Protolabs Reports First Quarter 2019 Financial Results
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Protolabs Reports First Quarter 2019 Financial Results

Revenue of $113.5 million, an increase of 5% over Q1 2018

Unique Product Developers served increased 9% over Q1 2018

MAPLE PLAIN, Minn. — (BUSINESS WIRE) — April 25, 2019 — 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, 2019.

First Quarter 2019 Highlights include:

“Protolabs reported another quarter of top-line growth with record revenue in our 3D printing and injection molding services,” said Vicki Holt, President and Chief Executive Officer. “We had strong growth in Europe and Japan; however, we had some challenges with our sheet metal service and expanded CNC offering acquired with the Rapid Manufacturing transaction.”

Additional First Quarter 2019 highlights include:

“In the first quarter of 2019, the headwinds described in our Q1 outlook were greater than anticipated, including a decline in our acquired services,” said John Way, Chief Financial Officer. “The organization is focused on actions to improve the performance of this business, delivering differentiated services to our customers.”

Non-GAAP Financial Measures

The company has included non-GAAP revenue growth that excludes the impact of changes in foreign currency exchange rates. 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 loss on foreign currency (collectively, “EBITDA and 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 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, operating margin, revenue growth and 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 2019 financial results and second quarter outlook today, April 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 first quarter financial results and second 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/m6/p/25uxfqee. 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)
       
 
March 31, December 31,
2019 2018
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 85,350 $ 85,046
Short-term marketable securities 35,045 46,750
Accounts receivable, net 61,535 59,155
Inventory 9,356 10,087
Income taxes receivable 2,852 5,757
Prepaid expenses and other current assets   8,613   8,567
Total current assets 202,751 215,362
 
Property and equipment, net 234,211 228,001
Goodwill 128,752 128,752
Other intangible assets, net 18,979 19,850
Long-term marketable securities 18,262 23,579
Operating lease assets 11,965 -
Other long-term assets   3,676   3,441
Total assets $ 618,596 $ 618,985
 
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 16,672 $ 17,411
Accrued compensation 10,129 18,130
Accrued liabilities and other 11,027 16,702
Current operating lease liabilities 3,021 -
Income taxes payable   594   491
Total current liabilities 41,443 52,734
 
Long-term operating lease liabilities 9,107 -
Long-term deferred tax liabilities 20,549 20,162
Other long-term liabilities 4,702 4,592
 
Shareholders' equity   542,795   541,497
Total liabilities and shareholders' equity $ 618,596 $ 618,985
   
       
 
Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
 
Three Months Ended
March 31,

2019

2018

Revenue
Injection Molding $ 55,311 $ 51,343
CNC Machining 37,872 36,731
3D Printing 14,480 12,325
Sheet Metal 5,025 6,241
Other   764   1,105
Total revenue 113,452 107,745
 
Cost of revenue   54,592   49,837
Gross profit 58,860 57,908
 
Operating expenses
Marketing and sales 18,577 16,572
Research and development 8,013 6,665
General and administrative   12,822   12,943
Total operating expenses   39,412   36,180
Income from operations 19,448 21,728
Other income, net   213   178
Income before income taxes 19,661 21,906
Provision for income taxes   4,150   3,855
Net income $ 15,511 $ 18,051
 
Net income per share:
Basic $ 0.58 $ 0.67
Diluted $ 0.57 $ 0.66
 
Shares used to compute net income per share:
Basic 26,963,366 26,879,388
Diluted 27,177,039 27,197,099
             
       
 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
2019 2018
Operating activities
Net income $ 15,511 $ 18,051
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,439 6,259
Stock-based compensation expense 3,040 2,307
Deferred taxes 379 612
Amortization of held-to-maturity securities 16 163
Other 236 106
Changes in operating assets and liabilities   (8,619 )   (1,353 )
Net cash provided by operating activities   18,002     26,145  
 
Investing activities
Purchases of property, equipment and other capital assets (12,735 ) (25,513 )
Cash used for acquisitions, net of cash acquired - (90 )
Purchases of other assets and investments (4,000 ) -
Purchases of marketable securities - (3,389 )
Proceeds from maturities of marketable securities   17,006     13,551  
Net cash provided by (used in) investing activities   271     (15,441 )
 
Financing activities
Payments on debt - (5,000 )
Proceeds from exercises of stock options and other 174 2,880
Purchases of shares withheld for tax obligations (594 ) (628 )
Repurchases of common stock   (17,309 )   -  
Net cash used in financing activities   (17,729 )   (2,748 )
Effect of exchange rate changes on cash and cash equivalents   (240 )   432  
Net increase in cash and cash equivalents 304 8,388
Cash and cash equivalents, beginning of period   85,046     36,707  
Cash and cash equivalents, end of period $ 85,350   $ 45,095  
                     
       
 
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,

2019

2018

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

GAAP net income $ 15,511 $ 18,051
Add back:
Stock-based compensation expense 3,040 2,307
Amortization expense 871 764
Unrealized loss on foreign currency   247     156  
Total adjustments 1 4,158 3,227
Income tax benefits on adjustments 2   (919 )   (2,043 )
Non-GAAP net income $ 18,750   $ 19,235  
 
 
Non-GAAP net income per share:
Basic $ 0.70   $ 0.72  
Diluted $ 0.69   $ 0.71  
 
Shares used to compute non-GAAP net income per share:
Basic 26,963,366 26,879,388
Diluted 27,177,039 27,197,099
             
 

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

Three Months Ended
March 31,

2019

2018

 
Cost of revenue $ 733 $ 287
 
Marketing and sales 549 377
Research and development 423 314
General and administrative   2,206     2,093  
Total operating expenses 3,178 2,784
 
Other income, net   247     156  
Total adjustments $ 4,158   $ 3,227  
 
2 For the three-month periods ended March 31, 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
March 31,

2019

2018

Revenue $ 113,452 $ 107,745
Income from operations   19,448     21,728  
GAAP operating margin 17.1 % 20.2 %
Add back:
Stock-based compensation expense 3,040 2,307
Amortization expense   871     764  
Total adjustments 3,911 3,071
Non-GAAP income from operations $ 23,359   $ 24,799  
Non-GAAP operating margin 20.6 % 23.0 %
             
       
 
Proto Labs, Inc.
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,

2019

2018

GAAP net income $ 15,511 $ 18,051
Amortization expense 871 764
Depreciation expense 6,568 5,495
Interest income, net (581 ) (266 )
Tax expense   4,150     3,855  
EBITDA   26,519     27,899  
Add back:
Stock-based compensation expense 3,040 2,307
Unrealized loss on foreign currency   247     156  
Total adjustments 3,287 2,463
Adjusted EBITDA $ 29,806   $ 30,362  
                     
                         
 
Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
 

Three Months Ended

March 31, 2019

Three Months
Ended
March 31, 2018

% % Change

Constant

GAAP Adjustments1 Non-GAAP GAAP

Change2

Currencies3
Revenues
United States $ 87,811 $ - $ 87,811 $ 84,167 4.3 % 4.3 %
Europe 21,254 1,634 22,888 19,945 6.6 % 14.8 %
Japan   4,387   88   4,475   3,633

20.8

%

23.2

%
Total Revenue $ 113,452 $ 1,722 $ 115,174 $ 107,745 5.3 % 6.9 %
                                       
 
1 Revenue for the three-month period ended March 31, 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-month period ended March 31, 2018 to GAAP revenue for the three-month period ended March 31, 2019.
3 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2018 to non-GAAP revenue for the three-month period ended March 31, 2019 (as recalculated using the foreign currency exchange rates in effect during the three-month period ended March 31, 2018) in order to provide a constant-currency comparison.
 
       
Proto Labs, Inc.
Product Developer Information
(Unaudited)
 
Three Months Ended
March 31,
2019 2018
Unique product developers and engineers served 20,573 18,816
             


Contact:

Investor Relations Contact:
Protolabs
Dan Schumacher, 763-479-7240
Director of Investor Relations
Email Contact
or
Media Contact:
Protolabs
Sarah Ekenberg, 763-479-7560
Marketing Manager, PR & Media
Email Contact