Proto Labs, Inc. · NYSE:PRLB
Proto Labs — Investor Day (December 2017)
79 slides from Proto Labs's investor day presentation, Dec 12, 2017
Slide 1: Proto Labs
proto labs:
Slide 2: Forward-looking statements
These slides and accompanying oral presentation contain forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or
Slide 3: Agenda and presenters
We Are Evolving Vicki Holt President and CEO Competitive Advantage Rich Baker Chief Technology Officer Expanding Service Offering Rob Bodor VP/GM Americas Maintaining Consistent Growth David Fein Chief Revenue Officer Financial Overview John Way Chief Financial Officer
Slide 4: We Are Evolving
WE ARE THE proto labs:
Slide 5: labs:
proto labs: COMPANIES ACCEEERA VELOPMENT, REDUCE: OPTIMIZE SUPPLY CHAIN GQU PROTOTYPIN
Slide 6: The world of manufacturing is evolving and so is Proto Labs
4 proto labs: > THE WORLD OF MANUFACTURING 4 EVOLVING AND SO 1S PROTO LABS /
Slide 7: The Industrial Revolutions
{__protolabs' _ labs > THE INDUSTRIAL REVOLUTIONS INDUSTRIAL REVOLUTION ] TRIAL REVOLUTION INDUSTRIAL REVOLUTION 1.0 2.0 3.0 Water and steam power is Electricity lets us create ¢ IT systems automate used to create mechanical ivision of labor production lines further. production facilities. mass prod
Slide 8: Industrial Revolution today
INDUSTRIAL REVOLUTION TODAY DIGITIZING THE FRONT-END OF MANUFACTURING IS UNLOCKING NEW OPPORTUNITIES IN ITERATIVE DESIGN AND DEVELOPMENT, PROTOTYPING, AND ON-DEMAND CUSTOM MANUFACTURING.
Slide 9: Slide 9
Slide 10: Shorter product lifecycles
proto labs’ > SHORTER PRODUCT LIFECYCLES of annual company revenues are derived from new products launched within the past three years, suggesting long-term product ‘cash cows’ are becominga thing of the past. Source: The product life cycle is in decline, Supply Chain Digital - Beat competitors to m
Slide 11: Internet of Things
proto labs’ > INTERNET OF THINGS Estimated Number of Installed loT Devices by Sector =, BI INTELLIGENCE Ey * Key lever for expanding to new markets or developing new product offerings * Engine for growth for companies that can successfully launch these types of products * 25 billion loT devices in t
Slide 12: Personalization & mass customization
proto labs’ > PERSONALIZATION & MASS CUSTOMIZATION Over the next five years in three sectors alone - retail, $800B health care, and financial services - personalization will push a shift of some $800 billion to the 15% of companies that get it right ‘Source: Boston Consulting Group 2047 Profiting fr
Slide 13: The challenge facing companies today
proto labs’ > THE CHALLENGE FACING COMPANIES TODAY Consistently growing revenues and earnings in this dynamic landscape 77%) of senior executives cited innovationand product development as one of their top three strategic priorities. ‘Source: The Most Innovative Companies 2013, BCG Perspectives Kim
Slide 14: Helping companies get their products to market
> HELPING COMPANIES GET THEIR PRODUCTS TO MARKET ¢ More than just prototyping * Our Customers Use us in a Variety of Ways — Shortening product development cycles « Accelerate Innovation « Reduce overall R&D cost by leveraging resources more effectively « Reduce risk in end products by iterating quic
Slide 15: The evolution of Proto Labs
THE EVOLUTION OF PROT! S 1999 2007 2016-17 2018 >>> Injection Molding ‘CNC Machining (On-Demand Manufactutring Total Solution H Digital inspection Report Sheet Metal Fabrication protomold” firstcut’ fineline’ proto labs PROTOLABS pieces Sschaay te stn noone Mandi coi IDENTITY ! i Ct \ Individual Ind
Slide 16: Rapid prototyping and on-demand production in as fast as 1 day
+$380M +2,000 Pro Forma Revenue (2017) Employees 12 +1000 Manufacturing Mills, Lathes, Locations Presses, 3D Printers INCREASE SPEED TO MARKET | REDUCE COSTS > RAPID PROTOTYPING AND ON-DEMAND PRODUCTION IN AS FAST AS 1 DAY +35,000 Product Developers Served (2017) +4,000,000 CAD Files Uploaded OPTIMI
Slide 17: Company culture values
INVOLVED 2ALANCE: wre ED | PORMANC *V-MIND? HUMBLE FUN CASUAL EMPOWERED CUSTOMER-FOCUSED COLLABORATIVE ADAPTABLE INNOVATIVE EFFICIENT KNOWLEDGEABLE CAIN LV {USTING CC .Lé TI. PERFOR: ICE-DRIVI OV Ey E EF JST GF US"> AD, TAP TAR IT VE JD 3LE_ UN AN 2D 4B «VE CRF ED Nt EN [MbowER KNOWL Us R= CU PY SA)
Slide 18: Evolving our approach to meet customer demands
> EVOLVING OUR APPROACH TO MEET CUSTOMER DEMANDS ¢ Investing in services and capabilities to become more of a total solution ¢ Leveraging our technology and approach to enhance our capabilities to address underserved markets ¢ Building our customer relationships to become a strategic partner
Slide 19: Competitive Advantage
Slide 20: proto labs’
proto labs’
Slide 21: Digital thread
—— DIGITAL THREAD Integrates advanced software and technology throughout the manufacturing process wy
Slide 22: Digital differentiation
> DIGITAL DIFFERENTIATION ‘At Proto Labs, 3D CAD models can be uploaded online at any time. An interactive quote is then sent within hours that contains automated design for manufacturability feedback & BS 6 — UY Q 3D CAD MODEL ONLINE INTERACTIVE DESIGN MOLD PRE-PRODUCTION UPLOAD QUOTE ANALYSIS ORDE
Slide 23: Automation
AUTOMATION
Slide 24: Automated quoting software
> AUTOMATED QUOTING SOFTWARE ProtoQuote° es) Injection Molding Quote Pro fr ABE Dang Co ‘ha ou appr te Interactive quotes Soe ess eee ens ieee festoeey within hours Fics coarfily Srrarasces. San 2087 ine 150 073310 © Confirm or Modify Specifications and Review Pricing Cost estimates with real-time p
Slide 25: Design for manufacturability feedback
Reviews part geometry and highlights any manufacturing issues Optimizes part design before any actual production begins ‘The following illustrations indicate changes tothe model which are required for compatibility with our injection molcing undereut portons Su nas ar) ate rosuchase ects wou Clortca
Slide 26: Development phase: design and request for quote
> DEVELOPMENT PHASE: DESIGN AND REQUEST FOR QUOTE (RFQ) Requesting quotes, a non-value add activity, often takes weeks for each component, greatly delaying the development process. Issue / Concern Digitalization of quoting provides actual cost and SOOT design-for-manufacturability (DFM) feedback wit
Slide 27: Case Study: Lockheed Martin
Case Study: tocKHEED MARTIN “This was an iterative design approach that was accelerated because of the quick turnaround of the quoting system. By using this process, | was able to better learn what was expected and what was possible for moldability.| was then able to think through how | would need t
Slide 28: Massive manufacturing scale
proto labs" i MASSIVE MANUFACTURING SGALE f INJECTION MOLDING | CNC MACHINING ee PRINTING | SE METAL
Slide 29: Digital manufacturing reduces time and cost
proto labs’ > DIGITAL MANUFACTURING REDUCES TIME AND COST Different use cases leveraging our market differentiation t Speed to Market y Design Risk t Number of design iterations q Speed to test prototype t Productivity of R&D Spend ¥ ¥ ¥ Supply Chain Risk @ inventories q Ability to manage volatile d
Slide 30: Digital manufacturing
proto labs’ > DIGITAL MANUFACTURING On-demand, web-enabled digital manufacturer serving our customers through out their productlife cycle at world class speed 1,000,000 MATURITY Traditional 100,000 DECLINE 10,000 proto labs’ QUANTITY OBSOLESCENCE Current Focus - Pay-as-you-go with virtual inventory
Slide 31: Contract manufacturing landscape
proto lab: > CONTRACT MANUFACTURING LANDSCAPE Majority of the market is. made up of small local shops that utilize skilled labor and are inherently not scalable Of contract manufacturers who have achieved scale, only Proto Labs operates in the high-mix low-volumespace, which is enabled by automating
Slide 32: Our digital manufacturing model enables Proto Labs' scalability
proto labs’ > OUR DIGITAL MANUFACTURING MODEL ENABLES PROTO LABS’ SCALABILITY Uploads | | | Revenue ae atl VP PE PS FS IS SEES LFS SE PL PMP Soe Parts all oonell | 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ee antl SPSF LSS SEPP PMP Se
Slide 33: Strong competitive position
> STRONG COMPETITIVE POSITION Unmatched ability to produce low volumes efficiently and cost effectively SS so $ we os ee s ‘ & ee CS sf x ora" & é < wS se S gro a s cy Sod se & eS we we & proto labs: Digital Brokers. Traditional Full Service Smail Individually Owned Job Shop High Volume Contract Man
Slide 34: Growth strategies
proto labs’ > GROWTH STRATEGIES Focus on the needs of our customers to help get their products to market as efficiently and cost effectively as possible Broadening the part envelope increases our competitive position Leveraging our technology to increase in the serviceable market ¢ 2) Broaden Part E
Slide 35: Envelope expansion focused on customer
proto labs’ > ENVELOPE EXPANSION FOCUSED ON CUSTOMER 3D PRINTING: Europe bl 3D PRINTING (SL, SLS, DMS): United States indexed milling CNCTurning with live tooling CNC MACHINING: Japan CNC MACHINING: Europe hi] CNC MACHINING: United tates Insert Molding nolding Molding MIM and Thixomolding INJECTION
Slide 36: R&D investment enables envelope expansion
> R&D INVESTMENT ENABLES ENVELOPE EXPANSION Materials Part Size * Flexible TPEs and TPUs. * Larger part geometries * High-temperature PEEK and PEI * — Efficiencies in producing parts * Brass and copper * Improved precision and tolerance * 3D-printed metals * Large-format industrial 3D printer * Elas
Slide 37: Summary
proto labs’ > Summary * Continue to build Proto Labs competitive advantage with our adaptable, integrated and scalable systems * Investing in services and capabilities to become more of a total solution ¢ Evolve our technology and offerings to address underserved markets
Slide 38: Expanding Service Offering
proto labs: SEXPANDINGSERVICE OFFERID
Slide 39: One partner, four services
proto labs’ INJECTION MOLDING ie CNC MACHINING ONE PARTNER // FOUR SERVICES Gg 3D PRINTING y SHEET METAL ~w ~ Poe A 3
Slide 40: Our capabilities drive our growth
proto lab: > OUR CAPABILITES DRIVE OUR GROWTH * Continuously expand our existing capabilities Leverage our capabilities to address underserved markets Address customer needs as we add manufacturing technologies (2) Broaden Part Envelope + Larger sizes + Increased complexity + New materials —~ (3) Ma
Slide 41: Expand services with rapid manufacturing
proto labs’ > EXPAND SERVICES WITH RAPID MANUFACTURING ACQUISITION CLEAR FIT « Natural disposition to speed « Extends services to include sheet metal — Approximately 75% of our customers purchase sheet metal parts « Broadens the CNC manufacturing offering — Expanded envelope (size, tolerance, etc) —
Slide 42: Sheet metal market
> SHEET METAL MARKET Customer Profile —— ——— Competitive Landscape ——— Rapid and Proto Labs share the same type of customer, across all major manufacturing A independent study found RAPID to be the leading industries, with significant penetration opportunity prototype and low-volume digital manufact
Slide 43: Leveraging capabilities to meet market demand
> LEVERAGING CAPABILITIES TO MEET MARKET DEMAND * Prototyping — Foundation of Proto Labs — Allows customers to rethink their product development process and shorten the cycle * On Demand Manufacturing — Continues to be an underserved segment of the market — We are leveraging our capabilities to capi
Slide 44: Development phase: prototyping
> DEVELOPMENT PHASE: PROTOTYPING Too often, prototypes are imperfect proxies for the final production components. * Material offerings in 3DP are limited * Traditional manufacturing is too expensive and time-consuming Issue / Concern Digital manufacturing enables affordable and responsive Solution p
Slide 45: Case Study: TRW Automotive
proto labs’ pC Case Study: J TCU Automotive “In general, there’s probably 15 or 20 parts that make up a clock spring assembly. If at least half of those need to be prototyped, multiply that times each iteration that we do, and it adds up pretty quick.” -Rick Bowes, Designer, TRW Automotive
Slide 46: On-demand manufacturing
> ON-DEMAND MANUFACTURING Uncertain demand often leads to under-ordering which causes stock-outs or over-ordering which leads to excess inventory. Issue / Concern Ordering from an on-demand manufacturer Solution allows customers to get parts quickly and without any minimum order quantities. Ordering
Slide 47: Case Study: Atom Power
Case Study: WANN POWER “...We didn’t want to have thousands of parts just sitting around in case Underwriters Laboratory wanted us to change something in the design.” -Taylor Santore, Mechanical Engineer and Project Lead, Atom Power proto labs’
Slide 48: Digital inspection
> DIGITAL INSPECTION Inspection reports to fulfill FAl requirements can add excess time and money to the development process. ee + Digital inspection reports that utilize PMI data anda high-speed digital 3D scanner to measure critical Ste) dimensions, include a visual aid and color mapping GoISIS -
Slide 49: Evolving customer perceptions toward a total solution
proto labs’ How does expanding our services to become more of a total solution evolve our customer’s perceptions of us? Proto Labsis..... .... and Proto Labs is also Partner that brings value in design Fast, easy to use, on-line supplier validation and production of parts Use cases: Use cases: Send
Slide 50: Case Study: Large Consumer Electronics Company
proto labs’ Case Study: Large Consumer Electronics Company ¢ Used all 4 services — Sheet Metal — 3D Printing — Injection Molding — CNC Machining ¢ Delivered a more complete solution with Proto Labs speed ¢ Server racks to house drivers that could be easily removed
Slide 51: Expanding service offerings
> EXPANDING SERVICE OFFERINGS * Investing in services and capabilities to become more of a total solution « Leveraging our technology and approach to enhance our capabilities to address underserved markets * We will continue to evolve with our customers’ needs
Slide 52: ~~ % .
proto labs’ ~~ % .
Slide 53: Our capabilities drive our growth
proto labs’ > OUR CAPABILITES DRIVE OUR GROWTH « Expanding capabilities allows us to meet more of our customers needs ¢ Establish deeper relationships to be a flexible manufacturing solutions provider (1) (3) Expand Customer Base + Acquire new customers + Increase sales within existing customers + E
Slide 54: Sales and marketing - past
> SALES AND MARKETING - PAST Marketing Engine Developer ~ Drive new Individual Developers to - Engineer with limited options to get website prototypes quickly Focused on capturing transactions via the internet ina lowtouch model. Minimize contact with customer Website INJECTION MOLI CNC MACHINING u
Slide 55: Sales and marketing - present
> SALES AND MARKETING - PRESENT Marketing Engine — - Educating customerson our services - Accentuate value propositions to certain industries cP Account Manager Y, Proactively understanding customer projects Focused on customers whose needs align with our value proposition Developer Cd - Engineer wi
Slide 56: Sales and marketing
proto labs’ > SALES AND MARKETING * Recent Investments — Improved manager to seller ratio — Changed Sales compensation (new customers > focused account base) — Developed a documentedsales process and implemented training — Added Strategic Sales Leadership — Opportunity Profiling * Focus sellers on o
Slide 57: Sales and marketing
> SALES AND MARKETING * Continued Evolution — Continue to enhance the experience and the efficiency of low touch opportunities « E-Commerce for customer to seamlessly upload and order all services * Decrease sales team involvement in low touch opportunities — Increase focus of sales team on customer
Slide 58: Customer relationship
> CUSTOMER RELATIONSHIP ¢ Abbott finds a strong partnership with Proto Labs through the following — Helping Abbott deliver products to the market ahead of the competition — Abundantavailable resources to provide rapid communication on projects — Consistent on-time delivery to ensure project deadline
Slide 59: Diverse customer base
proto labs’ > DIVERSE CUSTOMER BASE > We serve all manufacturing industry verticals > Each industry has unique needs and uses Proto Labs differently > We are combining tailored solutions with a go to market approach to serve an expanding customer base Medical + Computer Industrial Automotive Aerospa
Slide 60: Sales and marketing - continuing to evolve
> SALES AND MARKETING - CONTINUING TO EVOLVE We have experienced strong growth by focusing on individual product developers — Wewill continue this growth fueled by our enhanced capabilities and underlying market needs Product Developers Served 40,000 35,000 30,000 25,000 20,000 15,000 10,000 $000 20
Slide 61: Financial Overview
proto labs” > FINANCIABOVERVIEW — ,
Slide 62: Unmatched financial performance
proto labs’ > UNMATCHED FINANCIAL PERFORMANCE Revenue Growth - 17.3% CAGR (est) $500 $3000 $2500 2000 $1500 $1000 $500 s 2014 2015 2016 roves Operating Cash Flow - 1.5x Net Income (est) ° 20000 Strong revenue growth Consistent Gross Margins in excess of 56% Invested over $100 million in R&D since 20
Slide 63: Rapid acquisition
proto labs’ > RAPID ACQUISITION + Estimated 2017 revenue of $45 million and EBITDA of $10 million + Purchase price of $120 million ($110 million cash, $10 million stock) » Established line of credit for financial flexibility + Goodwill associated with transaction is tax deductible resulting in $30+
Slide 64: Q4 2017 guidance
proto labs’ > Q4 2017 GUIDANCE « Guidance provided on October 26, 2017 - Revenue of $85M - $90M - Non-GAAP EPS of $.52 - $.58 + Rapid Manufacturing transaction closed on November 30, 2017 « Rapid’s month of December will be included in our Q4 results » Q4 Guidance updated for the inclusion of Rapid
Slide 65: 2017 highlights
proto labs’ > 2017 HIGHLIGHTS » 2017 projected utilizing Q4 Guidance provided on the previous page » Projected revenue growth of ~15% - Strong and consistent margins - Projecting gross margins of ~56% » Projecting non-GAAP operating margins of ~24% - Strong growth in product developers served of 18%
Slide 66: Capital allocation
proto labs’ > CAPITAL ALLOCATION Invest in Equipment and Facilities for Growth and Scale + 1,000+ machines manufacturing customer parts + High ROI with equipment payback generally under one year + Approaching 1,000,000 sq. ft. to support operations Invest in R&D for Service and Envelope Expansions +
Slide 67: Long term financial objectives
proto labs’ > LONG TERM FINANCIAL OBJECTIVES 1. Drive Revenue Growth Focus on Customer needs Expand capabilities to capture market share 2. Grow Earnings Invest in Growth Continue to Invest in R&D to expand capabilities Invest Scalable Internal Systems Drive efficiencies through our Proto Excellence
Slide 68: 2018 guidance
proto labs’ > 2018 GUIDANCE Revenue (millions) $425 - $450 Revenue Growth 25-31% Non-GAAP Operating Income % 22-23% Non-GAAP Earnings Per Share $2.40-$2.60 See appendix for reconciliation of GAAP to Non-GAAP figures Guidance does not reflect any impact of potential tax reform
Slide 69: labs:
proto labs: COMPANIES ACCEEERA VELOPMENT, REDUCE: OPTIMIZE SUPPLY CHAIN GQU PROTOTYPIN
Slide 70: Summary
proto labs’ > SUMMARY - The leader in Digital Manufacturing - Proprietary technology: strong barrier to entry - Unmatched scale - Continue to evolve to expand our growth opportunity - Unmatched financial performance - Consistent, strong revenue growth - Very strong margins - Strong and consistent ca
Slide 71: Thank you!
THANK YOU!
Slide 72: labs:
proto labs:
Slide 73: Vicki Holt - President and Chief Executive Officer
proto labs’ > Vicki Holt - President and Chief Executive Officer Ms. Holt has been our President and Chief Executive Officer since February 2014. Prior to joining us, Ms. Holt served as President and Chief Executive Officer of Spartech Corporation, a leading producer of plastic sheet, compounds and
Slide 74: Rich Baker - Chief Technology Officer
proto labs’ > Rich Baker - Chief Technology Officer Dr. Baker joined Protolabs as CTO in May of 2016. Prior to joining that, Rich served as CTO at PaR Systems, a robotics and specialty machine tool builder. From 2005 to 2014 he held multiple positions at MTS Systems including General manager of the
Slide 75: Robert Bodor - Vice President/GM Americas
proto labs’ > Robert Bodor - Vice President/GM Americas Dr. Bodor has lead the Americas since January 2015. From July 2013 to January 2015 Rob served as the Chief Technology Officer. Rob started at Proto Labs in 2012 as Director of Business Development. Prior to joining Proto Labs, Rob held several
Slide 76: David Fein - Chief Revenue Officer
proto labs’ > David Fein - Chief Revenue Officer Mr. Fein joined Protolabs as CRO in December of 2016. David spent 16 years with California-based semiconductor company, PMC-Sierra. As Executive Vice President Global Sales, he helped establish the company’s international sales strategy, which contrib
Slide 77: John Way - Chief Financial Officer
proto labs’ > John Way- Chief Financial Officer Mr. Way has served as our Chief Financial Officer since December 2014. Most recently and since 2013, John served as Chief Financial Officer of Univita Health, Inc., a privately held home healthcare service provider. From 2012 until 2013, John served as
Slide 78: GAAP to Non-GAAP
Sees ho = GAAP TO: dee tote te ae ai ONwas. | proto labs:
Slide 79: GAAP to Non-GAAP reconciliation
proto labs’ > GAAP to NON-GAAP RECONCILIATION $'sin thousands Except Earnings per Share Revenue GAAP operating income asa % of revenue Add back ‘Stock-based compensation expense Amorization expense Transaction Costs Non-GAAP operating income asa % of revenue GAAP net income per diluted share Add bac