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Protolabs Reports Financial Results for the First Quarter of 2022

PRLB

Revenue of $124.2 million in the First Quarter of 2022;
GAAP Earnings Per Share of $0.19, Non-GAAP Earnings Per Share of $0.38

Proto Labs, Inc. (“Protolabs” or the “Company”) (NYSE: PRLB), the world’s leading provider of digital manufacturing services, today announced financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Highlights include:

  • Revenue for the first quarter of 2022 was $124.2 million, representing a 6.9 percent increase compared to revenue of $116.1 million in the first quarter of 2021.
  • Hubs generated $10.3 million of revenue in the first quarter, representing year-over-year growth of 78.6 percent, or approximately 38.2 percent organically. Hubs was acquired on January 22, 2021.
  • Net income was $5.1 million, or $0.19 per diluted share.
  • Non-GAAP net income was $10.4 million, or $0.38 per diluted share. See “Non-GAAP Financial Measures” below.

“Protolabs finished the first quarter strong after a slow start in January, and we also made progress on our 2022 strategic priorities,” said Rob Bodor, President and Chief Executive Officer. “As an ever-increasing group of companies adopt Manufacturing 4.0, Protolabs will continue to lead the way through focused execution of our strategy.”

Additional First Quarter 2022 Highlights include:

  • Protolabs served 23,492 unique product developers during the first quarter of 2022.
  • Gross margin was 44.9 percent of revenue; Non-GAAP gross margin was 45.7 percent of revenue. See “Non-GAAP Financial Measures” below.
  • EBITDA was $17.8 million, or 14.3 percent of revenue; Adjusted EBITDA was $22.3 million, or 17.9 percent of revenue. See “Non-GAAP Financial Measures” below.
  • Cash and investments balance was $105.3 million as of March 31, 2022.

“We are pleased to report first quarter margins ahead of our expectations,” said Dan Schumacher, Interim Chief Financial Officer. “We remain confident in our long-term strategy and are focused on execution. Protolabs will continue to reinforce our sustainable, long-term competitive advantage through profitable 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 its acquisition of 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 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 also included earnings before interest, taxes, depreciation and amortization margin (“EBITDA margin”) and EBITDA margin, adjusted for stock-based compensation expense, unrealized loss on foreign currency, and transaction costs (collectively, “Adjusted EBITDA margin”), 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 gross margin, adjusted for stock-based compensation expense and amortization expense, (collectively, “non-GAAP gross 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 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 net income per share, non-GAAP operating margin, non-GAAP income from operations, non-GAAP revenue growth, non-GAAP gross profit, non-GAAP gross margin, EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin, 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 management and the board of directors.

Conference Call

The Company has scheduled a conference call to discuss its first quarter 2022 financial results and second quarter 2022 outlook today, May 6, 2022, at 8:30 a.m. EDT. 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. EDT 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/n7feufxj. 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 provider of digital manufacturing services. The e-commerce-based company offers injection molding, CNC machining, 3D printing, and sheet metal fabrication to product developers, engineers, and supply chain teams across the globe. Protolabs serves customers using in-house production capabilities that bring unprecedented speed in tandem with Hubs, a Protolabs Company, which serves customers through its network of premium manufacturing partners. Together, they help companies bring new ideas to market with the fastest and most comprehensive digital manufacturing service in the world. 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 Securities and Exchange Commission. 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. To the extent permitted under applicable law, 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,

2022

2021

(Unaudited)
Assets
Current assets
Cash and cash equivalents

$

57,239

$

65,929

Short-term marketable securities

19,914

11,580

Accounts receivable, net

85,960

80,051

Inventory

14,227

13,161

Income taxes receivable

687

1,321

Prepaid expenses and other current assets

10,185

11,450

Total current assets

188,212

183,492

Property and equipment, net

270,946

280,346

Goodwill

398,319

400,610

Other intangible assets, net

36,234

37,998

Long-term marketable securities

28,196

14,340

Operating lease assets

4,800

5,578

Finance lease assets

1,773

1,898

Long-term assets held for sale

1,985

-

Other long-term assets

4,286

4,320

Total assets

$

934,751

$

928,582

Liabilities and shareholders' equity
Current liabilities
Accounts payable

$

17,511

$

25,364

Accrued compensation

13,094

13,704

Accrued liabilities and other

23,030

11,980

Current operating lease liabilities

2,253

3,298

Current finance lease liabilities

493

550

Income taxes payable

3,870

-

Total current liabilities

60,251

54,896

Long-term operating lease liabilities

2,514

2,245

Long-term finance lease liabilities

1,269

1,351

Long-term deferred tax liabilities

32,661

35,892

Other long-term liabilities

6,021

5,705

Shareholders' equity

832,035

828,493

Total liabilities and shareholders' equity

$

934,751

$

928,582

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

2022

2021

Revenue
Injection Molding

$

53,398

$

56,359

CNC Machining

46,098

36,703

3D Printing

19,672

17,235

Sheet Metal

4,687

5,219

Other

313

610

Total revenue

124,168

116,126

Cost of revenue

68,364

60,796

Gross profit

55,804

55,330

Operating expenses
Marketing and sales

20,586

19,480

Research and development

10,557

12,181

General and administrative

16,771

19,408

Total operating expenses

47,914

51,069

Income from operations

7,890

4,261

Other loss, net

(300

)

(313

)

Income before income taxes

7,590

3,948

Provision for income taxes

2,495

236

Net income

$

5,095

$

3,712

Net income per share:
Basic

$

0.19

$

0.14

Diluted

$

0.19

$

0.13

Shares used to compute net income per share:
Basic

27,502,941

27,464,136

Diluted

27,510,477

27,698,195

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

2022

2021

Operating activities
Net income

$

5,095

$

3,712

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

10,232

10,059

Stock-based compensation expense

4,397

5,620

Deferred taxes

(3,213

)

(69

)

Other

79

126

Changes in operating assets and liabilities

1,193

(13,023

)

Net cash provided by operating activities

17,783

6,425

Investing activities
Purchases of property, equipment and other capital assets

(3,069

)

(6,546

)

Cash used for acquisitions, net of cash acquired

-

(127,709

)

Purchases of marketable securities

(29,366

)

(8,227

)

Proceeds from sales of marketable securities

-

45,194

Proceeds from call redemptions and maturities of marketable securities

6,600

7,155

Net cash used in investing activities

(25,835

)

(90,133

)

Financing activities
Proceeds from exercises of stock options and other

6

1,704

Purchases of shares withheld for tax obligations

(468

)

(1,994

)

Principal repayments of finance lease obligations

(139

)

(137

)

Net cash used in financing activities

(601

)

(427

)

Effect of exchange rate changes on cash and cash equivalents

(37

)

306

Net decrease in cash and cash equivalents

(8,690

)

(83,829

)

Cash and cash equivalents, beginning of period

65,929

127,603

Cash and cash equivalents, end of period

$

57,239

$

43,774

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,

2022

2021

Non-GAAP net income, adjusted for stock-based compensation expense,
amortization expense, unrealized loss on foreign currency and
transaction costs
GAAP net income

$

5,095

$

3,712

Add back:
Stock-based compensation expense

4,397

5,620

Amortization expense

1,545

1,543

Unrealized loss on foreign currency

89

622

Transaction costs 1

-

2,515

Total adjustments 2

6,031

10,300

Income tax benefits on adjustments 3

(682

)

(3,001

)

Non-GAAP net income

$

10,444

$

11,011

Non-GAAP net income per share:
Basic

$

0.38

$

0.40

Diluted

$

0.38

$

0.40

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

27,502,941

27,464,136

Diluted

27,510,477

27,698,195

1 Transaction costs include direct costs incurred in the Company's acquisition of Hubs, Inc.
2 Stock-based compensation expense, amortization expense, unrealized loss on foreign currency and transaction costs were included in the following GAAP consolidated statement of operations categories:

Three Months Ended

March 31,

2022

2021

Cost of revenue

$

929

$

977

Marketing and sales

737

853

Research and development

629

624

General and administrative

3,647

7,224

Total operating expenses

5,013

8,701

Other (income) expense, net

89

622

Total adjustments

$

6,031

$

10,300

3 For the three-month periods ended March 31, 2022 and 2021, income tax effects were calculated using the effective tax rate for the relevant jurisdictions. The Company's non-GAAP tax rates differ from its 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 Gross Margin
(In thousands)
(Unaudited)

Three Months Ended

March 31,

2022

2021

Revenue

$

124,168

$

116,126

Gross Profit

55,804

55,330

GAAP gross margin

44.9

%

47.6

%

Add back:
Stock-based compensation expense

587

635

Amortization expense

342

342

Total adjustments

929

977

Non-GAAP gross profit

$

56,733

$

56,307

Non-GAAP gross margin

45.7

%

48.5

%

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

2022

2021

Revenue

$

124,168

$

116,126

Income from operations

7,890

4,261

GAAP operating margin

6.4

%

3.7

%

Add back:
Stock-based compensation expense

4,397

5,620

Amortization expense

1,545

1,543

Transaction costs 1

-

2,515

Total adjustments

5,942

9,678

Non-GAAP income from operations

$

13,832

$

13,939

Non-GAAP operating margin

11.1

%

12.0

%

1 Transaction costs include direct costs incurred in the Company's acquisition of Hubs, Inc.

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

2022

2021

Revenue

$

124,168

$

116,126

GAAP net income

5,095

3,712

GAAP net income margin

4.1

%

3.2

%

GAAP net income

$

5,095

$

3,712

Amortization expense

1,545

1,543

Depreciation expense

8,687

8,516

Interest income, net

(45

)

(87

)

Tax expense

2,495

236

EBITDA

17,777

13,920

EBITDA Margin

14.3

%

12.0

%

Add back:
Stock-based compensation expense

4,397

5,620

Unrealized loss on foreign currency

89

622

Transaction costs 1

-

2,515

Total adjustments

4,486

8,757

Adjusted EBITDA

$

22,263

$

22,677

Adjusted EBITDA Margin

17.9

%

19.5

%

1 Transaction costs include direct costs incurred in the Company's acquisition of Hubs, Inc.

Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
Three Months Ended
March 31, 2022
Three Months Ended
March 31, 2021
%
GAAP Foreign
Currency1
Hubs
Acquisition2
Non-GAAP GAAP Change3 %
Change
Organic4
Revenues
United States

$

95,496

$

-

$

(1,049

)

$

94,447

$

91,053

4.9

%

3.7

%

Europe

24,586

1,151

(1,279

)

24,458

21,449

14.6

14.0

Japan

4,086

392

-

4,478

3,624

12.7

23.6

Total Revenue

$

124,168

$

1,543

$

(2,328

)

$

123,383

$

116,126

6.9

%

6.2

%

1 Revenue for the three-month period ended March 31, 2022 has been recalculated using 2021 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, 2022 has been recalculated to exclude revenue earned from the Company's acquisition of Hubs, Inc. for the period from January 1, 2022 to January 21, 2022 to provide information useful in evaluating the underlying business trends excluding the impact of acquisitions. The Hubs, Inc. acquisition occurred on January 22, 2021 and was included in 2021 revenue after that date.

3 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2021 to GAAP revenue for the three-month period ended March 31, 2022.

4 This column presents the percentage change from GAAP revenue for the three-month period ended March 31, 2021 to non-GAAP revenue for the three-month period ended March 31, 2022 (as recalculated using the foreign currency exchange rates in effect during the three-month period ended March 31, 2021, excluding the impact of Hubs, Inc. acquisition) in order to provide a constant-currency comparison.

Proto Labs, Inc.
Product Developer Information
(Unaudited)

Three Months Ended

March 31,

2022

2021

Unique product developers and engineers served

23,492

22,605