Protolabs Reports Financial Results for the First Quarter of 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 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 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 expense

5,620

3,033

Deferred taxes

(69

)

3,392

Amortization of marketable securities

137

55

Realized gain on available-for-sale securities

(166

)

-

Other

155

(644

)

Changes in operating assets and liabilities

(13,023

)

(5,368

)

Net cash provided by operating activities

6,425

22,410

 
Investing activities
Purchases 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 securities

45,194

-

Proceeds from maturities of marketable securities

7,155

10,700

Net cash used in investing activities

(90,133

)

(43,350

)

 
Financing activities
Proceeds from exercises of stock options and other

1,704

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 equivalents

306

(282

)

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 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 currency

622

(797

)

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 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 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 Ended
March 31, 2021
Three Months Ended
March 31, 2020
GAAPForeign
Currency1
3D Hubs
Acquisition2
Non-GAAPGAAP % Change3% Change
Organic4
Revenues
United States

$

91,053

$

-

$

(3,157

)

$

87,896

$

90,076

1.1

%

(2.4

)%

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 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.
Product Developer Information
(Unaudited)
 
Three Months Ended
March 31,

2021

2020

Unique product developers and engineers served

22,605

20,876

 

Contacts:

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

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