Proto Labs Inc - FORM 8-K - EX-99.1 - EXHIBIT 99.1

Proto Labs Inc - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 12, 2021

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Proto Labs Inc Reports

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8-K - FORM 8-K - Proto Labs Inc	prlb20210209_8k.htm

Exhibit 99.1

3D Printing

CNC Machining

Sheet Metal Fabrication

Injection Molding

Protolabs Reports Financial Results for the Fourth Quarter and Full Year 2020

MAPLE PLAIN, Minn. – February 12. 2021 – 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, 2020.

Fourth Quarter 2020 Highlights include:

●

Revenue for the fourth quarter of 2020 was $105.2 million, representing a 2.1 percent decline compared to revenue of $107.5 million in the third quarter of 2020.

	●	EBITDA margin was 19.1 percent of revenue in the fourth quarter of 2020, compared to 24.4 percent in the third quarter of 2020.
	●	Adjusted EBITDA margin was 23.0 percent of revenue in the fourth quarter of 2020, compared to 27.9 percent in the third quarter of 2020. See "Non-GAAP Financial Measures" below.
	●	Net income for the fourth quarter of 2020 was $9.6 million, or $0.36 per diluted share.

●

Non-GAAP net income was $13.5 million, or $0.50 per diluted share. See “Non-GAAP Financial Measures” below.

“Protolabs responded very well in the face of unforseen challenges driven by the emergence of the global pandemic and the ensuing substantial decline in global economic activity during 2020. As an organization, we prioritized the health of our employees, while continuing to serve our customers,and advance our long-term business opportunities. As a result, we further enhanced our leadership in the digital manufacturing space,” said Vicki Holt, President and Chief Executive Officer.

“2020 showcased the adaptability of our workforce and our ability to further expand and improve our digital model,” said Rob Bodor, Vice President and General Manager of the Americas and incoming President and Chief Executive Officer. “There is tremendous opportunity ahead of us, and we have clear strategic objectives for 2021 and beyond: create a world-class customer experience, expand our digital manufacturing offer, and further invest in our employees. With the successful go-live of Protolabs 2.0 and the addition of 3D Hubs, we are uniquely positioned to capitalize on that opportunity. I look forward to partnering with all employees to drive the long-term success of Protolabs.”

Full Year 2020 Highlights include:

●

2020 revenue of $434.4 million, compared to $458.7 million in 2019.

●

Protolabs served 40,267 product developers during the year.

●

Gross margin was 50.1 percent of revenue in 2020, compared to 51.3 percent in 2019.

●

EBITDA margin was 21.7 percent of revenue in 2020, compared to 24.0 percent in 2019.

●

Adjusted EBITDA margin was 24.8 percent of revenue in 2020, compared to 26.5 percent in 2019. See “Non-GAAP Financial Measures” below.

●

Net income for 2020 was $50.9 million, or $1.89 per diluted share.

●

Non-GAAP net income was $63.6 million, or $2.36 per diluted share.

●

The company generated $107.0 million in cash from operations in 2020.

●

Cash and investments balance was $221.0 million at December 31, 2020.

“2020 was the most difficult backdrop our business has ever faced, yet our digital manufacturing model continued its strong cash flow generation, allowing us to proceed with investments to support the long-term growth of the business, while maintaining our financial strength and flexibility,” added John Way, Chief Financial Officer.

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 transaction costs (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, amortization expense, and transaction costs (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 transaction costs (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 2020 financial results today, February 12, 2021 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 will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/7ayaedkz. 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 leading source for digital manufacturing services. The technology-enabled company produces custom components in as fast as 1 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 manufacturing costs, and enables supply chain agility 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

Media Contact

Protolabs

Will Martin, 763-479-7719

Sr. Marketing Communications Manager

will.martin@protolabs.com

	December 31,		December 31,
	2020		2019
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	127,603	$	125,225
Short-term marketable securities		34,088		35,437
Accounts receivable, net		57,877		57,450
Inventory		10,862		10,075
Income taxes receivable		540		-
Prepaid expenses and other current assets		11,032		8,232
Total current assets		242,002		236,419

Property and equipment, net		282,666		263,712
Goodwill		128,752		128,752
Other intangible assets, net		14,350		17,369
Long-term marketable securities		59,357		12,960
Operating lease assets		9,855		11,425
Finance lease assets		2,396		-
Other long-term assets		4,826		3,030
Total assets	$	744,204	$	673,667

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	18,248	$	16,804
Accrued compensation		11,989		15,058
Accrued liabilities and other		16,193		11,057
Current operating lease liabilities		3,272		3,340
Current finance lease liabilities		552		-
Income taxes payable		-		1,322
Total current liabilities		50,254		47,581

Long-term operating lease liabilities		7,586		8,565
Long-term finance lease liabilities		1,919		-
Long-term deferred tax liabilities		33,854		26,283
Other long-term liabilities		6,235		5,448

Shareholders' equity		644,356		585,790
Total liabilities and shareholders' equity	$	744,204	$	673,667

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,
	2020		2019			2020		2019
Revenue
Injection Molding	$	52,065	$	51,480		$	217,992	$	217,415
CNC Machining		31,827		38,494			131,587		155,473
3D Printing		16,024		15,708			62,502		61,352
Sheet Metal		4,532		5,223			18,838		21,000
Other		760		984			3,476		3,488
Total revenue		105,208		111,889			434,395		458,728

Cost of revenue		52,580		55,311			216,568		223,438
Gross profit		52,628		56,578			217,827		235,290

Operating expenses
Marketing and sales		17,488		17,510			69,309		72,976
Research and development		11,390		8,151			36,940		32,692
General and administrative		12,759		11,355			51,742		49,766
Total operating expenses		41,637		37,016			157,991		155,434
Income from operations		10,991		19,562			59,836		79,856
Other income, net		560		(229	)		3,109		1,337
Income before income taxes		11,551		19,333			62,945		81,193
Provision for income taxes		1,972		4,147			12,078		17,538
Net income	$	9,579	$	15,186		$	50,867	$	63,655

Net income per share:
Basic	$	0.36	$	0.57		$	1.90	$	2.37
Diluted	$	0.36	$	0.56		$	1.89	$	2.35

Shares used to compute net income per share:
Basic		26,775,279		26,777,536			26,737,425		26,866,985
Diluted		26,976,582		26,945,927			26,896,357		27,049,423

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

	Year Ended
	December 31,
	2020			2019
Operating activities
Net income	$	50,867		$	63,655
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,594			30,864
Stock-based compensation expense		14,673			10,781
Deferred taxes		7,577			6,106
Amortization of held-to-maturity securities		415			5
Other		(336	)		391
Changes in operating assets and liabilities		1,179			4,250
Net cash provided by operating activities		106,969			116,052

Investing activities
Purchases of property, equipment and other capital assets		(47,010	)		(62,230	)
Purchases of other assets and investments		(3,000	)		(4,000	)
Purchases of marketable securities		(113,200	)		(46,403	)
Proceeds from maturities of marketable securities		67,737			68,330
Net cash used in investing activities		(95,473	)		(44,303	)

Financing activities
Principal repayments of finance lease obligations		(154	)		-
Proceeds from exercises of stock options		7,557			4,391
Purchases of shares withheld for tax obligations		(3,443	)		(2,487	)
Repurchases of common stock		(14,686	)		(33,521	)
Net cash used in financing activities		(10,726	)		(31,617	)
Effect of exchange rate changes on cash and cash equivalents		1,608			47
Net increase in cash and cash equivalents		2,378			40,179
Cash and cash equivalents, beginning of period		125,225			85,046
Cash and cash equivalents, end of period	$	127,603		$	125,225

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,
	2020			2019			2020			2019
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency and transaction costs
GAAP net income	$	9,579		$	15,186		$	50,867		$	63,655
Add back:
Stock-based compensation expense		4,056			1,043			14,673			10,781
Amortization expense		754			889			3,016			3,482
Unrealized (gain) loss on foreign currency		(353	)		286			(1,373	)		677
Transaction costs		427			-			427			-
Total adjustments ¹		4,884			2,218			16,743			14,940
Income tax benefits on adjustments ²		(1,013	)		(350	)		(4,043	)		(3,225	)
Non-GAAP net income	$	13,450		$	17,054		$	63,567		$	75,370


Non-GAAP net income per share:
Basic	$	0.50		$	0.64		$	2.38		$	2.81
Diluted	$	0.50		$	0.63		$	2.36		$	2.79

Shares used to compute non-GAAP net income per share:
Basic		26,775,279			26,777,536			26,737,425			26,866,985
Diluted		26,976,582			26,945,927			26,896,357			27,049,423

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

		Three Months Ended					Year Ended
		December 31,					December 31,
		2020		2019			2020			2019

Cost of revenue	$	1,032		$	933		$	3,820		$	3,335

Marketing and sales		888			708			3,121			2,631
Research and development		675			365			2,441			1,851
General and administrative		2,642			(74	)		8,734			6,446
Total operating expenses		4,205			999			14,296			10,928

Other income, net		(353	)		286			(1,373	)		677
Total adjustments	$	4,884		$	2,218		$	16,743		$	14,940

²For the three-month and year-ended periods ended December 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						Year Ended
	December 31,						December 31,
	2020			2019			2020			2019
Revenue	$	105,208		$	111,889		$	434,395		$	458,728
Income from operations		10,991			19,562			59,836			79,856
GAAP operating margin		10.4	%		17.5	%		13.8	%		17.4	%
Add back:
Stock-based compensation expense		4,056			1,043			14,673			10,781
Amortization expense		754			889			3,016			3,482
Transaction costs		427			-			427			-
Total adjustments		5,237			1,932			18,116			14,263
Non-GAAP income from operations	$	16,228		$	21,494		$	77,952		$	94,119
Non-GAAP operating margin		15.4	%		19.2	%		17.9	%		20.5	%

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,
	2020			2019			2020			2019
GAAP net income	$	9,579		$	15,186		$	50,867		$	63,655
Amortization expense		754			889			3,016			3,482
Depreciation expense		7,949			7,317			29,578			27,383
Interest income, net		(149	)		(560	)		(1,332	)		(2,095	)
Tax expense		1,972			4,147			12,078			17,538
EBITDA		20,105			26,979			94,207			109,963
Add back:
Stock-based compensation expense		4,056			1,043			14,673			10,781
Unrealized (gain) loss on foreign currency		(353	)		286			(1,373	)		677
Transaction costs		427			-			427			-
Total adjustments		4,130			1,329			13,727			11,458
Adjusted EBITDA	$	24,235		$	28,308		$	107,934		$	121,421

Proto Labs, Inc.

Comparison of GAAP to Non-GAAP Revenue Growth

(In thousands)

(Unaudited)

	Three Months Ended December 31, 2020							Three Months Ended December 31, 2019		%			% Change Constant
	GAAP		Adjustments¹			Non-GAAP		GAAP		Change²			Currencies³
Revenues
United States	$	83,201	$	-		$	83,201	$	88,329		(5.8%	)		(5.8%	)
Europe		18,383		(955	)		17,428		19,889		(7.6%	)		(12.4%	)
Japan		3,624		(145	)		3,479		3,671		(1.3%	)		(5.2%	)
Total Revenue	$	105,208	$	(1,100	)	$	104,108	$	111,889		(6.0%	)		(7.0%	)

	Year Ended December 31, 2020							Year Ended December 31, 2019		%			% Change Constant
	GAAP		Adjustments¹			Non-GAAP		GAAP		Change²			Currencies³
Revenues
United States	$	345,708	$	-		$	345,708	$	360,205		(4.0%	)		(4.0%	)
Europe		74,796		(718	)		74,078		82,805		(9.7%	)		(10.5%	)
Japan		13,891		(298	)		13,593		15,718		(11.6%	)		(13.5%	)
Total Revenue	$	434,395	$	(1,016	)	$	433,379	$	458,728		(5.3%	)		(5.5%	)

¹ Revenue growth for the three-month and year-ended periods ended December 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.

²This column presents the percentage change from GAAP revenue growth for the three-month and year-ended periods ended December 31, 2019 to GAAP revenue growth for the three-month and year-ended periods ended December 31, 2020.

³ This column presents the percentage change from GAAP revenue for the three-month and year-ended periods ended December 31, 2019 to non-GAAP revenue for the three-month and year-ended periods ended December 31, 2020 (as recalculated using the foreign currency exchange rates in effect during the three-month and year-ended periods ended December 31, 2019) in order to provide a constant currency comparison.

Proto Labs, Inc.

Product Developer Information

(Unaudited)

Three Months Ended

Year Ended

December 31,

2020

2019

2020

2019

Unique product developers and engineers served

18,157

20,595

40,267

47,774

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)