Jul 28, 2020   SOURCE: BusinessWire

Protolabs Reports Financial Results for the Second Quarter 2020

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, 2020.

Second Quarter 2020 Highlights include:

  • Revenue for the second quarter of 2020 was $106.6 million, representing an 8.1 percent decrease compared to revenue of $115.9 million in the second quarter of 2019.
  • Net income for the second quarter of 2020 was $12.6 million, or $0.47 per diluted share.
  • Non-GAAP net income was $15.9 million, or $0.59 per diluted share. See “Non-GAAP Financial Measures” below.

“The first half of 2020 has presented a great deal of challenges to all businesses, and Protolabs is no exception. We have a solid financial foundation, a healthy balance sheet, and resilient business model to weather the uncertain environment,” said Vicki Holt, President and Chief Executive Officer of Protolabs. “The COVID-19 pandemic provides an opportunity for Protolabs to demonstrate the value our digital business model can provide. During the quarter, we delivered over 8 million parts to support the medical industry, generating $12 million in revenue. Our dynamic digital manufacturing business model, and our agile and creative employees, will allow us to thrive as customer activity begins to re-accelerate.”

Additional Second Quarter 2020 Highlights include:

  • Gross margin was 49.2 percent of revenue for the second quarter of 2020, compared to 50.5 percent for the first quarter of 2020 on lower revenue.
  • Operating expenses were $38.1 million or 35.8 percent of revenue for the second quarter of 2020, down $3.2 million from $41.3 million of operating expenses in the first quarter of 2020.
  • GAAP operating margin was 13.5 percent of revenue during the second quarter of 2020, compared to 14.6 percent for the first quarter of 2020 due to lower revenue.
  • Non-GAAP operating margin was 17.6 percent of revenue during the second quarter of 2020, compared to 17.9 percent for the first quarter of 2020. See “Non-GAAP Financial Measures” below.
  • The company generated $31.0 million in cash from operations during the second quarter of 2020 up from $22.4 million in first quarter 2020.

“Our business model continues to generate strong cash flow, despite the uncertainty in the market,” said John Way, Chief Financial Officer. “We will continue to monitor demand levels and prudently manage expenses, while continuing to invest in and execute on key strategic initiatives to position our business for strong growth in the future.”

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 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 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 second quarter 2020 financial results and financial guidance today, July 28, 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/9crcgv9j. 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)
 
 

June 30,

December 31,

2020

2019

(Unaudited)
Assets
Current assets
Cash and cash equivalents

$

98,003

$

125,225

Short-term marketable securities

 

33,128

 

35,437

Accounts receivable, net

 

61,297

 

57,450

Inventory

 

10,774

 

10,075

Income taxes receivable

 

95

 

-

Prepaid expenses and other current assets

 

9,670

 

8,232

Total current assets

 

212,967

 

236,419

 
Property and equipment, net

 

281,129

 

263,712

Goodwill

 

128,752

 

128,752

Other intangible assets, net

 

15,861

 

17,369

Long-term marketable securities

 

44,127

 

12,960

Operating lease assets

 

11,049

 

11,425

Other long-term assets

 

4,560

 

3,030

Total assets

$

698,445

$

673,667

 
Liabilities and shareholders' equity
Current liabilities
Accounts payable

$

17,556

$

16,804

Accrued compensation

 

15,138

 

15,058

Accrued liabilities and other

 

15,041

 

11,057

Current operating lease liabilities

 

3,368

 

3,340

Income taxes payable

 

-

 

1,322

Total current liabilities

 

51,103

 

47,581

 
Long-term operating lease liabilities

 

8,379

 

8,565

Long-term deferred tax liabilities

 

31,907

 

26,283

Other long-term liabilities

 

5,807

 

5,448

 
Shareholders' equity

 

601,249

 

585,790

Total liabilities and shareholders' equity

$

698,445

$

673,667

 
 
 
 
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,

2020

2019

2020

2019

Revenue
Injection Molding

$

57,894

$

55,457

$

112,670

$

110,768

CNC Machining

 

28,760

 

38,888

 

66,645

 

76,760

3D Printing

 

14,236

 

15,266

 

30,184

 

29,746

Sheet Metal

 

4,669

 

5,472

 

10,318

 

10,497

Other

 

1,016

 

849

 

1,866

 

1,613

Total revenue

 

106,575

 

115,932

 

221,683

 

229,384

 
Cost of revenue

 

54,119

 

55,696

 

111,127

 

110,288

Gross profit

 

52,456

 

60,236

 

110,556

 

119,096

 
Operating expenses
Marketing and sales

 

16,936

 

19,285

 

35,116

 

37,862

Research and development

 

8,648

 

8,169

 

17,635

 

16,182

General and administrative

 

12,521

 

13,209

 

26,629

 

26,031

Total operating expenses

 

38,105

 

40,663

 

79,380

 

80,075

Income from operations

 

14,351

 

19,573

 

31,176

 

39,021

Other income, net

 

767

 

1,125

 

1,821

 

1,338

Income before income taxes

 

15,118

 

20,698

 

32,997

 

40,359

Provision for income taxes

 

2,511

 

4,532

 

6,406

 

8,682

Net income

$

12,607

$

16,166

$

26,591

$

31,677

 
Net income per share:
Basic

$

0.47

$

0.60

$

1.00

$

1.18

Diluted

$

0.47

$

0.60

$

0.99

$

1.17

 
Shares used to compute net income per share:
Basic

 

26,660,498

 

26,875,153

 

26,718,652

 

26,919,016

Diluted

 

26,760,866

 

27,041,422

 

26,837,938

 

27,113,328

 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended
June 30,

2020

2019

Operating activities
Net income

$

26,591

 

$

31,677

 

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

 

15,855

 

 

14,981

 

Stock-based compensation expense

 

6,672

 

 

6,526

 

Deferred taxes

 

5,651

 

 

1,585

 

Amortization of held-to-maturity securities

 

129

 

 

7

 

Other

 

(854

)

 

(279

)

Changes in operating assets and liabilities

 

(627

)

 

391

 

Net cash provided by operating activities

 

53,417

 

 

54,888

 

 
Investing activities
Purchases of property, equipment and other capital assets

 

(33,305

)

 

(34,136

)

Purchases of other assets and investments

 

(3,000

)

 

(4,000

)

Purchases of marketable securities

 

(57,212

)

 

(8,983

)

Proceeds from maturities of marketable securities

 

28,225

 

 

29,170

 

Net cash used in investing activities

 

(65,292

)

 

(17,949

)

 
Financing activities
Proceeds from exercises of stock options and other

 

2,855

 

 

2,243

 

Purchases of shares withheld for tax obligations

 

(3,367

)

 

(2,418

)

Repurchases of common stock

 

(14,686

)

 

(21,410

)

Net cash used in financing activities

 

(15,198

)

 

(21,585

)

Effect of exchange rate changes on cash and cash equivalents

 

(149

)

 

135

 

Net (decrease) increase in cash and cash equivalents

 

(27,222

)

 

15,489

 

Cash and cash equivalents, beginning of period

 

125,225

 

 

85,046

 

Cash and cash equivalents, end of period

$

98,003

 

$

100,535

 

 
 
 
 
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,

2020

2019

2020

2019

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

$

12,607

 

$

16,166

 

$

26,591

 

$

31,677

 

Add back:
Stock-based compensation expense

 

3,639

 

 

3,486

 

 

6,672

 

 

6,526

 

Amortization expense

 

754

 

 

863

 

 

1,508

 

 

1,734

 

Unrealized gain on foreign currency

 

(139

)

 

(305

)

 

(936

)

 

(58

)

Total adjustments 1

 

4,254

 

 

4,044

 

 

7,244

 

 

8,202

 

Income tax benefits on adjustments 2

 

(987

)

 

(1,074

)

 

(1,662

)

 

(1,993

)

Non-GAAP net income

$

15,874

 

$

19,136

 

$

32,173

 

$

37,886

 

 
 
Non-GAAP net income per share:
Basic

$

0.60

 

$

0.71

 

$

1.20

 

$

1.41

 

Diluted

$

0.59

 

$

0.71

 

$

1.20

 

$

1.40

 

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

 

26,660,498

 

 

26,875,153

 

 

26,718,652

 

 

26,919,016

 

Diluted

 

26,760,866

 

 

27,041,422

 

 

26,837,938

 

 

27,113,328

 

 
 
1 Stock-based compensation expense, amortization expense and unrealized gain on foreign currency were included in the following GAAP consolidated statement of operations categories:
Three Months Ended Six Months Ended
June 30, June 30,

2020

2019

2020

2019

 
Cost of revenue

$

936

 

$

797

 

$

1,799

 

$

1,530

 

 
Marketing and sales

 

750

 

 

614

 

 

1,368

 

 

1,163

 

Research and development

 

607

 

 

503

 

 

1,128

 

 

926

 

General and administrative

 

2,100

 

 

2,435

 

 

3,885

 

 

4,641

 

Total operating expenses

 

3,457

 

 

3,552

 

 

6,381

 

 

6,730

 

 
Other income, net

 

(139

)

 

(305

)

 

(936

)

 

(58

)

Total adjustments

$

4,254

 

$

4,044

 

$

7,244

 

$

8,202

 

 
2 For the three and six-month periods ended June 30, 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 Six Months Ended
June 30, June 30,

2020

2019

2020

2019

Revenue

$

106,575

 

$

115,932

 

$

221,683

 

$

229,384

 

Income from operations

 

14,351

 

 

19,573

 

 

31,176

 

 

39,021

 

GAAP operating margin

 

13.5

%

 

16.9

%

 

14.1

%

 

17.0

%

Add back:
Stock-based compensation expense

 

3,639

 

 

3,486

 

 

6,672

 

 

6,526

 

Amortization expense

 

754

 

 

863

 

 

1,508

 

 

1,734

 

Total adjustments

 

4,393

 

 

4,349

 

 

8,180

 

 

8,260

 

Non-GAAP income from operations

$

18,744

 

$

23,922

 

$

39,356

 

$

47,281

 

Non-GAAP operating margin

 

17.6

%

 

20.6

%

 

17.8

%

 

20.6

%

 
 
 
 
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,

2020

2019

2020

2019

GAAP net income

$

12,607

 

$

16,166

 

$

26,591

 

$

31,677

 

Amortization expense

 

754

 

 

863

 

 

1,508

 

 

1,734

 

Depreciation expense

 

7,143

 

 

6,678

 

 

14,347

 

 

13,246

 

Interest income, net

 

(368

)

 

(465

)

 

(928

)

 

(1,046

)

Tax expense

 

2,511

 

 

4,532

 

 

6,406

 

 

8,682

 

EBITDA

 

22,647

 

 

27,774

 

 

47,924

 

 

54,293

 

Add back:
Stock-based compensation expense

 

3,639

 

 

3,486

 

 

6,672

 

 

6,526

 

Unrealized gain on foreign currency

 

(139

)

 

(305

)

 

(936

)

 

(58

)

Total adjustments

 

3,500

 

 

3,181

 

 

5,736

 

 

6,468

 

Adjusted EBITDA

$

26,147

 

$

30,955

 

$

53,660

 

$

60,761

 

 
 
 
Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
 
Three Months Ended
June 30, 2020		 Three Months Ended
June 30, 2019		 % % Change
Constant
GAAP Adjustments1 Non-GAAP GAAP Change2 Currencies3
Revenues
United States

$

86,823

$

-

 

$

86,823

$

91,149

(4.7)

 

(4.7)

Europe

 

16,729

 

417

 

 

17,146

 

20,940

(20.1)

 

(18.1)

Japan

 

3,023

 

(62

)

 

2,961

 

3,843

(21.3)

 

(23.0)

Total Revenue

$

106,575

$

355

 

$

106,930

$

115,932

(8.1)

 

(7.8)

 
 
Six Months Ended
June 30, 2020		 Six Months Ended
June 30, 2019		 % % Change
Constant
GAAP Adjustments1 Non-GAAP GAAP Change2 Currencies3
Revenues
United States

$

176,899

$

-

 

$

176,899

$

178,960

(1.2)

 

(1.2)

Europe

 

37,516

 

1,065

 

 

38,581

 

42,194

(11.1)

 

(8.6)

Japan

 

7,268

 

(117

)

 

7,151

 

8,230

(11.7)

 

(13.1)

Total Revenue

$

221,683

$

948

 

$

222,631

$

229,384

(3.4)

 

(2.9)

 
1 Revenue for the three and six-month periods ended June 30, 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.
2 This column presents the percentage change from GAAP revenue for the three and six-month periods ended June 30, 2019 to GAAP revenue for the three and six-month periods ended June 30, 2020.
3 This column presents the percentage change from GAAP revenue for the three and six-month periods ended June 30, 2019 to non-GAAP revenue for the three and six-month periods ended June 30, 2020 (as recalculated using the foreign currency exchange rates in effect during the three- and six-month periods ended June 30, 2019) 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,

2020

2019

2020

2019

Unique product developers and engineers served

17,037

20,840

29,703

31,550