Greetings, and welcome to the Proto Labs Second Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded I would now like to turn the conference over to your host, Bill Dietrick, Vice President of Marketing. Thank you. Mr. Dietrick you may begin.

Thank you, operator, and good morning, everyone. This morning, before the market opened, Proto Labs issued a press release announcing its second quarter financial results for the period ended June 30, 2014. 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 subject to many risks and uncertainties that would 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 annual report filed on Form 10-K 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 includes the after-tax cost of stock compensation and amortization of intangibles. We believe that this non-GAPP 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’d like to turn the call over to Vicky Holt, President and Chief Executive Officer of Proto Labs. Vicky?

Thanks, Bill. Good morning, everyone. Thank you for joining us today on your second quarter 2014 conference call. With me today is Jack Judd, our Chief Financial Officer. We are proud today to announce another record quarter for our financial results. I’d like to begin with a brief overview of our second quarter 2014 financial results, then I will provide an update on our recently completed Fineline acquisition, including a review of the progress of our integration activities. Finally, I will discuss a couple of new initiatives pertaining to our growth sectors and provide an update on our marketing programs. I will then turn the call over to Jack, who will provide a more detailed look at our financial results and offer our views on the outlook for the third quarter of 2014. And then we’ll be glad to take your questions. I am pleased to report that Proto Labs has once again achieved record revenue. Second quarter revenues was $52.9 million, a 33% increase over the second quarter of 2013. Second quarter revenue includes $2.1 million of additive manufacturing services or 3D printing from our Fineline acquisition. Without these revenues, second quarter revenue would have been $50.8 million, an increase of 28% over the prior year. Our revenue results give us confidence that any weather-related effects we might have experienced during the first quarter are passed. In addition to revenue, we track the number of product developers we do business with as a key growth metric. We have not yet completed the integration of the FineLine and legacy Proto Labs' product developer and customer databases. Therefore, the product developer and customer numbers are presented without FineLine. Considering this exclusion, our legacy Proto Labs' revenue came from nearly 8,200 unique product developers, a 19% increase over the second quarter of…

Thank you, Vicki for the kind words. Revenue during the second quarter of 2014 was $52.9 million, an increase of $13.1 million or 33% over the same quarter in 2013. Additive services revenue or 3D printing relating to our acquisition of FineLine in April was $2.1 million. Without these revenue related to the acquisition, our revenue would have increased $11 million or 28% when compared to the previous year. Protomold and Firstcut revenues were $36.3 million and $14.5 million respectively. Revenue splits between Protomold, Firstcut and FineLine services were 69%, 27% and 4%. International revenue during the second quarter of 2014 totaled $12.9 million or 24% of total revenue compared to $9.6 million or 24% during the second quarter of 2013. The positive effects from currency were approximately $700,000 this past quarter. Within our legacy Protomold and FirstCut services during this past quarter, we did business with 8,222 product developers. This represents an increase of 19% over the same quarter in 2013. Average revenue per product developer increased 7% from the previous year. As we forecasted, our gross margin decreased 61.8% for the second quarter of 2014. The second quarter's gross margin was heavily impacted by the move of the U.S. FirstCut operation to our new factory in Plymouth, Minnesota. We are proud of our entire team who completed this complicated move on time and under budget without missing shipment deadlines or quality standards. The move negatively impacted margins by approximately 60 basis points. All costs related to the move have been absorbed in our operations. In addition to the above, our margin was impacted by our additive service revenues being at a lower margin than our legacy Protomold and FirstCut revenues. We estimate this mix of business effect on gross margins to be approximately 70 basis points. We feel…

(Operator Instructions). Our first question today is coming from Troy Jensen from Piper Jaffray. Please proceed with your question.

Yeah. Congratulations on a great quarter, Vicki and Jack.

Thank you.

Thanks Troy.

Can we just dig in little bit on geographic mix here, the U.S. business was up pretty substantially, but it looks like Europe and Asia was down. I was wondering if you could just kind of give some thoughts on that.

I would not know --- no, the Europe's and Japan businesses were down. The growth rate was less than the U.S' growth rate.

Yeah. Each region grew.

Each region grew.

Just a little bit less growth rate. We are really pleased with the consolidated results with that 33% increase year-over-year. The growth rates are not quite as high as United States. Remember we've got the FineLine acquisition that impacted U.S. sales, really didn't impact our sales outside of the U.S. much. And our services MIM was launched in North America and not in Europe. LSR was launched in both U.S. and Europe. So, there's some other impacts, but all regions grew.

Okay. I guess, I was looking sequentially not year-over-year, but that's fine. Follow-up here on FineLine, given you get about 20% of your business in Europe, would it make a sense to roll out additive manufacturing services to the European customer base?

Yeah. Our plan is to roll out additive manufacturing in Europe. We're working on the details of those plans right now. And I would expect in early -- in the first half of 2015, we will officially be launching additive manufacturing parts being produced in the EU.

Produced in the EU, okay, perfect. And then last question, I will see the floor, but are the Protoworks, this new [lathe] service are at the turned parts, is this the service that Brad always spoke so highly about being the biggest significant opportunity, or is that still in pipeline?

That one is still in pipeline, but I don't want to detract from the opportunity that we have with lathe, it is with turned parts, it is going to open some doors for us to be able to produce these types of cylindrical parts which today we do produce in the milled part when customer really demands speed. But the speed at which we can produce them in our equipment plus the amount of material we use and the quality of the finish is not as good as we're going to get with the turned part. So, we're going to do a much better job satisfying our customers with these parts and it will open the door for some parts where customers have said, hey this doesn't meet my need, I'm going to go somewhere else. So, now we can provide these kinds of turned parts with the speed that Proto Labs delivers. So, it's going to be great.

Hey got it. Good luck in the second half.

Thanks.

Thank you.

Thank you. Our next question today is coming from Brian Drab from William Blair. Please proceed with your question.

Good morning.

Good morning, Brian.

Good morning.

First one, for you, Jack, and good luck in the next phase, but can we talk just a little more about what's motivating you to leave such an innovative fast growth company like Proto Labs. I guess, we see this often where someone with public company expertise is, of course brought on ahead of an IPO and I am just wondering, if you feel like the job is completed in a sense or, you know, have you finally grown tired of the weather up there in Minneapolis?

You’ve asked some big question. The absolute truth behind all of this is it fits very well personally in my life. And it is a really great time to execute this for the company also that everything is well situated. Vicky is very much oriented to company and so it fits well for company. I mean, this is good news for me. It’s good news for the company. This is a fantastic job, and a fantastically well-run company. And it should be a job that the Proto Lab should be able to recruit for easily. And it will be a job that would appeal to a large number of qualified [CFO] candidates.

Okay. Thanks. And I guess, regarding the milled part opportunity, can you just educate me a little bit more about what the market potential is? Here I know that the market for CNC parts just in the U.S. has been talked about as roughly a $35 billion market. What percentage of that $35 billion or of that market, you know, might be milled parts versus turned parts versus other parts? And I am sorry – and I know that there are opportunities in turned parts, I think I said no.

In turn parts?

Yeah.

Yeah, when you refer to a $35 billion total market for machine parts, that's total machine parts. We really focus on that segment of the market that -- is desired speed and smaller volume. So, as you know, we did a study a year ago to take a look at what our total available market is. And with the services that we had back in 2013, we estimated that total available market to be $6 billion with some of the added service we've got, we now look at that to be the $7 billion range. The turned parts really opens the door for us to service a wider number of geometries, particularly the cylindrical type parts that a turned part via a lathe can produce much better quality, speed and at a lower cost, frankly, than with CNC machining. So it opens the door for us there. We think the market for the turned parts within speed and the size and capability, its going to be approximately the same size as the mill part. So this is a big growth opportunity for us in Firstcut.

But it doesn't double your mark size for CNC machine parts? There is overlap?

Yes. Well, no, it really doesn't -- it's essentially double it. We do produce some parts today that are of that geometry. Its just we are not as competitive, because of that manufacturing capability, we now will be much more competitive. So in a way it does increase total available market -- double almost total available market for us in machined parts by having both millings and turned parts deal via lathe.

Okay. And how many machines do you think that you will need to have online maybe -- in some timeframe, maybe by the end of to year to do the turned parts?

Yeah, I'm not going to give the number of machines. I will say we have commissioned several machines already. We do have another one that is on order and one that's going into Europe as well as is been in Europe. We do have several that we've commissioned already.

Okay. And is this the same type of expertise going from CAD model, translating that into language that's interpretable by the turning machine -- the lathe?

Absolutely, that's why we go through the soft launch phase, because what we do in soft launch is we start producing a lot of actual customer parts and as do that, we find things within the software that needs to be continued to develop. So, by the time we really opened the door and we let the flood gates of orders come in, which will be early next year, our software will have been developed and it's scalable and we can't handle that level of order activity. So, what we will be doing in the soft launch is working through bugs and making sure that our software is very, very robust before we launch enough scale. Similar to what we did with liquid silicone, rubber, and MIM, we did a soft launch for about four to six months before we did the full scale launch in April.

Okay. I'll get back in line. Thank you very much.

Thank you. Our next question today is coming from Jim Ricchiuti from Needham & Company. Please proceed with your question. Jim Ricchiuti - Needham & Company: Thank you. Good morning. Just on that topic of the new turning service, it sounds like you can -- when this is up and running, you'll be able to turn parts around in a day or so. Give us a sense as to traditionally out there, the traditional manufacturers, how long it would take and what are the -- are they the same technology hurdles for competitors to potentially be able to offer that fast service?

So, again remember the – our value proposition of speed it is also of proposition reliability. Our customers know that at any point in time they can get a part within a day, and they can do that day in and day out, order after order. I think if you went outside to a local machine shop down the street, standard turn for a part via lathe would probably be somewhere between five to ten days: could they on a time-to-time basis turn something around quickly, probably, but with the scale and reliability that our business model affords us, we do that every single day. And also, many of those machine shops frankly are not interested in small volume quantities. Our whole business model is attuned to small volume quantities. Jim Ricchiuti - Needham & Company: Got it. And then one follow-up question just with respect to the revenue generated from Fineline in the quarter the $2.1 million. Is that – it sounds like that’s primarily from the Fineline sales force. And I guess what I'm wondering is as we look out to Q3, you gave some guidance for what you think that business can generate. At what point does the Proto Lab sales force the legacy sales force become more engaged and really begins to contribute meaningfully to Fineline?

Great question, Jim. Yeah. So we had about two months’ worth of Fineline revenue in the quarter. We completed the acquisition in the end of April. And during that quarter, I would agree that the majority of the sales actually were from Fineline’s legacy business model, which didn't have a lot of sales engine to it. It was a web-based interface and got their customers pulled in through the web. During the quarter, we trained our sales people. By the end of May we had our sales people essentially trained and then we began turning on some selling during the month of June. We did generate some cross-selling activity. Recall that less than 2% of our customer databases overlapped, so it gave us some opportunity for some cross-selling. But it was very minimal in the quarter. We only really started turning on our full sales force with commissionable sales starting July 1. So we will start seeing that impact going forward and it will ramp slowly but surely, but we felt it was important to get the capacity in place so we can be prepared to delight our customers with the service as they place those orders. So we begin to be more significant as the year rolls forward. Jim Ricchiuti - Needham & Company: Okay. Thanks a lot.

Thank you. Our next question today is coming from John Baliotti from Janney Capital Markets. Please proceed with your question.

Good morning. Jack congratulations. Thanks for your help and best of luck.

Thank you.

Vicki, we've talked about how you can consolidate more of the customers prototyping work now that FineLine is part of Proto Labs and keep those customers, if they go up in volume on complex parts, and obviously CNC machined parts if they are less complex and lower volume. Could you see a time when a customer could send the part design into Proto Labs and your software it makes that extra decision to route it to whether its Protomold or Firstcut or FineLine?

Great question, John. I talked a little bit about the most important task we’ve got ahead of us next in integration, which is combining the front end, web-based quoting and order processing for our customers. And I mentioned that we are going to take the best of both companies quoting tools and combine them, but also to enhance our entire experience for our customers through that process. And I mentioned it was going to be taken forward in phases over the next 12 months. We do envision an opportunity to incorporate ways to be a lot more consultative with our customers, to help them understand what is the best approach for them to take based on where they are in their product development lifecycle to have a part made to accelerate their innovation and do it most cost effective way and in a way to help them make the best decisions. So, your question, we're thinking -- we're working on that diligently. That kind of thinking will be incorporated in this phased approach of the changes that we make with our combined web quoting and ordering system.

Because it seems like lot of these customers or designers -- based on my own experience, they don't necessarily care. I mean they want the part, right. They don't necessarily want to specify the way it's made. They want it delivered; they want it delivered right and obviously for the right price and speed. And it seems like this is where you could show your added -- that you could really reveal your expertise in speed, but also in identifying the right process or the most optimal process for them to use.

Correct. One of our major differentiation is the breadth of our capabilities of different processes and materials that we have to offer. And being able to work with customers to optimize that for their process is one of services we want to provide and we want our website to be part of doing that quickly and in a scalable way. So absolutely that's one of the differentiators and one of the services we’ll be providing.

Great. Thanks very much.

Thank you. Our next question today is coming from Andrea James from Dougherty & Co. Please proceed with question. Andrea James - Dougherty & Co.: Hi, thanks. I just have two questions. Can you give us some color on the types of new customers you’re signing in, just maybe at the high level whether or not some of the new services you’re offering is opening the door to larger organizations with more product developers?

Okay. Good question. Our sales team is constantly looking to bring new product developers into our system and become customers. We’ve got a couple of clients excelling, one is with larger accounts, national account managers and they go wide and deep within our customers. So, it -- this would be where we’ve got a large company like you mentioned medium to large company. We’ve got an entry point and they use their contacts to go wider and deeper and get process, get other colleagues to recommend us and infiltrate us more into the new product and process development process within these companies. And that is part what’s bringing in these new product developers. In addition our marketing engine is always bringing new leads in from new customers. And there we have business development managers BDRs we call them who actually go in and nurture those customers and get them to go from being a non-customer to a customer. And then as they get bigger-and-bigger, we will go wide and deep with those companies as well. So we do both. We get product developers from larger customers, but going wide and deep and new customers. Andrea James - Dougherty & Co.: Thanks. And then your operating margins are tracking really nicely against your 29% target. Is that still 29% still a good go forward rate to expect or do you think you're going to keep tracking higher than that.

I think 29% is a good number, and the reason I think it is a good number versus the 30% or 31%, that we've been operating at is that we do have plans to continue to sell -- spend money on sales and marketing to further our growth rates in the future, and so if we find good ideas and we find good people to hire, we will spend more money on sales and marketing. So I think the 29% number is where we would like it to be. Andrea James - Dougherty & Co.: Thank you.

Thank you. Our next question today is coming from Jason North from Jefferies. Please proceed with your question.

Hi. Can you talk about your gross margin expectations here for the second half with new capacity adds as well as FineLine and any other variables you feel relevant? Thanks.

Yeah. I think the best way to say that is it should stay within our target model which is 61% to 63%. You are correct that FineLine does run at a lower gross margin than our legacy businesses, but our gross margin should still be able to stay within our target model.

Okay. And then looking at DMLS, is that a function mainly, do you have a enough capacity or the growth and demand there is slower than some of the other SLA and SLS offerings of FineLine.

Yeah. No, it's the former. We -- the FineLine made an acquisition -- made an investment in additional DMLS capacity just earlier this year. So we can pass capacity there. We think to satisfy the demand going forward. We will be watching it closely and we will add capacity as we need it. Jason North – Jefferies: Great. Thank you.

Thank you.

Thank you. Our next question today is a follow-up from Brian Drab from William Blair. Please proceed with your question.

Hi. Yeah. I don't know that anyone has asked for more detail around this record number of new customer company additions in the second quarter. It's almost double what you did in the first quarter 1,100 new customer companies, anything specific in the quarter that could have contributed to that?

As we've said before, we provide that information because people ask for it, but it's not really how we run the company. So, I would say that if it was down in a previous quarter, it would be the variability of our business and that it's up is the variability of our business. As that reflects all the successes of our marketing and selling.

We really focus on those individual unique product developers. I was really pleased in the quarter to see a 19% increase, 8,222 product developers in quarter, I think that was a phenomenal performance on the part of our sales and marketing. So, really pleased with that result.

Okay. So, you haven't added anymore BDRs or nothing has changed specifically?

We have -- we have added. We've added 32 customer-facing people this quarter. So, we continue to expand sales and marketing. It's just the metric I would focus is that product developer, because we're also going wide and deep within our customer base. Our number of developers per customers continues to go up because of going wide and infiltrating accounts or customers in a broader way. That's a good thing because we -- it builds our credibility within the customer. And it puts us in a better position to be their first go-to as opposed to may be only when they only need speed, because we provide a lot more than speed. We provide our design for manufacture ability, our reliability, our speed and the ability to produce small volumes very quickly. So, the high, wide, deep is approached to take. And I would watch that product developer metric more than the customer metric.

Okay. I think it will be interesting to see, if maybe the weather had more and on the last call you told me that you didn't think the weather had much of an impact on the first quarter but I think it will be interesting to see if the 800 additions that you did in the fourth quarter and the step down in the first quarter and now to 1,100, if that would have been more linear if we didn’t have the massive ice storms in the first quarter but I guess we will see how it goes in the third quarter. It’s a great result.

Yeah. Great. Thank you, Brian.

Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back over to Ms. Holt for further closing comments

Great. Thanks. Thanks for joining us today. I want to take this opportunity to thank all of the Proto Labs employees around the world for their dedication, passion and energy delivering another record quarter for the company while at the same time executing on a number of very important strategic fronts. To our investors, I hope through our calls over the past few months you feel the genuine excitement I have for our organization and opportunities. We have clearly have confidence in the continuing strength of our business model and the value proposition, we bring to our customers. I am excited about the growth opportunities ahead of us and I look forward to updating you next quarter on our progress. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day. We thank you for your participation today.