PRLB Proto Labs Inc

Record Quarterly Revenue of $94.2 million, an increase of 30.2% over 2016

Record Full Year 2017 Revenue of $344.5 million, an increase of 15.6% over 2016

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, 2017.

Fourth Quarter 2017 Highlights include:

• Revenue for the fourth quarter of 2017 was a record $94.2 million, representing a 30.2 percent increase over revenue of $72.4 million in the fourth quarter of 2016.
• Fourth quarter revenue included $3.6 million revenue contribution from RAPID Manufacturing (“RAPID”), the New Hampshire company acquired in the fourth quarter of 2017. Excluding the revenue from RAPID and the impact of discontinued services, revenue increased 26.1 percent compared with the prior year’s fourth quarter. Adjusting for the positive impact on revenue from foreign currency exchange rates, revenue growth was 28.3 percent. See “Non-GAAP Financial Measures” below.
• The number of unique product developers and engineers served totaled 16,985 in the fourth quarter of 2017, an increase of 20.9 percent over the fourth quarter of 2016.
• Net income for the fourth quarter of 2017 was a record $14.3 million, or $0.53 per diluted share.
• The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) resulted in a current period net benefit of $1.9 million, with a benefit from the revaluation of deferred tax liabilities partially offset by deemed repatriation of foreign earnings.
• Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, acquisition costs, impairment on assets, unrealized foreign currency gains and the net benefit in the current period resulting from the Tax Act was $15.7 million, or $0.58 per diluted share. See “Non-GAAP Financial Measures” below.

Additional Fourth Quarter 2017 Highlights include:

• Gross margin was 56.2 percent of revenue for the fourth quarter of 2017, compared with 55.7 percent for the fourth quarter of 2016.
• GAAP operating margin was 19.9 percent of revenue during the fourth quarter of 2017, compared to 20.5 percent for the fourth quarter of 2016.
• Non-GAAP operating margin was 25.1 percent of revenue during the fourth quarter of 2017, compared to 23.1 percent for the fourth quarter of 2016. See “Non-GAAP Financial Measures” below.
• The Company generated $22.7 million in cash from operations during the fourth quarter of 2017.
• Cash and investments balance was $131.2 million at December 31, 2017.

“Proto Labs continues to demonstrate its ability to provide solutions to our customers to help them accelerate product development, reduce risk and optimize supply chains by delivering custom parts at unprecedented speeds. The fourth quarter was a strong ending to a great year,” said Vicki Holt, President and Chief Executive Officer. “During the quarter, we delivered double-digit revenue growth in each of our services and in each of our regions on a constant currency basis. We were especially pleased with the growth of revenue from our CNC business, up 37.6 percent organically. We continue to enhance our technology to further expand the services that we can provide to our customers.”

Full Year 2017 Highlights include:

• Revenue increased 15.6 percent to $344.5 million compared with $298.1 million in 2016. Adjusting for the $3.6 million revenue contribution from RAPID, and the impact of discontinued services, adjusted revenue totaled $340.4 million, an increase of 16.1 percent compared to 2016. See “Non-GAAP Financial Measures” below.
• Net income for 2017 increased to $51.8 million, or $1.93 per diluted share compared with $42.7 million, or $1.61 per diluted share in 2016.
• Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, impairment of assets, acquisition costs, unrealized foreign currency gains, legal settlement and the net benefit in the current period resulting from the Tax Act was $57.4 million, or $2.14 per diluted share. See “Non-GAAP Financial Measures” below.
• Cash generated from operations during the year totaled $81.7 million.

Additional 2017 Highlights include:

• Completion of our acquisition of RAPID manufacturing in the fourth quarter.
• Expansion of our service offerings with the launch of insert molding and on demand manufacturing in injection molding and the addition of multi-jet fusion and Polyjet to our 3D printing service.
• Served over 37,000 product developers during the year, an increase of 18.5 percent.
• Established a share repurchase program.

“Our accomplishments in 2017, including the acquisition of RAPID and the continued expansion of our services, will allow us to provide more of a total solution to our customers. These accomplishments have positioned us well for continued, sustainable growth in both revenue and earnings. Our customer focus will continue in 2018 as we continue to evolve our sales approach to develop deeper customer relationships, further advance each of our four service offerings, and increase the scale of our operations, with an initial focus on integrating the RAPID acquisition.” concluded Holt.

Non-GAAP Financial Measures

The company has included non-GAAP adjusted revenue growth that excludes the impact of changes in foreign currency exchange rates and non-GAAP adjusted revenue growth that excludes the impact of acquired and discontinued businesses in this press release to provide investors with additional information regarding the company’s financial results. Management believes these metrics are useful in evaluating the underlying business trends and ongoing operating performance of the company.

The company has included non-GAAP operating margin, adjusted for stock-based compensation expense, amortization expense, acquisition costs, impairment on assets and facilities-related charges (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, impairment on assets, facilities-related charges, acquisition costs, unrealized foreign currency activity, legal settlement, provisional charges related to the tax effect of deemed repatriation of foreign earnings, and revaluation of net deferred tax assets associated with the Tax Act (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, operating margin and revenues, 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 2017 financial results today, February 8, 2018 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 simultaneous webcast of the call will be available via the investor relations section of the Proto Labs website and the following link: https://edge.media-server.com/m6/p/jrmdwby8. A replay will be available for 14 days following the call on the investor relations section of Proto Labs’ website.

About Proto Labs, Inc.

Proto Labs 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 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 development and production costs, and minimizes risk throughout the product life cycle. Visit protolabs.com for more information.

  Proto Labs, Inc. Condensed Consolidated Balance Sheets (In thousands)           December 31, December 31,

2017 1

2016 (Unaudited) Assets Current assets Cash and cash equivalents $ 36,707 $ 68,795 Short-term marketable securities 57,424 39,477 Accounts receivable, net 51,503 34,060 Inventory 11,271 9,310 Income taxes receivable 461 445 Other current assets   6,267     5,697 Total current assets 163,633 157,784   Property and equipment, net 166,662 139,474 Long-term marketable securities 37,034 84,479 Goodwill 129,752 28,916 Other intangible assets, net 17,614 2,655 Other long-term assets   2,672     933 Total assets $ 517,367   $ 414,241   Liabilities and shareholders' equity Current liabilities Accounts payable $ 15,876 $ 11,322 Accrued compensation 12,100 7,670 Accrued liabilities and other 8,408 4,435 Short-term debt obligations 5,000 - Income taxes payable   1,000     - Total current liabilities 42,384 23,427   Long-term income taxes payable 2,181 - Long-term deferred tax liabilities 6,966 7,003 Other long-term liabilities 4,621 3,978   Shareholders' equity   461,215     379,833 Total liabilities and shareholders' equity $ 517,367   $ 414,241     1The unaudited condensed consolidated balance sheet at December 31, 2017 reflects the preliminary allocation of RAPID’s purchase price to identifiable tangible and intangible net assets acquired and the excess purchase price to goodwill. A final determination of the fair value of the assets acquired and liabilities assumed may differ materially from the preliminary estimates.       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,

2017

2016

2017

2016

Revenue Injection Molding $ 50,245 $ 41,598 $ 194,432 $ 175,974 CNC Machining 30,421 20,897 103,739 81,407 3D Printing 11,268 9,788 43,329 37,847 Sheet Metal 1,767 - 1,767 - Other   477   70   1,223   2,827 Total revenue 94,178 72,353 344,490 298,055   Cost of revenue   41,290   32,041   150,648   131,118 Gross profit 52,888 40,312 193,842 166,937   Operating expenses Marketing and sales 15,393 11,949 56,856 46,131 Research and development 5,776 5,278 23,560 22,388 General and administrative   12,944   8,254   41,200   36,651 Total operating expenses   34,113   25,481   121,616   105,170 Income from operations 18,775 14,831 72,226 61,767 Other income, net   430   112   2,209   2,454 Income before income taxes 19,205 14,943 74,435 64,221 Provision for income taxes   4,933   5,571   22,657   21,514 Net income $ 14,272 $ 9,372 $ 51,778 $ 42,707   Net income per share: Basic $ 0.53 $ 0.35 $ 1.94 $ 1.62 Diluted $ 0.53 $ 0.35 $ 1.93 $ 1.61   Shares used to compute net income per share: Basic 26,705,909 26,457,302 26,647,610 26,365,173 Diluted 27,009,017 26,609,929 26,845,071 26,564,639                                       Proto Labs, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)         Year Ended December 31, 2017 2016 Operating activities Net income $ 51,778 $ 42,707 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,474 17,485 Stock-based compensation expense 8,558 6,775 Deferred taxes 90 2,780 Amortization of held-to-maturity securities 1,063 1,173 Loss on impairment of assets 513 455 Other (153 ) (1,541 ) Changes in operating assets and liabilities   1,425     7,665   Net cash provided by operating activities   81,748     77,499     Investing activities Purchases of property and equipment (32,635 ) (33,616 ) Cash used for acquisitions, net of cash acquired (110,533 ) - Purchases of marketable securities (20,037 ) (89,315 ) Proceeds from maturities of marketable securities 47,972 62,176 Purchases of other assets and investments   (8,742 )   -   Net cash used in investing activities   (123,975 )   (60,755 )   Financing activities Proceeds from issuance of debt 5,000 - Acquisition-related contingent consideration - (400 ) Proceeds from exercises of stock options and other 8,602 5,715 Repurchases of common stock   (4,410 )   -   Net cash provided by financing activities   9,192     5,315   Effect of exchange rate changes on cash and cash equivalents   947     (917 ) Net (decrease) increase in cash and cash equivalents (32,088 ) 21,142 Cash and cash equivalents, beginning of period   68,795     47,653   Cash and cash equivalents, end of period $ 36,707   $ 68,795         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,

2017

2016

2017

2016

Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, impairment on assets, acquisition costs, unrealized (gain) loss on foreign currency, charges related to the exit of facilities and legal settlement

GAAP net income $ 14,272 $ 9,372 $ 51,778 $ 42,707 Add back: Stock-based compensation expense 2,400 1,515 8,558 6,775 Amortization expense 107 163 501 683 Impairment on assets 513 - 513 455 Acquisition costs 1,875 - 1,875 - Unrealized (gain) loss on foreign currency (102 ) 217 (185 ) (1,243 ) Facilities-related charges - 222 - 1,373 Legal settlement   -     -     (417 )   -   Total adjustments 1   4,793     2,117     10,845     8,043   Provisional charges related to the tax effect of deemed repatriation of foreign earnings 2,400 - 2,400 - Revaluation of net deferred tax assets and liabilities (4,262 ) - (4,262 ) - Income tax benefits on adjustments 2   (1,520 )   (646 )   (3,344 )   (3,139 ) Non-GAAP net income $ 15,683   $ 10,843   $ 57,417   $ 47,611       Non-GAAP net income per share: Basic $ 0.59   $ 0.41   $ 2.16   $ 1.81   Diluted $ 0.58   $ 0.41   $ 2.14   $ 1.79     Shares used to compute non-GAAP net income per share: Basic 26,705,909 26,457,302 26,647,610 26,365,173 Diluted 27,009,017 26,609,929 26,845,071 26,564,639   1 Stock-based compensation expense, amortization expense, impairment on assets, acquisition costs, unrealized (gain) loss on foreign currency, facilities-related charges and legal settlement were included in the following GAAP consolidated statement of operations categories:   Three Months Ended Year Ended December 31, December 31,

2017

2016

2017

2016

Cost of revenue $ 273 $ 318 $ 970 $ 1,318 Marketing and sales 405 234 1,429 974 Research and development 295 312 1,091 1,396 General and administrative 3,922 1,036 7,957 5,598 Other income, net   (102 )   217     (602 )   (1,243 ) Total adjustments $ 4,793   $ 2,117   $ 10,845   $ 8,043     2 For the three months and year ended December 31, 2017 and 2016, 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.     Proto Labs, Inc. Reconciliation of GAAP to Non-GAAP Operating Margin (In thousands) (Unaudited)                 Three Months Ended Year Ended December 31, December 31,

2017

2016

2017

2016

Revenue $ 94,178 $ 72,353 $ 344,490 $ 298,055 Income from operations   18,775     14,831     72,226     61,767   GAAP operating margin 19.9 % 20.5 % 21.0 % 20.7 % Add back: Stock-based compensation expense 2,400 1,515 8,558 6,775 Amortization expense 107 163 501 683 Acquisition Costs 1,875 - 1,875 - Impairment on assets 513 - 513 455 Facilities-related charges   -     222     -     1,373   Total adjustments   4,895     1,900     11,447     9,286  

Non-GAAP income from operations adjusted for stock-based compensation expense, amortization expense, acquisition costs, impairment on assets and facilities-related charges

$ 23,670   $ 16,731   $ 83,673   $ 71,053   Non-GAAP operating margin 25.1 % 23.1 % 24.3 % 23.8 %                               Proto Labs, Inc. Comparison of GAAP to Non-GAAP Revenue Growth (In thousands) (Unaudited)                                 Three Months Ended

Three Months EndedDecember 31, 2017

December31,2016

%

% ChangeConstant

GAAP

Adjustments1

Non-GAAP

GAAP

Change2

Currencies3

Revenues United States $ 72,067 $ - $ 72,067 $ 54,566 32.1 % 32.1 % Europe 18,930 (1,427 ) 17,503 14,847 27.5 % 17.9 % Japan   3,181   106     3,287   2,940   8.2 %   11.8 % Total Revenue $ 94,178 $ (1,321 ) $ 92,857 $ 72,353 30.2 % 28.3 %     Year Ended

Year EndedDecember 31, 2017

December31, 2016

%

% ChangeConstant

GAAP

Adjustments1

Non-GAAP

GAAP

Change2

Currencies3 Revenues United States $ 263,086 $ - $ 263,086 $ 223,930 17.5 % 17.5 % Europe 70,154 (282 ) 69,872 63,365 10.7 % 10.3 % Japan   11,250   361     11,611   10,760   4.6 %   7.9 % Total Revenue $ 344,490 $ 79   $ 344,569 $ 298,055 15.6 % 15.6 %   1 Revenue growth for the three month and year ended periods ended December 31, 2017 has been recalculated using 2016 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, 2016 to GAAP revenue growth for the three month and year ended periods ended December 31, 2017. 3 This column presents the percentage change from GAAP revenue growth for the three month and year ended periods ended December 31, 2016 (calculated using the foreign currency exchange rates in effect during those periods) to non-GAAP revenue growth for the three month and year ended periods ended December 31, 2017 (as recalculated using 2016 foreign currency exchange rates in order to provide a constant currency comparison).    

 

 

 

Three Months EndedDecember 31, 2017

Three Months EndedDecember 31, 2016

%

% ChangeAdjusted

GAAP

Adjustments4

Non-GAAP

GAAP

Adjustments4

Non-GAAP

Change Revenue Revenues Injection Molding $ 50,245 $ - $ 50,245 $ 41,598 $ (485 ) $ 41,113 20.8 % 22.2 % CNC Machining 30,421 (1,657 ) 28,764 $ 20,897 - 20,897 45.6 % 37.6 % 3D Printing 11,268 - 11,268 9,788 - 9,788 15.1 % 15.1 % Sheet Metal 1,767 (1,767 ) 0 - - - * * Other   477   (155 )   322   70   -     70   * * Total Revenue $ 94,178 $ (3,579 ) $ 90,599 $ 72,353 $ (485 ) $ 71,868   30.2 % 26.1 %   *Percentage change not meaningful.

 

  Year Ended Year Ended % Change December 31, 2017 December 31, 2016 % Adjusted

GAAP

Adjustments4

Non-GAAP

GAAP

Adjustments4

Non-GAAP

Change Revenue Revenues Injection Molding $ 194,432 $ (550 ) $ 193,882 $ 175,974 $ (2,904 ) $ 173,070 10.5 % 12.0 % CNC Machining 103,739 (1,657 ) 102,082 81,407 - 81,407 27.4 % 25.4 % 3D Printing 43,329 - 43,329 37,847 (242 ) 37,605 14.5 % 15.2 % Sheet Metal 1,767 (1,767 ) 0 - - - * * Other   1,223   (155 )   1,068   2,827   (1,784 )   1,043   * * Total Revenue $ 344,490 $ (4,129 ) $ 340,361 $ 298,055 $ (4,930 ) $ 293,125   15.6 % 16.1 %   *Percentage change not meaningful.   4 Revenue growth for the three month and year periods ended December 31, 2017 and 2016 has been recalculated to exclude revenue earned from the acquisition of Rapid and two discontinued manufacturing processes, Metal Injection Molding (MIM) and Magnesium Thixomolding (Thixo), discontinued non-core resin resale business and unprofitable Alphaform 3D Printing contracts.     Proto Labs, Inc. Revenue by Geography (In thousands) (Unaudited)                 Three Months Ended Year Ended December 31, December 31,

2017

2016

2017

2016

Revenue: United States $ 72,067 $ 54,566 $ 263,086 $ 223,930 Europe 18,930 14,847 70,154 63,365 Japan   3,181   2,940   11,250   10,760 Total Revenue $ 94,178 $ 72,353 $ 344,490 $ 298,055       Proto Labs, Inc. Product Developer Information (Unaudited)                 Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016 Unique product developers and engineers served 16,985 14,046 37,267 31,457   Note: the information above includes unique product developers and engineers who purchased our 3D Printed products in the United States and Europe through our web-based customer interface. The information does not include 3D Printing, Injection Molding and Sheet Metal customers resulting from the Alphaform and RAPID acquisitions who do not utilize our web-based customer interface.  

View source version on businesswire.com: http://www.businesswire.com/news/home/20180208005245/en/

Investor Relations Contact:Proto Labs, Inc.Dan Schumacher, 763-479-7240Director of Investor Relationsdaniel.schumacher@protolabs.comorMedia Contact:Padilla for Proto LabsTim Nelson, 612-455-1789tim.nelson@padillaco.com