Protolabs Reports Third Quarter 2019 Financial Results

Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights include:

  • Revenue for the third quarter of 2019 was $117.5 million, representing a 1.8 percent increase over revenue of $115.4 million for the third quarter of 2018.
  • The number of unique product developers and engineers served totaled 21,471 in the third quarter of 2019, an increase of 3.3 percent over the third quarter of 2018.
  • Net income for the third quarter of 2019 was $16.8 million, or $0.62 per diluted share.
  • Non-GAAP net income was $20.4 million, or $0.76 per diluted share. See “Non-GAAP Financial Measures” below.

“Our business grew year-over-year in the third quarter in an industrial environment that has continued to soften throughout 2019,” said Vicki Holt, President and Chief Executive Officer. “Despite a weaker macro climate, our customer retention rate remains high as we continue to delight our customers by expanding and improving our industry-leading digital manufacturing offer.”

Additional Third Quarter 2019 highlights include:

  • Gross margin was 50.8 percent of revenue for the third quarter of 2019, compared with 52.0 percent for the second quarter of 2019.
  • GAAP operating margin was 18.1 percent of revenue for the third quarter of 2019, compared to 16.9 percent for the second quarter of 2019.
  • Non-GAAP operating margin was 21.6 percent of revenue for the third quarter of 2019, compared to 20.6 percent for the second quarter of 2019. See “Non-GAAP Financial Measures” below.
  • EBITDA was $28.7 million, or 24.4 percent of revenue, for the third quarter of 2019.
  • Adjusted EBITDA was $32.4 million, or 27.5 percent of revenue, for the third quarter of 2019. See “Non-GAAP Financial Measures” below.
  • Cash flow from operations was $28.9 million in the third quarter of 2019.
  • Cash and investments balance was $155.0 million at September 30, 2019.
  • The Company repurchased $12.1 million, or 128,077 shares, of common stock during the quarter.

“Our customers are taking a more cautious approach in 2019 in general, including R&D projects, and that is reflected in our financial results year-to-date,” said John Way, Chief Financial Officer. “Our business continues to generate strong cash flows in order to invest for future growth, as well as return capital to shareholders in the form of stock repurchases.”

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 third quarter 2019 financial results and fourth quarter outlook today, October 24, 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 third quarter 2019 financial results and fourth 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/mofpzm2m. 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)
  
  
 

September 30,

December 31,

 

2019

2018

 (Unaudited)
Assets 
Current assets 
Cash and cash equivalents 

$

121,568

$

85,046

Short-term marketable securities 

23,642

46,750

Accounts receivable, net 

64,069

59,155

Inventory 

9,448

10,087

Income taxes receivable 

2,852

5,757

Prepaid expenses and other current assets 

8,038

8,567

Total current assets 

229,617

215,362

  
Property and equipment, net 

252,579

228,001

Goodwill 

128,752

128,752

Other intangible assets, net 

18,258

19,850

Long-term marketable securities 

9,783

23,579

Operating lease assets 

12,008

-

Other long-term assets 

3,902

3,441

Total assets 

$

654,899

$

618,985

  
Liabilities and shareholders' equity 
Current liabilities 
Accounts payable 

$

18,668

$

17,411

Accrued compensation 

12,926

18,130

Accrued liabilities and other 

13,133

16,702

Current operating lease liabilities 

3,364

-

Income taxes payable 

6,717

491

Total current liabilities 

54,808

52,734

  
Long-term operating lease liabilities 

9,006

-

Long-term deferred tax liabilities 

21,750

20,162

Other long-term liabilities 

5,238

4,592

  
Shareholders' equity 

564,097

541,497

Total liabilities and shareholders' equity 

$

654,899

$

618,985

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

2019

 

2018

2019

 

2018

Revenue   
Injection Molding 

$

55,167

 

$

53,681

$

165,935

 

$

156,610

CNC Machining 

40,219

 

40,845

116,979

 

115,364

3D Printing 

15,898

 

13,845

45,644

 

39,418

Sheet Metal 

5,280

 

6,452

15,777

 

19,002

Other 

891

 

607

2,504

 

2,433

Total revenue 

117,455

 

115,430

346,839

 

332,827

    
Cost of revenue 

57,839

 

53,027

168,127

 

153,303

Gross profit 

59,616

 

62,403

178,712

 

179,524

    
Operating expenses   
Marketing and sales 

17,604

 

16,818

55,466

 

50,947

Research and development 

8,359

 

7,458

24,541

 

21,155

General and administrative 

12,380

 

13,096

38,411

 

38,679

Total operating expenses 

38,343

 

37,372

118,418

 

110,781

Income from operations 

21,273

 

25,031

60,294

 

68,743

Other income, net 

228

 

390

1,566

 

1,376

Income before income taxes 

21,501

 

25,421

61,860

 

70,119

Provision for income taxes 

4,709

 

4,484

13,391

 

12,817

Net income 

$

16,792

 

$

20,937

$

48,469

 

$

57,302

    
Net income per share:   
Basic 

$

0.63

 

$

0.77

$

1.80

 

$

2.13

Diluted 

$

0.62

 

$

0.77

$

1.79

 

$

2.10

    
Shares used to compute net income per share:   
Basic 

26,846,030

 

27,038,585

26,894,420

 

26,963,205

Diluted 

27,005,341

 

27,337,886

27,072,873

 

27,268,311

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

2019

2018

Operating activities 
Net income 

$

48,469

$

57,302

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

22,658

19,520

Stock-based compensation expense 

9,738

7,986

Deferred taxes 

1,599

1,770

Gain on sale of businesses 

-

(671

)

Amortization of held-to-maturity securities 

(5

)

336

Other 

(133

)

160

Changes in operating assets and liabilities 

1,453

(1,441

)

Net cash provided by operating activities 

83,779

84,962

  
Investing activities 
Purchases of property, equipment and other capital assets 

(46,151

)

(61,898

)

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 

(17,443

)

(41,384

)

Proceeds from maturities of marketable securities 

54,352

44,721

Net cash used in investing activities 

(13,242

)

(58,493

)

  
Financing activities 
Payments on debt 

-

(5,000

)

Proceeds from exercises of stock options and other 

2,486

7,269

Purchases of shares withheld for tax obligations 

(2,420

)

(2,021

)

Repurchases of common stock 

(33,521

)

-

Net cash (used in) provided by financing activities 

(33,455

)

248

Effect of exchange rate changes on cash and cash equivalents 

(560

)

(831

)

Net increase in cash and cash equivalents 

36,522

25,886

Cash and cash equivalents, beginning of period 

85,046

36,707

Cash and cash equivalents, end of period 

$

121,568

$

62,593

Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Net Income per Share
(In thousands, except share and per share amounts)
(Unaudited)
    
 Three Months EndedNine Months Ended
 September 30,September 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 

$

16,792

 

$

20,937

$

48,469

 

$

57,302

Add back:   
Stock-based compensation expense 

3,212

 

2,952

9,738

 

7,986

Amortization expense 

859

 

808

2,593

 

2,371

Unrealized (gain) loss on foreign currency 

449

 

(101

)

391

 

147

Disposal of businesses 

-

 

-

-

 

(671

)

Total adjustments 1 

4,520

 

3,659

12,722

 

9,833

Income tax benefits on adjustments 2 

(882

)

 

(1,213

)

(2,875

)

 

(4,574

)

Non-GAAP net income 

$

20,430

 

$

23,383

$

58,316

 

$

62,561

    
    
Non-GAAP net income per share:   
Basic 

$

0.76

 

$

0.86

$

2.17

 

$

2.32

Diluted 

$

0.76

 

$

0.86

$

2.15

 

$

2.29

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

26,846,030

 

27,038,585

26,894,420

 

26,963,205

Diluted 

27,005,341

 

27,337,886

27,072,873

 

27,268,311

    
    
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 EndedNine Months Ended
 September 30,September 30,
 

2019

 

2018

2019

 

2018

    
Cost of revenue 

$

872

 

$

446

$

2,402

 

$

1,096

    
Marketing and sales 

760

 

560

1,923

 

1,380

Research and development 

560

 

419

1,486

 

1,109

General and administrative 

1,879

 

2,335

6,520

 

6,772

Total operating expenses 

3,199

 

3,314

9,929

 

9,261

    
Other income, net 

449

 

(101

)

391

 

(524

)

Total adjustments 

$

4,520

 

$

3,659

$

12,722

 

$

9,833

    
2 For the three- and nine-month periods ended September 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 EndedNine Months Ended
 September 30,September 30,
 

2019

 

2018

2019

 

2018

Revenue 

$

117,455

 

$

115,430

$

346,839

 

$

332,827

Income from operations 

21,273

 

25,031

60,294

 

68,743

GAAP operating margin 

18.1

%

 

21.7

%

17.4

%

 

20.7

%

Add back:   
Stock-based compensation expense 

3,212

 

2,952

9,738

 

7,986

Amortization expense 

859

 

808

2,593

 

2,371

Total adjustments 

4,071

 

3,760

12,331

 

10,357

Non-GAAP income from operations 

$

25,344

 

$

28,791

$

72,625

 

$

79,100

Non-GAAP operating margin 

21.6

%

 

24.9

%

20.9

%

 

23.8

%

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

2019

 

2018

2019

 

2018

GAAP net income 

$

16,792

 

$

20,937

$

48,469

 

$

57,302

Amortization expense 

859

 

808

2,593

 

2,371

Depreciation expense 

6,820

 

5,963

20,066

 

17,149

Interest income, net 

(489

)

 

(475

)

(1,535

)

 

(1,063

)

Tax expense 

4,709

 

4,484

13,391

 

12,817

EBITDA 

28,691

 

31,717

82,984

 

88,576

Add back:   
Stock-based compensation expense 

3,212

 

2,952

9,738

 

7,986

Unrealized (gain) loss on foreign currency 

449

 

(101

)

391

 

147

Disposal of businesses 

-

 

-

-

 

(671

)

Total adjustments 

3,661

 

2,851

10,129

 

7,462

Adjusted EBITDA 

$

32,352

 

$

34,568

$

93,113

 

$

96,038

Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
    
Three Months Ended
September 30, 2019
Three Months
Ended
September 30,
2018
 % % Change
Constant
GAAP Adjustments1 Non-GAAPGAAP  Change2 Currencies3
Revenues    
United States

$

92,916

 

$

-

 

$

92,916

$

90,732

 

2.4

%

 

2.4

%

Europe

20,721

 

1,001

 

21,722

21,273

 

(2.6

%)

 

2.1

%

Japan

3,818

 

(140

)

 

3,678

3,425

 

11.5

%

 

7.4

%

Total Revenue

$

117,455

 

$

861

 

$

118,316

$

115,430

 

1.8

%

 

2.5

%

    
    
Nine Months Ended
September 30, 2019
Nine Months
Ended
September 30,
2018
 % % Change
Constant
GAAP Adjustments1 Non-GAAPGAAP  Change2 Currencies3
Revenues    
United States

$

271,877

 

$

-

 

$

271,877

$

261,253

 

4.1

%

 

4.1

%

Europe

62,915

 

3,968

 

66,883

61,431

 

2.4

%

 

8.9

%

Japan

12,047

 

(19

)

 

12,028

10,143

 

18.8

%

 

18.6

%

Total Revenue

$

346,839

 

$

3,949

 

$

350,788

$

332,827

 

4.2

%

 

5.4

%

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

2019

2018

2019

2018

Unique product developers and engineers served 

21,471

20,792

40,791

38,823

Contacts:

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

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.