
Net	$ 21,440	24,463
Useful Life (Year)	12 years
Weighted average useful life remaining (Year)	10 years 3 months 18 days
Trade Names [Member]
Gross	$ 337	359
Accumulated Amortization	(190)	(114)
Net	$ 147	245
Useful Life (Year)	3 years
Weighted average useful life remaining (Year)	1 year 3 months 18 days
Customer Relationships [Member]
Gross	$ 12,117	12,252
Accumulated Amortization	(9,491)	(7,873)
Net	$ 2,626	$ 4,379
Weighted average useful life remaining (Year)	1 year 1 month 6 days
Customer Relationships [Member] | Minimum [Member]
Useful Life (Year)	3 years
Customer Relationships [Member] | Maximum [Member]
Useful Life (Year)	9 years

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Note 5 - Goodwill and Other Intangible Assets - Estimated Aggregated Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Remaining 2022	$ 1,491
2023	5,774
2024	3,647
2025	3,551
2026	3,453
Thereafter	13,991
Total estimated amortization expense	$ 31,907	$ 37,998

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Note 6 - Assets Held for Sale (Details Textual) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) ft²
Gain (Loss) on Disposition of Property Plant Equipment, Total		$ 1,174	$ (0)
Facility in Maple Plain, Minnesota [Member]
Area of Real Estate Property (Square Foot) | ft²				35,000
Assets Held-for-sale, Not Part of Disposal Group, Total				$ 2,000
Proceeds from Sale of Property, Plant, and Equipment, Total	$ 3,200
Facility in Maple Plain, Minnesota [Member] | General and Administrative Expense [Member]
Gain (Loss) on Disposition of Property Plant Equipment, Total	$ 1,200

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Note 7 - Fair Value Measurements - Fair Value of Financial Assets Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Marketable securities	$ 54,510
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Marketable securities	17,096	$ 7,602
Total	76,457	73,531
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Cash [Member]
Cash	36,813	65,637
Cash and cash equivalents	36,813	65,637
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Cash	22,548	292
Cash and cash equivalents	22,548	292
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Marketable securities	37,414	18,318
Total	37,414	18,318
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Cash [Member]
Cash	0	0
Cash and cash equivalents	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Money Market Funds [Member]
Cash	0	0
Cash and cash equivalents	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Marketable securities	0	0
Total	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Cash [Member]
Cash	0	0
Cash and cash equivalents	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Money Market Funds [Member]
Cash	0	0
Cash and cash equivalents	$ 0	$ 0

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Note 8 - Marketable Securities - Short-term and Long-term Available for Sale Securities (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Amortized Cost	$ 56,062
Unrealized Gains	0
Unrealized Losses	(1,552)
Fair Value	54,510
US States and Political Subdivisions Debt Securities [Member]
Amortized Cost	17,991
Unrealized Gains	0
Unrealized Losses	(494)
Fair Value	17,497
Corporate Debt Securities [Member]
Amortized Cost	9,602
Unrealized Gains	0
Unrealized Losses	(259)
Fair Value	9,343
US Government Agencies Debt Securities [Member]
Amortized Cost	25,780
Unrealized Gains	0
Unrealized Losses	(787)
Fair Value	24,993
Bank Time Deposits [Member]
Amortized Cost	1,189
Unrealized Gains	0
Unrealized Losses	(11)
Fair Value	1,178
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
Amortized Cost	1,500
Unrealized Gains	0
Unrealized Losses	(1)
Fair Value	$ 1,499

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Note 8 - Marketable Securities - Short-term and Long-term Held-to-Maturity Securities (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Amortized Cost	$ 26,039
Unrealized Gains	7
Unrealized Losses	(126)
Fair Value	25,920
US States and Political Subdivisions Debt Securities [Member]
Amortized Cost	12,549
Unrealized Gains	0
Unrealized Losses	(70)
Fair Value	12,479
Corporate Debt Securities [Member]
Amortized Cost	9,303
Unrealized Gains	0
Unrealized Losses	(44)
Fair Value	9,259
US Government Agencies Debt Securities [Member]
Amortized Cost	2,500
Unrealized Gains	0
Unrealized Losses	(12)
Fair Value	2,488
Bank Time Deposits [Member]
Amortized Cost	1,687
Unrealized Gains	7
Unrealized Losses	0
Fair Value	1,694
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
Amortized Cost	0
Unrealized Gains	0
Unrealized Losses	0
Fair Value	$ 0

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Note 8 - Marketable Securities - Balance of Held-to-maturity Debt Securities by Contractual Maturity (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Due in one year or less	$ 25,253
Due after one year through five years	29,257
Total marketable securities	$ 54,510

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Note 9 - Inventory - Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Total inventory	$ 14,953	$ 13,474
Allowance for obsolescence	(336)	(313)
Inventory, net of allowance	$ 14,617	$ 13,161

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Note 10 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 20, 2022	Sep. 30, 2021
Share-Based Payment Arrangement, Expense	$ 4.9	$ 5.0	$ 13.3		$ 15.5
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)			$ 23.11
ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date			15.00%
Employee Stock Purchase Plan, Offering Period (Month)			6 months
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent			85.00%
Share-Based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			4 years
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	4.5		$ 4.5
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)				2 years 9 months 18 days
Restricted Stock [Member]
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	24.7		$ 24.7
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			2 years 7 months 6 days
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			4 years
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 2.8		$ 2.8
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			2 years 2 months 12 days
Percentage of Target Number Capable of Being Earned and Vesting, Lower Limit	0.00%		0.00%
Percentage of Target Number Capable of Being Earned and Vesting, Upper Limit	200.00%		200.00%
Long-Term Incentive Plan 2012 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)			10 years

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Note 10 - Stock-based Compensation - Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Options outstanding (in shares) | shares	233,384
Options outstanding, weighted-average exercise price (in dollars per share) | $ / shares	$ 97.78
Granted (in shares) | shares	118,434
Granted, weighted-average exercise price (in dollars per share) | $ / shares	$ 48.24
Exercised (in shares) | shares	(3,114)
Exercised, weighted-average exercise price (in dollars per share) | $ / shares	$ 30.58
Forfeited (in shares) | shares	(38,618)
Forfeited, weighted-average exercise price (in dollars per share) | $ / shares	$ 91.27
Expired (in shares) | shares	(34,201)
Expired (in dollars per share) | $ / shares	$ 89.71
Options outstanding (in shares) | shares	275,885
Options outstanding, weighted-average exercise price (in dollars per share) | $ / shares	$ 79.19
Options exercisable (in shares) | shares	108,659
Options exercisable, weighted-average exercise price (in dollars per share) | $ / shares	$ 91.50

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Note 10 - Stock-based Compensation - Assumptions Used in the Black-Scholes Option Pricing Model (Details) - Share-Based Payment Arrangement, Option [Member]	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Expected life (years) (Year)	6 years 3 months	6 years 3 months
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Risk-free interest rate	1.94%	0.80%
Expected volatility	45.95%	45.28%
Maximum [Member]
Risk-free interest rate	3.40%	1.12%
Expected volatility	46.03%	45.35%

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Note 10 - Stock-based Compensation - Restricted Stock Options (Details) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Restricted stock (in shares) | shares	343,782
Restricted stock, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 111.79
Granted (in shares) | shares	312,270
Granted, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 42.05
Restrictions lapsed (in shares) | shares	(120,606)
Restrictions lapsed, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 104.99
Forfeited (in shares) | shares	(39,480)
Forfeited, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 106.64
Restricted stock (in shares) | shares	495,966
Restricted stock, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 69.95

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Note 10 - Stock-based Compensation - Performance Stock (Details) - Performance Shares [Member]	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Performance stock (in shares) | shares	16,839
Restricted stock, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 115.56
Granted (in shares) | shares	35,697
Granted, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 96.71
Restrictions lapsed (in shares) | shares	0
Restrictions lapsed, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 0
Performance change (in shares) | shares	0
Performance change, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 0
Forfeited (in shares) | shares	(3,578)
Forfeited, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 121.79
Performance stock (in shares) | shares	48,958
Restricted stock, weighted-average grant date fair value (in dollars per share) | $ / shares	$ 109.80

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Note 10 - Stock-based Compensation - Assumptions Used in the Valuation of Performance Stock (Details) - Performance Shares [Member]	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Risk-free interest rate		0.22%
Expected life (years) (Year)		2 years 10 months 13 days
Expected volatility		51.40%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Risk-free interest rate	1.76%
Expected life (years) (Year)	2 years 4 months 2 days
Expected volatility	53.50%
Maximum [Member]
Risk-free interest rate	3.40%
Expected life (years) (Year)	2 years 10 months 13 days
Expected volatility	53.60%

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Note 10 - Stock-based Compensation - Assumptions Used to Estimate the Fair Value of the ESPP (Details) - Employee Stock Purchase Plan [Member]	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Expected life (months) (Month)	6 months	6 months
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Risk-free interest rate	0.17%	0.06%
Expected volatility	47.05%	50.85%
Maximum [Member]
Risk-free interest rate	2.06%	0.12%
Expected volatility	53.44%	65.53%

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Note 11 - Accumulated Other Comprehensive Income (Loss) - Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Balance	$ 820,698	$ 831,977	$ 828,493	$ 644,356
Balance	810,846	824,621	810,846	824,621
AOCI Attributable to Parent [Member]
Balance	(36,149)	(8,115)	(16,817)	(3,420)
Balance	(47,024)	(13,458)	(47,024)	(13,458)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Other comprehensive income (loss) before reclassifications	(10,287)	(5,298)	(28,774)	(10,110)
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income (loss)	(10,287)	(5,298)	(28,774)	(10,110)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Parent [Member]
Other comprehensive income (loss) before reclassifications	(588)	(45)	(1,433)	72
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income (loss)	$ (588)	$ (45)	$ (1,433)	$ 72

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Note 12 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		21 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Dec. 31, 2021
Income Tax Expense (Benefit), Total	$ 2,083	$ 2,228	$ 7,223	$ 5,790
Effective Income Tax Rate Reconciliation, Percent, Total	34.50%	31.50%	38.40%		21.20%
Effective Income Tax Rate Continuing Operations Increase (Decrease) During the Period	3.00%		17.20%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%
Unrecognized Tax Benefits, Ending Balance	$ 4,500		$ 4,500		$ 4,500	$ 4,400

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Note 13 - Segment Reporting (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disposal Group, Operating Expense	$ 1,194	$ 0	$ 6,388	$ 0
Goodwill, Written Off			630
Disposal Group, Disposed of by Means Other than Sale, Not Discontinued Operations [Member] | Manufacturing Facility in Japan [Member]
Disposal Group, Operating Expense	1,200		6,400
Disposal Group, Employee Severance, Operating Expense	100		2,300
Disposal Group, Write-down of Fixed Assets, Operating Expense	$ 1,100		2,300
Disposal Group, Facility-related Charges, Operating Expense			900
Goodwill, Written Off			600
Disposal Group, Other Closure Related Charges, Operating Expense			$ 300

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Note 13 - Segment Reporting - Revenue From Operations by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenue	$ 121,721	$ 125,342	$ 372,791	$ 364,516
Operating Segments [Member]
Revenue	121,721	125,342	372,791	364,516
Operating Segments [Member] | United States Segment [Member]
Revenue	98,970	100,127	295,121	286,524
Operating Segments [Member] | Europe Segment [Member]
Revenue	21,464	22,155	69,441	68,259
Operating Segments [Member] | Japan Segment [Member]
Revenue	$ 1,287	$ 3,060	$ 8,229	$ 9,733

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Note 13 - Segment Reporting - Income From Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income from operations	$ 6,058	$ 6,927	$ 19,149	$ 27,292
Operating Segments [Member] | United States Segment [Member]
Income from operations	25,293	23,475	73,984	72,258
Operating Segments [Member] | Europe Segment [Member]
Income from operations	(3,581)	(2,223)	(7,509)	1,469
Operating Segments [Member] | Corporate Unallocated and Japan Segment[Member]
Income from operations	$ (15,654)	$ (14,325)	$ (47,326)	$ (46,435)

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Note 13 - Segment Reporting - Long-lived Assets by Geographic Region (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Long-lived assets	$ 259,856	$ 280,346
Operating Segments [Member] | United States Segment [Member]
Long-lived assets	206,965	215,701
Operating Segments [Member] | Europe Segment [Member]
Long-lived assets	51,636	59,388
Operating Segments [Member] | Japan Segment [Member]
Long-lived assets	$ 1,255	$ 5,257

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Note 13 - Segment Reporting - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenue	$ 121,721	$ 125,342	$ 372,791	$ 364,516
Injection Molding (Protomold) [Member]
Revenue	48,940	57,685	155,693	172,212
CNC Machining (Firstcut) [Member]
Revenue	47,489	43,658	141,809	121,953
3D Printing (Fineline) [Member]
Revenue	19,823	18,589	59,458	53,994
Sheet Metal [Member]
Revenue	5,219	4,854	15,066	14,790
Other Products [Member]
Revenue	$ 250	$ 556	$ 765	$ 1,567