Proto Labs Reports Record Revenue for the Fourth Quarter and

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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