Proto Labs Reports Financial Results for the Fourth Quarter and Full Year 2016
Board of Directors Authorizes Stock Repurchase Program
Fourth Quarter 2016 Highlights include:
-
Revenue for the fourth quarter of 2016 was
$72.4 million compared with$73.8 million in revenue in the fourth quarter of 2015. TheAlphaform acquisition was completed onOctober 9, 2015 , resulting in comparable year-over-year comparisons for the fourth quarters of 2016 and 2015. -
Revenue from 3D printing for the fourth quarter of 2016 totaled
$9.8 million , an increase of eight percent over the prior year’s fourth quarter. Reflected in the 2015 fourth quarter results was revenue from unprofitable 3D printing contracts atAlphaform that have been terminated. Excluding these unprofitable contracts, revenue from 3D printing increased 16.6 percent. See “Non-GAAP Financial Measures” below. - The number of unique product developers and engineers served totaled 14,046 in the fourth quarter of 2016, an increase of 13.1 percent over the fourth quarter of 2015.
-
Net income for the fourth quarter of 2016 was
$9.4 million , or$0.35 per diluted share. Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, charges related to the exit of facilities and unrealized foreign currency gains, was$10.8 million , or$0.41 per diluted share. See “Non-GAAP Financial Measures” below.
“Our fourth quarter financial results continued to reflect the
challenges that we faced throughout 2016 with general economic
conditions affecting the R&D spending in certain industries, a trend
that was felt with greater impact as we closed out the year,” said
“From an operational standpoint, we achieved several important
milestones during 2016 that have strengthened our competitive position
and enhanced our ability to generate improved top and bottom line growth
across all our businesses going forward. They include strengthening the
management team, integrating our acquisition in
Additional Fourth Quarter 2016 Highlights include:
- Gross margin was 55.7 percent of revenue for the fourth quarter of 2016 compared with 56.0 percent for the fourth quarter of 2015 and 57.2 percent in the third quarter of 2016.
- GAAP operating margin was 20.5 percent of revenue during the fourth quarter of 2016 compared to 22.4 percent for the fourth quarter of 2015. On a non-GAAP basis, operating margin was 23.1 percent for the fourth quarter of 2016. See “Non-GAAP Financial Measures” below.
-
The Company generated
$18.8 million in cash from operations during the fourth quarter of 2016.
Full Year 2016 Highlights include:
-
Revenue for 2016 increased 12.9 percent to
$298.1 million compared with$264.1 million in 2015. -
Net income for 2016 was
$42.7 million , or$1.61 per diluted share, compared with$46.5 million , or$1.77 per diluted share in 2015. Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, asset impairment expense, and facilities-related charges, was$47.6 million , or$1.79 per diluted share. See “Non-GAAP Financial Measures” below. -
Cash generated from operations during the year totaled
$75.0 million . Cash, cash equivalents and investments increased$47.2 million during the year and were$192.8 million atDecember 31, 2016 compared with$145.6 million atDecember 31, 2015 .
“For 2017 we will be focused on three strategic priorities. Our first
initiative will be to improve our sales and marketing productivity to
bring in new product developers and generate increased revenue. We will
continue to expand our envelope of services to capture more of our
customers’ needs. As part of this effort, we launched Insert Molding as
an expansion of our Injection Molding service this quarter. Finally, we
will work to improve our gross margin to achieve our 58 to 60 percent of
revenue target. We remain very optimistic about the prospects for
Stock Repurchase Program
The Board of Directors has authorized the repurchase of up to
The timing and amount of any shares of the company’s common stock that are repurchased under the program will be determined by the company’s management based on its evaluation of market conditions and other factors. The share repurchase program may be suspended or discontinued at any time.
The company expects to fund the share repurchase program through cash
generated from operations and cash on hand. At
Non-GAAP Financial Measures
The company has included non-GAAP revenue growth that excludes the
impact of changes in foreign currency exchange rates, revenue excluding
the acquired revenue contribution from
The company has also included non-GAAP operating margin, adjusted for stock-based compensation expense, amortization expense, impairment on assets and charges related to the exit of facilities (collectively, “non-GAAP operating margin”), in this press release to provide investors with additional information regarding the company’s financial results.
The company has also included non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized foreign currency activity, impairment on assets and charges related to the exit of facilities (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 a reconciliation of non-GAAP revenue growth to revenue growth, non-GAAP operating margin to operating margin and non-GAAP net income to net income, the most directly comparable measures calculated and presented in accordance with GAAP. Non-GAAP revenue growth, non-GAAP operating margins and non-GAAP net income 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 revenue growth, non-GAAP operating margin 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 2016 financial results today,
About
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, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(In thousands) |
||||||
December 31, | December 31, | |||||
2016 | 2015 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 68,795 | $ | 47,653 | ||
Short-term marketable securities | 39,477 | 33,201 | ||||
Accounts receivable, net | 34,060 | 36,125 | ||||
Inventory | 9,310 | 9,771 | ||||
Income taxes receivable | 445 | 6,028 | ||||
Other current assets | 5,697 | 5,224 | ||||
Total current assets | 157,784 | 138,002 | ||||
Property and equipment, net | 139,474 | 125,475 | ||||
Long-term marketable securities | 84,479 | 64,789 | ||||
Goodwill | 28,916 | 28,916 | ||||
Other intangible assets, net | 2,655 | 3,337 | ||||
Other long-term assets | 933 | 517 | ||||
Total assets | $ | 414,241 | $ | 361,036 | ||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 11,322 | $ | 13,643 | ||
Accrued compensation | 7,670 | 9,993 | ||||
Accrued liabilities and other | 4,435 | 2,626 | ||||
Total current liabilities | 23,427 | 26,262 | ||||
Long-term deferred tax liabilities | 7,003 | 4,240 | ||||
Other long-term liabilities | 3,978 | 2,889 | ||||
Shareholders' equity | 379,833 | 327,645 | ||||
Total liabilities and shareholders' equity | $ | 414,241 | $ | 361,036 | ||
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, | |||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||
Revenue | ||||||||||||
Injection Molding | $ | 41,598 | $ | 43,865 | $ | 175,974 | $ | 163,387 | ||||
CNC Machining | 20,897 | 19,581 | 81,407 | 74,368 | ||||||||
3D Printing | 9,788 | 9,094 | 37,847 | 25,132 | ||||||||
Other | 70 | 1,219 | 2,827 | 1,219 | ||||||||
Total revenue | 72,353 | 73,759 | 298,055 | 264,106 | ||||||||
Cost of revenue | 32,041 | 32,485 | 131,118 | 109,703 | ||||||||
Gross profit | 40,312 | 41,274 | 166,937 | 154,403 | ||||||||
Operating expenses | ||||||||||||
Marketing and sales | 11,949 | 10,805 | 46,131 | 39,188 | ||||||||
Research and development | 5,278 | 4,879 | 22,388 | 18,350 | ||||||||
General and administrative | 8,254 | 9,033 | 36,651 | 29,716 | ||||||||
Total operating expenses | 25,481 | 24,717 | 105,170 | 87,254 | ||||||||
Income from operations | 14,831 | 16,557 | 61,767 | 67,149 | ||||||||
Other income, net | 112 | 612 | 2,454 | 712 | ||||||||
Income before income taxes | 14,943 | 17,169 | 64,221 | 67,861 | ||||||||
Provision for income taxes | 5,571 | 5,176 | 21,514 | 21,347 | ||||||||
Net income | $ | 9,372 | $ | 11,993 | $ | 42,707 | $ | 46,514 | ||||
Net income per share: | ||||||||||||
Basic | $ | 0.35 | $ | 0.46 | $ | 1.62 | $ | 1.79 | ||||
Diluted | $ | 0.35 | $ | 0.45 | $ | 1.61 | $ | 1.77 | ||||
Shares used to compute net income per share: | ||||||||||||
Basic | 26,457,302 | 26,164,340 | 26,365,173 | 26,005,858 | ||||||||
Diluted | 26,609,929 | 26,465,043 | 26,564,639 | 26,320,284 | ||||||||
Proto Labs, Inc. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Year Ended | ||||||||
December 31, | ||||||||
2016 | 2015 | |||||||
Operating activities | ||||||||
Net income | $ | 42,707 | $ | 46,514 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 17,485 | 14,126 | ||||||
Stock-based compensation expense | 6,775 | 6,082 | ||||||
Deferred taxes | 2,780 | 2,837 | ||||||
Excess tax benefit from stock-based compensation | (2,532 | ) | (5,539 | ) | ||||
Amortization of held-to-maturity securities | 1,173 | 1,234 | ||||||
Gain on acquisition | - | (344 | ) | |||||
Loss on impairment of assets | 455 | - | ||||||
Other | (1,541 | ) | - | |||||
Changes in operating assets and liabilities | 7,665 | (6,353 | ) | |||||
Net cash provided by operating activities | 74,967 | 58,557 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (33,616 | ) | (44,362 | ) | ||||
Acquisitions, net of cash acquired | - | (5,032 | ) | |||||
Purchases of marketable securities | (89,315 | ) | (66,393 | ) | ||||
Proceeds from sales and maturities of marketable securities | 62,176 | 52,193 | ||||||
Net cash used in investing activities | (60,755 | ) | (63,594 | ) | ||||
Financing activities | ||||||||
Payments on debt | - | (152 | ) | |||||
Acquisition-related contingent consideration | (400 | ) | (1,400 | ) | ||||
Proceeds from exercises of stock options and other | 5,715 | 6,251 | ||||||
Excess tax benefit from stock-based compensation | 2,532 | 5,539 | ||||||
Net cash provided by financing activities | 7,847 | 10,238 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (917 | ) | (877 | ) | ||||
Net increase in cash and cash equivalents | 21,142 | 4,324 | ||||||
Cash and cash equivalents, beginning of period | 47,653 | 43,329 | ||||||
Cash and cash equivalents, end of period | $ | 68,795 | $ | 47,653 | ||||
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, | |||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency, gain on acquisition and acquisition costs, impairment on assets and charges related to the exit of facilities |
||||||||||||||||
GAAP net income | $ | 9,372 | $ | 11,993 | $ | 42,707 | $ | 46,514 | ||||||||
Add back: | ||||||||||||||||
Stock-based compensation expense | 1,515 | 1,567 | 6,775 | 6,082 | ||||||||||||
Amortization expense | 163 | 186 | 683 | 746 | ||||||||||||
Impairment on assets | - | - | 455 | - | ||||||||||||
Facilities-related charges | 222 | - | 1,373 | - | ||||||||||||
Acquisition costs | - | 343 | - | 915 | ||||||||||||
Unrealized (gain) loss on foreign currency | 217 | 43 | (1,243 | ) | 254 | |||||||||||
Gain on acquisition | - | (344 | ) | - | (344 | ) | ||||||||||
Total adjustments 2 | 2,117 | 1,795 | 8,043 | 7,653 | ||||||||||||
Income tax benefits on adjustments1 | (646 | ) | (417 | ) | (3,139 | ) | (2,240 | ) | ||||||||
Non-GAAP net income | $ | 10,843 | $ | 13,371 | $ | 47,611 | $ | 51,927 | ||||||||
Non-GAAP net income per share: | ||||||||||||||||
Basic | $ | 0.41 | $ | 0.51 | $ | 1.81 | $ | 2.00 | ||||||||
Diluted | $ | 0.41 | $ | 0.50 | $ | 1.79 | $ | 1.97 | ||||||||
Shares used to compute non-GAAP net income per share: | ||||||||||||||||
Basic | 26,457,302 | 26,164,340 | 26,365,173 | 26,005,858 | ||||||||||||
Diluted | 26,609,929 | 26,465,043 | 26,564,639 | 26,320,284 | ||||||||||||
1 For the three months ended December 31, 2016 and 2015, income tax effects were calculated reflecting an effective GAAP tax rate of 37.3% and 30.1%, respectively, and an effective non-GAAP tax rate of 36.4% and 29.5%, respectively. For the year ended December 31, 2016 and 2015, income tax effects were calculated reflecting an effective GAAP tax rate of 33.4% and 31.5%, respectively, and an effective non-GAAP tax rate of 34.1% and 31.2%, respectively. The difference between our GAAP and non-GAAP tax rate for the three months and year ended December 31, 2016 was primarily due to the tax effect of stock-based compensation expense, amortization expense, unrealized gain on foreign currency, impairment on assets and charges related to the exit of facilities. The difference between our GAAP and non-GAAP tax rate for the three months and year ended December 31, 2015 was primarily due to stock-based compensation expense, amortization expense, unrealized loss on foreign currency, gain on acquisition and acquisition costs. | ||||||||||||||||
2 Stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency, gain on acquisition and acquisition costs, impairment on assets and charges related to the exit of facilities were included in the following GAAP consolidated statement of operations categories: | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Cost of revenue | $ | 318 | $ | 135 | $ | 1,318 | $ | 513 | ||||||||
Marketing and sales | 234 | 279 | 974 | 1,074 | ||||||||||||
Research and development | 312 | 318 | 1,396 | 1,285 | ||||||||||||
General and administrative | 1,036 | 1,364 | 5,598 | 4,871 | ||||||||||||
Other income (expense), net | 217 | (301 | ) | (1,243 | ) | (90 | ) | |||||||||
Total adjustments | $ | 2,117 | $ | 1,795 | $ | 8,043 | $ | 7,653 | ||||||||
Proto Labs, Inc. | ||||||||||||
Reconciliation of GAAP to Non-GAAP Operating Margin | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | Year Ended | |||||||||||
December 31, | December 31, | |||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||
Revenue | $ | 72,353 | $ | 73,759 | $ | 298,055 | $ | 264,106 | ||||
Income from operations | 14,831 | 16,557 | 61,767 | 67,149 | ||||||||
GAAP operating margin | 20.5% | 22.4% | 20.7% | 25.4% | ||||||||
Add back: | ||||||||||||
Stock-based compensation expense | 1,515 | 1,567 | 6,775 | 6,082 | ||||||||
Amortization expense | 163 | 186 | 683 | 746 | ||||||||
Impairment on assets | - | - | 455 | - | ||||||||
Facilities-related charges | 222 | - | 1,373 | - | ||||||||
Acquisition costs | - | 343 | - | 915 | ||||||||
Total adjustments | 1,900 | 2,096 | 9,286 | 7,743 | ||||||||
Non-GAAP income from operations adjusted for stock-based compensation expense, amortization expense, impairment on assets, facilities-related charges and acquisition costs |
$ | 16,731 | $ | 18,653 | $ | 71,053 | $ | 74,892 | ||||
Non-GAAP operating margin | 23.1% | 25.3% | 23.8% | 28.4% | ||||||||
Proto Labs, Inc. | ||||||||||||||||||||||||
Comparison of GAAP to Non-GAAP Revenue Growth | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended | % Change | Year Ended | % Change | |||||||||||||||||||||
December 31, |
% |
Constant | December 31, |
% |
Constant | |||||||||||||||||||
2016 |
2015 |
Change | Currencies1 |
2016 |
2015 |
Change | Currencies1 | |||||||||||||||||
Revenues | ||||||||||||||||||||||||
United States | $ | 54,566 | $ | 53,911 | 1.2 | % | 1.2 | % | $ | 223,930 | $ | 208,017 | 7.6 | % | 7.6 | % | ||||||||
Europe | 14,847 | 17,271 | -14.0 | % | -8.2 | % | 63,365 | 47,433 | 33.6 | % | 38.8 | % | ||||||||||||
Japan | 2,940 | 2,577 | 14.1 | % | 2.4 | % | 10,760 | 8,656 | 24.3 | % | 11.1 | % | ||||||||||||
Total Revenue | $ | 72,353 | $ | 73,759 | -1.9 | % | -1.0 | % | $ | 298,055 | $ | 264,106 | 12.9 | % | 13.4 | % | ||||||||
1 Revenue growth for the three-month and year-ended periods ended December 31, 2016 has been recalculated using 2015 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. | ||||||||||||||||||||||||
Year Ended |
% Change |
|||||||||||||||||||||||
December 31, |
% |
Constant | ||||||||||||||||||||||
2016 |
2015 |
Change 2 |
Currencies2 |
|||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
United States | $ | 223,930 | $ | 208,017 | 7.6 | % | 7.6 | % | ||||||||||||||||
Europe | 49,719 | 47,433 | 4.8 | % | 10.0 | % | ||||||||||||||||||
Japan | 10,760 | 8,656 | 24.3 | % | 11.1 | % | ||||||||||||||||||
Total Revenue | $ | 284,409 | $ | 264,106 | 7.7 | % | 8.2 | % | ||||||||||||||||
2 Revenue growth for the year ended December 31, 2016 has been recalculated to exclude revenue earned from our acquisition of Alphaform for the nine months ended September 30, 2016, and using 2015 foreign currency exchange rates in effect during comparable periods to provide information useful in evaluating the underlying business trends excluding the impact of acquired revenue and changes in foreign currency exchange rates. | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
December 31, |
% |
|||||||||||||||||||||||
2016 |
2015 |
Change 3 |
||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Injection Molding | $ | 41,598 | $ | 43,865 | -5.2 | % | ||||||||||||||||||
CNC Machining | 20,897 | 19,581 | 6.7 | % | ||||||||||||||||||||
3D Printing | 9,788 | 8,398 | 16.6 | % | ||||||||||||||||||||
Other | 70 | 454 | -84.6 | % | ||||||||||||||||||||
Total Revenue | $ | 72,353 | $ | 72,298 | 0.1 | % | ||||||||||||||||||
3 Revenue growth for the three months ended December 31, 2016 has been recalculated to exclude revenue earned from unprofitable Alphaform 3D Printing contracts and discontinued non-core resin resale business included in Other above. | ||||||||||||||||||||||||
Proto Labs, Inc. | ||||||||||||
Revenue by Geography - Based on Shipping Location | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | Year Ended | |||||||||||
December 31, | December 31, | |||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||
Revenues | ||||||||||||
Domestic | ||||||||||||
United States | $ | 49,907 | $ | 49,709 | $ | 208,002 | $ | 194,065 | ||||
International | ||||||||||||
Europe | 14,847 | 17,271 | 63,365 | 47,433 | ||||||||
Japan | 2,940 | 2,577 | 10,760 | 8,656 | ||||||||
United States | 4,659 | 4,202 | 15,928 | 13,952 | ||||||||
Total international | 22,446 | 24,050 | 90,053 | 70,041 | ||||||||
Total revenue | $ | 72,353 | $ | 73,759 | $ | 298,055 | $ | 264,106 | ||||
Proto Labs, Inc. | ||||||||
Product Developer Information | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2016 | 2015 | 2016 | 2015 | |||||
Unique product developers and engineers served | 14,046 | 12,414 | 31,457 | 27,235 | ||||
Note: the information above includes unique product developers and engineers who purchased our 3D Printed products in the United States and Europe through our web-based customer interface. The information does not include 3D Printing and Injection Molding customers resulting from the Alphaform acquisition who do not utilize our web-based customer interface. |
||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170209005516/en/
Source:
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