Protolabs Reports Second Quarter 2019 Financial Results

Record Quarterly Revenue of $115.9 million, an increase of 6% over Q2 2018

MAPLE PLAIN, Minn. — (BUSINESS WIRE) — July 25, 2019 — Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights include:

  • Revenue for the second quarter of 2019 was $115.9 million, representing a 5.7 percent increase over revenue of $109.7 million for the second quarter of 2018.
  • The number of unique product developers and engineers served through our web-based customer interface totaled 20,840 in the second quarter of 2019, an increase of 4.7 percent over the second quarter of 2018.
  • Net income for the second quarter of 2019 was $16.2 million, or $0.60 per diluted share.
  • Non-GAAP net income was $19.1 million, or $0.71 per diluted share. See “Non-GAAP Financial Measures” below.

“Protolabs continues to be a leader in digital manufacturing and achieved record revenue of $115.9 million in the second quarter,” said Vicki Holt, President and Chief Executive Officer. “We continue to focus on serving our customers by expanding our differentiated offering as we launched a metal 3D printing production offer and custom color matching for injection molding.”

Additional Second Quarter 2019 highlights include:

  • Gross margin was 52.0 percent of revenue for the second quarter of 2019, compared with 54.0 percent for the second quarter of 2018.
  • GAAP operating margin was 16.9 percent of revenue for the second quarter of 2019, compared to 20.0 percent for the second quarter of 2018.
  • Non-GAAP operating margin was 20.6 percent of revenue for the second quarter of 2019, compared to 23.3 percent for the second quarter of 2018. See “Non-GAAP Financial Measures” below.
  • EBITDA was $27.8 million, or 24.0% of revenue, for the second quarter of 2019.
  • Adjusted EBITDA was $31.0 million, or 26.7% of revenue, for the second quarter of 2019. See “Non-GAAP Financial Measures” below.
  • Cash flow from operations was $36.9 million in the second quarter of 2019.
  • Cash and investments balance was $150.7 million at June 30, 2019.
  • The Company repurchased $4.1 million, or 40,669 shares, of common stock during the quarter.
  • Protolabs continued to expand its service offering through two new launches in Q2:
    • Custom color matching for injection molding
    • Production offer for metal 3D printing

       

“Protolabs grew 5.7% in the quarter despite currency headwinds, softness in automotive and industrial markets, and the challenge of transforming our newly acquired RAPID business to Protolabs’ business model,” said John Way, Chief Financial Officer. “We continue to focus on delighting our customers, driving sequential improvement in our business, and generating strong cash flows to allow us to continue to invest in future growth.”

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, unrealized (gain) loss on foreign currency, and disposal of businesses (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 second quarter 2019 financial results and third quarter outlook today, July 25, 2019 at 8:30 a.m. ET. 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. start time. No participant code is required. A presentation containing information on the company’s second quarter 2019 financial results and third quarter outlook will be available prior to the call. A simultaneous webcast of the call and slide presentation will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/sf4ezs6m. A replay will be available for 14 days following the call on the investor relations section of the Protolabs website.

About Protolabs

Protolabs is the world's fastest digital manufacturing source for rapid prototyping and on-demand production. The technology-enabled 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)
 
June 30, December 31,

2019

2018

(Unaudited)
Assets
Current assets
Cash and cash equivalents

$

100,535

$

85,046

Short-term marketable securities

 

35,867

 

46,750

Accounts receivable, net

 

62,548

 

59,155

Inventory

 

9,688

 

10,087

Income taxes receivable

 

2,852

 

5,757

Prepaid expenses and other current assets

 

7,826

 

8,567

Total current assets

 

219,316

 

215,362

 
Property and equipment, net

 

248,816

 

228,001

Goodwill

 

128,752

 

128,752

Other intangible assets, net

 

18,116

 

19,850

Long-term marketable securities

 

14,268

 

23,579

Operating lease assets

 

12,249

 

-

Other long-term assets

 

4,010

 

3,441

Total assets

$

645,527

$

618,985

 
Liabilities and shareholders' equity
Current liabilities
Accounts payable

$

21,230

$

17,411

Accrued compensation

 

14,068

 

18,130

Accrued liabilities and other

 

10,422

 

16,702

Current operating lease liabilities

 

3,296

 

-

Income taxes payable

 

2,417

 

491

Total current liabilities

 

51,433

 

52,734

 
Long-term operating lease liabilities

 

9,218

 

-

Long-term deferred tax liabilities

 

21,745

 

20,162

Other long-term liabilities

 

5,018

 

4,592

 
Shareholders' equity

 

558,113

 

541,497

Total liabilities and shareholders' equity

$

645,527

$

618,985

 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Revenue
Injection Molding

$

55,457

$

51,586

$

110,768

$

102,929

CNC Machining

 

38,888

 

37,788

 

76,760

 

74,519

3D Printing

 

15,266

 

13,248

 

29,746

 

25,573

Sheet Metal

 

5,472

 

6,309

 

10,497

 

12,550

Other

 

849

 

721

 

1,613

 

1,826

Total revenue

 

115,932

 

109,652

 

229,384

 

217,397

 
Cost of revenue

 

55,696

 

50,439

 

110,288

 

100,276

Gross profit

 

60,236

 

59,213

 

119,096

 

117,121

 
Operating expenses
Marketing and sales

 

19,285

 

17,557

 

37,862

 

34,129

Research and development

 

8,169

 

7,032

 

16,182

 

13,697

General and administrative

 

13,209

 

12,640

 

26,031

 

25,583

Total operating expenses

 

40,663

 

37,229

 

80,075

 

73,409

Income from operations

 

19,573

 

21,984

 

39,021

 

43,712

Other income, net

 

1,125

 

808

 

1,338

 

986

Income before income taxes

 

20,698

 

22,792

 

40,359

 

44,698

Provision for income taxes

 

4,532

 

4,478

 

8,682

 

8,333

Net income

$

16,166

$

18,314

$

31,677

$

36,365

 
Net income per share:
Basic

$

0.60

$

0.68

$

1.18

$

1.35

Diluted

$

0.60

$

0.67

$

1.17

$

1.34

 
Shares used to compute net income per share:
Basic

 

26,875,153

 

26,972,990

 

26,919,016

 

26,925,673

Diluted

 

27,041,422

 

27,274,882

 

27,113,328

 

27,232,215

 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 

 

 

Six Months Ended

 

June 30,

 

2019

2018

Operating activities

Net income

$

31,677

 

$

36,365

 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

14,981

 

 

12,749

 

Stock-based compensation expense

 

6,526

 

 

5,034

 

Deferred taxes

 

1,585

 

 

1,620

 

Gain on sale of businesses

 

-

 

 

(671

)

Amortization of held-to-maturity securities

 

7

 

 

276

 

Other

 

(279

)

 

7

 

Changes in operating assets and liabilities

 

391

 

 

3,937

 

Net cash provided by operating activities

 

54,888

 

 

59,317

 

 

 

Investing activities

Purchases of property, equipment and other capital assets

 

(34,136

)

 

(43,194

)

Cash used for acquisitions, net of cash acquired

 

-

 

 

(90

)

Proceeds from sale of businesses

 

-

 

 

284

 

Purchases of other assets and investments

 

(4,000

)

 

-

 

Purchases of marketable securities

 

(8,983

)

 

(17,129

)

Proceeds from maturities of marketable securities

 

29,170

 

 

29,056

 

Net cash used in investing activities

 

(17,949

)

 

(31,073

)

 

 

Financing activities

Payments on debt

 

-

 

 

(5,000

)

Proceeds from exercises of stock options and other

 

2,243

 

 

4,696

 

Purchases of shares withheld for tax obligations

 

(2,418

)

 

(1,390

)

Repurchases of common stock

 

(21,410

)

 

-

 

Net cash used in financing activities

 

(21,585

)

 

(1,694

)

Effect of exchange rate changes on cash and cash equivalents

 

135

 

(652

)

Net increase in cash and cash equivalents

 

15,489

 

 

25,898

 

Cash and cash equivalents, beginning of period

 

85,046

 

 

36,707

 

Cash and cash equivalents, end of period

$

100,535

 

$

62,605

 

 

 

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

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

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

$

16,166

 

$

18,314

 

$

31,677

 

$

36,365

 

Add back:
Stock-based compensation expense

 

3,486

 

 

2,726

 

 

6,526

 

 

5,034

 

Amortization expense

 

863

 

 

799

 

 

1,734

 

 

1,563

 

Unrealized (gain) loss on foreign currency

 

(305

)

 

93

 

 

(58

)

 

248

 

Disposal of businesses

 

-

 

 

(671

)

 

-

 

 

(671

)

Total adjustments 1

 

4,044

 

 

2,947

 

 

8,202

 

 

6,174

 

Income tax benefits on adjustments 2

 

(1,074

)

 

(1,318

)

 

(1,993

)

 

(3,361

)

Non-GAAP net income

$

19,136

 

$

19,943

 

$

37,886

 

$

39,178

 

 
 
Non-GAAP net income per share:
Basic

$

0.71

 

$

0.74

 

$

1.41

 

$

1.46

 

Diluted

$

0.71

 

$

0.73

 

$

1.40

 

$

1.44

 

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

 

26,875,153

 

 

26,972,990

 

 

26,919,016

 

 

26,925,673

 

Diluted

 

27,041,422

 

 

27,274,882

 

 

27,113,328

 

 

27,232,215

 

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

 
Cost of revenue

$

797

 

$

363

 

$

1,530

 

$

650

 

 
Marketing and sales

 

614

 

 

443

 

 

1,163

 

 

820

 

Research and development

 

503

 

 

376

 

 

926

 

 

690

 

General and administrative

 

2,435

 

 

2,343

 

 

4,641

 

 

4,437

 

Total operating expenses

 

3,552

 

 

3,162

 

 

6,730

 

 

5,947

 

 
Other income, net

 

(305

)

 

(578

)

 

(58

)

 

(423

)

Total adjustments

$

4,044

 

$

2,947

 

$

8,202

 

$

6,174

 

 
2 For the three- and six-month periods ended June 30, 2019 and 2018, 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

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Revenue

$

115,932

 

$

109,652

 

$

229,384

 

$

217,397

 

Income from operations

 

19,573

 

 

21,984

 

 

39,021

 

 

43,712

 

GAAP operating margin

 

16.9

%

 

20.0

%

 

17.0

%

 

20.1

%

Add back:
Stock-based compensation expense

 

3,486

 

 

2,726

 

 

6,526

 

 

5,034

 

Amortization expense

 

863

 

 

799

 

 

1,734

 

 

1,563

 

Total adjustments

 

4,349

 

 

3,525

 

 

8,260

 

 

6,597

 

Non-GAAP income from operations

$

23,922

 

$

25,509

 

$

47,281

 

$

50,309

 

Non-GAAP operating margin

 

20.6

%

 

23.3

%

 

20.6

%

 

23.1

%

 
Proto Labs, Inc.
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

GAAP net income

$

16,166

 

$

18,314

 

$

31,677

 

$

36,365

 

Amortization expense

 

863

 

 

799

 

 

1,734

 

 

1,563

 

Depreciation expense

 

6,678

 

 

5,691

 

 

13,246

 

 

11,186

 

Interest income, net

 

(465

)

 

(322

)

 

(1,046

)

 

(588

)

Tax expense

 

4,532

 

 

4,478

 

 

8,682

 

 

8,333

 

EBITDA

 

27,774

 

 

28,960

 

 

54,293

 

 

56,859

 

Add back:
Stock-based compensation expense

 

3,486

 

 

2,726

 

 

6,526

 

 

5,034

 

Unrealized (gain) loss on foreign currency

 

(305

)

 

93

 

 

(58

)

 

248

 

Total adjustments

 

3,181

 

 

2,819

 

 

6,468

 

 

5,282

 

Adjusted EBITDA

$

30,955

 

$

31,779

 

$

60,761

 

$

62,141

 

 
Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
 
Three Months Ended
June 30, 2019
Three Months
Ended
June 30, 2018
% % Change
Constant
GAAP Adjustments 1 Non-GAAP GAAP Change 2 Currencies 3
Revenues
United States

$

91,149

$

-

$

91,149

$

86,354

5.6

%

5.6

%

Europe

 

20,940

 

1,333

 

22,273

 

20,213

3.6

%

10.2

%

Japan

 

3,843

 

33

 

3,876

 

3,085

24.6

%

25.6

%

Total Revenue

$

115,932

$

1,366

$

117,298

$

109,652

5.7

%

7.0

%

 
 
Six Months Ended
June 30, 2019
Six Months
Ended
June 30, 2018
% % Change
Constant
GAAP Adjustments 1 Non-GAAP GAAP Change 2 Currencies 3
Revenues
United States

$

178,960

$

-

$

178,960

$

170,521

4.9

%

4.9

%

Europe

 

42,194

 

2,967

 

45,161

 

40,158

5.1

%

12.5

%

Japan

 

8,230

 

121

 

8,351

 

6,718

22.5

%

24.3

%

Total Revenue

$

229,384

$

3,088

$

232,472

$

217,397

5.5

%

6.9

%

 
1 Revenue for the three- and six-month periods ended June 30, 2019 has been recalculated using 2018 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.
2 This column presents the percentage change from GAAP revenue for the three- and six-month periods ended June 30, 2018 to GAAP revenue for the three- and six-month periods ended June 30, 2019.
3 This column presents the percentage change from GAAP revenue for the three- and six-month periods ended June 30, 2018 to non-GAAP revenue for the three- and six-month periods ended June 30, 2019 (as recalculated using the foreign currency exchange rates in effect during the three- and six-month periods ended June 30, 2018) in order to provide a constant-currency comparison.
Proto Labs, Inc.
Product Developer Information
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Unique product developers and engineers served

20,840

19,901

31,550

30,625

 

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