Ladies and gentlemen, thank you for standing by. Welcome to the Proto Labs Fourth Quarter 2012 Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator instructions) This conference is being recorded today, Wednesday, February 13, 2013. I would now like to turn the conference over to Bill Dietrick, Vice President of Marketing at Proto Labs. Please go ahead, Mr. Dietrick.

Thank you operator, and good morning everyone. This morning before the market opened, Proto Labs issued a press release announcing its fourth quarter and fourth quarter financial results for the period ended December 31, 2012. The release is available on the company’s website at protolabs.com. Before we get started, during the course of this conference call the company will provide financial projections and make other statements about its business that are forward-looking and are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. A detailed discussion of the risks and uncertainties that affect the business is contained in the company’s IPO prospectus and other SEC filings, particularly under the heading risk factors. Copies of these filings are available online from the SEC or on the Proto Labs website. The company’s projections and other forward-looking statements are based on factors that are subject to change, and therefore these statements speak only as of the date they are given. The company does not undertake to update any projection or forward-looking statement. In addition, to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and basic and diluted net income per share information that excludes the after-tax costs of stock compensation. We believe that this non- GAAP number provides meaningful supplemental information and is helpful in assessing our historical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in our financial release. Now I would like to turn the call over to Brad Cleveland, President and CEO of Proto Labs. Brad.

Good morning everyone. Thank you for joining us today on our fourth quarter 2012 conference call. With me today is Jack Judd, our Chief Financial Officer. I will begin with a brief overview of our fourth quarter and 2012 fiscal year financial results, as well as provide some related commentary. Then Jack will provide a more detailed look at our financial results and offer our views on the outlook for the first quarter of 2013. At the end of our remarks, we will be glad to take your questions. In our recently completed fourth quarter of 2012, Proto Labs generated record revenue of $33.6 million, an increase of 31% over the fourth quarter of 2011. For the full year, we generated revenue of $126 million, 27% above our 2011 revenue of $98.9 million. These excellent results in the fourth quarter were the result of record quarterly revenues from each of our global operations in the United States, Europe and Japan. As a result of this strong global revenue, we were also able to achieve record quarterly earnings. Our net income for the fourth quarter was $7.4 million or $0.29 per diluted share. This in turn allowed us to grow our annual net income to $24 million or $0.98 per diluted share. The number of customers we have served also continues to grow. During the full year of 2012, we served 2991 new customers, generating $20.8 million in revenue, and 4763 existing customers, generating $105.2 million in revenue. Jack will walk through our record financial results in greater detail later. Right now though I would like provide an update on each of our geographic locations, our Protoworks initiative and our Cool Idea program. During the just completed fourth-quarter record revenue from our US operations increased to $26 million, 36% over the…

Thank you Brad, and good morning to everyone. Revenue in the fourth quarter of 2012 was $33.6 million, an increase of $8 million or 31% over fourth quarter 2011 revenue. Protomold revenue during the just completed quarter was $23.7 million, and Firstcut revenue was $9.9 million. During the quarter, Firstcut revenue represented 30% of total revenue, compared to 26% during the fourth quarter of 2011. Our international revenue was $8.6 million or 26% of total revenue during the fourth quarter of 2012 compared to $7.4 million or 29% of revenue during the same period in 2011. During the just completed quarter, the impact of revenue due to changes in currency was insignificant. For the full year, revenue was negatively impacted by approximately $250,000. Full year 2012 consolidated revenue was $126 million, an increase of $27.1 million or 27% over 2011 revenue. For 2012, our international revenue was $31.1 million, an increase of 20% over $25.9 million in 2011. Our increases in revenue were driven both by new customer acquisition and increased orders from our existing customers. During 2012, we did business with 2991 new customers, generating $20.8 million in revenue, and 4763 existing customers, generating $105.2 in revenue. This compares to 2598 new and 3429 existing customers, generating $18.4 million and $80.5 million in revenue respectively during 2011. Our gross margin in the fourth quarter of 2012 was 62.5% compared to 56.8% in the same quarter in 2011, and 60.7% in the third quarter of 2012. While we are very pleased with the quarterly results of our gross margin, I do want to reinforce that our fourth quarter 2012 results exceed our long-term model for gross margins of 60% to 62%. Our gross margin can vary and generally is based on how well the timing of our capacity investments align…

Okay. The first question we have comes from Troy Jensen from Piper Jaffray. Please go ahead sir.

Hi guys. Congratulations on a really nice quarter here.

Thank you.

So a couple of questions, first could you just talk maybe about the ramp in the materials, specifically various metals and then I think there is also two others that popped up in the quarter, [peak]?

Yes. This is Brad. We added some new metals to Firstcut during the quarter. The key ones, the big key one was stainless steel, which we have been very pleased with how quickly our customers have started ordering that. And yes, pretty recently we started using steel tools in our Protomold service, which allows us to go to some higher temperature plastics that are very difficult to do in aluminum tools. The additional metals for Firstcut we think could be a significant revenue enhancement over time. I do not expect that the higher temperature plastics for Protomold will be that big of a deal though.

Those higher temps, that is all (inaudible)?

Yes.

Great, perfect. But as far as like revenue, is modest revenue contribution now, but potentially bigger ramp this year?

I would say the additional metals for Firstcut should be pretty significant revenue. I don’t think that the additional higher temperature of Protomold revenue will be a significant revenue enhancement. That is just the continual thing we are always doing.

Okay. Great, perfect. Hi, then just capacity expansion plan, you kind of alluded to it, I mean are you guys looking at this buying land, building a property, or buying an existing facility. And when do you think you will know whether or not you are going to be pulling off a capital purchase here soon?

This is Brad. We are growing pretty fast, so we are constantly looking at all of the different options of expanding our factory space. And so I would guess within the next few months, we will have a decision on that, and we’re just talking the United States.

I would expect that by the end of the second quarter all our plans will be firm.

It is just normal business for us, right.

No, no, no, I get that. I mean, (inaudible) so that ties into my next question about just the business model targets, Jack you said 60% to 62% is your target range, but you just hit 62.7%, right, if we’re going to get good sequential growth here in the March quarter and we don’t have any new capacity coming on in March, it just seems that 60% to 62% is little conservative with what you have just proven you can do. And arguably the same discussion on the operating line, I think I am shown 27% plus, you just hit 32.6% and it seems to me that there is going to be some more scale efficiencies as you continue to grow?

We sure hope that we can have some more efficiencies. But like we have said in previous quarters is that we like being conservative, and while we think the business has some room to grow, we are in terms of margins, we are really not forecasting that right now.

Okay. All right guys. Well, keep up the good work.

Thanks Troy.

The next question we have comes from Brian Drab from William Blair. Please go ahead.

Good morning. Congratulations on a great finish to the year.

Thanks Brian.

Thank you, Brian.

So the first question is just around your expectations for revenue per customer in 2013, and maybe you could talk about it in terms of revenue for customers in total and even specifically what you are expecting for revenue per new customer and revenue per existing customer?

I think Brian overall the revenue that we got overall this year for new customer and existing customer at least on a worldwide basis was similar and within the range that we would expect based upon our previous year’s experience in those numbers. In terms of -- as you look at any one individual market, there is obviously a bit more variability. We do not project revenue per new or existing customer as part of our internal metrics that we manage to. We measure it on an historical basis, but we don’t have necessarily quarterly goals to reach certain numbers.

So, yes, I understand you haven’t talked about specific goals, but could you even talk about it directionally, would you expect that since Firstcut growth has been outpacing Protomold growth that we are going to continue to see some modest decline in revenue per customer, or are there initiatives ongoing here that are -- and new materials that might even push up revenue per customer slightly.

I would say that the initiative that we have going that could create some variability in the numbers, is our efforts to go deeper and wider in international accounts. And so we have more and more of our sales efforts going in and trying to find more engineers within our present customer base. And so that would create more revenue, but it wouldn’t necessarily create new customers. And so that has been an active thing going on. But overall in this past year it didn’t seem to influence our numbers too much. And even though we had obviously an increase in Firstcut business versus total revenue, the numbers are still in line. Brad I don’t know if you want to say anything additional.

What I would add to that is, sure, the Firstcut sales point is a little bit lower than the average price. But as we ramp up our mold and metal products over the next couple of years that should more than offset that. So I would agree, I don’t really see a whole lot changing on a revenue per customer, new or existing.

Okay thanks that is very helpful. And then I just want to ask one more for now and that is if you look at the new customer growth in 2013, it was about 15%, and it had been stronger than that in past periods. What would you expect for 2014, well, first of all did that 15% growth in new customers meet your expectations, or was it kind of depressed against some of the macro factors that you mentioned earlier in the call, and have been putting some pressure on the business. Would you expect it to be better than 15% going forward?

This is Brad. What I would say is that if you will look at our 10-K when it comes out and look at the new customer accounts for the US versus Europe, you will find that it was really slow in Europe. The US really wasn’t too bad. So I really associate it with the economic conditions. And if things pick up, my assumption is that that will pick up as well, which is what we have seen in the past.

Okay, great. Thank you.

The next best thing we have comes from Jim Ricchiuti from the Needham & Company. Please go ahead. Jim Ricchiuti - Needham & Company: Thank you. Good morning. Maybe just to pick up on that last point, is there anything we can in terms of the sequential growth in new customers in Europe, is there anything you can tell us about what you are seeing in Q4 versus Q3?

I think the new customer growth in the third quarter and fourth quarter in Europe wouldn’t be significant enough that it would really cause any special research or special comments. We did see slowing of new customers. We attribute it to the recession in the Eurozone, and you know, overall the new customer growth was better overall consolidated in the first half of the year than it was in the last half of the year. But I still like to say we still exceeded our revenue growth numbers that we all had projected for the year. And so if there is a little bit of vagaries in the numbers too. Jim Ricchiuti - Needham & Company: Okay. If we look at the verticals in 2012 versus 2011, is there anything that stands out either from a new customer standpoint or perhaps from a revenue standpoint.

We just have been looking at that. And the same breakdown of markets that we serve, then the pie chart that breaks down the biggest market that we serve versus the next biggest and so on looks almost exactly the same for 2012 as it is for 2011. So there is very little change in the who’s our biggest market. Obviously we grew significantly, but the breakdown is about the same. Jim Ricchiuti - Needham & Company: Hi, Brad, do you see that relatively steady in 2013, or it looks like with some of the new materials that there perhaps is a bigger focus on the medical market. Do you see the profile changing at all?

We haven’t looked at 2013 yet. But I would be surprised if it changes very much. Jim Ricchiuti - Needham & Company: Okay, and just one final question just with respect to the facility expansion, Jack you are saying by Q2 we will know a little bit more, but it is capacity expansion in the US, is it going to be close to your corporate headquarters, are you looking at other sites?

We anticipate it will be in the Twin cities area. We’re just been careful because if we would choose to buy a building versus lease a building, whether it would include buying land, all that has a lot of different financial numbers to it. And so, we do expect our decision to be made by the end of the second quarter. But again, it is for expansion because our revenue is growing. Jim Ricchiuti - Needham & Company: Presuming you make that decision, when possibly could we see that facility begin operating, is that looking out to 2014?

It may be as early as the fourth quarter of 2013. Jim Ricchiuti - Needham & Company: Okay. Thank you.

The next question comes from the line of Steve Dyer from Craig-Hallum. Please go ahead. Steve Dyer – Craig-Hallum: Good morning, and let me add my congratulations. Nice quarter.

Thank you. Steve Dyer – Craig-Hallum: Most of mine I think by now have been answered. A couple of questions just as it relates to the Capex and the facilities expansion, I guess my understanding going forward was that it would be more was that the Rosemount facility certainly had the footprint that would set you up well for a while, and it would be more kind of adding machines and adding lines. Is that not the case, or is it probably another facility as well, or is it just an expansion of what you have?

Yes, Steve, this is Brad. Yes, we have some empty space in one of our plants here in Maple Plain. And I think the Rosemount building is about only half full right now. But the reason that we are looking at yet another building is because we have Protomold and we Firstcut, and within Protomold we have got our toolmaking versus our production. So we’re trying to stay kind of ahead of the game. The new facility would be for expanding things that we are not currently planning to put into our plant one, which is up the street here or in our Rosemount building. So yes, we have extra space now if we need it. If the orders ramp up faster than we expect we can expand into our existing building. So we basically have our base covered twice. Steve Dyer – Craig-Hallum: Okay, that is helpful. And then as it relates to -- I’m sorry, R&D going forward, with Protoworks and some of the other initiatives, would you expect sort of the spending on that is sort of in-line with previous indications going forward?

Steve Dyer – Craig-Hallum : Okay. All right. Thanks guys.

Thank you.

The next question we have comes from the line of Nicole DeBlase from Morgan Stanley. Please go ahead.

Yes, good morning guys.

Hi Nicole.

Hi Nicole.

Congrats on a good quarter. So a couple here, most of mine have been answered as well. But, I mean I think that Europe looks really strong this quarter. You had sales up 13%, returned to growth, can you just talk about some of the trends outside of new customers that you saw there and what really drove the strength?

I could try a little bit. It is pretty much just steady state business practices. From a marketing standpoint and a sales standpoint, we are looking at going deeper and wider within bigger companies, but it is just our folks in marketing and sales doing the same thing that they have been doing for quarter after quarter after quarter. There really wasn’t anything that stands out in terms of a new thrust or a new initiative or any kind of breakthrough. It is just a lot of hard work by some really smart people.

Okay, got it. And then maybe shifting a little bit to the US, growth definitely accelerated there versus last quarter, I mean, have you seen strength continue into the first quarter, we have heard a lot of shorter cycle US manufacturing companies talk about things getting even better in January, and into February?

We feel [a little bit] the macro situation in the United States, and we have been hiring sales people and doing marketing programs all throughout the last couple of years. And we expect that -- good news out of those efforts in 2013.

Perfect, okay and then one more if I may, marketing and sales growth continues to decelerate, do you think we are at a good run rate as a percent of sales for 2013?

Pretty much all of our financial statements, especially in the fourth quarter, were at our target model, or above our target model. Marketing programs can be somewhat flat. It depends upon as having good ideas to go do initial marketing. I can’t say that if we come up with additional ideas in marketing, we’re going to spend the money. And I expect that worldwide we will continue to regularly hire new sales reps to contact new and existing customers for business. And so those numbers will not stay flat that they will go up with sales but they are within the target model.

Perfect. Thanks guys.

Thank you.

Okay. The next question we have comes from the line of Zach Larkin from Stephens. Please proceed.

Hi, good morning gentlemen. Thanks for taking my call.

Good morning Zach.

Hi, I wondered if we could talk maybe a little bit about what your expectations are in the distribution of revenues from Protomold and Firstcut as we move through the year. We’re obviously seeing and have seen an increase in the percentage of Firstcut, but are you expecting the growth rate to be kind of similar, how should we think about the distribution of revenues, maybe if we thought about 2013 versus 2014 on the two segments?

Well, we market the two services to the same customer base with the same sales force. And so if somebody calls us up, it is generally pretty easy to see whether Firstcut is a good solution for them or whether Protomold is a good solution for them. So, you know, in that sense, we don’t necessarily try to sell one over the other. Firstcut has a really good price point to it. And so it is probably a little bit of an easier sell or a quicker sell. So I would expect that Firstcut will increase as a percentage of our total revenue over time. I do not think it is going to be 50:50 in the near future at all. I think that Protomold still will exceed Firstcut by quite a bit. And the second thing is that especially when it comes to the gross margin, they are really targeted to be very similar. And so it isn’t as if one has a profit point that is significantly different than the others.

Thanks Jack that is helpful, and then Brad I wondered that maybe you could talk a little bit about as you are looking at these new materials that you are adding into the overall portfolio, what is the policy you go through in making a decision on adding a new portfolio, or a new material, is there a certain addressable market that you are going after, is there an internal ROI calculation, or how do you go about thinking about let us add magnesium, or whatever the new product that might be?

And that is how we did the stainless steel for Firstcut, and that is how we did the high-temperature plastics for Protomold. So it is all based on actual market feedback.

, :

Exactly right. And we made that decision about three years ago.

All right. Thank you very much.

Thank you.

The next question we have comes from Greg McKinley from Dougherty. Please go ahead. Greg McKinley - Dougherty & Company: Yes, good morning.

Good morning Greg.

Hi Greg. Greg McKinley - Dougherty & Company: Could you talk a little bit about where your sales and marketing staff is today from an headcount standpoint versus it might have been a year ago, just so we could get a sense for how aggressively you are investing there?

Sure. We have sales and marketing staff in the United States and in Europe in several places, and in Japan. And the overall distribution today is about the same as it was a year ago, just a little bit bigger in each of those locations. So we did not change our allocation of resources geographically over the last year in any dramatic way. Greg McKinley - Dougherty & Company: Okay. And in terms of the headcount there, did that grow similarly to what you had commented on in terms of your overall employee base, or is that something you are investing in more heavily?

On the sales side we invested in more heavily, on the marketing side it is probably aligned with the rest of the company. Greg McKinley - Dougherty & Company: Okay. Could you also talk a little bit about any changes you are seeing in value per order trends, I know those are very different between Protomold and Firstcut, but my sense is maybe your value per order improved somewhat in Q4, versus where it had been earlier in the year, were there any trends of note there. And then did you also see any mix shift between maybe initial orders and follow on orders as you suggested you tend to see when economic conditions impact customers?

The average part, the average mold, the average Firstcut part there was no significant change from the beginning of the year to the end of the year. We do have natural fluctuations in part orders off of our molds, and we did comment that that they did vary during the course of the year. And like Brad said in his script that is one of the ways we can kind of tell what is going on in the economy. Greg McKinley - Dougherty & Company: But you didn’t really see much of a sequential change in those behaviors from Q3 to Q4?

No. Greg McKinley - Dougherty & Company: Okay. Thank you.

The next question we have comes from the line of Tom Hayes from the Thompson Research Group. Please go ahead sir.

Thank you. Good morning gentlemen. Congratulations on the quarter.

Thank you.

Most of my questions have been answered. I just maybe talk about the possibility, you guys have good detailed color on your thoughts on improving the profitability in Japan, just wondering for the quarter and for the year, was Europe kind of meeting your expectations and targets for profitability as well?

Europe does well. Actually their P&L in Europe would look very similar to the P&L in the United States. You know, margin wise what it costs to operate, very similar between the two markets. But I would say considering that tightness of revenue over the course of the year, our European colleagues did a really wonderful job of managing their P&L for us.

Good. I guess just secondly then maybe on kind of tied into the facility expansion and your R&D spending, which was up significantly for the year, would any of the new capacity be for R&D and are you on kind of R&D space as you continue to build out that wonderful process over there?

Yes. The capacity expansions that we talked about in our presentation earlier are entirely for our standard everyday business. They have nothing to do with Protoworks. Most of our capacity expansions for Protoworks are already done.

Okay. Thank you.

Sure.

The next question we have comes from Patrick Wu from the Battle Road Research. Please go ahead.

Hi guys. Very nice quarter. So congratulations on that.

Thank you.

Yes, most of my questions are also answered as well, but I just wanted to maybe touch upon op margin real quick, it seemed like it regressed a little bit, what can be I guess expect in 2013, as sort of your target -- I know you guys talked about gross margin target, but maybe you guys can shed some color on that as well?

So, Patrick, I want to see if I heard that question right. You are saying that our operating margin regressed during the year?

No, no, no. Just in the last quarter versus the previous quarter. It seemed like it is at 30.5%, and we have it around -- closer to 2% in the previous quarter, I just wanted to see obviously that is attributable to the increase in R&D. I just wanted to understand maybe for 2014 what is the progression there? Sorry, I am unfamiliar (inaudible) that is why you maybe…

That is okay. I think that in the third quarter, actually in the fourth quarter of 2012 our operating margin was 30.5% compared to 29.5% in the third quarter. So I have -- our numbers would say that our operating margin increased fourth-quarter from the third quarter. And it was significantly above the year ago. Last year in the fourth quarter a year ago, we did 19.1%, and so I think our operating margin increased nicely during the quarter compared to previous quarters and the same period last year.

Also, I must be looking at the wrong column there, but can you maybe shed some color on I guess the target for 2013 for you guys?

I think our target is the same as we have been talking about and the same we would like our operating margin on a GAAP basis to be above 27%. And we have had some questions about target model, and over this past year, we had two quarters that nicely exceeded that target model, and we had two quarters that were below our target model. So when it comes to trying to say what would we like to have in the future, I think these last two quarters provided us good evidence that our target model is reachable and attainable especially in 2013.

That is all I have, thanks.

I think that is the end of our questions. Operator.

Hello. I would now like to hand over the call to Brad Cleveland for closing remarks.

Thank you, Michele. Well, thank you all for joining us today. I hope we have conveyed a sense of our confidence in the continuing strength of the Proto Labs business model, and our excitement about the growth opportunities ahead of us. We look forward to updating you on our progress during our second quarter conference call. Thank you very much. Thanks Michele.

Thank you for your participation in today’s conference call. This concludes the presentation. You may now disconnect. Good day.