Business Wire | May 6, 2021 06:00AM EDT

Protolabs Reports Financial Results for the First Quarter of 2021

May 06, 2021

MAPLE PLAIN, Minn.--(BUSINESS WIRE)--May 06, 2021--Proto Labs, Inc. (NYSE: PRLB), the world's largest ecommerce manufacturer and supplier of on-demand prototype and production parts, today announced financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Highlights include:

* Revenue for the first quarter of 2021 was $116.1 million, representing a 10.4 percent increase compared to revenue of $105.2 million in the fourth quarter of 2020. 3D Hubs generated $5.8 million of revenue in the period between acquisition close (January 22, 2021) and the end of the first quarter. * Net income for the first quarter of 2021 was $3.7 million, or $0.13 per diluted share. * Non-GAAP net income was $11.0 million, or $0.40 per diluted share. See "Non-GAAP Financial Measures" below.

"During the first quarter of 2021, we achieved two very important milestones, the successful launch of Protolabs 2.0 and the transformative acquisition of 3D Hubs, which will enable us to accelerate growth," said Rob Bodor, President and Chief Executive Officer. "I am very pleased that we also delivered strong first quarter financial performance within our expectations. As the COVID-19 vaccine rollout progresses and global demand continues to recover, our best-in-class digital manufacturing model positions us to expand our leadership position."

Additional First Quarter 2021 Highlights include:

* Protolabs served 22,605 unique product developers during the year, representing a 24.5 percent increase over the fourth quarter of 2020. * Gross margin in the first quarter of 2021 was 47.6 percent of revenue; Non-GAAP gross margin was 48.5 percent of revenue. See "Non-GAAP Financial Measures" below. * EBITDA margin was 12.0 percent of revenue in the first quarter of 2021; adjusted EBITDA margin was 19.5 percent of revenue in the first quarter of 2021. See "Non-GAAP Financial Measures" below. * Cash and investments balance was $93.1 million as of March 31, 2021.

"We managed our financial performance very well in the first quarter through the Protolabs 2.0 systems launch and acquisition of 3D Hubs," added John Way, Chief Financial Officer. "Our balance sheet remains very healthy with $93 million in cash and investments and no debt, providing flexibility and allowing us to continue to invest to serve our customers and drive future growth."

Non-GAAP Financial Measures

The company has included non-GAAP revenue growth that excludes the impact of changes in foreign currency exchange rates and revenue earned from our acquisition of 3D Hubs (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 first quarter 2021 financial results and second quarter 2021 outlook today, May 6, 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 and accompanying presentation will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/p2q42oaz. 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 digital manufacturing source for rapid prototyping and on-demand production. 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) March 31, December 31, 2021 2020

(Unaudited) Assets Current assets Cash and cash equivalents $ 43,774 $ 127,603

Short-term marketable securities 19,592 34,088

Accounts receivable, net 74,666 57,877

Inventory 9,918 10,862

Prepaid expenses and other current assets 8,803 11,032

Income taxes receivable 1,763 540

Total current assets 158,516 242,002

Property and equipment, net 279,901 282,666

Goodwill 399,426 128,752

Other intangible assets, net 46,883 14,350

Long-term marketable securities 29,760 59,357

Operating lease assets 12,819 9,855

Financing lease assets 2,271 2,396

Other long-term assets 4,872 4,826

Total assets $ 934,448 $ 744,204

Liabilities and shareholders' equity Current liabilities Accounts payable $ 21,846 $ 18,248

Accrued compensation 11,745 11,989

Accrued liabilities and other 16,705 16,193

Current contingent consideration 5,221 -

Current operating lease liabilities 2,732 3,272

Current finance lease liabilities 553 552

Income taxes payable 1,047 -

Total current liabilities 59,849 50,254

Long-term contingent consideration 4,789 -

Long-term operating lease liabilities 11,534 7,586

Long-term finance lease liabilities 1,779 1,919

Long-term deferred tax liabilities 36,899 33,854

Other long-term liabilities 6,167 6,235

Shareholders' equity 813,431 644,356

Total liabilities and shareholders' equity $ 934,448 $ 744,204

Proto Labs, Inc.Condensed Consolidated Statements of Operations(In thousands, except share and per share amounts)(Unaudited)Three Months EndedMarch 31,2021

2020

RevenueInjection Molding$

56,359

$

54,776

CNC Machining36,703

37,885

3D Printing17,235

15,948

Sheet Metal5,219

5,649

Other610

850

Total revenue116,126

115,108

Cost of revenue60,796

57,008

Gross profit55,330

58,100

Operating expensesMarketing and sales19,480

18,180

Research and development12,181

8,987

General and administrative19,408

14,108

Total operating expenses51,069

41,275

Income from operations4,261

16,825

Other (loss) income, net(313

)

1,054

Income before income taxes3,948

17,879

Provision for income taxes236

3,895

Net income$

3,712

$

13,984

Net income per share:Basic$

0.14

$

0.52

Diluted$

0.13

$

0.52

Shares used to compute net income per share:Basic27,464,136

26,776,806

Diluted27,698,195

26,929,640

Proto Labs, Inc.Condensed Consolidated Statements of Operations(In thousands, except share and per share amounts)(Unaudited) Three Months Ended March 31, 2021 2020

Revenue Injection Molding $ 56,359 $ 54,776

CNC Machining 36,703 37,885

3D Printing 17,235 15,948

Sheet Metal 5,219 5,649

Other 610 850

Total revenue 116,126 115,108

Cost of revenue 60,796 57,008

Gross profit 55,330 58,100

Operating expenses Marketing and sales 19,480 18,180

Research and development 12,181 8,987

General and administrative 19,408 14,108

Total operating expenses 51,069 41,275

Income from operations 4,261 16,825

Other (loss) income, net (313 ) 1,054

Income before income taxes 3,948 17,879

Provision for income taxes 236 3,895

Net income $ 3,712 $ 13,984

Net income per share: Basic $ 0.14 $ 0.52

Diluted $ 0.13 $ 0.52

Shares used to compute net income per share: Basic 27,464,136 26,776,806

Diluted 27,698,195 26,929,640

Proto Labs, Inc.Condensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)Three Months EndedMarch 31,2021

2020

Operating activitiesNet income$

3,712

$

13,984

Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization10,059

7,958

Stock-based compensation expense5,620

3,033

Deferred taxes(69

)

3,392

Amortization of marketable securities137

55

Realized gain on available-for-sale securities(166

)

-

Other155

(644

)

Changes in operating assets and liabilities(13,023

)

(5,368

)

Net cash provided by operating activities6,425

22,410

Investing activitiesPurchases of property, equipment and other capital assets(6,546

)

(13,421

)

Cash used for acquisitions, net of cash acquired(127,709

)

-

Purchases of other assets and investments-

(3,000

)

Purchases of marketable securities(8,227

)

(37,629

)

Proceeds from sales of marketable securities45,194

-

Proceeds from maturities of marketable securities7,155

10,700

Net cash used in investing activities(90,133

)

(43,350

)

Financing activitiesProceeds from exercises of stock options and other1,704

135

Purchases of shares withheld for tax obligations(1,994

)

(1,048

)

Repurchases of common stock-

(11,185

)

Principal repayments of finance lease obligations(137

)

-

Net cash used in financing activities(427

)

(12,098

)

Effect of exchange rate changes on cash and cash equivalents306

(282

)

Net decrease in cash and cash equivalents(83,829

)

(33,320

)

Cash and cash equivalents, beginning of period127,603

125,225

Cash and cash equivalents, end of period$

43,774

$

91,905

Proto Labs, Inc.Condensed Consolidated Statements of Cash Flows(In thousands)(Unaudited) Three Months Ended March 31, 2021 2020

Operating activities Net income $ 3,712 $ 13,984

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,059 7,958

Stock-based compensation 5,620 3,033 expense Deferred taxes (69 ) 3,392

Amortization of marketable 137 55 securities Realized gain on (166 ) - available-for-sale securities Other 155 (644 )

Changes in operating assets (13,023 ) (5,368 ) and liabilities Net cash provided by operating activities 6,425 22,410

Investing activities Purchases of property, equipment and other (6,546 ) (13,421 ) capital assets Cash used for acquisitions, net of cash (127,709 ) - acquired Purchases of other assets and investments - (3,000 )

Purchases of marketable securities (8,227 ) (37,629 )

Proceeds from sales of marketable securities 45,194 -

Proceeds from maturities of marketable 7,155 10,700 securities Net cash used in investing activities (90,133 ) (43,350 )

Financing activities Proceeds from exercises of stock options and 1,704 135 other Purchases of shares withheld for tax (1,994 ) (1,048 ) obligations Repurchases of common stock - (11,185 )

Principal repayments of finance lease (137 ) - obligations Net cash used in financing activities (427 ) (12,098 )

Effect of exchange rate changes on cash and cash 306 (282 ) equivalents Net decrease in cash and cash equivalents (83,829 ) (33,320 )

Cash and cash equivalents, beginning of period 127,603 125,225

Cash and cash equivalents, end of period $ 43,774 $ 91,905

Proto Labs, Inc.Reconciliation of GAAP to Non-GAAP Net Income per Share(In thousands, except share and per share amounts)(Unaudited)Three Months EndedMarch 31,2021

2020

Non-GAAP net income, adjusted for stock-based compensation expense,amortization expense, unrealized (gain) loss on foreign currency andtransaction costsGAAP net income$

3,712

$

13,984

Add back:Stock-based compensation expense5,620

3,033

Amortization expense1,543

754

Unrealized (gain) loss on foreign currency622

(797

)

Transaction costs2,515

-

Total adjustments 110,300

2,990

Income tax benefits on adjustments 2(3,001

)

(675

)

Non-GAAP net income$

11,011

$

16,299

Non-GAAP net income per share:Basic$

0.40

$

0.61

Diluted$

0.40

$

0.61

Shares used to compute non-GAAP net income per share:Basic27,464,136

26,776,806

Diluted27,698,195

26,929,640

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 EndedMarch 31,2021

2020

Cost of revenue$

977

$

863

Marketing and sales853

618

Research and development624

521

General and administrative7,224

1,785

Total operating expenses8,701

2,924

Other income, net622

(797

)

Total adjustments$

10,300

$

2,990

2 For the three-month periods ended March 31, 2021 and 2020, 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 Net Income per Share(In thousands, except share and per share amounts)(Unaudited) Three Months Ended March 31, 2021 2020

Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency and transaction costs GAAP net income $ 3,712 $ 13,984

Add back: Stock-based compensation expense 5,620 3,033

Amortization expense 1,543 754

Unrealized (gain) loss on foreign 622 (797 ) currency Transaction costs 2,515 -

Total adjustments ^1 10,300 2,990

Income tax benefits on adjustments ^2 (3,001 ) (675 )

Non-GAAP net income $ 11,011 $ 16,299

Non-GAAP net income per share: Basic $ 0.40 $ 0.61

Diluted $ 0.40 $ 0.61

Shares used to compute non-GAAP net income per share: Basic 27,464,136 26,776,806

Diluted 27,698,195 26,929,640

^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 March 31, 2021 2020

Cost of revenue $ 977 $ 863

Marketing and sales 853 618

Research and development 624 521

General and administrative 7,224 1,785

Total operating expenses 8,701 2,924

Other income, net 622 (797 )

Total adjustments $ 10,300 $ 2,990

^2 For the three-month periods ended March 31, 2021 and 2020, 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 EndedMarch 31,2021

2020

Revenue$

116,126

$

115,108

Income from operations4,261

16,825

GAAP operating margin3.7

%

14.6

%

Add back:Stock-based compensation expense5,620

3,033

Amortization expense1,543

754

Transaction costs2,515

-

Total adjustments9,678

3,787

Non-GAAP income from operations$

13,939

$

20,612

Non-GAAP operating margin12.0

%

17.9

%

Proto Labs, Inc.Reconciliation of GAAP to Non-GAAP Operating Margin(In thousands)(Unaudited) Three Months Ended March 31, 2021 2020

Revenue $ 116,126 $ 115,108

Income from operations 4,261 16,825

GAAP operating margin 3.7 % 14.6 %

Add back: Stock-based compensation expense 5,620 3,033

Amortization expense 1,543 754

Transaction costs 2,515 -

Total adjustments 9,678 3,787

Non-GAAP income from operations $ 13,939 $ 20,612

Non-GAAP operating margin 12.0 % 17.9 %

Proto Labs, Inc.Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA(In thousands)(Unaudited)Three Months EndedMarch 31,2021

2020

GAAP net income$

3,712

$

13,984

Amortization expense1,543

754

Depreciation expense8,516

7,204

Interest income, net(87

)

(560

)

Tax expense236

3,895

EBITDA13,920

25,277

EBITDA Margin12.0

%

22.0

%

Add back:Stock-based compensation expense5,620

3,033

Unrealized (gain) loss on foreign currency622

(797

)

Transaction costs2,515

-

Total adjustments8,757

2,236

Adjusted EBITDA$

22,677

$

27,513

Adjusted EBITDA Margin19.5

%

23.9

%

Proto Labs, Inc.Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA(In thousands)(Unaudited) Three Months Ended March 31, 2021 2020

GAAP net income $ 3,712 $ 13,984

Amortization expense 1,543 754

Depreciation expense 8,516 7,204

Interest income, net (87 ) (560 )

Tax expense 236 3,895

EBITDA 13,920 25,277

EBITDA Margin 12.0 % 22.0 %

Add back: Stock-based compensation expense 5,620 3,033

Unrealized (gain) loss on foreign currency 622 (797 )

Transaction costs 2,515 -

Total adjustments 8,757 2,236

Adjusted EBITDA $ 22,677 $ 27,513

Adjusted EBITDA Margin 19.5 % 23.9 %

Proto Labs, Inc.Comparison of GAAP to Non-GAAP Revenue Growth(In thousands)(Unaudited)Three Months EndedMarch 31, 2021Three Months EndedMarch 31, 2020GAAPForeignCurrency13D HubsAcquisition2Non-GAAPGAAP% Change3% ChangeOrganic4RevenuesUnited States$

91,053

$

-

$

(3,157

)

$

87,896

$

90,076

1.1

%

(2.4

)%

Europe21,449

(1,560

)

(2,606

)

17,283

20,787

3.2

(16.9

)

Japan3,624

(85

)

-

3,539

4,245

(14.6

)

(16.6

)

Total Revenue$

116,126

$

(1,645

)

$

(5,763

)

$

108,718

$

115,108

0.9

%

(5.6

)%

1 Revenue for the three-month period ended March 31, 2021 has been recalculated using 2020 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 Revenue for the three-month period ended March 31, 2021 has been recalculated to exclude revenue earned from our acquisition of 3D Hubs to provide information useful in evaluating the underlying business trends excluding the impact of acquisitions.3 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2020 to GAAP revenue for the three-month period ended March 31, 2021.4 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2020 to non-GAAP revenue for the three-month period ended March 31, 2021 (as recalculated using the foreign currency exchange rates in effect during the three-month period ended March 31, 2020, excluding the impact of 3D Hubs acquisition) in order to provide a constant-currency comparison.Proto Labs, Inc.Comparison of GAAP to Non-GAAP Revenue Growth(In thousands)(Unaudited) Three Three Months Ended Months March 31, 2021 Ended March 31, 2020 Foreign 3D Hubs % % Change GAAP Currency^1 Acquisition^ Non-GAAP GAAP Change^ Organic^ 2 3 4 Revenues United $ 91,053 $ - $ (3,157 ) $ 87,896 $ 90,076 1.1 % (2.4 )% States Europe 21,449 (1,560 ) (2,606 ) 17,283 20,787 3.2 (16.9 )

Japan 3,624 (85 ) - 3,539 4,245 (14.6 ) (16.6 )

Total $ 116,126 $ (1,645 ) $ (5,763 ) $ 108,718 $ 115,108 0.9 % (5.6 )% Revenue ^1 Revenue for the three-month period ended March 31, 2021 has beenrecalculated using 2020 foreign currency exchange rates in effect duringcomparable periods to provide information useful in evaluating the underlyingbusiness trends excluding the impact of changes in foreign currency exchangerates.^2 Revenue for the three-month period ended March 31, 2021 has beenrecalculated to exclude revenue earned from our acquisition of 3D Hubs toprovide information useful in evaluating the underlying business trendsexcluding the impact of acquisitions.^3 This column presents the percentage change from GAAP revenue for thethree-month period ended March 31, 2020 to GAAP revenue for the three-monthperiod ended March 31, 2021.^4 This column presents the percentage change from GAAP revenue for thethree-month period ended March 31, 2020 to non-GAAP revenue for the three-monthperiod ended March 31, 2021 (as recalculated using the foreign currencyexchange rates in effect during the three-month period ended March 31, 2020,excluding the impact of 3D Hubs acquisition) in order to provide aconstant-currency comparison. Proto Labs, Inc.Product Developer Information(Unaudited)Three Months EndedMarch 31,2021

2020

Unique product developers and engineers served22,605

20,876

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CONTACT: Investor Relations Contact Protolabs Dan Schumacher, 763-479-7240 Vice President of Investor Relations daniel.schumacher@protolabs.com

CONTACT: Media Contact Protolabs Brent Renneke, 763-479-7704 PR & Media Strategist brent.renneke@protolabs.com