Proto Labs Reports Record Revenue and Net Income for the Second Quarter 2015

Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the second quarter ended June 30, 2015.

Highlights include:

• Revenue for the second quarter of 2015 increased to a record $64.0 million, 21 percent above revenue of $52.9 million in the second quarter of 2014. On a constant currency basis, revenue was up 25 percent versus the prior year.
• Revenue from additive services (3D printing) through the Fineline acquisition completed in April 2014 totaled $5.4 million, an increase of 86 percent from the second quarter of 2014.
• Revenue growth reflected a 28 percent increase in the number of unique product developers and engineers served over the prior year period.
• Net income for the second quarter of 2015 was a record $11.7 million, or $0.44 per diluted share. Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, and non-cash unrealized foreign currency losses, was $13.0 million, or $0.50 per diluted share. See “Non-GAAP Financial Measure” below.

“Our second quarter results reflected strong execution in many areas,” said Vicki Holt, President and Chief Executive Officer. “Revenue in North America grew 23 percent, driven primarily by growth in additive manufacturing and Firstcut services. We were especially pleased with the growth in European revenue, up 33.5 percent on a constant currency basis, 12 percent when translated to dollars. Japan also executed well, generating an increase in revenue of 33 percent on a constant currency basis, 12 percent as reported. The growth across all regions reflected the actions we took earlier in the year to strengthen the leadership team and drive more focused marketing and sales efforts.”

Additional Highlights include:

• Gross margin was 58.7 percent of revenue for the second quarter of 2015 compared with 61.8 percent during the same quarter last year. The current period reflects a lower gross margin on the additive business, representing approximately 90 basis points. Foreign currency exchange rates had an 80 basis point impact year over year with the remaining difference driven by capacity additions and business mix.
• GAAP operating margin was 27.1 percent of revenue during the second quarter of 2015 compared to 30.2 percent for the second quarter of 2014.
• Cash generated from operations during the second quarter totaled $12.4 million. Cash, cash equivalents and investments were $142.0 million at June 30, 2015 compared with $137.2 million at March 31, 2015.

“We continue to focus on our priorities – to enhance our targeted sales and marketing efforts worldwide, expand our envelope of manufacturing services and continually improve customer service. We are making progress on each of these initiatives. In the second half of the year, we anticipate growing demand for our recently introduced materials and processes, including lathe-turned parts in North America and Europe, the full launch of additive manufacturing in Europe in the third quarter and the introduction of the lathe process in Japan later in 2015. Our expanded sales and marketing focus is beginning to gain traction. While there is much work ahead, we remain committed to our continued execution and believe our success will result in strong, consistent revenue growth and profitability,” concluded Ms. Holt.

Non-GAAP Financial Measures

The company has included non-GAAP adjusted revenue growth that excludes the impact of changes in foreign currency exchange rates from total revenues in this press release to provide investors with additional information regarding the company’s financial results. Management believes this metric is useful in evaluating the underlying business trends and ongoing operating performance of the company.

The company has also included non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, and non-cash unrealized foreign currency activity (collectively, “non-GAAP net income”), 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 to net income, the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP net income 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 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 second quarter financial results today, July 23, 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 be available via the investor relations section of the Proto Labs website and the following link: http://edge.media-server.com/m/p/waibd344/lan/en. 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 the world's fastest digital manufacturing source for custom prototypes and low-volume production parts. The technology-enabled company uses advanced 3D printing, CNC machining and injection molding technologies to produce parts within days. The result is an unprecedented speed-to-market value for product designers and engineers worldwide. Visit protolabs.com for more information.

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.

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