Protolabs Reports Financial Results for the Fourth Quarter and

Protolabs Reports Financial Results for the Fourth Quarter and Full Year 2023

About Protolabs

Protolabs is the fastest and most comprehensive digital manufacturing service in the world. Our digital factories produce low-volume parts in days while Protolabs Network unlocks advanced capabilities and volume pricing through its highly vetted manufacturing partners. The result? One manufacturing source—from prototyping to production—for product developers, engineers, and supply chain teams across the globe. See what's next at protolabs.com.

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, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	83,790	$	56,558
Short-term marketable securities		19,013		23,568
Accounts receivable, net		72,848		76,225
Inventory		13,657		13,578
Income taxes receivable		2,228		4,042
Prepaid expenses and other current assets		9,124		12,597
Total current assets		200,660		186,568

Property and equipment, net		253,655		257,785
Goodwill		273,991		273,991
Other intangible assets, net		25,584		31,250
Long-term marketable securities		8,019		26,419
Operating lease assets		4,628		3,844
Finance lease assets		960		17,532
Other long-term assets		4,856		4,779
Total assets	$	772,353	$	802,168

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	15,636	$	17,356
Accrued compensation		15,292		12,743
Accrued liabilities and other		16,872		22,384
Current operating lease liabilities		1,585		1,561
Current finance lease liabilities		296		17,537
Total current liabilities		49,681		71,581

Long-term operating lease liabilities		3,008		2,255
Long-term finance lease liabilities		595		—
Long-term deferred tax liabilities		18,742		26,322
Other long-term liabilities		5,032		4,362

Shareholders' equity		695,295		697,648
Total liabilities and shareholders' equity	$	772,353	$	802,168

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


	Three Months Ended December 31,					Twelve Months Ended December 31,
	2023		2022			2023			2022
Revenue
Injection Molding	$	51,486	$	44,885		$	203,941		$	200,578
CNC Machining		48,905		46,563			198,222			188,372
3D Printing		20,339		19,530			84,291			78,988
Sheet Metal		4,062		4,432			16,540			19,498
Other Revenue		256		197			883			962
Total Revenue		125,048		115,607			503,877			488,398

Cost of revenue		69,236		67,000			281,884			272,933
Gross profit		55,812		48,607			221,993			215,465

Operating expenses
Marketing and sales		21,825		20,517			87,688			82,752
Research and development		9,488		8,906			40,135			38,222
General and administrative		16,075		17,774			65,788			67,544
Goodwill impairment		—		118,008			—			118,008
Closure of Japan business		29		534			215			6,922
Total operating expenses		47,417		165,739			193,826			313,448
Income (loss) from operations		8,395		(117,132	)		28,167			(97,983	)
Other income (loss), net		1,543		429			(215	)		106
Income (loss) before income taxes		9,938		(116,703	)		27,952			(97,877	)
Provision for income taxes		2,948		(1,638	)		10,732			5,585
Net income (loss)	$	6,990	$	(115,065	)	$	17,220		$	(103,462	)

Net income (loss) per share:
Basic	$	0.27	$	(4.24	)	$	0.66		$	(3.77	)
Diluted	$	0.27	$	(4.24	)	$	0.66		$	(3.77	)

Shares used to compute net income (loss) per share:
Basic		25,820,802		27,136,821			26,186,533			27,409,838
Diluted		25,889,004		27,136,821			26,223,498			27,409,838

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


	Twelve Months Ended December 31,
	2023			2022
Operating activities
Net income (loss)	$	17,220		$	(103,462	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		37,528			39,425
Stock-based compensation expense		15,989			17,545
Deferred taxes		(7,656	)		(9,499	)
Interest on finance lease obligations		1,055			—
Loss on impairment of goodwill		—			118,008
Loss on foreign currency translation		3,906			—
Impairments related to closure of Japan business		—			2,842
Gain on disposal of property and equipment		(498	)		(1,211	)
Other		154			35
Changes in operating assets and liabilities		5,576			(1,604	)
Net cash provided by operating activities		73,274			62,079

Investing activities
Purchases of property, equipment and other capital assets		(28,116	)		(21,686	)
Proceeds from sales of property, equipment and other capital assets		699			4,108
Purchases of marketable securities		—			(46,872	)
Purchases of other assets and investments		(1,000	)		—
Proceeds from sales of marketable securities		—			1,998
Proceeds from call redemptions and maturities of marketable securities		23,865			19,360
Net cash used in investing activities		(4,552	)		(43,092	)

Financing activities
Proceeds from exercises of stock options		3,835			3,950
Purchases of shares withheld for tax obligations		(1,436	)		(1,682	)
Repurchases of common stock		(43,951	)		(29,659	)
Principal repayments of finance lease obligations		(306	)		(531	)
Net cash used in financing activities		(41,858	)		(27,922	)
Effect of exchange rate changes on cash and cash equivalents		368			(436	)
Net increase (decrease) in cash and cash equivalents		27,232			(9,371	)
Cash and cash equivalents, beginning of period		56,558			65,929
Cash and cash equivalents, end of period	$	83,790		$	56,558

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 December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Non-GAAP net income (loss), adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency, goodwill impairment and costs related to Japan closure activities
GAAP net income (loss)	$	6,990		$	(115,065	)	$	17,220		$	(103,462	)
Add back:
Stock-based compensation expense		4,178			4,210			15,989			17,545
Amortization expense		1,457			1,514			5,928			6,096
Unrealized (gain) loss on foreign currency		(211	)		(490	)		(125	)		252
Goodwill impairment		—			118,008			—			118,008
Costs related to Japan closure activities		29			534			4,122			6,922
Total adjustments ¹		5,453			123,776			25,914			148,823
Income tax benefits on adjustments ²		(609	)		(1,753	)		(1,540	)		(4,271	)
Non-GAAP net income	$	11,834		$	6,958		$	41,594		$	41,090


Non-GAAP net income per share:
Basic	$	0.46		$	0.26		$	1.59		$	1.50
Diluted	$	0.46		$	0.26		$	1.59		$	1.50

Shares used to compute non-GAAP net income per share:
Basic		25,820,802			27,136,821			26,186,533			27,409,838
Diluted		25,889,004			27,151,991			26,223,498			27,433,257

Stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency, goodwill impairment and costs related to Japan closure activities were included in the following GAAP consolidated statement of operations categories:

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023		2022

Cost of revenue	$	794		$	840		$	3,210	$	3,541

Marketing and sales		916			816			3,424		3,295
Research and development		669			488			2,557		2,190
General and administrative		3,256			3,580			12,727		14,615
Goodwill impairment		-			118,008			-		118,008
Closure of Japan business		29			534			215		6,922
Total operating expenses		4,870			123,426			18,923		145,030

Other income (loss), net		(211	)		(490	)		3,781		252
Total adjustments	$	5,453		$	123,776		$	25,914	$	148,823

2		For the three and twelve months ended December 31, 2023 and 2022, 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 December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Revenue	$	125,048		$	115,607		$	503,877		$	488,398
Gross profit		55,812			48,607			221,993			215,465
GAAP gross margin		44.6	%		42.0	%		44.1	%		44.1	%
Add back:
Stock-based compensation expense		452			498			1,840			2,172
Amortization expense		342			342			1,370			1,369
Total adjustments		794			840			3,210			3,541
Non-GAAP gross profit	$	56,606		$	49,447		$	225,203		$	219,006
Non-GAAP gross margin		45.3	%		42.8	%		44.7	%		44.8	%

Proto Labs, Inc. Reconciliation of GAAP to Non-GAAP Gross Margin Excluding Japan (In thousands) (Unaudited)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Revenue	$	125,048		$	115,607		$	503,877		$	488,398
Revenue excluding Japan	$	125,048		$	115,607		$	503,877		$	480,169
Gross profit		55,812			48,607			221,993			215,465
GAAP gross margin		44.6	%		42.0	%		44.1	%		44.1	%
Less: Japan gross profit		—			(93	)		—			3,057
Gross Profit excluding Japan		55,812			48,700			221,993			212,408
GAAP gross margin excluding Japan		44.6	%		42.1	%		44.1	%		44.2	%
Add back:
Stock-based compensation expense		452			498			1,840			2,172
Amortization expense		342			342			1,370			1,369
Less:
Japan stock-based compensation expense		—			—			—			61
Japan amortization expense		—			—			—			—
Total adjustments		794			840			3,210			3,480
Non-GAAP gross profit excluding Japan	$	56,606		$	49,540		$	225,203		$	215,888
Non-GAAP gross margin excluding Japan		45.3	%		42.9	%		44.7	%		45.0	%

Proto Labs, Inc. Reconciliation of GAAP to Non-GAAP Operating Margin (In thousands) (Unaudited)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Revenue	$	125,048		$	115,607		$	503,877		$	488,398
Income (loss) from operations		8,395			(117,132	)		28,167			(97,983	)
GAAP operating margin		6.7	%		(101.3	%)		5.6	%		(20.1	%)
Add back:
Stock-based compensation expense		4,178			4,210			15,989			17,545
Amortization expense		1,457			1,514			5,928			6,096
Goodwill impairment		—			118,008			—			118,008
Costs related to Japan closure activities		29			534			215			6,922
Total adjustments		5,664			124,266			22,132			148,571
Non-GAAP income from operations	$	14,059		$	7,134		$	50,299		$	50,588
Non-GAAP operating margin		11.2	%		6.2	%		10.0	%		10.4	%

Proto Labs, Inc. Reconciliation of GAAP to Non-GAAP Operating Margin Excluding Japan (In thousands) (Unaudited)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Revenue	$	125,048		$	115,607		$	503,877		$	488,398
Revenue excluding Japan	$	125,048		$	115,607		$	503,877		$	480,169
Income (loss) from operations		8,395			(117,132	)		28,167			(97,983	)
GAAP operating margin		6.7	%		(101.3	%)		5.6	%		(20.1	%)
Less: Japan (loss) income from operations		(18	)		(594	)		(499	)		(1,424	)
Income from operations excluding Japan		8,413			(116,538	)		28,666			(96,559	)
GAAP operating margin excluding Japan		6.7	%		(100.8	%)		5.7	%		(20.1	%)
Add back:
Stock-based compensation expense		4,178			4,210			15,989			17,545
Amortization expense		1,457			1,514			5,928			6,096
Goodwill impairment		—			118,008			—			118,008
Costs related to Japan closure activities		29			534			215			6,922
Less:
Japan stock-based compensation expense		—			20			17			406
Japan amortization expense		—			—			—			—
Total adjustments		5,664			124,246			22,115			148,165
Non-GAAP income from operations excluding Japan	$	14,077		$	7,708		$	50,781		$	51,606
Non-GAAP operating margin excluding Japan		11.3	%		6.7	%		10.1	%		10.7	%

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


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Revenue	$	125,048		$	115,607		$	503,877		$	488,398
GAAP net income (loss)		6,990			(115,065	)		17,220			(103,462	)
GAAP net income margin		5.6	%		(99.5	%)		3.4	%		(21.2	%)
Add back:
Amortization expense	$	1,457		$	1,514		$	5,928		$	6,096
Depreciation expense		7,858			7,930			31,600			33,329
Interest income, net		(951	)		(509	)		(2,234	)		(968	)
Provision for income taxes		2,948			(1,638	)		10,732			5,585
EBITDA		18,302			(107,768	)		63,246			(59,420	)
EBITDA Margin		14.6	%		(93.2	%)		12.6	%		(12.2	%)
Add back:
Stock-based compensation expense		4,178			4,210			15,989			17,545
Unrealized (gain) loss on foreign currency		(211	)		(490	)		(125	)		252
Goodwill impairment		—			118,008			—			118,008
Costs related to Japan closure activities		29			534			4,122			6,922
Total adjustments		3,996			122,262			19,986			142,727
Adjusted EBITDA	$	22,298		$	14,494		$	83,232		$	83,307
Adjusted EBITDA Margin		17.8	%		12.5	%		16.5	%		17.1	%

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


	Three Months Ended December 31, 2023							Three Months Ended December 31, 2022		% Change ²		% Change Organic ³
	GAAP		Foreign Currency ¹			Non-GAAP		GAAP		% Change ²		% Change Organic ³
Revenues
United States	$	98,814	$	—		$	98,814	$	92,278	7.1	%	7.1	%
Europe		26,234		(1,144	)		25,090		23,329	12.5	%	7.5	%
Total revenue	$	125,048	$	(1,144	)	$	123,904	$	115,607	8.2	%	7.2	%


	Twelve Months Ended December 31, 2023						Twelve Months Ended December 31, 2022		% Change ²		% Change Organic ³
	GAAP		Foreign Currency ¹		Non-GAAP		GAAP		% Change ²		% Change Organic ³
Revenues
United States	$	396,821	$	—	$	396,821	$	387,399	2.4	%	2.4	%
Europe		107,056		167		107,223		92,770	15.4	%	15.6	%
Japan		—		—		—		8,229	(100.0	%)	(100.0	%)
Total revenue	$	503,877	$	167	$	504,044	$	488,398	3.2	%	3.2	%

1		Revenue for the three and twelve months ended December 31, 2023 has been recalculated using 2022 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 for the three and twelve months ended December 31, 2022 to GAAP revenue for the twelve months ended months ended December 31, 2023.

3		This column presents the percentage change from GAAP revenue for the three and twelve months ended December 31, 2022 to non-GAAP revenue for the three and twelve months ended December 31, 2023 (as recalculated using the foreign currency exchange rates in effect during the three and twelve months ended December 31, 2022) in order to provide a constant-currency comparison.

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


	Three Months Ended December 31, 2023							Three Months Ended December 31, 2022		% Change ²		% Change Organic ³
	GAAP		Foreign Currency ¹			Non-GAAP		GAAP		% Change ²		% Change Organic ³
Revenues
Injection Molding	$	51,486	$	(453	)	$	51,033	$	44,885	14.7	%	13.7	%
CNC Machining		48,905		(395	)		48,510		46,563	5.0		4.2
3D Printing		20,339		(268	)		20,071		19,530	4.1		2.8
Sheet Metal		4,062		(1	)		4,061		4,432	(8.3	)	(8.4	)
Other Revenue		256		(27	)		229		197	29.9		16.2
Total Revenue	$	125,048	$	(1,144	)	$	123,904	$	115,607	8.2	%	7.2	%


	Twelve Months Ended December 31, 2023							Twelve Months Ended December 31, 2022		% Change ²		% Change Organic ³
	GAAP		Foreign Currency ¹			Non-GAAP		GAAP		% Change ²		% Change Organic ³
Revenues
Injection Molding	$	203,941	$	328		$	204,269	$	200,578	1.7	%	1.8	%
CNC Machining		198,222		(243	)		197,979		188,372	5.2		5.1
3D Printing		84,291		9			84,300		78,988	6.7		6.7
Sheet Metal		16,540		(10	)		16,530		19,498	(15.2	)	(15.2	)
Other Revenue		883		83			966		962	(8.2	)	0.4
Total Revenue	$	503,877	$	167		$	504,044	$	488,398	3.2	%	3.2	%

1			Revenue for the three and twelve months ended December 31, 2023 has been recalculated using 2022 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 for the three and twelve months ended December 31, 2022 to GAAP revenue for the three and twelve months ended December 31, 2023.

3			This column presents the percentage change from GAAP revenue for the three and twelve months ended December 31, 2022 to non-GAAP revenue for the three and twelve months ended December 31, 2023 (as recalculated using the foreign currency exchange rates in effect during the three and twelve months ended December 31, 2022) in order to provide a constant-currency comparison.

Proto Labs, Inc. Customer Contact Information (Unaudited)


	Three Months Ended December 31,				Twelve Months Ended December 31,
	2023		2022		2023		2022
Customer contacts		21,879		22,205		53,464		56,333
Revenue per customer contact	$	5,715	$	5,206	$	9,425	$	8,670

Proto Labs, Inc. Reconciliation of GAAP to Non-GAAP Guidance (In thousands, except per share and per share amounts) (Unaudited)


	Q1 2024 Outlook
	Low		High
GAAP diluted net income per share	$	0.09		0.17
Add back:
Stock-based compensation expense		0.14		0.14
Amortization expense		0.03		0.03
Unrealized (gain) loss on foreign currency		0.00		0.00
Total adjustments		0.18		0.18
Non-GAAP diluted net income per share	$	0.26	$	0.34

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