10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-35435

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	41-1939628
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
5540 Pioneer Creek Drive
Maple Plain, Minnesota	55359
(Address of principal executive offices)	(Zip Code)

(763) 479-3680

(Registrant’s telephone number, including area code)

                   Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

____________________________________________

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                ☑Yes ☐No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                      ☑Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ☑		Accelerated filer  ☐
Non-accelerated filer    ☐	(Do not check if a smaller reporting company)	Smaller reporting company   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☑No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 26,360,113 shares of Common Stock, par value $0.001 per share, were outstanding at April 29, 2016.

Proto Labs, Inc.

TABLE OF CONTENTS

Item	Description	Page
PART I
1.	Financial Statements	3
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
3.	Quantitative and Qualitative Disclosures about Market Risk	20
4.	Controls and Procedures	21
PART II
1.	Legal Proceedings	22
1A.	Risk Factors	22
2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
3.	Defaults Upon Senior Securities	22
4.	Mine Safety Disclosures	22
5.	Other Information	22
6.	Exhibits	22

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	March 31,			December 31,
	2016			2015
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	50,626		$	47,653
Short-term marketable securities		38,804			33,201
Accounts receivable, net of allowance for doubtful accounts of $281 and $330 as of March 31, 2016 and December 31, 2015, respectively		36,152			36,125
Inventory		9,920			9,771
Prepaid expenses and other current assets		6,617			5,224
Income taxes receivable		2,029			6,028
Total current assets		144,148			138,002
Property and equipment, net		130,341			125,475
Goodwill		28,916			28,916
Other intangible assets, net		3,150			3,337
Long-term marketable securities		67,726			64,789
Other long-term assets		554			517
Total assets	$	374,835		$	361,036
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	13,541		$	13,643
Accrued compensation		8,747			9,993
Accrued liabilities and other		1,648			2,626
Total current liabilities		23,936			26,262
Long-term deferred tax liabilities		4,325			4,240
Other long-term liabilities		2,868			2,889
Total liabilities		31,129			33,391
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2016 and December 31, 2015		-			-
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,301,688 and 26,200,718 shares as of March 31, 2016 and December 31, 2015, respectively		26			26
Additional paid-in capital		203,490			198,835
Retained earnings		144,658			133,996
Accumulated other comprehensive loss		(4,468	)		(5,212	)
Total shareholders' equity		343,706			327,645
Total liabilities and shareholders' equity	$	374,835		$	361,036

The accompanying notes are an integral part of these consolidated financial statements.

3

Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2016		2015
Statements of Operations:
Revenue	$	72,568	$	58,536
Cost of revenue		32,914		23,282
Gross profit		39,654		35,254
Operating expenses
Marketing and sales		10,942		8,854
Research and development		5,318		4,314
General and administrative		8,251		6,245
Total operating expenses		24,511		19,413
Income from operations		15,143		15,841
Other income (expense), net		625		(457	)
Income before income taxes		15,768		15,384
Provision for income taxes		5,106		4,931
Net income	$	10,662	$	10,453
Net income per share:
Basic	$	0.41	$	0.40
Diluted	$	0.40	$	0.40
Shares used to compute net income per share:
Basic		26,222,148		25,850,274
Diluted		26,442,357		26,214,204
Comprehensive Income (net of tax)
Comprehensive income	$	11,406	$	9,378

The accompanying notes are an integral part of these consolidated financial statements.

4

Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2016			2015
Operating activities
Net income	$	10,662		$	10,453
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,789			3,399
Stock-based compensation expense		1,732			1,342
Deferred taxes		89			343
Excess tax benefit from stock-based compensation		(1,310	)		(510	)
Amortization of held-to-maturity securities		289			305
Changes in operating assets and liabilities:
Accounts receivable		23			(4,363	)
Inventories		(62	)		(243	)
Prepaid expenses and other		(1,557	)		(989	)
Income taxes		5,296			2,729
Accounts payable		(135	)		776
Accrued liabilities and other		(1,872	)		2,175
Net cash provided by operating activities		16,944			15,417
Investing activities
Purchases of property and equipment		(8,275	)		(6,230	)
Purchases of marketable securities		(18,794	)		(11,575	)
Proceeds from sales and maturities of marketable securities		10,465			11,646
Net cash used in investing activities		(16,604	)		(6,159	)
Financing activities
Payments on debt		-			(49	)
Acquisition-related contingent consideration		(400	)		(1,000	)
Proceeds from exercises of stock options and other		1,614			878
Excess tax benefit from stock-based compensation		1,310			510
Net cash provided by financing activities		2,524			339
Effect of exchange rate changes on cash and cash equivalents		109			(373	)
Net increase in cash and cash equivalents		2,973			9,224
Cash and cash equivalents, beginning of period		47,653			43,329
Cash and cash equivalents, end of period	$	50,626		$	52,553

The accompanying notes are an integral part of these consolidated financial statements.

5

Note 1 – Basis of Presentation

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Proto Labs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (SEC) on February 26, 2016.

The accompanying Consolidated Balance Sheet as of December 31, 2015 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Annual Report on Form 10-K filed on February 26, 2016 as referenced above.

Note 2 – Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The Company is required to adopt the new pronouncement using one of two retrospective application methods.

On July 9, 2015, the FASB voted to approve a deferral of the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date. The Company is evaluating the application method and the impact of this new standard on its financial statements, but does not expect the impact to be material.

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of the future adoption of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. This guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact this new guidance will have on its consolidated financial statements.

Note 3 – Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options, restricted stock units and restricted stock awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

6

The table below sets forth the computation of basic and diluted net income per share:

	Three Months Ended
	March 31,
(in thousands, except share and per share amounts)	2016		2015
Net income	$	10,662	$	10,453
Basic - weighted-average shares outstanding:		26,222,148		25,850,274
Effect of dilutive securities:
Employee stock options and other		220,209		363,930
Diluted - weighted-average shares outstanding:		26,442,357		26,214,204
Net income per share:
Basic	$	0.41	$	0.40
Diluted	$	0.40	$	0.40

Note 4 – Goodwill and Other Intangible Assets

There were no changes in the carrying amount of Goodwill during the three months ended March 31, 2016.

Intangible assets other than Goodwill at March 31, 2016 and December 31, 2015 were as follows:

	March 31, 2016							December 31, 2015							Useful		Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)		Useful Life  Remaining (in years)
Intangible Assets with finite lives:
Marketing assets	$	930	$	(178	)	$	752	$	930	$	(155	)	$	775		10.0		8.1
Non-compete agreement		190		(182	)		8		190		(158	)		32		2.0		0.1
Trade secrets		250		(96	)		154		250		(83	)		167		5.0		3.1
Internally developed software		680		(435	)		245		680		(378	)		302		3.0		1.1
Customer relationships		2,530		(539	)		1,991		2,530		(469	)		2,061		9.0		7.1
Total intangible assets	$	4,580	$	(1,430	)	$	3,150	$	4,580	$	(1,243	)	$	3,337

Amortization expense for intangible assets was $0.2 million for each of the three months ended March 31, 2016 and 2015.

Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets is as follows:

(in thousands)	Estimated Amortization Expense
Remaining 2016	$	495
2017		500
2018		424
2019		391
2020		374
Thereafter		966
Total estimated amortization expense	$	3,150

7

Note 5 – Fair Value Measurements

ASC 820, Fair Value Measurement (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash consists of bank deposits. The Company’s cash equivalents measured at fair value consist of money market mutual funds. The Company determines the fair value of these investments using Level 1 inputs.

A summary of financial assets as of March 31, 2016 and December 31, 2015 measured at fair value on a recurring basis follows:

	March 31, 2016						December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents
Money market mutual fund	$	5,941	$	-	$	-	$	11,896	$	-	$	-
Total	$	5,941	$	-	$	-	$	11,896	$	-	$	-

Note 6 – Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as held-to-maturity and are recorded at amortized cost. Categorization as held-to-maturity is based on the Company’s ability and intent to hold these securities to maturity. Information regarding the Company’s short-term and long-term marketable securities as of March 31, 2016 and December 31, 2015 is as follows:

	March 31, 2016
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	37,517	$	19	$	(24	)	$	37,512
Corporate debt securities		30,059		21		(18	)		30,062
U.S. government agency securities		31,050		11		(9	)		31,052
Certificates of deposit/time deposits		6,405		19		-			6,424
Commercial paper		1,499		-		-			1,499
Total marketable securities	$	106,530	$	70	$	(51	)	$	106,549

8

	December 31, 2015
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	35,667	$	8	$	(56	)	$	35,619
Corporate debt securities		28,133		-		(114	)		28,019
U.S. government agency securities		26,784		2		(99	)		26,687
Certificates of deposit/time deposits		5,909		2		(11	)		5,900
Commercial paper		1,497		-		(2	)		1,495
Total marketable securities	$	97,990	$	12	$	(282	)	$	97,720

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and commercial paper are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

The Company tests for other-than-temporary losses on a quarterly basis and has considered the unrealized losses indicated above, which are the result of changes in interest rates, to be temporary in nature. In reaching this conclusion, the Company considered the credit quality of the issuers of the debt securities as well as the Company’s intent to hold the investments to maturity and recover the full principal.

Classification of marketable securities as current or non-current is based upon the security’s maturity date as of the date of these financial statements.

The March 31, 2016 balance of held-to-maturity debt securities by contractual maturity is shown in the following table at amortized cost. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

	March 31,
(in thousands)	2016
Due in one year or less	$	38,804
Due after one year through five years		67,726
Total marketable securities	$	106,530

Note 7 – Inventory

Inventory consists primarily of raw materials, which are recorded at the lower of cost or market using the average-cost method, which approximates first-in, first-out (FIFO) cost. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts.

The Company’s inventory consisted of the following as of the dates indicated:

	March 31,			December 31,
(in thousands)	2016			2015
Raw materials	$	8,766		$	8,589
Work in process		1,466			1,529
Total inventory		10,232			10,118
Allowance for obsolescence		(312	)		(347	)
Inventory, net of allowance	$	9,920		$	9,771

9

Note 8 – Stock-Based Compensation

Under the 2012 Long-Term Incentive Plan (2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any future awards will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per share exercise price of stock options and SARs granted under the 2012 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was $1.7 million and $1.3 million for the three months ended March 31, 2016 and 2015, respectively.

Stock Options

A summary of stock option activity during the three months ended March 31, 2016 is as follows:

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2015		766,042		$	36.52
Granted		104,960			57.88
Exercised		(111,796	)		14.44
Forfeited		-			-
Options outstanding at March 31, 2016		759,206		$	42.72
Exercisable at March 31, 2016		350,415		$	27.30

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a five-year period beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, options generally become exercisable in full on the first anniversary of the grant date.

The weighted-average grant date fair value of options that were granted during the three months ended March 31, 2016 was $26.44.

10

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2016 and 2015, respectively:

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		1.53%		1.77%
Expected life (years)		6.50		6.50
Expected volatility		44.38%		47.23%
Expected dividend yield		0%		0%

As of March 31, 2016, there was $9.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.5 years.

Restricted Stock

Restricted stock awards are share settled awards and restrictions lapse ratably over the vesting period, which is generally a five-year period, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the first anniversary of the grant date.

A summary of restricted stock activity during the three months ended March 31, 2016 is as follows:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2015		124,393		$	68.97
Granted		47,965			57.88
Restrictions lapsed		(11,870	)		73.44
Forfeited		-			-
Restricted stock at March 31, 2016		160,488		$	65.33

As of March 31, 2016, there was $8.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 3.9 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2016 and 2015, respectively:

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		0.39%		0.08%
Expected life (months)		6.00		6.00
Expected volatility		29.41%		37.64%
Expected dividend yield		0%		0%

11

Note 9 – Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised entirely of foreign currency translation adjustments. The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31, 2016 and 2015, respectively:

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Foreign currency translation adjustments
Balance at beginning of period	$	(5,212	)	$	(2,929	)
Other comprehensive loss before reclassifications		744			(1,075	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-
Net current-period other comprehensive loss		744			(1,075	)
Balance at end of period	$	(4,468	)	$	(4,004	)

Note 10 – Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2016 and 2015, the Company recorded an income tax provision of $5.1 million and $4.9 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2016 was 32.4 percent compared to 32.1 percent in the same period of the prior year.

The effective income tax rate for the three months ended March 31, 2016 differs from the U.S. federal statutory rate of 35 percent due primarily to the mix of income earned in domestic and foreign tax jurisdictions and deductions and credits for which the Company qualifies.

The Company had liabilities related to unrecognized tax benefits totaling $2.9 million and $2.8 million at March 31, 2016 and December 31, 2015, respectively, all of which, if recognized, would affect the Company’s effective tax rate. The Company recognizes interest and penalties related to income tax matters in income tax expense, and reports the liability in current or long-term income taxes payable as appropriate.

Note 11 – Revenue and Geographic Information

The Company’s revenue is primarily derived from its Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline) product lines. Total revenue by product line is as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
Injection Molding (Protomold)	$	43,169	$	37,618
CNC Machining (Firstcut)		18,875		16,370
3D Printing (Fineline)		9,110		4,548
Other		1,414		-
Total revenue	$	72,568	$	58,536

Revenue to external customers based on the billing location of the end user customer and long-lived assets by geographic region are as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
United States	$	50,567	$	44,845
International		22,001		13,691
Total revenue	$	72,568	$	58,536

	March 31,		December 31,
(in thousands)	2016		2015
Long-lived assets:
United States	$	102,153	$	98,633
International		28,188		26,842
Total long-lived assets	$	130,341	$	125,475

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2015.

Forward-Looking Statements

Statements contained in this report 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. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors which may cause our results to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K as filed with the SEC. Other unknown or unpredictable factors also could have material adverse effects on our future results. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, we expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

Overview

We are a leading online and technology-enabled manufacturer of quick-turn, on-demand 3D printed, CNC-machined and injection-molded custom parts for prototyping and low-volume production. We provide “Real Parts, Really Fast” to product developers and engineers worldwide, who are under increasing pressure to bring their finished products to market faster than their competition. We believe custom parts manufacturing has historically been an underserved market due to the inefficiencies inherent in the quotation, equipment set-up and non-recurring engineering processes required to produce custom parts. Our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets.

Our primary manufacturing product lines currently include Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline). We continually seek to expand the range of size and geometric complexity of the parts we can make with these manufacturing processes, to extend the variety of materials we are able to support and to identify additional manufacturing processes to which we can apply our technology in order to better serve the evolving preferences and needs of product developers and engineers.

Injection Molding (Protomold)

Our Injection Molding (Protomold) product line uses our 3D CAD-to-CNC machining technology for the automated design and manufacture of thermoplastic, metal, or liquid silicone injection molds, which are then used to produce custom injection-molded parts on commercially available equipment. Our Injection Molding (Protomold) product line is used for prototype, on-demand and low-volume production. Prototype quantities typically range from 25 to 100 parts. Because we retain possession of the molds, customers who need low-volume production often come back to Proto Labs’ Injection Molding product line for additional quantities typically ranging up to 10,000 parts or more. They do so to support pilot production while their tooling for high-volume production is being prepared, because they need on-demand manufacturing due to disruptions in their manufacturing process, because their product will only be released in a limited quantity, or because they need end-of-life production support. These additional part orders typically occur on approximately half of the molds that we make, typically accounting for approximately half of our total Injection Molding (Protomold) revenue.

CNC Machining (Firstcut)

Our CNC Machining (Firstcut) product line includes both CNC-machined and CNC-turned (lathe) parts, and uses commercially available CNC machines to cut plastic or metal blocks or bars into one or more custom parts based on the 3D CAD model uploaded by the product developer or engineer. Our efficiencies derive from the automation of the programming of these machines and a proprietary fixturing process. The CNC Machining (Firstcut) product line is well suited to produce small quantities, typically in the range of one to 200 parts.

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3D Printing (Fineline)

Our 3D Printing (Fineline) includes stereolithography (SL), selective laser sintering (SLS) and direct metal laser sintering (DMLS) processes, which offers customers a wide-variety of high-quality, precision rapid prototyping and low volume production. These processes create parts with a high level of accuracy, detail, strength and durability. 3D Printing is well suited to produce small quantities, typically in the range of one to 50 parts.

Key Financial Measures and Trends

Revenue

The Company’s operations are comprised of three geographic business units in the United States, Europe and Japan, which we believe are three of the largest geographic markets where product developers and engineers are located. Revenue within our United States and Europe business units is derived from our Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline) product lines. Revenue within our Japan business unit is derived from our Injection Molding (Protomold) and CNC Machining (Firstcut) product lines. Our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by:

● increasing marketing and selling activities;

● introducing our CNC Machining (Firstcut) product line in 2007;

● expanding internationally, including the opening of our Japanese plant in 2009;

● offering additional product lines such as 3D Printing (Fineline), through our acquisition of FineLine Prototyping, Inc. (FineLine) in April 2014 and expanded through our acquisition of certain assets, including shares of select subsidiaries, of Alphaform AG (Alphaform) in 2015;

● improving the usability of our product lines such as our web-centric applications; and

● expanding the breadth and scope of our products, for example by adding more sizes and materials to our offerings such as liquid silicone rubber (LSR).

Excluding product developers and engineers gained through the acquisition of Alphaform, during the three months ended March 31, 2016, we served 13,249 unique product developers and engineers, an increase of 20% over the same period in 2015.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue consists primarily of raw materials, employee compensation, benefits, stock-based compensation, equipment depreciation, facilities costs and overhead allocations associated with the manufacturing process for molds and custom parts. We expect cost of revenue to increase in absolute dollars, but remain relatively constant as a percentage of total revenue.

We define gross profit as our revenue less our cost of revenue, and we define gross margin as gross profit expressed as a percentage of revenue. Our gross profit and gross margin are affected by many factors, including our pricing, sales volume and manufacturing costs, the costs associated with increasing production capacity, the mix between sales by product line, the mix between domestic and foreign revenue sources and foreign exchange rates.

Operating Expenses

Operating expenses consist of marketing and sales, research and development and general and administrative expenses. Personnel-related costs are the most significant component of the marketing and sales, research and development and general and administrative expense categories.

Our recent growth in operating expenses is mainly due to higher headcounts to support our growth and expansion, and we expect that trend to continue. Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand 3D printed, CNC-machined and injection-molded custom parts for prototyping and low-volume production. For us to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses.

Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as print and pay-per-click advertising, trade shows, direct mail and other related overhead. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base.

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Research and development. Research and development expense consists primarily of employee compensation, benefits, stock-based compensation, depreciation on equipment, outside services and other related overhead. All of our research and development costs have been expensed as incurred. We expect research and development expense to increase in the future as we seek to enhance and expand our product line offerings.

General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal and other related overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

Other Income (Expense), Net

Other income (expense), net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments. Our foreign currency-related gains and losses will vary depending upon movements in underlying exchange rates. Our interest income will vary each reporting period depending on our average cash balances during the period, composition of our marketable security portfolio and the current level of interest rates.

Provision for Income Taxes

Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. We expect income taxes to increase as our taxable income increases and we expect our effective tax rate to remain relatively constant.

Results of Operations

The following table sets forth a summary of our results of operations and the related changes for the periods indicated. The results below are not necessarily indicative of the results for future periods.

	Three Months Ended March 31,									Change
(dollars in thousands)	2016				2015					$			%
Revenue	$	72,568	100.0	%	$	58,536		100.0	%	$	14,032			24.0	%
Cost of revenue		32,914	45.4			23,282		39.8			9,632			41.4
Gross profit		39,654	54.6			35,254		60.2			4,400			12.5
Operating expenses:
Marketing and sales		10,942	15.1			8,854		15.1			2,088			23.6
Research and development		5,318	7.3			4,314		7.4			1,004			23.3
General and administrative		8,251	11.4			6,245		10.6			2,006			32.1
Total operating expenses		24,511	33.8			19,413		33.1			5,098			26.3
Income from operations		15,143	20.8			15,841		27.1			(698	)		(4.4	)
Other income (expense), net		625	0.9			(457	)	(0.8	)		1,082			*
Income before income taxes		15,768	21.7			15,384		26.3			384			2.5
Provision for income taxes		5,106	7.0			4,931		8.4			175			3.5
Net income	$	10,662	14.7	%	$	10,453		17.9	%	$	209			2.0	%

* Percentage change not meaningful

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Stock-based compensation expense included in the statements of operations data above is as follows:

	Three Months Ended March 31,
(dollars in thousands)	2016		2015
Stock options and restricted stock	$	1,604	$	1,219
Employee stock purchase plan		127		123
Total stock-based compensation expense	$	1,731	$	1,342
Cost of revenue	$	130	$	111
Operating expenses:
Marketing and sales		278		236
Research and development		294		294
General and administrative		1,029		701
Total stock-based compensation expense	$	1,731	$	1,342

Comparison of Three Months Ended March 31, 2016 and 2015

Revenue

Revenue by product line and the related changes for the three months ended March 31, 2016 and 2015 were as follows:

	Three Months Ended March 31,
	2016					2015					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$		%
Revenue
Injection Molding (Protomold)	$	43,169		59.5	%	$	37,618		64.3	%	$	5,551		14.8	%
CNC Machining (Firstcut)		18,875		26.0			16,370		28.0			2,505		15.3
3D Printing (Fineline)		9,110		12.6			4,548		7.7			4,562		100.3
Other		1,414		1.9			-		-			1,414		100.0
Total revenue	$	72,568		100.0	%	$	58,536		100.0	%	$	14,032		24.0	%

Revenue by geographic region, based on the billing location of the end customer, for the three months ended March 31, 2016 and 2015 is summarized as follows:

	Three Months Ended March 31,
	2016					2015					Change
(dollars in thousands)	$		% of Total Revenue			$		% of Total Revenue			$		%
Revenue
United States	$	50,567		69.7	%	$	44,845		76.6	%	$	5,722		12.8	%
International		22,001		30.3			13,691		23.4			8,310		60.7
Total revenue	$	72,568		100.0	%	$	58,536		100.0	%	$	14,032		24.0	%

Our revenue increased $14.0 million, or 24.0%, for the three months ended March 31, 2016 compared to the same period in 2015. By geographic region, this revenue growth was driven by a 12.8% increase in United States revenue and a 60.7% increase in international revenue, which includes $4.9 million in revenue from our acquisition of Alphaform in October 2015. By product line, this revenue growth was driven by a 14.8% increase in Injection Molding (Protomold) revenue, a 15.3% increase in CNC Machining (Firstcut) revenue, and a 100.3% increase in 3D Printing (Fineline) revenue, which includes a $2.5 million increase in revenue from the Alphaform acquisition, in each case for the three months ended March 31, 2016 compared to the same period in 2015.

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Our revenue growth during the three months ended March 31, 2016 was the result of revenue gained through our acquisition of Alphaform as well as an increased number of the product developers and engineers we served. During the three months ended March 31, 2016, excluding product developers and engineers gained through the acquisition of Alphaform, we served 13,249 unique product developers and engineers, an increase of 20% over the same period in 2015. Average revenue per product developer or engineer, excluding product developers and engineers gained through the acquisition of Alphaform, decreased 4% during the three months ended March 31, 2016 when compared to the same period in 2015.

Our revenue increases were primarily driven by increases in sales personnel and marketing activities and revenue earned as a result of our acquisition of Alphaform in October 2015. Our sales personnel focus on gaining new customer accounts and expanding the depth and breadth into existing customer accounts. Our marketing personnel focus on marketing activities that have proven to result in the greatest number of customer prospects to support sales activity.

International revenue was negatively impacted by $0.4 million in foreign currency movements for the three months ended March 31, 2016 compared to the same period in 2015 due primarily to the strengthening of the United States dollar relative to the British Pound. The effect of pricing changes on revenue was negligible for the three months ended March 31, 2016 compared to the same period in 2015.

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue. Cost of revenue increased $9.6 million, or 41.4%, for the three months ended March 31, 2016 compared to the same period in 2015, which was faster than the rate of revenue increase of 24.0% for the three months ended March 31, 2016 compared to the same period in 2015. The increase in cost of revenue resulted from the growth of the business including the Alphaform acquisition, and was due to raw material and production cost increases of $3.5 million to support increased sales volumes, an increase in direct labor headcount resulting in personnel and related cost increases of $4.8 million and equipment and facility-related cost increases of $1.3 million.

Gross Profit and Gross Margin. Gross profit increased from $35.3 million, or 60.2% of revenues, in the three months ended March 31, 2015 to $39.7 million, or 54.6% of revenue, in the three months ended March 31, 2016 primarily due to increases in revenue offset by the cost of revenue as discussed above. Gross margin decreased primarily as a result of lower margins in our Alphaform business as well as increases in investments of additional manufacturing capacity and the impact of fluctuations in foreign currency exchange rates.

Operating Expenses, Other Income (Expense), net and Provision for Income Taxes

Marketing and Sales. Marketing and sales expenses increased $2.1 million, or 23.6%, during the three months ended March 31, 2016 compared to the same period in 2015 due primarily to an increase in headcount resulting in personnel and related cost increases of $2.0 million and marketing program cost increases of $0.1 million. 

Research and Development. Our research and development expenses increased $1.0 million, or 23.3%, during the three months ended March 31, 2016 compared to the same period in 2015 due to an increase in headcount resulting in personnel and related cost increases of $0.9 million and professional services cost increases of $0.1 million.

General and Administrative. Our general and administrative expenses increased $2.0 million, or 32.1%, during the three months ended March 31, 2016 compared to the same period in 2015 due to an increase in headcount, including additions of Alphaform personnel, resulting in personnel and related cost increases of $1.0 million, stock-based compensation cost increases of $0.3 million, administrative cost increases of $0.5 million and professional services cost increases of $0.2 million.

Other Income (Expense), net. We recognized other income, net of $0.6 million for the three months ended March 31, 2016, an increase of $1.1 million when compared to other expense, net of $0.5 million for the three months ended March 31, 2015. The increase is primarily due to changes in foreign currency rates. Other income, net includes $0.4 million in foreign currency exchange gains for the three months ended March 31, 2016 compared to $0.6 million in foreign currency exchange losses in the same period of the prior year.

Provision for Income Taxes. Our effective tax rate of 32.4% for the three months ended March 31, 2016 increased 0.3% when compared to 32.1% for the same period in 2015. The increase in the effective tax rate is primarily due to a change in the mix of income earned in domestic and foreign jurisdictions in the quarter ended March 31, 2016 when compared to the quarter ended March 31, 2015. As a result of an increase in income before income taxes, our income tax provision increased by $0.2 million to $5.1 million for the three months ended March 31, 2016 compared to our income tax provision of $4.9 million for the three months ended March 31, 2015.

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Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows during the three months ended March 31, 2016 and 2015:

	Three Months Ended March 31,
(dollars in thousands)	2016			2015
Net cash provided by operating activities	$	16,944		$	15,417
Net cash used in investing activities		(16,604	)		(6,159	)
Net cash provided by financing activities		2,524			339
Effect of exchange rates on cash and cash equivalents		109			(373	)
Net increase in cash and cash equivalents	$	2,973		$	9,224

Sources of Liquidity

Historically we have primarily financed our operations and capital expenditures primarily through cash flow from operations. We had cash and cash equivalents of $50.6 million as of March 31, 2016, an increase of $3.0 million from December 31, 2015. The increase in our cash was primarily due to cash generated through operations and, to a lesser extent, proceeds from exercises of stock options and purchases through our employee stock purchase plan, which were partially offset by investing activity.

Cash Flows from Operating Activities

Cash flows from operating activities were $16.9 million during the three months ended March 31, 2016 and primarily consisted of net income of $10.7 million, adjusted for certain non-cash items, including depreciation and amortization of $3.8 million, stock-based compensation expense of $1.7 million, amortization of held-to-maturity securities of $0.3 million and deferred taxes of $0.1 million, which were partially offset by excess tax benefit from stock-based compensation expense of $1.3 million. Cash flows from operating activities increased $1.5 million during the three months ended March 31, 2016 compared to the same period in 2015 primarily due to increases in net income of $0.2 million, depreciation and amortization of $0.4 million and stock-based compensation expense of $0.4 million, changes in operating assets and liabilities of $1.6 million, which were partially offset by an increase in excess tax benefits of $0.8 million.

Cash flows from operating activities during the three months ended March 31, 2015 primarily consisted of net income of $10.5 million, adjusted for certain non-cash items, including depreciation and amortization of $3.4 million, stock-based compensation expense of $1.3 million, deferred taxes of $0.3 million and amortization of held-to-maturity securities of $0.3 million, which were partially offset by excess tax benefit from stock-based compensation expense of $0.5 million.

Cash Flows from Investing Activities

Cash used in investing activities was $16.6 million during the three months ended March 31, 2016, consisting of $8.3 million for the purchases of property and equipment and $18.8 million for the purchases of marketable securities, which were partially offset by $10.5 million in proceeds from maturities and call redemptions of marketable securities.

Cash used in investing activities during the three months ended March 31, 2015 consisted of $6.2 million for the purchases of property and equipment. Purchases of marketable securities for the period were $11.6 million, which were offset by $11.6 million in proceeds from maturities and call redemptions of marketable securities.

Cash Flows from Financing Activities

Cash provided by financing activities was $2.5 million during the three months ended March 31, 2016, consisting of proceeds from exercises of stock options of $1.6 million and $1.3 million in excess tax benefit on stock-based compensation, which were partially offset by $0.4 million for acquisition-related contingent consideration payments.

Cash provided by financing activities was $0.3 million for the three months ended March 31, 2015, consisting of proceeds from exercises of stock options of $0.9 million and $0.5 million in excess tax benefit on stock-based compensation, which were partially offset by $1.0 million for payments of acquisition-related contingent consideration and $0.1 million for payments of debt.

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Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Critical Accounting Policies and Use of Estimates

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Our significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. There were no material changes in our significant accounting policies during the three months ended March 31, 2016.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2 to the consolidated financial statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

As a result of our foreign operations, we have revenue, expenses, assets and liabilities that are denominated in foreign currencies. We generate revenue and incur production costs and operating expenses in British Pounds, Euros and Japanese Yen.

Our operating results and cash flows are adversely impacted when the United States dollar appreciates relative to other foreign currencies. Additionally, our operating results and cash flows are adversely impacted when the British Pound appreciates relative to the Euro. As we expand internationally, our results of operations and cash flows will become increasingly subject to changes in foreign currency exchange rates.

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be quantified by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. We recognized foreign currency gains of $0.4 million in the three months ended March 31, 2016. We recognized foreign currency losses of $0.6 million in the three months ended March 31, 2015.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time frames specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of these financial statements, we do not believe we are party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business.

Item 1A. Risk Factors

There have been no material changes from the risk factors we previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No matters to disclose.

Item 3. Defaults Upon Senior Securities

No matters to disclose.

Item 4. Mine Safety Disclosures

No matters to disclose.

Item 5. Other Information

No matters to disclose.

Item 6. Exhibits

The following documents are filed as part of this report:

Exhibit Number	Description of Exhibit
3.1(1)	Third Amended and Restated Articles of Incorporation of Proto Labs, Inc.
3.2(2)	Amended and Restated By-Laws of Proto Labs, Inc.
3.3(3)	Articles of Amendment to Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. dated May 20, 2015
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1)	Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A (File No. 333-175745), filed with the Commission on February 13, 2012, and incorporated by reference herein.
(2)	Previously filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-1/A (File No. 333-175745), filed with the Commission on February 13, 2012, and incorporated by reference herein.
(3)	Previously filed as Exhibit 3.1 to the Company’s Form 8-K (File No. 001-35435), filed with the Commission on May 21, 2015, and incorporated by reference herein.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Proto Labs, Inc.
Date: May 5, 2016	/s/ Victoria M. Holt
	Victoria M. Holt
	President and Chief Executive Officer (Principal Executive Officer)

Date: May 5, 2016	/s/ John A. Way
	John A. Way
	Chief Financial Officer (Principal Financial Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Victoria M. Holt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Proto Labs, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 5, 2016	By:	/s/ Victoria M. Holt
		Victoria M. Holt
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002 

I, John A. Way, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Proto Labs, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 5, 2016	By:	/s/ John A. Way
		John A. Way
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Victoria M. Holt, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: May 5, 2016

By:	/s/ Victoria M. Holt
Name:	Victoria M. Holt
Title:	President and Chief Executive Officer

I, John A. Way, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Proto Labs, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Proto Labs, Inc.

Date: May 5, 2016

By:	/s/ John A. Way
Name:	John A. Way
Title:	Chief Financial Officer

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Entity Registrant Name	Proto Labs Inc
Entity Central Index Key	0001443669
Trading Symbol	prlb
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding (in shares)		26,360,113
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 50,626,000	$ 47,653,000
Short-term marketable securities	38,804,000	33,201,000
Accounts receivable, net of allowance for doubtful accounts of $281 and $330 as of March 31, 2016 and December 31, 2015, respectively	36,152,000	36,125,000
Inventory	9,920,000	9,771,000
Prepaid expenses and other current assets	6,617,000	5,224,000
Income taxes receivable	2,029,000	6,028,000
Total current assets	144,148,000	138,002,000
Property and equipment, net	130,341,000	125,475,000
Goodwill	28,916,000	28,916,000
Other intangible assets, net	3,150,000	3,337,000
Long-term marketable securities	67,726,000	64,789,000
Other long-term assets	554,000	517,000
Total assets	374,835,000	361,036,000
Current liabilities
Accounts payable	13,541,000	13,643,000
Accrued compensation	8,747,000	9,993,000
Accrued liabilities and other	1,648,000	2,626,000
Total current liabilities	23,936,000	26,262,000
Long-term deferred tax liabilities	4,325,000	4,240,000
Other long-term liabilities	2,868,000	2,889,000
Total liabilities	$ 31,129,000	$ 33,391,000
Shareholders' equity
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2016 and December 31, 2015
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,301,688 and 26,200,718 shares as of March 31, 2016 and December 31, 2015, respectively	$ 26,000	$ 26,000
Additional paid-in capital	203,490,000	198,835,000
Retained earnings	144,658,000	133,996,000
Accumulated other comprehensive loss	(4,468,000)	(5,212,000)
Total shareholders' equity	343,706,000	327,645,000
Total liabilities and shareholders' equity	$ 374,835,000	$ 361,036,000

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Allowance for doubtful accounts	$ 281	$ 330
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	150,000,000	150,000,000
Common stock, shares issued (in shares)	26,301,688	26,200,718
Common stock, shares outstanding (in shares)	26,301,688	26,200,718

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statements of Operations:
Revenue	$ 72,568	$ 58,536
Cost of revenue	32,914	23,282
Gross profit	39,654	35,254
Operating expenses
Marketing and sales	10,942	8,854
Research and development	5,318	4,314
General and administrative	8,251	6,245
Total operating expenses	24,511	19,413
Income from operations	15,143	15,841
Other income (expense), net	625	(457)
Income before income taxes	15,768	15,384
Provision for income taxes	5,106	4,931
Net income	$ 10,662	$ 10,453
Net income per share:
Basic (in dollars per share)	$ 0.41	$ 0.40
Diluted (in dollars per share)	$ 0.40	$ 0.40
Shares used to compute net income per share:
Basic (in shares)	26,222,148	25,850,274
Diluted (in shares)	26,442,357	26,214,204
Comprehensive Income (net of tax)
Comprehensive income	$ 11,406	$ 9,378

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities
Net income	$ 10,662	$ 10,453
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,789	3,399
Stock-based compensation expense	1,732	1,342
Deferred taxes	89	343
Excess tax benefit from stock-based compensation	(1,310)	(510)
Amortization of held-to-maturity securities	289	305
Changes in operating assets and liabilities:
Accounts receivable	23	(4,363)
Inventories	(62)	(243)
Prepaid expenses and other	(1,557)	(989)
Income taxes	5,296	2,729
Accounts payable	(135)	776
Accrued liabilities and other	(1,872)	2,175
Net cash provided by operating activities	16,944	15,417
Investing activities
Purchases of property and equipment	(8,275)	(6,230)
Purchases of marketable securities	(18,794)	(11,575)
Proceeds from sales and maturities of marketable securities	10,465	11,646
Net cash used in investing activities	$ (16,604)	(6,159)
Financing activities
Payments on debt		(49)
Acquisition-related contingent consideration	$ (400)	(1,000)
Proceeds from exercises of stock options and other	1,614	878
Excess tax benefit from stock-based compensation	1,310	510
Net cash provided by financing activities	2,524	339
Effect of exchange rate changes on cash and cash equivalents	109	(373)
Net increase in cash and cash equivalents	2,973	9,224
Cash and cash equivalents, beginning of period	47,653	43,329
Cash and cash equivalents, end of period	$ 50,626	$ 52,553

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Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 –

Basis of Presentation

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Proto Labs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (SEC) on February 26, 2016.

The accompanying Consolidated Balance Sheet as of December 31, 2015 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Annual Report on Form 10-K filed on February 26, 2016 as referenced above.

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Note 2 - Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note

2 –

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The Company is required to adopt the new pronouncement using one of two retrospective application methods.

On July 9, 2015, the FASB voted to approve a deferral of the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date. The Company is evaluating the application method and the impact of this new standard on its financial statements, but does not expect the impact to be material.

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of the future adoption of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. This guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact this new guidance will have on its consolidated financial statements.

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Note 3 - Net Income per Common Share

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

3 –

Net Income per Common Share

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options, restricted stock units and restricted stock awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted net income per share:

	Three Months Ended
	March 31,
(in thousands, except share and per share amounts)	2016		2015
Net income	$	10,662	$	10,453
Basic - weighted-average shares outstanding:		26,222,148		25,850,274
Effect of dilutive securities:
Employee stock options and other		220,209		363,930
Diluted - weighted-average shares outstanding:		26,442,357		26,214,204
Net income per share:
Basic	$	0.41	$	0.40
Diluted	$	0.40	$	0.40

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Note 4 - Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

4 –

Goodwill and Other Intangible Assets

There were no changes in the carrying amount of Goodwill during the three months ended March 31, 2016.

Intangible assets other than Goodwill at March 31, 2016 and December 31, 2015 were as follows:

	March 31, 2016							December 31, 2015							Useful		Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)		Useful Life  Remaining (in years)
Intangible Assets with finite lives:
Marketing assets	$	930	$	(178	)	$	752	$	930	$	(155	)	$	775		10.0		8.1
Non-compete agreement		190		(182	)		8		190		(158	)		32		2.0		0.1
Trade secrets		250		(96	)		154		250		(83	)		167		5.0		3.1
Internally developed software		680		(435	)		245		680		(378	)		302		3.0		1.1
Customer relationships		2,530		(539	)		1,991		2,530		(469	)		2,061		9.0		7.1
Total intangible assets	$	4,580	$	(1,430	)	$	3,150	$	4,580	$	(1,243	)	$	3,337

Amortization expense for intangible assets was $0.2 million for each of the three months ended March 31, 2016 and 2015.

Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets is as follows:

(in thousands)	Estimated Amortization Expense
Remaining 2016	$	495
2017		500
2018		424
2019		391
2020		374
Thereafter		966
Total estimated amortization expense	$	3,150

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Note 5 - Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

5

– Fair Value Measurements

ASC 820,

Fair Value Measuremen

t (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1

—Quoted prices in active markets for identical assets or liabilities.

Level 2

—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3

—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash consists of bank deposits. The Company’s cash equivalents measured at fair value consist of money market mutual funds. The Company determines the fair value of these investments using Level 1 inputs.

A summary of financial assets as of March 31

, 2016 and December 31, 2015 measured at fair value on a recurring basis follows:

	March 31, 2016						December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents
Money market mutual fund	$	5,941	$	-	$	-	$	11,896	$	-	$	-
Total	$	5,941	$	-	$	-	$	11,896	$	-	$	-

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Note 6 - Marketable Securities

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Investment [Text Block]

Note

6

– Marketable Securities

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as held-to-maturity and are recorded at amortized cost. Categorization as held-to-maturity is based on the Company’s ability and intent to hold these securities to maturity. Information regarding the Company’s short-term and long-term marketable securities as of March 31

, 2016 and December 31, 2015 is as follows:

	March 31, 2016
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	37,517	$	19	$	(24	)	$	37,512
Corporate debt securities		30,059		21		(18	)		30,062
U.S. government agency securities		31,050		11		(9	)		31,052
Certificates of deposit/time deposits		6,405		19		-			6,424
Commercial paper		1,499		-		-			1,499
Total marketable securities	$	106,530	$	70	$	(51	)	$	106,549

	December 31, 2015
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	35,667	$	8	$	(56	)	$	35,619
Corporate debt securities		28,133		-		(114	)		28,019
U.S. government agency securities		26,784		2		(99	)		26,687
Certificates of deposit/time deposits		5,909		2		(11	)		5,900
Commercial paper		1,497		-		(2	)		1,495
Total marketable securities	$	97,990	$	12	$	(282	)	$	97,720

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and commercial paper are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

The Company tests for other-than-temporary losses on a quarterly basis and has considered the unrealized losses indicated above, which are the result of changes in interest rates, to be temporary in nature. In reaching this conclusion, the Company considered the credit quality of the issuers of the debt securities as well as the Company’s intent to hold the investments to maturity and recover the full principal.

Classification of marketable securities as current or non-current is based upon the security’s maturity date as of the date of these financial statements.

The March 31, 2016

balance of held-to-maturity debt securities by contractual maturity is shown in the following table at amortized cost. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

	March 31,
(in thousands)	2016
Due in one year or less	$	38,804
Due after one year through five years		67,726
Total marketable securities	$	106,530

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Note 7 - Inventory

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

7 –

Inventory

Inventory consists primarily of raw materials, which are recorded at the lower of cost or market using the average-cost method, which approximates first-in, first-out (FIFO) cost. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts.

The Company’s inventory consisted of the following as of the dates indicated:

	March 31,			December 31,
(in thousands)	2016			2015
Raw materials	$	8,766		$	8,589
Work in process		1,466			1,529
Total inventory		10,232			10,118
Allowance for obsolescence		(312	)		(347	)
Inventory, net of allowance	$	9,920		$	9,771

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Note 8 - Stock-based Compensation

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note

8

– Stock-Based Compensation

Under the 2012 Long-Term Incentive Plan (2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any future awards will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per share exercise price of stock options and SARs granted under the 2012 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was $1.7 million and $1.3 million for the three months ended March 31

, 2016 and 2015, respectively.

Stock Options

A summary of stock option activity during the three months ended March 31, 2016 is as follows:

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2015		766,042		$	36.52
Granted		104,960			57.88
Exercised		(111,796	)		14.44
Forfeited		-			-
Options outstanding at March 31, 2016		759,206		$	42.72
Exercisable at March 31, 2016		350,415		$	27.30

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a five-year period beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, options generally become exercisable in full on the first anniversary of the grant date.

The weighted-average grant date fair value of options that were granted during the three months ended March 31, 2016

was $26.44.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31

, 2016 and 2015, respectively:

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		1.53%		1.77%
Expected life (years)		6.50		6.50
Expected volatility		44.38%		47.23%
Expected dividend yield		0%		0%

As of March 31, 2016,

there was $9.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.5 years

.

Restricted Stock

Restricted stock awards are share settled awards and restrictions lapse ratably over the vesting period, which is generally a five-year period, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the first anniversary of the grant date.

A summary of restricted stock activity during the three months ended March 31

, 2016 is as follows:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2015		124,393		$	68.97
Granted		47,965			57.88
Restrictions lapsed		(11,870	)		73.44
Forfeited		-			-
Restricted stock at March 31, 2016		160,488		$	65.33

As of March 31, 2016

, there was $8.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 3.9 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2016

and 2015, respectively:

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		0.39%		0.08%
Expected life (months)		6.00		6.00
Expected volatility		29.41%		37.64%
Expected dividend yield		0%		0%

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Note 9 - Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Disclosure of Reclassification Amount [Text Block]

Note

9

– Accumulated Other Comprehensive Income

(Loss)

Other comprehensive income (loss) is comprised entirely of foreign currency translation adjustments. The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31

, 2016 and 2015, respectively:

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Foreign currency translation adjustments
Balance at beginning of period	$	(5,212	)	$	(2,929	)
Other comprehensive loss before reclassifications		744			(1,075	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-
Net current-period other comprehensive loss		744			(1,075	)
Balance at end of period	$	(4,468	)	$	(4,004	)

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Note 10 - Income Taxes

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

10

–

Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2016 and 2015, the Company recorded an income tax provision of $5.1 million and $4.9 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2016 was 32.4 percent compared to 32.1 percent in the same period of the prior year.

The effective income tax rate for the three months ended March 31, 2016 differs from the U.S. federal statutory rate of 35 percent due primarily to the mix of income earned in domestic and foreign tax jurisdictions and deductions and credits for which the Company qualifies.

The Company had liabilities related to unrecognized tax benefits totaling $2.9 million and $2.8 million at March 31, 2016 and December 31, 2015, respectively, all of which, if recognized, would affect the Company’s effective tax rate. The Company recognizes interest and penalties related to income tax matters in income tax expense, and reports the liability in current or long-term income taxes payable as appropriate.

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Note 11 - Revenue and Geographic Information

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

11

–

Revenue and Geographic Information

The Company’s revenue is primarily derived from its Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline) product lines. Total revenue by product line is as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
Injection Molding (Protomold)	$	43,169	$	37,618
CNC Machining (Firstcut)		18,875		16,370
3D Printing (Fineline)		9,110		4,548
Other		1,414		-
Total revenue	$	72,568	$	58,536

Revenue to external customers based on the billing location of the end user customer and long-lived assets by geographic region are as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
United States	$	50,567	$	44,845
International		22,001		13,691
Total revenue	$	72,568	$	58,536

	March 31,		December 31,
(in thousands)	2016		2015
Long-lived assets:
United States	$	102,153	$	98,633
International		28,188		26,842
Total long-lived assets	$	130,341	$	125,475

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Proto Labs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (SEC) on February 26, 2016.

The accompanying Consolidated Balance Sheet as of December 31, 2015 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Annual Report on Form 10-K filed on February 26, 2016 as referenced above.

New Accounting Pronouncements, Policy [Policy Text Block]

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The Company is required to adopt the new pronouncement using one of two retrospective application methods.

On July 9, 2015, the FASB voted to approve a deferral of the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date. The Company is evaluating the application method and the impact of this new standard on its financial statements, but does not expect the impact to be material.

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of the future adoption of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. This guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact this new guidance will have on its consolidated financial statements.

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Note 3 - Net Income per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	March 31,
(in thousands, except share and per share amounts)	2016		2015
Net income	$	10,662	$	10,453
Basic - weighted-average shares outstanding:		26,222,148		25,850,274
Effect of dilutive securities:
Employee stock options and other		220,209		363,930
Diluted - weighted-average shares outstanding:		26,442,357		26,214,204
Net income per share:
Basic	$	0.41	$	0.40
Diluted	$	0.40	$	0.40

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Note 4 - Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	March 31, 2016							December 31, 2015							Useful		Weighted Average
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Life (in years)		Useful Life  Remaining (in years)
Intangible Assets with finite lives:
Marketing assets	$	930	$	(178	)	$	752	$	930	$	(155	)	$	775		10.0		8.1
Non-compete agreement		190		(182	)		8		190		(158	)		32		2.0		0.1
Trade secrets		250		(96	)		154		250		(83	)		167		5.0		3.1
Internally developed software		680		(435	)		245		680		(378	)		302		3.0		1.1
Customer relationships		2,530		(539	)		1,991		2,530		(469	)		2,061		9.0		7.1
Total intangible assets	$	4,580	$	(1,430	)	$	3,150	$	4,580	$	(1,243	)	$	3,337

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(in thousands)	Estimated Amortization Expense
Remaining 2016	$	495
2017		500
2018		424
2019		391
2020		374
Thereafter		966
Total estimated amortization expense	$	3,150

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Note 5 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	March 31, 2016						December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents
Money market mutual fund	$	5,941	$	-	$	-	$	11,896	$	-	$	-
Total	$	5,941	$	-	$	-	$	11,896	$	-	$	-

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Note 6 - Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Held-to-maturity Securities [Table Text Block]

	March 31, 2016
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	37,517	$	19	$	(24	)	$	37,512
Corporate debt securities		30,059		21		(18	)		30,062
U.S. government agency securities		31,050		11		(9	)		31,052
Certificates of deposit/time deposits		6,405		19		-			6,424
Commercial paper		1,499		-		-			1,499
Total marketable securities	$	106,530	$	70	$	(51	)	$	106,549

	December 31, 2015
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. municipal securities	$	35,667	$	8	$	(56	)	$	35,619
Corporate debt securities		28,133		-		(114	)		28,019
U.S. government agency securities		26,784		2		(99	)		26,687
Certificates of deposit/time deposits		5,909		2		(11	)		5,900
Commercial paper		1,497		-		(2	)		1,495
Total marketable securities	$	97,990	$	12	$	(282	)	$	97,720

Investments Classified by Contractual Maturity Date [Table Text Block]

	March 31,
(in thousands)	2016
Due in one year or less	$	38,804
Due after one year through five years		67,726
Total marketable securities	$	106,530

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Note 7 - Inventory (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,			December 31,
(in thousands)	2016			2015
Raw materials	$	8,766		$	8,589
Work in process		1,466			1,529
Total inventory		10,232			10,118
Allowance for obsolescence		(312	)		(347	)
Inventory, net of allowance	$	9,920		$	9,771

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Note 8 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2015		766,042		$	36.52
Granted		104,960			57.88
Exercised		(111,796	)		14.44
Forfeited		-			-
Options outstanding at March 31, 2016		759,206		$	42.72
Exercisable at March 31, 2016		350,415		$	27.30

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		1.53%		1.77%
Expected life (years)		6.50		6.50
Expected volatility		44.38%		47.23%
Expected dividend yield		0%		0%

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2015		124,393		$	68.97
Granted		47,965			57.88
Restrictions lapsed		(11,870	)		73.44
Forfeited		-			-
Restricted stock at March 31, 2016		160,488		$	65.33

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block]

	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		0.39%		0.08%
Expected life (months)		6.00		6.00
Expected volatility		29.41%		37.64%
Expected dividend yield		0%		0%

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Note 9 - Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Foreign currency translation adjustments
Balance at beginning of period	$	(5,212	)	$	(2,929	)
Other comprehensive loss before reclassifications		744			(1,075	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-
Net current-period other comprehensive loss		744			(1,075	)
Balance at end of period	$	(4,468	)	$	(4,004	)

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Note 11 - Revenue and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Revenue from External Customers by Products and Services [Table Text Block]

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
Injection Molding (Protomold)	$	43,169	$	37,618
CNC Machining (Firstcut)		18,875		16,370
3D Printing (Fineline)		9,110		4,548
Other		1,414		-
Total revenue	$	72,568	$	58,536

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three Months Ended March 31,
(in thousands)	2016		2015
Revenue:
United States	$	50,567	$	44,845
International		22,001		13,691
Total revenue	$	72,568	$	58,536

Long-lived Assets by Geographic Areas [Table Text Block]

	March 31,		December 31,
(in thousands)	2016		2015
Long-lived assets:
United States	$	102,153	$	98,633
International		28,188		26,842
Total long-lived assets	$	130,341	$	125,475

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Note 3 - Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net income	$ 10,662	$ 10,453
Basic (in shares)	26,222,148	25,850,274
Effect of dilutive securities:
Employee stock options and other (in shares)	220,209	363,930
Diluted - weighted-average shares outstanding: (in shares)	26,442,357	26,214,204
Net income per share:
Basic (in dollars per share)	$ 0.41	$ 0.40
Diluted (in dollars per share)	$ 0.40	$ 0.40

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Note 4 - Goodwill and Other Intangible Assets (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Amortization of Intangible Assets	$ 0.2	$ 0.2

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Note 4 - Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Marketing-Related Intangible Assets [Member]
Intangible Assets with finite lives:
Gross	$ 930	$ 930
Accumulated amortization	(178)	(155)
Net	$ 752	775
Useful life	10 years
Weighted average useful life remaining	8 years 36 days
Noncompete Agreements [Member]
Intangible Assets with finite lives:
Gross	$ 190	190
Accumulated amortization	(182)	(158)
Net	$ 8	32
Useful life	2 years
Weighted average useful life remaining	36 days
Trade Secrets [Member]
Intangible Assets with finite lives:
Gross	$ 250	250
Accumulated amortization	(96)	(83)
Net	$ 154	167
Useful life	5 years
Weighted average useful life remaining	3 years 36 days
Computer Software, Intangible Asset [Member]
Intangible Assets with finite lives:
Gross	$ 680	680
Accumulated amortization	(435)	(378)
Net	$ 245	302
Useful life	3 years
Weighted average useful life remaining	1 year 36 days
Customer Relationships [Member]
Intangible Assets with finite lives:
Gross	$ 2,530	2,530
Accumulated amortization	(539)	(469)
Net	$ 1,991	2,061
Useful life	9 years
Weighted average useful life remaining	7 years 36 days
Gross	$ 4,580	4,580
Accumulated amortization	(1,430)	(1,243)
Net	$ 3,150	$ 3,337

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Note 4 - Estimated Aggregated Amortization Expense (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Remaining 2016	$ 495
2017	500
2018	424
2019	391
2020	374
Thereafter	966
Total estimated amortization expense	$ 3,150	$ 3,337

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Note 5 - Fair Value of Financial Assets Measured on a Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 1 [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Cash and cash equivalents:
Money market mutual fund	$ 5,941	$ 11,896
Total	$ 5,941	$ 11,896

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Note 6 - Short-term and Long-term Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
US States and Political Subdivisions Debt Securities [Member]
Amortized Cost	$ 37,517	$ 35,667
Unrealized Gains	19	8
Unrealized Losses	(24)	(56)
Fair Value	37,512	35,619
Corporate Debt Securities [Member]
Amortized Cost	30,059	$ 28,133
Unrealized Gains	21
Unrealized Losses	(18)	$ (114)
Fair Value	30,062	28,019
US Government Agencies Debt Securities [Member]
Amortized Cost	31,050	26,784
Unrealized Gains	11	2
Unrealized Losses	(9)	(99)
Fair Value	31,052	26,687
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
Amortized Cost	$ 1,499	$ 1,497
Unrealized Gains
Unrealized Losses		$ (2)
Fair Value	$ 1,499	1,495
Bank Time Deposits [Member]
Amortized Cost	6,405	5,909
Unrealized Gains	$ 19	2
Unrealized Losses		(11)
Fair Value	$ 6,424	5,900
Amortized Cost	106,530	97,990
Unrealized Gains	70	12
Unrealized Losses	(51)	(282)
Fair Value	$ 106,549	$ 97,720

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Note 6 - Balance of Held-to-Maturity Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Due in one year or less	$ 38,804
Due after one year through five years	67,726
Total marketable securities	$ 106,530	$ 97,990

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Note 7 - Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Raw materials	$ 8,766	$ 8,589
Work in process	1,466	1,529
Total inventory	10,232	10,118
Allowance for obsolescence	(312)	(347)
Inventory, net of allowance	$ 9,920	$ 9,771

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Note 8 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 9,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 182 days
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 8,700
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 328 days
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date	15.00%
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period	180 days
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Share-based Compensation	$ 1,732	$ 1,342
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 26.44

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Note 8 - Stock Option Activity (Details)	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Options outstanding, beginning of period (in shares) | shares	766,042
Options outstanding, beginning of period, weighted-average exercise price (in dollars per share) | $ / shares	$ 36.52
Granted (in shares) | shares	104,960
Granted, weighted-average exercise price (in dollars per share) | $ / shares	$ 57.88
Exercised (in shares) | shares	(111,796)
Exercised, weighted-average exercise price (in dollars per share) | $ / shares	$ 14.44
Forfeited (in shares) | shares
Forfeited, weighted-average exercise price (in dollars per share) | $ / shares
Options outstanding, end of period (in shares) | shares	759,206
Options outstanding, end of period, weighted-average exercise price (in dollars per share) | $ / shares	$ 42.72
Options exercisable (in shares) | shares	350,415
Options exercisable, weighted-average exercise price (in dollars per share) | $ / shares	$ 27.30

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Note 8 - Assumptions Used in the Black-Scholes Option Pricing Model (Details) - Employee Stock Option [Member]	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Minimum [Member]
Risk-free interest rate	1.53%
Expected life (years)	6 years 182 days
Expected volatility	44.38%
Expected dividend yield	0.00%
Risk-free interest rate		1.77%
Expected life (years)		6 years 182 days
Expected volatility		47.23%
Expected dividend yield		0.00%

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Note 8 - Non-vested Restricted Stock Options (Details) - Restricted Stock [Member]	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Restricted stock at December 31, 2015 (in shares) | shares	124,393
Restricted stock at December 31, 2015 (in dollars per share) | $ / shares	$ 68.97
Granted (in shares) | shares	47,965
Granted (in dollars per share) | $ / shares	$ 57.88
Restrictions lapsed (in shares) | shares	(11,870)
Restrictions lapsed (in dollars per share) | $ / shares	$ 73.44
Forfeited (in shares) | shares
Forfeited (in dollars per share) | $ / shares
Restricted stock at March 31, 2016 (in shares) | shares	160,488
Restricted stock at March 31, 2016 (in dollars per share) | $ / shares	$ 65.33

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Note 8 - Assumptions Used to Estimate the Fair Value of the ESPP (Details) - ESPP [Member]	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Minimum [Member]
Risk-free interest rate	0.39%
Expected life (years)	180 days
Expected volatility	29.41%
Expected dividend yield	0.00%
Risk-free interest rate		0.08%
Expected life (years)		180 days
Expected volatility		37.64%
Expected dividend yield		0.00%

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Note 9 - Other Comprehensive Income (Loss) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Balance beginning of period	$ (5,212,000)	$ (2,929,000)
Other comprehensive loss before reclassifications	744,000	(1,075,000)
Amounts reclassified from accumulated other comprehensive income (loss)	0	0
Net current-period other comprehensive loss	744,000	(1,075,000)
Balance at end of period	$ (4,468,000)	$ (4,004,000)

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Note 10 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Tax Expense (Benefit)	$ 5,106	$ 4,931
Effective Income Tax Rate Reconciliation, Percent	32.40%	32.10%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%
Unrecognized Tax Benefits	$ 2,900		$ 2,800

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Note 11 - Total Revenue by Product Line (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Injection Molding (Protomold) [Member]
Revenue:
Revenues	$ 43,169	$ 37,618
CNC Machining (Firstcut) [Member]
Revenue:
Revenues	18,875	16,370
3D Printing (Fineline) [Member]
Revenue:
Revenues	9,110	$ 4,548
Other Products [Member]
Revenue:
Revenues	1,414
Revenues	$ 72,568	$ 58,536

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Note 11 - Revenue to External Customers and Long-lived Assets by Geography (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
UNITED STATES
Revenues	$ 50,567	$ 44,845
International [Member]
Revenues	22,001	13,691
Revenues	$ 72,568	$ 58,536

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Note 11 - Long-lived Assets by Geographic Region (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
UNITED STATES
Long-lived assets:
Long-lived assets	$ 102,153	$ 98,633
International [Member]
Long-lived assets:
Long-lived assets	28,188	26,842
Long-lived assets	$ 130,341	$ 125,475