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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): October 28, 2021

 

 

 

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.  ☐

 

 

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Item 2.02.

Results of Operations and Financial Condition.

 

On October 28, 2021, Proto Labs, Inc. issued a press release announcing its third quarter 2021 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	Press release of Proto Labs, Inc. dated October 28, 2021.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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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:	October 28, 2021	By:	/s/ John A. Way
			John A. Way
			Chief Financial Officer

 

 

Exhibit 99.1

 

 

3D Printing CNC Machining Sheet Metal Fabrication Injection Molding

 

 

Protolabs Reports Financial Results for the Third Quarter of 2021

 

Record Revenue of $125.3 million in the Third Quarter of 2021, an increase of 17% year-over-year

 

MAPLE PLAIN, Minn. – October 28, 2021 – Proto Labs, Inc. (NYSE: PRLB), the world’s leading provider of digital manufacturing services, today announced financial results for the third quarter ended September 30, 2021.

 

Third Quarter 2021 Highlights include:

 

●

Revenue for the third quarter of 2021 was $125.3 million, representing a 16.6 percent increase compared to revenue of $107.5 million in the third quarter of 2020.

●

Hubs generated $8.8 million of revenue in the third quarter.

●

Net income for the third quarter of 2021 was $4.8 million, or $0.17 per diluted share.

●

Non-GAAP net income was $9.7 million, or $0.35 per diluted share. See “Non-GAAP Financial Measures” below.

 

“We achieved record revenue in the third quarter amidst a difficult backdrop of global supply chain issues and labor and materials constraints. During the quarter, we also received external recognition of our best-in-class digital manufacturing capabilities as the World Economic Forum announced our induction into their Global Lighthouse Network, recognizing our industry leading efforts to implement Fourth Industrial Revolution technologies,” noted Rob Bodor, President and Chief Executive Officer. “We continue to focus on the long-term market opportunities and invest in the business to serve the evolving needs of our customers.”

 

Additional Third Quarter 2021 Highlights include:

 

●

Protolabs served 23,457 unique product developers during the quarter, representing a 24.8 percent increase over the third quarter of 2020.

●

Gross margin in the third quarter of 2021 was 44.1 percent of revenue; Non-GAAP gross margin was 44.9 percent of revenue. See “Non-GAAP Financial Measures” below.

●

EBITDA margin was 13.7 percent of revenue in the third quarter of 2021; adjusted EBITDA margin was 17.1 percent of revenue in the third quarter of 2021. See “Non-GAAP Financial Measures” below.

●

Cash and investments balance was $83.9 million as of September 30, 2021.

 

“Our earnings in the third quarter were impacted by post pandemic-related cost inflation, as well as continued investments in our systems and product offering in order to maintain our position as the largest and fastest provider of digital manufacturing services,” added John Way, Chief Financial Officer. “We have a very strong balance sheet with $84 million in cash and investments and no debt, allowing us to continue to invest in future growth and return capital to our shareholders.”

 

 

Non-GAAP Financial Measures

 

The company has included non-GAAP revenue growth that excludes the impact of changes in foreign currency exchange rates and revenue earned from our acquisition of Hubs (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 third quarter 2021 financial results and fourth quarter 2021 outlook today, October 28, 2021 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 presentation will be available via the investor relations section of the Protolabs website and the following link: https://edge.media-server.com/mmc/p/kff4bprd. 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 provider of digital manufacturing services. The e-commerce-based company offers injection molding, CNC machining, 3D printing, and sheet metal fabrication to product developers, engineers, and supply chain teams across the globe. Protolabs serves customers using in-house production capabilities that bring unprecedented speed in tandem with Hubs, a Protolabs Company, which serves customers through its network of premium manufacturing partners. Together, they help companies bring new ideas to market with the fastest and most comprehensive digital manufacturing service in the world. 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

Vice President of Investor Relations and FP&A

daniel.schumacher@protolabs.com

 

Media Contact

Protolabs

Brent Renneke, 763-479-7704

PR & Media Strategist

brent.renneke@protolabs.com

 

 

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

		September 30,				December 31,
		2021				2020
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	47,802			$	127,603
Short-term marketable securities			16,542				34,088
Accounts receivable, net			85,629				57,877
Inventory			9,813				10,862
Income taxes receivable			1,766				540
Prepaid expenses and other current assets			10,571				11,032
Total current assets			172,123				242,002
Property and equipment, net			283,019				282,666
Goodwill			404,240				128,752
Other intangible assets, net			39,816				14,350
Long-term marketable securities			19,557				59,357
Operating lease assets			5,197				9,855
Finance lease assets			2,022				2,396
Other long-term assets			4,337				4,826
Total assets		$	930,311			$	744,204
Liabilities and shareholders' equity
Current liabilities
Accounts payable		$	22,735			$	18,248
Accrued compensation			15,269				11,989
Accrued liabilities and other			12,636				16,193
Current contingent consideration			2,506				-
Current operating lease liabilities			2,362				3,272
Current finance lease liabilities			555				552
Total current liabilities			56,063				50,254
Long-term contingent consideration			2,294				-
Long-term operating lease liabilities			2,792				7,586
Long-term finance lease liabilities			1,498				1,919
Long-term deferred tax liabilities			36,331				33,854
Other long-term liabilities			6,712				6,235
Shareholders' equity			824,621				644,356
Total liabilities and shareholders' equity		$	930,311			$	744,204

 

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Proto Labs, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Revenue
Injection Molding		$	57,685			$	53,257			$	172,212			$	165,927
CNC Machining			43,658				33,115				121,953				99,760
3D Printing			18,589				16,294				53,994				46,478
Sheet Metal			4,854				3,988				14,790				14,306
Other			556				850				1,567				2,716
Total revenue			125,342				107,504				364,516				329,187
Cost of revenue			70,018				52,861				197,237				163,988
Gross profit			55,324				54,643				167,279				165,199
Operating expenses
Marketing and sales			21,422				16,705				61,946				51,821
Research and development			10,614				7,915				33,855				25,550
General and administrative			16,361				12,354				44,186				38,983
Total operating expenses			48,397				36,974				139,987				116,354
Income from operations			6,927				17,669				27,292				48,845
Other income (expense), net			136				728				(40	)			2,549
Income before income taxes			7,063				18,397				27,252				51,394
Provision for income taxes			2,228				3,700				5,790				10,106
Net income		$	4,835			$	14,697			$	21,462			$	41,288
Net income per share:
Basic		$	0.17			$	0.55			$	0.78			$	1.54
Diluted		$	0.17			$	0.55			$	0.77			$	1.54
Shares used to compute net income per share:
Basic			27,713,229				26,736,709				27,638,611				26,724,715
Diluted			27,730,105				26,886,433				27,707,784				26,861,647

 

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Proto Labs, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

		Nine Months Ended
		September 30,
		2021				2020
Operating activities
Net income		$	21,462			$	41,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			30,231				23,891
Stock-based compensation expense			15,539				10,617
Deferred taxes			(139	)			6,578
Amortization of marketable securities			374				202
Realized gain on available-for-sale securities			(72	)			-
Changes in fair value of contingent consideration			(8,513	)			-
Other			140				(865	)
Changes in operating assets and liabilities			(26,797	)			664
Net cash provided by operating activities			32,225				82,375
Investing activities
Purchases of property, equipment and other capital assets			(27,956	)			(40,489	)
Cash used for acquisitions, net of cash acquired			(127,413	)			-
Purchases of other assets and investments			-				(3,000	)
Purchases of marketable securities			(15,159	)			(90,596	)
Proceeds from sales of marketable securities			57,089				-
Proceeds from maturities of marketable securities			15,114				56,428
Net cash used in investing activities			(98,325	)			(77,657	)
Financing activities
Proceeds from exercises of stock options and other			3,838				5,674
Purchases of shares withheld for tax obligations			(4,209	)			(3,367	)
Repurchases of common stock			(13,036	)			(14,686	)
Principal repayments of finance lease obligations			(413	)			-
Net cash used in financing activities			(13,820	)			(12,379	)
Effect of exchange rate changes on cash and cash equivalents			119				690
Net decrease in cash and cash equivalents			(79,801	)			(6,971	)
Cash and cash equivalents, beginning of period			127,603				125,225
Cash and cash equivalents, end of period		$	47,802			$	118,254

 

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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								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency and transaction costs
GAAP net income		$	4,835			$	14,697			$	21,462			$	41,288
Add back:
Stock-based compensation expense			4,978				3,945				15,539				10,617
Amortization expense			1,568				754				4,601				2,262
Unrealized (gain) loss on foreign currency			121				(84	)			341				(1,020	)
Transaction costs 1			(730	)			-				(5,870	)			-
Total adjustments 2			5,937				4,615				14,611				11,859
Income tax benefits on adjustments 3			(1,063	)			(1,368	)			(4,639	)			(3,030	)
Non-GAAP net income		$	9,709			$	17,944			$	31,434			$	50,117
Non-GAAP net income per share:
Basic		$	0.35			$	0.67			$	1.14			$	1.88
Diluted		$	0.35			$	0.67			$	1.13			$	1.87
Shares used to compute non-GAAP net income per share:
Basic			27,713,229				26,736,709				27,638,611				26,724,715
Diluted			27,730,105				26,886,433				27,707,784				26,861,647

	1 Transaction costs include direct costs incurred in our acquisition of Hubs, Inc. and the impact of changes in the fair value of acquisition-related contingent consideration obligations.
	2 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								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Cost of revenue		$	986			$	989			$	2,974			$	2,788
Marketing and sales			1,059				865				2,841				2,233
Research and development			776				638				2,144				1,766
General and administrative			2,995				2,207				6,311				6,092
Total operating expenses			4,830				3,710				11,296				10,091
Other (income) loss, net			121				(84	)			341				(1,020	)
Total adjustments		$	5,937			$	4,615			$	14,611			$	11,859

 

	3 For the three and nine-month periods ended September 30, 2021 and 2020, 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								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Revenue		$	125,342			$	107,504			$	364,516			$	329,187
Income from operations			6,927				17,669				27,292				48,845
GAAP operating margin			5.5	%			16.4	%			7.5	%			14.8	%
Add back:
Stock-based compensation expense			4,978				3,945				15,539				10,617
Amortization expense			1,568				754				4,601				2,262
Transaction costs 1			(730	)			-				(5,870	)			-
Total adjustments			5,816				4,699				14,270				12,879
Non-GAAP income from operations		$	12,743			$	22,368			$	41,562			$	61,724
Non-GAAP operating margin			10.2	%			20.8	%			11.4	%			18.8	%

	1 Transaction costs include direct costs incurred in our acquisition of Hubs, Inc. and the impact of changes in the fair value of acquisition-related contingent consideration obligations.

 

 

Proto Labs, Inc.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

(In thousands)

(Unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
GAAP net income		$	4,835			$	14,697			$	21,462			$	41,288
Amortization expense			1,568				754				4,601				2,262
Depreciation expense			8,536				7,282				25,630				21,629
Interest income, net			(55	)			(255	)			(207	)			(1,183	)
Tax expense			2,228				3,700				5,790				10,106
EBITDA			17,112				26,178				57,276				74,102
Add back:
Stock-based compensation expense			4,978				3,945				15,539				10,617
Unrealized (gain) loss on foreign currency			121				(84	)			341				(1,020	)
Transaction costs 1			(730	)			-				(5,870	)			-
Total adjustments			4,369				3,861				10,010				9,597
Adjusted EBITDA		$	21,481			$	30,039			$	67,286			$	83,699

 

1 Transaction costs include direct costs incurred in our acquisition of Hubs, Inc. and the impact of changes in the fair value of acquisition-related contingent consideration obligations.

 

 

Proto Labs, Inc.

Comparison of GAAP to Non-GAAP Revenue Growth

(In thousands)

(Unaudited)

 

		Three Months Ended September 30, 2021																Three Months Ended September 30, 2020				%
		GAAP				Foreign Currency1				Hubs Acquisition2				Non-GAAP				GAAP				Change3				% Change Organic4
Revenues
United States		$	100,127			$	-			$	(4,729	)		$	95,398			$	85,608				17.0	%			11.4	%
Europe			22,155				(513	)			(4,022	)			17,620				18,897				17.2				(6.8	)
Japan			3,060				114				-				3,174				2,999				2.0				5.8
Total Revenue		$	125,342			$	(399	)		$	(8,751	)		$	116,192			$	107,504				16.6	%			8.1	%

 

		Nine Months Ended September 30, 2021																Nine Months Ended September 30, 2020				%
		GAAP				Foreign Currency1				Hubs Acquisition2				Non-GAAP				GAAP				Change3				% Change Organic4
Revenues
United States		$	286,524			$	-			$	(12,512	)		$	274,012			$	262,507				9.1	%			4.4	%
Europe			68,259				(3,986	)			(10,942	)			53,331				56,413				21.0				(5.5	)
Japan			9,733				83				-				9,816				10,267				(5.2	)			(4.4	)
Total Revenue		$	364,516			$	(3,903	)		$	(23,454	)		$	337,159			$	329,187				10.7	%			2.4	%

 

	1 Revenue for the three and nine-month periods ended September 30, 2021 has been recalculated using 2020 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 Revenue for the three and nine-month periods ended September 30, 2021 has been recalculated to exclude revenue earned from our acquisition of Hubs, Inc. to provide information useful in evaluating the underlying business trends excluding the impact of acquisitions.
	3 This column presents the percentage change from GAAP revenue for the three and nine-month periods ended September 30, 2020 to GAAP revenue for the three and nine-month periods ended September 30, 2021.
	4 This column presents the percentage change from GAAP revenue for the three and nine-month periods ended September 30, 2020 to non-GAAP revenue for the three and nine-month periods ended September 30, 2021 (as recalculated using the foreign currency exchange rates in effect during the three- and nine-month periods ended September 30, 2020, excluding the impact of Hubs, Inc. acquisition) in order to provide a constant-currency comparison.

 

 

Proto Labs, Inc.

Product Developer Information

(Unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Unique product developers and engineers served			23,457				18,796				49,300				37,504