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

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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 unforeseen 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.

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

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

1 Stock-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

2 For 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.

2 This 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,

December 31,

2020

2019

2020

2019

Unique product developers and engineers served

18,157

20,595

40,267

47,774

View source version on businesswire.com: https://www.businesswire.com/news/home/20210212005075/en/

Contacts

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