Protolabs Reports Financial Results for the Third Quarter of 2024

MINNEAPOLIS--(BUSINESS WIRE)--Proto Labs, Inc. ("Protolabs" or the "Company") (NYSE: PRLB), the world's leading provider of digital manufacturing services, today announced financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Financial Highlights:

• Revenue was $125.6 million, a 3.9% decrease compared to record revenue of $130.7 million in the third quarter of 2023.
• Revenue generated from Protolabs Network was $25.3 million, a 11.6% increase compared to the third quarter of 2023.
• Net income was $7.2 million, or $0.29 per diluted share, compared to $8.0 million, or $0.31 per diluted share, in the third quarter of 2023.
• Non-GAAP net income was $11.8 million, or $0.47 per diluted share, compared to $13.2 million, or $0.51 per diluted share, in the third quarter of 2023. See "Non-GAAP Financial Measures" below.
• EBITDA was $17.5 million, or 13.9% of revenue. See "Non-GAAP Financial Measures" below.
• Adjusted EBITDA was $21.9 million, or 17.4% of revenue, compared to $23.9 million, or 18.3% of revenue, in the third quarter of 2023. See "Non-GAAP Financial Measures" below.

"Our disciplined approach and resilient business model drove solid financial results in the third quarter, despite continued dynamic challenges in the manufacturing sector," said Rob Bodor, President and Chief Executive Officer. "We remain committed to accelerating our growth, as highlighted by the actions we initiated at the end of the second quarter to reorganize our internal structure and better position the company for growth and value-creation over the long-term. We are committed to executing on our priorities and increasing value for our shareholders."

Dan Schumacher, Chief Financial Officer, commented: "In the third quarter, our business generated its highest quarterly operating cash flow since 2020-before the acquisition of 3D Hubs. This is a testament to the profitability of Protolabs' model against any macro backdrop, driven by our unique combined factory and network model. We will continue to invest profits to accelerate growth and create value for shareholders."

Additional Third Quarter 2024 Highlights:

• Customer contact information
  • Protolabs served 22,511 customer contacts during the quarter.
  • Revenue per customer contact decreased 1.5% year-over-year to $5,580. Year-to-date, revenue per customer contact is up 4.7%.
• Gross margin was 45.6% of revenue, compared to 45.4% of revenue in the third quarter of 2023.
• Non-GAAP gross margin was 46.2% of revenue, compared to 46.0% of revenue in the third quarter of 2023. See "Non-GAAP Financial Measures" below.
• Cash flow from operations was $24.8 million in the third quarter of 2024.
• Cash and investments balance was $117.6 million as of September 30, 2024.

Fourth Quarter 2024 Outlook

For the fourth quarter of 2024, the Company expects to generate revenue between $115 million and $123 million.

The Company expects fourth quarter 2024 diluted net income per share between $0.10 and $0.18, and non-GAAP diluted net income per share between $0.28 and $0.36. See "Non-GAAP Financial Measures" below.

Non-GAAP Financial Measures

The Company has included non-GAAP revenue growth by region and by service line that excludes the impact of changes in foreign currency exchange rates (collectively, "non-GAAP revenue growth"). Management believes these metrics, when viewed in conjunction with the comparable GAAP 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 costs related to the Japan closure activities (collectively, "Adjusted EBITDA"), in this press release to provide investors with additional information regarding the Company's financial results. The Company has also included earnings before interest, taxes, depreciation and amortization margin ("EBITDA margin") and EBITDA margin, adjusted for stock-based compensation expense, unrealized (gain) loss on foreign currency and costs related to the Japan closure activities (collectively, "Adjusted EBITDA margin"), in this press release to provide investors with additional information regarding the Company's financial results.

The Company has included non-GAAP gross margin, adjusted for stock-based compensation expense and amortization expense 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 costs related to the closure of Japan (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 costs related to the closure of Japan (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 gross margin, non-GAAP operating margin, non-GAAP revenue growth by region and by service, and Adjusted EBITDA and Adjusted EBITDA margin, 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 2024 financial results and fourth quarter 2024 outlook today, November 1, 2024 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/b94yu8yp/. 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 fastest and most comprehensive digital manufacturing service in the world. Our digital factories produce low-volume parts in days while Protolabs Network unlocks advanced capabilities and volume pricing through its highly vetted manufacturing partners. The result? One manufacturing source-from prototyping to production-for product developers, engineers, and supply chain teams across the globe. See what's next at protolabs.com.

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)
	September 30, 2024			December 31, 2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	87,873		$	83,790
Short-term marketable securities		12,638			19,013
Accounts receivable, net		69,464			72,848
Inventory		12,415			13,657
Income taxes receivable		665			2,228
Prepaid expenses and other current assets		10,019			9,124
Total current assets		193,074			200,660
Property and equipment, net		237,942			253,655
Goodwill		273,991			273,991
Other intangible assets, net		22,890			25,584
Long-term marketable securities		17,120			8,019
Operating lease assets		3,519			4,628
Finance lease assets		759			960
Other long-term assets		4,491			4,856
Total assets	$	753,786		$	772,353
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	15,004		$	15,636
Accrued compensation		17,549			15,292
Accrued liabilities and other		18,455			16,872
Current operating lease liabilities		1,450			1,585
Current finance lease liabilities		306			296
Income taxes payable		994			-
Total current liabilities		53,758			49,681
Long-term operating lease liabilities		1,979			3,008
Long-term finance lease liabilities		365			595
Long-term deferred tax liabilities		12,688			18,742
Other long-term liabilities		5,003			5,032
Shareholders' equity		679,993			695,295
Total liabilities and shareholders' equity	$	753,786		$	772,353

Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue
Injection Molding	$	46,831		$	51,688		$	148,574		$	152,455
CNC Machining		53,327			52,916			154,498			149,317
3D Printing		21,437			21,622			64,300			63,952
Sheet Metal		3,743			4,291			11,218			12,478
Other Revenue		281			188			550			627
Total Revenue		125,619			130,705			379,140			378,829
Cost of revenue		68,389			71,423			207,897			212,648
Gross profit		57,230			59,282			171,243			166,181
Operating expenses
Marketing and sales		22,619			21,682			69,070			65,863
Research and development		9,772			10,105			31,600			30,647
General and administrative		16,259			17,058			49,167			49,713
Closure of Japan business		-			22			-			186
Total operating expenses		48,650			48,867			149,837			146,409
Income from operations		8,580			10,415			21,406			19,772
Other income (loss), net		1,288			320			3,548			(1,758	)
Income before income taxes		9,868			10,735			24,954			18,014
Provision for income taxes		2,679			2,781			7,957			7,784
Net income	$	7,189		$	7,954		$	16,997		$	10,230
Net income per share:
Basic	$	0.29		$	0.31		$	0.67		$	0.39
Diluted	$	0.29		$	0.31		$	0.67		$	0.39
Shares used to compute net income per share:
Basic		24,980,536			26,023,830			25,304,985			26,296,304
Diluted		25,022,485			26,028,456			25,382,280			26,327,606

Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Nine Months Ended September 30,
		2024				2023
Operating activities
Net income	$	16,997			$	10,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,984				28,213
Stock-based compensation expense		12,716				11,811
Deferred taxes		(6,140	)			(9,197	)
Interest on finance lease obligations		26				859
Loss on impairment of equipment		256				-
Loss on foreign currency translation		-				3,906
Gain on disposal of property and equipment		(24	)			(498	)
Other		103				122
Changes in operating assets and liabilities		9,617				10,600
Net cash provided by operating activities		60,535				56,046
Investing activities
Purchases of property, equipment and other capital assets		(8,339	)			(9,935	)
Proceeds from sales of property, equipment and other capital assets		34				693
Purchases of marketable securities		(18,087	)			-
Proceeds from call redemptions and maturities of marketable securities		15,709				19,115
Net cash (used in) provided by investing activities		(10,683	)			9,873
Financing activities
Proceeds from exercises of stock options and employee stock purchases		2,094				1,986
Purchases of shares withheld for tax obligations		(1,920	)			(1,436	)
Repurchases of common stock		(45,958	)			(39,053	)
Principal repayments of finance lease obligations		(220	)			(234	)
Net cash used in financing activities		(46,004	)			(38,737	)
Effect of exchange rate changes on cash and cash equivalents		235				(244	)
Net increase in cash and cash equivalents		4,083				26,938
Cash and cash equivalents, beginning of period		83,790				56,558
Cash and cash equivalents, end of period	$	87,873			$	83,496

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 September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency and costs related to Japan closure activities
GAAP net income	$	7,189			$	7,954			$	16,997			$	10,230
Add back:
Stock-based compensation expense		4,196				4,441				12,716				11,811
Amortization expense		888				1,461				2,796				4,471
Unrealized (gain) loss on foreign currency		174				(29	)			323				86
Costs related to Japan closure activities		-				22				-				4,093
Total adjustments 1		5,258				5,895				15,835				20,461
Income tax benefits on adjustments 2		(627	)			(633	)			(1,066	)			(931	)
Non-GAAP net income	$	11,820			$	13,216			$	31,766			$	29,760
Non-GAAP net income per share:
Basic	$	0.47			$	0.51			$	1.26			$	1.13
Diluted	$	0.47			$	0.51			$	1.25			$	1.13
Shares used to compute non-GAAP net income per share:
Basic		24,980,536				26,023,830				25,304,985				26,296,304
Diluted		25,022,485				26,028,456				25,382,280				26,327,606

1

Stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency and costs related to Japan closure activities were included in the following GAAP consolidated statement of operations categories:

	Three Months Ended September 30,							Nine Months Ended September 30,
	2024			2023				2024			2023
Cost of revenue	$	817		$	805			$	2,428		$	2,416
Marketing and sales		727			961				2,378			2,508
Research and development		671			675				2,031			1,888
General and administrative		2,869			3,461				8,675			9,471
Closure of Japan business		-			22				-			186
Total operating expenses		4,267			5,119				13,084			14,053
Other income (loss), net		174			(29	)			323			3,992
Total adjustments	$	5,258		$	5,895			$	15,835		$	20,461

2

For the three and nine months ended September 30, 2024 and 2023, income tax effects were calculated using the effective tax rate for the relevant jurisdictions. The Company's non-GAAP tax rates differ from its 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 Gross Margin
(In thousands)
(Unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Revenue	$	125,619			$	130,705			$	379,140			$	378,829
Gross profit		57,230				59,282				171,243				166,181
GAAP gross margin		45.6	%			45.4	%			45.2	%			43.9	%
Add back:
Stock-based compensation expense		474				462				1,401				1,388
Amortization expense		343				343				1,027				1,028
Total adjustments		817				805				2,428				2,416
Non-GAAP gross profit	$	58,047			$	60,087			$	173,671			$	168,597
Non-GAAP gross margin		46.2	%			46.0	%			45.8	%			44.5	%

Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Operating Margin
(In thousands)
(Unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Revenue	$	125,619			$	130,705			$	379,140			$	378,829
Income from operations		8,580				10,415				21,406				19,772
GAAP operating margin		6.8	%			8.0	%			5.6	%			5.2	%
Add back:
Stock-based compensation expense		4,196				4,441				12,716				11,811
Amortization expense		888				1,461				2,796				4,471
Costs related to Japan closure activities		-				22				-				186
Total adjustments		5,084				5,924				15,512				16,468
Non-GAAP income from operations	$	13,664			$	16,339			$	36,918			$	36,240
Non-GAAP operating margin		10.9	%			12.5	%			9.7	%			9.6	%

Proto Labs, Inc.
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Revenue	$	125,619			$	130,705			$	379,140			$	378,829
GAAP net income		7,189				7,954				16,997				10,230
GAAP net income margin		5.7	%			6.1	%			4.5	%			2.7	%
Add back:
Amortization expense	$	888			$	1,461			$	2,796			$	4,471
Depreciation expense		8,021				7,869				24,188				23,742
Interest income, net		(1,287	)			(561	)			(3,548	)			(1,283	)
Provision for income taxes		2,679				2,781				7,957				7,784
EBITDA		17,490				19,504				48,390				44,944
EBITDA Margin		13.9	%			14.9	%			12.8	%			11.9	%
Add back:
Stock-based compensation expense		4,196				4,441				12,716				11,811
Unrealized (gain) loss on foreign currency		174				(29	)			323				86
Costs related to Japan closure activities		-				22				-				4,093
Total adjustments		4,370				4,434				13,039				15,990
Adjusted EBITDA	$	21,860			$	23,938			$	61,429			$	60,934
Adjusted EBITDA Margin		17.4	%			18.3	%			16.2	%			16.1	%

Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth by Region
(In thousands)
(Unaudited)
	Three Months Ended September 30, 2024										Three Months Ended September 30, 2023			% Change2			% Change Organic3
	GAAP			Foreign Currency1				Non-GAAP			GAAP
Revenues
United States	$	99,571		$	-			$	99,571		$	103,940		(4.2	%)		(4.2	%)
Europe		26,048			(474	)			25,574			26,765		(2.7	%)		(4.4	%)
Total revenue	$	125,619		$	(474	)		$	125,145		$	130,705		(3.9	%)		(4.3	%)
	Nine Months Ended September 30, 2024										Nine Months Ended September 30, 2023			% Change2			% Change Organic3
	GAAP			Foreign Currency1				Non-GAAP			GAAP
Revenues
United States	$	299,593		$	-			$	299,593		$	298,007		0.5	%		0.5	%
Europe		79,547			(1,357	)			78,190			80,822		(1.6	%)		(3.3	%)
Total revenue	$	379,140		$	(1,357	)		$	377,783		$	378,829		0.1	%		(0.3	%)

1		Revenue for the three and nine months ended September 30, 2024 has been recalculated using 2023 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 for the three and nine months ended September 30, 2023 to GAAP revenue for the three and nine months ended September 30, 2024.
3		This column presents the percentage change from GAAP revenue for the three and nine months ended September 30, 2023 to non-GAAP revenue for the three and nine months ended September 30, 2024 (as recalculated using the foreign currency exchange rates in effect during the three and nine months ended September 30, 2023) in order to provide a constant-currency comparison.

Proto Labs, Inc.
Comparison of GAAP to Non-GAAP Revenue Growth by Service Line
(In thousands)
(Unaudited)
	Three Months Ended September 30, 2024										Three Months Ended September 30, 2023			% Change2			% Change Organic3
	GAAP			Foreign Currency1				Non-GAAP			GAAP
Revenues
Injection Molding	$	46,831		$	(198	)		$	46,633		$	51,688		(9.4	)%		(9.8	)%
CNC Machining		53,327			(160	)			53,167			52,916		0.8			0.5
3D Printing		21,437			(108	)			21,329			21,622		(0.9	)		(1.4	)
Sheet Metal		3,743			(4	)			3,739			4,291		(12.8	)		(12.9	)
Other Revenue		281			(4	)			277			188		49.5			47.3
Total Revenue	$	125,619		$	(474	)		$	125,145		$	130,705		(3.9	%)		(4.3	%)
	Nine Months Ended September 30, 2024										Nine Months Ended September 30, 2023			% Change2			% Change Organic3
	GAAP			Foreign Currency1				Non-GAAP			GAAP
Revenues
Injection Molding	$	148,574		$	(666	)		$	147,908		$	152,455		(2.5	)%		(3.0	)%
CNC Machining		154,498			(378	)			154,120			149,317		3.5			3.2
3D Printing		64,300			(315	)			63,985			63,952		0.5			0.1
Sheet Metal		11,218			9				11,227			12,478		(10.1	)		(10.0	)
Other Revenue		550			(7	)			543			627		(12.3	)		(13.4	)
Total Revenue	$	379,140		$	(1,357	)		$	377,783		$	378,829		0.1	%		(0.3	%)

1		Revenue for the three and nine months ended September 30, 2024 has been recalculated using 2023 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 for the three and nine months ended September 30, 2023 to GAAP revenue for the three and nine months ended September 30, 2024.
3		This column presents the percentage change from GAAP revenue for the three and nine months ended September 30, 2023 to non-GAAP revenue for the three and nine months ended September 30, 2024 (as recalculated using the foreign currency exchange rates in effect during the three and nine months ended September 30, 2023) in order to provide a constant-currency comparison.

Proto Labs, Inc.
Customer Contact Information
(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Customer contacts		22,511			23,080			43,671			45,668
Revenue per customer contact	$	5,580		$	5,663		$	8,682		$	8,295

Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Guidance
(In thousands, except per share and per share amounts)
(Unaudited)
	Q4 2024 Outlook
	Low			High
GAAP diluted net income per share	$	0.10		$	0.18
Add back:
Stock-based compensation expense		0.15			0.15
Amortization expense		0.03			0.03
Unrealized (gain) loss on foreign currency		0.00			0.00
Total adjustments		0.18			0.18
Non-GAAP diluted net income per share	$	0.28		$	0.36

Contacts

Investor Relations Contacts:
Protolabs
Ryan Johnsrud, 612-225-4873
Manager - Investor Relations and FP&A
[e-mail]

Gateway Group, Inc.
949-574-3860
[e-mail]

Media Contact:
Protolabs
Brent Renneke, 763-479-7704
Marketing Communications Manager
[e-mail]