Proto Labs (PRLB) 8-K Proto Labs Reports Record Revenueand Net Incomefor theThirdQuarter2015

Exhibit 99.1

Proto Labs Reports Record Revenueand Net Incomefor theThirdQuarter2015

QuarterlyRevenueUp 24% Year over Year to $67.8 Million

RecordQuarterly Net Incomeof $12.4 Million

MAPLE PLAIN, Minn. – October 22, 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.

Contacts:

Investor Relations:

John Way, 763-479-7726

john.way@protolabs.com

Jenifer Kirtland, 408-656-9496

jkirtland@evcgroup.com

Media Relations:

Bill Dietrick, 763-479-7664

bill.dietrick@protolabs.com

Proto Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

	September 30,		December 31,
	2015		2014
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	64,131	$	43,329
Short-term marketable securities		28,062		30,706
Accounts receivable, net		32,897		24,226
Inventory		7,228		6,194
Income taxes receivable		4,029		-
Other current assets		6,193		3,889
Total current assets		142,540		108,344
Property and equipment, net		108,626		91,626
Long-term marketable securities		57,801		54,318
Goodwill		28,916		28,916
Other intangible assets, net		3,523		4,083
Other long-term assets		520		227
Total assets	$	341,926	$	287,514
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	11,552	$	7,882
Accrued compensation		10,519		6,067
Accrued liabilities and other		2,424		2,718
Income taxes payable		-		1,953
Current portion of long-term debt obligations		39		139
Total current liabilities		24,534		18,759
Long-term deferred tax liabilities		1,488		1,846
Long-term debt obligations		-		10
Other long-term liabilities		1,716		1,360
Shareholders' equity		314,188		265,539
Total liabilities and shareholders' equity	$	341,926	$	287,514

Proto Labs, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2015		2014			2015		2014
Revenue
Protomold	$	41,971	$	35,655		$	119,521	$	104,604
Firstcut		19,833		15,549			54,788		43,407
Fineline		6,038		3,370			16,038		5,503
Total revenue		67,842		54,574			190,347		153,514
Cost of revenue		27,517		21,492			77,218		58,725
Gross profit		40,325		33,082			113,129		94,789
Operating expenses
Marketing and sales		10,027		7,351			28,383		21,029
Research and development		4,760		4,555			13,471		11,925
General and administrative		8,134		5,733			20,683		15,970
Total operating expenses		22,921		17,639			62,537		48,924
Income from operations		17,404		15,443			50,592		45,865
Other income (expense), net		593		(56	)		100		(19	)
Income before income taxes		17,997		15,387			50,692		45,846
Provision for income taxes		5,615		5,003			16,171		14,404
Net income	$	12,382	$	10,384		$	34,521	$	31,442
Net income per share:
Basic	$	0.47	$	0.40		$	1.33	$	1.23
Diluted	$	0.47	$	0.40		$	1.31	$	1.20
Shares used to compute net income per share:
Basic		26,083,405		25,757,593			25,952,451		25,651,156
Diluted		26,381,313		26,200,741			26,290,758		26,109,539

Proto Labs, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2015			2014
Operating activities
Net income	$	34,521		$	31,442
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,422			7,696
Stock-based compensation expense		4,515			3,561
Deferred taxes		(310	)		487
Excess tax benefit from stock-based compensation		(5,212	)		(4,383	)
Amortization of held-to-maturity securities		936			1,194
Changes in operating assets and liabilities		(3,588	)		7
Net cash provided by operating activities		41,284			40,004
Investing activities
Purchases of property and equipment		(27,259	)		(35,928	)
Acquisitions, net of cash acquired		-			(33,864	)
Purchases of marketable securities		(42,674	)		(47,338	)
Proceeds from sales and maturities of marketable securities		40,899			61,896
Net cash used in investing activities		(29,034	)		(55,234	)
Financing activities
Payments on debt		(107	)		(1,005	)
Acquisition-related contingent consideration		(1,400	)		(800	)
Proceeds from exercises of stock options and other		5,165			3,962
Excess tax benefit from stock-based compensation		5,212			4,383
Net cash provided by financing activities		8,870			6,540
Effect of exchange rate changes on cash and cash equivalents		(318	)		(81	)
Net increase (decrease) in cash and cash equivalents		20,802			(8,771	)
Cash and cash equivalents, beginning of period		43,329			43,039
Cash and cash equivalents, end of period	$	64,131		$	34,268

Proto Labs, Inc.

Reconciliation of GAAP to Non-GAAP Net Income per Share

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized loss (gain) on foreign currency, and acquisition costs:
GAAP net income	$	12,382		$	10,384		$	34,521		$	31,442
Add back:
Stock-based compensation expense		1,606			1,313			4,515			3,561
Income tax benefits on stock-based compensation expense		(494	)		(417	)		(1,378	)		(1,128	)
Amortization expense		186			186			559			311
Income tax benefits on amortization expense		(65	)		(65	)		(196	)		(109	)
Unrealized loss (gain) on foreign currency		(407	)		104			211			231
Income tax benefits on unrealized loss (gain) on foreign currency		78			(26	)		(50	)		(47	)
Acquisition costs		648			-			648			-
Income tax benefits on acquisition costs		(227	)		-			(227	)		-
Total adjustments		1,325			1,095			4,082			2,819
Non-GAAP net income adjusted for stock-based compensation expense, amortization expense, unrealized loss (gain) on foreign currency, and acquisition costs	$	13,707		$	11,479		$	38,603		$	34,261
Non-GAAP net income per share:
Basic	$	0.53		$	0.45		$	1.49		$	1.34
Diluted	$	0.52		$	0.44		$	1.47		$	1.31
Shares used to compute non-GAAP net income per share:
Basic		26,083,405			25,757,593			25,952,451			25,651,156
Diluted		26,381,313			26,200,741			26,290,758			26,109,539

Proto Labs, Inc.

Reconciliation of GAAP to Non-GAAP Operating Margin

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Revenue	$	67,842		$	54,574		$	190,347		$	153,514
Income from operations		17,404			15,443			50,592			45,865
GAAP operating margin		25.7	%		28.3	%		26.6	%		29.9	%
Add back:
Stock-based compensation expense		1,606			1,313			4,515			3,561
Amortization expense		186			186			559			311
Acquisition costs		648			-			648			-
Total adjustments		2,440			1,499			5,722			3,872
Non-GAAP income from operations adjusted for stock-based compensation expense, amortization expense and acquisition costs	$	19,844		$	16,942		$	56,314		$	49,737
Non-GAAP operating margin		29.3	%		31.0	%		29.6	%		32.4	%

Proto Labs, Inc.

Comparison of GAAP to Non-GAAP Revenue Growth

(In thousands)

(Unaudited)

	Three Months Ended							% Change			Nine Months Ended							% Change
	September 30,				%			Constant			September 30,				%			Constant
	2015		2014		Change			Currencies1			2015		2014		Change			Currencies1
Revenues
United States	$	54,408	$	43,363		25.5	%		25.5	%	$	154,107	$	120,781		27.6	%		27.6	%
Europe		11,297		9,333		21.0	%		39.9	%		30,161		27,523		9.6	%		27.9	%
Japan		2,137		1,878		13.8	%		33.4	%		6,079		5,210		16.7	%		36.9	%
Total Revenue	$	67,842	$	54,574		24.3	%		28.2	%	$	190,347	$	153,514		24.0	%		28.0	%

¹ Revenue growth for the three- and nine-month periods ended September 30, 2015 has been recalculated using 2014 foreign currency exchange rates in effect during comparable periods to provide information useful in evaluating the underlying business trends excluding the impact of changes in foreign currency exchange rates.

Proto Labs, Inc.

Revenue by Geography - Based on Shipping Location

(In thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Revenues
Domestic
United States	$	50,214	$	40,822	$	144,356	$	113,810
International
Europe		11,297		9,333		30,161		27,523
Japan		2,137		1,878		6,079		5,210
United States		4,194		2,541		9,751		6,971
Total international		17,590		13,752		45,953		39,704
Total revenue	$	67,842	$	54,574	$	190,347	$	153,514

Proto Labs, Inc.

Product Developer Information

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Unique product developers and engineers served		12,541		10,097		22,633		17,526