Proto Labs Inc
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
PRLB$65.69+4.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001628280-24-020233
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001628280-24-034354
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 69 previous paragraphs and 83 current paragraphs.
46 unchanged; 21 reworded; 8 added; 2 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 5 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Comparison of Six Months Ended June 30, 2024 and 2023
Current report
Revenue
Current report
Gross Profit and Gross Margin. Gross profit increased from $106.9 million in the six months ended June 30, 2023 to $114.0 million in the six months ended June 30, 2024. Gross margin increased from 43.1% in the six months ended June 30, 2023 to 45.0% in the six months ended June 30, 2024.
Current report
Marketing and Sales. Marketing and sales expenses increased $2.3 million, or 5.1%, during the six months ended June 30, 2024 compared to the same period in 2023. The increase was driven by increases in personnel and related costs of $1.3 million, marketing demand generation costs increases of $0.5 million and other operating costs of $0.5 million during the six months ended June 30, 2024 when compared to the same period in 2023.
Current report
Research and Development. Our research and development expenses increased $1.3 million, or 6.3%, during the six months ended June 30, 2024 compared to the same period in 2023 primarily due to personnel and related cost increases of $0.4 million, professional services increases of $0.3 million and other operating cost increases of $0.6 million.
Current report
General and Administrative. Our general and administrative expenses increased $0.3 million, or 0.8%, during the six months ended June 30, 2024 compared to the same period in 2023 primarily due to increases in stock-based compensation of $0.9 million, personnel and related costs increases of $0.8 million and professional services of $0.6 million, partially offset by decreases in amortization costs of $0.7 million, administrative costs decreases of $0.6 million and other operating cost decreases of $0.7 million.
Current report
Other income (loss), net. We recognized other income, net of $2.3 million for the six months ended June 30, 2024, an increase of $4.3 million compared to other loss, net of $2.1 million for the six months ended June 30, 2023. Other income, net for the six months ended June 30, 2024 primarily consisted of $2.6 million in interest income on investments and other income, partially offset by $0.3 million of foreign currency losses. Other loss, net for the six months ended June 30, 2023 primarily consisted of a $3.9 million foreign currency translation loss from the substantial completion on the closure of our Japan business, which was partially offset by $1.8 million in interest income on investments and other income.
Current report
Provision for Income Taxes. Our effective tax rate of 35.0% for the six months ended June 30, 2024 decreased 33.7% compared to 68.7% for the same period in 2023. The decrease in the effective tax rate is primarily due to the prior year one-time tax impact of the foreign currency translation loss from the substantial completion on the closure of our Japan business. Our income tax provision of $5.3 million for the six months ended June 30, 2024 increased $0.3 million compared to our income tax provision of $5.0 million for the six months ended June 30, 2023.
Removed paragraphs (2)
Previous report
Cost of Revenue, Gross Profit and Gross Margin
Previous report
Cost of Revenue, Gross Profit and Gross Margin
Reworded paragraphs (21)
Previous wording
Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as electronic, print and pay-per-click advertising, trade shows and other related overhead. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base and grow revenue.
Current wording
Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing demand generation costs such as electronic, print and pay-per-click advertising, trade shows and other related overhead. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing demand generation costs targeted to increase our customer base and grow revenue.
Previous wording
Stock-based compensation expense included in the statements of operations data above for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Stock-based compensation expense included in the statements of operations data above for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
During the three months ended March 31, 2024, we served 22,466 unique customer contacts, which is a decrease of 3.5% from the same period in 2023. Our customer contacts served decreased compared to an increase in revenue. This is primarily due to 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 our factory and the Protolabs Network provide.
Current wording
During the three months ended June 30, 2024, we served 22,456 unique customer contacts, which is a decrease of 3.9% from the same period in 2023. Our customer contacts served decreased compared to an increase in revenue. This was primarily due to 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.
Previous wording
By product line, our revenue increase was driven by a 3.8% increase in CNC Machining revenue, a 1.2% increase in 3D Printing revenue and a 1.4% increase in Injection Molding revenue, which was partially offset by a 16.4% decrease in Sheet Metal revenue and a 31.6% decrease in Other Revenue, in each case for the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
By product line, our revenue increase was driven by a 6.1% increase in CNC Machining revenue, a 1.3% increase in 3D Printing revenue and a 0.5% increase in Injection Molding revenue, which was partially offset by a 0.4% decrease in Sheet Metal revenue and a 46.8% decrease in Other Revenue, in each case for the three months ended June 30, 2024 compared to the same period in 2023.
Previous wording
Gross Profit and Gross Margin. Gross profit increased from $53.8 million in the three months ended March 31, 2023 to $57.5 million in the three months ended March 31, 2024. Gross margin increased from 42.7% in the three months ended March 31, 2023 to 44.9% in the three months ended March 31, 2024.
Current wording
Gross Profit and Gross Margin. Gross profit increased from $53.1 million in the three months ended June 30, 2023 to $56.5 million in the three months ended June 30, 2024. Gross margin increased from 43.4% in the three months ended June 30, 2023 to 45.0% in the three months ended June 30, 2024.
Previous wording
Marketing and Sales. Marketing and sales expenses increased $0.7 million, or 3.2%, during the three months ended March 31, 2024 compared to the same period in 2023. The increase in marketing and sales expenses was primarily driven by increases in personnel and related costs of $0.3 million and marketing program cost of $0.4 million during the three months ended March 31, 2024 when compared to the same period in 2023.
Current wording
Marketing and Sales. Marketing and sales expenses increased $1.6 million, or 7.2%, during the three months ended June 30, 2024 compared to the same period in 2023. The increase in marketing and sales expenses was primarily driven by increases in personnel and related costs of $1.0 million, marketing demand generation costs increases of $0.3 million and other operating costs of $0.3 million during the three months ended June 30, 2024 when compared to the same period in 2023.
Previous wording
Research and Development. Our research and development expenses increased $0.5 million, or 4.6%, during the three months ended March 31, 2024 compared to the same period in 2023 primarily due to increases of $0.2 million in professional services and $0.3 million of other operating costs.
Current wording
Research and Development. Our research and development expenses increased $0.8 million, or 8.1%, during the three months ended June 30, 2024 compared to the same period in 2023 primarily due to increases in personnel and related costs of $0.4 million, $0.2 million in professional services and $0.2 million of other operating costs.
Previous wording
General and Administrative. Our general and administrative expenses decreased $0.5 million, or 3.1%, during the three months ended March 31, 2024 compared to the same period in 2023 primarilydue to decreases of $0.6 million in administrative costs and professional services, $0.4 million in intangible amortization expense and $0.1 million of other operating costs. These decreases were partially offset by increases of personnel and related costs of $0.3 million and $0.3 million stock based compensation costs in the current period.
Current wording
General and Administrative. Our general and administrative expenses increased $0.8 million, or 4.9%, during the three months ended June 30, 2024 compared to the same period in 2023 primarilydue to increases in stock-based compensation of $0.6 million, personnel and related costs increases of $0.5 million and $0.5 million in administrative costs and professional services, partially offset by decreases of $0.4 million in intangible amortization expense and $0.4 million of other operating costs.
Previous wording
Other income, net. We recognized other income, net of $0.9 million for the three months ended March 31, 2024, a decline of $0.4 million compared to other income, net of $1.3 million for the three months ended March 31, 2023. Other income, net for the three months ended March 31, 2024 primarily consisted of $1.1 million in interest income on investments and other income, partially offset by $0.2 million of foreign currency losses. Other income, net for the three months ended March 31, 2023 primarily consisted of a $0.1 million gain on foreign currency and $1.2 million in interest income on investments and other income.
Current wording
Other income (loss), net. We recognized other income, net of $1.4 million for the three months ended June 30, 2024, an increase of $4.7 million compared to other loss, net of $3.4 million for the three months ended June 30, 2023. Other income, net for the three months ended June 30, 2024 primarily consisted of $1.5 million in interest income on investments and other income, partially offset by $0.1 million of foreign currency losses. Other loss, net for the three months ended June 30, 2023 primarily consisted of a $3.9 million foreign currency translation loss from the substantial completion on the closure of our Japan business, partially offset by $0.5 million in interest income on investments and other income.
Previous wording
Provision for Income Taxes. Our effective tax rate of 31.8% for the three months ended March 31, 2024 decreased 15.4% compared to 47.2% for the same period in 2023. The decrease in the effective tax rate is primarily due to adecrease in tax expense from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as adecrease in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $2.5 million for the three months ended March 31, 2024 increased $0.1 million as compared our income tax provision of $2.4 million to the same period in 2023.
Current wording
Provision for Income Taxes. Our effective tax rate of 38.3% for the three months ended June 30, 2024 decreased 78.8% compared to 117.1% for the same period in 2023. The decrease in the effective tax rate is primarily due to the prior year one-time tax impact of the foreign currency translation loss on the closure of our Japan business. Our income tax provision of $2.8 million for the three months ended June 30, 2024 increased $0.2 million as compared to our income tax provision of $2.6 million to the same period in 2023.
Previous wording
Our revenue increased $2.0 million, or 1.6%, for the three months ended March 31, 2024 compared to the same period in 2023. By reportable segment, revenue in the United States increased $3.7 million, or 3.8%, for the three months ended March 31, 2024 compared to the same period in 2023. Revenue in Europe decreased $1.7 million, or 6.1%, for the three months ended March 31, 2024 compared to the same period in 2023. Revenue generated from the Protolabs Network was $23.9 million and $17.2 million for the three months ended March 31, 2024 and 2023, respectively. International revenue was positively impacted by $0.9 million during three months ended March 31, 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 $5.4 million, or 2.2%, for the six months ended June 30, 2024 compared to the same period in 2023. By reportable segment, revenue in the United States increased $6.0 million, or 3.1%, for the six months ended June 30, 2024 compared to the same period in 2023. Revenue in Europe decreased $0.6 million, or 1.0%, for the six months ended June 30, 2024 compared to the same period in 2023. Revenue generated from Protolabs Network was $48.6 million and $37.5 million for the six months ended June 30, 2024 and 2023, respectively. International revenue was positively impacted by $0.9 million during six months ended June 30, 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.
Previous wording
Cost of Revenue. Cost of revenue decreased $1.7 million, or 2.3%, for the three months ended March 31, 2024 compared to the same period in 2023, while revenue increased 1.6% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease in the cost of revenue of$1.7 million was primarily driven by reductions in contract labor, headcount and overtime leading to lower personnel and related costs of $1.6 million primarily in our digital manufacturing factory business during the three months ended March 31, 2024 compared to the same period in 2023. The cost reductions in our digital factories 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 decreased $1.7 million, or 1.2%, for the six months ended June 30, 2024 compared to the same period in 2023, while revenue increased 2.2% for the six months ended June 30, 2024 compared to the same period in 2023. The decrease in cost of revenue of $1.7 million was driven by reductions in headcount and overtime leading to lower personnel and related costs of $2.3 million primarily in our digital manufacturing factory business during the six months ended June 30, 2024 compared to the same period in 2023. The cost reductions in our digital factories were the result of focused management of resources aligned to order volumes, partially supported by increased automation. Partially offsetting the lower personnel and related costs were increases in equipment and facility related costs of $0.6 million during the six months ended June 30, 2024 compared to the same period in 2023.
Previous wording
The following table summarizes our cash flows during the three months ended March 31, 2024 and 2023:
Current wording
The following table summarizes our cash flows during the six months ended June 30, 2024 and 2023:
Previous wording
Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $92.8 million as of March 31, 2024, an increase of $9.0 million from December 31, 2023. The increase in our cash was primarily due to cash provided by operating activities of $21.3 million and proceeds from call redemptions and maturities of marketable securities of $7.0 million, which were partially offset by $2.6 million for purchases of property, equipment and other capital assets, and $16.0 million in repurchases of common stock.
Current wording
Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $96.1 million as of June 30, 2024, an increase of $12.4 million from December 31, 2023. The increase in our cash was primarily due to cash provided by operating activities of $35.8 million and proceeds from call redemptions and maturities of marketable securities of $10.4 million, which were partially offset by $6.8 million for purchases of property, equipment and other capital assets, and $26.9 million in repurchases of common stock.
Previous wording
Cash flows from operating activities were $21.3 million during the three months ended March 31, 2024 and primarily consisted of net income of $5.3 million, adjusted for certain non-cash items, including depreciation and amortization of $9.1 million, stock-based compensation expense of $4.3 million and changes in operating assets and liabilities and other items totaling $4.9 million, which were partially offset by deferred taxes of $2.2 million. Cash flows from operating activities were $22.6 million during the three months ended March 31, 2023 and primarily consisted of net income of $2.7 million, adjusted for certain non-cash items, including depreciation and amortization of $9.4 million and stock-based compensation expense of $3.7 million, interest on finance lease obligations of $0.3 million and changes in operating assets and liabilities and other items totaling $9.7 million, which were partially offset by deferred taxes of $3.1 million.
Current wording
Cash flows from operating activities were $35.8 million during the six months ended June 30, 2024 and primarily consisted of net income of $9.8 million, adjusted for certain non-cash items, including depreciation and amortization of $18.1 million, stock-based compensation expense of $8.5 million and changes in operating assets and liabilities and other items totaling $3.5 million, which were partially offset by deferred taxes of $4.1 million. Cash flows from operating activities were $31.9 million during the six months ended June 30, 2023 and primarily consisted of net income of $2.3 million, adjusted for certain non-cash items, including depreciation and amortization of $18.9 million, stock-based compensation expense of $7.4 million and a non-cash foreign currency translation loss of $3.9 million, interest on finance lease obligations of $0.6 million and changes in operating assets and liabilities and other items totaling $4.7 million, which were partially offset by deferred taxes of $5.6 million.
Previous wording
Cash flows from operating activities decreased$1.2 million during the three months ended March 31, 2024 compared to the same period in 2023, primarily due to decreases in changes in operating assets and liabilities totaling $4.8 million, interest on finance lease obligations of $0.3 million and depreciation and amortization of $0.3 million, which were partially offset by increases in net income of $2.6 million, stock-based compensation of $0.6 million and deferred taxes of $0.8 million.
Current wording
Cash flows from operating activities increased $3.9 million during the six months ended June 30, 2024 compared to the same period in 2023, primarily due to increases in net income of $7.5 million, stock-based compensation of $1.2 million and deferred taxes of $1.5 million, which were partially offset by decreases in changes in operating assets and liabilities totaling $1.2 million, interest on finance lease obligations of $0.6 million and depreciation and amortization of $0.8 million. The six months ended June 30, 2023 also included a $3.9 million non-cash foreign currency loss.
Previous wording
Cash provided by investing activities was $4.4 million during the three months ended March 31, 2024, consisting of $7.0 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $2.6 million for net purchases of property, equipment and other capital assets.
Current wording
Cash provided by investing activities was $3.7 million during the six months ended June 30, 2024, consisting of $10.4 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $6.7 million for net purchases of property, equipment and other capital assets.
Previous wording
Cash provided by investing activities was$4.4 million during the three months ended March 31, 2023, consisting of$7.6 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by$3.2 million for net purchases of property, equipment and other capital assets.
Current wording
Cash provided by investing activities was $7.8 million during the six months ended June 30, 2023, consisting of $14.0 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $6.2 million for net purchases of property, equipment and other capital assets.
Previous wording
Cash used in financing activities was $16.6 million during the three months ended March 31, 2024, consisting of $16.0 million in repurchases of common stock, $0.5 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.1 million for repayments of finance lease obligations.
Current wording
Cash used in financing activities was $26.9 million during the six months ended June 30, 2024, consisting of $26.9 million in repurchases of common stock, $1.9 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.2 million for repayments of finance lease obligations, which were partially offset by $2.1 million in proceeds from exercises of stock options.
Previous wording
Cash used in financing activities was$21.6 million during the three months ended March 31, 2023, consisting of$21.1 million in repurchases of common stock,$0.4 million in purchases of shares withheld for tax obligations associated with equity transactions and$0.1 million for repayments of finance lease obligations.
Current wording
Cash used in financing activities was $29.7 million during the six months ended June 30, 2023, consisting of $30.1 million in repurchases of common stock, $1.4 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.2 million for repayments of finance lease obligations, which were partially offset by $2.0 million in proceeds from exercises of stock options.
Previous wording
We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgements and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the Consolidated Financial Statements included Pat II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024.
Current wording
We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgements and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the Consolidated Financial Statements included Pat II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2024.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Our revenue increased $3.4 million, or 2.8%, for the three months ended June 30, 2024 compared to the same period in 2023. By reportable segment, revenue in the United States increased $2.2 million, or 2.3%, for the three months ended June 30, 2024 compared to the same period in 2023. Revenue in Europe increased $1.1 million, or 4.4%, for the three months ended June 30, 2024 compared to the same period in 2023. Revenue generated from the Protolabs Network was $24.7 million and $20.2 million for the three months ended June 30, 2024 and 2023, respectively. International revenue wasminimally impacted during the three months ended June 30, 2024 compared to the same period in 2023 as a result of foreign currency movements.
Current report — wording carried from elsewhere
Cost of Revenue. Cost of revenue decreased $0.1 million, or 0.1%, for the three months ended June 30, 2024 compared to the same period in 2023, while revenue increased 2.8% for the three months ended June 30, 2024 compared to the same period in 2023. The decrease in the cost of revenue of $0.1 million was primarily driven by reductions in headcount and overtime leading to lower personnel and related costs of $0.8 million primarily in our digital manufacturing factory business during the three months ended June 30, 2024 compared to the same period in 2023. The cost reductions in our digital factories were the result of focused management of resources aligned to order volumes, partially supported by increased automation. Partially offsetting the lower personnel and related costs were increases in raw material in our factory business and production costs of $0.4 million primarily within the our digital network business as a result of higher revenue volumes and equipment and facility related costs of $0.3 million during the three months ended June 30, 2024 compared to the same period in 2023.
Current report — wording carried from elsewhere
Revenue by reportable segment and the related changes for the six months ended June 30, 2024 and 2023 were as follows:
Current report — wording carried from elsewhere
During the six months ended June 30, 2024, we served 34,338 unique product developers and engineers, a decrease of 3.9% from the same period in 2023. Our customer contacts served decreased compared to an increase in revenue. This was primarily due to 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.
Current report — wording carried from elsewhere
Revenue by product line and the related changes for the six months ended June 30, 2024 and 2023 were as follows:
Current report — wording carried from elsewhere
By product line, our revenue increase was driven by a 4.9% increase in CNC Machining revenue, a 1.0% increase in Injection Molding revenue, and a 1.3% increase in 3D Printing revenue, which was partially offset by a 8.7% decrease in Sheet Metal revenue and a 38.7% decrease in Other Revenue in each case for the six months ended June 30, 2024 compared to the same period in 2023.
Current report — wording carried from elsewhere
Operating Expenses, Other Income (Loss), net and Provision for Income Taxes
Current report — wording carried from elsewhere
Closure of Japan business. We had no expenses related to the closure of our Japan business during the six months ended June 30, 2024. During the six months ended June 30, 2023, we recognized $0.2 million in operating expenses related to the closure.