Proto Labs PRLB Form 10-Q filing Q1 FY2026

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

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

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

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Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

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

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (SEC) on February 20, 2026.

The accompanying Consolidated Balance Sheet as of December 31, 2025 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K filed on February 20, 2026 as referenced above.

Note 2 – Recent Accounting Pronouncements

The Company did not recently adopt any accounting pronouncements that had a material impact on the Company's Consolidated Financial Statements.

Apart from the items discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, there are no other new accounting pronouncements that are expected to have a significant impact on the Company’s consolidated financial statements or related disclosures.

Note 3 – Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied. Anti-dilutive options were excluded from the calculation of diluted weighted average shares outstanding and were 120,716 and 436,669 for the three months ended March 31, 2026 and 2025, respectively.

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

Note 4 – Goodwill and Other Intangible Assets

There were no changes in the carrying amount of goodwill during the three months ended March 31, 2026.

Intangible assets other than goodwill at March 31, 2026 and December 31, 2025 were as follows:

Intangible assets allocated to the Protolabs Network entities consisted of intangible assets of €11.6 million in Europe and $16.6 million in the United States as of the date of the acquisition. The Euro denominated intangible assets are translated at the end of each period using the current exchange rates resulting in a foreign currency translation adjustment that is recorded as a component of Other Comprehensive Income. Foreign currency unrealized losses related to intangible assets were $0.8 million and $0.5 million as of March 31, 2026 and December 31, 2025, respectively. Amortization expense for intangible assets was $0.9 million for each of the three months ended March 31, 2026 and 2025.

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

Note 5 – Fair Value Measurements

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

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

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

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

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

The following table summarizes financial assets as of March 31, 2026 and December 31, 2025 measured at fair value on a recurring basis:

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Note 6 – Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as available-for-sale and are recorded at fair value. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of March 31, 2026 and December 31, 2025:

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

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

The March 31, 2026 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 7 – 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.

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

Note 8 – 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 for ten 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 of ten 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.

In addition, the Company has outstanding awards that were not granted under the 2022 Plan or the 2012 Plan. These awards were granted as inducement awards to the Company’s new Chief Executive Officer in May 2025.

Employee Stock Purchase Plan

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

Stock-Based Compensation Expense

Stock-based compensation expense was $3.2 million and $4.0 million for the three months ended March 31, 2026 and 2025, respectively.

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Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2026:

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

The weighted-average grant date fair value of options that were granted during the three months ended March 31, 2026 was $34.35.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2026 and 2025:

As of March 31, 2026, there was $4.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.2 years.

Restricted Stock Units

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

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The following table summarizes restricted stock units activity during the three months ended March 31, 2026:

As of March 31, 2026, there was $15.4 million of unrecognized compensation expense related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.7 years.

Performance Stock Units

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 200 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s three-year cumulative total shareholder return performance relative to an index and the award recipient’s continued employment. The Company’s PSUs 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 units activity during the three months ended March 31, 2026:

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the three months ended March 31, 2026 and 2025:

As of March 31, 2026, there was $11.7 million of unrecognized compensation expense related to non-vested performance stock units, which is expected to be recognized over a weighted-average period of 2.4 years.

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Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2026 and 2025:

Note 9 – Accumulated Other Comprehensive (Loss) Income

Other comprehensive income (loss) is comprised of foreign currency translation adjustments and net unrealized gains (losses) on investments in securities.

The following table presents the changes in accumulated other comprehensive (loss) income balances during the three months ended March 31, 2026 and 2025:

Note 10 – Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2026 and 2025, the Company recorded an income tax provision of $3.2 million and $2.4 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2026 was 28.3 percent compared to 39.9 percent in the same period of the prior year. The effective tax rate decreased by 11.6 percent for the three months ended March 31, 2026 when compared to the same period in 2025, primarily due to an increase in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as a one-time tax benefit related to the successful closure of a state income tax audit.

The effective income tax rate for the three months ended March 31, 2026 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions partially offset by tax credits for which the Company qualifies.

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The Company had unrecognized tax benefits totaling $3.1 million as of March 31, 2026 and December 31, 2025, 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.

Note 11 – 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 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.

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

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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, employee compensation including benefits and stock-based compensation, severance, 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 were as follows:

Revenue by product line the three months ended March 31, 2026 and 2025 were as follows:

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025.

Overview

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. Our vision is accelerating innovation by revolutionizing manufacturing. Our mission is to shape the future by bringing customer ideas to life across every stage of their product cycle. We accomplish this by offering a variety of manufacturing capabilities fulfilled through a combination of owned manufacturing factories and a worldwide network of premium manufacturing partners. Our automated quoting and manufacturing systems are highly integrated with our manufacturing and fulfillment systems, which allow us to offer a vast array of manufacturing technologies in a variety of materials across a continuum of lead times and prices. Protolabs uses artificial intelligence (AI) in a number of different ways to improve our efficiency and the value we offer to customers, including: intelligent pricing and sourcing algorithms, automated quality inspection in injection molding, toolpath verification in CNC machining, software development, and various other AI end use cases. In the age of AI, we are well-positioned with our long history of leveraging technology to solve legacy manufacturing challenges and are deploying AI to power how we drive innovation to better serve our customers. AI is enabling us to move faster than ever before and continue to scale our business efficiently. Our technology-enabled digital engineering and manufacturing applications enable us to produce commercial-grade prototype and production plastic, metal, and liquid silicone rubber parts in as fast as one day.

Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets, 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. We believe our use of advanced technologies enable us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts.

We have established our operations in the United States and Europe.

Our primary manufacturing product lines currently include Injection Molding, CNC Machining, 3D Printing and Sheet Metal. We continually seek to expand the range of sizes and geometric complexity of the parts we can make with these processes, to extend the variety of materials we are able to support, and to identify additional manufacturing processes to which we can apply our technology or incorporate into our manufacturing network in order to better serve the evolving preferences and needs of our customers.

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Key Financial Measures and Trends

Revenue

Our operations are comprised of two geographic operating segments in the United States and Europe.

Revenue is derived from the sale or parts fulfilled through our owned manufacturing factories and worldwide network of premium manufacturing partners. Our product lines consist of Injection Molding, CNC Machining, 3D Printing and Sheet Metal. Injection Molding revenue consists of sales of custom injection molds and injection-molded parts. CNC Machining revenue consists of sales of CNC-machined custom parts. 3D Printing revenue consists of sales of 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal custom parts.

Protolabs’ long-term strategy is to serve customers across the entire lifecycle of a part—from prototype through production. To support this long-term strategy, we have aligned the organization around four strategic pillars:

• Elevate Customer Experience – remove friction across the customer journey to deliver a best-in-class experience and increase revenue per customer. Enable employees to serve customers more efficiently, driving faster growth.
• Accelerate Innovation – reaccelerate innovation across core manufacturing services to drive outsized growth and an accelerated pace of new releases. Leverage differentiated IP and deep manufacturing & engineering talent.
• Expand Production – take a deliberate, customer-led approach—prioritizing the right customers, applications, and capabilities. Begin with most strategic customers and scale over time.
• Drive Operational Efficiency – expand our factory and Protolabs network gross margins and capture operating expense leverage via efficiencies and productivity. Reallocate resources and funds to invest in the highest-priority growth initiatives.

The following table summarizes our unique customer contacts and revenue per customer contact:

1 Revenue per customer contact is calculated using the revenue recognized during the respective period divided by the actual number of customer contacts served during the same period. Customer contacts are product developers, engineers, procurement and supply chain professionals and other individuals who place an order, and that order is shipped and invoiced during the period. The Company believes revenue per customer contact is useful to investors in evaluating the underlying business trends and ongoing operating performance of the Company.

Cost of Revenue, Gross Profit and Gross Margin

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

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

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Operating Expenses

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

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 fabricated sheet metal custom parts for prototyping and low-volume production. In order to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses in the future.

Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing 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.

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

General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal, and other related overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

Restructuring and transformation costs. Costs related to actions taken to improve operational efficiency and streamline the organization. Such costs include employee severance and related benefits, professional fees, and other charges in connection with organizational realignments. Cost savings generated from these restructuring and transformation initiatives are being redeployed primarily into technology investments, including enhancements to core systems, automation, and digital capabilities, to support growth in the Company's core business and further drive scale and efficiency.

Costs related to disposal and exit activities. Costs related to disposal and exit activities is driven by our decision to close certain manufacturing facilities in Germany. The expenses consist primarily of operating expenses, including employee severance, write-down of fixed assets and facility-related charges. Benefits may result from adjustments to initial estimates regarding the nature and timing of disposal and exit activities.

Other Income, net

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

Provision for Income Taxes

Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. Overall, our effective tax rate for 2026 and beyond may differ from historical effective tax rates due to increases in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as any future tax law changes that may impact our effective tax rate.

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Results of Operations

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

• Percentage change not meaningful

Stock-based compensation expense included in the statements of operations data above for the three months ended March 31, 2026 and 2025 were as follows:

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Comparison of Three Months Ended March 31, 2026 and 2025

Revenue

Revenue by reportable segment and the related changes for the three months ended March 31, 2026 and 2025 were as follows:

Our revenue increased $13.1 million, or 10.4%, for the three months ended March 31, 2026 compared to the same period in 2025. The growth in revenue was primarily driven by an increase in CNC revenue in the United States from key growth industries, primarily aerospace and defense, and market dynamics that have driven increases in price. By reportable segment, revenue in the United States increased $11.9 million, or 11.8%, for the three months ended March 31, 2026 compared to the same period in 2025. Revenue in Europe increased $1.3 million, or 4.9%, for the three months ended March 31, 2026 compared to the same period in 2025. International revenue was favorably impacted by $2.2 million during the three months ended March 31, 2026 compared to the same period in 2025 as a result of foreign currency movements, primarily due to the strengthening of the British Pound and Euro relative to the United States Dollar.

During the three months ended March 31, 2026, we served 19,826 unique customer contacts, which is a decrease of 8.3% from the same period in 2025. During the three months ended March 31, 2026, our customer contacts served decreased while our revenue grew. This was primarily due to our mix of customers served in the quarter as compared to the same period in 2025 and our focus on larger, more strategic customers as we strive to be their supplier of choice by serving their custom parts needs through our comprehensive offer. Our revenue per customer contact grew 20.4% for the three months ended March 31, 2026 compared to the same period in 2025.

Revenue by product line and the related changes for the three months ended March 31, 2026 and 2025 were as follows:

By product line, our revenue increase was driven by a 19.7% increase in CNC Machining revenue, a 4.8% increase in Injection Molding revenue, a 1.3% increase in 3D Printing revenue, and a 3.3% increase in Sheet Metal revenue, in each case for the three months ended March 31, 2026 compared to the same period in 2025.

Cost of Revenue, Gross Profit and Gross Margin

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Cost of Revenue. Cost of revenue increased $5.2 million, or 7.4%, for the three months ended March 31, 2026 compared to the same period in 2025, while revenue increased 10.4% for the three months ended March 31, 2026 compared to the same period in 2025. The increase in the cost of revenue of $5.2 million was primarily driven by higher revenue volumes resulting in increases of $3.9 million in raw material and production and fulfillment related costs, and $1.7 million in personnel and related costs, primarily due to increases in head count and overtime costs and contract labor to meet increased order volume, during the three months ended March 31, 2026 compared to the same period in 2025, partially offset by decreases in equipment and facility-related costs of $0.4 million.

Gross Profit and Gross Margin. Gross profit increased $7.9 million, or 14.2%, for the three months ended March 31, 2026 compared to the same period in 2025. Gross margin increased to 45.6% in the three months ended March 31, 2026 from 44.1% in the same period in 2025.

Operating Expenses, Other Income, net and Provision for Income Taxes

Marketing and Sales. Our marketing and sales expenses increased $1.0 million during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to increases in personnel and related costs of $0.7 million and $0.3 million in marketing program costs.

Research and Development. Our research and development expenses decreased $0.1 million, or 0.7%, during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to decreases in personnel and related costs of $0.3 million and $0.1 million in professional services, partially offset by increases of $0.3 million in operating costs.

General and Administrative. Our general and administrative expenses increased $0.2 million, or 1.0%, during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to increases in personnel and related costs of $0.5 million and $0.4 million in professional services, partially offset by decreases of $0.4 million in stock-based compensation, and $0.3 million in administrative costs.

Restructuring and transformation costs. Restructuring and transformation costs include expenses related to actions taken to improve operational efficiency and streamline the organization and resulted in $1.4 million in operating expenses during 2026 primarily related to severance and related benefit costs, and professional services. We had no restructuring and transformation costs for the same period in 2025.

Costs related to exit and disposal. We had no costs related to exit and disposal activities during the three months ended March 31, 2026. Our decision to exit and close certain operations in Germany resulted in less than a $0.1 million in personnel and related cost benefits during the three months ended March 31, 2025.

Other income, net. We recognized other income, net of $1.5 million for the three months ended March 31, 2026 and the same period in 2025. Other income, net for the three months ended March 31, 2026 primarily consisted of $1.2 million in interest income on investments and $0.3 million of other income. Other income, net for the three months ended March 31, 2025 primarily consisted of $1.4 million in interest income on investments and other income.

Provision for Income Taxes. Our effective tax rate of 28.3% for the three months ended March 31, 2026 decreased 11.6% compared to 39.9% for the same period in 2025. The decrease in the effective tax rate was primarily due to an increase in tax benefits from the vesting of restricted stock and the exercise of stock options, as well as a one-time tax benefit related to the successful closure of a state income tax audit. Our income tax provision of $3.2 million for the three months ended March 31, 2026 increased $0.8 million as compared to our income tax provision of $2.4 million for the same period in 2025.

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Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows during the three months ended March 31, 2026 and 2025:

Sources of Liquidity

Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $124.0 million as of March 31, 2026, an increase of $13.1 million from December 31, 2025. The increase in our cash was primarily due to cash provided by operating activities of $17.5 million, which were partially offset by net purchases of marketable securities of $2.5 million and net purchases of property, equipment and other capital assets of $2.3 million.

We believe that our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Cash Flows from Operating Activities

Cash flows from operating activities were $17.5 million during the three months ended March 31, 2026 and primarily consisted of net income of $8.1 million, adjusted for certain non-cash items, including depreciation and amortization of $8.1 million, stock-based compensation expense of $3.2 million and increases in deferred taxes of $2.4 million, which were partially offset by changes in operating assets and liabilities and other items totaling $4.1 million, and a gain on disposal of property and equipment of $0.1 million. Cash flows from operating activities were $18.4 million during the three months ended March 31, 2025 and primarily consisted of net income of $3.6 million, adjusted for certain non-cash items, including depreciation and amortization of $8.7 million, stock-based compensation expense of $4.0 million and changes in operating assets and liabilities and other items totaling $3.4 million and an impairment of leased facility of $0.2 million, which were partially offset by deferred taxes of $1.6 million.

Cash flows from operating activities decreased $0.8 million during the three months ended March 31, 2026 compared to the same period in 2025, primarily due to changes in operating assets and liabilities and other items totaling $7.9 million, decreases in stock-based compensation of $0.8 million, and decreases in depreciation and amortization of $0.6 million, which were partially offset by increases in net income of $4.5 million and increases in deferred taxes of $3.9 million.

Cash Flows from Investing Activities

Cash used in investing activities was $4.8 million during the three months ended March 31, 2026, consisting of $2.5 million of net purchases of marketable securities and $2.3 million for net purchases of property, equipment and other capital assets.

Cash used in investing activities was $2.9 million during the three months ended March 31, 2025, consisting of $1.3 million for net purchases of property, equipment and other capital assets and $1.6 million of purchases of marketable securities, net of proceeds from call redemptions and maturities.

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Cash Flows from Financing Activities

Cash provided by financing activities was $0.7 million during the three months ended March 31, 2026, consisting of $3.6 million in proceeds related to equity plans, which were partially offset by $2.9 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.1 million for repayments of finance lease obligations.

Cash used in financing activities was $21.9 million during the three months ended March 31, 2025, consisting of $20.9 million in repurchases of common stock, $1.2 million in purchases of shares withheld for tax obligations associated with equity transactions and $0.1 million for repayments of finance lease obligations, which were partially offset by $0.3 million in proceeds related to the exercise of non-qualified stock options.

Critical Accounting Estimates

We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgments and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the Consolidated Financial Statements included Part II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2025. There were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2026.

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

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

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

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be assessed by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. We recognized foreign currency gains of less than $0.1 million and foreign currency losses of $0.1 million for the three months ended March 31, 2026 and 2025, respectively. The changes in foreign exchange rates had a favorable impact on consolidated revenue of $2.2 million for the three months ended March 31, 2026 compared to the same period in 2025.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time frames specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION

Item 5. Other Information

During the three months ended March 31, 2026, no directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

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Item 6. Exhibits

The following documents are filed or furnished, as applicable, as part of this Quarterly Report on Form 10-Q:

Exhibit Number Description of Exhibit

3.1 Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed on February 13, 2012). 3.2 Articles of Amendment to Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. dated May 20, 2015 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K, filed with the Commission on May 21, 2015). 3.3 Third Amended and Restated By-Laws of Proto Labs, Inc., as amended through November 15, 2022 (incorporated by reference to Exhibit 3.2 to the Company's Form 8-K, filed on November 15, 2022). 10.1 Protolabs Annual Incentive Plan (incorporated by reference to Exhibit 10.37 to the Company's Form 10-K, filed on February 20, 2026). 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act* 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act* 32.1 Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act** 101.INS Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)* 101.SCH Inline XBRL Taxonomy Extension Schema Document* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* (104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

*Filed herewith.

**Furnished herewith.

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Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 includes a discussion of our risk factors. There have been no material changes from the risk factors described in our Annual Report on Form 10-K.