Proto Labs(PRLB) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and condition, including detailed statements and management's analysis Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Q2 2024, including balance sheets, income statements, cash flows, and notes, showing a net income of $4.5 million Consolidated Balance Sheets The balance sheet as of June 30, 2024, shows total assets of $758.2 million, a decrease from year-end 2023, with cash increasing to $96.1 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $96,149 | $83,790 | | Total current assets | $207,623 | $200,660 | | Property and equipment, net | $243,710 | $253,655 | | Goodwill | $273,991 | $273,991 | | Total assets | $758,206 | $772,353 | | Liabilities & Equity | | | | Total current liabilities | $50,946 | $49,681 | | Total liabilities | $72,970 | $77,058 | | Total shareholders' equity | $685,236 | $695,295 | Consolidated Statements of Comprehensive Income Q2 2024 revenue increased 2.8% to $125.6 million, resulting in a net income of $4.5 million, a significant improvement from a net loss in Q2 2023 Key Performance Indicators (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $125,631 | $122,265 | $253,521 | $248,124 | | Gross Profit | $56,546 | $53,123 | $114,013 | $106,899 | | Income from Operations | $5,999 | $5,608 | $12,826 | $9,357 | | Net Income (Loss) | $4,540 | $(383) | $9,808 | $2,276 | | Diluted EPS | $0.18 | $(0.01) | $0.38 | $0.09 | Consolidated Statements of Cash Flows Operating activities generated $35.8 million in cash for the six months ended June 30, 2024, leading to a net increase of $12.4 million in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 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 | Notes to Consolidated Financial Statements Detailed notes cover accounting policies, goodwill, fair value, stock compensation, income taxes, and segment reporting, highlighting U.S. growth and CNC Machining revenue Revenue by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | United States | $98,541 | $96,321 | $200,022 | $194,067 | | Europe | $27,090 | $25,944 | $53,499 | $54,057 | | Total Revenue | $125,631 | $122,265 | $253,521 | $248,124 | Revenue by Product Line (in thousands) | Product Line | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Injection Molding | $49,080 | $48,819 | $101,743 | $100,767 | | CNC Machining | $51,239 | $48,297 | $101,171 | $96,401 | | 3D Printing | $21,281 | $21,005 | $42,863 | $42,330 | | Sheet Metal | $3,922 | $3,939 | $7,475 | $8,187 | | Total Revenue | $125,631 | $122,265 | $253,521 | $248,124 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2024 performance, highlighting a 2.8% revenue increase, improved gross margin of 45.0%, strong liquidity, and capital allocation strategies - Protolabs is a leading digital manufacturer of custom parts, serving product developers and engineers through an online platform that combines its own factories with a network of manufacturing partners[62][63] Results of Operations This section details operational results for Q2 and H1 2024, analyzing revenue drivers by segment and product line, cost of revenue, gross margin, and operating expenses - For Q2 2024, revenue increased 2.8% YoY, driven by a 2.3% increase in the United States and a 4.4% increase in Europe[80] - The number of unique customer contacts served in Q2 2024 decreased by 3.9% YoY, indicating a strategic focus on securing larger orders from existing customers[81] - Gross margin for Q2 2024 improved to 45.0% from 43.4% in Q2 2023, primarily due to reductions in personnel and related costs from better resource management and increased automation[84][85] Liquidity and Capital Resources The company maintains strong liquidity with $96.1 million in cash, generating $35.8 million in operating cash flow in H1 2024, sufficient for future needs - The company's cash and cash equivalents increased by $12.4 million in the first half of 2024 to a total of $96.1 million[101] - Key uses of cash in H1 2024 included $26.9 million for common stock repurchases and $6.8 million for purchases of property and equipment[101] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is foreign currency exposure from European operations, with no hedging instruments currently in use - The main market risk is foreign currency exchange rate fluctuations, particularly between the U.S. Dollar, British Pound, and Euro[110] - The company does not currently use forward contracts or other hedging instruments to manage foreign currency risk[111] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective and provide reasonable assurance of accurate and timely reporting[112] - No material changes were made to the internal control over financial reporting during the second quarter of 2024[113] PART II - OTHER INFORMATION This section covers other essential information including legal proceedings, risk factors, equity security sales, and a list of exhibits Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - As of the filing date, the company is not party to any litigation that would be reasonably expected to have a material adverse effect on its business[115] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes from the risk factors described in the company's 2023 Form 10-K[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 345,234 shares for $10.9 million, with $61.4 million remaining under the repurchase program Common Stock Repurchase Activity (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | — | — | | May 2024 | 269,662 | $31.68 | | June 2024 | 75,572 | $31.43 | | Total Q2 | 345,234 | $31.62 | - As of June 30, 2024, $61.4 million remains authorized for future share repurchases[117] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and long-term incentive plan documents