Exhibit 99.1

 

 

 

 

Protolabs Reports Financial Results for the Fourth Quarter and Full Year 2019

 

Record Full Year 2019 Revenue of $458.7 million, an increase of 3% over 2018

 

 

MAPLE PLAIN, Minn. – February 6, 2020 – Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the fourth quarter and full year ended December 31, 2019.

 

Fourth Quarter 2019 Highlights include:

 

●

Revenue for the fourth quarter of 2019 was $111.9 million, representing a 0.8 percent decrease compared to revenue of $112.8 million in the fourth quarter of 2018.

 

●

The number of unique product developers and engineers served totaled 20,595 in the fourth quarter of 2019, an increase of 0.9 percent over the fourth quarter of 2018.

 

●

Net income for the fourth quarter of 2019 was $15.2 million, or $0.56 per diluted share.

 

●

Non-GAAP net income was $17.1 million, or $0.63 per diluted share. See “Non-GAAP Financial Measures” below.

 

“The fourth quarter of 2019 played out as we expected, as global macroeconomic conditions continued to weaken through the end of 2019,” said Vicki Holt, President and Chief Executive Officer. “Despite softer revenue in the fourth quarter, our world-class e-commerce digital manufacturing offer still resonates with customers, as evidenced by our three percent growth in 2019 in these tough macro conditions.”

 

Additional Fourth Quarter 2019 Highlights include:

 

●

Gross margin was 50.6 percent of revenue for the fourth quarter of 2019, compared to 52.5 percent for the fourth quarter of 2018.

 

●

Operating expenses were 33.1 percent of revenue for the fourth quarter of 2019, compared to 34.6 percent for the fourth quarter of 2018.

 

●

GAAP operating margin was 17.5 percent of revenue during the fourth quarter of 2019, compared to 17.9 percent for the fourth quarter of 2018.

 

●

Non-GAAP operating margin was 19.2 percent of revenue during the fourth quarter of 2019, compared to 21.2 percent for the fourth quarter of 2018. See “Non-GAAP Financial Measures” below.

 

●

EBITDA was $27.0 million, or 24.1 percent of revenue, for the fourth quarter of 2019.

 

●

Adjusted EBITDA was $28.3 million, or 25.3 percent of revenue, for the fourth quarter of 2019. See “Non-GAAP Financial Measures” below.

 

●

The company generated $32.3 million in cash from operations during the fourth quarter of 2019.

 

●

Cash and investments balance was $173.6 million at December 31, 2019.

 

“Protolabs continued its track record of very strong cash generation in the fourth quarter of 2019, despite revenue softness and contraction in global manufacturing activity,” said John Way, Chief Financial Officer. “Our balance sheet remains very healthy as we enter into 2020, allowing us to make strategic investments focused on long term business performance.”

 

 

Full Year 2019 Financial Highlights include:

 

●

Revenue increased 2.9 percent to $458.7 million compared to $445.6 million in 2018.

 

●

Protolabs served 47,774 product developers during the year, an increase of 3.9 percent over 2018.

 

●

Net income for 2019 was $63.7 million, or $2.35 per diluted share.

 

●

Non-GAAP net income was $75.4 million, or $2.79 per diluted share. See “Non-GAAP Financial Measures” below.

 

●

Cash generated from operations during the year totaled $116.1 million.

 

●

The Company repurchased $33.5 million or 326,462 shares of common stock.

 

“Although macroeconomic headwinds across various industries have resulted in lower than expected purchasing from our customers in 2019, Protolabs remains committed to continually improving our offer and delighting our customers,” said Holt. “As we enter 2020, we are very excited about enhancements we are making to our e-commerce platform and back-end support systems. This project, called Protolabs 2.0, will build out our systems to support our customers and our strategy for the next decade and beyond. We have an outstanding team and are well-situated strategically and financially to expand our position as the leading e-commerce, digitally enabled supplier of custom manufacturing parts and services, which will lead to long-term shareholder value creation.”

 

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, unrealized (gain) loss on foreign currency, and disposal of businesses (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 fourth quarter and full year 2019 financial results and financial guidance today, February 6, 2020 at 8:30 a.m. EST. 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. EST 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/mcknxyj8. 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.

Source: Proto Labs, Inc.

 

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 

 

 

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

		December 31,				December 31,
		2019				2018
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	125,225			$	85,046
Short-term marketable securities			35,437				46,750
Accounts receivable, net			57,450				59,155
Inventory			10,075				10,087
Income taxes receivable			-				5,757
Prepaid expenses and other current assets			8,232				8,567
Total current assets			236,419				215,362
Property and equipment, net			263,712				228,001
Goodwill			128,752				128,752
Other intangible assets, net			17,369				19,850
Long-term marketable securities			12,960				23,579
Operating lease assets			11,425				-
Other long-term assets			3,030				3,441
Total assets		$	673,667			$	618,985
Liabilities and shareholders' equity
Current liabilities
Accounts payable		$	16,804			$	17,411
Accrued compensation			15,058				18,130
Accrued liabilities and other			11,057				16,702
Current operating lease liabilities			3,340				-
Income taxes payable			1,322				491
Total current liabilities			47,581				52,734
Long-term operating lease liabilities			8,565				-
Long-term deferred tax liabilities			26,283				20,162
Other long-term liabilities			5,448				4,592
Shareholders' equity			585,790				541,497
Total liabilities and shareholders' equity		$	673,667			$	618,985

 

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Proto Labs, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
Revenue
Injection Molding		$	51,480			$	53,913			$	217,415			$	210,523
CNC Machining			38,494				38,157				155,473				153,521
3D Printing			15,708				13,924				61,352				53,342
Sheet Metal			5,223				5,996				21,000				24,998
Other			984				779				3,488				3,212
Total revenue			111,889				112,769				458,728				445,596
Cost of revenue			55,311				53,614				223,438				206,917
Gross profit			56,578				59,155				235,290				238,679
Operating expenses
Marketing and sales			17,510				17,586				72,976				68,533
Research and development			8,151				7,580				32,692				28,735
General and administrative			11,355				13,834				49,766				52,513
Total operating expenses			37,016				39,000				155,434				149,781
Income from operations			19,562				20,155				79,856				88,898
Other income, net			(229	)			1,381				1,337				2,757
Income before income taxes			19,333				21,536				81,193				91,655
Provision for income taxes			4,147				2,250				17,538				15,067
Net income		$	15,186			$	19,286			$	63,655			$	76,588
Net income per share:
Basic		$	0.57			$	0.71			$	2.37			$	2.84
Diluted		$	0.56			$	0.71			$	2.35			$	2.81
Shares used to compute net income per share:
Basic			26,777,536				27,040,207				26,866,985				26,982,614
Diluted			26,945,927				27,311,988				27,049,423				27,278,816

 

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Proto Labs, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

		Year Ended
		December 31,
		2019				2018
Operating activities
Net income		$	63,655			$	76,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			30,864				26,754
Stock-based compensation expense			10,781				10,928
Deferred taxes			6,106				11,936
Gain on sale of businesses			-				(671	)
Amortization of held-to-maturity securities			5				374
Other			391				(619	)
Changes in operating assets and liabilities			4,250				(2,361	)
Net cash provided by operating activities			116,052				122,929
Investing activities
Purchases of property, equipment and other capital assets			(62,230	)			(87,104	)
Cash used for acquisitions, net of cash acquired			-				(90	)
Proceeds from sale of businesses			-				284
Purchases of other assets and investments			(4,000	)			(126	)
Purchases of marketable securities			(46,403	)			(41,384	)
Proceeds from maturities of marketable securities			68,330				65,139
Net cash used in investing activities			(44,303	)			(63,281	)
Financing activities
Payments on debt			-				(5,000	)
Proceeds from exercises of stock options			4,391				8,935
Purchases of shares withheld for tax obligations			(2,487	)			(2,144	)
Repurchases of common stock			(33,521	)			(12,229	)
Net cash used in financing activities			(31,617	)			(10,438	)
Effect of exchange rate changes on cash and cash equivalents			47				(871	)
Net increase in cash and cash equivalents			40,179				48,339
Cash and cash equivalents, beginning of period			85,046				36,707
Cash and cash equivalents, end of period		$	125,225			$	85,046

 

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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								Year Ended
		December 31,								December 31,
		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		$	15,186			$	19,286			$	63,655			$	76,588
Add back:
Stock-based compensation expense			1,043				2,942				10,781				10,928
Amortization expense			889				862				3,482				3,233
Unrealized (gain) loss on foreign currency			286				(527	)			677				(380	)
Disposal of businesses			-				-				-				(671	)
Total adjustments 1			2,218				3,277				14,940				13,110
Provisional charges related to the tax effect of deemed repatriation of foreign earnings			-				(719	)			-				(719	)
Revaluation of net deferred tax assets and liabilities			-				(496	)			-				(496	)
Income tax benefits on adjustments 2			(350	)			(1,086	)			(3,225	)			(5,660	)
Non-GAAP net income		$	17,054			$	20,262			$	75,370			$	82,823
Non-GAAP net income per share:
Basic		$	0.64			$	0.75			$	2.81			$	3.07
Diluted		$	0.63			$	0.74			$	2.79			$	3.04
Shares used to compute non-GAAP net income per share:
Basic			26,777,536				27,040,207				26,866,985				26,982,614
Diluted			26,945,927				27,311,988				27,049,423				27,278,816

 

1Stock-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								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
Cost of revenue		$	933			$	448			$	3,335			$	1,543
Marketing and sales			708				562				2,631				1,942
Research and development			365				407				1,851				1,517
General and administrative			(74	)			2,387				6,446				9,159
Total operating expenses			999				3,356				10,928				12,618
Other income, net			286				(527	)			677				(1,051	)
Total adjustments		$	2,218			$	3,277			$	14,940			$	13,110

 

2 For the three-month and year-ended periods ended December 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								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
Revenue		$	111,889			$	112,769			$	458,728			$	445,596
Income from operations			19,562				20,155				79,856				88,898
GAAP operating margin			17.5	%			17.9	%			17.4	%			20.0	%
Add back:
Stock-based compensation expense			1,043				2,942				10,781				10,928
Amortization expense			889				862				3,482				3,233
Total adjustments			1,932				3,804				14,263				14,161
Non-GAAP income from operations		$	21,494			$	23,959			$	94,119			$	103,059
Non-GAAP operating margin			19.2	%			21.2	%			20.5	%			23.1	%

 

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Proto Labs, Inc.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

(In thousands)

(Unaudited)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
GAAP net income		$	15,186			$	19,286			$	63,655			$	76,588
Amortization expense			889				862				3,482				3,233
Depreciation expense			7,317				6,372				27,383				23,521
Interest income, net			(560	)			(641	)			(2,095	)			(1,704	)
Tax expense			4,147				2,250				17,538				15,067
EBITDA			26,979				28,129				109,963				116,705
Add back:
Stock-based compensation expense			1,043				2,942				10,781				10,928
Unrealized (gain) loss on foreign currency			286				(527	)			677				(380	)
Disposal of businesses			-				-				-				(671	)
Total adjustments			1,329				2,415				11,458				9,877
Adjusted EBITDA		$	28,308			$	30,544			$	121,421			$	126,582

 

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Proto Labs, Inc.

Comparison of GAAP to Non-GAAP Revenue Growth

(In thousands)

(Unaudited)

 

		Three Months Ended December 31, 2019												Three Months Ended December 31, 2018				%				% Change Constant
		GAAP				Adjustments1				Non-GAAP				GAAP				Change2				Currencies3
Revenues
United States		$	88,329			$	-			$	88,329			$	89,282				(1.1%	)			(1.1%	)
Europe			19,889				385				20,274				19,458				2.2	%			4.2	%
Japan			3,671				(131	)			3,540				4,029				(8.9%	)			(12.1%	)
Total Revenue		$	111,889			$	254			$	112,143			$	112,769				(0.8%	)			(0.6%	)

 

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		Year Ended December 31, 2019												Year Ended December 31, 2018				%				% Change Constant
		GAAP				Adjustments1				Non-GAAP				GAAP				Change2				Currencies3
Revenues
United States		$	360,205			$	-			$	360,205			$	350,535				2.8	%			2.8	%
Europe			82,805				4,353				87,158				80,889				2.4	%			7.8	%
Japan			15,718				(150	)			15,568				14,172				10.9	%			9.9	%
Total Revenue		$	458,728			$	4,203			$	462,931			$	445,596				2.9	%			3.9	%

 

1 Revenue growth for the three-month and year-ended periods ended December 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 growth for the three-month and year-ended periods ended December 31, 2018 to GAAP revenue growth for the three-month and year-ended periods ended December 31, 2019.

3 This column presents the percentage change from GAAP revenue for the three-month and year-ended periods ended December 31, 2018 to non-GAAP revenue for the three-month and year-ended periods ended December 31, 2019 (as recalculated using the foreign currency exchange rates in effect during the three-month and year-ended periods ended December 31, 2018) in order to provide a constant currency comparison.

 

 

Proto Labs, Inc.

Product Developer Information

(Unaudited)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
Unique product developers and engineers served			20,595				20,403				47,774				45,968

 

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