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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant | |||||||||
Check the appropriate box:
Preliminary Proxy Statement | |||||||
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||||
Definitive Proxy Statement | |||||||
Definitive Additional Materials | |||||||
Soliciting Material under §240.14a-12 | |||||||
Proto Labs, Inc.
(Name of Registrant as Specified In Its Charter) | ||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
No fee required | ||||||||
Fee paid previously with preliminary materials | ||||||||
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 | ||||||||
Proto Labs, Inc.
5540 Pioneer Creek Drive
Maple Plain, Minnesota 55359
(763) 479-3680
Dear Fellow Shareholder:
The Board of Directors of Proto Labs, Inc. cordially invites you to attendjoin our Special2024 Annual Meeting of Shareholders (the “Special“Annual Meeting”) on Monday, August 29, 2022Thursday, May 23, 2024 at 8:30 a.m. Central Time,Time. Our Annual Meeting will be a “virtual meeting” of shareholders, which will be held at our headquarters, 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359.conducted exclusively online via live webcast.
We will be using the “Notice and Access” method of furnishing proxy materials via the Internet to our shareholders. We believe that this process will provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to reduce the environmental impact of the Specialour Annual Meeting and the costs of printing and distributing the proxy materials. On or about July 19, 2022,April 12, 2024, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K and vote electronically via the Internet. The Notice also contains instructions on how to receive a paper copy of your proxy materials.
It is important that your shares be represented at the SpecialAnnual Meeting, whether or not you plan to attend in person.participate. Please vote electronically via the Internet or, if you receive a paper copy of the proxy card by mail, you may vote by Internet, or telephone or by returning your signed proxy card in the envelope provided. If you do attendparticipate in the SpecialAnnual Meeting and desire to vote in person,at that time, you may do so by following the proceduresas described in the Proxy Statement.
Very truly yours,
Rainer Gawlick
Chairman of the Board
NOTICE OF SPECIALANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 29, 2022MAY 23, 2024
| Proto Labs, Inc. will hold | ||||||||||||||||
| TIME AND DATE: | 8:30 a.m. Central Time, on Thursday, May 23, 2024 | |||||||||||||||
| ITEM OF BUSINESS: | 1.Elect eight directors to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected. 2.Vote on the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for | |||||||||||||||
4.Vote on the approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan. 5.Act on any other matters that may properly come before the Annual Meeting, or any adjournment or postponement thereof. | ||||||||||||||||
| RECOMMENDATION: | ||||||||||||||||
The board of directors recommends that shareholders vote FOR each of the following: | ||||||||||||||||
•The approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan. | ||||||||||||||||
Only shareholders of record at the close of business on | ||||||||||||||||
By Order of the Board of Directors | ||||||||||||||||
 | ||||||||||||||||
 | ||||||||||||||||
Jason Frankman Corporate Secretary | ||||||||||||||||
YOUR VOTE IS IMPORTANT
Whether or not you plan to join the SpecialAnnual Meeting, we urge you to vote as soon as possible. If you received the Notice of Internet Availability of Proxy Materials (the “Notice”), you may vote via the Internet as described in the Notice. If you received a copy of the proxy card by mail, you may vote by Internet or telephone as instructed on the proxy card, or you may sign, date and mail the proxy card in the envelope provided.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL2024 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 29, 2022.MAY 23, 2024.
Our Proxy Statement for the Special2024 Annual Meeting of Shareholders isand our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 are available at www.proxyvote.com.
| TABLE OF CONTENTS | ||
TABLE OF CONTENTS
Proto Labs, Inc.
5540 Pioneer Creek Drive
Maple Plain, Minnesota 55359
(763) 479-3680
Fax: (763) 479-2679
July 19, 2022PROXY STATEMENT
The board of directors of Proto Labs, Inc. is soliciting proxies for use atCautionary Note Regarding Forward-Looking Statements
Proposal 1 - ApprovalPrivate Securities Litigation Reform Act of the Proto Labs, Inc. 2022 Long-Term Incentive Plan.Proposal 2 - Approval of one1995 that is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, expressed, or more adjournments of the Special Meetingimplied by such forward-looking information. Risks and uncertainties that could cause or contribute to a later date or dates if necessary or appropriatesuch differences include, but are not limited to, solicit additional proxies if there are insufficient votes to approve Proposal 1 at the time of the Special Meeting.
FOR Proposal 1 - Approval of the Proto Labs, Inc. 2022 Long-Term Incentive Plan; andFOR Proposal 2 - Approval of one or more adjournments of the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve Proposal 1 at the time of the Special Meeting.
The Notice also instructs as to how you may submit your proxythose discussed in Item 1A, “Risk Factors” included in our Annual Report on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. Any request to receive proxy materials by mail will remain in effect until you revoke it. | 1
This proxy statement contains forward-looking information within the Special Meeting to be held on August 29, 2022, and at any adjournment or postponementmeaning of the meeting.
| PROXY SUMMARY | ||
This Proxy Summary provides general information about Proto Labs, Inc. (the “Company” and Limitations on Awards. A maximum of 1,236,000 shares of our common stock may be the subject of awards"Protolabs") and issued under the 2022 Plan. The shares of common stock issuable under the 2022 Plan will be authorized and unissued shares of our Company. The share limitations under the 2022 Plan are subject to adjustment for changeshighlights certain information contained elsewhere in our corporate structure or shares, as described below.
| | Plan Category | | | Number of Securities to Be Issued Upon Exercise of Outstanding Options and Stock Appreciation Rights | | | Weighted Average Exercise Price of Outstanding Options and Stock Appreciation Rights | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | |
| | Equity compensation plans approved by security holders(1) | | | #594,005(1) | | | $97.78 | | | #5,766,8762) | |
| | Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| | Total | | | 594,005 | | | 97.78 | | | 5,766,876 | |
2023 HIGHLIGHTS
Against a challenging macroeconomic backdrop, Protolabs had a solid year in 2023, delivering revenue growth and making progress on the integration of the digital factory and digital network, as we continue to create the most complete and comprehensive offer in our “named executive officers”:
DIRECTOR NOMINEES
| Name | Age | Director Since | Independent | Audit Committee | Compensation and Talent Committee | Nominating and Governance Committee | ||||||||||||||
| Robert Bodor | 51 | 2021 | No | |||||||||||||||||
| Archie C. Black | 62 | 2016 | Yes |  | | |||||||||||||||
| Sujeet Chand | 66 | 2017 | Yes |  | ||||||||||||||||
| Moonhie Chin | 66 | 2019 | Yes | | ||||||||||||||||
| Rainer Gawlick | 56 | 2008 | Yes | | ||||||||||||||||
| Stacy Greiner | 50 | 2021 | Yes | | ||||||||||||||||
| Donald G. Krantz | 69 | 2017 | Yes | | ||||||||||||||||
| Sven A. Wehrwein | 73 | 2011 | Yes | | | |||||||||||||||
| Chairperson | ||||
| Member | ||||
| 1 | |||||
| TENURE | AGE | DIVERSITY | ||||||||||||
| Average: 8 Years | Average: 62 Years | 38% Diverse | ||||||||||||
| SKILLS & EXPERIENCE | ||||||||||||||||||||||||||
| QUALIFICATIONS / ATTRIBUTES | Robert Bodor | Archie C. Black | Sujeet Chand | Moonhie Chin | Rainer Gawlick | Stacy Greiner | Donald G. Krantz | Sven A. Wehrwein | ||||||||||||||||||
| Finance: Well versed in finance with the ability to interpret financial results and what drives performance, obtain the most from its value drivers and foresee the likely outcomes from board decisions. | l | l | l | l | l | l | ||||||||||||||||||||
| Operational: Experience with operational matters, including developing long-term operational strategies and leading organizations to meet objectives. Knowledge of multiple operational functions and principles. Proven ability to plan and manage operational process for maximum efficiency and productivity. | l | l | l | l | l | l | l | l | ||||||||||||||||||
| Industry Experience: IM, CNC, 3DP, & Sheet Metal: Relevant experience in the industry in which the Company operates. | l | l | l | l | ||||||||||||||||||||||
| Public Company Leadership: Current or former executive of publicly-listed company. | l | l | l | l | l | l | l | l | ||||||||||||||||||
| Strategy and M&A: Experience with M&A activities; current or former executive role with responsibility to develop and execute corporate strategy. | l | l | l | l | l | l | l | l | ||||||||||||||||||
| Sales, Marketing, E-commerce: Current or former executive role with responsibilities for sales, marketing, e-commerce, or customer service. | l | l | l | l | l | |||||||||||||||||||||
| Technology, IT, Cybersecurity: Expertise or degree in area, covering digital technology, cyber security, digital marketing, social media, etc. Could be current or former executive role in the IT sector. | l | l | l | l | l | l | l | |||||||||||||||||||
| Global Experience: Proven knowledge of the overseas markets in which the Company operates. | l | l | l | l | l | l | l | l | ||||||||||||||||||
| Lean Manufacturing Expertise: Qualifications include current or former executive role in the manufacturing sector; expertise in sourcing, manufacturing, supply chain, infrastructure, logistics, product development, distribution and marketing. | l | l | l | |||||||||||||||||||||||
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| SKILLS & EXPERIENCE | ||||||||||||||||||||||||||
| QUALIFICATIONS / ATTRIBUTES | Robert Bodor | Archie C. Black | Sujeet Chand | Moonhie Chin | Rainer Gawlick | Stacy Greiner | Donald G. Krantz | Sven A. Wehrwein | ||||||||||||||||||
| Risk Oversight: Risk oversight processes assess the nature and scope of risks applicable to the Company, review appropriate controls to minimize risks, and monitor the controls to ensure their effectiveness. | l | l | l | l | l | l | l | l | ||||||||||||||||||
| Corporate Governance Expertise: Corporate governance oversight includes the rules, controls, policies, and processes that guide the Company's operations and corporate behavior. | l | l | l | l | l | l | ||||||||||||||||||||
| RACIAL/ETHNIC DIVERSITY | ||||||||||||||||||||||||||
| Black/African American | ||||||||||||||||||||||||||
| Asian | l | l | ||||||||||||||||||||||||
| Hispanic | ||||||||||||||||||||||||||
| White | l | l | l | l | l | l | ||||||||||||||||||||
| GENDER DIVERSITY | ||||||||||||||||||||||||||
| Female | l | l | ||||||||||||||||||||||||
| Male | l | l | l | l | l | l | ||||||||||||||||||||
| OTHER QUALIFICATIONS & TENURE | ||||||||||||||||||||||||||
| Sitting CEO | l | |||||||||||||||||||||||||
| Number of other public company boards | 0 | 2 | 2 | 1 | 1 | 0 | 0 | 2 | ||||||||||||||||||
| Years on Board | 3 | 8 | 6 | 4 | 15 | 2 | 7 | 12 | ||||||||||||||||||
CORPORATE GOVERNANCE HIGHLIGHTS
•Separate Board Chairperson and CEO
•Risk oversight by full Board and Committees
•Majority voting standard for uncontested director elections
•Annual election of directors
•Bylaws provide for Proxy Access by shareholders
•Annual advisory say-on-pay vote
CORPORATE RESPONSIBILITY AND SUSTAINABILITY HIGHLIGHTS
Our corporate responsibility and sustainability practices are built on a foundation of shared fundamental values of teamwork, trust and achievement, and help us to deliver strong financial results that create value for our Company and our shareholders in a way that respects our communities and the environments in which we operate.
•Teamwork – We are dedicated to the idea that a diversity of minds is better than one. Through open communication, we strive to collaborate with and include all of our colleagues to maximize our creativity and to make our good ideas great. We respect each other’s opinions. We help colleagues who are struggling to improve, so our success is everyone’s success.
•Trust – Our integrity is built on honest answers to our customers and colleagues. It is okay to make mistakes if we use them to learn. We navigate difficult situations with compassion. The success of our Company depends on the success of our people.
•Achievement – Speed and innovation are the cornerstones of our success. We are committed to being a solution for getting things done quickly and sustainably and a catalyst for great ideas for our shareholders, customers, the environment and each other. We are responsible for our performance, our results and our future.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our board of directors, executives and leaders throughout the organization have identified our top environmental, social and governance ("ESG") priorities. The figure below shows the results of our ESG priorities in terms of both importance to stakeholders and our Company’s success.
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Our environmental key priorities include:
•Environmental compliance
•Energy use reduction
•Waste management/recycling
In 2023, we devoted resources to manage increasing costs of energy, particularly in the European region, and sought opportunities to reduce our consumption of energy resources. In addition, our teams continue to evaluate opportunities to increase recycling of scrap or other waste material in our manufacturing operations, and to reduce our waste impact on landfills.
Our social key priorities include:
•Ethics and integrity
•Employee health and well being
•Diversity, equity and inclusion
In 2023, our global human resources leadership advanced our social initiatives as we continue to integrate operations of the factory and network. This work includes acknowledging the vast and growing diversity we have in our global organization and engaging employees throughout the organization to define our values and culture, which we will deploy in 2024.
Our governance key priorities include:
•Ethics, compliance and transparency
•Regulatory management
•Risk and crisis management
In 2023, we expanded our enterprise risk management ("ERM") program by embedding ERM into our strategic goal-setting processes. This included in-depth risk-based conversations regarding strategic alternatives and defining actions to mitigate risk. The results of the enterprise risk management program will be used to drive governance key priorities and company strategy in 2024 and beyond. In addition, our ERM program includes an information security program designed to identify, protect, detect and respond to and manage reasonably foreseeable cybersecurity risks and threats.
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Environmental
•Digital Manufacturing Drives Sustainability
As a digital manufacturer, we are able to assist our customers as they focus on materials management, operational productivity and on-demand solutions. Digital manufacturing is a solution our customers can deploy to reduce product waste by iterating part designs virtually, on a digital twin model, before any actual production begins. With on-demand production of parts, there is also reduced reliance on storage facilities since inventory is virtual – the parts you need, when you need them. Our on-demand manufacturing model also helps customers efficiently order low quantities quickly, reducing the need to order excess parts with shifting market demand throughout the lifecycle of a product.
When paired with a robust e-commerce platform, digital manufacturing can also increase efficiencies in material selection and usage, the procurement process, and accelerating innovation. Furthermore, reducing scrap rate requires monitoring systems that enable automated process cycle sheet generation, ensuring run-to-run repeatability and reducing operator error. This kind of monitoring system can improve consistency in part production and reduce scrap costs, especially in injection molding. We believe sustainability in product development, and in manufacturing, is the future and we will continue to support our customers in their own sustainability journeys.
•Environmental Initiatives
We are committed to having a positive impact on the environment. In 2023, we again hosted InspirON in Europe, a knowledge sharing event to focus on what design engineers need to consider when developing sustainable products for manufacturing. The event was designed to provide insight into designing more sustainable products and to explore how design can help make the manufacturing process greener and more efficient. The event covered topics ranging from: manufacturing innovation in the face of adversity, using rapid manufacturing to solve complex development challenges, and practical innovation for production methods.
In 2021, we were awarded a Manufacturing Leadership Award from the National Association of Manufacturers (NAM) in the Sustainability Leadership category. This category recognizes companies embracing manufacturing processes that are non-polluting, conserve energy and natural resources, and are economically sound and safe for employees, communities, and consumers. In 2020, we installed nearly 1,900 solar panels on the roof of our facility in Plymouth, MN, one of our larger manufacturing facilities. The solar array covers nearly 20 percent of our energy use in Plymouth, MN and offsets the equivalent of 1.3 million pounds of CO2 and preserves 775 acres of forest annually.
We strive to maximize recycling in both our manufacturing and office facilities. In our manufacturing facilities, we recycle metal, plastic and water used throughout the manufacturing processes. Finally, the Green Team, an employee-led organization, educates our employees on how they can positively impact the environment, both at work and at home. The Green Team also provides opportunities for employees to positively impact the environment, including activities like roadside cleanup and tree planting.
Social
•Diversity, Equity and Inclusion
At Protolabs, diversity, equity and inclusion matters. We are committed to nurturing a culture where we celebrate diversity, equity and inclusivity as a way of life. Our diversity and inclusion efforts start at the top with our board regularly reviewing initiatives. Our Diversity, Equity and Inclusion ("DEI") Leadership Council was highlighted by two major accomplishments that transformedestablished to promote honest conversations, influence best practices and educate our businessemployees. Our DEI Leadership Council members are employee representatives chosen from various functions and position uslocations to work directly with our leadership team to drive change in our work environment. We also require certain employees to participate in annual unconscious bias training to further foster a work environment of fairness and sensitivity. As we continue to grow, we will continue to emphasize employee safety and having an inclusive work environment as top priorities. Our goal is to build diverse teams throughout the global organization and be a role model for the future. First,communities where we work and live. Uniqueness defines us as a company, from our custom products to our employees. Our pledge is to promote a global culture that invites, recognizes and embraces each individuals contributions to make a stronger “US”.
•Workforce Demographics
As of December 31, 2023, we had 2,415 full-time employees, including 1,672 full-time employees in the United States and 743 full-time employees in Europe. We also regularly use independent contractors and other temporary employees across the organization to augment our regular staff. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified, diverse and inclusive personnel.
We are an equal opportunity employer, and we believe that a diverse workforce made up of people with different ideas, strengths, interests and cultural backgrounds drives employee and business success. Our workforce is composed of a diverse group of engineers, technicians and business professionals from around the world and every walk of life.
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We believe our employees are critical to our success and continually seek employee feedback to enhance employee engagement. In 2023, our attrition rates were higher than historical averages and were impacted by actions we took during the year to reduce our workforce in areas of the business that experienced lower volumes. Our attrition rates were 20.4% and 23.9% in the United States and Europe, respectively.
•Compensation and Benefits
We believe our success depends in large measure on our ability to attract, retain and motivate a broad range of employees to be successful in a dynamic and changing business environment, and that a competitive compensation program is essential. In determining employee compensation, our executive leadership team reviews and considers several factors, including individual and company performance, input from managers, competitor market data from third party compensation surveys, our compensation philosophy and key principles, and the leadership’s collective experience and knowledge. Annually, our executive leadership team reviews input from managers throughout our organization, including recommendations as to compensation levels that the managers believe are commensurate with an individual’s job performance, skills, experience, qualifications, criticality to our Company and development/career opportunities. We also award long-term equity-based compensation to high performing employees and managers who have the greatest impact on the creation of shareholder value to further align the interests of our employees and shareholders.
We provide employee benefits that meet or exceed the requirements of local law. We are committed to providing comprehensive benefits plans including, but not limited to, paid leave, retirement savings, health benefits, dental benefits, parental leave, family care leave, and childcare benefits. All overtime is performed and compensated in accordance with the law and the individual’s employment contract or other applicable contract or collective agreement.
•Education
We firmly believe that investing in the education of our employees is critical to our success. Our employees are provided access to a robust learning management system that offers hundreds of courses on various topics ranging from compliance to leadership to job-specific skills. In 2023 and 2022, employees spent an average of 35 and 36 hours, respectively, per employee in training sessions. We provide an Educational Assistance Program for employees, which offers financial assistance for both professional and personal development to inspire employees to continuously enhance their skills and knowledge. We have a customized leadership development program designed for current and aspiring managers in search of developing their leadership skills. The program provides training on topics that are aligned with our Leadership Principles and our Core Values. In 2023, we completed the largest acquisitionfirst year of our mentorship program to provide opportunity for mentors and mentees to accelerate their personal and professional development through a one-on-one guided relationship.
To ensure our industry remains robust, we are committed to supporting Science, Technology, Engineering and Mathematics ("STEM") programs in the cities where we have facilities. Through the Proto Labs Foundation, we provide STEM education grants to eligible organizations. In addition, we partner with schools, colleges and universities to provide various outreach opportunities and sponsorships.
•Health, Safety and Wellness
We are committed to providing a work environment that minimizes health and safety risks. Our processes support accident prevention and prioritizes the health and safety of all of our employees and all others affected by their activities. We provide and require our employees to use personal protective equipment at all times. To ensure our employees understand the importance of safety, we provide regular, mandatory training.
We strive to continuously improve our employees’ health, safety and wellness. Our “I Am” safety program teaches that safety is the responsibility of every individual in our historyorganization. We believe this program is the basis for our excellent safety compliance record. We believe that our employees are our most valuable asset, and joined forcestheir safety and health is among our top priorities.
In addition to concentrating on employee safety in the workplace, we also focus on the overall well-being of our employees. We continue to invest in a variety of employee health and wellness programs, including gym membership discounts, on-site fitness classes at certain facilities, wellness newsletters and learning sessions, and providing various Employee Assistance Programs.
•Charitable Giving
We pride ourselves in being a responsible corporate citizen through our Proto Labs Foundation. We support several charitable causes with Hubsour Employee Matching, Cool Ideas, and Major Gifts Programs. The Foundation’s efforts serve as a sustaining investment in the future of the communities where our employees live and work, and also a commitment to expandbuild talent to support the future employment needs of the manufacturing industry. ProtoGivers, our service capabilities withemployee led community involvement team, organizes a wide variety of charitable activities, including blood drives, working for Habitat for Humanity projects, volunteering for Feed My Starving Children, and making financial contributions to charitable causes, many of which are matched through the intent of servicing more customer use cases. Second, we revamped our e-commerce experience and made significant enhancements to our internal systems architecture to improve our customer experience.
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•Human Rights
We recognize our responsibility to protect human rights and we are committed to fostering an organizational culture which promotes support for internationally recognized human rights and labor standards. We strive to respect and promote human rights in accordance with the UN Guiding Principles on Business and Human Rights in our relationship with our employees, customers and suppliers. We have established a Human Rights Policy which is available on the Investor Relations section of our website.
•Supply Chain
We are committed to conducting our business in accordance with the highest ethical standards and in compliance with all applicable laws, rules and regulations. We expect our suppliers to share our principles and uphold our standards and for each to develop policies and programs, as strong as peers at the end of 2021, it has been historically very strong, exceedingappropriate, to ensure that of the peer group, the S&P 500all workers understand and the Russell 2000 Growth Index from our IPO through 2020. While our shareholder value has declined in 2021 relativeadhere to these measures, our boardstandards. We have established a Vendor Code of directorsConduct Policy, including guidance on anti-bribery, privacy and senior management team believe thisdata protection, responsible sourcing of materials, environmental standards, labor and human rights, and anti-tax evasion. Our full policy is temporary and are strongly committed to our Company’s long-term sustainable growth.
We believe our success depends in large measure on our ability to attract, retain and motivate a talented senior management team to effectively lead our Company in a dynamic and changing business environment, and that a competitive executive compensation program is essential to that effort. We believe that our executive compensation program should support our short- and long-term strategic and operational objectives, and reward corporate and individual performance that contributes to creating value for our shareholders.
Consistent with this philosophy, and past practice, the majority of our named executive officers’ 2023 summary annual compensation is considered "at risk".
2023 Summary Annual Compensation
| CEO | CFO | Average Other Current NEOs | ||||||||||||
 |  |  | ||||||||||||
| Salary | Non-Equity Incentive Plan Compensation | Option Awards | Stock Awards | Performance Based | ||||||||||||||||||||||||||||
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AGENDA ITEMS AND BOARD RECOMMENDATIONS
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of our board of directors. Each of the below proposals are described in more detail in this Proxy Statement:
| Proposal | Board's Voting Recommendation | |||||||
| 1. | Election of the eight director nominees named in this Proxy Statement to serve for one-year terms. | For | ||||||
| 2. | Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2024. | For | ||||||
| 3. | Advisory vote to approve the executive officer compensation disclosed in this Proxy Statement (“say-on-pay”). | For | ||||||
| 4. | Approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan | For | ||||||
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| PROXY STATEMENT | ||
The Board of Directors of Proto Labs, Inc. is soliciting proxies for use at the Annual Meeting to be held on May 23, 2024, and at any adjournment or postponement of the meeting.
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | ||
Q:Who can vote?
A:You can vote if you were a shareholder at the close of business on the record date of March 28, 2024 (the “Record Date”). There were a total of 25,560,238 shares of our common stock outstanding on the Record Date. The Notice of Internet Availability of Proxy Materials (the “Notice”), notice of Annual Meeting, this Proxy Statement and accompanying proxy card and the Annual Report on Form 10-K for 2023 were first mailed or made available to you beginning on or about April 12, 2024. This Proxy Statement summarizes the information you need to vote at the Annual Meeting.
Q:Who can attend the Annual Meeting?
A:This year, the 2024 Annual Meeting will once again be conducted exclusively virtually via live webcast at www.virtualshareholdermeeting.com/PRLB2024 (the “Annual Meeting Website”). All shareholders, regardless of size, resources or physical location, eligible to attend the Annual Meeting will be able to participate via webcast and will be able to communicate with us and ask questions before and during the Annual Meeting. All shareholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. If you hold your shares in street name, then you must request a legal proxy from your broker or nominee to attend and vote at the Annual Meeting.
Q:What am I voting on?
A:You are voting on:
•Election of eight nominees as directors to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected.
•Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2024.
•Approval on an advisory basis of the compensation of our officers disclosed in this Proxy Statement, which we refer to as a “say-on-pay” vote.
•Approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan.
Q:How does the board of directors recommend I vote on the proposals?
A:The board is soliciting your proxy and recommends you vote:
•FOR each of the director nominees;
•FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2024;
•FOR the say-on-pay proposal; and
•FOR the approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan.
Q:Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of the proxy materials?
A:“Notice and Access” rules adopted by the United States Securities and Exchange Commission (the “SEC”) permit us to furnish proxy materials, including this Proxy Statement and our Annual Report on Form 10-K for 2023, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Shareholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice instructs as to how you may access and review all of the proxy materials on the Internet.
The Notice also instructs as to how you may submit your proxy via the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. Any request to receive proxy materials by mail will remain in effect until you revoke it.
Q:How many shares must be voted to approve each proposal?
A:Quorum. A majority of the shares entitled to vote, present in person (virtually) or by proxy, is necessary to constitute a quorum for the transaction of business at the Annual Meeting. As of the Record Date, 25,560,238 shares of our
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common stock were issued and outstanding. A majority of those shares will constitute a quorum for the purpose of electing directors and adopting proposals at the Annual Meeting. If you submit a valid proxy or attend the Annual Meeting, your shares will be counted to determine whether there is a quorum.
Vote Required. Generally, directors are elected by a majority of the votes cast with respect to the director, meaning that the votes cast “for” a director must exceed the votes cast “against” the director. However, in a contested election of directors in which the number of nominees exceeds the number of directors to be elected, the directors are elected by a plurality of the votes present in person (virtually) or by proxy at the meeting. The election of directors at the Annual Meeting will be an uncontested election, and therefore directors will be elected by a majority of the votes cast with respect to the director.
The proposal to ratify the selection of our independent registered public accounting firm must be approved by the affirmative vote of the greater of (a) a majority of the shares of our common stock present in person (virtually) or by proxy at the Annual Meeting and entitled to vote or (b) a majority of the minimum number of shares of common stock entitled to vote that would constitute a quorum. For the advisory say-on-pay vote, there is no minimum approval necessary since it is advisory. However, if the advisory say-on-pay resolution in this Proxy Statement receives more votes “for” than “against,” then it will be deemed to be approved. The say-on-pay vote is advisory and is not binding on the board of directors. The proposal to approve the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan must be approved by the affirmative vote of the greater of (a) a majority of the shares of our common stock present in person (virtually) or by proxy at the Annual Meeting and entitled to vote or (b) a majority of the minimum number of shares of common stock entitled to vote that would constitute a quorum.
Q:What is the effect of broker non-votes and abstentions?
A:A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have or does not exercise discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. If a broker returns a “non-vote” proxy indicating a lack of authority to vote on a proposal, then the shares covered by such a “non-vote” proxy will be deemed present at the Annual Meeting for purposes of determining a quorum, but not present for purposes of calculating the vote with respect to any non-discretionary proposals. Nominees will not have discretionary voting power with respect to any matter to be voted upon at the Annual Meeting, other than the ratification of the selection of our independent registered public accounting firm. As a result, there will not be any broker non-votes with respect to that proposal. Broker non-votes will have no effect on the outcome of any of the other proposals, unless the voting standard under clause (b) of the last sentence of the previous paragraph applies, in which case broker non-votes will have the same effect as a vote against the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan.
A properly executed proxy marked “ABSTAIN” with respect to a proposal will be counted for purposes of determining whether there is a quorum and will be considered present in person (virtually) or by proxy and entitled to vote, but will not be deemed to have been voted in favor of such proposal. Abstentions will have no effect on the voting for the election of directors or approval of the advisory say-on-pay resolution. Abstentions will have the same effect as voting against the proposal to ratify the selection of our independent registered public accounting firm, the proposal to approve the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan, and any other item properly presented at the Annual Meeting or any adjournments or postponements thereof.
Q:How will the proxies vote on any other business brought up at the Annual Meeting?
A:By submitting your proxy, you authorize the proxies to use their judgment to determine how to vote on any other matter brought before the Annual Meeting, or any adjournments or postponements thereof. We do not know of any other business to be considered at the Annual Meeting. The proxies’ authority to vote according to their judgment applies only to shares you own as the shareholder of record.
Q:How do I cast my vote?
A:If you are a shareholder whose shares are registered in your name, you may vote using any of the following methods:
•Internet. You may vote by going to the web address www.proxyvote.com 24-hours a day, seven days a week, until 11:59 p.m. Eastern Time on May 22, 2024 and following the instructions for Internet voting shown on your Notice or proxy card.
•Telephone. If you requested printed proxy materials and you received a paper copy of the proxy card, you may vote by dialing 1-800-690-6903 24-hours a day, seven days a week, until 11:59 p.m. Eastern Time on May 22, 2024 and following the instructions for telephone voting shown on your proxy card.
•Mail. If you requested printed proxy materials and you receive a paper copy of the proxy card, then you may vote by completing, signing, dating and mailing the proxy card in the envelope provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote by Internet or telephone, please do not mail your proxy card.
•Virtually at the Annual Meeting Website. If you are a shareholder whose shares are registered in your name, you may vote virtually via live webcast during the Annual Meeting.
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If your shares are held on account at a brokerage firm, bank or similar organization, you will receive voting instructions from your bank, broker or other nominee describing how to vote your shares. You must follow those instructions to vote your shares. You will receive the Notice that instructs how to access our proxy materials on the Internet and vote your shares via the Internet. It also instructs how to request a paper copy of our proxy materials. If you hold your shares in street name and want to vote virtually during the Annual Meeting, then you must obtain a legal proxy from your broker or nominee.
Proxies that are voted via the Internet or by telephone in accordance with the voting instructions provided, and proxy cards that are properly signed, dated and returned, will be voted in the manner specified.
Q:Can I vote my shares by filling out and returning the Notice?
A:No. The Notice identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and returning it. The Notice provides instructions on how to vote by Internet, by requesting and returning a paper proxy card or voting instruction card, or by voting at the Annual Meeting.
Q:Can I revoke or change my vote?
A:You can revoke your proxy at any time before it is voted at the Annual Meeting by:
•submitting a new proxy with a more recent date than that of the prior proxy given before 11:59 p.m. Eastern Time on May 22, 2024 by (1) following the Internet voting instructions or (2) following the telephone voting instructions;
•completing, signing, dating and returning a new proxy card to us, which must be received by us before the time of the Annual Meeting; or
•participating in the virtual Annual Meeting and revoking the proxy by voting those shares when joining the meeting.
Joining the Annual Meeting will not by itself revoke a previously granted proxy. Unless you decide to vote your shares virtually at the Annual Meeting, you should revoke your prior proxy in the same way you initially submitted it—that is, by Internet, telephone or mail.
Q:Who will count the votes?
A:Broadridge Financial Solutions, Inc., our independent proxy tabulator, will count the votes. Daniel Schumacher, our Chief Financial Officer, will act as inspector of election for the Annual Meeting.
Q:Is my vote confidential?
A:All proxies and all vote tabulations that identify an individual shareholder are confidential. Your vote will not be disclosed except:
•to allow Broadridge Financial Solutions, Inc. to tabulate the vote;
•to allow Daniel Schumacher to certify the results of the vote; and
•to meet applicable legal requirements.
Q:What shares are included on my proxy?
A:Your proxy will represent all shares registered to your account.
Q:What happens if I don’t vote shares that I own?
A:For shares registered in your name. If you do not vote shares that are registered in your name by voting in person (virtually) at the Annual Meeting or by proxy through the Internet, telephone or mail, your shares will not be counted in determining the presence of a quorum or in determining the outcome of the vote on the proposals presented at the Annual Meeting.
For shares held in street name. If you hold shares through a broker, you will receive voting instructions from your broker. If you do not submit voting instructions to your broker and your broker does not have discretion to vote your shares on a particular matter, then your shares will not be counted in determining the outcome of the vote on that matter at the Annual Meeting. See “What is the effect of broker non-votes and abstentions?” as described above. Your broker will not have discretion to vote your shares for any matter to be voted upon at the Annual Meeting other than the ratification of the selection of our independent registered public accounting firm. Accordingly, it is important that you provide voting instructions to your broker for the matters to be voted upon at the Annual Meeting.
Q:What if I do not specify how I want my shares voted?
A:If you are a registered shareholder and submit a signed proxy card or submit your proxy by Internet or telephone but do not specify how you want to vote your shares on a particular matter, we will vote your shares as follows:
•FOR each of the director nominees;
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•FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2024;
•FOR the say-on-pay proposal; and
•FOR the approval of the Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan.
If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned or postponed, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described under “Can I revoke or change my vote?”
If you hold shares through a broker, please see above under “What happens if I don’t vote shares that I own?”
Q:What does it mean if I get more than one Notice or proxy card?
A:Your shares are probably registered in more than one account. You should provide voting instructions for all Notices and proxy cards you receive.
Q:How many votes can I cast?
A:You are entitled to one vote per share on all matters presented at the Annual Meeting or any adjournment or postponement thereof. There is no cumulative voting.
Q:When are shareholder proposals and nominees due for the 2025 Annual Meeting of Shareholders?
A:If you want to submit a shareholder proposal or nominee for the 2025 Annual Meeting of Shareholders, you must submit the proposal in writing to our Secretary, Proto Labs, Inc., 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359, so it is received by the relevant dates set forth below under “Submission of Shareholder Proposals and Nominations.”
Q:What is “householding”?
A:We may send a single Notice, as well as other shareholder communications, to any household at which two or more shareholders reside unless we receive other instruction from you. This practice, known as “householding,” is designed to reduce duplicate mailings and printing and postage costs, and conserve natural resources. If your Notice is being householded and you wish to receive multiple copies of the Notice, or if you are receiving multiple copies and would like to receive a single copy, or if you would like to opt out of this practice for future mailings, you may contact:
Broadridge Financial Solutions, Inc.
Householding Department
51 Mercedes Way
Edgewood, New York 11717
1-800-542-1061
Broadridge will deliver the requested documents to you promptly upon receipt of your request.
Q:How is this proxy solicitation being conducted?
A:We will pay for the cost of soliciting proxies and we will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our shareholders. In addition, some of our employees may solicit proxies. We may solicit proxies in person, via the Internet, by telephone and by mail. Our employees will not receive special compensation for these services, which the employees will perform as part of their regular duties.
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| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||
The following table sets forth information as of March 28, 2024 regarding the beneficial ownership of our common stock by:
•each person or group who is known by us to own beneficially more than 5% of our outstanding shares of common stock;
•each of our named executive officers named in the Summary Compensation Table ("SCT") below;
•each of our directors and each director nominee; and
•all of our current executive officers, directors and director nominees as a group.
The percentage of beneficial ownership is based on 25,560,238 shares of common stock outstanding as of March 28, 2024. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the shareholder. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o Proto Labs, Inc., 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359.
| Name and Address of Beneficial Owner | Beneficial Ownership on March 28, 2024 | ||||||||||
| Number | Percent | ||||||||||
| Greater than 5% shareholders: | |||||||||||
| BlackRock, Inc. | |||||||||||
| 50 Hudson Yards | |||||||||||
| New York, NY 10001 | 4,472,070 | (1) | 17.5 | % | |||||||
| The Vanguard Group | |||||||||||
| 100 Vanguard Blvd. | |||||||||||
| Malvern, PA 19355 | 2,922,263 | (2) | 11.4 | % | |||||||
| Disciplined Growth Investors, Inc. | |||||||||||
| 150 South Fifth Street, Suite 2550 | |||||||||||
| Minneapolis, MN 55402 | 1,739,638 | (3) | 6.8 | % | |||||||
| Directors and named executive officers: | |||||||||||
| Archie C. Black | 17,578 | (4) | * | ||||||||
| Sujeet Chand | 16,013 | (5) | * | ||||||||
| Moonhie Chin | 11,456 | (6) | * | ||||||||
| Rainer Gawlick | 36,868 | (7) | * | ||||||||
| Stacy Greiner | 11,004 | (8) | * | ||||||||
| Donald Krantz | 16,013 | (9) | * | ||||||||
| Sven A. Wehrwein | 26,995 | (10) | * | ||||||||
| Robert Bodor | 95,981 | (11) | * | ||||||||
| Daniel Schumacher | 21,853 | (12) | * | ||||||||
| Michael R. Kenison | 24,718 | (13) | * | ||||||||
| Bjoern Klaas | 21,455 | (14) | * | ||||||||
| Oleg Ryaboy | 15,270 | (15) | * | ||||||||
| All directors and executive officers as a group (12 persons) | 315,204 | (16) | 1.2 | % | |||||||
*Represents beneficial ownership of less than one percent
(1)Information is based on a Schedule 13G/A filed with the SEC by BlackRock, Inc. (“BlackRock”) on January 22, 2024. BlackRock has sole voting power over 4,416,763 shares of our common stock and sole dispositive power over 4,472,070 shares of our common stock.
(2)Information is based on a Schedule 13G/A filed with the SEC by Vanguard Group Inc. (“Vanguard”) on February 13, 2024. Vanguard has shared voting power over 16,599 shares of our common stock, sole dispositive power over 2,878,723 shares of our common stock and shared dispositive power over 43,540 shares of our common stock.
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(3)Information is based on a Schedule 13G/A filed with the SEC by Disciplined Growth Investors, Inc. (“DGI”) on February 14, 2024. DGI has sole voting power over 1,502,898 shares of our common stock, shared voting power over 236,740 shares of our common stock and sole dispositive power over 1,739,638 shares of our common stock.
(4)Includes 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(5)Includes 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(6)Includes 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(7)Includes 3,340 shares that Dr. Gawlick has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options and 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(8)Includes 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(9)Includes 4,513 shares of restricted stock units that vest on May 15, 2024.
(10)Includes 3,340 shares that Mr. Wehrwein has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options and 4,513 shares of deferred stock units that vest on May 15, 2024 and will be settled after separation from service on the board of directors.
(11)Includes 65,592 shares that Dr. Bodor has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options.
(12)Includes 1,207 shares of restricted stock units that vest on May 20, 2024 and 13,085 shares that Mr. Schumacher has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options.
(13)Includes 1,094 shares of restricted stock units that vest on May 20, 2024 and 13,345 shares that Mr. Kenison has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options.
(14)Includes 12,595 shares that Mr. Klaas has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options.
(15)Includes 8,654 shares that Mr. Ryaboy has the right to acquire from us within 60 days of the date of the table pursuant to the exercise of stock options.
(16)Includes 119,951 shares held by our executive officers and directors, in the aggregate, that can be acquired from us within 60 days of the date of the table pursuant to the exercise of stock options, 27,078 shares of deferred stock units, in the aggregate, that vest on May 15, 2024 and will be settled after separation from service on the board of directors, 4,513 shares of restricted stock units that vest on May 15, 2024 and 2,301 shares of restricted stock units that vest on May 20, 2024.
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| CORPORATE GOVERNANCE | ||
Board Leadership Structure
Rainer Gawlick leads our board of directors in his role as Chairman. Our board of directors believes that its leadership structure is appropriate for our Company in light of the importance of maintaining independent board leadership and engagement.
As Chairman, Dr. Gawlick:
•presides at all meetings of the board of directors, including executive sessions of the independent directors;
•conducts the annual performance review of the Chief Executive Officer, with input from the other independent directors;
•sets the board agenda and frequency of meetings, in consultation with the committee chairs as applicable; and
•has the authority to convene meetings of the independent directors at every meeting.
Risk Oversight
Our management is responsible for defining the various risks facing our Company, formulating risk management policies and procedures, and managing our risk exposures on a day-to-day basis. The board’s responsibility is to monitor our risk management processes by using board meetings, management presentations and other opportunities to educate itself concerning our material risks and evaluating whether management has reasonable controls in place to address the material risks; the board is not responsible, however, for defining or managing our various risks. The full board is responsible for monitoring management’s responsibility in the area of risk oversight. In addition, the audit committee and the compensation and talent committee have risk oversight responsibilities in their respective areas of focus, on which they report to the full board. Management reports from time to time to the full board, the audit committee and the compensation and talent committee on risk management. The board focuses on the material risks facing our Company, including operational, credit, liquidity, legal and cybersecurity risks, to assess whether management has reasonable controls in place to address these risks.
Nominating Process and Board Diversity
In consultation with other members of the board of directors, the nominating and governance committee is responsible for identifying individuals who it considers qualified to become board members. The nominating and governance committee will screen potential director candidates, including those recommended by shareholders, and recommend to the board of directors suitable nominees for the election to the board of directors. The nominating and governance committee uses a variety of methods for identifying and evaluating nominees for directors. The nominating and governance committee regularly assesses the appropriate size and composition of the board of directors, the needs of the board of directors and the respective committees of the board of directors, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the nominating and governance committee through shareholders, management, current members of the board of directors, or search firms. The evaluation of these candidates may be based solely upon information provided to the committee or may include discussions with persons familiar with the candidate, an interview of the candidate or other actions the committee deems appropriate, including the use of third parties to review candidates.
In considering whether to recommend an individual for election to the board, the nominating and governance committee considers, as required by the corporate governance guidelines and its charter, the board’s overall balance of diversity of perspectives, backgrounds, and experiences, although it does not have a formal policy regarding the consideration of diversity of board members. The nominating and governance committee views diversity expansively and considers, among other things, breadth and depth of relevant business and board skills and experiences, educational background, employment experience and leadership performance as well as those intangible factors that it deems appropriate to develop a heterogeneous and cohesive board, such as integrity, achievements, judgment, intelligence, personal character, the interplay of the candidate’s relevant experience with the experience of other board members, the willingness of the candidate to devote sufficient time to board duties, and likelihood that he or she will be willing and able to serve on the board for an extended period of time.
The nominating and governance committee will consider a recommendation by a shareholder of a candidate for election as a Protolabs director. Shareholders who wish to recommend individuals for consideration by the nominating and governance committee to become nominees for election to the board may do so by submitting a written recommendation to our Secretary. Recommendations must be received by the Secretary within the timelines specified in our Bylaws to be considered by the nominating and governance committee for possible nomination at our Annual Meeting of Shareholders the following year. Our Bylaws provide that such notice should be received no less than 90 days prior to the first anniversary of the preceding year’s Annual Meeting, except in certain circumstances. All recommendations must contain the information required in our Bylaws and corporate governance guidelines, including, among other things, the identification of the
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nominee, a written consent by the recommended individual to agree to be named in our proxy statement and to serve as director if elected, and the name and address of the shareholder submitting the nomination. Shareholders may also have the opportunity to include nominees in our proxy statement by complying with the requirements set forth in Section 2.17 of our Bylaws. Recommendations must be received by the Secretary within the timeframes noted under “Submission of Shareholder Proposals and Nominations.”
Proxy Access
Our Bylaws include a “proxy access” provision for director nominations under which eligible shareholders may nominate candidates for election to our board and inclusion in our proxy statement. The “proxy access” provision permits an eligible shareholder, or an eligible group of up to 20 shareholders, owning continuously for at least three years shares of our Company representing an aggregate of at least three percent of the voting power entitled to vote in the election of directors, to nominate and include in our annual meeting proxy materials director nominees not to exceed the greater of (i) two or (ii) 25 percent of the number of directors then serving on our board, or, if such amount is not a whole number, the closest whole number below 25 percent, but not less than two. Such nominations are subject to certain eligibility, procedural, and disclosure requirements set forth in section 2.17 of our Bylaws, including the requirement that our Company must receive notice of such nominations not less than 120 calendar days prior to the anniversary date of the prior year’s annual proxy materials mailing, except as otherwise provided in section 2.17 of our Bylaws. Section 2.17 of our Bylaws provides the exclusive method for a shareholder to include nominees for election to the board of directors in the Company’s proxy materials, other than with respect to Rule 14a-19 to the extent applicable with respect to the form of proxies.
Director Independence
Our board of directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, our board has determined that, with the exception of Dr. Robert Bodor, our Chief Executive Officer, all of the directors and director nominees are “independent directors” as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual.
Code of Ethics and Business Conduct
We have adopted a code of ethics and business conduct relating to the conduct of our business by our employees, officers and directors, which is posted on our website at www.protolabs.com under the investor relations section. Annually, our employees are required to complete code of conduct and business ethics training. We plan to post to our website at the address described above any future amendments or waivers to our code of ethics and business conduct.
Insider Trading Policy
We have adopted an insider trading policy that governs the purchase, sale, and other dispositions and transactions in our securities by our directors, officers and employees, which is reasonably designed to promote compliance with insider trading laws, rules, and regulations, as well as applicable listing standards.
Communications with the Board and Corporate Governance Guidelines
Under our Corporate Governance Guidelines, a process has been established by which shareholders and other interested parties may communicate with members of the board of directors. Any shareholder or other interested party who desires to communicate with the board, individually or as a group, may do so by writing to the intended member or members of the board, c/o Secretary, Proto Labs, Inc., 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359. A copy of our Corporate Governance Guidelines is available at www.protolabs.com under the investor relations section.
All communications received in accordance with these procedures will initially be received and processed by the office of our Secretary to determine that the communication is a message to one or more of our directors and will be relayed to the appropriate director or directors. The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full board or one or more of its committees and whether any response to the person sending the communication is appropriate.
Board Meetings
During 2023, the full board of directors met four times in person and held eight meetings via videoconference. Four of the meetings were preceded and/or followed by an executive session of the independent directors, chaired by Dr. Gawlick or the acting chair of the meeting. Each of our then-serving directors attended at least 75% percent of the meetings of the board and any committee on which they served in 2023. We do not maintain a formal policy regarding the board’s attendance at annual shareholder meetings; however, board members are expected to regularly attend all board meetings and meetings of the committees on which they serve and are encouraged to make every effort to attend the Annual Meeting of Shareholders. All of our then-serving directors attended the 2023 Annual Meeting of Shareholders.
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Committees of the Board
Our board of directors has established an audit committee, a compensation and talent committee and a nominating and governance committee. The charters of these committees are posted on our website at www.protolabs.com under the investor relations section.
The current composition and responsibilities of each committee, as well as the number of times it met during 2023, are described below.
| Audit Committee | Compensation and Talent Committee | Nominating and Governance Committee | ||||||
| Sven A.Wehrwein (chair) | Moonhie Chin (chair) | Sujeet Chand (chair) | ||||||
| Rainer Gawlick | Archie C. Black | Archie C. Black | ||||||
| Stacy Greiner | Donald G. Krantz | Sven A. Wehrwein | ||||||
Audit Committee
Among other matters, our audit committee:
•oversees management’s processes for ensuring the quality and integrity of our consolidated financial statements, our accounting and financial reporting processes, and other financial information provided by us to any governmental body or to the public;
•evaluates the qualifications, independence and performance of our independent auditor and internal audit function;
•oversees management's processes to monitor, control and report on the Company's cybersecurity, information technology and data security risks and threats;
•oversees the resolution of any disagreements between management and the auditors regarding financial reporting;
•oversees our investment and cash management policies; and
•supervises management’s processes for ensuring our compliance with legal, ethical and regulatory requirements as set forth in policies established by our board of directors.
Each of the members of our audit committee meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and the New York Stock Exchange (“NYSE”). Our board of directors has determined that Sven A. Wehrwein is an audit committee financial expert, as defined under the applicable rules of the SEC. The audit committee met seven times in 2023.
Nominating and Governance Committee
Among other matters, our nominating and governance committee:
•identifies qualified individuals to become board members, consistent with criteria approved by the board;
•selects director nominees for the next Annual Meeting of Shareholders;
•determines the composition of the board’s committees and evaluates and enhances the effectiveness of the board and individual directors and officers;
•develops and implements the corporate governance guidelines for our Company; and
•ensures that succession planning takes place for critical senior management positions.
Each member of our nominating and governance committee satisfies the NYSE independence standards. The nominating and governance committee met four times in 2023.
Compensation and Talent Committee
Among other matters, our compensation and talent committee:
•reviews and approves compensation programs, awards and employment arrangements for executive officers;
•administers compensation plans for employees;
•reviews our programs and practices relating to leadership development and continuity;
•determines the compensation of non-employee directors;
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•updates and administers any compensation recovery policy allowing the Company to recoup compensation paid to officers and other employees; and
•reviews our pay equity and pay gap analyses.
In addition, the compensation and talent committee has the authority to select, retain and compensate compensation consulting firms and other experts as it deems necessary to carry out its responsibilities.
Each member of our compensation and talent committee satisfies the NYSE independence standards and is a “non-employee director” as that term is defined in Rule 16b-3 under the Securities Exchange Act of 1934. The compensation and talent committee met nine times in 2023.
Certain Relationships and Related Party Transactions
Related Person Transaction Approval Policy
Our board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our related person policy. Subject to the exceptions described below, our related person policy requires our audit committee to review and approve any proposed related person transaction and all material facts with respect thereto. In reviewing a transaction, our audit committee will consider all relevant facts and circumstances, including (1) whether the terms are fair to us, (2) whether the transaction is material to us, (3) the role the related person played in arranging the transaction, (4) the structure of the transaction, (5) the interests of all related persons in the transaction, and (6) whether the transaction has the potential to influence the exercise of business judgment by the related person or others. Our audit committee will not approve or ratify a related person transaction unless it determines that, upon consideration of all relevant information, the transaction is beneficial to us and our shareholders and the terms of the transaction are fair to us. No related person transaction will be consummated without the approval or ratification of our audit committee. Under our related person policy, a related person includes any of our directors, director nominees, executive officers, any beneficial owner of more than 5% of our common stock and any immediate family member of any of the foregoing. Related party transactions exempt from our policy include payment of compensation by us to a related person for the related person’s service to us as an employee, director or executive officer, transactions available to all of our employees and shareholders on the same terms and transactions between us and the related person that, when aggregated with the amount of all other transactions between us and the related person or its affiliates, involve $120,000 or less in a year.
Since the beginning of 2023, we have not engaged in any related party transactions as defined above.
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| PROPOSAL 1—ELECTION OF DIRECTORS | ||
General Information
Eight directors will be elected at the Annual Meeting. Upon the recommendation of the nominating and governance committee, the board of directors has nominated for election the eight persons named below. Each has consented to being named a nominee and will, if elected, serve until the next Annual Meeting of Shareholders or until a successor is duly elected. There are no family relationships between any director and any executive officer. Each nominee listed below is currently a director of Protolabs and has been duly elected by shareholders.
Nominees
The names of the nominees and other information are set forth below:
 Robert Bodor – Age51 Director since 2021 | Dr. Bodor has served as our President and Chief Executive Officer since March 2021. Dr. Bodor previously served as our Vice President and General Manager – Americas from January 2015 to March 2021. From July 2013 to January 2015, Dr. Bodor served as our Chief Technology Officer. From December 2012 to June 2013, Dr. Bodor served as our Director of Business Development. Prior to joining Protolabs, from January 2011 to December 2012, Dr. Bodor held several roles at Honeywell, most recently leading SaaS business offerings for Honeywell’s Life Safety Division. Dr. Bodor holds B.S., M.S., and Ph.D. degrees in Engineering and Computer Science. Skills and Qualifications Dr. Bodor’s extensive leadership and operating experience provides important perspective to our board of directors. Dr. Bodor brings extensive knowledge in business and product development. As Chief Executive Officer, Dr. Bodor is also responsible for determining our strategy, articulating priorities and managing our continued growth. | |||||||
 Archie C. Black – Age 62 Director since 2016 Committees Compensation & Talent Nominating & Governance | Mr. Black has served as a director of our Company since March 2016, including as Chairman of the Board from May 2020 to May 2023. From 2001 until his retirement in October 2023, Mr. Black served as the Chief Executive Officer of SPS Commerce, Inc., a provider of cloud-based supply chain management solutions, where he currently serves as Executive Chair of the board. Prior to joining SPS Commerce, Inc., Mr. Black was a Senior Vice President and Chief Financial Officer at Investment Advisors, Inc. Prior to his time at Investment Advisors, Inc., Mr. Black spent three years at PricewaterhouseCoopers. Skills and Qualifications Mr. Black contributes to our board’s extensive management, financial, and operational experience. During his time as President and Chief Executive Officer at SPS Commerce, Inc., Mr. Black led the transformation of a tech-driven startup company into a global business and developed a deep knowledge of the requirements involved with being a public company. Other Current U.S. Public Company Board Memberships: SPS Commerce, Inc. Graco, Inc. | |||||||
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 Sujeet Chand – Age 66 Director since 2017 Committees Nominating & Governance (Chair) | Dr. Chand was the Senior Vice President and Chief Technology Officer at Rockwell Automation, Inc. from 2005 until his retirement in 2021. Prior to taking on that role, Mr. Chand served in various leadership positions at Rockwell. Mr. Chand has sat on multiple government, industry, and higher education advisory boards, and has long had significant interaction with the board of directors of Rockwell. Mr. Chand earned a Doctor of Philosophy degree in electrical and computer engineering and a master's degree in electrical engineering from the University of Florida. Skills and Qualifications Mr. Chand’s qualifications to serve on our board of directors include, among other skills and qualifications, his deep technical expertise and industry knowledge, particularly his experience at Rockwell and his service on other public company boards. Mr. Chand brings a highly effective balance of strategic insight and technical engineering skills, as well as a unique perspective on technology, innovation and customer needs. He has previously served on the boards of the National Institute for Standards and Technology (NIST), National Electrical Manufacturers Association (NEMA), FIRST Robotics, Wisconsin Technology Council, University of Wisconsin Foundation, and Robert W. Baird Venture Partners. He has also represented the U.S. as the head of a delegation to Intelligent Manufacturing Systems, a worldwide consortium on manufacturing technology. Other Current U.S. Public Company Board Memberships: Flowserve Corporation Veeco Instruments, Inc. | |||||||
 Moonhie Chin – Age66 Director since 2019 Committees Compensation & Talent (Chair) | Ms. Chin was employed at Autodesk from 1989 to 2019 and held multiple leadership positions, including most recently, Senior Vice President of Digital Platform and Experience. Autodesk is a global leader in Architectural, Engineering and Construction (AEC), Product Design and Manufacturing, and Media and Entertainment Software with millions of customers. Her expertise extends to general management, business model transformation from perpetual license to subscription, digital platforms, extracting business insights from advanced analytics, global multi-channel models, global customer support and operations, strategic planning, and corporate governance. Prior to joining Autodesk, she worked for the General Electric Company which she joined after earning her B.S. from the Columbia University School of Engineering and Applied Sciences. Skills and Qualifications Ms. Chin's leadership, strategic acumen, operational proficiency and exceptional track record of incubating and driving new initiatives enable her to provide valuable insights and counsel on strategy and the realization of key drivers. She is a recognized mentor to emerging leaders, especially women in technology, and is engaged in leadership opportunities that promote a culture of excellence, positive team dynamics, and personal and professional development. Other Current U.S. Public Company Board Memberships: FARO Technologies, Inc. | |||||||
 Rainer Gawlick – Age56 Director since2008 Committees Audit | Dr. Gawlick has served as our Chairman of the Board since May 2023. He also serves on the boards of ChyronHego, Sectigo, Cloudsense, Oktopost, PhotoShelter and Progress Software Corporation, a publicly traded company, where he is also a member of the audit committee and the strategy committee. Previously, from July 2015 to October 2016, Dr. Gawlick was President of Perfecto Mobile, Ltd., a leader in mobile testing. Prior to that he was with IntraLinks, Inc., a computer software company providing virtual data rooms and other content management services, where he served as Executive Vice President of Global Sales. From August 2008 to April 2012, Dr. Gawlick served as Chief Marketing Officer of Sophos Ltd, a computer security company providing endpoint, network and data protection software. From April 2005 to August 2008, Dr. Gawlick served as Vice President of Worldwide Marketing and Strategy at SolidWorks Corp., a CAD software company. He also has held a variety of executive positions in other technology businesses and was a consultant with McKinsey & Company. Skills and Qualifications Dr. Gawlick has extensive sales, marketing and product-management experience in the technology industry. Dr. Gawlick offers expertise in building brand awareness, managing marketing and sales on a global scale and developing growth strategies, which enables him to counsel our Company on our on-going growth initiatives. In addition, Dr. Gawlick has extensive business experience in Europe, which is our key international market. Other Current U.S. Public Company Board Memberships: Progress Software Corporation | |||||||
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 Stacy Greiner – Age50 Director since2021 Committees Audit | Ms. Greiner is the Chief Operating Officer at DailyPay, the leader in on-demand pay. Prior to DailyPay, she most recently served as the General Manager of the Sales & Marketing Solutions business for Dun & Bradstreet, a global provider of business decisioning data and analytics. In this role, Ms. Greiner was responsible for the growth and profitability of the company’s solutions for its Sales & Marketing customers. Before this role, she served as the global Chief Marketing Officer for Dun & Bradstreet. Prior to Dun & Bradstreet, Ms. Greiner was Chief Marketing Officer at DMI, a global digital services firm where she transformed Marketing into a modern growth engine enabling the company’s rapid expansion. Previously, Ms. Greiner held executive roles at Cisco, DXC and IBM. She led Marketing for Cisco System’s Software Platforms Group, building its new business in edge analytics. She also served as the first CMO for DXC’s Big Data and Analytics division, shaping and launching this new Service Line. Before DXC, Ms. Greiner was an executive at IBM, most recently leading product marketing for IBM’s Business Analytics division. Her early career was as a software developer and product manager starting with Accenture’s Center for Strategic Technology in Silicon Valley and several Silicon Valley start-ups. Ms. Greiner holds an MBA from the MIT Sloan School of Management and a BS in Aerospace Engineering from Iowa State University. Skills and Qualifications Ms. Greiner has spent over two decades helping organizations around the world use emerging technologies, data and analytics to better serve their customers, create new business models, and transform their operations. | |||||||
 Donald G. Krantz – Age69 Director since 2017 Committees Compensation & Talent | Dr. Krantz is currently an associate at Digi Labs, a Wayzata-based technology incubator. He serves on the advisory board for Activated Research Company, a maker of catalysis-based instruments. Dr. Krantz served as our Executive Vice President and Technology Officer from January 2015 until his retirement in June 2016. From January 2007 to January 2015, Dr. Krantz served as our Chief Operating Officer. From November 2005 to January 2007, Dr. Krantz served as our Vice President of Development. Prior to joining our Company, Dr. Krantz served in various roles at MTS Systems, Inc., a builder of custom precision testing and advanced manufacturing systems, including as a business unit Vice President, Vice President of Engineering, and most recently, Chief Technology Officer. Dr. Krantz was an Engineering Fellow at Alliant Techsystems and Honeywell, Inc., and was named the 2005 Distinguished Alumnus of the Department of Computer Science and Engineering at the University of Minnesota. In 2016, he was named a “Titan of Technology” by the Minneapolis/St. Paul Business Journal. Skills and Qualifications Dr. Krantz's knowledge of and experience in leadership positions within multiple departments of our Company, as well as his education and experience, enable him to provide guidance and counsel on strategy, relationships, general business matters and risk management. | |||||||
 Sven A. Wehrwein – Age73 Director since2011 Committees Audit (Chair) Nominating & Governance | Mr. Wehrwein has served as a director of our Company since June 2011, is chair of the audit committee, and is a member of the nominating and governance committee. He also served as Board Chair from May 2017 to May 2020. Mr. Wehrwein has been an independent financial consultant to emerging companies since 1999. During his 40-plus years in accounting and finance, Mr. Wehrwein has experience as a certified public accountant (inactive), investment banker to emerging-growth companies, chief financial officer, and audit committee chair. He currently serves on the board of directors of SPS Commerce, Inc., a publicly traded supply-chain management software company, and AtriCure, Inc., a publicly traded medical device company. Earlier in his career, Mr. Wehrwein also served on the board of these publicly traded companies: Compellent Technologies, Cogentix Medical, Image Sensing Systems, Synovis Life Technologies, Vital Images, and Zamba. He served as the audit committee chair for all of these companies. Skills and Qualifications Mr. Wehrwein’s qualifications to serve on our board of directors include, among other skills and qualifications, his capabilities in financial understanding, strategic planning and auditing expertise, given his experiences in investment banking and in financial leadership positions. As chairman of the audit committee, Mr. Wehrwein also keeps the board abreast of current audit issues and collaborates with our independent auditors and senior management team. Other Current U.S. Public Company Board Memberships: AtriCure, Inc. SPS Commerce, Inc. | |||||||
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Voting Information and Board Voting Recommendation
As set forth in our Third Amended and Restated Articles of Incorporation, as amended, each director shall be elected by the vote of the majority of the votes cast with respect to the director. A majority of the votes cast means that the votes cast “for” a director nominee must exceed the votes that are voted “against” that director.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR”EACH NOMINEE LISTED. | ||
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
Named Executive Officers
The compensation provided to our named executive officers for 2023 is set forth in detail in the SCT and the other tables, accompanying footnotes and narrative that follow in this section. This Compensation Discussion and Analysis explains our executive compensation philosophy, objectives and design, our compensation-setting process, our executive compensation program components and the decisions made in 2023 affecting the compensation of our named executive officers. Throughout this section, we refer to the following individuals as our “named executive officers” or “NEOs”:
•Robert Bodor, our President and Chief Executive Officer, or CEO;
•Daniel Schumacher, our Chief Financial Officer, or CFO;
•Michael R. Kenison, our Vice President/General Manager – Americas;
•Bjoern Klaas, our Vice President/General Manager and Managing Director – Europe, Middle East and Africa; and
•Oleg Ryaboy, our Chief Technology Officer.
Executive Summary
This section provides an overview of our performance, key decisions and actions made by our compensation and talent committee during the course of the year, a summary of the governance features of our executive compensation program, and a history of our say-on-pay results.
Summary of Protolabs’ Performance
Against a challenging macroeconomic backdrop, Protolabs had a solid year in 2023, delivering revenue growth and making progress on the integration of the digital factory and digital network, as we continue to create the most complete and comprehensive offer in our industry. 2023 was highlighted by a return to growth in our most differentiated injection molding service, and continued growth in our CNC machining and 3D printing services. The Protolabs Network by Hubs continued its strong performance, growing 70% when compared to 2022. Protolabs' strong business model generated $73.3 million in cash from operations in 2023 and paid 97% of our free cash flows to shareholders through share repurchases. We believe our business strategy and market opportunity continue to be strong, and are well-positioned to thrive when growth returns to the manufacturing industry.
| Revenue | Cash Generation | Strategic | ||||||
| $503.9m | $73.3m | Protolabs Network Performance & Integration | ||||||
| Revenue increased to $503.9 million in 2023 compared with $488.4 million in 2022. | Cash generated from operations during the year totaled $73.3 million as compared to $62.1 million in 2022. | Enhanced our ability to serve customers more extensively with the industry's most complete and comprehensive CNC offer, resulting in nearly 70% network revenue growth. | ||||||
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Shareholder Value Creation
2023 was an important year for the Company, with improved financial performance that validates our strategic transformation that we commenced in 2021, from a quick-turn, prototype-focused manufacturer to a complete and comprehensive supplier. Our one-year total shareholder return (“TSR”) reflects our execution, and while our TSR was not as strong as our peer group and reference indices for the three- and five-year periods as our Company goes through this transformation, it has been historically very strong, exceeding that of our peer group, the S&P 500 and the Russell 2000 Growth Index from our initial public offering through 2020. Furthermore, in 2023 our one-year TSR exceeded that of our peer group, the S&P 500 and the Russell 2000 Growth Index, reflecting our execution and commitment to our Company’s long-term strategy, and ongoing efforts to drive profitable revenue growth and increase shareholder value.
The information above reflects the period of time ending December 31, 2023, and the “peer group” reflected in the chart above represents the compensation peer group used for 2023 compensation developed by our independent compensation consultant Pearl Meyer. The peer group includes the following companies: 3D Systems Corporation, Badger Meter, Inc., Cerence Inc., CTS Corporation, Enerpac Tool Group Corp, ESCO Technologies, Inc., FARO Technologies, Inc., Helios Technologies Inc., Lindsay Corporation, Novanta Inc., RBC Bearings Incorporated, Semtech Corporation, SPS Commerce, Inc., and Vicor Corporation.
Although Protolabs’ TSR performance shown in the chart above trailed that of the peer group over the three- and five-year periods, the compensation and talent committee believes that pay and performance are appropriately aligned. Our 2021, 2022 and 2023 annual cash incentive payouts for our named executive officers were well below the target amounts. Additionally, many of the long-term incentives awarded to our named executive officers are well below their initial grant date fair value; specifically, all outstanding stock options granted prior to 2023 are underwater and no performance stock units ("PSUs") have been paid out in the last four years.
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Key Actions and Decisions in 2023
In 2023, the Company made a number of important decisions related to our named executive officer compensation program.
| Topic | Actions / Decisions | |||||||
| 2023 Salary Adjustments | ✔ | As a result of the Company's performance in 2022, no base salary adjustments were made in 2023. | ||||||
| ✔ | In lieu of base salary increases in 2023, our named executive officers each received an equity grant of stock options with a grant date value of 20% of base salary for Dr. Bodor and approximately 10% of base salary for all other named executive officers. The options vest 100% after one year and expire after three years. The decision in 2023 to grant options instead of merit-based salary increases was a one-time occurrence based on 2022 corporate performance and driven by our conviction that stock options more closely align with shareholder interests by tying management’s rewards directly to performance and results. | |||||||
| 2023 Annual Incentives and Long-Term Incentives | ✔ | Paid annual incentives to our named executive officers in the range of 42% - 66% of target for the partial achievement of corporate and regional objectives where applicable. | ||||||
| ✔ | Granted our named executive officers 2023 equity awards comprised of stock options, restricted stock units (“RSUs”) and PSUs. The equity grant in 2023 to each of Dr. Bodor and Mr. Schumacher was based on a calculation of 50% in the form of PSUs, 25% in the form of RSUs, and 25% in the form of stock options. The equity grant in 2023 for the other named executive officers was based on a calculation of 50% in the form of RSUs, 25% in the form of PSUs, and 25% in the form of stock options. | |||||||
| Annual Incentive Program Performance Metrics and Design | ✔ | Continued the use of revenue and adjusted operating income (“AOI”) as our short-term incentive bonus metrics. | ||||||
| ✔ | Maintained the annual incentive plan maximum payout for 2023 at 200% of the target incentive award. | |||||||
| PSU Performance Metrics | ✔ | Continued to measure performance for PSU awards based on the Company’s three-year cumulative TSR performance relative to the Russell 2000 Growth Index. | ||||||
| Benchmarking | ✔ | Reviewed and approved changes to our compensation peer group for 2024 compensation. | ||||||
Key Governance Attributes
Our compensation and talent committee is committed to establishing an executive compensation program that reflects strong corporate governance attributes. The following table summarizes those corporate governance attributes.
| Things We Do | Things We Don’t Do | ||||
•“Double-trigger” accelerated equity vesting upon a change in control •Meaningful stock ownership guidelines for our executive officers •Requirement that executive officers hold 100% of after-tax shares from option exercises or RSU/PSU vesting until they have achieved their ownership requirement •Continual review of our compensation programs for alignment with our shareholder expectations of driving profitable growth •Compensation recoupment (“clawback”) policy •Equity award approval policy •Independent compensation and talent committee •Independent compensation consultant •Annual compensation risk assessment | •No tax gross-ups on perquisites, severance or change in control payments •No hedging/pledging of Protolabs stock by executive officers •No option repricing without shareholder approval •No excessive or additional perquisites unique to named executive officers •No guaranteed bonus •No pension or executive retirement plan benefits •No multi-year guarantee for salary increases, non-performance-based bonuses or equity compensation •No single trigger or excessive change in control benefits •No liberal change in control definitions for severance or equity benefits | ||||
In addition, the proposed Amended and Restated Proto Labs, Inc. 2022 Long-Term Incentive Plan adds a minimum vesting requirement, which provides that no time-vested award (or any portion of it) may vest less than one year after the grant date, and each performance-based award must have a performance period of at least one year, subject only to limited exceptions.
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Say-on-Pay Results
Protolabs and the compensation and talent committee value the input of our shareholders. In 2023, 86% of votes cast on our say-on-pay proposal were favorable, which reflected strong shareholder support for our executive compensation programs. In 2023, the Company performed a voting analysis and reached out to shareholders. Based on discussions and analysis, the compensation and talent committee found that our shareholders were generally supportive of the executive compensation design changes that we have made in recent years and the alignment between our CEO pay and Protolabs' performance. The compensation and talent committee carefully considered the shareholder feedback and insights from the analysis as part of its ongoing review of our executive compensation program.
Executive Compensation Philosophy and Objectives
We believe our success depends in large measure on our ability to attract, retain and motivate a talented senior management team to effectively lead our Company in a dynamic and changing business environment, and that a competitive executive compensation program is essential to that effort. We believe that our executive compensation program should support our short- and long-term strategic and operational objectives, and reward company and individual performance that contributes to creating value for our shareholders.
Executives covered by this philosophy include the CEO, any “officer” of the Company as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, and any other management-level employee reporting directly to the CEO.
Consistent with this philosophy, our executive compensation program incorporates the following key principles and objectives:
•Focus on total compensation for purpose of understanding the competitiveness of executive officer compensation;
•Strike an effective balance between the market data findings with our internal objectives and business needs in the compensation-setting process;
•Structure the compensation program so as to align the interests of our executive officers with those of our customers, employees, and shareholders;
•Provide a competitive total compensation opportunity that includes target incentive goals that are reasonably achievable and aligned to long-term objectives;
•Utilize equity-based awards in a manner designed to motivate long-term Company performance, increase shareholder value and emphasize their long-term retentive function;
•Recognize and reward the achievement of Company and business unit goals as well as individual performance;
•Provide compensation commensurate with the level of business performance achieved;
•Provide greater compensation opportunities for individuals who have the most significant responsibilities and therefore the greatest ability to influence our achievement of strategic and operational objectives;
•Structure the compensation program so that it is understandable and easily communicated to executives, shareholders and other constituencies;
•Place increasing emphasis on incentive/variable compensation for positions of increasing responsibility; and
•Make benefit programs available to executive officers generally consistent with those provided to salaried employees.
Compensation Decisions and Processes
The compensation and talent committee of our board of directors, which consists solely of independent directors, generally has been responsible for overseeing our executive compensation program, including annually reviewing the ongoing compensation arrangements for each of our executive officers, including our CEO, and reporting those arrangements to our board.
Our compensation and talent committee regularly receives and considers input from our CEO regarding the compensation and performance of the other executive officers, including recommendations as to compensation levels that the CEO believes are commensurate with an individual’s job performance, skills, experience, qualifications, criticality to our Company and development/career opportunities, as well as with our compensation philosophy, external market data and considerations of internal equity. With the assistance of our CFO, our CEO also has provided
recommendations to the compensation and talent committee regarding the establishment of performance goals for the annual cash incentive plan based on the operating budget approved by our board of directors. Our CEO regularly attends meetings of our compensation and talent committee, except where the CEO’s own compensation is being considered or times when the compensation and talent committee meets in executive session. Our CEO makes no recommendations to the compensation and talent committee regarding his or her own compensation. The compensation and talent committee communicates its
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views and decisions regarding compensation arrangements for our executive officers to our CEO, who generally has been responsible for implementing the arrangements.
In determining executive compensation, our compensation and talent committee reviews and considers a number of factors, including individual and corporate performance, input from our CEO, peer group compensation and market data from third party compensation surveys (including Pearl Meyer, our independent compensation consultant), our compensation philosophy and key principles, the pay practices of a set of comparable companies, feedback received from shareholders concerning say-on-pay, and the compensation and talent committee’s collective experience and knowledge. We define our relevant peer group for executive talent, with assistance of Pearl Meyer, in the technology and industrial sectors, also taking into account size of the company, business models, and other factors. We have used market data primarily as a reference point to assess whether our compensation practices are reasonable, competitive and likely to achieve our objectives, and actually deliver compensation in amounts that are consistent with the compensation and talent committee’s assessment of our Company’s relative performance. As part of these assessments, we assumed thatWe target total compensation levels were likely to be reasonable andwithin a competitive if they approximatedrange of the market median we calculated from the surveys and other compensation data we utilized which for us generally meant a range between 85% and 115% of the market median. The utilization of a range is largely in recognition of the limitations of the survey data that include companies with limited degrees of comparability to our Company and position titles that may encompass positions with responsibilities that differ to varying degrees from the responsibilities of a similarly titled position within our Company.utilized. As a result, we do not establish specific compensation amounts or parameters for any executive officer position based on market data, recognizing that factors unique to each individual will ultimately determine that individual’s compensation, which may not necessarily be within the median range. In evaluating 2023 compensation, each of our executive officers was at or below the targeted range of peer group compensation. Our compensation and talent committee approves all awards to our executive officers under our 20122022 Long-Term Incentive Plan, as amended to date (the “LTIP”).Plan.
Peer Group
In 2020,2022, the compensation and talent committee requested that its independent compensation consultant, Pearl Meyer, review our peer group used for executive compensation.compensation in 2023. Pearl Meyer used a multi-step process that goeswent beyond basic financial characteristics to construct a peer group that we believe fits our market position and profile. The compensation and talent committee and our board of directors reviewed information relating to this peer group when establishing base salaries, annual equity awards and target annual incentive compensation for 2021.2023.
Pearl Meyer employed the following robust process to construct the proposed peer group.
•First, theyPearl Meyer identified a pool of potential companies that were U.S.-based, publicly-traded, and were classified in the technology or industrialsand industrial sectors.
•Second, theyPearl Meyer screened out companies that were outside of approximately one-third to three times that of Protolabsour Company based on revenue, market capitalization, revenue, and number of employees.
•Third, they reviewed company business models, fixed asset turnover,additional financial operating parameters and financial growth statistics in selectingidentified companies that havewith similar characteristics to Protolabs.our Company.
Overall, the new peer group used for 2023 compensation is similar to Protolabs primarily in terms of profitability, operating size and industry.
The compensation and talent committee also reviewed the peer groups used for comparison by proxy advisory firms.
This process resulted in a select number of changes as shown below.
| 2022 Peer Group | Recommended Changes | ||||||||||||||
3D Systems Corporation (DDD) Badger Meter, Inc. (BMI) Cerence Inc. (CRNC) Enerpac Tool Group Corp. (EPAC) ESCO Technologies Inc. (ESE) FARO Technologies, Inc. (FARO) Helios Technologies, Inc. (HLIO) Novanta Inc. (NOVT) Power Integrations, Inc. (POWI) Raven Industries, Inc. (RAVN) RBC Bearings Incorporated (RBC) Semtech Corporation (SMTC) SPS Commerce, Inc. (SPSC) Universal Display Corporation (OLED) Vicor Corporation (VICR) | (-) Exclusions Power Integrations, Inc. Raven Industries, Inc. Universal Display Corporation | (+) Additions | EVO Payments Lindsay Corporation | 3D Systems Corporation (DDD) Badger Meter, Inc. (BMI) CTS Corporation (CTS) Enerpac Tool Group Corp. (EPAC) ESCO Technologies Inc. (ESE) EVO Payments (EVOP) FARO Technologies, Inc. (FARO) Helios Technologies, Inc. (HLIO) Lindsay Corporation (LNN) Novanta Inc. (NOVT) RBC Bearings Incorporated (RBC) Semtech Corporation (SMTC) SPS Commerce, Inc. (SPSC) (VICR) | |||||||||||
*Some companies were retained that did not meet all screening criteria for year-over-year continuity.
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Below is information about the companies in the peer group, as well as the corresponding information for Protolabs, that Pearl Meyer referenced when constructing the peer group:
Annual Revenue(1) | Market Capitalization(1) | ||||||||||||||
$ | |||||||||||||||
$ | |||||||||||||||
$ | |||||||||||||||
(1)Revenue shown in this table is for the twelve-month period ended as of the most recently disclosed quarter prior to the 2022 meeting at which Pearl Meyer presented the peer group information to the compensation and talent committee. Market capitalization reflects end of June 2022.
The compensation and talent committee uses data about executive compensation at peer group companies as a tool to assess the reasonableness of the total compensation paid to our executive officers. As discussed above, we do not establish a percentile which any part of our executive’s compensation or any executive’s overall compensation must meet or exceed.
In 2023, the compensation and talent committee requested that Pearl Meyer again review our peer group to be used for 2024 executive compensation. Pearl Meyer used the same multi-step process to recommend changes to the peer group used for 2024 compensation.
Elements of Executive Compensation
Our executive compensation program historically has been comprised of three primary elements—base salary, an annual cash incentive, and equity-based long-term incentives. The primary elements of our compensation program for 20212023 were consistent with our 20202022 compensation program. While all elements of our executive compensation program are intended to collectively achieve our overriding purpose of attracting, retaining and motivating talented executives, the table below identifies the additional specific purposes of each element as reflected in our 20212023 compensation program.
| Compensation Component | Form of Compensation | Purpose | ||||||||||||||||
| Cash | • | Compensate each | ||||||||||||||||
• | Provide steady cash flow not contingent on short-term variations in Company performance | |||||||||||||||||
| Cash | • | Align compensation with our annual corporate financial performance | ||||||||||||||||
• | Reward achievement of short-term financial objectives | |||||||||||||||||
• | Provide participants with a meaningful total cash compensation opportunity (base salary plus annual incentive) | |||||||||||||||||
Long-Term Incentives | Stock Options, Restricted Stock Units and Performance Stock Units | • | Align compensation with our long-term returns to shareholders | |||||||||||||||
• | Encourage long-term retention | |||||||||||||||||
• | Create a long-term performance focus | |||||||||||||||||
• | Provide executive ownership opportunities | |||||||||||||||||
We seek to minimize perquisites for executive officers which are unique to our executive officers. Our compensation and talent committee has not adopted a formal or informal policy for allocating compensation among the various elements, or between fixed and at-risk, cash and non-cash elements or between long- and short-term compensation; however, the compensation and talent committee considers total compensation and then adjusts the mix among each element of compensation based on market comparisons, individual role and performance. As noted earlier, however, we do place greater emphasis on incentive-based and variable forms of compensation for executives with more significant responsibilities, reflecting their greater capacity to affect our performance and results.
Base Salaries
At the time an executive officer is first hired, his or her base salary generally is established through individual negotiations between us and the executive officer, taking into account judgments as to the executive officer’s qualifications, experience, responsibilities, prior salary history, internal pay equity considerations and market factors.
The compensation and talent committee annually reviews the base salaries of our executive officers near the end of each year and bases any adjustments for the following year on merit and market considerations. Merit-based adjustments primarily reflect an assessment of an individual’s performance. Any market-based adjustments reflect an assessment of the competitive positioning of an individual’s salary with comparable positions in the market based on market data provided to the compensation and talent committee by the compensation consultant and other market surveys the compensation and talent committee might use.
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