Proto Labs Reports Record Revenue for the Fourth Quarter and Full Year 2014

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 fourth quarter financial results today, February 5, 2015 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 section of Proto Labs’ website.

About Proto Labs, Inc.

Proto Labs is a leading online and technology-enabled, quick-turn, on-demand manufacturer of custom parts for prototyping and short-run production. Proto Labs provides “Real Parts, Really Fast” to product developers and engineers 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)
             
       
December 31, December 31,
2014 2013
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 43,329 $ 43,039
Short-term marketable securities 30,706 36,339
Accounts receivable, net 24,226 18,320
Inventory 6,194 5,166
Other current assets   3,889   6,931
Total current assets 108,344 109,795
 
Property and equipment, net 91,626 56,101
Long-term marketable securities 54,318 64,023
Goodwill 28,916 -
Other intangible assets, net 4,083 -
Other long-term assets   227   256
Total assets $ 287,514 $ 230,175
 
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 7,882 $ 6,455
Accrued compensation 6,067 6,196
Accrued liabilities and other 2,718 808
Income taxes payable 1,953 -
Current portion of long-term debt obligations   139   204
Total current liabilities 18,759 13,663
 
Long-term deferred tax liabilities 1,846 3,682
Long-term debt obligations 10 159
Other long-term liabilities 1,360 1,028
 
Shareholders' equity   265,539   211,643
Total liabilities and shareholders' equity $ 287,514 $ 230,175
                 
 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
               
 
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Revenue
Protomold $ 35,678 $ 30,731 $ 140,282 $ 115,069
Firstcut 16,507 13,311 59,914 48,043
Fineline   3,884   -   9,387   -
Total revenue 56,069 44,042 209,583 163,112
 
Cost of revenue   22,457   16,427   81,182   61,410
Gross profit 33,612 27,615 128,401 101,702
 
Operating expenses
Marketing and sales 8,115 6,164 29,144 22,386
Research and development 4,682 3,458 16,607 11,863
General and administrative   6,152   4,119   22,122   16,154
Total operating expenses   18,949   13,741   67,873   50,403
Income from operations 14,663 13,874 60,528 51,299
Other income, net   22   129   3   279
Income before income taxes 14,685 14,003 60,531 51,578
Provision for income taxes   4,492   4,496   18,896   16,301
Net income $ 10,193 $ 9,507 $ 41,635 $ 35,277
 
Net income per share:
Basic $ 0.39 $ 0.37 $ 1.62 $ 1.40
Diluted $ 0.39 $ 0.36 $ 1.60 $ 1.36
 
Shares used to compute net income per share:
Basic 25,815,973 25,506,107 25,692,699 25,198,556
Diluted 26,152,891 26,115,866 26,100,320 25,859,741
 
 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Year Ended
December 31,
2014 2013
 
Operating activities
Net income $ 41,635 $ 35,277
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 11,138 7,569
Stock-based compensation expense 4,809 3,461
Deferred taxes (1,875 ) 467
Excess tax benefit from stock-based compensation (4,470 ) (9,873 )
Amortization of held-to-maturity securities 1,517 1,468
Loss on disposal of property and equipment - 110
Changes in operating assets and liabilities   4,456     9,962  
Net cash provided by operating activities   57,210     48,441  
 
Investing activities
Purchases of property and equipment (43,507 ) (18,753 )
Acquisitions, net of cash acquired (33,864 ) -
Purchases of marketable securities (60,186 ) (106,298 )
Proceeds from sales and maturities of marketable securities   74,058     66,570  
Net cash used in investing activities   (63,499 )   (58,481 )
 
Financing activities
Payments on debt (1,055 ) (258 )
Acquisition-related contingent consideration (1,200 ) -
Proceeds from exercises of stock options and other 4,821 6,496
Excess tax benefit from stock-based compensation   4,470     9,873  
Net cash provided by financing activities   7,036     16,111  
Effect of exchange rate changes on cash and cash equivalents   (457 )   209  
Net increase in cash and cash equivalents 290 6,280
Cash and cash equivalents, beginning of period   43,039     36,759  
Cash and cash equivalents, end of period $ 43,329   $ 43,039  
                     
 
 
Proto Labs, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measure
(In thousands, except share and per share amounts)
(Unaudited)
       
 
Three Months Ended Year Ended
December 31, 2014 December 31, 2014

Non-GAAP net income, adjusted for stock-based compensation and amortization expenses:

GAAP net income $ 10,193 $ 41,635
Add back: Stock-based compensation expense
Cost of revenue 104 386
Marketing and sales 242 927
Research and development 278 1,048
General and administrative   624     2,448  
Total stock-based compensation expense 1,248 4,809
Income tax benefits on stock-based compensation expense   (396 )   (1,524 )
Non-GAAP net income adjusted for stock-based compensation expense   11,045     44,920  
Add back: Amortization expense
General and administrative 186 496
Income tax benefits on amortization expense   (65 )   (174 )

Non-GAAP net income adjusted for stock-based compensation and amortization expenses

$ 11,166   $ 45,242  
 
Non-GAAP net income per share:
Basic $ 0.43   $ 1.76  
Diluted $ 0.43   $ 1.73  
 
Shares used to compute non-GAAP net income per share:
Basic 25,815,973 25,692,699
Diluted 26,152,891 26,100,320
                     
 
 
Proto Labs, Inc.
Revenue by Geography - Based on Shipping Location
(In thousands)
(Unaudited)
               
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Revenues
Domestic
United States $ 42,223 $ 31,054 $ 156,033 $ 119,870
International
Europe 9,967 9,653 37,490 31,513
Japan 1,766 1,604 6,976 5,857
United States   2,113   1,731   9,084   5,872
Total international   13,846   12,988   53,550   43,242
Total revenue $ 56,069 $ 44,042 $ 209,583 $ 163,112
                                 
 
 
Proto Labs, Inc.
Customer Information
(In thousands, except customer amounts)
(Unaudited)
               
Year Ended December 31,
2014 2013
Number of Number of
Customers Revenue ($) Customers Revenue ($)
 
New customers - Protomold and Firstcut 3,425 $ 25,596 3,027 $ 22,532
Existing customers - Protomold and Firstcut 6,719   174,600 5,734   140,580
Total 10,144 $ 200,196 8,761 $ 163,112
                         
Note: the data above does not include customers who purchased Fineline products during the periods presented.
 
 
Proto Labs, Inc.
Product Developer Information
(Unaudited)
               
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
 
Unique product developers served - Protomold and Firstcut 8,773 7,290 19,294 16,128
Unique product developers served - Fineline 1,939 - 3,329 -
Product developer overlap* (481 ) - (1,071 ) -
Total unique product developers served 10,231   7,290 21,552   16,128
 
                         
* Product developer overlap represents product developers and engineers who purchased both our legacy Protomold/Firstcut products and newly acquired Fineline products during the periods presented.
 

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