PRLB Proto Labs Inc

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 StatementsStatements 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 ofCustomers

Revenue ($)

Number ofCustomers

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