Quarterly Revenue Increases 30% Year over Year to $54.6 Million

Year-to-Date Revenue Increases 29% Year over Year to $153.5 Million

MAPLE PLAIN, Minn. — (BUSINESS WIRE) — October 23, 2014 — Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled quick-turn manufacturer, today announced financial results for the third quarter ended September 30, 2014.

Highlights include:

• Revenue for the third quarter of 2014 increased to a record $54.6 million, 30 percent above revenue of $42.0 million in the third quarter of 2013.
• Revenue for the third quarter of 2014 from additive services (3D printing) through the Fineline acquisition completed last April increased to $3.4 million, a 38% increase when compared to Fineline’s third quarter of 2013.
• The record quarterly revenue was achieved through a 19 percent increase in the number of product developers served combined with an increase of 3 percent in spending per product developer.
• Net income for the third quarter of 2014 increased to $10.4 million, or $0.40 per diluted share. Non-GAAP net income, excluding the after tax expense of stock compensation and amortization of intangibles, was $11.4 million, or $0.44 per diluted share. See “Non-GAAP Financial Measure” below.

“We achieved strong revenue growth in the third quarter, especially in light of the weakness we experienced in our European markets. While our European business was flat compared to the previous year, our North American business excluding our Fineline operation grew 26 percent,” said Vicki Holt, President and Chief Executive Officer of Proto Labs. “We continue to add to our sales and marketing teams worldwide as we believe this will drive further revenue growth. In addition, best practices developed by our US marketing team are being incorporated throughout all our international operations to ensure consistent lead generation and customer awareness. We remain extremely optimistic about the outlook for Proto Labs and continue to make investments in the business to drive sustainable growth long term.”

Additional highlights include:

• Gross margin was 60.6 percent of revenue during the third quarter of 2014 compared with 61.8 percent during the same quarter in 2013.
• During the third quarter of 2014, spending on research and development, including the Protoworks initiatives and integration activities related to Fineline, totaled $4.6 million, or 8.3 percent of revenue. This compares to $3.0 million, or 7.2 percent of revenue, during the third quarter of 2013.
• Operating margin was 28.3 percent of revenue during the third quarter of 2014 compared to 31.9 percent during the third quarter of 2013.
• As measured on a year-to-date basis, cash generated from operations totaled $40 million. Cash, cash equivalents and investments totaled $119 million as of September 30, 2014.

“We remain on track with our integration of Fineline and continue to see the value of our additive offering combined with our legacy services of injection molding and CNC machining,” commented Ms. Holt. “The new services we have rolled out this year through our Protoworks initiatives, LSR molding and metal injection molding, have been well-received and remain on track to provide more meaningful revenue in 2015. In summary, I continue to be impressed with the high-level of accomplishments of all our teams and am confident our activities will continue to support our long-term target model.”

Non-GAAP Financial Measure

The company has included non-GAAP net income, 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 provided below a reconciliation of non-GAAP net income, adjusted for stock-based compensation expense and amortization expense, to net income, the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP net income, adjusted for stock-based compensation expense and amortization expense, is used by the company’s management and board of directors to understand and evaluate operating performance and trends and provides a useful measure for period-to-period comparisons of the company’s business. Accordingly, the company believes that non-GAAP net income, adjusted for stock-based compensation expense and amortization expense, provides 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 financial results today, October 23, 2014 at 8:30 a.m. ET. To access the call in the U.S. please dial 877-709-8150. Outside the U.S. please dial 201-689-8354. No participant code is required. A simultaneous webcast of the call will also be available on the investor relations section of the company’s website at www.protolabs.com/investors . An audio replay will be available for 14 days following the call on the investor relations website of Proto Lab’s website.