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

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

Highlights include:

• Revenue for the third quarter of 2015 increased to a record $67.8 million, 24 percent above revenue of $54.6 million in the third quarter of 2014. On a constant currency basis, revenue was up 28 percent versus the prior year.
• Revenue from additive services (3D printing) totaled $6.0 million, an increase of 79 percent from the third quarter of 2014.
• Revenue growth reflected a 24 percent increase in the number of unique product developers and engineers served over the prior year period.
• Net income for the third quarter of 2015 was a record $12.4 million, or $0.47 per diluted share. Non-GAAP net income, excluding the after-tax expense of stock compensation, transaction costs related to the Alphaform acquisition, amortization of intangibles and unrealized foreign currency gains, was $13.7 million, or $0.52 per diluted share. See “Non-GAAP Financial Measures” below.

“We continued to demonstrate strong momentum in the third quarter, reflecting solid execution of our marketing and sales, manufacturing, and new product and service initiatives,” said Vicki Holt, President and Chief Executive Officer. “Revenue in North America increased 26% percent, led by strong growth in additive manufacturing and Firstcut services. Europe remained a highlight with 40 percent revenue growth on a constant currency basis, 21 percent when translated to dollars. Japan generated a 33 percent increase in revenue on a constant currency basis, 14 percent as reported.”

Additional Third Quarter Highlights include:

• Gross margin was 59.4 percent of revenue for the third quarter of 2015 compared with 58.7 percent for the second quarter of 2015 and 60.6 percent during the same quarter last year.
• GAAP operating margin, including transaction expenses, was 25.7 percent of revenue during the third quarter of 2015 compared to 28.3 percent for the third quarter of 2014. On a non-GAAP basis, operating margins were 29.3 percent. See “Non-GAAP Financial Measures” below.
• Cash generated from operations during the third quarter totaled $13.5 million. Cash, cash equivalents and investments were $150.0 million at September 30, 2015 compared with $142.0 million at June 30, 2015.

“On October 9, we announced the completion of our acquisition of Alphaform, a leading service bureau based in Germany,” Ms. Holt continued. “We are very excited about the opportunities this transaction offers Proto Labs. Alphaform is known for its quality additive manufacturing and injection molding services and we expect this acquisition will significantly accelerate our growth in Europe. We believe we can leverage Alphaform’s manufacturing assets, customer base and experienced workforce quickly and cost effectively into our existing European operations, positioning us well for future expansion.”

“We are on track with the roll out of our new materials and service offerings. Demand for our Stereolithography service in Europe, launched in the second quarter, has been growing steadily. We are seeing excellent reception for our lathe process which is now operational in all of our regions. We remain focused on our marketing and sales initiatives and we are gaining traction in markets worldwide. We look forward to the opportunities ahead and are working very hard to execute on our strategy for growth,” 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 operating margin, adjusted for stock-based compensation expense, transaction expenses related to the acquisition of Alphaform and amortization expense in this press release to provide investors with additional information regarding the company’s financial results.

The company has also included non-GAAP net income, adjusted for stock-based compensation expense, transaction expenses related to the acquisition of Alphaform, amortization expense, and 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 operating margin to operating margin and non-GAAP net income to net income, the most directly comparable measures calculated and presented in accordance with GAAP. Non-GAAP operating margins and non-GAAP net income are used by the company’s management and board of directors to understand and evaluate operating performance and trends and provide useful measures for period-to-period comparisons of the company’s business. Accordingly, the company believes that non-GAAP operating margin and net income provide 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 22, 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/rjdabigy/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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