Proto Labs Inc

Previous wording

We are one of the world’s largest, fastest, and most comprehensive digital manufacturers of custom parts. We manufacture prototypes and low-volume production parts for companies worldwide that 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. Our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Through the acquisition of Hubs (formerly 3D Hubs, Inc.) (Hubs) in 2021, we provide our customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia. In January 2024, we rebranded Hubs to the Protolabs Network by Hubs (Protolabs Network). The Protolabs Network complements our in-house manufacturing, enabling us to significantly increase the size, complexity, breadth of manufacturing processes, lead times and prices of the parts we produce. Our customers conduct nearly all their business with us over the Internet. We target our products at the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets, to the procurement and supply chain professionals seeking to easily and efficiently source custom parts on-demand, and to a wide variety of customers seeking to purchase low-volume custom parts.

Current wording

We are the world’s fastest manufacturing service enabling companies across every industry to streamline production of quality parts throughout the entire product life cycle. We manufacture prototypes and low-volume production parts for companies worldwide that 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. Our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Through the acquisition of Hubs (formerly 3D Hubs, Inc., recently rebranded to Protolabs Network) in 2021, we provide our customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia. The manufacturing partner network, complements our in-house manufacturing, enabling us to significantly increase the size, complexity, breadth of manufacturing processes, lead times and prices of the parts we produce. Our customers conduct nearly all their business with us over the Internet. We target our products at the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets, to the procurement and supply chain professionals seeking to easily and efficiently source custom parts on-demand, and to a wide variety of customers seeking to purchase custom parts.

Previous wording

We currently operate in a global custom contract manufacturing market which is a form of outsourcing where companies enter into an arrangement or formal agreement with another company or individual for the manufacture of complete parts, products, or components. Since our inception, we have focused on areas where we could automate the manufacturing process via our digital model and we positioned ourselves to avoid routine, low margin, high-volume commoditized manufacturing. Our initial focus was on prototypes and simple parts and have added complexity over time. We have added product lines and expanded those product lines to meet the needs of our customers, which has historically driven our growth. In 2022, we launched the first iteration of our integrated offer in Europe and followed with the launch in the United States in early 2023. The integrated offer allows us to offer CNC manufacturing for eligible parts through the combination of our internal digital manufacturing and our digital network of manufacturing partners. We also continually seek to enhance other aspects of our technology and manufacturing processes, including our interactive web-based and automated user interface and quoting system. We intend to continue to invest significantly to enhance our technology and manufacturing processes and expand the range of our existing capabilities with the aim of meeting the needs of a broader set of customers. As a result of the factors described above, many of our customers tend to return to Proto Labs to meet their ongoing needs.

Current wording

We currently operate in a global custom contract manufacturing market which is a form of outsourcing where companies enter into an arrangement or formal agreement with another company or individual for the manufacture of complete parts, products, or components. Since our inception, we have focused on areas where we could automate the manufacturing process via our digital model and we positioned ourselves to avoid routine, low margin, high-volume commoditized manufacturing. Our initial focus was on prototypes and simple parts and have added complexity over time, as well as adding production to our offer. We have added additional manufacturing services and expanded those services to meet the needs of our customers, which has ultimately driven our growth. We continually seek to expand the range of size and geometric complexity of the parts we can make or source with these processes, to extend the variety of materials we are able to support, and to identify additional manufacturing processes to which we can apply our technology or incorporate into our manufacturing network in order to better serve the evolving preferences and needs of our customers. As a result of the factors described above, many of our customers tend to return to Proto Labs to meet their ongoing needs, with approximately 96%, 95% and 95% of our revenue in the years ended December 31, 2025, 2024 and 2023, respectively, derived from existing customers.

Previous wording

We have established our operations in the United States and Europe. On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany. The Company expects to substantially complete the plan within fiscal year 2025. The Company will continue offering all its manufacturing services to customers across Europe, including injection molding and metal 3D printing. These services will be fulfilled through internal manufacturing facilities and a network of manufacturing partners. Previously we had established operations in Japan. 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. The Company dissolved its Japan operations in December 2023. Our revenue outside of the United States accounted for approximately 21% of our consolidated revenue in each of the years ended December 31, 2024 and 2023. We intend to continue to expand our international sales efforts and believe opportunities exist to serve the needs of customers in select new geographic regions.

Current wording

We have established our operations in the United States and Europe. On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany. The Company substantially completed the plan during the fourth quarter of 2025.The Company continues to offer all its manufacturing services to customers across Europe, including injection molding and metal 3D printing through internal manufacturing facilities and a network of manufacturing partners. Previously we had established operations in Japan. Our revenue outside of the United States accounted for approximately 19% and 21% of our consolidated revenue in the years ended December 31, 2025 and 2024, respectively. We intend to continue to expand our international sales efforts and believe opportunities exist to serve the needs of customers in select new geographic regions.

Previous wording

Total revenue decreased to $500.9 million in the year December 31, 2024 from $503.9 million in the year ended December 31, 2023. During this period, our operating expenses increased to $203.3 million in the year ended December 31, 2024 from $193.8 million in the year ended December 31, 2023 primarily due to $5.6 million of costs related to disposal and exit activities in the year ended December 31, 2024 related our decision to exit and close certain operations in Germany. Historically, our growth in revenue has been accompanied by increased cost of revenues and operating expenses. We expect to increase investment in our operations to support anticipated future growth as discussed more fully below.

Current wording

Total revenue increased to $533.1 million in the year December 31, 2025 from $500.9 million in the year ended December 31, 2024. During this period, our operating expenses increased to $212.0 million in the year ended December 31, 2025 from $203.3 million in the year ended December 31, 2024. Historically, our growth in revenue has been accompanied by increased cost of revenues and operating expenses. We expect to increase investment in our operations to support anticipated future growth as discussed more fully below.

Previous wording

In addition, we believe that a number of trends affecting our industry have impacted our results of operations, which have increased our revenue and our operating expenses, and may continue to do so. For example, we believe that many of our target customers are facing three mega trends, which are disrupting long-term product growth models. We believe our customers are facing increased pressure to shorten product life-cycles, to embed products with connectivity driven by the "internet of things" technology, and to deliver products that are personalized and customized to unique customer specifications. We believe we continue to be well positioned to benefit from these trends, given our proprietary technology that enables us to automate and integrate the majority of activities involved in procuring custom parts. As a result, the adoption of e-commerce manufacturing has accelerated, which allows opportunity for us to provide valuable solutions to customers looking to build resiliency in their supply chains through fast, on-demand manufacturers. While our business may be positively affected by these trends, our results may also be favorably or unfavorably impacted by other trends that affect customer orders for custom parts, including, among others, economic conditions, changes in customer preferences or needs, developments in our industry and among our competitors, and developments in our customers' industries. For a more complete discussion of the risks facing our business, see Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

Current wording

In addition, we believe that a number of trends affecting our industry have impacted our results of operations, which have increased our revenue and our operating expenses, and may continue to do so. For example, we believe that many of our target customers are facing trends, which are disrupting long-term product growth models. We believe our customers are facing increased pressure to shorten product life-cycles, to embed products with connectivity driven by the "internet of things" technology, and to deliver products that are personalized and customized to unique customer specifications. We believe we continue to be well positioned to benefit from these trends, given our proprietary technology that enables us to automate and integrate the majority of activities involved in procuring custom parts. As a result, the adoption of e-commerce manufacturing has accelerated, which allows opportunity for us to provide valuable solutions to customers looking to build resiliency in their supply chains through fast, on-demand manufacturers. While our business may be positively affected by these trends, our results may also be favorably or unfavorably impacted by other trends that affect customer orders for custom parts, including, among others, economic conditions, changes in customer preferences or needs, developments in our industry and among our competitors, and developments in our customers' industries. For a more complete discussion of the risks facing our business, see Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

Previous wording

Our operations are comprised of two geographic operating segments in the United States and Europe. On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany. The Company expects to substantially complete the plan within fiscal year 2025. The Company will continue offering all its manufacturing services to customers across Europe, including injection molding and metal 3D printing. These services will be fulfilled through internal manufacturing facilities and a network of manufacturing partners. 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. The Company dissolved its Japan operations in December 2023.

Current wording

Our operations are comprised of two geographic operating segments in the United States and Europe. On October 21, 2024, the Company's board of directors approved a plan related to the Company's manufacturing facilities in Germany. The plan includes the closure of the Company's prototype injection molding manufacturing facility in Eschenlohe, Germany, and the discontinuation of Direct Metal Laser Sintering 3D printing services through its 3D printing facility in Putzbrunn, Germany. The Company substantially completed the plan in the fourth quarter of 2025. These services will be fulfilled through internal manufacturing facilities and a network of manufacturing partners.

Previous wording

During 2024, we served 51,552 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 3.6% over the same period in 2023. Our customer contacts served decreased at a rate greater than our decrease in revenue. This was primarily due to our mix of customers served in 2024 as compared to 2023 and our strategic focus to earn larger orders from our customers as we strive to be their supplier of choice by serving their custom parts needs through the comprehensive offer of our factory and the Protolabs Network. Our revenue per customer contact grew 3.1% as compared to 2023.

Current wording

During 2025, we served 48,415 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 6.1% over the same period in 2024. Our customer contacts served decreased while our revenue increased. This was primarily due to our mix of customers served in 2025 as compared to 2024 and our strategic focus to earn larger orders from our customers as we strive to be their supplier of choice by serving their custom parts needs through the comprehensive offer of our factory and the Protolabs Network. Our revenue per customer contact grew 13.3% as compared to 2024.

Previous wording

During 2023, we served 53,464 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 5.1% over the same period in 2022.

Current wording

During 2024, we served 51,552 unique customer contacts who purchased our products through our web-based customer interface, a decrease of 3.6% over the same period in 2023.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

Our business strategy is to serve customers across the entire lifecycle of a part—from prototype through production. In order to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses in the future.

Previous wording

Our revenue decreased $3.0 million, or 0.6%, for 2024 compared with 2023. By reportable segment, revenue in the United States decreased $0.6 million, or 0.2%, for 2024 compared with 2023. Revenue in Europe decreased $2.4 million, or 2.2%, for 2024 compared with 2023. International revenue was positively impacted by $1.9 million during 2024 compared to the same period in 2023 as a result of foreign currency movements, primarily the strengthening of the British Pound and Euro relative to the United States Dollar.

Current wording

Our revenue increased $32.2 million, or 6.4%, for 2025 compared with 2024. By reportable segment, revenue in the United States increased $36.1 million, or 9.1%, for 2025 compared with 2024. Revenue in Europe decreased $3.9 million, or 3.7%, for 2025 compared with 2024. International revenue was positively impacted by $3.5 million during 2025 compared to the same period in 2024 as a result of foreign currency movements, primarily the strengthening of the British Pound and Euro relative to the United States Dollar.

Previous wording

During 2024, we served 51,552 unique customer contacts, a decrease of 3.6% over 2023. Our customer contacts served decreased at a rate greater than our decrease in revenue. This was primarily due to our mix of customers served in 2024 as compared to 2023 and our strategic focus to earn larger orders from our customers as we strive to be their supplier of choice by serving their custom parts needs through the comprehensive offer of our factory and the Protolabs Network. Our revenue per customer grew 3.1% as compared to 2023.

Current wording

During 2025, we served 48,415 unique customer contacts, a decrease of 6.1% over 2024. Our customer contacts served decreased while our revenue grew. This was primarily due to our mix of customers served in 2025 as compared to 2024 and our strategic focus to earn larger orders from our customers as we strive to be their supplier of choice by serving their custom parts needs through the comprehensive offer of our factory and the Protolabs Network. Our revenue per customer contact grew 13.3% as compared to 2024.

Previous wording

By product line, our revenue decrease was driven by a 4.8% decrease in Injection Molding revenue, a 7.7% decrease in Sheet Metal revenue, a 0.6% decrease in 3D Printing revenue and a 14.4% decrease in Other Revenue, which was partially offset by a 4.4% increase in CNC Machining revenue, in each case for 2024 compared with 2023.

Current wording

By product line, our revenue increase was driven by a 17.6% increase in CNC Machining revenue, a 12.4% increase in Sheet Metal revenue, and a 8.6% increase in Other Revenue, which was partially offset by a 4.1% decrease in 3D Printing revenue, and 1.4% decrease in Injection Molding revenue, in each case for 2025 compared with 2024.

Previous wording

Cost of Revenue. Cost of revenue decreased $4.2 million, or 1.5%, for 2024 compared to 2023, which was more than the rate of revenue decrease of 0.6% for 2024 compared to 2023. The decrease in the cost of revenue of$4.2 million was driven by reductions in headcount and overtime leading to lower personnel and related costs of $4.1 million in our digital factory business and $0.1 million in other operating costs in 2024 compared with 2023. The cost reductions in our digital manufacturing business were the result of focused management of resources aligned to order volumes, partially supported by increased automation.

Current wording

Cost of Revenue. Cost of revenue increased $18.3 million, or 6.6%, for 2025 compared to 2024, which was more than the rate of revenue increase of 6.4% for 2025 compared to 2024. The increase in the cost of revenue of $18.3 million was driven by higher revenue volumes resulting in an increase of $12.3 million in raw material and production and fulfillment related costs and $7.6 million in personnel related costs, primarily due to incentive compensation related to our annual short-term incentive compensation plan, overtime and medical related costs in 2025 compared with 2024, partially offset by decreases in equipment and facility-related and other costs of $1.6 million.

Previous wording

Gross Profit and Gross Margin. Gross profit increased to $223.2 million in 2024 from $222.0 million in 2023. Gross margin increased to 44.6% of revenue in 2024 from 44.1% in 2023, primarily due to focused management of resources aligned to order volumes, partially supported by increased automation.

Current wording

Gross Profit and Gross Margin. Gross profit increased to $237.1 million in 2025 from $223.2 million in 2024. Gross margin decreased to 44.5% of revenue in 2025 from 44.6% in 2024.

Previous wording

Research and Development. Our research and development expense increased $1.2 million, or 2.9%, for 2024 compared to 2023 primarily due to increases of $1.1 million in other operating costs, $0.4 million in professional services and $0.3 million in administrative costs, partially offset by decreases in personnel and related costs of $0.6 million for 2024 compared with 2023.

Current wording

Research and Development. Our research and development expense increased $1.5 million, or 3.7%, for 2025 compared to 2024 primarily due to personnel and related cost increases of $2.2 million, primarily related to incentive compensation related to our annual short-term incentive compensation plan and merit increases, partially offset by decreases of $0.4 million in operating costs and $0.3 million in professional services.

Previous wording

Costs related to disposal and exit activities. Our decision to exit and close certain operations in Germany resulted in $5.6 million in operating expenses during 2024. Operating expenses included $3.3 million of employee severance and $2.3 million related to the write-down of fixed assets. During 2023 we recognized $0.2 million in professional services expenses related to the closure of the Japan business.

Current wording

Costs related to disposal and exit activities. Our decision to exit and close certain operations in Germany resulted in $0.3 million in operating expenses during 2025 primarily related to the write down of fixed assets and other related costs. These items are the result of changes from the estimated amounts accrued in 2024 and the timing of employee separation payments. Costs related to disposal and exit activities for 2024 primarily consisted of $3.3 million of severance and $2.3 million related to the write-down of fixed assets.

Previous wording

Income from operations decreased $8.3 million, or 29.3%, for 2024 compared with 2023. By reportable segment, income from operations for the United States increased $3.6 million for 2024 compared with 2023. Loss from operations for Europe increased $3.0 million for 2024 compared with 2023, which was primarily driven by $5.6 million in operating expenses associated with our decision to exit and close certain operations in Germany. Loss from operations included in Corporate Unallocated and Japan increased $8.9 million for 2024 compared with 2023.

Current wording

Income from operations increased $5.2 million, or 26.1%, for 2025 compared with 2024. By reportable segment, income from operations for the United States increased $12.4 million for 2025 compared with 2024. Loss from operations for Europe increased $1.6 million for 2025 compared with 2024, which was primarily driven by lower revenue volumes, negative operating leverage and $0.3 million in operating expenses associated with our decision to exit and close certain operations in Germany. Loss from operations included in Corporate Unallocated increased $5.6 million for 2025 compared with 2024.

Previous wording

Other (Expense) Income, Net and Provision for Income Taxes

Current wording

Other Income (Expense), Net and Provision for Income Taxes

Previous wording

Other (Expense) Income, Net. We recognized other expense, net of $4.8 million in 2024, an increase of $5.0 million compared to other income, net of $0.2 million for 2023. Other expense, net for 2024 primarily consisted of $5.4 million of interest income on investments and other income, partially offset by $0.4 million of foreign currency losses and $0.2 million of interest expense and other expenses. Other income, net for 2023 primarily consisted of $3.9 million foreign currency translation loss from the completion on the closure of our Japan business and $1.1 million of interest expense, which was partially offset by a $3.3 million of interest income on investments and $1.5 of other income and gains on foreign currency.

Current wording

Other Income (Expense), Net. We recognized other income, net of $6.0 million in 2025, an increase of $1.2 million compared to other income, net of $4.8 million for 2024. Other expense, net for 2025 primarily consisted of $5.4 million of interest income on investments and other income and $0.6 million of foreign currency and other gains. Other income, net for 2024 primarily consisted of $5.4 million of interest income on investments and other income, partially offset by $0.4 million of foreign currency losses and $0.2 million of interest expense and other expenses.

Previous wording

Provision for Income Taxes. Our income tax provision decreased by $2.7 million for 2024 compared to 2023. The decrease in the provision is primarily due to a release of tax reserves arising from a successful audit closure, and a reduction in deferred tax liabilities from being revalued at a lower state tax rate, partially offset by an increase in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances. Our effective tax rate of 32.7% for 2024 decreased 5.7% compared to 38.4% for the same period in 2023, primarily due to a release of tax reserves arising from a successful audit closure, and a reduction in deferred tax liabilities from being revalued at a lower state tax rate, partially offset by an increase in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances.

Current wording

Provision for Income Taxes. Our income tax provision increased by $1.7 million for 2025 when compared to 2024. The increase in the provision is primarily due to an increase in operating income, as well as 2024 including a one-time reduction in deferred tax liabilities from being revalued at a lower state tax rate, that did not repeat in 2025. Our effective tax rate of 31.6% for 2025 decreased 1.1% compared to 32.7% for the same period in 2024, primarily due to a decrease in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as a decrease in tax expense from the vesting of restricted stock and the exercise of stock options, partially offset by 2024 including a one-time reduction in deferred tax liabilities from being revalued at a lower state tax rate, that did not repeat in 2025.

Previous wording

We finance our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $89.1 million as of December 31, 2024, an increase of $5.3 million from December 31, 2023. The increase in our cash was primarily due to cash generated through operations of $77.8 million, which was partially offset by cash used in investing activities of $13.6 million, consisting primarily of net purchases of property, equipment and other capital assets of $9.1 million and net purchases of marketable securities of $4.4 million, and cash used in financing activities of $58.6 million, primarily for repurchases of common stock of $60.3 million and purchases of shares withheld for tax obligations of $2.0 million, which was partially offset by cash proceeds from the issuance of common stock from equity plans of $4.0 million. We had cash and cash equivalents of $83.8 million as of December 31, 2023, an increase of $27.2 million from December 31, 2022. The increase in our cash was primarily due to cash generated through operations of $73.3 million, which was partially offset by cash used in investing activities $4.6 million, consisting primarily of net purchases of property, equipment and other capital assets of $27.4 million, partially offset by proceeds from the maturity of marketable securities of $23.9 million, and cash used in financing activities of $41.9 million, primarily for repurchases of common stock of $44.0 million.

Current wording

We finance our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $110.8 million as of December 31, 2025, an increase of $21.8 million from December 31, 2024. The increase in our cash was primarily due to cash generated through operations of $74.5 million, which was partially offset by cash used in financing activities of $40.4 million, primarily for repurchases of common stock of $43.0 million and purchases of shares withheld for tax obligations of $3.4 million, which was partially offset by cash proceeds from the issuance of common stock from equity plans of $6.3 million and cash used in investing activities of $13.4 million, consisting primarily of net purchases of property, equipment and other capital assets of $14.0 million, partially offset by net proceeds from marketable securities of $0.6 million. We had cash and cash equivalents of $89.1 million as of December 31, 2024, an increase of $5.3 million from December 31, 2023. The increase in our cash was primarily due to cash generated through operations of $77.8 million, which was partially offset by cash used in investing activities of $13.6 million, consisting primarily of net purchases of property, equipment and other capital assets of $9.1 million and net purchases of marketable securities of $4.4 million, and cash used in financing activities of $58.6 million, primarily for repurchases of common stock of $60.3 million and purchases of shares withheld for tax obligations of $2.0 million, which was partially offset by cash proceeds from the issuance of common stock from equity plans of $4.0 million.

Previous wording

As of December 31, 2024, the amount of cash and cash equivalents held by foreign subsidiaries was $12.1 million. Our intent is to continue to reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations. We believe that our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our working capital expenditure requirements for at least the next 12 months.

Current wording

As of December 31, 2025, the amount of cash and cash equivalents held by foreign subsidiaries was $9.3 million. Our intent is to continue to reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations. We believe that our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our working capital expenditure requirements for at least the next 12 months.

Previous wording

Cash flow from operating activities of $73.3 million during 2023 primarily consisted of net income of $17.2 million, adjusted for certain non-cash items, including depreciation and amortization of $37.5 million, stock-based compensation expense of $16.0 million, foreign currency translation losses of $3.9 million, interest on finance lease obligations of $1.1 million and changes in operating asset and liabilities and other items totaling $5.2 million, which were partially offset by changes in deferred taxes of $7.7 million. The cash flow from operating activities during 2023 compared to 2022 increased $11.2 million primarily due to changes in operating assets and liabilities and other items of $7.2 million, increases in deferred taxes of $1.8 million, increases in interest on finance lease obligations of $1.1 million and increases in net income of $120.7 million, which were partially offset by decreases in stock-based compensation of $1.6 million and loss on impairment of goodwill of $118.0 million.

Current wording

Cash flow from operating activities of $74.5 million during 2025 primarily consisted of net income of $21.2 million, adjusted for certain non-cash items, including depreciation and amortization of $33.8 million, stock-based compensation expense of $15.7 million, deferred taxes of $2.9 million, non-cash fixed asset impairment charges primarily related to the exit of certain operations in Germany $0.4 million, and changes in operating assets and liabilities and other items totaling $0.3 million. The cash flow from operating activities during 2025 compared to 2024 decreased $3.3 million primarily due to changes in operating assets and liabilities and other of $10.6 million, a decrease in non-cash fixed impairment charges primarily related to certain operations in Germany during 2024 of $2.1 million, a decrease in depreciation and amortization of $2.0 million, decreases in stock-based compensation of $1.3 million, which were partially offset by increases in deferred taxes of $8.1 million and net income of $4.6 million.

Previous wording

Cash flow from operating activities of $77.8 million during 2024 primarily consisted of net income of $16.6 million, adjusted for certain non-cash items, including depreciation and amortization of $35.8 million, stock-based compensation expense of $17.0 million, changes in operating assets and liabilities and other items totaling $11.0 million and non-cash fixed asset impairment charges primarily related to the exit of certain operations in Germany $2.6 million, which were partially offset by changes in deferred taxes of $5.2 million. The cash flow from operating activities during 2024 compared to 2023 increased $4.6 million primarily due to changes in operating assets and liabilities of $5.4 million, non-cash fixed impairment charges primarily related to certain operations in Germany of $2.6 million, increases in deferred taxes of $2.5 million, increases in stock-based compensation of $1.0 million and other items of $0.3 million, which were partially offset by decreases in foreign currency translation losses of $3.9 million, depreciation and amortization of $1.7 million, interest on finance lease obligations of $1.0 million and net income of $0.6 million.

Current wording

Cash flow from operating activities of $77.8 million during 2024 primarily consisted of net income of $16.6 million, adjusted for certain non-cash items, including depreciation and amortization of $35.8 million, stock-based compensation expense of $17.0 million, changes in operating asset and liabilities and other items totaling $11.0 million and non-cash fixed asset impairment charges related to the exit of certain operations in Germany of $2.6 million, which were partially offset by changes in deferred taxes of $5.2 million. The cash flow from operating activities during 2024 compared to 2023 increased $4.6 million primarily due to changes in operating assets and liabilities of $5.4 million, non-cash fixed asset impairment charges primarily related to certain operations in Germany of $2.6 million, increases in deferred taxes of $2.5 million, increases in stock-based compensation of $1.0 million and other items of $0.3 million, which were partially offset by decreases in foreign currency translation losses of $3.9 million, depreciation and amortization of $1.7 million, interest on finance lease obligations of $1.0 million and net income $0.6 million.

Previous wording

Cash used in investing activities was $4.6 million for the year ended December 31, 2023, consisting of $27.4 million for the net purchases of property, equipment and other capital assets, $1.0 million in other investing activities, which were partially offset by $23.9 million of net proceeds from maturities of marketable securities.

Current wording

Cash used in investing activities was $13.4 million for the year ended December 31, 2025, consisting of $14.0 million for the net purchases of property, equipment and other capital assets, partially offset by $0.6 million in net proceeds from maturities of marketable securities.

Previous wording

Cash used in investing activities was $13.6 million for the year ended December 31, 2024, consisting of $9.1 million for the net purchases of property, equipment and other capital assets and $4.4 million in net purchases of marketable securities.

Current wording

Cash used in investing activities was $13.6 million for the year ended December 31, 2024, consisting of $9.1 million for the net purchases of property, equipment and other capital assets and $4.4 million of net purchases of marketable securities.

Previous wording

Cash used in financing activities was $41.9 million for the year ended December 31, 2023, consisting of $44.0 million in repurchases of common stock, $1.4 million in shares withheld for tax obligations associated with equity transactions, and $0.3 million for repayments of finance lease obligations, which were partially offset by $3.8 million in proceeds from issuance of common stock from equity plans.

Current wording

Cash used in financing activities was $40.4 million for the year ended December 31, 2025, consisting of $43.0 million in repurchases of common stock, $3.4 million in shares withheld for tax obligations associated with equity transactions, and $0.3 million for repayments of finance lease obligations, which were partially offset by $6.3 million in proceeds from issuance of common stock from equity plans.

Previous wording

As of December 31, 2024, our contractual obligations are $3.5 million related to current and long-term operating and finance lease liabilities and $8.7 million related to unsatisfied performance obligations for revenue generating contracts with an original expected length of one year or less.

Current wording

As of December 31, 2025, our contractual obligations are $3.0 million related to current and long-term operating and finance lease liabilities and $9.6 million related to unsatisfied performance obligations for revenue generating contracts with an original expected length of one year or less.

Previous wording

We recognize revenue for our internal and outsourced manufacturing operations in accordance with ASC 606, Revenue from Contracts with Customers. We manufacture custom parts to specific customer orders that have no alternative use to us, and we believe there is a legally enforceable right to payment for performance completed to date on internally and outsourced manufactured parts. For manufactured parts that meet these two criteria, we will recognize revenue over time. Revenue is recognized over time using the input method based on time in production as a percentage of total estimated production time to measure progress toward satisfying performance obligations using the estimated total time necessary to complete the parts per the customer's order and an estimate of inventory and production costs incurred to date. The majority of our CNC machining, 3D printing, and sheet metal contracts have a single performance obligation. The majority of our injection molding contracts have multiple performance obligations including one obligation to produce the mold and a second obligation to produce parts. For injection molding contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling price based on the price charged to customers.

Current wording

We recognize revenue for our internal and outsourced manufacturing operations in accordance with ASC 606, Revenue from Contracts with Customers. We manufacture custom parts to specific customer orders that have no alternative use to us, and we believe there is a legally enforceable right to payment for performance completed to date on internally and outsourced manufactured parts. For manufactured parts that meet these two criteria, we will recognize revenue over time. Revenue is recognized over time using the input method based on time in production as a percentage of total estimated production time to measure progress toward satisfying performance obligations using the estimated total time necessary to complete the parts per the customer's order and an estimate of inventory and production costs incurred to date.

Previous wording

Goodwill is tested for impairment annually as of the first day of the fourth quarter, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. In performing the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, but are not limited to, economic, market and industry conditions, cost factors and overall financial performance of the reporting unit. If after assessing these qualitative factors, the Company determines it is "more-likely-than not" that the fair value is less than the carrying value, a quantitative assessment of goodwill is required. The quantitative impairment test requires judgment, including the identification of reporting units, the assignment of assets, liabilities and goodwill to reporting units, and the determination of fair value of each reporting unit. The impairment test requires the comparison of the fair value of each reporting unit with its carrying amount, including goodwill. In performing the impairment test, we determined the fair value of our reporting units through the income approach by using discounted cash flow (DCF) analyses. Determining fair value requires us to make judgments about appropriate discount rates, perpetual growth rates and the amount and timing of expected future cash flows. The cash flows employed in the DCF analysis for each reporting unit are based on the reporting unit's budget, long-term business plan and recent operating performance. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions. Given the inherent uncertainty in determining the assumptions underlying a DCF analysis, actual results may differ from those used in our valuations. As a result of the fiscal year 2022 analysis, which used the quantitative assessment, a $118.0 million impairment related to the Europe reporting unit was identified, which represented a write-off of all Europe goodwill, and recorded during the year ended December 31, 2022. As a result of the fiscal years 2024 and 2023 analyses, which used the qualitative assessment, there were no impairments recorded during the years ended December 31, 2024 and 2023.

Current wording

Goodwill is tested for impairment annually as of the first day of the fourth quarter, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. In performing the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, but are not limited to, economic, market and industry conditions, cost factors and overall financial performance of the reporting unit. If after assessing these qualitative factors, the Company determines it is "more-likely-than not" that the fair value is less than the carrying value, a quantitative assessment of goodwill is required. The quantitative impairment test requires judgment, including the identification of reporting units, the assignment of assets, liabilities and goodwill to reporting units, and the determination of fair value of each reporting unit. The impairment test requires the comparison of the fair value of each reporting unit with its carrying amount, including goodwill.

Previous wording

We recognize stock-based compensation expense on a straight-line basis over the requisite service period. We recorded stock-based compensation expense relating to stock options, restricted stock awards, performance stock units and our ESPP of $17.0 million, $16.0 million and $17.5 million during the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had $3.6 million of unrecognized stock-based compensation costs related to unvested stock options that are expected to be recognized over a weighted average period of 2.5 years. We issued options to purchase 140,405, 186,804 and 118,434 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had $18.4 million of unrecognized stock-based compensation costs related to unvested restricted stock, which is expected to be recognized over a weighted average period of 2.6 years. We issued restricted stock awards of 377,961, 410,682 and 315,432 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had $4.2 million of unrecognized stock-based compensation costs related to unvested performance stock, which is expected to be recognized over a weighted average period of 1.7 years. We issued performance stock awards of 79,436, 71,295 and 35,697 shares of our common stock during the years ended December 31, 2024, 2023 and 2022, respectively.

Current wording

We recognize stock-based compensation expense on a straight-line basis over the requisite service period. We recorded stock-based compensation expense relating to stock options, restricted stock awards, performance stock units and our ESPP of $15.7 million, $17.0 million and $16.0 million during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we had $2.7 million of unrecognized stock-based compensation costs related to unvested stock options that are expected to be recognized over a weighted average period of 2.8 years. We issued options to purchase 147,664, 140,405 and 186,804 shares of our common stock during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we had $16.6 million of unrecognized stock-based compensation costs related to unvested restricted stock, which is expected to be recognized over a weighted average period of 2.7 years. We issued restricted stock awards of 312,953, 377,961 and 410,682 shares of our common stock during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we had $6.6 million of unrecognized stock-based compensation costs related to unvested performance stock, which is expected to be recognized over a weighted average period of 2.0 years. We issued performance stock awards of 160,939, 79,436 and 71,295 shares of our common stock during the years ended December 31, 2025, 2024 and 2023, respectively.

Previous wording

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. The Company records penalties and interest related to unrecognized tax benefits in income taxes in the Company’s Consolidated Statements of Income. Including interest and penalties, we have established a liability for uncertain tax positions of $4.6 million as of December 31, 2024.

Current wording

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. The Company records penalties and interest related to unrecognized tax benefits in income taxes in the Company’s Consolidated Statements of Income. Including interest and penalties, we have established a liability for uncertain tax positions of $4.3 million as of December 31, 2025.

Previous wording

The effective tax rate decreased by 5.7% for the year ended December 31, 2024 when compared to 2023 primarily due to a release of tax reserves arising from a successful audit closure, and a reduction in deferred tax liabilities from being revalued at a lower state tax rate, partially offset by an increase in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances.

Current wording

The effective tax rate decreased by 1.1% for the year ended December 31, 2025 when compared to 2024 primarily due to a decrease in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as a decrease in tax expense from the vesting of restricted stock and the exercise of stock options, partially offset by 2024 including a one-time reduction in deferred tax liabilities from being revalued at a lower state tax rate, that did not repeat in 2025.

Previous wording

Recently issued accounting pronouncements not yet adopted

Current wording

See Item 8 of Part II, "Financial Statements and Supplementary Data - Note 2 — Summary of Significant Accounting Policies - Recently adopted accounting pronouncements and Recently issued accounting pronouncements."