PRLB - Protolabs Reports Financial Results for the Fourth Quarter and Full Year 2022

Revenue of $115.6 million in the Fourth Quarter of 2022
Record Annual Revenue of $488.4 million in 2022
Increases share repurchase authorization to $250 million

Proto Labs, Inc. (the "Company" or "Protolabs") (NYSE: PRLB), the world’s leading provider of digital manufacturing services, today announced financial results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Highlights include :

• Revenue for the fourth quarter of 2022 was $115.6 million, representing a 6.5 percent decrease compared to revenue of $123.6 million in the fourth quarter of 2021.
• Revenue generated from our digital network powered by Hubs was $14.8 million in the fourth quarter, representing growth of 49.6 percent over the fourth quarter of 2021 and 22.2 percent sequential growth compared to the third quarter of 2022.
• Net loss for the fourth quarter of 2022 was $115.1 million, or ($4.24) per diluted share, driven by a goodwill impairment charge of $118.0 million.
• Non-GAAP net income was $7.0 million, or $0.26 per diluted share. See “Non-GAAP Financial Measures” below.

Expanded Share Repurchase Program :

• On February 7, 2023, Protolabs' Board of Directors approved $50 million increase to existing Share Repurchase Program, bringing the total amount authorized under the program to $250 million.
• As of December 31, 2022, the Company has purchased $117.7 million under the program, which expires December 31, 2024.
• With the increased authorization, the Company has $132.3 million remaining to repurchase shares under the expanded program.

“In a challenging economic environment, impacted by inflation, slowing growth and continued supply chain challenges, our Protolabs and Hubs teams continued to delight our customers as together we build the most comprehensive digital manufacturing capabilities in the world,” said Rob Bodor, President and Chief Executive Officer. “Following the launch of several new offers in 2022 and early 2023, we are well-positioned to extend our market differentiation with quality internal manufacturing at speed and the expansive breadth and depth afforded by our curated network of manufacturing partners.”

Full Year 2022 Highlights include :

• Record annual revenue of $488.4 million in 2022.
• Protolabs served 56,333 unique product developers during the year.
• Gross margin was 44.1 percent of revenue in 2022, compared to 45.6 percent in 2021.
• EBITDA margin was (12.2 percent) of revenue in 2022 driven by a fourth quarter goodwill impairment charge of $118.0 million, compared to 16.5 percent in 2021.
• Adjusted EBITDA margin was 17.1 percent of revenue in 2022, compared to 18.3 percent in 2021. See “Non-GAAP Financial Measures” below.
• Net loss for 2022 was $103.5 million, or ($3.77) per diluted share.
• Non-GAAP net income was $41.1 million, or $1.50 per diluted share. See “Non-GAAP Financial Measures” below.
• Cash and investments balance was $106.5 million as of December 31, 2022.

“As we narrow our focus in 2023 on growth of our Injection Molding business and accelerating growth from the integrated Protolabs and Hubs CNC offer, we are managing expenses to enable continued strategic investments which we expect to drive profitable revenue growth,” said Dan Schumacher, Chief Financial Officer. “Combined with a healthy financial position and strong cash balance, disciplined cost management will help fuel growth of the business while returning capital to our shareholders.”

Expanded Share Repurchase Program

Under the expanded $250 million Share Repurchase Program, shares of the Company’s common stock may be repurchased periodically, including in the open market or privately negotiated transactions. The actual timing, manner, number, and value of shares repurchased under the program will be determined by management at its discretion and will depend on several factors, including the market price of Proto Labs’ common stock, general market and economic conditions, applicable requirements, and other business considerations. The Share Repurchase Program does not obligate the Company to acquire any particular amount of shares of the Company’s stock.

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 and revenue earned from our acquisition of Hubs (collectively, “non-GAAP revenue growth”). Management believes these 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 goodwill impairment charges, stock-based compensation expense, unrealized (gain) loss on foreign currency, costs related to the Japan closure activities and transaction costs (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 goodwill impairment charges, stock-based compensation expense, unrealized (gain) loss on foreign currency, costs related to the Japan closure activities and transaction costs (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 goodwill impairment charges, stock-based compensation expense, amortization expense, costs related to the closure of Japan, and transaction costs (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 gross margin excluding Japan, 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 excluding Japan, adjusted for goodwill impairment charges, stock-based compensation expense, amortization expense, costs related to the Japan closure activities and transaction costs (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 goodwill impairment charges, stock-based compensation expense, amortization expense, unrealized (gain) loss on foreign currency, costs related to the closure of Japan, and transaction costs (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 gross margin excluding Japan, non-GAAP operating margin, non-GAAP operating margin excluding Japan, 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 fourth quarter and full year 2022 financial results and first quarter 2023 outlook today, February 10, 2023 at 8:30 a.m. EST. 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. EST 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/d3nzbm3z . 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 our supply network powered by Hubs unlocks advanced capabilities and volume pricing at higher quantities. 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 Securities and Exchange Commission. 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.