Proto Labs(PRLB) - 2024 Q2 - Quarterly Results

Financial Highlights and Outlook Protolabs achieved a profitable Q2 2024 with revenue growth led by its Network business, and provided its financial outlook for the third quarter Second Quarter 2024 Financial Highlights Protolabs reported Q2 2024 revenue of $125.6 million, a 2.8% year-over-year increase, primarily driven by a 22.0% growth in its Network business. The company achieved a significant turnaround in profitability, with GAAP net income of $4.5 million ($0.18 per diluted share) compared to a net loss in the prior year. Non-GAAP net income also grew to $9.5 million ($0.38 per diluted share) Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $125.6M | $122.3M | +2.8% | | Protolabs Network Revenue | $24.7M | $20.2M | +22.0% | | GAAP Net Income (Loss) | $4.5M | ($0.4M) | N/A | | GAAP Diluted EPS | $0.18 | ($0.01) | N/A | | Non-GAAP Net Income | $9.5M | $8.7M | +9.2% | | Non-GAAP Diluted EPS | $0.38 | $0.33 | +15.2% | | Adjusted EBITDA | $19.3M | $19.2M | +0.5% | | Adjusted EBITDA Margin | 15.4% | 15.7% | -30 bps | - Management highlighted successful execution in a challenging macroeconomic environment, focusing on driving customer adoption of the combined Factory and Network offerings and increasing revenue per customer[3] - The company demonstrated its commitment to returning capital to shareholders by repurchasing $10.9 million of its common stock during the quarter[3] Additional Second Quarter 2024 Highlights In Q2 2024, Protolabs served 22,456 customer contacts, achieving a 7.0% year-over-year increase in revenue per customer contact. Gross margin improved to 45.0% from 43.4%, and the company generated $14.4 million in cash flow from operations, ending the quarter with a cash and investments balance of $112.9 million Q2 2024 Customer and Margin Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Customer Contacts | 22,456 | 23,377 | -4.0% | | Revenue per Customer Contact | $5,595 | $5,230 | +7.0% | | GAAP Gross Margin | 45.0% | 43.4% | +160 bps | | Non-GAAP Gross Margin | 45.7% | 44.1% | +160 bps | - The company maintained a strong liquidity position, with cash flow from operations at $14.4 million and a total cash and investments balance of $112.9 million as of June 30, 2024[3] Third Quarter 2024 Outlook For the third quarter of 2024, Protolabs anticipates revenue to be in the range of $117 million to $125 million. The company projects GAAP diluted net income per share between $0.10 and $0.18, and non-GAAP diluted net income per share between $0.29 and $0.37 Q3 2024 Guidance | Metric | Low Estimate | High Estimate | | :--- | :--- | :--- | | Revenue | $117M | $125M | | GAAP Diluted EPS | $0.10 | $0.18 | | Non-GAAP Diluted EPS | $0.29 | $0.37 | Consolidated Financial Statements The consolidated financial statements for Q2 2024 show stable assets, increased revenue and net income, and positive operating cash flow with significant share repurchases Condensed Consolidated Balance Sheets As of June 30, 2024, Protolabs reported total assets of $758.2 million, a slight decrease from $772.4 million at the end of 2023. The company's cash and cash equivalents increased to $96.1 million from $83.8 million. Total liabilities remained relatively stable, and shareholders' equity stood at $685.2 million Key Balance Sheet Items (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $96,149 | $83,790 | | Total current assets | $207,623 | $200,660 | | Total assets | $758,206 | $772,353 | | Total current liabilities | $50,946 | $49,681 | | Total liabilities | $72,970 | $77,058 | | Total shareholders' equity | $685,236 | $695,295 | Condensed Consolidated Statements of Operations For the second quarter of 2024, total revenue increased to $125.6 million from $122.3 million in the prior-year period. Gross profit rose to $56.5 million, leading to an income from operations of $6.0 million. The company reported a net income of $4.5 million, a significant improvement from a net loss of $0.4 million in Q2 2023 Q2 2024 Income Statement Summary (in thousands, except EPS) | Account | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $125,631 | $122,265 | | Gross Profit | $56,546 | $53,123 | | Income from Operations | $5,999 | $5,608 | | Net Income (Loss) | $4,540 | ($383) | | Diluted EPS | $0.18 | ($0.01) | Q2 2024 Revenue by Service (in thousands) | Service Line | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Injection Molding | $49,080 | $48,819 | | CNC Machining | $51,239 | $48,297 | | 3D Printing | $21,281 | $21,005 | | Sheet Metal | $3,922 | $3,939 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, Protolabs generated $35.8 million in net cash from operating activities, an increase from $31.9 million in the same period last year. The company used $26.9 million for common stock repurchases. The net result was a $12.4 million increase in cash and cash equivalents, bringing the ending balance to $96.1 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,781 | $31,867 | | Net cash provided by investing activities | $3,665 | $7,814 | | Net cash used in financing activities | ($26,912) | ($29,666) | | Net increase in cash and cash equivalents | $12,359 | $9,935 | | Cash and cash equivalents, end of period | $96,149 | $66,493 | - A significant use of cash in financing activities was the repurchase of common stock, amounting to $26.9 million for the first six months of 2024[14] Reconciliation of GAAP to Non-GAAP Measures This section details the adjustments from GAAP to Non-GAAP measures for net income, gross and operating margins, and EBITDA, providing a clearer view of underlying financial performance Reconciliation of GAAP to Non-GAAP Net Income For Q2 2024, Protolabs reconciled its GAAP net income of $4.5 million to a non-GAAP net income of $9.5 million. Key adjustments included adding back $4.2 million in stock-based compensation and $0.9 million in amortization expense. This resulted in a non-GAAP diluted EPS of $0.38, compared to $0.33 in the prior year Q2 2024 Reconciliation of GAAP to Non-GAAP Net Income (in thousands) | Description | Amount | | :--- | :--- | | GAAP net income | $4,540 | | Stock-based compensation expense | $4,244 | | Amortization expense | $921 | | Unrealized (gain) on foreign currency | ($88) | | Income tax benefits on adjustments | ($85) | | Non-GAAP net income | $9,532 | Reconciliation of GAAP to Non-GAAP Gross and Operating Margins In Q2 2024, the GAAP gross margin of 45.0% was adjusted for stock-based compensation and amortization to arrive at a non-GAAP gross margin of 45.7%. Similarly, the GAAP operating margin of 4.8% was adjusted for these items, resulting in a non-GAAP operating margin of 8.9%, which was flat compared to the prior year Q2 Margin Reconciliation (GAAP vs. Non-GAAP) | Margin Type | Q2 2024 GAAP | Q2 2024 Non-GAAP | Q2 2023 Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Margin | 45.0% | 45.7% | 44.1% | | Operating Margin | 4.8% | 8.9% | 8.9% | Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA For Q2 2024, EBITDA was $15.2 million, representing a 12.1% margin. After adjustments for items such as stock-based compensation ($4.2 million), the Adjusted EBITDA was $19.3 million. The Adjusted EBITDA margin was 15.4%, a slight decrease from 15.7% in Q2 2023 Q2 EBITDA Reconciliation (in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | GAAP net income (loss) | $4,540 | ($383) | | EBITDA | $15,183 | $11,363 | | EBITDA Margin | 12.1% | 9.3% | | Adjusted EBITDA | $19,339 | $19,229 | | Adjusted EBITDA Margin | 15.4% | 15.7% | Supplemental Financial Information Supplemental financial information provides a detailed breakdown of Q2 2024 revenue performance by geographic region and specific service lines Revenue by Geographic Region In Q2 2024, revenue from the United States grew by 2.3% year-over-year to $98.5 million. The European region showed stronger growth at 4.4%, with revenues reaching $27.1 million. Overall GAAP revenue growth for the quarter was 2.8% Q2 2024 Revenue by Region (in thousands) | Region | Q2 2024 Revenue | Q2 2023 Revenue | GAAP % Change | | :--- | :--- | :--- | :--- | | United States | $98,541 | $96,321 | 2.3% | | Europe | $27,090 | $25,944 | 4.4% | | Total Revenue | $125,631 | $122,265 | 2.8% | Revenue by Service Line CNC Machining was the primary growth driver in Q2 2024, with revenue increasing 6.1% year-over-year to $51.2 million. Injection Molding and 3D Printing posted modest growth of 0.5% and 1.3% respectively. Sheet Metal revenue saw a slight decline of 0.4% Q2 2024 Revenue by Service Line (in thousands) | Service Line | Q2 2024 Revenue | Q2 2023 Revenue | GAAP % Change | | :--- | :--- | :--- | :--- | | Injection Molding | $49,080 | $48,819 | 0.5% | | CNC Machining | $51,239 | $48,297 | 6.1% | | 3D Printing | $21,281 | $21,005 | 1.3% | | Sheet Metal | $3,922 | $3,939 | (0.4%) | | Total Revenue | $125,631 | $122,265 | 2.8% |