Proto Labs Reports Record Revenue for the Third Quarter 2014

About Proto Labs, Inc.

Proto Labs is a leading online and technology-enabled quick-turn manufacturer of custom parts for prototyping and short-run production. Proto Labs provides “Real Parts, Really Fast” to product developers worldwide. Proto Labs utilizes computer numerical control (CNC) machining, injection molding, and additive manufacturing (3D printing), to manufacture custom parts for our customers. For more information, visit 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 Proto Labs 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 SEC. Other unknown or unpredictable factors also could have material adverse effects on Proto Labs’ future results. The forward-looking statements included in this press release are made only as of the date hereof. Proto Labs cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Proto Labs expressly disclaims any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.


Proto Labs, Inc.
Condensed Consolidated Balance Sheets
(In thousands)


	September 30,		December 31,
	2014		2013
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	34,268	$	43,039
Short-term marketable securities		24,212		36,339
Accounts receivable, net		25,460		18,320
Inventory		5,705		5,166
Other current assets		7,953		6,931
Total current assets		97,598		109,795

Property and equipment, net		87,962		56,101
Long-term marketable securities		60,449		64,023
Goodwill		28,916		-
Other intangible assets, net		4,269		-
Other long-term assets		232		256
Total assets	$	279,426	$	230,175

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	7,973	$	6,455
Accrued compensation		8,154		6,196
Accrued liabilities and other		3,804		808
Current portion of long-term debt obligations		164		204
Total current liabilities		20,095		13,663

Long-term deferred tax liabilities		4,112		3,682
Long-term debt obligations		42		159
Other long-term liabilities		854		1,028

Shareholders' equity		254,323		211,643
Total liabilities and shareholders' equity	$	279,426	$	230,175


Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013
Revenue
Protomold	$	35,655		$	29,534	$	104,604		$	84,338
Firstcut		15,549			12,474		43,407			34,732
Fineline		3,370			-		5,503			-
Total revenue		54,574			42,008		153,514			119,070

Cost of revenue		21,492			16,053		58,725			44,983
Gross profit		33,082			25,955		94,789			74,087

Operating expenses
Marketing and sales		7,351			5,409		21,029			16,222
Research and development		4,555			3,026		11,925			8,405
General and administrative		5,733			4,118		15,970			12,035
Total operating expenses		17,639			12,553		48,924			36,662
Income from operations		15,443			13,402		45,865			37,425
Other income (expense), net		(56	)		31		(19	)		149
Income before income taxes		15,387			13,433		45,846			37,574
Provision for income taxes		5,003			4,561		14,404			11,804
Net income	$	10,384		$	8,872	$	31,442		$	25,770

Net income per share:
Basic	$	0.40		$	0.35	$	1.23		$	1.03
Diluted	$	0.40		$	0.34	$	1.20		$	1.00

Shares used to compute net income per share:
Basic		25,757,593			25,384,940		25,651,156			25,121,941
Diluted		26,200,741			26,002,240		26,109,539			25,794,950


Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	Nine Months Ended
	September 30,
	2014			2013

Operating activities
Net income	$	31,442		$	25,770
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,696			5,528
Stock-based compensation expense		3,561			2,595
Deferred taxes		487			(61	)
Excess tax benefit from stock-based compensation		(4,383	)		(8,198	)
Amortization of held-to-maturity securities		1,194			1,007
Loss on disposal of property and equipment		-			111
Changes in operating assets and liabilities		7			8,148
Net cash provided by operating activities		40,004			34,900

Investing activities
Purchases of property and equipment		(35,928	)		(12,976	)
Acquisitions, net of cash acquired		(33,864	)		-
Purchases of marketable securities		(47,338	)		(82,657	)
Proceeds from sales and maturities of marketable securities		61,896			50,663
Net cash used in investing activities		(55,234	)		(44,970	)

Financing activities
Payments on debt		(1,005	)		(211	)
Acquisition-related contingent consideration		(800	)		-
Proceeds from exercises of stock options and other		3,962			4,635
Excess tax benefit from stock-based compensation		4,383			8,198
Net cash provided by financing activities		6,540			12,622
Effect of exchange rate changes on cash and cash equivalents		(81	)		71
Net increase (decrease) in cash and cash equivalents		(8,771	)		2,623
Cash and cash equivalents, beginning of period		43,039			36,759
Cash and cash equivalents, end of period	$	34,268		$	39,382


Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measure
(In thousands, except share and per share amounts)
(Unaudited)


	Three Months Ended			Nine Months Ended
	September 30, 2014			September 30, 2014
Non-GAAP net income, adjusted for stock-based compensation and amortization expenses:
GAAP net income	$	10,384		$	31,442
Add back: Stock-based compensation expense
Cost of revenue		103			282
Marketing and sales		250			685
Research and development		287			770
General and administrative		673			1,824
Total stock-based compensation expense		1,313			3,561
Income tax benefits on stock-based compensation expense		(417	)		(1,128	)
Non-GAAP net income adjusted for stock-based compensation expense		11,280			33,875
Add back: Amortization expense
General and administrative		186			311
Income tax benefits on amortization expense		(65	)		(109	)
Non-GAAP net income adjusted for stock-based compensation and amortization expenses	$	11,401		$	34,077

Non-GAAP net income per share:
Basic	$	0.44		$	1.33
Diluted	$	0.44		$	1.31

Shares used to compute non-GAAP net income per share:
Basic		25,757,593			25,651,156
Diluted		26,200,741			26,109,539


Proto Labs, Inc.
Revenue by Geography - Based on Shipping Location
(In thousands)
(Unaudited)


	Three Months Ended		Nine Months Ended
	September 30, 2014		September 30, 2014
Revenues
Domestic
United States	$	40,822	$	113,810
International
Europe		9,333		27,523
Japan		1,878		5,210
United States		2,541		6,971
Total international		13,752		39,704
Total revenue	$	54,574	$	153,514


Proto Labs, Inc.
Customer Information
(In thousands, except customer amounts)
(Unaudited)

	Nine Months Ended September 30,
	2014			2013
	Number of			Number of
	Customers	Revenue ($)		Customers	Revenue ($)

New customers - Protomold and Firscut	2,564	$	16,054	2,261	$	14,636
Existing customers - Protomold and Firscut	6,154		131,957	5,315		104,434
Total	8,718	$	148,011	7,576	$	119,070

Note: the data above does not include customers who purchased Fineline products during the periods presented