Proto Labs Reports Record Revenue and Net Income for the Third Quarter 2017
Proto Labs, Inc. (NYSE: PRLB), a leading online and technology-enabled, quick-turn, on-demand manufacturer, today announced financial results for the third quarter ended September 30, 2017.
Third Quarter 2017 Highlights include:
- Revenue for the third quarter of 2017 was $88.1 million, 12.7 percent above revenue of $78.2 million in the third quarter of 2016.
- The number of unique product developers and engineers served totaled 16,909 in the third quarter of 2017, an increase of 18.5 percent over the third quarter of 2016.
- Net income for the third quarter of 2017 was $13.2 million, or $0.49 per diluted share. Non-GAAP net income, excluding the after-tax expense of stock compensation, amortization of intangibles, and unrealized foreign currency gains, was $15.0 million, or $0.56 per diluted share. See "Non-GAAP Financial Measures" below.
"We continued to drive strong performance in the third quarter, delivering record revenue for the third straight quarter," said Vicki Holt, President and Chief Executive Officer. "Our investments in the business to support the needs of our customers are delivering returns with increasing operating margins and record earnings this quarter." Additional Third Quarter 2017 Highlights include:
- Gross margin was 56.0 percent of revenue for the third quarter of 2017 compared with 57.2 percent for the third quarter of 2016.
- Operating margin was 22.0 percent of revenue during the third quarter of 2017 compared to 21.7 percent for the third quarter of 2016.
- The Company generated $19.6 million in cash from operations during the third quarter of 2017.
- Cash and investments balance increased to $227.8 million at September 30, 2017.
"Our concerted effort over the past couple of years to expand relationships with our customers continues to drive our performance. The U.S. and Europe, our two largest geographies, delivered record revenue levels as our focus on the customer continues to show positive signs. We continue to expand our capabilities and provide more of a total solution to help our customers get their products to market as efficiently and cost effectively as possible," concluded Holt.
Non-GAAP Financial Measures
The company has included non-GAAP adjusted revenue growth that excludes the impact of changes in foreign currency exchange rates and non-GAAP adjusted revenue growth that excludes the impact of discontinued businesses in this press release to provide investors with additional information regarding the company's financial results. Management believes these metrics are useful in evaluating the underlying business trends and ongoing operating performance of the company.
The company has also included non-GAAP operating margin, adjusted for stock-based compensation expense, amortization expense, impairment on assets and facilities-related charges (collectively, "non-GAAP operating margin"), in this press release to provide investors with additional information regarding the company's financial results.
The company has also included non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized foreign currency activity, impairment on assets, facilities-related charges and legal settlement (collectively, "non-GAAP net income"), in this press release to provide investors with additional information regarding the company's financial results.
The company has provided below reconciliations of GAAP to non-GAAP net income and revenues, the most directly comparable measures calculated and presented in accordance with GAAP. Non-GAAP net income is used by the company's management and board of directors to understand and evaluate operating performance and trends and provide useful measures for period-to-period comparisons of the company's business. Accordingly, the company believes that non-GAAP net income provides useful information to investors and others in understanding and evaluating operating results in the same manner as our management and board of directors.
Conference Call
The company has scheduled a conference call to discuss its third quarter and full year 2017 financial results today, October 26, 2017 at 8:30 a.m. ET. To access the call in the U.S. please dial 877-709-8150. Outside the U.S. please dial 201-689-8354. No participant code is required. A simultaneous webcast of the call will be available via the investor relations section of the Proto Labs website and the following link: https://edge.media-server.com/m6/p/epn5s29w. A replay will be available for 14 days following the call on the investor relations section of Proto Labs' website.
About Proto Labs, Inc.
Proto Labs is the world's fastest digital manufacturing source for custom prototypes and low-volume production parts. The technology-enabled company uses advanced 3D printing, CNC machining and injection molding technologies to produce parts within days. The result is an unprecedented speed-to-market value for product designers and engineers worldwide. Visit protolabs.com for more information.
Forward-Looking Statements
Statements contained in this press release regarding matters that are not historical or current facts are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of Proto Labs to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in the "Risk Factors" section within reports filed with the SEC. Other unknown or unpredictable factors also could have material adverse effects on Proto Labs' future results. The forward-looking statements included in this press release are made only as of the date hereof. Proto Labs cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Proto Labs expressly disclaims any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.
| Proto Labs, Inc. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
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September 30, |
December 31, |
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| (Unaudited) | |||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 119,283 | $ | 68,795 | |||
| Short-term marketable securities | 53,201 | 39,477 | |||||
| Accounts receivable, net | 46,276 | 34,060 | |||||
| Inventory | 9,789 | 9,310 | |||||
| Income taxes receivable | - | 445 | |||||
| Other current assets | 6,280 | 5,697 | |||||
| Total current assets | 234,829 | 157,784 | |||||
| Property and equipment, net | 153,512 | 139,474 | |||||
| Long-term marketable securities | 55,351 | 84,479 | |||||
| Goodwill | 28,916 | 28,916 | |||||
| Other intangible assets, net | 2,261 | 2,655 | |||||
| Other long-term assets | 2,701 | 933 | |||||
| Total assets | $ | 477,570 | $ | 414,241 | |||
| Liabilities and shareholders' equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 13,130 | $ | 11,322 | |||
| Accrued compensation | 11,366 | 7,670 | |||||
| Accrued liabilities and other | 7,463 | 4,435 | |||||
| Income taxes payable | 3,804 | - | |||||
| Total current liabilities | 35,763 | 23,427 | |||||
| Long-term deferred tax liabilities | 7,721 | 7,003 | |||||
| Other long-term liabilities | 4,247 | 3,978 | |||||
| Shareholders' equity | 429,839 | 379,833 | |||||
| Total liabilities and shareholders' equity | $ | 477,570 | $ | 414,241 | |||
| Proto Labs, Inc. | ||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||
| (In thousands, except share and per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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| Revenue | ||||||||||||
| Injection Molding | $ | 49,480 | $ | 46,445 | $ | 144,187 | $ | 134,376 | ||||
| CNC Machining | 27,166 | 21,781 | 73,318 | 60,510 | ||||||||
| 3D Printing | 11,102 | 9,850 | 32,061 | 28,059 | ||||||||
| Other | 357 | 97 | 746 | 2,757 | ||||||||
| Total revenue | 88,105 | 78,173 | 250,312 | 225,702 | ||||||||
| Cost of revenue | 38,793 | 33,448 | 109,358 | 99,077 | ||||||||
| Gross profit | 49,312 | 44,725 | 140,954 | 126,625 | ||||||||
| Operating expenses | ||||||||||||
| Marketing and sales | 13,846 | 11,787 | 41,463 | 34,182 | ||||||||
| Research and development | 5,877 | 5,976 | 17,784 | 17,110 | ||||||||
| General and administrative | 10,222 | 10,020 | 28,256 | 28,397 | ||||||||
| Total operating expenses | 29,945 | 27,783 | 87,503 | 79,689 | ||||||||
| Income from operations | 19,367 | 16,942 | 53,451 | 46,936 | ||||||||
| Other income, net | 291 | 625 | 1,779 | 2,342 | ||||||||
| Income before income taxes | 19,658 | 17,567 | 55,230 | 49,278 | ||||||||
| Provision for income taxes | 6,438 | 5,585 | 17,724 | 15,943 | ||||||||
| Net income | $ | 13,220 | $ | 11,982 | $ | 37,506 | $ | 33,335 | ||||
| Net income per share: | ||||||||||||
| Basic | $ | 0.50 | $ | 0.45 | $ | 1.41 | $ | 1.27 | ||||
| Diluted | $ | 0.49 | $ | 0.45 | $ | 1.40 | $ | 1.26 | ||||
| Shares used to compute net income per share: | ||||||||||||
| Basic | 26,617,349 | 26,416,041 | 26,600,174 | 26,334,738 | ||||||||
| Diluted | 26,802,034 | 26,609,878 | 26,716,553 | 26,539,078 | ||||||||
| Proto Labs, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
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Nine Months Ended |
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2017 |
2016 |
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| Operating activities | ||||||||
| Net income | $ | 37,506 | $ | 33,335 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 13,539 | 12,831 | ||||||
| Stock-based compensation expense | 6,159 | 5,260 | ||||||
| Deferred taxes | 715 | 495 | ||||||
| Amortization of held-to-maturity securities | 851 | 881 | ||||||
| Loss on impairment of assets | - | 455 | ||||||
| Other | 21 | (1,381 | ) | |||||
| Changes in operating assets and liabilities | 209 | 6,266 | ||||||
| Net cash provided by operating activities | 59,000 | 58,142 | ||||||
| Investing activities | ||||||||
| Purchases of property and equipment | (24,164 | ) | (30,981 | ) | ||||
| Purchases of marketable securities | (20,037 | ) | (56,213 | ) | ||||
| Proceeds from maturities of marketable securities | 34,090 | 45,907 | ||||||
| Purchases of other investments | (514 | ) | - | |||||
| Net cash used in investing activities | (10,625 | ) | (41,287 | ) | ||||
| Financing activities | ||||||||
| Acquisition-related contingent consideration | - | (400 | ) | |||||
| Proceeds from exercises of stock options and other | 5,749 | 4,168 | ||||||
| Repurchases of common stock | (4,410 | ) | - | |||||
| Net cash provided by (used in) financing activities | 1,339 | 3,768 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 774 | (58 | ) | |||||
| Net increase in cash and cash equivalents | 50,488 | 20,565 | ||||||
| Cash and cash equivalents, beginning of period | 68,795 | 47,653 | ||||||
| Cash and cash equivalents, end of period | $ | 119,283 | $ | 68,218 | ||||
| Proto Labs, Inc. | |||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Net Income per Share | |||||||||||||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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Non-GAAP net income, adjusted for stock-based compensation expense, amortization expense, unrealized gain on foreign currency, legal settlement, impairment on assets and charges related to the exit of facilities |
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| GAAP net income | $ | 13,220 | $ | 11,982 | $ | 37,506 | $ | 33,335 | |||||||||
| Add back: | |||||||||||||||||
| Stock-based compensation expense | 2,201 | 1,719 | 6,159 | 5,260 | |||||||||||||
| Amortization expense | 106 | 163 | 394 | 520 | |||||||||||||
| Impairment on assets | - | - | - | 455 | |||||||||||||
| Facilities-related charges | - | 731 | - | 1,150 | |||||||||||||
| Unrealized loss (gain) on foreign currency | 266 | (330 | ) | (83 | ) | (1,460 | ) | ||||||||||
| Legal settlement | - | - | (417 | ) | - | ||||||||||||
| Total adjustments 1 | 2,573 | 2,283 | 6,053 | 5,925 | |||||||||||||
| Income tax benefits on adjustments 2 | (747 | ) | (743 | ) | (1,824 | ) | (2,054 | ) | |||||||||
| Non-GAAP net income | $ | 15,046 | $ | 13,522 | $ | 41,735 | $ | 37,206 | |||||||||
| Non-GAAP net income per share: | |||||||||||||||||
| Basic | $ | 0.57 | $ | 0.51 | $ | 1.57 | $ | 1.41 | |||||||||
| Diluted | $ | 0.56 | $ | 0.50 | $ | 1.56 | $ | 1.40 | |||||||||
| Shares used to compute non-GAAP net income per share: | |||||||||||||||||
| Basic | 26,617,349 | 26,416,041 | 26,600,174 | 26,334,738 | |||||||||||||
| Diluted | 26,802,034 | 26,609,878 | 26,716,553 | 26,539,078 | |||||||||||||
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| 1 Stock-based compensation expense, amortization expense, impairment on assets, facilities-related charges, unrealized gain on foreign currency and legal settlement were included in the following GAAP consolidated statement of operations categories: | |||||||||||||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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| Cost of revenue | $ | 263 | $ | 558 | $ | 698 | $ | 999 | |||||||||
| Marketing and sales | 417 | 250 | 1,024 | 741 | |||||||||||||
| Research and development | 295 | 310 | 796 | 1,084 | |||||||||||||
| General and administrative | 1,332 | 1,495 | 4,035 | 4,561 | |||||||||||||
| Other income, net | 266 | (330 | ) | (500 | ) | (1,460 | ) | ||||||||||
| Total adjustments | $ | 2,573 | $ | 2,283 | $ | 6,053 | $ | 5,925 | |||||||||
| 2 For the three months ended September 30, 2017 and 2016, income tax effects were calculated reflecting an effective GAAP tax rate of 32.8% and 31.8%, respectively, and an effective non-GAAP tax rate of 32.3% and 31.9%, respectively. For the nine months ended September 30, 2017 and 2016, income tax effects were calculated reflecting an effective GAAP tax rate of 32.1% and 32.4%, respectively, and an effective non-GAAP tax rate of 31.9% and 32.6%, respectively. Our non-GAAP tax rates for the three and nine months ended September 30, 2017 and 2016 differ from our GAAP tax rates for the same periods due primarily to the mix of activity incurred in domestic and foreign tax jurisdictions. | |||||||||||||||||
| Proto Labs, Inc. | |||||||||||||
| Reconciliation of GAAP to Non-GAAP Operating Margin | |||||||||||||
| (In thousands) | |||||||||||||
| (Unaudited) | |||||||||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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| Revenue | $ | 88,105 | $ | 78,173 | $ | 250,312 | $ | 225,702 | |||||
| Income from operations | 19,367 | 16,942 | 53,451 | 46,936 | |||||||||
| GAAP operating margin | 22.0 % | 21.7 % | 21.4 % | 20.8 % | |||||||||
| Add back: | |||||||||||||
| Stock-based compensation expense | 2,201 | 1,719 | 6,159 | 5,260 | |||||||||
| Amortization expense | 106 | 163 | 394 | 520 | |||||||||
| Impairment on assets | - | - | - | 455 | |||||||||
| Facilities-related charges | - | 731 | - | 1,150 | |||||||||
| Total adjustments | 2,307 | 2,613 | 6,553 | 7,385 | |||||||||
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Non-GAAP income from operations adjusted for stock-based compensation expense, amortization expense, impairment on assets and facilities-related charges |
$ | 21,674 | $ | 19,555 | $ | 60,004 | $ | 54,321 | |||||
| Non-GAAP operating margin | 24.6 % | 25.0 % | 24.0 % | 24.1 % | |||||||||
| Proto Labs, Inc. | ||||||||||||||||
| Comparison of GAAP to Non-GAAP Revenue Growth | ||||||||||||||||
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Three Months Ended |
Three |
% |
% Change Constant |
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| GAAP | Adjustments1 | Non-GAAP | GAAP |
Change2 |
Currencies3 | |||||||||||
| Revenues | ||||||||||||||||
| United States | $ | 67,490 | $ | - | $ | 67,490 | $ | 59,574 | 13.3% | 13.3% | ||||||
| Europe | 18,094 | (657 | ) | 17,437 | 15,610 | 15.9% | 11.7% | |||||||||
| Japan | 2,521 | 211 | 2,732 | 2,989 | -15.7% | -8.6% | ||||||||||
| Total Revenue | $ | 88,105 | $ | (446 | ) | $ | 87,659 | $ | 78,173 | 12.7% | 12.1% | |||||
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Nine Months Ended |
Nine |
% |
% Change Constant |
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GAAP |
Adjustments1 | Non-GAAP | GAAP |
Change2 |
Currencies3 | |||||||||||
| Revenues | ||||||||||||||||
| United States | $ | 191,019 | $ | - | $ | 191,019 | $ | 169,364 | 12.8% | 12.8% | ||||||
| Europe | 51,224 | 1,144 | 52,368 | 48,518 | 5.6% | 7.9% | ||||||||||
| Japan | 8,069 | 256 | 8,325 | 7,820 | 3.2% | 6.5% | ||||||||||
| Total Revenue | $ | 250,312 | $ | 1,400 | $ | 251,712 | $ | 225,702 | 10.9% | 11.5% | ||||||
| 1 Revenue growth for the three- and nine-month periods ended September 30, 2017 has been recalculated using 2016 foreign currency exchange rates in effect during comparable periods to provide information useful in evaluating the underlying business trends excluding the impact of changes in foreign currency exchange rates. | ||||||||||||||||
| 2 This column presents the percentage change from GAAP revenue growth for the three- and nine-month periods ended September 30, 2016 to GAAP revenue growth for the three- and nine-month periods ended September 30, 2017. | ||||||||||||||||
| 3 This column presents the percentage change from GAAP revenue growth for the three- and nine-month periods ended September 30, 2016 (calculated using the foreign currency exchange rates in effect during those periods) to non-GAAP revenue growth for the three- and nine-month periods ended September 30, 2017 (as recalculated using 2016 foreign currency exchange rates in order to provide a constant currency comparison). | ||||||||||||||||
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Three Months Ended |
Three Months Ended |
% |
% Change |
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| GAAP | Adjustments4 | Non-GAAP | GAAP | Adjustments4 | Non-GAAP | Change | Revenue | |||||||||||||||||
| Revenues | ||||||||||||||||||||||||
|
Injection Molding |
$ | 49,480 | $ | - | $ | 49,480 | $ | 46,445 | $ | (1,100 | ) | $ | 45,345 | 6.5% | 9.1% | |||||||||
| CNC Machining | $ | 27,166 | - | 27,166 | $ | 21,781 | - | 21,781 | 24.7% | 24.7% | ||||||||||||||
| 3D Printing | 11,102 | - | 11,102 | 9,850 | (68 | ) | 9,782 | 12.7% | 13.5% | |||||||||||||||
| Other | 357 | - | 357 | 97 | - | 97 | 268.0% | 268.0% | ||||||||||||||||
| Total Revenue | $ | 88,105 | $ | - | $ | 88,105 | $ | 78,173 | $ | (1,168 | ) | $ | 77,005 | 12.7% | 14.4% | |||||||||
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Nine Months Ended |
Nine Months Ended |
% |
% Change |
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| GAAP | Adjustments4 | Non-GAAP | GAAP | Adjustments4 | Non-GAAP | Change | Revenue | |||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Injection Molding | $ | 144,187 | $ | (550 | ) | $ | 143,637 | $ | 134,376 | $ | (2,419 | ) | $ | 131,957 | 7.3% | 8.9% | ||||||||
| CNC Machining | $ | 73,318 | - | 73,318 | 60,510 | - | 60,510 | 21.2% | 21.2% | |||||||||||||||
| 3D Printing | 32,061 | - | 32,061 | 28,059 | (242 | ) | 27,817 | 14.3% | 15.3% | |||||||||||||||
| Other | 959 | - | 959 | 2,757 | (1,784 | ) | 973 | -72.9% | -23.3% | |||||||||||||||
| Total Revenue | $ | 250,525 | $ | (550 | ) | $ | 249,975 | $ | 225,702 | $ | (4,445 | ) | $ | 221,257 | 10.9% | 12.9% | ||||||||
| 4 Revenue growth for the three- and nine-month periods ended September 30, 2017 and 2016 has been recalculated to exclude revenue earned from two discontinued manufacturing processes, Metal Injection Molding (MIM) and Magnesium Thixomolding (Thixo), discontinued non-core resin resale business and unprofitable Alphaform 3D Printing contracts. | ||||||||||||||||||||||||
| Proto Labs, Inc. | ||||||||||||
| Revenue by Geography | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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| Revenue: | ||||||||||||
| United States | $ | 67,490 | $ | 59,574 | $ | 191,019 | $ | 169,364 | ||||
| Europe | 18,094 | 15,610 | 51,224 | 48,518 | ||||||||
| Japan | 2,521 | 2,989 | 8,069 | 7,820 | ||||||||
| Total Revenue | $ | 88,105 | $ | 78,173 | $ | 250,312 | $ | 225,702 | ||||
| Proto Labs, Inc. | |||||||
| Product Developer Information | |||||||
| (Unaudited) | |||||||
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Three Months Ended |
Nine Months Ended |
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2017 |
2016 |
2017 |
2016 |
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| Unique product developers and engineers served | 16,909 | 14,271 | 31,307 | 26,528 | |||
| Note: the information above includes unique product developers and engineers who purchased our 3D Printed products in the United States and Europe through our web-based customer interface. The information does not include 3D Printing and Injection Molding customers resulting from the Alphaform acquisition who do not utilize our web-based customer interface. | |||||||
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