Proto Labs(PRLB) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the Company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Proto Labs, Inc. for the periods ended June 30, 2025, and December 31, 2024, along with accompanying notes detailing accounting policies, recent pronouncements, and specific financial line items Consolidated Balance Sheets The Consolidated Balance Sheets provide a snapshot of the Company's financial position as of June 30, 2025, compared to December 31, 2024, showing slight decreases in total assets and shareholders' equity | Metric (in thousands) | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------------------ | :------------------ | | Total assets | $743,252 | $743,512 | | Total current assets | $205,506 | $194,854 | | Cash and cash equivalents | $90,382 | $89,071 | | Accounts receivable, net | $78,011 | $66,504 | | Inventory | $13,169 | $12,305 | | Total liabilities | $78,545 | $73,361 | | Total shareholders' equity | $664,707 | $670,151 | Consolidated Statements of Comprehensive Income The Consolidated Statements of Comprehensive Income show a revenue increase for both the three and six months ended June 30, 2025, compared to the prior year, but a decrease in net income for both periods | Metric (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $135,063 | $125,631 | $261,268 | $253,521 | | Gross profit | $59,774 | $56,546 | $115,472 | $114,013 | | Income from operations | $4,969 | $5,999 | $9,500 | $12,826 | | Net income | $4,427 | $4,540 | $8,026 | $9,808 | | Basic Net income per share | $0.19 | $0.18 | $0.33 | $0.39 | | Diluted Net income per share | $0.18 | $0.18 | $0.33 | $0.38 | | Comprehensive income | $6,755 | $3,953 | $11,447 | $8,389 | Consolidated Statements of Shareholders' Equity The Consolidated Statements of Shareholders' Equity detail changes in equity components, including common stock repurchases, stock-based compensation, and net income, for the six months ended June 30, 2025 and 2024 | Metric (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Balance at December 31, 2024 (2023) | $670,151 | $695,295 | | Stock-based compensation expense | $8,251 | $8,520 | | Repurchases of common stock and other | $(24,123) | $(27,142) | | Net income | $8,026 | $9,808 | | Foreign currency translation adjustment | $3,303 | $(1,603) | | Net unrealized gains on investments | $118 | $184 | | Balance at June 30, 2025 (2024) | $664,707 | $685,236 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows indicate a decrease in net cash provided by operating activities and a shift from cash provided to cash used in investing activities for the six months ended June 30, 2025, compared to the prior year | Metric (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $28,963 | $35,781 | | Net cash (used in) provided by investing activities | $(3,552) | $3,665 | | Net cash used in financing activities | $(25,169) | $(26,912) | | Net increase in cash and cash equivalents | $1,311 | $12,359 | | Cash and cash equivalents, end of period | $90,382 | $96,149 | Notes to Consolidated Financial Statements These notes provide detailed disclosures on the basis of financial statement presentation, recent accounting pronouncements, net income per share calculations, goodwill and intangible assets, fair value measurements, marketable securities, inventory, stock-based compensation, accumulated other comprehensive income, income taxes, and segment reporting Note 1 – Basis of Presentation The unaudited interim consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, reflecting management's estimates and assumptions - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q, relying on management's estimates and assumptions[17][18] Note 2 – Recent Accounting Pronouncements The Company is evaluating the impact of new FASB ASUs on income tax disclosures (ASU 2023-09, effective Dec 2025) and expense disaggregation (ASU 2024-03, effective Dec 2026), with no material impact from recently adopted pronouncements - The Company is evaluating the impact of ASU No. 2023-09 (Income Taxes) and ASU No. 2024-03 (Expense Disaggregation) on its disclosures, with no material impact from recently adopted pronouncements[20][21][22] Note 3 – Net Income per Common Share Basic and diluted net income per share are calculated based on weighted-average shares outstanding, with adjustments for potentially dilutive securities like stock options and other stock-based awards | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (in thousands) | $4,427 | $4,540 | $8,026 | $9,808 | | Basic - weighted-average shares outstanding | 23,900,390 | 25,313,036 | 24,018,119 | 25,473,937 | | Diluted - weighted-average shares outstanding | 24,101,592 | 25,372,972 | 24,291,246 | 25,573,344 | | Basic Net income per share | $0.19 | $0.18 | $0.33 | $0.39 | | Diluted Net income per share | $0.18 | $0.18 | $0.33 | $0.38 | - Anti-dilutive options excluded from diluted EPS calculation were 459,386 and 452,239 for the three months ended June 30, 2025 and 2024, respectively, and 446,174 and 371,313 for the six months ended June 30, 2025 and 2024, respectively[23] Note 4 – Goodwill and Other Intangible Assets Goodwill remained unchanged, while other intangible assets, primarily software platforms and technology, saw a slight net decrease due to amortization. Amortization expense was consistent year-over-year for the three-month period - There were no changes in the carrying amount of goodwill during the three and six months ended June 30, 2025[25] | Intangible Asset (in thousands) | June 30, 2025 Net (in thousands) | December 31, 2024 Net (in thousands) | Weighted Average Remaining Useful Life (in years) | | :------------------------------ | :---------------- | :-------------------- | :------------------------------------------------ | | Non-compete agreement | $65 | $116 | 0.4 | | Software technology | $3,421 | $4,106 | 2.5 | | Software platform | $17,014 | $17,200 | 7.6 | | Total intangible assets | $20,500 | $21,422 | | - Amortization expense for intangible assets was $0.9 million for each of the three months ended June 30, 2025 and 2024, and $1.8 million and $1.9 million for the six months ended June 30, 2025 and 2024, respectively[25] Note 5 – Fair Value Measurements The Company measures financial assets like cash, money market mutual funds, and marketable securities at fair value, primarily using Level 1 (quoted prices in active markets) and Level 2 (observable inputs other than Level 1 prices) inputs - The Company's financial assets measured at fair value on a recurring basis include cash, cash equivalents (money market mutual funds), and marketable securities[29] | Financial Assets (in thousands) | June 30, 2025 (Level 1) (in thousands) | June 30, 2025 (Level 2) (in thousands) | December 31, 2024 (Level 1) (in thousands) | December 31, 2024 (Level 2) (in thousands) | | :------------------------------ | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Cash | $82,748 | — | $86,366 | — | | Money market mutual fund | $7,634 | — | $2,705 | — | | Marketable securities | $16,270 | $16,571 | $17,261 | $14,531 | | Total | $106,652 | $16,571 | $106,332 | $14,531 | Note 6 – Marketable Securities The Company's marketable securities, categorized as available-for-sale, consist of various debt securities with a total fair value of $32.8 million as of June 30, 2025, and maturities primarily within one to five years | Marketable Securities (in thousands) | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :----------------------------------- | :----------------------- | :--------------------------- | | U.S. government agency securities | $1,003 | $8,301 | | Corporate debt securities | $15,889 | $15,770 | | U.S. municipal securities | $8,963 | $6,724 | | U.S. treasury bonds | $6,986 | $997 | | Total marketable securities | $32,841 | $31,792 | | Contractual Maturity (in thousands) | June 30, 2025 Fair Value (in thousands) | | :---------------------------------- | :----------------------- | | Due in one year or less | $12,804 | | Due after one year through five years | $20,037 | | Total marketable securities | $32,841 | Note 7 – Inventory Inventory, primarily raw materials, is recorded at the lower of cost and net realizable value using the standard cost method (approximating FIFO), with an allowance for obsolescence of $0.7 million as of June 30, 2025 - Inventory consists primarily of raw materials, recorded at the lower of cost and net realizable value using the standard cost method, which approximates FIFO cost[34] | Inventory (in thousands) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------- | :------------ | :---------------- | | Total inventory | $13,886 | $12,989 | | Allowance for obsolescence | $(717) | $(684) | | Inventory, net of allowance | $13,169 | $12,305 | Note 8 – Stock-Based Compensation The Company's stock-based compensation plans, including the 2022 Long-Term Incentive Plan and ESPP, saw an increase in shares available for issuance and the granting of inducement awards to the new CEO. Total stock-based compensation expense was $4.3 million for the three months ended June 30, 2025, and $8.3 million for the six months ended June 30, 2025 - The 2022 Long-Term Incentive Plan was amended to increase shares available by 296,000, and one-time inducement awards were granted to the incoming CEO[36][38] | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options, RSUs and PSUs | $3,939 | $3,938 | $7,600 | $7,893 | | Employee stock purchase plan | $320 | $306 | $651 | $627 | | Total stock-based compensation expense | $4,259 | $4,244 | $8,251 | $8,520 | - As of June 30, 2025, unrecognized compensation expense was $3.9 million for stock options (over 3.1 years), $21.7 million for restricted stock units (over 2.9 years), and $8.6 million for performance stock units (over 2.3 years)[43][45][48] Note 9 – Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) is primarily influenced by foreign currency translation adjustments and net unrealized gains on investments in securities, showing a positive change for the three and six months ended June 30, 2025 | Component (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $(26,891) | $(28,845) | $(27,984) | $(28,013) | | Foreign currency translation adjustments | $2,300 | $(678) | $3,303 | $(1,603) | | Net unrealized gains on investments | $28 | $91 | $118 | $184 | | Balance at end of period | $(24,563) | $(29,432) | $(24,563) | $(29,432) | Note 10 – Income Taxes The income tax provision decreased for both the three and six months ended June 30, 2025. The effective tax rate decreased for the three-month period due to lower tax expense from equity vesting but increased for the six-month period due to losses in jurisdictions without tax benefits. The Company is evaluating the impact of the recently enacted OBBBA tax legislation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $2,247 | $2,820 | $4,633 | $5,278 | | Effective income tax rate | 33.7% | 38.3% | 36.6% | 35.0% | - The effective tax rate decreased by 4.6% for the three months ended June 30, 2025, primarily due to a decrease in tax expense from the vesting of restricted stock units and the exercise of stock options[51] - The effective tax rate increased by 1.6% for the six months ended June 30, 2025, primarily due to an increase in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances[51] - The Company had unrecognized tax benefits totaling $3.7 million as of June 30, 2025, and is evaluating the impact of the recently enacted H.R. 1 (OBBBA) on deferred tax liabilities and income tax payable[53][54] Note 11 – Segment Reporting The Company reports financial information by geographic segments (United States and Europe) and product lines. For the three months ended June 30, 2025, US revenue increased while Europe revenue decreased. CNC Machining and Sheet Metal revenue grew significantly, offsetting declines in Injection Molding and 3D Printing - The Company's reportable segments are based on geographic region: United States and Europe. The Corporate Unallocated category includes R&D and G&A costs not allocated to segments[55] | Metric (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue by Segment: | | | | | | United States | $110,712 | $98,541 | $210,979 | $200,022 | | Europe | $24,351 | $27,090 | $50,289 | $53,499 | | Total Revenue | $135,063 | $125,631 | $261,268 | $253,521 | | Income (Loss) from Operations by Segment: | | | | | | United States | $27,687 | $24,241 | $53,184 | $50,573 | | Europe | $(4,968) | $(1,732) | $(8,791) | $(4,176) | | Corporate Unallocated | $(17,750) | $(16,510) | $(34,893) | $(33,571) | | Total Income from Operations | $4,969 | $5,999 | $9,500 | $12,826 | | Revenue by Product Line: | | | | | | Injection Molding | $47,415 | $49,080 | $96,138 | $101,743 | | CNC Machining | $61,945 | $51,239 | $114,788 | $101,171 | | 3D Printing | $21,215 | $21,281 | $41,409 | $42,863 | | Sheet Metal | $4,303 | $3,922 | $8,514 | $7,475 | | Other Revenue | $185 | $109 | $419 | $269 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, including an overview of its business, key financial measures and trends, detailed results of operations for the three and six months ended June 30, 2025, and an analysis of liquidity and capital resources Forward-Looking Statements This section includes a standard disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially - Statements in this report that are not historical facts are forward-looking and involve known and unknown risks, uncertainties, and other factors that may cause material differences in results[62] Overview Proto Labs, Inc. is a leading digital manufacturer of custom parts, aiming to accelerate innovation through its factory and global network of manufacturing partners. The Company recently approved a plan to close its prototype injection molding facility and discontinue Direct Metal Laser Sintering 3D printing services in Germany - Proto Labs is a leading digital manufacturer of custom parts, utilizing both owned manufacturing factories and a worldwide network of premium manufacturing partners[63][66] - The Company approved a plan to close its prototype injection molding facility in Eschenlohe, Germany, and discontinue Direct Metal Laser Sintering 3D printing services in Putzbrunn, Germany, expected to be substantially complete during fiscal year 2025[65] President and Chief Executive Officer Transition Suresh Krishna was appointed President and Chief Executive Officer, effective May 20, 2025, succeeding Robert Bodor - Suresh Krishna was appointed President and Chief Executive Officer, effective May 20, 2025, succeeding Robert Bodor[67][68] Key Financial Measures and Trends This section outlines the Company's revenue sources, cost of revenue, gross profit, operating expenses, other income, and provision for income taxes, along with factors influencing these financial measures Revenue Revenue is generated from sales of custom parts across product lines (Injection Molding, CNC Machining, 3D Printing, Sheet Metal) in the United States and Europe. The Company focuses on increasing revenue by gaining new customers and expanding sales to existing ones, resulting in increased revenue per customer contact despite a decrease in total customer contacts - Revenue is derived from sales of parts fulfilled through owned manufacturing factories and a worldwide network of premium manufacturing partners, across product lines including Injection Molding, CNC Machining, 3D Printing, and Sheet Metal[70] | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue (in thousands) | $135,063 | $125,631 | $261,268 | $253,521 | | Customer contacts | 21,775 | 22,456 | 33,136 | 34,338 | | Revenue per customer contact | $6,203 | $5,595 | $7,885 | $7,383 | Cost of Revenue, Gross Profit and Gross Margin Cost of revenue includes raw materials, depreciation, employee compensation, and costs for outsourced parts. Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue, both influenced by factors like revenue mix, pricing, and manufacturing costs - Cost of revenue primarily consists of raw materials, equipment depreciation, employee compensation, facilities costs, overhead, and costs to procure parts through manufacturing partners[72][73] - Gross profit and gross margin are affected by revenue mix (internal vs. outsourced), pricing, sales volume, manufacturing costs, production capacity increases, domestic/foreign revenue mix, product line mix, and foreign currency exchange rates[74] Operating Expenses Operating expenses comprise marketing and sales, research and development, general and administrative, and costs related to exit and disposal activities. Personnel-related costs are the most significant component, and the Company anticipates continued investments in technology and personnel - Operating expenses consist of marketing and sales, research and development, general and administrative, and costs related to exit and disposal activities, with personnel-related costs being the most significant component[75] - The Company expects continued substantial investments in technology and personnel, leading to increased operating expenses in the future[76] - Costs related to disposal and exit activities are driven by the decision to close certain manufacturing facilities in Germany, primarily consisting of operating expenses, employee severance, fixed asset write-downs, and facility-related charges[80] Other Income, net Other income, net, primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments, which fluctuate based on exchange rates and interest rate levels - Other income, net, primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments, varying with foreign currency exchange rates and interest rates[81] Provision for Income Taxes The provision for income taxes includes federal, state, local, and foreign taxes. The effective tax rate may differ from historical rates due to increased losses in foreign operations not eligible for tax benefits and future tax law changes - The provision for income taxes is comprised of federal, state, local, and foreign taxes. The effective tax rate may differ from historical rates due to increases in losses in foreign operations not eligible for tax benefits and future tax law changes[82] Results of Operations This section provides a detailed comparison of the Company's financial performance for the three and six months ended June 30, 2025, versus 2024, highlighting changes in revenue, gross profit, operating expenses, and net income | Metric (in thousands) | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change ($) (in thousands) | Change (%) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change ($) (in thousands) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $135,063 | $125,631 | $9,432 | 7.5% | $261,268 | $253,521 | $7,747 | 3.1% | | Gross profit | $59,774 | $56,546 | $3,228 | 5.7% | $115,472 | $114,013 | $1,459 | 1.3% | | Income from operations | $4,969 | $5,999 | $(1,030) | (17.2)% | $9,500 | $12,826 | $(3,326) | (25.9)% | | Net income | $4,427 | $4,540 | $(113) | (2.5)% | $8,026 | $9,808 | $(1,782) | (18.2)% | Comparison of Three Months Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, revenue increased by 7.5% driven by a 12.4% increase in the United States, while Europe revenue decreased by 10.1%. CNC Machining revenue grew significantly by 20.9%, offsetting a 3.4% decrease in Injection Molding. Gross margin slightly decreased to 44.3%, and operating expenses rose due to personnel costs and CEO transition expenses. Net income saw a slight decrease | Metric (in thousands) | 2025 (in thousands) | 2024 (in thousands) | Change ($) (in thousands) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Revenue: | | | | | | United States | $110,712 | $98,541 | $12,171 | 12.4% | | Europe | $24,351 | $27,090 | $(2,739) | (10.1)% | | Total Revenue | $135,063 | $125,631 | $9,432 | 7.5% | | Revenue by Product Line: | | | | | | Injection Molding | $47,415 | $49,080 | $(1,665) | (3.4)% | | CNC Machining | $61,945 | $51,239 | $10,706 | 20.9% | | 3D Printing | $21,215 | $21,281 | $(66) | (0.3)% | | Sheet Metal | $4,303 | $3,922 | $381 | 9.7% | | Other Revenue | $185 | $109 | $76 | 69.7% | - Customer contacts decreased by 3.0% to 21,775, but revenue per customer contact grew by 10.9% due to a strategic focus on larger orders[87] - Gross margin decreased from 45.0% to 44.3%. Marketing and sales expenses increased by $1.4 million due to personnel costs. General and administrative expenses increased by $2.2 million, primarily due to CEO transition costs[91][92][94] Comparison of Six Months Ended June 30, 2025 and 2024 For the six months ended June 30, 2025, total revenue increased by 3.1%, with US revenue up 5.5% and Europe revenue down 6.0%. CNC Machining revenue increased by 13.5%, while Injection Molding decreased by 5.5%. Gross margin slightly declined to 44.2%. Operating expenses increased, notably in general and administrative due to CEO transition costs. The effective tax rate increased to 36.6% due to losses in jurisdictions without tax benefits | Metric (in thousands) | 2025 (in thousands) | 2024 (in thousands) | Change ($) (in thousands) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Revenue: | | | | | | United States | $210,979 | $200,022 | $10,957 | 5.5% | | Europe | $50,289 | $53,499 | $(3,210) | (6.0)% | | Total Revenue | $261,268 | $253,521 | $7,747 | 3.1% | | Revenue by Product Line: | | | | | | Injection Molding | $96,138 | $101,743 | $(5,605) | (5.5)% | | CNC Machining | $114,788 | $101,171 | $13,617 | 13.5% | | 3D Printing | $41,409 | $42,863 | $(1,454) | (3.4)% | | Sheet Metal | $8,514 | $7,475 | $1,039 | 13.9% | | Other Revenue | $419 | $269 | $150 | 55.8% | - Customer contacts decreased by 3.5% to 33,136, but revenue per customer contact grew by 6.8% due to a strategic focus on larger orders[99] - Gross margin decreased from 45.0% to 44.2%. General and administrative expenses increased by $2.7 million, primarily due to CEO transition costs[103][106] - The effective tax rate increased by 1.6% to 36.6% primarily due to an increase in losses in jurisdictions not eligible for tax benefits due to valuation allowances[109] Liquidity and Capital Resources The Company's liquidity is primarily driven by cash flow from operations. Cash and cash equivalents increased slightly to $90.4 million as of June 30, 2025. Operating cash flow decreased, while investing activities shifted to a net cash outflow, and financing activities continued to be a net cash outflow, largely due to common stock repurchases Cash Flows Cash flows from operating activities decreased, while investing activities shifted from providing to using cash, and financing activities continued to use cash for the six months ended June 30, 2025, compared to 2024 | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $28,963 | $35,781 | | Net cash (used in) provided by investing activities | $(3,552) | $3,665 | | Net cash used in financing activities | $(25,169) | $(26,912) | | Net increase in cash and cash equivalents | $1,311 | $12,359 | Sources of Liquidity The Company primarily finances operations and capital expenditures through cash flow from operations. Cash and cash equivalents increased to $90.4 million as of June 30, 2025, and management believes existing cash and operating cash flow will be sufficient for the next 12 months - The Company primarily finances operations and capital expenditures through cash flow from operations[112] | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $90.4 million | $89.1 million | - Management believes existing cash and cash equivalents, along with cash generated from operations, will be sufficient to meet working capital and capital expenditure requirements for at least the next 12 months[113] Cash Flows from Operating Activities Net cash provided by operating activities decreased by $6.8 million to $29.0 million for the six months ended June 30, 2025, primarily due to changes in operating assets and liabilities, lower net income, and decreases in depreciation, amortization, and stock-based compensation | Metric (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $28,963 | $35,781 | | Net income | $8,026 | $9,808 | | Depreciation and amortization | $17,264 | $18,075 | | Stock-based compensation expense | $8,251 | $8,520 | | Deferred taxes | $(3,985) | $(4,144) | | Impairments related to exit and closure of facilities | $448 | — | | Changes in operating assets and liabilities | $(9,487) (Accounts receivable), $(983) (Inventories), $7,980 (Accrued liabilities and other) | $113 (Accounts receivable), $1,263 (Inventories), $1,551 (Accrued liabilities and other) | - Cash flows from operating activities decreased by $6.8 million during the six months ended June 30, 2025, compared to the same period in 2024, primarily due to changes in operating assets and liabilities and decreases in lower net income, depreciation, amortization, and stock-based compensation[115] Cash Flows from Investing Activities The Company used $3.6 million in investing activities for the six months ended June 30, 2025, primarily for purchases of property, equipment, and marketable securities, a shift from providing $3.7 million in the prior year | Investing Activity (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Purchases of property, equipment and other capital assets | $(2,730) | $(6,784) | | Purchases of marketable securities | $(11,052) | — | | Proceeds from call redemptions and maturities of marketable securities | $10,230 | $10,419 | | Net cash (used in) provided by investing activities | $(3,552) | $3,665 | Cash Flows from Financing Activities Net cash used in financing activities was $25.2 million for the six months ended June 30, 2025, primarily driven by common stock repurchases and purchases of shares withheld for tax obligations, partially offset by proceeds from equity plans | Financing Activity (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Repurchases of common stock | $(23,980) | $(26,940) | | Purchases of shares withheld for tax obligations | $(3,117) | $(1,920) | | Proceeds from issuance of common stock from equity plans | $2,081 | $2,094 | | Principal repayments of finance lease obligations | $(153) | $(146) | | Net cash used in financing activities | $(25,169) | $(26,912) | Critical Accounting Estimates There were no material changes to the Company's critical accounting policies and estimates during the six months ended June 30, 2025 - There were no material changes to the Company's critical accounting policies and estimates during the six months ended June 30, 2025[120] Recent Accounting Pronouncements For information on recent accounting pronouncements, refer to Note 2 to the Consolidated Financial Statements - Information on recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements[121] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the Company's exposure to market risks, primarily foreign currency risk, due to its international operations. It highlights the impact of exchange rate fluctuations on operating results and cash flows Foreign Currency Risk The Company is exposed to foreign currency risk from operations denominated in British Pounds and Euros. USD appreciation adversely impacts results, and a hypothetical 10% adverse change in exchange rates could materially impact operating results. Foreign currency movements had a favorable impact on consolidated revenue for both the three and six months ended June 30, 2025 - The Company has revenue, expenses, assets, and liabilities denominated in British Pounds and Euros, making its operating results and cash flows susceptible to adverse impacts from USD appreciation[122][123] - A hypothetical 10% adverse change in foreign exchange rates could have a material impact on operating results, though not generally on financial position[124] - Foreign currency movements favorably impacted consolidated revenue by $1.3 million for the three months and $0.8 million for the six months ended June 30, 2025, compared to the same periods in 2024[124] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for accurate and timely financial reporting - Management, with CEO and CFO participation, evaluated and concluded that the Company's disclosure controls and procedures are effective as of June 30, 2025[125][126] Changes in Internal Control over Financial Reporting There have been no material changes in the Company's internal control over financial reporting during the period covered by this report - There have been no material changes in the Company's internal control over financial reporting during the period covered by this report[127] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Company is subject to various legal proceedings in the ordinary course of business but does not believe any would have a material adverse effect on its operations - The Company is subject to various legal proceedings and claims in the ordinary course of business, but does not believe any would individually or in aggregate have a material adverse effect[128] Item 1A. Risk Factors There have been no material changes to the risk factors previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors described in the Company's most recent Annual Report on Form 10-K[129] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The board of directors authorized a $100 million share repurchase program in February 2025, with $76.0 million remaining. During the three months ended June 30, 2025, the Company repurchased 75,432 shares for $3.1 million - The board authorized a $100 million share repurchase program in February 2025, with $76.0 million remaining under authorization[130] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------------ | | May 1, 2025 through May 31, 2025 | 75,432 | $40.97 | $76,035 | | Total (3 months ended June 30, 2025) | 75,432 | $40.97 | $76,035 | Item 3. Defaults Upon Senior Securities There are no matters to disclose regarding defaults upon senior securities - No matters to disclose[132] Item 4. Mine Safety Disclosures There are no matters to disclose regarding mine safety - No matters to disclose[133] Item 5. Other Information No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[134] Item 6. Exhibits This section lists all documents filed or furnished as exhibits to this Quarterly Report on Form 10-Q, including corporate governance documents, employment agreements, incentive plans, and certifications - Exhibits include Third Amended and Restated Articles of Incorporation and By-Laws, Executive Employment Agreement for Suresh Krishna, Consulting Agreements for Robert Bodor, Amended and Restated 2022 Long-Term Incentive Plan, and various certifications (302, 906, XBRL)[135]