Protolabs Reports Financial Results for the Fourth Quarter and

Protolabs Reports Financial Results for the Fourth Quarter and Full Year 2020

MAPLE PLAIN, Minn. — (BUSINESS WIRE) — February 12, 2021 — 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, 2020.

Fourth Quarter 2020 Highlights include:

Revenue for the fourth quarter of 2020 was $105.2 million, representing a 2.1 percent decline compared to revenue of $107.5 million in the third quarter of 2020.
EBITDA margin was 19.1 percent of revenue in the fourth quarter of 2020, compared to 24.4 percent in the third quarter of 2020.
Adjusted EBITDA margin was 23.0 percent of revenue in the fourth quarter of 2020, compared to 27.9 percent in the third quarter of 2020. See “Non-GAAP Financial Measures” below.
Net income for the fourth quarter of 2020 was $9.6 million, or $0.36 per diluted share.
Non-GAAP net income was $13.5 million, or $0.50 per diluted share. See “Non-GAAP Financial Measures” below.

“Protolabs responded very well in the face of unforeseen challenges driven by the emergence of the global pandemic and the ensuing substantial decline in global economic activity during 2020. As an organization, we prioritized the health of our employees, while continuing to serve our customers and advance our long-term business opportunities. As a result, we further enhanced our leadership in the digital manufacturing space,” said Vicki Holt, President and Chief Executive Officer.

“2020 showcased the adaptability of our workforce and our ability to further expand and improve our digital model,” said Rob Bodor, Vice President and General Manager of the Americas and incoming President and Chief Executive Officer. “There is tremendous opportunity ahead of us, and we have clear strategic objectives for 2021 and beyond: create a world-class customer experience, expand our digital manufacturing offer, and further invest in our employees. With the successful go-live of Protolabs 2.0 and the addition of 3D Hubs, we are uniquely positioned to capitalize on that opportunity. I look forward to partnering with all employees to drive the long-term success of Protolabs.”

Full Year 2020 Highlights include:

2020 revenue of $434.4 million, compared to $458.7 million in 2019.
Protolabs served 40,267 product developers during the year.
Gross margin was 50.1 percent of revenue in 2020, compared to 51.3 percent in 2019.
EBITDA margin was 21.7 percent of revenue in 2020, compared to 24.0 percent in 2019.
Adjusted EBITDA margin was 24.8 percent of revenue in 2020, compared to 26.5 percent in 2019. See “Non-GAAP Financial Measures” below.
Net income for 2020 was $50.9 million, or $1.89 per diluted share.
Non-GAAP net income was $63.6 million, or $2.36 per diluted share.
The company generated $107.0 million in cash from operations in 2020.
Cash and investments balance was $221.0 million at December 31, 2020.

“2020 was the most difficult backdrop our business has ever faced, yet our digital manufacturing model continued its strong cash flow generation, allowing us to proceed with investments to support the long-term growth of the business, while maintaining our financial strength and flexibility,” added John Way, Chief Financial Officer.

Non-GAAP Financial Measures

The company has included non-GAAP revenue growth that excludes the impact of changes in foreign currency exchange rates (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 fourth quarter and full year 2020 financial results today, February 12, 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 will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/7ayaedkz. 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 source for digital manufacturing services. 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)


				December 31,	December 31,
				2020	2019
				(Unaudited)
	Assets
	Current assets
		Cash and cash equivalents		$ 127,603	$ 125,225
		Short-term marketable securities		34,088	35,437
		Accounts receivable, net		57,877	57,450
		Inventory		10,862	10,075
		Income taxes receivable		540	-
		Prepaid expenses and other current assets		11,032	8,232
			Total current assets	242,002	236,419

	Property and equipment, net			282,666	263,712
	Goodwill			128,752	128,752
	Other intangible assets, net			14,350	17,369
	Long-term marketable securities			59,357	12,960
	Operating lease assets			9,855	11,425
	Finance lease assets			2,396	-
	Other long-term assets			4,826	3,030
			Total assets	$ 744,204	$ 673,667

	Liabilities and shareholders' equity
	Current liabilities
		Accounts payable		$ 18,248	$ 16,804
		Accrued compensation		11,989	15,058
		Accrued liabilities and other		16,193	11,057
		Current operating lease liabilities		3,272	3,340
		Current finance lease liabilities		552	-
		Income taxes payable		-	1,322
			Total current liabilities	50,254	47,581

	Long-term operating lease liabilities			7,586	8,565
	Long-term finance lease liabilities			1,919	-
	Long-term deferred tax liabilities			33,854	26,283
	Other long-term liabilities			6,235	5,448

	Shareholders' equity			644,356	585,790
	Total liabilities and shareholders' equity			$ 744,204	$ 673,667

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,
			2020	2019	2020	2019
	Revenue
		Injection Molding	$ 52,065	$ 51,480	$ 217,992	$ 217,415
		CNC Machining	31,827	38,494	131,587	155,473
		3D Printing	16,024	15,708	62,502	61,352
		Sheet Metal	4,532	5,223	18,838	21,000
		Other	760	984	3,476	3,488
		Total revenue	105,208	111,889	434,395	458,728

	Cost of revenue		52,580	55,311	216,568	223,438
	Gross profit		52,628	56,578	217,827	235,290

	Operating expenses
		Marketing and sales	17,488	17,510	69,309	72,976
		Research and development	11,390	8,151	36,940	32,692
		General and administrative	12,759	11,355	51,742	49,766
		Total operating expenses	41,637	37,016	157,991	155,434
	Income from operations		10,991	19,562	59,836	79,856
	Other income, net		560	(229)	3,109	1,337
	Income before income taxes		11,551	19,333	62,945	81,193
	Provision for income taxes		1,972	4,147	12,078	17,538
	Net income		$ 9,579	$ 15,186	$ 50,867	$ 63,655

	Net income per share:
		Basic	$ 0.36	$ 0.57	$ 1.90	$ 2.37
		Diluted	$ 0.36	$ 0.56	$ 1.89	$ 2.35

	Shares used to compute net income per share:
		Basic	26,775,279	26,777,536	26,737,425	26,866,985
		Diluted	26,976,582	26,945,927	26,896,357	27,049,423

Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

				Year Ended
				December 31,
				2020	2019
	Operating activities
		Net income		$ 50,867	$ 63,655
		Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization	32,594	30,864
			Stock-based compensation expense	14,673	10,781
			Deferred taxes	7,577	6,106
			Amortization of held-to-maturity securities	415	5
			Other	(336)	391
			Changes in operating assets and liabilities	1,179	4,250
		Net cash provided by operating activities		106,969	116,052

	Investing activities
		Purchases of property, equipment and other capital assets		(47,010)	(62,230)
		Purchases of other assets and investments		(3,000)	(4,000)
		Purchases of marketable securities		(113,200)	(46,403)
		Proceeds from maturities of marketable securities		67,737	68,330
		Net cash used in investing activities		(95,473)	(44,303)

	Financing activities
		Principal repayments of finance lease obligations		(154)	-
		Proceeds from exercises of stock options		7,557	4,391
		Purchases of shares withheld for tax obligations		(3,443)	(2,487)
		Repurchases of common stock		(14,686)	(33,521)
		Net cash used in financing activities		(10,726)	(31,617)
	Effect of exchange rate changes on cash and cash equivalents			1,608	47
	Net increase in cash and cash equivalents			2,378	40,179
	Cash and cash equivalents, beginning of period			125,225	85,046
	Cash and cash equivalents, end of period			$ 127,603	$ 125,225

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,
				2020			2019			2020			2019
	Non-GAAP net income, adjusted for stock-based compensation expense,
	amortization expense, unrealized (gain) loss on foreign currency and
	transaction costs
		GAAP net income	$	9,579		$	15,186		$	50,867		$	63,655
		Add back:
		Stock-based compensation expense		4,056			1,043			14,673			10,781
		Amortization expense		754			889			3,016			3,482
		Unrealized (gain) loss on foreign currency		(353	)		286			(1,373	)		677
		Transaction costs		427			-			427			-
		Total adjustments ¹		4,884			2,218			16,743			14,940
		Income tax benefits on adjustments ²		(1,013	)		(350	)		(4,043	)		(3,225	)
		Non-GAAP net income	$	13,450		$	17,054		$	63,567		$	75,370


	Non-GAAP net income per share:
		Basic	$	0.50		$	0.64		$	2.38		$	2.81
		Diluted	$	0.50		$	0.63		$	2.36		$	2.79

	Shares used to compute non-GAAP net income per share:
		Basic		26,775,279			26,777,536			26,737,425			26,866,985
		Diluted		26,976,582			26,945,927			26,896,357			27,049,423


	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						Year Ended
			December 31,						December 31,
				2020			2019			2020			2019

		Cost of revenue	$	1,032		$	933		$	3,820		$	3,335

		Marketing and sales		888			708			3,121			2,631
		Research and development		675			365			2,441			1,851
		General and administrative		2,642			(74	)		8,734			6,446
		Total operating expenses		4,205			999			14,296			10,928

		Other income, net		(353	)		286			(1,373	)		677
		Total adjustments	$	4,884		$	2,218		$	16,743		$	14,940

	² For the three-month and year-ended periods ended December 31, 2020 and 2019, 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,
				2020			2019			2020			2019
	Revenue		$	105,208		$	111,889		$	434,395		$	458,728
	Income from operations			10,991			19,562			59,836			79,856
		GAAP operating margin		10.4	%		17.5	%		13.8	%		17.4	%
		Add back:
		Stock-based compensation expense		4,056			1,043			14,673			10,781
		Amortization expense		754			889			3,016			3,482
		Transaction costs		427			-			427			-
		Total adjustments		5,237			1,932			18,116			14,263
		Non-GAAP income from operations	$	16,228		$	21,494		$	77,952		$	94,119
		Non-GAAP operating margin		15.4	%		19.2	%		17.9	%		20.5	%

Proto Labs, Inc.
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)

			Three Months Ended						Year Ended
			December 31,						December 31,
				2020			2019			2020			2019
	GAAP net income		$	9,579		$	15,186		$	50,867		$	63,655
		Amortization expense		754			889			3,016			3,482
		Depreciation expense		7,949			7,317			29,578			27,383
		Interest income, net		(149	)		(560	)		(1,332	)		(2,095	)
		Tax expense		1,972			4,147			12,078			17,538
		EBITDA		20,105			26,979			94,207			109,963
		Add back:
		Stock-based compensation expense		4,056			1,043			14,673			10,781
		Unrealized (gain) loss on foreign currency		(353	)		286			(1,373	)		677
		Transaction costs		427			-			427			-
		Total adjustments		4,130			1,329			13,727			11,458
		Adjusted EBITDA	$	24,235		$	28,308		$	107,934		$	121,421

Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)

		Three Months Ended December 31, 2020							Three Months Ended December 31, 2019		%		% Change Constant
		GAAP		Adjustments ¹			Non-GAAP		GAAP		Change ²		Currencies ³
	Revenues
	United States	$	83,201	$	-		$	83,201	$	88,329	(5.8	%)	(5.8	%)
	Europe		18,383		(955	)		17,428		19,889	(7.6	%)	(12.4	%)
	Japan		3,624		(145	)		3,479		3,671	(1.3	%)	(5.2	%)
	Total Revenue	$	105,208	$	(1,100	)	$	104,108	$	111,889	(6.0	%)	(7.0	%)


		Year Ended December 31, 2020							Year Ended December 31, 2019		%		% Change Constant
		GAAP		Adjustments ¹			Non-GAAP		GAAP		Change ²		Currencies ³
	Revenues
	United States	$	345,708	$	-		$	345,708	$	360,205	(4.0	%)	(4.0	%)
	Europe		74,796		(718	)		74,078		82,805	(9.7	%)	(10.5	%)
	Japan		13,891		(298	)		13,593		15,718	(11.6	%)	(13.5	%)
	Total Revenue	$	434,395	$	(1,016	)	$	433,379	$	458,728	(5.3	%)	(5.5	%)

¹ Revenue growth for the three-month and year-ended periods ended December 31, 2020 has been recalculated using 2019 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, 2019 to GAAP revenue growth for the three-month and year-ended periods ended December 31, 2020.
³ This column presents the percentage change from GAAP revenue for the three-month and year-ended periods ended December 31, 2019 to non-GAAP revenue for the three-month and year-ended periods ended December 31, 2020 (as recalculated using the foreign currency exchange rates in effect during the three-month and year-ended periods ended December 31, 2019) in order to provide a constant currency comparison.

Proto Labs, Inc.
Product Developer Information
(Unaudited)

		Three Months Ended		Year Ended
		December 31,		December 31,
		2020	2019	2020	2019
	Unique product developers and engineers served	18,157	20,595	40,267	47,774

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