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Proto Labs Reports Record Revenue and Net Income for the Fourth Quarter 2013

Quarterly Revenue Increases 31% Year over Year to $44.0 Million
Quarterly Net Income Increases 29% Year over Year to $9.5 Million

MAPLE PLAIN, Minn.--(BUSINESS WIRE)--Feb. 11, 2014-- Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled quick-turn manufacturer, today announced record financial results for the fourth quarter ended December 31, 2013.

Highlights include:

  • Revenue for the fourth quarter of 2013 increased to a record $44.0 million, 31 percent above revenue of $33.6 million in the fourth quarter of 2012.
  • The record quarterly revenue was achieved through a 21 percent increase in the number of product developers served combined with an increase of 9 percent in spending per product developer.
  • Net income for the fourth quarter of 2013 increased to a record $9.5 million, or $0.36 per diluted share. Non-GAAP net income, excluding the after tax expense of stock compensation, was $10.2 million, or $0.39 per diluted share. See “Non-GAAP Financial Measure” below.

“I am very proud of our many accomplishments in the fourth quarter of 2013, my last as CEO,” said Brad Cleveland, departing President and Chief Executive Officer of Proto Labs. “We were very successful during 2013 on all fronts, including gains with product developers, progress with our Protoworks initiatives, enhancements in our software, exceptional new employees, and of course, successive quarters of record financial results. Our organization is clearly in an excellent condition to transition the CEO position to Vicki Holt.”

Additional highlights include:

  • Gross margin was 62.7 percent of revenue in the fourth quarter of 2013 compared with 62.5 percent during the same quarter in 2012.
  • During the fourth quarter of 2013, spending on research and development, including the Protoworks initiatives, totaled $3.5 million, or 7.9 percent of revenue. This compares to $2.5 million, or 7.5 percent of revenue during the fourth quarter of 2012.
  • Operating margin was 31.5 percent of revenue during the fourth quarter of 2013 compared to 30.5 percent in the fourth quarter of 2012.
  • As measured on a year to date basis, cash generated from operations totaled $48.4 million and expenditures on capital equipment were $18.8 million. Cash and cash equivalents and investments totaled $143.4 million as of December 31, 2013.

“As part of the Proto Labs team for a few days now, I am enjoying getting to know the company and its employees,” said Victoria Holt, current President and Chief Executive Officer. “I am excited by this opportunity at Proto Labs and grateful to the Board of Directors for their confidence in my ability to lead the company to the next level of growth. We have exciting new services rolling out in Protoworks and during the next few months I will be spending time with our sales and marketing teams to gain a clear understanding of our customer base worldwide. I look forward to communicating with our investors the strengths of our business and our plans to drive continued growth and profitability.”

Non-GAAP Financial Measure

The company has included non-GAAP net income, adjusted for stock-based compensation 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, 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, 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, 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 11, 2014 at 8:30 a.m. ET. To access the call in the U.S. please dial 877-299-4454. Outside the U.S. please dial 617-597-5447. Use participant code 14866316#. 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 and injection molding 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,
2013 2012
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 43,039 $ 36,759
Short-term marketable securities 36,339 25,137
Accounts receivable, net 18,320 15,791
Inventory 5,166 4,619
Other current assets   6,931   7,850
Total current assets 109,795 90,156
 
Property and equipment, net 56,101 45,316
Long-term marketable securities 64,023 36,965
Other long-term assets   256   285
Total assets $ 230,175 $ 172,722
 
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 6,455 $ 4,758
Accrued compensation 6,196 5,995
Accrued liabilities and other 808 513
Current portion of long-term debt obligations   204   273

Total current liabilities

13,663 11,539
 
Long-term deferred tax liabilities 3,682 3,346
Long-term debt obligations 159 356
Other long-term liabilities 1,028 782
 
Shareholders' equity   211,643   156,699
Total liabilities and shareholders' equity $ 230,175 $ 172,722
 
 
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,

2013

2012

2013

2012

Revenues
Protomold $ 30,731 $ 23,674 $ 115,069 $ 90,371
Firstcut   13,311   9,942   48,043   35,620

Total revenues

44,042 33,616 163,112 125,991
 
Cost of revenues   16,427   12,611   61,410   49,853
Gross profit 27,615 21,005 101,702 76,138
 
Operating expenses
Marketing and sales 6,164 4,658 22,386 18,098
Research and development 3,458 2,515 11,863 9,137
General and administrative   4,119   3,564   16,154   13,957
Total operating expenses   13,741   10,737   50,403   41,192
Income from operations 13,874 10,268 51,299 34,946
Other income, net   129   114   279   23
Income before income taxes 14,003 10,382 51,578 34,969
Provision for income taxes   4,496   2,987   16,301   10,944
Net income $ 9,507 $ 7,395 $ 35,277 $ 24,025
 
Net income per share:
Basic $ 0.37 $ 0.30 $ 1.40 $ 1.03
Diluted $ 0.36 $ 0.29 $ 1.36 $ 0.98
 
Shares used to compute net income per share:
Basic 25,506,107 24,557,878 25,198,556 23,373,593
Diluted 26,115,866 25,359,071 25,859,741 24,443,665
 
 
Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Year Ended
December 31,
2013 2012
 
Operating activities
Net income $ 35,277 $ 24,025
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,569 6,080
Stock-based compensation expense 3,461 3,039
Deferred taxes 467 (583 )
Excess tax benefit from stock-based compensation (9,873 ) (6,218 )
Amortization of held-to-maturity securities 1,468 369
Loss on disposal of property and equipment 110 154
Changes in operating assets and liabilities   9,962     (1,191 )
Net cash provided by operating activities   48,441     25,675  
 
Investing activities
Purchases of property and equipment (18,753 ) (17,397 )
Purchases of marketable securities (106,298 ) (84,588 )
Proceeds from maturities of marketable securities   66,570     22,368  
Net cash used in investing activities   (58,481 )   (79,617 )
 
Financing activities
Proceeds from initial public offering, net of offering costs - 71,530
Proceeds from follow-on offering, net of offering costs - 2,451
Payments on debt (258 ) (388 )
Proceeds from exercises of stock options and other 6,496 2,975
Excess tax benefit from stock-based compensation   9,873     6,218  
Net cash provided by financing activities   16,111     82,786  
Effect of exchange rate changes on cash and cash equivalents   209     (220 )
Net increase in cash and cash equivalents 6,280 28,624
Cash and cash equivalents, beginning of period   36,759     8,135  
Cash and cash equivalents, end of period $ 43,039   $ 36,759  
 
 
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, 2013 December 31, 2013
Non-GAAP net income, adjusted for stock-based compensation expense:
GAAP net income $ 9,507 $ 35,277
Add back: Stock-based compensation expense
Cost of revenue 83 316
Marketing and sales 155 610
Research and development 199 754
General and administrative   429     1,781  
Total stock-based compensation expense 866 3,461
Less: Tax benefit on stock-based compensation   (223 )   (847 )
Non-GAAP net income $ 10,150   $ 37,891  
 
Non-GAAP net income per share:
Basic $ 0.40   $ 1.50  
Diluted $ 0.39   $ 1.47  
 
Shares used to compute non-GAAP net income per share:
Basic 25,506,107 25,198,556
Diluted 26,115,866 25,859,741
 
 
Proto Labs, Inc.
Revenue by Geography - Based on Shipping Location
(In thousands)
(Unaudited)
               
 
Three Months Ended Year Ended
December 31, December 31,

2013

2012

2013

2012

Revenues
Domestic
United States $ 31,054 $ 24,979 $ 119,870 $ 94,866
International
Europe 9,653 6,212 31,513 22,517
Japan 1,604 1,396 5,857 4,814
United States   1,731   1,029   5,872   3,794
Total international   12,988   8,637   43,242   31,125
Total revenue $ 44,042 $ 33,616 $ 163,112 $ 125,991
 
 
Proto Labs, Inc.
Customer Information
(In thousands, except customer amounts)
(Unaudited)
               
Year Ended December 31,
2013 2012
Number of Number of
Customers Revenue ($) Customers Revenue ($)
 
New customers 3,027 $ 22,532 2,991 $ 20,766
Existing customers 5,734   140,580 4,763   105,225
Total 8,761 $ 163,112 7,754 $ 125,991
 
 
Proto Labs, Inc.
Product Developer Information
(Unaudited)
               

Three Months Ended

Year Ended
December 31, December 31,
2013 2012 2013 2012
 
Unique product developers served 7,290 6,042 16,128 13,454
 

Source: Proto Labs, Inc.

Proto Labs, Inc.
Investor Relations:
Jack Judd, 763-479-7408
jack.judd@protolabs.com
or
Media Relations:
Bill Dietrick, 763-479-7664
bill.dietrick@protolabs.com