Proto Labs Reports Record Revenue and Net Income for the Fourth Quarter 2012

MAPLE PLAIN, Minn. -- (BUSINESS WIRE) -- Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled quick-turn manufacturer, today announced its financial results for the fourth quarter and the year ended December 31, 2012.

Highlights include:

• Revenue for the fourth quarter of 2012 increased to a record $33.6 million, 31 percent above revenue of $25.6 million in the fourth quarter of 2011.
• For the year ended 2012, revenue increased to $126.0 million, or 27 percent above revenue of $98.9 million during 2011.
• During 2012, revenue from 2,991 new customer companies totaled $20.8 million and revenue from 4,763 existing customer companies totaled $105.2 million.
• Net income for the fourth quarter of 2012 totaled $7.4 million, or $0.29 per diluted share. Non-GAAP net income, excluding the after tax expense of stock compensation, was $7.9 million, or $0.31 per diluted share. See “Non-GAAP Financial Measure” below.
• Net income during 2012 totaled $24.0 million, or $0.98 per diluted share. Non-GAAP net income, excluding the after tax expense of stock compensation, was $26.2 million, or $1.07 per diluted share. See “Non-GAAP Financial Measure” below.

“The fourth quarter was a strong finish to a very good year, marked by record quarterly revenue and net income for Proto Labs,” said Brad Cleveland, President and CEO. “It is particularly encouraging that each of our global operations in the United States, Europe and Japan achieved quarterly revenue records. Our global colleagues did a tremendous job during the quarter despite significant economic challenges.”

Additional highlights include:

• Gross margin was 62.5 percent of revenue in the fourth quarter of 2012 compared with 56.8 percent during the same quarter in 2011.
• During the fourth quarter of 2012, spending on research and development, including the Protoworks initiatives, totaled $2.5 million, or 7.5 percent of revenue. This compares to $1.6 million, or 6.2 percent of revenue during the fourth quarter of 2011.
• Operating margin was 30.5 percent of revenue during the fourth quarter of 2012 compared to 19.1 percent in the fourth quarter of 2011.
• Cash generated from operations totaled $25.3 million during 2012. Expenditures on capital equipment were $17.4 million during 2012.

“Our manufacturing and engineering teams also continued their focus on streamlining our processes and further improving our already excellent margins. The result was yet another increase in our net income, and I would like to congratulate everyone involved on the success of their efforts,” concluded Mr. Cleveland.

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 13, at 8:30 a.m. ET. To access the call in the U.S. please dial 800-659-2032. Outside the U.S. please dial 617-614-2712. Use participant code 74470100#. 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,
			2012				2011
			(Unaudited)
Assets
Current assets
Cash and cash equivalents			$	36,759			$	8,135
Short-term marketable securities				25,137				250
Accounts receivable, net				15,791				11,533
Inventory				4,619				3,797
Other current assets				7,850				4,362
Total current assets				90,156				28,077
Property and equipment, net				45,316				34,249
Long-term marketable securities				36,965				-
Other long-term assets				1,493				-
Total assets			$	173,930			$	62,326
Liabilities, redeemable convertible stock and
shareholder's equity (deficit)
Current liabilities
Accounts payable			$	4,758			$	4,431
Accrued compensation				5,995				4,767
Accrued liabilities and other				513				351
Current portion of long-term debt obligations				273				390
Total current liabilities				11,539				9,939
Deferred tax liability				4,554				4,252
Long-term debt obligations				356				613
Other				782				871
Redeemable convertible preferred and common stock				-				66,894
Shareholders' equity (deficit)				156,699				(20,243	)
Total liabilities, redeemable convertible stock and
shareholders' equity (deficit)			$	173,930			$	62,326

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,
			2012				2011					2012				2011
Revenues
Protomold			$	23,674			$	19,002				$	90,371			$	74,090
Firstcut				9,942				6,635					35,620				24,849
Total revenues				33,616				25,637					125,991				98,939
Cost of revenues				12,611				11,073					49,853				39,324
Gross profit				21,005				14,564					76,138				59,615
Operating expenses
Marketing and sales				4,658				4,612					18,098				15,752
Research and development				2,515				1,584					9,137				5,222
General and administrative				3,564				3,475					13,957				11,772
Total operating expenses				10,737				9,671					41,192				32,746
Income from operations				10,268				4,893					34,946				26,869
Other income (expense), net				114				(132	)				23				(114	)
Income before income taxes				10,382				4,761					34,969				26,755
Provision for income taxes				2,987				1,531					10,944				8,783
Net income				7,395				3,230					24,025				17,972
Less: dividends on redeemable preferred stock				-				(1,053	)				-				(4,179	)
Less: undistributed earnings allocated to preferred shareholders				-				(673	)				-				(4,507	)
Net income attributable to common shareholders			$	7,395			$	1,504				$	24,025			$	9,286
Net income per share:
Basic			$	0.30			$	0.12				$	1.03			$	0.75
Diluted			$	0.29			$	0.11				$	0.98			$	0.67
Shares used to compute net income per share:
Basic				24,557,878				12,895,918					23,373,593				12,352,004
Diluted				25,359,071				14,045,402					24,443,665				13,939,072

Proto Labs, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
			Year Ended
			December 31,
			2012					2011
Operating activities
Net income			$	24,025				$	17,972
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization				6,080					4,264
Stock-based compensation expense				3,039					1,130
Deferred taxes				(582	)				2,230
Excess tax benefit from stock-based compensation				(6,218	)				(657	)
Loss on disposal of property and equipment				154					(10	)
Changes in operating assets and liabilities:				(1,192	)				(1,394	)
Net cash provided by operating activities				25,306					23,535
Investing activities
Purchases of property and equipment				(17,397	)				(19,003	)
Purchases of marketable securities				(84,219	)				-
Proceeds from sale of marketable securities				22,368					500
Net cash used in investing activities				(79,248	)				(18,503	)
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				(388	)				(4,049	)
Proceeds from exercises of warrants and stock options				2,975					547
Excess tax benefit from stock-based compensation				6,218					657
Net cash provided by (used in) financing activities				82,786					(2,845	)
Effect of exchange rate changes on cash and cash equivalents				(220	)				(153	)
Net increase in cash and cash equivalents				28,624					2,034
Cash and cash equivalents, beginning of period				8,135					6,101
Cash and cash equivalents, end of period			$	36,759				$	8,135

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, 2012					December 31, 2012
Non-GAAP net income, adjusted for stock-based compensation expense:
GAAP net income			$	7,395				$	24,025
Add back: Stock-based compensation expense
Cost of revenue				87					335
Marketing and sales				118					418
Research and development				140					486
General and administrative				332					1,800
Total stock-based compensation expense				677					3,039
Less: Tax benefit on stock-based compensation				(181	)				(844	)
Non-GAAP net income			$	7,891				$	26,220
Non-GAAP net income per share:
Basic			$	0.32				$	1.12
Diluted			$	0.31				$	1.07
Shares used to compute non-GAAP net income per share:
Basic				24,557,878					23,373,593
Diluted				25,359,071					24,443,665

Proto Labs, Inc.
Revenue by Geography - Based on Shipping Location
(In thousands)
(Unaudited)
			Three Months Ended								Year Ended
			December 31,								December 31,
			2012				2011				2012				2011
Revenues
Domestic
United States			$	24,979			$	18,287			$	94,866			$	73,010
International
Europe				6,212				5,512				22,517				19,453
Japan				1,396				1,002				4,814				2,852
United States				1,029				836				3,794				3,624
Total international				8,637				7,350				31,125				25,929
Total revenue			$	33,616			$	25,637			$	125,991			$	98,939

Proto Labs, Inc.
Customer Information
(In thousands, except customer amounts)
(Unaudited)
			Year Ended December 31,
			2012							2011
			Number of Customers			Revenue ($)				Number of Customers			Revenue ($)
New Customers			2,991			$	20,766			2,598			$	18,401
Existing Customers			4,763				105,225			3,430				80,538
Total			7,754			$	125,991			6,028			$	98,939