Q4 2018 Revenue of $112.8 million, an increase of 20% over Q4 2017
Full
Year 2018 Revenue of $445.6 million, an increase of 29% over 2017
Q4
2018 Net Income of $19.3 million, an increase of 35% over Q4 2017
Full
Year 2018 Net Income of $76.6 million, an increase of 48% over 2017
MAPLE PLAIN, Minn. — (BUSINESS WIRE) — February 7, 2019 — 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, 2018.
Fourth Quarter 2018 Highlights include:
- Revenue for the fourth quarter of 2018 was $112.8 million, representing a 19.7 percent increase over revenue of $94.2 million in the fourth quarter of 2017.
- The number of unique product developers and engineers served totaled 20,403 in the fourth quarter of 2018, an increase of 18.2 percent over the fourth quarter of 2017.
- Net income for the fourth quarter of 2018 was $19.3 million, or $0.71 per diluted share.
- Non-GAAP net income was $20.3 million, or $0.74 per diluted share. See “Non-GAAP Financial Measures” below.
“Protolabs had another quarter of strong revenue growth, however, fourth quarter financial results were below our expectations,” said Vicki Holt, President and Chief Executive Officer. “We experienced a strong start to the quarter in terms of revenue, followed by a weak December. In addition, our recent acquisition of Rapid Manufacturing is performing below our expectations. These factors, combined with the relocation of our CNC facility in the United States impacted our productivity during the quarter, negatively affecting our operating earnings.”
Additional Fourth Quarter 2018 Highlights include:
- Gross margin was 52.5 percent of revenue for the fourth quarter of 2018, compared to 56.2 percent for the fourth quarter of 2017.
- Operating expenses were 34.6 percent of revenue for the fourth quarter of 2018, compared to 36.2 percent for the fourth quarter of 2017.
- GAAP operating margin was 17.9 percent of revenue during the fourth quarter of 2018, compared to 19.9 percent for the fourth quarter of 2017.
- Non-GAAP operating margin was 21.2 percent of revenue during the fourth quarter of 2018, compared to 25.1 percent for the fourth quarter of 2017. See “Non-GAAP Financial Measures” below.
- The company generated $38.0 million in cash from operations during the fourth quarter of 2018.
- Cash and investments balance was $155.4 million at December 31, 2018.
- The company repurchased $12.2 million or 104,600 shares of common stock.
“As a company, we are focused on serving our customers and driving growth and profitability over the long term,” said Holt. “Protolabs achieved several major milestones during the fourth quarter that will facilitate future growth. We successfully completed the relocation of our CNC operations in Minnesota while fulfilling commitments to customers, increased the number of product developers served in 2018 to nearly 46,000, and became a founding member of MIT’s ADAPT consortium.”
Full Year 2018 Financial Highlights include:
- Revenue increased 29.3 percent to $445.6 million compared to $344.5 million in 2017. This growth includes the acquisition of Rapid Manufacturing in December 2017.
- Net income for 2018 increased 47.9 percent to $76.6 million, or $2.81 per diluted share compared to $51.8 million, or $1.93 per diluted share in 2017.
- Non-GAAP net income was $82.8 million, or $3.04 per diluted share. See “Non-GAAP Financial Measures” below.
- Cash generated from operations during the year totaled $122.9 million.
Additional 2018 Highlights include:
- Served nearly 46,000 product developers during the year, an increase of 22.5 percent over 2017.
- Formed a partnership with Misumi, a Japanese parts distributer, to increase our brand recognition and demand in Japan.
- Moved the company’s CNC operations, including nearly 300 machines over a six-week period, to a new 215,000 square foot state-of-the-art CNC machining digital manufacturing facility in Minnesota.
- New Hampshire operations received national recognition, winning The FABRICATOR’s 2019 Industry Award, an award that recognizes Protolabs’ quick-turn production capabilities, lean manufacturing efforts, and overall evolution over the past year.
- Became a founding member of MIT’s ADAPT (Additive and Digital Advanced Production Technologies) consortium along with other leading organizations in industry and academia.
“2018 was a strong year overall for our company. As we enter into our 20th year of operations, it is rewarding to look back at all we have accomplished since our inception. It is also very exciting to look ahead and see the numerous opportunities we have to help our customers win in their markets as they capitalize on underlying market trends. Our 2019 priorities are aligned to serving our customers through enhanced relationships, continuously improving the customer experience and increased efficiency in operations. After a strong 2018, these priorities continue our focus on our customers, enabling us to drive growth and deliver long term shareholder returns,” concluded Holt.
Non-GAAP Financial Measures
The company has included non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, impairment on assets, acquisition costs, unrealized foreign currency activity, disposal of businesses, legal settlement, provisional charges related to the tax effect of deemed repatriation of foreign earnings, and revaluation of net deferred tax assets and liabilities (collectively, “non-GAAP net income”), 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, acquisition costs, and impairment on assets (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 revenue growth that excludes the impact of changes in foreign currency exchange rates. Management believes these metrics are useful in evaluating the underlying business trends and ongoing operating performance of the company.
The company has provided 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 2018 financial results today, February 7, 2019 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 Protolabs website and the following link: https://edge.media-server.com/m6/p/xhkhdnme. 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 fastest digital manufacturing source for rapid prototyping and on-demand production. The technology-enabled company produces custom parts and assemblies in as fast as one 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.
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, | |||||
2018 | 2017 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 85,046 | $ | 36,707 | ||
Short-term marketable securities | 46,750 | 57,424 | ||||
Accounts receivable, net | 59,155 | 51,503 | ||||
Inventory | 10,087 | 11,271 | ||||
Income taxes receivable | 5,757 | 1,832 | ||||
Other current assets | 8,567 | 6,267 | ||||
Total current assets | 215,362 | 165,004 | ||||
Property and equipment, net | 228,001 | 166,440 | ||||
Long-term marketable securities | 23,579 | 37,034 | ||||
Goodwill | 128,752 | 128,504 | ||||
Other intangible assets, net | 19,850 | 19,084 | ||||
Other long-term assets | 3,441 | 2,672 | ||||
Total assets | $ | 618,985 | $ | 518,738 | ||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 17,411 | $ | 15,876 | ||
Accrued compensation | 18,130 | 12,100 | ||||
Accrued liabilities and other | 16,702 | 8,408 | ||||
Short-term debt obligations | - | 5,000 | ||||
Income taxes payable | 491 | 2,371 | ||||
Total current liabilities | 52,734 | 43,755 | ||||
Long-term income taxes payable | - | 2,181 | ||||
Long-term deferred tax liabilities | 20,162 | 6,966 | ||||
Other long-term liabilities | 4,592 | 4,621 | ||||
Shareholders' equity | 541,497 | 461,215 | ||||
Total liabilities and shareholders' equity | $ | 618,985 | $ | 518,738 | ||
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, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
Revenue | |||||||||||||
Injection Molding | $ | 53,913 | $ | 50,245 | $ | 210,523 | $ | 194,432 | |||||
CNC Machining | 38,157 | 30,421 | 153,521 | 103,739 | |||||||||
3D Printing | 13,924 | 11,268 | 53,342 | 43,329 | |||||||||
Sheet Metal | 5,996 | 1,767 | 24,998 | 1,767 | |||||||||
Other | 779 | 477 | 3,212 | 1,223 | |||||||||
Total revenue | 112,769 | 94,178 | 445,596 | 344,490 | |||||||||
Cost of revenue | 53,614 | 41,290 | 206,917 | 150,648 | |||||||||
Gross profit | 59,155 | 52,888 | 238,679 | 193,842 | |||||||||
Operating expenses | |||||||||||||
Marketing and sales | 17,586 | 15,393 | 68,533 | 56,856 | |||||||||
Research and development | 7,580 | 5,776 | 28,735 | 23,560 | |||||||||
General and administrative | 13,834 | 12,944 | 52,513 | 41,200 | |||||||||
Total operating expenses | 39,000 | 34,113 | 149,781 | 121,616 | |||||||||
Income from operations | 20,155 | 18,775 | 88,898 | 72,226 | |||||||||
Other income, net | 1,381 | 430 | 2,757 | 2,209 | |||||||||
Income before income taxes | 21,536 | 19,205 | 91,655 | 74,435 | |||||||||
Provision for income taxes | 2,250 | 4,933 | 15,067 | 22,657 | |||||||||
Net income | $ | 19,286 | $ | 14,272 | $ | 76,588 | $ | 51,778 | |||||
Net income per share: | |||||||||||||
Basic | $ | 0.71 | $ | 0.53 | $ | 2.84 | $ | 1.94 | |||||
Diluted | $ | 0.71 | $ | 0.53 | $ | 2.81 | $ | 1.93 | |||||
Shares used to compute net income per share: | |||||||||||||
Basic | 27,040,207 | 26,705,909 | 26,982,614 | 26,647,610 | |||||||||
Diluted | 27,311,988 | 27,009,017 | 27,278,816 | 26,845,071 | |||||||||
Proto Labs, Inc. | |||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
Year Ended | |||||||||
December 31, | |||||||||
2018 | 2017 | ||||||||
Operating activities | |||||||||
Net income | $ | 76,588 | $ | 51,778 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 26,754 | 18,474 | |||||||
Stock-based compensation expense | 10,928 | 8,558 | |||||||
Deferred taxes | 11,936 | 1,174 | |||||||
Gain on sale of businesses | (671 | ) | - | ||||||
Amortization of held-to-maturity securities | 374 | 1,063 | |||||||
Loss on impairment of assets | - | 513 | |||||||
Other | (619 | ) | (153 | ) | |||||
Changes in operating assets and liabilities | (2,361 | ) | 341 | ||||||
Net cash provided by operating activities | 122,929 | 81,748 | |||||||
Investing activities | |||||||||
Purchases of property, equipment and other capital assets | (87,104 | ) | (32,635 | ) | |||||
Cash used for acquisitions, net of cash acquired | (90 | ) | (110,533 | ) | |||||
Proceeds from sale of businesses | 284 | - | |||||||
Purchases of other assets and investments | (126 | ) | (8,742 | ) | |||||
Purchases of marketable securities | (41,384 | ) | (20,037 | ) | |||||
Proceeds from maturities of marketable securities | 65,139 | 47,972 | |||||||
Net cash used in investing activities | (63,281 | ) | (123,975 | ) | |||||
Financing activities | |||||||||
Payments on debt | (5,000 | ) | 5,000 | ||||||
Proceeds from exercises of stock options and other | 6,791 | 8,602 | |||||||
Repurchases of common stock | (12,229 | ) | (4,410 | ) | |||||
Net cash (used in) provided by financing activities | (10,438 | ) | 9,192 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (871 | ) | 947 | ||||||
Net increase (decrease) in cash and cash equivalents | 48,339 | (32,088 | ) | ||||||
Cash and cash equivalents, beginning of period | 36,707 | 68,795 | |||||||
Cash and cash equivalents, end of period | $ | 85,046 | $ | 36,707 | |||||
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, | |||||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, impairment on assets, acquisition costs, unrealized gain on foreign currency, disposal of businesses and legal settlement |
||||||||||||||||||
GAAP net income | $ | 19,286 | $ | 14,272 | $ | 76,588 | $ | 51,778 | ||||||||||
Add back: | ||||||||||||||||||
Stock-based compensation expense | 2,942 | 2,400 | 10,928 | 8,558 | ||||||||||||||
Amortization expense | 862 | 107 | 3,233 | 501 | ||||||||||||||
Impairment on assets | - | 513 | - | 513 | ||||||||||||||
Acquisition costs | - | 1,875 | - | 1,875 | ||||||||||||||
Unrealized gain on foreign currency | (527 | ) | (102 | ) | (380 | ) | (185 | ) | ||||||||||
Disposal of businesses | - | - | (671 | ) | - | |||||||||||||
Legal settlement | - | - | - | (417 | ) | |||||||||||||
Total adjustments 1 | 3,277 | 4,793 | 13,110 | 10,845 | ||||||||||||||
Provisional charges related to the tax effect of deemed repatriation of foreign earnings | (719 | ) | 2,400 | (719 | ) | 2,400 | ||||||||||||
Revaluation of net deferred tax assets and liabilities | (496 | ) | (4,262 | ) | (496 | ) | (4,262 | ) | ||||||||||
Income tax benefits on adjustments 2 | (1,086 | ) | (1,520 | ) | (5,660 | ) | (3,344 | ) | ||||||||||
Non-GAAP net income | $ | 20,262 | $ | 15,683 | $ | 82,823 | $ | 57,417 | ||||||||||
Non-GAAP net income per share: | ||||||||||||||||||
Basic | $ | 0.75 | $ | 0.59 | $ | 3.07 | $ | 2.16 | ||||||||||
Diluted | $ | 0.74 | $ | 0.58 | $ | 3.04 | $ | 2.14 | ||||||||||
Shares used to compute non-GAAP net income per share: | ||||||||||||||||||
Basic | 27,040,207 | 26,705,909 | 26,982,614 | 26,647,610 | ||||||||||||||
Diluted | 27,311,988 | 27,009,017 | 27,278,816 | 26,845,071 | ||||||||||||||
1 Stock-based compensation expense, amortization expense, impairment on assets, acquisition costs, unrealized gain on foreign currency, disposal of businesses and legal settlement were included in the following GAAP consolidated statement of operations categories: |
||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
Cost of revenue | $ | 448 | $ | 273 | $ | 1,543 | $ | 970 | ||||||||||
Marketing and sales | 562 | 405 | 1,942 | 1,429 | ||||||||||||||
Research and development | 407 | 295 | 1,517 | 1,091 | ||||||||||||||
General and administrative | 2,387 | 3,922 | 9,159 | 7,957 | ||||||||||||||
Total operating expenses | 3,356 | 4,622 | 12,618 | 10,477 | ||||||||||||||
Other income, net | (527 | ) | (102 | ) | (1,051 | ) | (602 | ) | ||||||||||
Total adjustments | $ | 3,277 | $ | 4,793 | $ | 13,110 | $ | 10,845 | ||||||||||
2 For the three-month and year-ended periods ended December 31, 2018 and 2017, 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, | ||||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||
Revenue | $ | 112,769 | $ | 94,178 | $ | 445,596 | $ | 344,490 | |||||||||
Income from operations | 20,155 | 18,775 | 88,898 | 72,226 | |||||||||||||
GAAP operating margin | 17.9 | % | 19.9 | % | 20.0 | % | 21.0 | % | |||||||||
Add back: | |||||||||||||||||
Stock-based compensation expense | 2,942 | 2,400 | 10,928 | 8,558 | |||||||||||||
Amortization expense | 862 | 107 | 3,233 | 501 | |||||||||||||
Acquisition Costs | - | 1,875 | - | 1,875 | |||||||||||||
Impairment on assets | - | 513 | - | 513 | |||||||||||||
Total adjustments | 3,804 | 4,895 | 14,161 | 11,447 | |||||||||||||
Non-GAAP income from operations adjusted for stock-based compensation expense, amortization expense, acquisition costs, and impairment on assets |
$ | 23,959 | $ | 23,670 | $ | 103,059 | $ | 83,673 | |||||||||
Non-GAAP operating margin | 21.2 | % | 25.1 | % | 23.1 | % | 24.3 | % | |||||||||
Proto Labs, Inc. | ||||||||||||||||||||
Comparison of GAAP to Non-GAAP Revenue Growth | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months | ||||||||||||||||||||
Ended | ||||||||||||||||||||
Three Months Ended | December 31, | % Change | ||||||||||||||||||
December 31, 2018 | 2017 | % | Constant | |||||||||||||||||
GAAP | Adjustments1 | Non-GAAP | GAAP |
Change2 |
Currencies3 | |||||||||||||||
Revenues | ||||||||||||||||||||
United States | $ | 89,282 | $ | 89,282 | $ | 72,067 | 23.9 | % | 23.9 | % | ||||||||||
Europe | 19,458 | 523 | 19,981 | 18,930 | 2.8 | % | 5.6 | % | ||||||||||||
Japan | 4,029 | (5 | ) | 4,024 | 3,181 | 26.7 | % | 26.5 | % | |||||||||||
Total Revenue | $ | 112,769 | $ | 518 | $ | 113,287 | $ | 94,178 | 19.7 | % | 20.3 | % | ||||||||
Year Ended | ||||||||||||||||||||
Year Ended | December 31, | % Change | ||||||||||||||||||
December 31, 2018 | 2017 | % | Constant | |||||||||||||||||
GAAP |
Adjustments1 |
Non-GAAP | GAAP |
Change2 |
Currencies3 | |||||||||||||||
Revenues | ||||||||||||||||||||
United States | $ | 350,535 | $ | 350,535 | $ | 263,086 | 33.2 | % | 33.2 | % | ||||||||||
Europe | 80,889 | (3,302 | ) | 77,587 | 70,154 | 15.3 | % | 10.6 | % | |||||||||||
Japan | 14,172 | (216 | ) | 13,956 | 11,250 | 26.0 | % | 24.1 | % | |||||||||||
Total Revenue | $ | 445,596 | $ | (3,518 | ) | $ | 442,078 | $ | 344,490 | 29.3 | % | 28.3 | % | |||||||
1 Revenue growth for the three-month and year-ended periods ended December 31, 2018 has been recalculated using 2017 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. |
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2 This column presents the percentage change from GAAP revenue growth for the three-month and year-ended periods ended December 31, 2017 to GAAP revenue growth for the three-month and year-ended periods ended December 31, 2018. | ||||||||||||||||||||
3 This column presents the percentage change from GAAP revenue growth for the three-month and year-ended periods ended December 31, 2017 (calculated using the foreign currency exchange rates in effect during that period) to non-GAAP revenue growth for the three-month and year-ended periods ended December 31, 2018 (as recalculated using the foreign currency exchange rates in effect during the three-month and year-ended periods ended December 31, 2017) in order to provide a constant currency comparison. | ||||||||||||||||||||
Proto Labs, Inc. | |||||||||
Product Developer Information | |||||||||
(Unaudited) | |||||||||
Three Months Ended | Year Ended | ||||||||
December 31, | December 31, | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||
Unique product developers and engineers served | 20,403 | 17,256 | 45,968 | 37,538 | |||||
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