Q4 2018 Revenue of $112.8 million, an
increase of 20% over Q4 2017Full Year 2018 Revenue of $445.6
million, an increase of 29% over 2017Q4 2018 Net Income of
$19.3 million, an increase of 35% over Q4 2017Full Year 2018
Net Income of $76.6 million, an increase of 48% over 2017
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.
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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Investor Relations Contact:ProtolabsDan Schumacher,
763-479-7240Director of Investor
Relationsdaniel.schumacher@protolabs.comorMedia
Contact:ProtolabsSarah Ekenberg, 763-479-7560Marketing Manager, PR
& Mediasarah.ekenberg@protolabs.com
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