Protolabs Reports Financial Results for the First Quarter 2020

First Quarter 2020 Revenue of $115.1 million, an increase of 1.5% over 2019

First Quarter 2020 GAAP EPS of $0.52, Non-GAAP EPS of $0.61

MAPLE PLAIN, Minn.--()--Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the first quarter ended March 31, 2020.

“As Protolabs confronts the immediate challenges of the COVID-19 pandemic, our top priority is the health and safety of our employees, communities, and customers,” said Vicki Holt, President and Chief Executive Officer of Protolabs. “We continue to serve our customers during these uncertain times, and are thankful that we are able to be a part of the solution. I am very proud of the dedicated Protolabs employees who continue to support our customers and manufacture parts with critical applications in the fight against the Coronavirus.”

COVID-19 Response Highlights include:

  • Protolabs COVID-19 Commitment:
    • Remain fully operational as an essential business.
    • Prioritize COVID-19 related orders and customer needs.
    • Waive expedite fees for COVID-19 orders; parts manufactured and shipped in as fast as 1 day.
  • Protolabs has received COVID-19 related orders for applications including components for lifesaving equipment, diagnostic systems, and personal protective equipment (PPE).
  • In our manufacturing facilities we have implemented new cleaning and sanitizing standard operating procedures, new shift change procedures to minimize employee interaction and achieved social distancing with new employee work station layouts.
  • Our non-manufacturing employees have transitioned to a remote work environment; approximately 90 percent of our non-manufacturing employees are working from home.
  • Protolabs Foundation has accelerated annual STEM education grants to provide food and technology needs during distance learning. The Foundation also doubled its match for employee charitable contributions.

     

First Quarter 2020 Highlights include:

  • Revenue for the first quarter of 2020 was $115.1 million, representing a 1.5 percent increase compared to revenue of $113.5 million in the first quarter of 2019.
  • Net income for the first quarter of 2020 was $14.0 million, or $0.52 per diluted share.
  • Non-GAAP net income was $16.3 million, or $0.61 per diluted share. See “Non-GAAP Financial Measures” below.

“During the first two and a half months of the first quarter of 2020, ordering trends were in-line with our expectations,” added Holt. “In mid-March, as the global pandemic intensified and economic activity declined, ordering activity slowed. In the last week of March, we began to receive orders for COVID-19 related parts—primarily injection molding in the Americas—which helped mitigate the slowdown in other services and regions. In the midst of this unprecedented uncertainty, we were able to deliver essential parts to our customers and achieve strong financial performance. We will continue to produce the high-quality parts our customers have come to expect from Protolabs, and we are confident that our ecommerce digital manufacturing business model will thrive as manufacturing adapts in response to this pandemic.”

Additional First Quarter 2020 Highlights include:

  • Gross margin was 50.5 percent of revenue for the first quarter of 2020, compared to 51.9 percent for the firstquarter of 2019.
  • Operating expenses were 35.9 percent of revenue for the firstquarter of 2020, compared to 34.7 percent for the firstquarter of 2019.
  • GAAP operating margin was 14.6 percent of revenue during the firstquarter of 2020, compared to 17.1 percent for the firstquarter of 2019.
  • Non-GAAP operating margin was 17.9 percent of revenue during the firstquarter of 2020, compared to 20.6 percent for the firstquarter of 2019. See “Non-GAAP Financial Measures” below.
  • EBITDA was $25.3 million, or 22.0 percent of revenue, for the firstquarter of 2020.
  • Adjusted EBITDA was $27.5 million, or 23.9 percent of revenue, for the firstquarter of 2020. See “Non-GAAP Financial Measures” below.
  • The company generated $22.4 million in cash from operations during the firstquarter of 2020.
  • Cash and investments balance was $167.2 million at March 31, 2020.

“The ultimate financial impact of the COVID-19 pandemic is unknown at this time. We will continue to monitor demand levels and prudently manage expenses during this time,” said John Way, Chief Financial Officer. “The health of our balance sheet and the strength of our unique digital manufacturing model allow us to manage through these challenging times, deliver exceptional value to our customers, and provide long term benefits to our stakeholders.”

Non-GAAP Financial Measures

The company has included non-GAAP revenue growth that excludes the impact of changes in foreign currency exchange rates (collectively, “non-GAAP revenue growth”). Management believes these metrics are useful in evaluating the underlying business trends and ongoing operating performance of the company.

The company has included earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA, adjusted for stock-based compensation expense and unrealized (gain) loss on foreign currency (collectively, “Adjusted EBITDA”), in this press release to provide investors with additional information regarding the company’s financial results.

The company has included non-GAAP operating margin, adjusted for stock-based compensation expense and amortization expense (collectively, “non-GAAP operating margin”), in this press release to provide investors with additional information regarding the company’s financial results.

The company has included non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, and unrealized (gain) loss on foreign currency (collectively, “non-GAAP net income”), in this press release to provide investors with additional information regarding the company’s financial results.

The company has provided below reconciliations of GAAP to non-GAAP net income, non-GAAP operating margin, non-GAAP revenue growth and Adjusted EBITDA, the most directly comparable measures calculated and presented in accordance with GAAP. These non-GAAP measures are used by the company’s management and board of directors to understand and evaluate operating performance and trends and provide useful measures for period-to-period comparisons of the company’s business. Accordingly, the company believes that these non-GAAP measures provide useful information to investors and others in understanding and evaluating operating results in the same manner as our management and board of directors.

Conference Call

The company has scheduled a conference call to discuss its first quarter 2020 financial results and financial guidance today, April 30, 2020 at 8:30 a.m. EDT. To access the call in the U.S. please dial 877-709-8150 or outside the U.S. dial 201-689-8354 at least five minutes prior to the 8:30 a.m. EDT start time. No participant code is required. A simultaneous webcast of the call, and accompanying presentations will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/5cshwxe6. A replay will be available for 14 days following the call on the investor relations section of the Protolabs website.

About Protolabs

Protolabs is a leading digital manufacturing source for rapid prototyping and on-demand production. The company produces custom parts and assemblies in as fast as one day with automated 3D printing, CNC machining, sheet metal fabrication, and injection molding processes. Its digital approach to manufacturing enables accelerated time to market, reduces development and production costs, and minimizes risk throughout the product life cycle. Visit protolabs.com for more information.

Forward-Looking Statements

Statements contained in this press release regarding matters that are not historical or current facts are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of Protolabs to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in the “Risk Factors” section within reports filed with the SEC. Other unknown or unpredictable factors also could have material adverse effects on Protolabs’ future results. The forward-looking statements included in this press release are made only as of the date hereof. Protolabs cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Protolabs expressly disclaims any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

 

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

2020

 

2019

 

 

 

 

(Unaudited)

 

 

Assets
Current assets
Cash and cash equivalents

$

91,905

$

125,225

Short-term marketable securities

 

38,194

 

35,437

Accounts receivable, net

 

62,091

 

57,450

Inventory

 

10,507

 

10,075

Prepaid expenses and other current assets

 

9,777

 

8,232

Total current assets

 

212,474

 

236,419

 
Property and equipment, net

 

268,001

 

263,712

Goodwill

 

128,752

 

128,752

Other intangible assets, net

 

16,615

 

17,369

Long-term marketable securities

 

37,077

 

12,960

Operating lease assets

 

10,548

 

11,425

Other long-term assets

 

4,623

 

3,030

Total assets

$

678,090

$

673,667

 
Liabilities and shareholders' equity
Current liabilities
Accounts payable

$

18,219

$

16,804

Accrued compensation

 

12,460

 

15,058

Accrued liabilities and other

 

12,950

 

11,057

Current operating lease liabilities

 

3,254

 

3,340

Income taxes payable

 

414

 

1,322

Total current liabilities

 

47,297

 

47,581

 
Long-term operating lease liabilities

 

7,871

 

8,565

Long-term deferred tax liabilities

 

29,652

 

26,283

Other long-term liabilities

 

5,530

 

5,448

 
Shareholders' equity

 

587,740

 

585,790

Total liabilities and shareholders' equity

$

678,090

$

673,667

 
   

Proto Labs, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

2019

Revenue  
Injection Molding

$

54,776

 

$

55,311

CNC Machining

 

37,885

 

 

37,872

3D Printing

 

15,948

 

 

14,480

Sheet Metal

 

5,649

 

 

5,025

Other

 

850

 

 

764

Total revenue

 

115,108

 

 

113,452

   
Cost of revenue

 

57,008

 

 

54,592

Gross profit

 

58,100

 

 

58,860

   
Operating expenses  
Marketing and sales

 

18,180

 

 

18,577

Research and development

 

8,987

 

 

8,013

General and administrative

 

14,108

 

 

12,822

Total operating expenses

 

41,275

 

 

39,412

Income from operations

 

16,825

 

 

19,448

Other income, net

 

1,054

 

 

213

Income before income taxes

 

17,879

 

 

19,661

Provision for income taxes

 

3,895

 

 

4,150

Net income

$

13,984

 

$

15,511

   
Net income per share:  
Basic

$

0.52

 

$

0.58

Diluted

$

0.52

 

$

0.57

   
Shares used to compute net income per share:  
Basic

 

26,776,806

 

 

26,963,366

Diluted

 

26,929,640

 

 

27,177,039

   

 

 

Proto Labs, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

 

 

2020

 

2019

Operating activities
Net income

 $

           13,984

 

 $

        15,511

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

                7,958

 

 

             7,439

 

Stock-based compensation expense

 

                3,033

 

 

             3,040

 

Deferred taxes

 

                3,392

 

 

                379

 

Amortization of held-to-maturity securities

 

                     55

 

 

                  16

 

Other

 

                 (644

)

 

                236

 

Changes in operating assets and liabilities

 

              (5,368

)

 

           (8,619

)

Net cash provided by operating activities

 

              22,410

 

 

           18,002

 

 
Investing activities
Purchases of property, equipment and other capital assets

 

            (13,421

)

 

         (12,735

)

Cash used for acquisitions, net of cash acquired

 

                      -  

 

 

                   -  

 

Purchases of other assets and investments

 

              (3,000

)

 

           (4,000

)

Purchases of marketable securities

 

            (37,629

)

 

                   -  

 

Proceeds from maturities of marketable securities

 

              10,700

 

 

           17,006

 

Net cash (used in) provided by investing activities

 

            (43,350

)

 

                271

 

 
Financing activities
Proceeds from exercises of stock options and other

 

                   135

 

 

                174

 

Purchases of shares withheld for tax obligations

 

              (1,048

)

 

              (594

)

Repurchases of common stock

 

            (11,185

)

 

         (17,309

)

Net cash used in financing activities

 

            (12,098

)

 

         (17,729

)

Effect of exchange rate changes on cash and cash equivalents

 

                 (282

)

 

              (240

)

Net (decrease) increase in cash and cash equivalents

 

            (33,320

)

 

                304

 

Cash and cash equivalents, beginning of period

 

            125,225

 

 

           85,046

 

Cash and cash equivalents, end of period

 $

           91,905

 

 $

        85,350

 

               

 

 

Proto Labs, Inc.

Reconciliation of GAAP to Non-GAAP Net Income per Share

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

2019

Non-GAAP net income, adjusted for stock-based compensation expense,  
amortization expense and unrealized (gain) loss on foreign currency  
GAAP net income

 $

             13,984

 

 

 $

             15,511

 

Add back:  
Stock-based compensation expense

 

3,033

 

 

 

3,040

 

Amortization expense

 

754

 

 

 

871

 

Unrealized (gain) loss on foreign currency

 

                   (797

)

 

 

                     247

 

Total adjustments 1

 

                  2,990

 

 

 

                  4,158

 

Income tax benefits on adjustments 2

 

                   (675

)

 

 

                   (919

)

Non-GAAP net income

 $

             16,299

 

 

 $

             18,750

 

   
   
Non-GAAP net income per share:  
Basic

 $

                 0.61

 

 

 $

                 0.70

 

Diluted

 $

                 0.61

 

 

 $

                 0.69

 

   
Shares used to compute non-GAAP net income per share:  
Basic

 

         26,776,806

 

 

 

         26,963,366

 

Diluted

 

         26,929,640

 

 

 

         27,177,039

 

           
1 Stock-based compensation expense, amortization expense and unrealized (gain) loss on foreign currency were included in the following GAAP consolidated statement of operations categories:

Three Months Ended

March 31,

2020

 

2019

   
 Cost of revenue

 $

                  863

 

 

 $

                  733

 

   
 Marketing and sales 

 

                     618

 

 

 

                     549

 

 Research and development 

 

                     521

 

 

 

                     423

 

 General and administrative 

 

                  1,785

 

 

 

                  2,206

 

 Total operating expenses 

 

                  2,924

 

 

 

                  3,178

 

   
 Other income, net 

 

                   (797

)

 

 

                     247

 

Total adjustments

 $

               2,990

 

 

 $

               4,158

 

   
2 For the three-month periods ended March 31, 2020 and 2019, income tax effects were calculated using the effective tax rate for the relevant jurisdictions. Our non-GAAP tax rates differ from our GAAP tax rates due primarily to the mix of activity incurred in domestic and foreign tax jurisdictions and removing effective tax rate benefits from stock-based compensation activity in the quarter.
           

 

 

Proto Labs, Inc.

Reconciliation of GAAP to Non-GAAP Operating Margin

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

 

2019

Revenue

 $

           115,108

 

 

 $

           113,452

 

Income from operations

 

                16,825

 

 

 

                19,448

 

GAAP operating margin

 

14.6

%

 

 

17.1

%

Add back:  
Stock-based compensation expense

 

3,033

 

 

 

3,040

 

Amortization expense

 

                     754

 

 

 

                     871

 

Total adjustments

 

                  3,787

 

 

 

                  3,911

 

Non-GAAP income from operations 

 $

             20,612

 

 

 $

             23,359

 

Non-GAAP operating margin

 

17.9

%

 

 

20.6

%

           

 

 

Proto Labs, Inc.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

GAAP net income

 $

             13,984

 

 

 $

             15,511

 

Amortization expense

 

                     754

 

 

 

                     871

 

Depreciation expense

 

7,204

 

 

 

6,568

 

Interest income, net

 

(560

)

 

 

(581

)

Tax expense

 

                  3,895

 

 

 

                  4,150

 

EBITDA

 

                25,277

 

 

 

                26,519

 

Add back:  
Stock-based compensation expense

 

3,033

 

 

 

3,040

 

Unrealized (gain) loss on foreign currency

 

                   (797

)

 

 

                     247

 

Total adjustments

 

                  2,236

 

 

 

                  3,287

 

Adjusted EBITDA

 $

             27,513

 

 

 $

             29,806

 

           

 

 

Proto Labs, Inc.

Comparison of GAAP to Non-GAAP Revenue Growth

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31, 2020

 

Three Months Ended
March 31, 2019

 

%

 

% Change
Constant

 

 

 

 

GAAP

 

Adjustments1

 

Non-GAAP

 

GAAP 

 

Change2

 

Currencies3

 

Revenues        
United States

 $

         90,076

 

 $

                           -

 

 

 $

          90,076

 $

                    87,811

 

2.6

%

 

2.6

%

Europe

 

            20,787

 

 

                          648

 

 

 

             21,435

 

21,254

 

(2.2

)

 

0.9

 

Japan

 

              4,245

 

 

                          (55

)

 

 

               4,190

 

                         4,387

 

(3.2

)

 

(4.5

)

Total Revenue

 $

       115,108

 

 $

                       593

 

 

 $

        115,701

 $

                  113,452

 

1.5

%

 

2.0

%

         
1 Revenue for the three-month period ended March 31, 2020 has been recalculated using 2019 foreign currency exchange rates in effect during comparable periods to provide information useful in evaluating the underlying business trends excluding the impact of changes in foreign currency exchange rates.
This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2019 to GAAP revenue for the three-month period ended March 31, 2020.
3 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2019 to non-GAAP revenue for the three-month period ended March 31, 2020 (as recalculated using the foreign currency exchange rates in effect during the three-month period ended March 31, 2019) in order to provide a constant-currency comparison.
   

 

 

Proto Labs, Inc.

Product Developer Information

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Unique product developers and engineers served

                  20,876

                  20,573

         

 

Contacts

Investor Relations Contact:
Protolabs
Dan Schumacher, 763-479-7240
Director of Investor Relations
daniel.schumacher@protolabs.com
or
Media Contact:
Protolabs
Sarah Ekenberg, 763-479-7560
Marketing Manager, PR & Media
sarah.ekenberg@protolabs.com

Contacts

Investor Relations Contact:
Protolabs
Dan Schumacher, 763-479-7240
Director of Investor Relations
daniel.schumacher@protolabs.com
or
Media Contact:
Protolabs
Sarah Ekenberg, 763-479-7560
Marketing Manager, PR & Media
sarah.ekenberg@protolabs.com