Proto Labs Inc - FORM 8-K - EX-99 - EXHIBIT 99.1

Proto Labs Inc - FORM 8-K - EX-99 - EXHIBIT 99.1 - October 23, 2014

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Proto Labs Inc Reports

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8-K - FORM 8-K - Proto Labs Inc	prlb20141022_8k.htm

Exhibit 99.1

Proto Labs Reports Record Revenue for the Third Quarter 2014

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.—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.

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.

Contacts:

Investor Relations:

Jack Judd, 763-479-7408

jack.judd@protolabs.com

Jenifer Kirtland, 408-656-9496

jkirtland@evcgroup.com

Media Relations:

Bill Dietrick, 763-479-7664

bill.dietrick@protolabs.com

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

		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 Customers		Revenue ($)		Number of Customers		Revenue ($)

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

Proto Labs, Inc.
Product Developer Information
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Unique product developers served - Protomold and Firscut

8,680

7,308

15,942

13,421


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

Proto Labs, Inc.

Revenue by Geography - Based on Shipping Location

(In thousands)

(Unaudited)