MRO Magazine

Proto Labs Reports Record Revenue for the Fourth Quarter and Full Year 2015


February 4, 2016
By Business Wire News

MAPLE PLAIN, Minn.

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, 2015.

Fourth Quarter 2015 Highlights include:

  • Revenue for the fourth quarter of 2015 increased to a record $73.8 million, 32 percent above revenue of $56.1 million in the fourth quarter of 2014. Excluding the $5.1 million revenue contribution from Alphaform, the German company acquired in the fourth quarter of 2015, legacy revenue totaled $68.7 million, an increase of 22.5 percent compared with the prior year’s fourth quarter. Excluding the negative impact on revenue from foreign currency exchange rates (“constant currency”), legacy revenue was up 25 percent versus the prior year.
  • Revenue from 3D printing totaled $9.1 million. Excluding the Alphaform 3D printing revenue of $2.5 million, legacy 3D printing revenue was $6.6 million, an increase of 69 percent from the fourth quarter of 2014.
  • Revenue growth was driven by a 21 percent increase in the number of unique product developers and engineers served to 12,414 from 10,231 in the fourth quarter of 2014.
  • Net income for the fourth quarter of 2015 was $12.0 million, or $0.45 per diluted share. Non-GAAP net income, excluding the after-tax expense of stock compensation, transaction costs and a bargain purchase gain related to the Alphaform acquisition, amortization of intangibles and unrealized foreign currency gains, was $13.4 million, or $0.50 per diluted share. See “Non-GAAP Financial Measures” below.

“In 2015, Proto Labs’ differentiated, technology-enabled digital manufacturing model helped more and more product developers rapidly take their ideas from concept to low volume production, saving R&D expense and getting their products to market faster. The fourth quarter was a strong ending to a very good year for Proto Labs with excellent growth across all our geographies and business lines,” said Vicki Holt, President and Chief Executive Officer. “On a constant currency basis, revenue in North America increased 22 percent; Europe, excluding Alphaform, grew 35 percent and Japan was up 54 percent. This strength was the result of solid execution of our marketing and sales strategy, our digital manufacturing model, which allows us to consistently deliver high quality parts, our outstanding manufacturing team members who continue to successfully scale our operations, and finally, continued strong customer demand for all our service offerings. During the quarter, on a consolidated basis, revenue from injection molding grew 23 percent, setting another quarterly record and revenue from CNC machining increased 19 percent. We were especially pleased with the growth of revenue from our legacy 3D printing, up 69 percent. This was a solid demonstration of the success of our cross-selling efforts.

“We acquired Alphaform during the quarter to accelerate our launch of 3D printing in Europe. Our new Proto Labs team members who joined us from Alphaform are partnering closely with our European and global team on the integration of that business into Proto Labs’ business model and we are on schedule. During the quarter, we completed training of the combined sales force on the full suite of our service offerings and we completed implementation of a manual order interface that will now allow customers to place orders over the Proto Labs’ website. The response to our outreach to Alphaform customers and new customers in Europe has been extremely positive and we are confident in the enhanced market opportunity that this acquisition has provided.”

Additional Fourth Quarter Highlights include:

  • Gross margin was 56.0 percent of revenue for the fourth quarter compared with 59.4 percent for the third quarter of 2015 and 59.9 percent during the fourth quarter last year. The decrease from both periods was primarily due to the 260 basis point impact of the Alphaform acquisition. Other drivers included additional investments in capacity and foreign currency exchange rates.
  • GAAP operating margin was 22.4 percent of revenue during the fourth quarter of 2015 compared to 26.2 percent for the fourth quarter of 2014. On a non-GAAP basis, operating margins were 25.3 percent. See “Non-GAAP Financial Measures” below.
  • Cash generated from operations during the fourth quarter totaled $17.3 million.

Full Year 2015 Highlights include:

  • Revenue increased 26 percent to $264.1 million compared with $209.6 million in 2014. Excluding the $5.1 million revenue contribution from Alphaform, legacy revenue totaled $259.0 million, an increase of 23.6 percent compared to 2014. On a constant currency basis, 2015 legacy revenue grew 27.2 percent and 29.6 percent including Alphaform.
  • Net income for 2015 increased to $46.5 million, or $1.77 per diluted share compared with $41.6 million, or $1.60 per diluted share in 2014. Non-GAAP net income, excluding the after-tax expense of stock compensation, transaction costs and a bargain purchase gain related to the Alphaform acquisition, amortization of intangibles and unrealized foreign currency gains, was $51.9 million, or $1.97 per diluted share. See “Non-GAAP Financial Measures” below.
  • Cash generated from operations during the year totaled $58.6 million. Cash, cash equivalents and investments were $145.6 million at December 31, 2015 compared with $128.4 million at December 31, 2014.

“Our accomplishments in 2015 have positioned us well for continued, sustainable growth and profitability. In 2016, we will focus on executing our strategy to reliably and quickly deliver quality custom parts to an increasing number of product developers. We will complete the integration of Alphaform into Proto Labs’ operations so that our European customers can purchase 3D-printed parts from all three of our technologies with the same reliability, quality and speed that the company is known for. We are continually refining our marketing and sales based on the successes we have seen over the past year. We will make further investments in R&D in 2016 and anticipate the launch of at least one significant new product offering within our injection molding service during the year. And we will pursue our ongoing efforts to ensure the most efficient, cost-effective manufacturing of high-quality parts. Proto Labs enjoys a very large market opportunity worldwide and demand for all our services remains strong. We have a clear strategy to capitalize on the unique value we deliver to customers, which will result in sustainable revenue and profit growth and allow us to continue to meet our commitments to all our stakeholders,” concluded Ms. Holt.

Non-GAAP Financial Measures

The company has included non-GAAP adjusted revenue growth that excludes the impact of changes in foreign currency exchange rates and legacy revenue excluding the revenue contribution from Alphaform from total revenues in this press release to provide investors with additional information regarding the company’s financial results. Management believes these metrics are useful in evaluating the underlying business trends and ongoing operating performance of the company.

The company has also included non-GAAP net income, adjusted for stock-based compensation expense, transaction expenses and a bargain purchase gain related to the acquisition of Alphaform, amortization expense, and unrealized foreign currency activity (collectively, “non-GAAP net income”), in this press release to provide investors with additional information regarding the company’s financial results.

The company has also included a reconciliation of non-GAAP condensed consolidated statement of operations to GAAP condensed consolidated statement of operations. The non-GAAP condensed consolidated statement of operations provides non-GAAP operating income and non-GAAP net income, which 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 non-GAAP operating income and non-GAAP net income 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 2015 financial results today, February 4, 2016 at 8:30 a.m. ET. To access the call in the U.S. please dial 877-709-8150. Outside the U.S. please dial 201-689-8354. No participant code is required. A simultaneous webcast of the call will be available via the investor relations section of the Proto Labs website and the following link: http://edge.media-server.com/m/p/gv3m2epe. A replay will be available for 14 days following the call on the investor relations section of Proto Labs’ website.

About Proto Labs, Inc.

Proto Labs is the world’s fastest digital manufacturing source for custom prototypes and low-volume production parts. The technology-enabled company uses advanced 3D printing, CNC machining and injection molding technologies to produce parts within days. The result is an unprecedented speed-to-market value for product designers and engineers worldwide. 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 Proto Labs 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 Proto Labs’ future results. The forward-looking statements included in this press release are made only as of the date hereof. Proto Labs cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Proto Labs 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,
20152014
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 47,653 $ 43,329
Short-term marketable securities 33,201 30,706
Accounts receivable, net 36,125 24,226
Inventory 9,771 6,194
Income taxes receivable 6,028
Other current assets   5,224   3,889
Total current assets 138,002 108,344
 
Property and equipment, net 125,475 91,626
Long-term marketable securities 64,789 54,318
Goodwill 28,916 28,916
Other intangible assets, net 3,337 4,083
Other long-term assets   517   227
Total assets $ 361,036 $ 287,514
 
Liabilities and shareholders’ equity
Current liabilities
Accounts payable $ 13,643 $ 7,882
Accrued compensation 9,993 6,067
Accrued liabilities and other 2,626 2,718
Income taxes payable 1,953
Current portion of long-term debt obligations     139
Total current liabilities 26,262 18,759
 
Long-term deferred tax liabilities 4,240 1,846
Long-term debt obligations 10
Other long-term liabilities 2,889 1,360
 
Shareholders’ equity   327,645   265,539
Total liabilities and shareholders’ equity $ 361,036 $ 287,514
 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
               
Three Months EndedYear Ended
December 31,December 31,

2015

2014

2015

2014

Revenue
Injection Molding (Protomold) $ 43,865 $ 35,678 $ 163,387 $ 140,282
CNC Machining (Firstcut) 19,581 16,507 74,368 59,914
3D Printing (Fineline) 9,094 3,884 25,132 9,387
Other  1,219    1,219  
Total revenue 73,759 56,069 264,106 209,583
 
Cost of revenue  32,485  22,457  109,703  81,182
Gross profit 41,274 33,612 154,403 128,401
 
Operating expenses
Marketing and sales 10,805 8,115 39,188 29,144
Research and development 4,879 4,682 18,350 16,607
General and administrative  9,033  6,152  29,716  22,122
Total operating expenses  24,717  18,949  87,254  67,873
Income from operations 16,557 14,663 67,149 60,528
Other income, net  612  22  712  3
Income before income taxes 17,169 14,685 67,861 60,531
Provision for income taxes  5,176  4,492  21,347  18,896
Net income$11,993$10,193$46,514$41,635
 
Net income per share:
Basic$0.46$0.39$1.79$1.62
Diluted$0.45$0.39$1.77$1.60
 
Shares used to compute net income per share:
Basic 26,164,340 25,815,973 26,005,858 25,692,699
Diluted 26,465,043 26,152,891 26,320,284 26,100,320
 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Year Ended
December 31,
20152014
Operating activities
Net income $ 46,514 $ 41,635
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,126 11,138
Stock-based compensation expense 6,082 4,809
Deferred taxes 2,837 (1,875 )
Excess tax benefit from stock-based compensation (5,539 ) (4,470 )
Amortization of held-to-maturity securities 1,234 1,517
Gain on acquisition (344 )
Changes in operating assets and liabilities  (6,353)  4,456  
Net cash provided by operating activities  58,557    57,210  
 
Investing activities
Purchases of property and equipment (44,362 ) (43,507 )
Acquisitions, net of cash acquired (5,032 ) (33,864 )
Purchases of marketable securities (66,393 ) (60,186 )
Proceeds from sales and maturities of marketable securities  52,193    74,058  
Net cash used in investing activities  (63,594)  (63,499)
 
Financing activities
Payments on debt (152 ) (1,054 )
Acquisition-related contingent consideration (1,400 ) (1,200 )
Proceeds from exercises of stock options and other 6,251 4,820
Excess tax benefit from stock-based compensation  5,539    4,470  
Net cash provided by financing activities  10,238    7,036  
Effect of exchange rate changes on cash and cash equivalents  (877)  (457)
Net increase in cash and cash equivalents 4,324 290
Cash and cash equivalents, beginning of period  43,329    43,039  
Cash and cash equivalents, end of period$47,653  $43,329  
 
 
Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
                       
Three Months EndedThree Months Ended
December 31, 2015December 31, 2014

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue
Injection Molding (Protomold) $ 43,865 $ $ 43,865 $ 35,678 $ $ 35,678
CNC Machining (Firstcut) 19,581 19,581 16,507 16,507
3D Printing (Fineline) 9,094 9,094 3,884 3,884
Other   1,219       1,219        
Total revenue 73,759 73,759 56,069 56,069
 
Cost of revenue  32,485   (135 )  32,350  22,457   (104 )  22,353
Gross profit 41,274 135 41,409 33,612 104 33,716
 
Operating expenses
Marketing and sales 10,805 (279 ) 10,526 8,115 (242 ) 7,873
Research and development 4,879 (318 ) 4,561 4,682 (278 ) 4,404
General and administrative  9,033  (1,364)  7,669  6,152  (810)  5,342
Total operating expenses  24,717  (1,961)  22,756  18,949  (1,330)  17,619
Income from operations 16,557 2,096 18,653 14,663 1,434 16,097
Other income (expense), net  612  (301)  311  22  44    66
Income before income taxes 17,169 1,795 18,964 14,685 1,478 16,163
Provision for income taxes  5,176  417    5,593  4,492  474    4,966
Net income$11,993$1,378  $13,371$10,193$1,004  $11,197
 
Net income per share:
Basic$0.46$0.05  $0.51$0.39$0.04  $0.43
Diluted$0.45$0.05  $0.50$0.39$0.04  $0.43
 
Shares used to compute net income per share:
Basic 26,164,340 26,164,340 26,164,340 25,815,973 25,815,973 25,815,973
Diluted 26,465,043 26,465,043 26,465,043 26,152,891 26,152,891 26,152,891
 
 
Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
                       
Year EndedYear Ended
December 31, 2015December 31, 2014

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue
Injection Molding (Protomold) $ 163,387 $ $ 163,387 $ 140,282 $ $ 140,282
CNC Machining (Firstcut) 74,368 74,368 59,914 59,914
3D Printing (Fineline) 25,132 25,132 9,387 9,387
Other   1,219       1,219        
Total revenue 264,106 264,106 209,583 209,583
 
Cost of revenue  109,703   (513 )  109,190  81,182   (386 )  80,796
Gross profit 154,403 513 154,916 128,401 386 128,787
 
Operating expenses
Marketing and sales 39,188 (1,074 ) 38,114 29,144 (927 ) 28,217
Research and development 18,350 (1,285 ) 17,065 16,607 (1,048 ) 15,559
General and administrative  29,716  (4,871)  24,845  22,122  (2,944)  19,178
Total operating expenses  87,254  (7,230)  80,024  67,873  (4,919)  62,954
Income from operations 67,149 7,743 74,892 60,528 5,305 65,833
Other income (expense), net  712  (90)  622  3  275    278
Income before income taxes 67,861 7,653 75,514 60,531 5,580 66,111
Provision for income taxes  21,347  2,240    23,587  18,896  1,758    20,654
Net income$46,514$5,413  $51,927$41,635$3,822  $45,457
 
Net income per share:
Basic$1.79$0.21  $2.00$1.62$0.15  $1.77
Diluted$1.77$0.21  $1.97$1.60$0.15  $1.74
 
Shares used to compute net income per share:
Basic 26,005,858 26,005,858 26,005,858 25,692,699 25,692,699 25,692,699
Diluted 26,320,284 26,320,284 26,320,284 26,100,320 26,100,320 26,100,320
 
 
Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Net Income per Share
(In thousands, except share and per share amounts)
(Unaudited)
               
Three Months EndedYear Ended
December 31,December 31,

2015

2014

2015

2014

Non-GAAP net income, adjusted for stock-based compensation expense,
amortization expense, unrealized loss on foreign currency,
gain on acquisition and acquisition costs:
GAAP net income $ 11,993 $ 10,193 $ 46,514 $ 41,635
Add back:
Stock-based compensation expense 1,567 1,248 6,082 4,809
Amortization expense 186 186 746 496
Unrealized loss on foreign currency 43 44 254 275
Acquisition costs 343 915
Gain on acquisition  (344)      (344)    
Total adjustments  1,795    1,478    7,653    5,580  
Income tax benefits on adjustments  (417)  (474)  (2,240)  (1,758)
Non-GAAP net income$13,371  $11,197  $51,927  $45,457  
 
 
Non-GAAP net income per share:
Basic$0.51  $0.43  $2.00  $1.77  
Diluted$0.50  $0.43  $1.97  $1.74  
 
Shares used to compute non-GAAP net income per share:
Basic 26,164,340 25,815,973 26,005,858 25,692,699
Diluted 26,465,043 26,152,891 26,320,284 26,100,320
 
 
Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth
(In thousands)
(Unaudited)
                   
Three Months Ended% ChangeYear Ended% Change
December 31,%ConstantDecember 31,%Constant

2015

2014

ChangeCurrencies1

2015

2014

ChangeCurrencies1
Revenues
United States $ 53,911 $ 44,336 21.6 % 21.6 % $ 208,017 $ 165,117 26.0 % 26.0 %
Europe 17,271 9,967 73.3 % 87.9 % 47,433 37,490 26.5 % 44.5 %
Japan  2,577  1,76645.9%54.1%  8,656  6,97624.1%41.3%
Total Revenue$73,759$56,06931.6%34.0%$264,106$209,58326.0%29.6%
 

1 Revenue growth for the three months and year ended December 31, 2015 has been recalculated using 2014 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.

 
 
Three Months Ended% ChangeYear Ended% Change
December 31,%ConstantDecember 31,%Constant

2015

2014

Change2

Currencies2

2015

2014

Change2

Currencies2
Revenues
United States $ 53,911 $ 44,336 21.6 % 21.6 % $ 208,017 $ 165,117 26.0 % 26.0 %
Europe 12,190 9,967 22.3 % 34.7 % 42,352 37,490 13.0 % 29.7 %
Japan  2,577  1,76645.9%54.1%  8,656  6,97624.1%41.3%
Total Revenue$68,678$56,06922.5%25.0%$259,025$209,58323.6%27.2%
 
2 Revenue growth for the three months and year ended December 31, 2015 has been recalculated to exclude revenue earned from our acquisition of Alphaform, and using 2014 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.
 
 
Proto Labs, Inc.
Revenue by Geography – Based on Shipping Location
(In thousands)
(Unaudited)
               
Three Months EndedYear Ended
December 31,December 31,

2015

2014

2015

2014

Revenues
Domestic
United States $ 49,709 $ 42,223 $ 194,065 $ 156,033
International
Europe 17,271 9,967 47,433 37,490
Japan 2,577 1,766 8,656 6,976
United States  4,202  2,113  13,952  9,084
Total international  24,050  13,846  70,041  53,550
Total revenue$73,759$56,069$264,106$209,583
 
 
Proto Labs, Inc.
Product Developer Information
(Unaudited)
               
Three Months EndedYear Ended
December 31,December 31,
2015201420152014
Unique product developers and engineers served12,41410,23127,23521,552
                         
Note: the data above does not include product developers and engineers who purchased products attributable to our acquisition of Alphaform during the periods presented
 

Proto Labs, Inc.
Investor Relations:
John Way, 763-479-7726
john.way@protolabs.com
or
Jenifer Kirtland, 408-656-9496
jkirtland@evcgroup.com
or
Media Relations:
Bill Dietrick, 763-479-7664
bill.dietrick@protolabs.com