prlb20200723

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

prlb20200723_8k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 28, 2020

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)

Minnesota		001-35435		41-1939628
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification Number)

5540 Pioneer Creek Drive Maple Plain, Minnesota		55359
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:		(763) 479-3680

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	PRLB	New York Stock Exchange

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.

Results of Operations and Financial Condition.

On July 28, 2020, Proto Labs, Inc. issued a press release announcing its second quarter 2020 financial results. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

99.1

104

Press release of Proto Labs, Inc. dated July 28, 2020

Cover Page Interactive Data File (formatted as Inline XBRL)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Proto Labs, Inc.


Date:	July 28, 2020	By:	/s/ John A. Way
			John A. Way
			Chief Financial Officer

ex_194867.htm

Exhibit 99.1

Protolabs Reports Financial Results for the Second Quarter 2020

Second Quarter 2020 Revenue of $106.6 million

Second Quarter 2020 GAAP EPS of $0.47, Non-GAAP EPS of $0.59

MAPLE PLAIN, Minn. – July 28, 2020 – Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights include:

●

Revenue for the second quarter of 2020 was $106.6 million, representing an 8.1 percent decrease compared to revenue of $115.9 million in the second quarter of 2019.

●

Net income for the second quarter of 2020 was $12.6 million, or $0.47 per diluted share.

●

Non-GAAP net income was $15.9 million, or $0.59 per diluted share. See “Non-GAAP Financial Measures” below.

“The first half of 2020 has presented a great deal of challenges to all businesses, and Protolabs is no exception. We have a solid financial foundation, a healthy balance sheet, and resilient business model to weather the uncertain environment,” said Vicki Holt, President and Chief Executive Officer of Protolabs. “The COVID-19 pandemic provides an opportunity for Protolabs to demonstrate the value our digital business model can provide. During the quarter, we delivered over 8 million parts to support the medical industry, generating $12 million in revenue. Our dynamic digital manufacturing business model, and our agile and creative employees, will allow us to thrive as customer activity begins to re-accelerate.”

Additional Second Quarter 2020 Highlights include:

●

Gross margin was 49.2 percent of revenue for the second quarter of 2020, compared to 50.5 percent for the first quarter of 2020 on lower revenue.

●

Operating expenses were $38.1 million or 35.8 percent of revenue for the second quarter of 2020, down $3.2 million from $41.3 million of operating expenses in the first quarter of 2020.

●

GAAP operating margin was 13.5 percent of revenue during the second quarter of 2020, compared to 14.6 percent for the first quarter of 2020 due to lower revenue.

●

Non-GAAP operating margin was 17.6 percent of revenue during the second quarter of 2020, compared to 17.9 percent for the first quarter of 2020. See “Non-GAAP Financial Measures” below.

●

The company generated $31.0 million in cash from operations during the second quarter of 2020 up from $22.4 million in first quarter 2020.

“Our business model continues to generate strong cash flow, despite the uncertainty in the market,” said John Way, Chief Financial Officer. “We will continue to monitor demand levels and prudently manage expenses, while continuing to invest in and execute on key strategic initiatives to position our business for strong growth in the future.”

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 and unrealized gain on foreign currency (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 and amortization expense (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, and unrealized gain on foreign currency (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 second quarter 2020 financial results and financial guidance today, July 28, 2020 at 8:30 a.m. EDT. 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. EDT start time. No participant code is required. A simultaneous webcast of the call, and accompanying presentations will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/9crcgv9j. A replay will be available for 14 days following the call on the investor relations section of the Protolabs website.

About Protolabs

Protolabs is a leading digital manufacturing source for rapid prototyping and on-demand production. The 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.

Source: Proto Labs, Inc.

Investor Relations Contact:
Protolabs
Dan Schumacher, 763-479-7240
Director of Investor Relations
daniel.schumacher@protolabs.com

Media Contact:
Protolabs

Sarah Ekenberg, 763-479-7560

Marketing Manager, PR & Media

sarah.ekenberg@protolabs.com

	June 30,		December 31,
	2020		2019
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	98,003	$	125,225
Short-term marketable securities		33,128		35,437
Accounts receivable, net		61,297		57,450
Inventory		10,774		10,075
Income taxes receivable		95		-
Prepaid expenses and other current assets		9,670		8,232
Total current assets		212,967		236,419

Property and equipment, net		281,129		263,712
Goodwill		128,752		128,752
Other intangible assets, net		15,861		17,369
Long-term marketable securities		44,127		12,960
Operating lease assets		11,049		11,425
Other long-term assets		4,560		3,030
Total assets	$	698,445	$	673,667

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	17,556	$	16,804
Accrued compensation		15,138		15,058
Accrued liabilities and other		15,041		11,057
Current operating lease liabilities		3,368		3,340
Income taxes payable		-		1,322
Total current liabilities		51,103		47,581

Long-term operating lease liabilities		8,379		8,565
Long-term deferred tax liabilities		31,907		26,283
Other long-term liabilities		5,807		5,448

Shareholders' equity		601,249		585,790
Total liabilities and shareholders' equity	$	698,445	$	673,667

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue
Injection Molding	$	57,894	$	55,457	$	112,670	$	110,768
CNC Machining		28,760		38,888		66,645		76,760
3D Printing		14,236		15,266		30,184		29,746
Sheet Metal		4,669		5,472		10,318		10,497
Other		1,016		849		1,866		1,613
Total revenue		106,575		115,932		221,683		229,384

Cost of revenue		54,119		55,696		111,127		110,288
Gross profit		52,456		60,236		110,556		119,096

Operating expenses
Marketing and sales		16,936		19,285		35,116		37,862
Research and development		8,648		8,169		17,635		16,182
General and administrative		12,521		13,209		26,629		26,031
Total operating expenses		38,105		40,663		79,380		80,075
Income from operations		14,351		19,573		31,176		39,021
Other income, net		767		1,125		1,821		1,338
Income before income taxes		15,118		20,698		32,997		40,359
Provision for income taxes		2,511		4,532		6,406		8,682
Net income	$	12,607	$	16,166	$	26,591	$	31,677

Net income per share:
Basic	$	0.47	$	0.60	$	1.00	$	1.18
Diluted	$	0.47	$	0.60	$	0.99	$	1.17

Shares used to compute net income per share:
Basic		26,660,498		26,875,153		26,718,652		26,919,016
Diluted		26,760,866		27,041,422		26,837,938		27,113,328

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

	Six Months Ended
	June 30,
	2020			2019
Operating activities
Net income	$	26,591		$	31,677
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,855			14,981
Stock-based compensation expense		6,672			6,526
Deferred taxes		5,651			1,585
Amortization of held-to-maturity securities		129			7
Other		(854	)		(279	)
Changes in operating assets and liabilities		(627	)		391
Net cash provided by operating activities		53,417			54,888

Investing activities
Purchases of property, equipment and other capital assets		(33,305	)		(34,136	)
Purchases of other assets and investments		(3,000	)		(4,000	)
Purchases of marketable securities		(57,212	)		(8,983	)
Proceeds from maturities of marketable securities		28,225			29,170
Net cash used in investing activities		(65,292	)		(17,949	)

Financing activities
Proceeds from exercises of stock options and other		2,855			2,243
Purchases of shares withheld for tax obligations		(3,367	)		(2,418	)
Repurchases of common stock		(14,686	)		(21,410	)
Net cash used in financing activities		(15,198	)		(21,585	)
Effect of exchange rate changes on cash and cash equivalents		(149	)		135
Net (decrease) increase in cash and cash equivalents		(27,222	)		15,489
Cash and cash equivalents, beginning of period		125,225			85,046
Cash and cash equivalents, end of period	$	98,003		$	100,535

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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense and unrealized gain on foreign currency
GAAP net income	$	12,607		$	16,166		$	26,591		$	31,677
Add back:
Stock-based compensation expense		3,639			3,486			6,672			6,526
Amortization expense		754			863			1,508			1,734
Unrealized gain on foreign currency		(139	)		(305	)		(936	)		(58	)
Total adjustments ¹		4,254			4,044			7,244			8,202
Income tax benefits on adjustments ²		(987	)		(1,074	)		(1,662	)		(1,993	)
Non-GAAP net income	$	15,874		$	19,136		$	32,173		$	37,886


Non-GAAP net income per share:
Basic	$	0.60		$	0.71		$	1.20		$	1.41
Diluted	$	0.59		$	0.71		$	1.20		$	1.40

Shares used to compute non-GAAP net income per share:
Basic		26,660,498			26,875,153			26,718,652			26,919,016
Diluted		26,760,866			27,041,422			26,837,938			27,113,328

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019

Cost of revenue	$	936		$	797		$	1,799		$	1,530

Marketing and sales		750			614			1,368			1,163
Research and development		607			503			1,128			926
General and administrative		2,100			2,435			3,885			4,641
Total operating expenses		3,457			3,552			6,381			6,730

Other income, net		(139	)		(305	)		(936	)		(58	)
Total adjustments	$	4,254		$	4,044		$	7,244		$	8,202

²For the three and six-month periods ended June 30, 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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Revenue	$	106,575		$	115,932		$	221,683		$	229,384
Income from operations		14,351			19,573			31,176			39,021
GAAP operating margin		13.5	%		16.9	%		14.1	%		17.0	%
Add back:
Stock-based compensation expense		3,639			3,486			6,672			6,526
Amortization expense		754			863			1,508			1,734
Total adjustments		4,393			4,349			8,180			8,260
Non-GAAP income from operations	$	18,744		$	23,922		$	39,356		$	47,281
Non-GAAP operating margin		17.6	%		20.6	%		17.8	%		20.6	%

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
GAAP net income	$	12,607		$	16,166		$	26,591		$	31,677
Amortization expense		754			863			1,508			1,734
Depreciation expense		7,143			6,678			14,347			13,246
Interest income, net		(368	)		(465	)		(928	)		(1,046	)
Tax expense		2,511			4,532			6,406			8,682
EBITDA		22,647			27,774			47,924			54,293
Add back:
Stock-based compensation expense		3,639			3,486			6,672			6,526
Unrealized gain on foreign currency		(139	)		(305	)		(936	)		(58	)
Total adjustments		3,500			3,181			5,736			6,468
Adjusted EBITDA	$	26,147		$	30,955		$	53,660		$	60,761

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

	Three Months Ended June 30, 2020							Three Months Ended June 30, 2019		%			% Change Constant
	GAAP		Adjustments¹			Non-GAAP		GAAP		Change²			Currencies³
Revenues
United States	$	86,823	$	-		$	86,823	$	91,149		(4.7	)		(4.7	)
Europe		16,729		417			17,146		20,940		(20.1	)		(18.1	)
Japan		3,023		(62	)		2,961		3,843		(21.3	)		(23.0	)
Total Revenue	$	106,575	$	355		$	106,930	$	115,932		(8.1	)		(7.8	)

	Six Months Ended June 30, 2020							Six Months Ended June 30, 2019		%			% Change Constant
	GAAP		Adjustments¹			Non-GAAP		GAAP		Change²			Currencies³
Revenues
United States	$	176,899	$	-		$	176,899	$	178,960		(1.2	)		(1.2	)
Europe		37,516		1,065			38,581		42,194		(11.1	)		(8.6	)
Japan		7,268		(117	)		7,151		8,230		(11.7	)		(13.1	)
Total Revenue	$	221,683	$	948		$	222,631	$	229,384		(3.4	)		(2.9	)

¹ Revenue for the three and six-month periods ended June 30, 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.

²This column presents the percentage change from GAAP revenue for the three and six-month periods ended June 30, 2019 to GAAP revenue for the three and six-month periods ended June 30, 2020.

³ This column presents the percentage change from GAAP revenue for the three and six-month periods ended June 30, 2019 to non-GAAP revenue for the three and six-month periods ended June 30, 2020 (as recalculated using the foreign currency exchange rates in effect during the three- and six-month periods ended June 30, 2019) in order to provide a constant-currency comparison.

Proto Labs, Inc.

Product Developer Information

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

2020

2019

2020

2019

Unique product developers and engineers served

17,037

20,840

29,703

31,550

Document And Entity Information	Jul. 28, 2020
Document Information [Line Items]
Entity, Registrant Name	Proto Labs, Inc.
Document, Type	8-K
Document, Period End Date	Jul. 28, 2020
Entity, Incorporation, State or Country Code	MN
Entity, File Number	001-35435
Entity, Tax Identification Number	41-1939628
Entity, Address, Address Line One	5540 Pioneer Creek Drive
Entity, Address, City or Town	Maple Plain
Entity, Address, State or Province	MN
Entity, Address, Postal Zip Code	55359
City Area Code	763
Local Phone Number	479-3680
Title of 12(b) Security	Common Stock
Trading Symbol	PRLB
Security Exchange Name	NYSE
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0001443669