Protolabs Reports Record Revenue and Net Income for First

Protolabs Reports Record Revenue and Net Income for First Quarter 2018

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)


	March 31,		December 31,
	2018		2017
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	45,095	$	36,707
Short-term marketable securities		53,467		57,424
Accounts receivable, net		58,464		51,503
Inventory		9,506		11,271
Income taxes receivable		-		1,832
Other current assets		8,106		6,267
Total current assets		174,638		165,004

Property and equipment, net		187,863		166,440
Long-term marketable securities		30,667		37,034
Goodwill		128,752		128,504
Other intangible assets, net		19,319		19,084
Other long-term assets		2,670		2,672
Total assets	$	543,909	$	518,738

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	18,358	$	15,876
Accrued compensation		9,736		12,100
Accrued liabilities and other		10,809		8,408
Short-term debt obligations		-		5,000
Income taxes payable		2,962		2,371
Total current liabilities		41,865		43,755

Long-term income taxes payable		2,181		2,181
Long-term deferred tax liabilities		7,582		6,966
Other long-term liabilities		4,605		4,621

Shareholders' equity		487,676		461,215
Total liabilities and shareholders' equity	$	543,909	$	518,738


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

	Three Months Ended
	March 31,
	2018		2017
Revenue
Injection Molding	$	51,343	$	47,916
CNC Machining		36,731		21,972
3D Printing		12,325		10,085
Sheet Metal		6,241		-
Other		1,105		194
Total revenue		107,745		80,167

Cost of revenue		49,837		34,894
Gross profit		57,908		45,273

Operating expenses
Marketing and sales		16,572		12,987
Research and development		6,665		5,823
General and administrative		12,943		8,781
Total operating expenses		36,180		27,591
Income from operations		21,728		17,682
Other income, net		178		315
Income before income taxes		21,906		17,997
Provision for income taxes		3,855		5,797
Net income	$	18,051	$	12,200

Net income per share:
Basic	$	0.67	$	0.46
Diluted	$	0.66	$	0.46

Shares used to compute net income per share:
Basic		26,879,388		26,466,731
Diluted		27,197,099		26,599,200


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

	Three Months Ended
	March 31,
	2018			2017
Operating activities
Net income	$	18,051		$	12,200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,259			4,250
Stock-based compensation expense		2,307			1,716
Deferred taxes		612			394
Amortization of held-to-maturity securities		163			301
Other		106			(56	)
Changes in operating assets and liabilities		(1,353	)		(13	)
Net cash provided by operating activities		26,145			18,792

Investing activities
Purchases of property and equipment		(25,513	)		(7,812	)
Cash used for acquisitions, net of cash acquired		(90	)		-
Purchases of marketable securities		(3,389	)		(16,520	)
Proceeds from maturities of marketable securities		13,551			10,755
Net cash used in investing activities		(15,441	)		(13,577	)

Financing activities
Payments on debt		(5,000	)		-
Proceeds from exercises of stock options and other		2,252			194
Repurchases of common stock		-			(2,662	)
Net cash used in financing activities		(2,748	)		(2,468	)
Effect of exchange rate changes on cash and cash equivalents		432			346
Net increase in cash and cash equivalents		8,388			3,093
Cash and cash equivalents, beginning of period		36,707			68,795
Cash and cash equivalents, end of period	$	45,095		$	71,888


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,
	2018			2017
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, and unrealized loss on foreign currency
GAAP net income	$	18,051		$	12,200
Add back:
Stock-based compensation expense		2,307			1,716
Amortization expense		764			163
Unrealized loss on foreign currency		156			63
Total adjustments ¹		3,227			1,942
Income tax benefits on adjustments ²		(2,043	)		(574	)
Non-GAAP net income	$	19,235		$	13,568


Non-GAAP net income per share:
Basic	$	0.72		$	0.51
Diluted	$	0.71		$	0.51

Shares used to compute non-GAAP net income per share:
Basic		26,879,388			26,466,731
Diluted		27,197,099			26,599,200


¹ Stock-based compensation expense, amortization expense, and unrealized loss on foreign currency were included in the following GAAP consolidated statement of operations categories:

	Three Months Ended
	March 31,
	2018			2017

Cost of revenue	$	287		$	197

Marketing and sales		377			269
Research and development		314			222
General and administrative		2,093			1,191
Total operating expenses		2,784			1,682

Other income, net		156			63
Total adjustments	$	3,227		$	1,942

² For the three months ended March 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
	March 31,
	2018			2017
Revenue	$	107,745		$	80,167
Income from operations		21,728			17,682
GAAP operating margin		20.2	%		22.1	%
Add back:
Stock-based compensation expense		2,307			1,716
Amortization expense		764			163
Total adjustments		3,071			1,879
Non-GAAP income from operations adjusted for stock-based compensation expense and amortization expense	$	24,799		$	19,561
Non-GAAP operating margin		23.0	%		24.4	%


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

	Three Months Ended March 31, 2018							Three Months Ended March 31, 2017		%		% Change Constant
	GAAP		Adjustments ¹			Non-GAAP		GAAP		Change ²		Currencies ³
Revenues
United States	$	84,167	$	-		$	84,167	$	60,176	39.9	%	39.9	%
Europe		19,945		(2,534	)		17,411		16,999	17.3	%	2.4	%
Japan		3,633		(176	)		3,457		2,992	21.4	%	15.5	%
Total Revenue	$	107,745	$	(2,710	)	$	105,035	$	80,167	34.4	%	31.0	%

¹ Revenue growth for the three month period ended March 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.
² This column presents the percentage change from GAAP revenue growth for the three month period ended March 31, 2017 to GAAP revenue growth for the three month period ended March 31, 2018.
³ This column presents the percentage change from GAAP revenue growth for the three month period ended March 31, 2017 (calculated using the foreign currency exchange rates in effect during that period) to non-GAAP revenue growth for the three month period ended March 31, 2018 (as recalculated using 2017 foreign currency exchange rates in order to provide a constant currency comparison).


Proto Labs, Inc.
Product Developer Information
(Unaudited)

	Three Months Ended
	March 31,
	2018	2017
Unique product developers and engineers served	18,057	14,801

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 who do not utilize our web-based customer interface; these customers are principally related to our recent acquisitions.

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