Proto Labs Inc

Note 1 —Nature of Business

Organization and business

Proto Labs, Inc. and its subsidiaries (Proto Labs, the Company, we, us, or our) is a digital manufacturer of parts. The Company utilizes injection molding, computer numerical control (CNC) machining, 3D printing and sheet metal fabrication to manufacture custom parts for its customers. The Company's customers conduct nearly all their business over the internet. The Company targets its 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, 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. The Company has established 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 included the closure of the Company's 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. The Company will continue offering all its manufacturing services to customers across Europe, including injection molding and metal 3D printing. Through the acquisition of Hubs in 2021, the Company provides its customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia, complementing its in-house manufacturing. Proto Labs, Inc. is headquartered in Maple Plain, Minnesota. The Company’s subsidiaries are:

Note 2 —Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as listed within “Organization and business” above. All intercompany accounts and transactions have been eliminated in consolidation.

Comprehensive income (loss)

Components of comprehensive income (loss) include net income, foreign currency translation adjustments and net unrealized gains and losses on investments in securities. Comprehensive income (loss) is disclosed in the accompanying Consolidated Statements of Comprehensive Income and Consolidated Statements of Shareholders’ Equity.

Accounting estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include cash and other investments, including marketable securities, with maturities of three months or less at the date of purchase. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses on such accounts.

Marketable securities

Marketable securities are categorized as available-for-sale and are recorded at fair value. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. The classification of marketable securities as current or non-current is dependent upon the security’s maturity date. Securities with maturities of three months or less at the time of purchase are categorized as cash equivalents as described above.

Accounts receivable and allowance for credit losses

Accounts receivable are reported at the invoiced amount less an allowance for credit losses. As of each balance sheet date, the Company evaluates its accounts receivable and establishes an allowance for credit losses based on a combination of specific customer circumstances and credit conditions taking into account the history of write-offs and collections. A receivable is considered past due if payment has not been received within the period agreed upon in the invoice. Accounts receivable are written off after all collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received.

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.

Property, equipment and leasehold improvements

Property, equipment and leasehold improvements are stated at cost. Major improvements that substantially extend an asset’s useful life are capitalized. Repairs, maintenance and minor improvements are charged to operations as incurred. Depreciation, including amortization of leasehold improvements and assets recorded under capital leases, is calculated using the straight-line method over the estimated useful lives of the individual assets and ranges from 3 to 39 years. Manufacturing equipment is depreciated over 3 to 15 years, office furniture and equipment are depreciated over 3 to 7 years, computer hardware and software are depreciated over 3 to 5 years, building costs are depreciated over 39 years, leasehold improvements are depreciated over the estimated lives of the related assets or the life of the lease, whichever is shorter, and building and land improvements are depreciated over 10 to 39 years. Assets not in service are not depreciated until the asset is put into use.

The Company follows ASC 350-40, Internal-Use Software, in accounting for internally developed software.

Goodwill

The Company recognizes goodwill in accordance with ASC 350, Intangibles—Goodwill and Other. Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is allocated to the Company's reporting units, which are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management. The Company's reporting units are the United States and Europe. Goodwill is not amortized.

Goodwill is tested for impairment annually as of the first day of the fourth quarter, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. 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.

If performing the quantitative impairment test, the Company would determine the fair value of its reporting units through the income approach by using discounted cash flow (DCF) analyses. Determining fair value requires the Company 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 the Company's valuations.

For the fiscal year 2025 annual impairment assessment, the Company performed a qualitative assessment for the United States reporting unit, since it is the only reporting unit with goodwill, and determined there were no indicators of impairment and it was more likely than not that the fair value of the United States reporting unit exceeded its carrying value.

Other Intangible Assets

Other intangible assets include software technology, customer relationships and other intangible assets acquired from other independent parties. Other intangible assets with a definite life are amortized over a period ranging fromtwo to 12 years on a straight line basis, and are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows generated by the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value.

Accounting for long-lived assets

The Company periodically reviews the carrying amount of its property, equipment and leasehold improvements to determine if circumstances exist indicating an impairment or if depreciation periods should be modified. If facts or circumstances indicate that an impairment may exist, the Company will prepare a projection of the undiscounted future cash flows of the specific assets to determine if the assets are recoverable. If impairment exists based on these projections, an adjustment will be made to reduce the carrying amount of the specific assets to fair value. During the years ended December 31, 2025 and 2024, the Company recognized $0.2 million and $2.3 million, respectively, related to write-down of fixed assets for certain manufacturing operations in Germany.

Revenue recognition

The Company recognizes revenue for its internal and outsourced manufacturing operations in accordance with ASC 606, Revenue from Contracts with Customers. The Company manufactures custom parts to specific customer orders that have no alternative use to the Company, and the Company believes 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, the Company 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 the Company’s 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, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling price based on the price charged to customers.

Leases

The Company accounts for leases in accordance with ASC 842, Leases, which requires the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating and finance leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease assets, current operating lease liabilities and long-term operating lease liabilities in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at the commencement date. Finance leases are included in finance lease assets, current finance lease liabilities and long-term finance lease liabilities in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at commencement date. The majority of the Company’s leases do not provide an implicit rate of return, therefore, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease agreements that contain non-lease components, with the exception of certain real estate leases, are accounted for as a single lease component.

The Company has operating leases for office space, manufacturing facilities and certain company vehicles and equipment and finance leases for certain company equipment and manufacturing facilities. The leases have remaining lease terms of less thanone year tofive years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As of December 31, 2025, the operating lease liability does not include any options to extend or terminate leases.

Income taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (ASC 740). Under this method, the Company determines tax assets and liabilities based upon the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities and equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax basis of assets or liabilities and their reported amounts in the financial statements. Because the Company assumes that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, giving rise to a deferred tax asset or liability. The Company establishes a valuation allowance for any portion of its deferred tax assets that are not at a level of "more-likely-than-not" to be recognized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by requiring that individual tax positions are recorded only when they meet a "more-likely-than-not" criterion. 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.

Stock-based compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation (ASC 718). Under the fair value recognition provisions of ASC 718, the Company measures stock-based compensation cost at the grant date fair value and recognizes the compensation expense over the requisite service period, which is the vesting period, using a straight-line attribution method. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company accounts for forfeitures as they occur. Ultimately, the total expense recognized over the vesting period will only be for those awards that vest. The Company’s awards are not eligible to vest early in the event of retirement, however, the awards vest early in the event of a change in control.

In determining the compensation cost of the options granted, the fair value of options granted has been estimated on the date of grant using the Black-Scholes option-pricing model.

Advertising costs

Advertising is expensed as incurred and was approximately $15.3 million, $14.3 million and $13.8 million for the years ended December 31, 2025,2024 and 2023, respectively.

Research and development

Research and development expenses consist primarily of personnel and outside service costs related to the development of new processes and product lines, enhancements 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. Research and development costs were approximately $42.8 million, $41.3 million and $40.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Foreign currency translation/transactions

The Company translated the balance sheets of its foreign subsidiaries at period-end exchange rates and the income statement at the average exchange rates in effect throughout the period. The Company has recorded the translation adjustment as a separate component of consolidated shareholders’ equity. Foreign currency transaction gains and losses are recognized in the Consolidated Statements of Comprehensive Income.

Recently adopted accounting pronouncements

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The Company adopted this guidance on a prospective basis for its annual year ending December 31, 2025 and all interim periods thereafter. Prior period disclosures have not been adjusted to reflect the new disclosure requirements. See Note 15 for further detail.

Recently issued accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU No. 2024-03 ("ASU 2024-03"), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve disclosures about a public business entity's expenses, primarily through additional disaggregation of income statement expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating ASU 2024-03 to determine the impact on the Company's disclosures.

In July 2025, the FASB issued ASU No. 2025-05 ("ASU 2025-05"), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivables and Contract Assets, which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivables and contract assets. ASU 2025-05 is effective for annual and interim periods beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating ASU 2025-05 to determine the impact on the Company's financial statements and disclosures.

In September 2025, the FASB issued ASU No. 2025-06 ("ASU 2025-06"), Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which updates the cost capitalization threshold for internal-use software development costs by removing all references to software project development stages and provides new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. ASU 2025-06 is effective for annual and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating ASU 2025-06 to determine the impact on the Company's financial statements and disclosures.

In December 2025, the FASB issued ASU No. 2025-12 ("ASU 2025-12"), Codification Improvements, to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating ASU 2025-12 to determine the impact on the Company's financial statements and disclosures.

Note 3 –Revenue

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company provides quality, quick-turn prototyping and on-demand manufacturing services. As a result, the majority of revenue recognized in a reporting period is based on completed, invoiced contracts.

The Company manufactures parts that have no alternative use to the Company since the parts are custom made to specific customer orders, and the Company believes there is a legally enforceable right to payment for performance completed to date on these manufactured parts. For manufactured parts that meet these two criteria, the Company 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 value of unbilled receivables related to the performance on manufactured parts not yet completed as of December 31, 2025 and 2024 was $12.1 million and $10.1 million, respectively, recorded within accounts receivable, net of allowance for credit losses. The value of unsatisfied performance obligations for contracts with an original expected length of one year or less as of December 31, 2025 and 2024 was $9.6 million and $8.7 million, respectively, recorded within accrued liabilities.

Revenue by geographic region for the years ended December 31, 2025, 2024 and 2023 was as follows:

Revenue by product line for the years ended December 31, 2025, 2024 and 2023 was as follows:

The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within marketing and sales expenses.

Note 4 –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 the 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. For the years ended December 31, 2025, 2024 and 2023 respectively,285,731,451,029 and 263,992 anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding.

The following table presents the calculation of net income per basic and diluted share attributable to common shareholders:

Note 5 –Goodwill and Other Intangible Assets

There wereno changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024.

The Euro denominated goodwill had been translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that was recorded as a component of Other Comprehensive Income.

Intangible assets other than goodwill for the years ended December 31, 2025 and 2024 were as follows:

Amortization expense for intangible assets for the years ended December 31, 2025, 2024 and 2023 was $3.7 million, $3.7 million and $5.9 million, respectively. 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. For the years ended December 31, 2025, 2024 and 2023 the foreign currency translation adjustment was $0.5 million, $2.2 million and $1.3 million, respectively.

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

Note 6 –Fair Value Measurements

ASC 820, 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 which 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. The Company’s cash equivalents measured at fair value consist 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 tables summarizes financial assets as of December 31, 2025 and 2024 measured at fair value on a recurring basis:

Note 7 –Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. As of December 31, 2025 and 2024, the securities are categorized as available-for-sale and are recorded at fair value.

Information regarding the Company’s short-term and long-term marketable securities as of December 31, 2025 and 2024 is as follows:

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. government agency securities, U.S. municipal securities, commercial paper and certificates of deposit 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 December 31, 2025 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.

Note 8 –Property and Equipment

Property and equipment consists of the following:

Depreciation expense for the years ended December 31, 2025, 2024 and 2023 was $30.1 million, $32.1 million and $31.6 million, respectively.

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 consists of the following:

Note 10 –Financing Obligations

The Company hadno financing obligations as of December 31, 2025 and 2024.

Note 11 –Employee Benefit Plans

The Company maintains a 401(k) retirement plan that covers employees in the United States. Under the plan, a full-time or regular part-time (over 20 hours/week) employee becomes a participant after completing three months of employment. Employees may elect to contribute up to 50 percent of regular gross pay, subject to federal law limits on the dollar amount that participants may contribute to the plan, each calendar year. The Company matches part of the employee contributions and may make a discretionary contribution to the plan. Total employer contributions were approximately $4.5 million, $4.3 million and $4.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company also sponsors defined contribution retirement plans that covers the employees in the United Kingdom and the Netherlands. Total employer contributions in the United Kingdom were approximately $0.5 million in each of the years ended December 31, 2025, 2024 and 2023, respectively. Total employer contributions in the Netherlands were approximately $0.7 million for the year ended December 31, 2025 and $0.6 million in each of the years December 31, 2024 and 2023 respectively.

Note 12 –Stock-Based Compensation

On July 8, 2022, the board of directors approved the Proto Labs, Inc. 2022 Long-Term Incentive Plan, which was approved by the Company's shareholders at a Special Meeting of Shareholders on August 29, 2022, and subsequently amended and restated by the Company's shareholders at the Annual Meeting of Shareholders on May 23, 2024 (as amended and restated, and subsequently further amended, the 2022 Plan) to increase the number of shares available for issuance pursuant to awards under the 2022 Plan by an additional 430,000 shares, add a minimum vesting requirement, and extend the expiration date so that the term of the 2022 Plan runs forten years from the date of the shareholder approval. On May 20, 2025, the Company's shareholders approved an amendment to the 2022 Plan to increase the number of shares available for issuance pursuant to awards under the 2022 Plan by an additional 296,000 shares. 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 often years from the date of grant. The compensation and talent 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 and talent 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.

The Company also has outstanding awards under the 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), although the plan expired in February 2022 and no additional awards have since been or will be made under the 2012 Plan. The 2012 Plan provided the Company the ability to grant stock options, SARs, restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan that subsequently expired, were forfeited or cancelled, or settled in cash after August 29, 2022 became available for awards under the 2022 Plan.

On May 23, 2025, the Company granted one-time inducement awards (the Inducement Awards) within the meaning of the New York Stock Exchange Listed Company Manual Section 303A.08 to the Company's incoming Chief Executive Officer. The Inducement Awards were not granted under the 2022 Plan, but have the same terms and conditions as equity awards granted under the 2022 Plan, except as otherwise provided in the award agreements.

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 at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides forsix-month offering periods with a single purchase period, and 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. The Company determines the fair value stock-based compensation related to its ESPP in accordance with ASC 718 using the component measurement approach and the Black-Scholes standard option pricing model.

Employees purchased 111,844 and 141,743 shares of common stock under the ESPP at an average exercise price of $33.30 and $27.91 during 2025 and 2024, respectively. As of December 31, 2025,490,306 shares remained available for future issuance under the ESPP.

The Company determines its stock-based compensation in accordance with ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors based on fair value.

Determining the appropriate fair value model and calculating the fair value of stock option grants requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. Stock-based compensation expense is calculated using the Company’s best estimates, which involve inherent uncertainties and the application of management’s judgment. Significant estimates include its expected term and stock price volatility.

The expected term of stock options is estimated from the vesting period of the award and represents the weighted average period that the Company's stock options are expected to be outstanding. The Company estimates the volatility of its stock price based on the historic volatility of its common stock. The Company bases the risk-free interest rate that it uses in the Black-Scholes option pricing model on U.S. Treasury instruments with maturities similar to the expected term of the award being valued. The Company has never paid, and does not anticipate paying, any cash dividends in the foreseeable future and, therefore, the Company uses an expected dividend yield of zero in the option pricing model. The Company accounts for forfeitures as they occur. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period.

The following table summarizes stock-based compensation expense for the years ended December 31, 2025, 2024 and 2023, respectively:

Stock Options

The following table provides the assumptions used in the Black-Scholes option pricing model for the years ended December 31, 2025, 2024 and 2023:

The following table summarizes stock option activity and the weighted average exercise price for the years ended December 31, 2025, 2024 and 2023:

The outstanding options have a term of 10 years. For employees, options that have been granted become exercisable ratably over the vesting period, which is generally afour-year period, beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, options generally become exercisable in full on the first anniversary of the grant date.

The total intrinsic value of options exercised during the years ended December 31, 2025 and 2024, was $1.1 million and less than $0.1 million for each period respectively. There wereno options exercised during the year ended December 31, 2023. The aggregate intrinsic value represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices.

For options outstanding at December 31, 2025, the weighted-average remaining contractual term was 6.4 years and the aggregate intrinsic value was $3.7 million. For options exercisable at December 31, 2025, the weighted-average remaining contractual term was 4.3 years and the aggregate intrinsic value was $1.3 million. Refer to the table below for additional information.

The following table summarizes information about stock options outstanding at December 31, 2025:

The fair value of share-based payment transactions is recognized in the Consolidated Statements of Comprehensive Income. As of December 31, 2025, there was $2.7 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 2.8 years. The total fair value of options vested was $2.3 million, $2.3 million and $1.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Restricted Stock

The 2012 Plan provides for the award of restricted stock or restricted stock units. Restricted stock awards are share settled and restrictions lapse ratably over the vesting period, which is generally afour-year period, beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, restrictions generally lapse in full on the first anniversary of the grant date.

The following table summarizes restricted stock activity for the years ended December 31, 2025, 2024 and 2023:

As of December 31, 2025, there was $16.6 million of unrecognized compensation expense related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 2.7 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 athree-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 outstanding PSUs at December 31, 2025 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 for the years ended December 31, 2025, 2024 and 2023:

1 Includes a target number of 54,320 PSUs granted as part of the May 23, 2025, Inducement Awards,27,160 of which have the same market condition as the PSUs granted under the 2022 Plan as described above, and 27,160 of which also include a performance condition with anywhere between 0 percent and 100 percent of the target number capable of being achieved duringtwo six-month performance periods depending on revenue and then anywhere between 0 percent and 200 percent of such achieved PSUs capable of being earned and vesting during athree-year performance period depending on the Company's three-year cumulative total shareholder return performance relative to an index and the award recipient's continued employment.

As of December 31, 2025, there was $6.6 million of unrecognized compensation expense related to unvested performance stock, which is expected to be recognized over a weighted-average period of 2.0 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the years ended December 31, 2025, 2024 and 2023:

Note 13 –Leases

Supplemental balance sheet information related to leases was as follows:

Lease expense is recognized on a straight-line basis over the lease term, with variable payments recognized in the period those payments are incurred. The components of lease expense for the periods reported were as follows:

Maturities of operating and finance lease liabilities as of December 31, 2025 were as follows:

As of December 31, 2025, we haveno operating or finance leases that have not yet commenced.

Weighted average remaining lease term and discount rate was as follows:

Supplemental cash flow information related to leases was as follows:

Note 14 –Accumulated Other Comprehensive Loss

Other comprehensive loss is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities. During the year ended December 31, 2023 we recognized a $3.9 million foreign currency translation loss from the completion on the closure of our Japan business.

The following table presents the changes in accumulated other comprehensive loss balances for the years ended December 31, 2025, 2024 and 2023, respectively:

Note 15 –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 years ended December 31, 2025, 2024 and 2023, the Company recorded an income tax provision of $9.8 million, $8.1 million and $10.7 million, respectively. The effective income tax rate for the years ended December 31, 2025, 2024 and 2023 was 31.6 percent,32.7 percent and 38.4 percent, respectively.

The effective tax rate decreased by 1.1 percent 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.

The provision for income taxes is based on income before income taxes reported for financial statement purposes. The components of income before income taxes are as follows:

Significant components of the provision for income taxes for the following periods are as follows:

A reconciliation of the federal statutory income tax rate to the effective tax rate for fiscal year 2025, after the prospective adoption of ASU 2023-09 is as follows:

1 During the year ended December 31, 2025, the tax effect in this category was primarily driven by state taxes in California (greater than 50 percent).

A reconciliation of the federal statutory income tax rate to the effective tax rate for fiscal years 2024 and 2023 prior to the adoption of ASU 2023-09 is as follows:

Significant components of deferred tax assets and liabilities are as follows:

The Company has recorded no U.S. deferred taxes related to the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2025. Such amounts are intended to be reinvested outside of the United States indefinitely, and it is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings. As of December 31, 2025, the Company hadno accumulated undistributed earnings in non-U.S. subsidiaries.

As of December 31, 2025, the Company had estimated net operating loss carry forwards of $23.0 million for tax purposes. The net operating losses relate to operations in the United Kingdom, Germany and Netherlands. The United Kingdom net operating losses may be carried forward without any time limitations, but are limited to £5 million, plus 50 percent of taxable income exceeding £5 million. Germany net operating losses may be carried forward without any time limitations but are limited to €1 million, plus 60 percent of taxable income exceeding €1 million. Netherlands net operating losses may be carried forward without any time limitations, but are limited to €1 million, plus 50 percent of taxable income exceeding €1 million.

As of December 31, 2025, the Company had an estimated Minnesota R&D credit carry forward of $3.7 million available to reduce future income taxes. The Minnesota R&D credit can be carried forward 15 years, with expiration beginning in 2029.

The Company establishes valuation allowances for deferred tax assets when, after consideration of all positive and negative evidence, it is considered "more-likely-than-not" that a portion of the deferred tax assets will not be realized. The Company's valuation allowances of $22.3 million and $21.8 million at December 31, 2025 and 2024, respectively, reduce the carrying value of deferred tax assets associated with certain net operating loss carry forwards and other assets with insufficient positive evidence for recognition. The increase in the valuation allowance is primarily attributable to additional net operating losses generated in 2025.

The Company files a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state, or foreign income tax examinations by tax authorities for years before 2021.

The Company has liabilities related to unrecognized tax benefits totaling $3.1 million and $3.4 million at December 31, 2025 and 2024, 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.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

A reconciliation of cash taxes paid (net of refunds received). All jurisdictions in which cash taxes paid (net of refunds received) were equal to or greater than five percent of total income taxes paid are included below, after the prospective adoption of ASU 2023-09 is as follows:

On July 4, 2025, the U.S. enacted H.R. 1 "A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14", commonly referred to as the One Big Beautiful Bill Act. As a result of the enactment of H.R. 1, the impact to the deferred tax liability and the income tax payable related to the provisions for 100% bonus depreciation for assets placed in service after January 19, 2025 and full expensing of domestic research and experimental expenditures is reflected in our results for year ended December 31, 2025. We do not expect any material change to our ongoing tax rate as a result of this legislation. We continue to evaluate the impacts the new legislation may have on the Company's financial statements.

Note 16 –Litigation

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is a party to any litigation the outcome of which, if determined adversely, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business.

Note 17 –Segment Reporting

The Company’s reportable segments are based on the internal reporting used by the Company’s CEO, who is the chief operating decision maker (CODM), to assess operating performance and make decisions about the allocation of resources. The CODM's primary profit measure for purposes of resource allocation and performance assessment is income (loss) from operations at the segment level. This measure is used to evaluate current-period performance, develop forecasts and budgets, and make decisions about capital and other resource allocations between segments. The Company’s reportable segments are based upon geographic region, consisting of the United States and Europe. The Corporate Unallocated category includes non-reportable segments, as well as research and development and general and administrative costs that are global in nature and that the Company does not allocate directly to its operating segments.

Revenue in the United States and Europe is derived primarily from 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 and lathe-turned customer parts. 3D Printing revenue consists of sales of 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal parts.

The accounting policies of the reportable segments are the same as those described in Note 2 – Summary of Significant Accounting Policies. Intercompany transactions primarily relate to intercontinental activity and have been eliminated and are excluded from the reported amounts. The difference between income (loss) 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.

The following table summarizes selected financial information by reportable segments:

1 Segment expenses consist primarily of raw materials, equipment depreciation, employee compensation including benefits, commissions and stock-based compensation, facilities costs and overhead allocations associated with the manufacturing process for molds and custom parts, marketing programs such as electronic, print and pay-per-click advertising and trade shows and other related costs for our United States and Europe reportable segments. Segment expenses for our Corporate Unallocated reportable segment consist primarily of personnel and outside service costs related to the development of new processes and product lines, enhancements of existing product lines, software developed for internal use, maintenance of internally developed software, quality assurance and testing and employee compensation including benefits, stock-based compensation, professional service fees related to accounting, tax and legal and other related overhead costs.

Total long-lived assets, expenditures for additions to long-lived assets and depreciation and amortization expense are as follows: