Proto Labs Inc (PRLB) 2013 Q2 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Proto Labs second quarter 2013 conference call. (Operator Instructions). I would now like to turn the conference over to Bill Dietrick, Vice President of Marketing at Proto Labs. Please go ahead, Mr. Dietrick.

Thank you, Operator. And good morning everyone. This morning before the market opened, Proto Labs issued a press release announcing its second quarter financial results for the period ended June 30, 2013. The release is available on the Company's website at www.protolabs.com.

Before we get started during the course of this conference call the Company will provide financial projections and make other statements about its business that are forward looking and subject to many risks and uncertainties that could cause actual results to differ materially from expectations. A detailed discussion of the risks and uncertainties that affect the business is contained in the Company's annual report filed on form 10-K and other SEC filings particularly under the heading risk factors. Copies of these filings are available online from the SEC or on the Proto Labs' website.

The Company's projects and other forward looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given. The Company does not undertake to update any projection or forward-looking statement.

In addition to supplement the GAAP numbers we have provided non-GAAP adjusted net income and basic and diluted net income per share information that excludes the after tax cost of stock compensation. We believe that this non-GAAP number provides meaningful supplemental information and is helpful in assessing our historical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in our financial release.

Now I would like to turn the call over to Jack Judd, Chief Financial Officer of Proto Labs. Jack.

Good morning, everyone. Thank you for joining us today on our second quarter 2013 conference call. Brad Cleveland our President and CEO recently had surgery and is home recovering unable to be on the call today. We expect Brad will back in the office on August 12.

With me today is Rob Bodor our Chief Technology Officer. I will provide a brief overview of our second quarter 2013 financial results and some related commentary. Rob will review the market sizing work that we have talked about previously. Then I will provide a more detailed look at our financial results and offer our views on the outlook for the third quarter of 2013. At the end of our remarks, Rob and I will be glad to take your questions.

Proto Labs again generated record revenue of $39.7 million in our just completed second quarter, a 33% increase over the prior year. The effects of negative currency translation amounted to $515,000 this past quarter without this our revenue in the quarter would have been $40.3 million a 34% increase over the prior year. Our results so far this year continue to demonstrate the strength of our business model combined with solid execution and as reported during our first quarter earnings call this excellent perform was once again the result of record quarterly revenues from each of our global operations in the United States, Europe and Japan.

Our record quarterly revenue helped us achieve record quarterly earnings. Our net income for the second quarter was $8.6 million or $0.33 per diluted share. Every quarter Proto Labs sells its services to product developers many for the first time as well as those that have used us for many projects through the years. To help our investors understand this concept better we have provided customer company accounts and revenues for both new and existing customer companies. As measured on a year to date basis through June 2013, we have done business with 1,435 new customer companies generating $8 million in revenue and 4,644 existing customer companies generating $69.1 million in revenue.

Over the past few quarters, we have seen a flattening of our new customer company growth numbers even as overall revenue has grown. This has been possible due to our greater penetration of our existing customer base. This group comes back sooner and with larger value purchase orders demonstrating the success of digging deeper and wider with our current customers.

Since the vast majority of our marketing and sales efforts are directed towards individual product developers and not at customers companies we feel a more accurate measurement to provide the market would be the total number of product developers that did business with us in the past quarter. During the second quarter of 2013, we did business with approximately 6,900 product developers. This is 22% higher than the same quarter in 2012. In addition, our average revenue per product developer increased 8%. The just completed second quarter customer results point to the strength of our strategy to find and sell to new product developers combined with selling more services to existing product developer customers. In support of this new measurement our press release contains tables at the end with customer account information from 2011 through the second quarter of 2013.

We recently announced the promotion of Rob Bodor to the position of Chief Technology Officer our founder Larry Lukis has held this position. We feel confident and proud to have Rob take on this critical role. Rob came aboard last December with broad experience in business development and technology. We tapped his experience working at McKinsey to lead the project of measuring the total market for services we provide. I thought it might be best if Rob describes the completed study and results. Rob.

Thank you, Jack. And good morning everyone. Starting early this year Proto Labs sponsored a study to understand the nature and size of the market for prototyping and short run productions of parts manufactured by either injection modeling or CNC machining processes. The study was jointly conducted by the Industrial Designers Society of America or IDSA and ORC International. IDSA is the world's largest and oldest member driven society for industrial design. IDSA represents professionals in product design, ergonomics, design management and related design fields.

ORC founded in 1938 is a leading global market research firm specializing in research related to product development and innovation. ORC conducted approximately two dozen interviews and together they surveyed an additional 563 engineers and product designers across the major manufacturing industries to understand the volume of products they make, their demand for contract manufacturing and how they outsource prototyping and small volume production of their products. ORC used these results to build an estimate of the total market for injection molded and CNC machine prototype and small volume production parts globally in the geographic regions where Proto Labs operates.

Constraint to fit Proto Labs business practices including limiting the part size to match our envelope and excluding any parts that require additional services which we do not provide. With these constraints in place ORC International believes the market for Proto Lab services as offered today is approximately $6 billion globally and $2.6 billion in the US.

In addition, the study found that by manufacturing process CNC machining and injection molding make up two of the largest segments of outsource functional prototyping and small volume production. Together these two processes account for more than 50% of the total spend on outsource prototyping and equate to approximately 5% of the total R&D budgets of companies across all industries globally. IDSA and ORC will be releasing a white paper that summarizes the survey results shortly. We expect this report will be available from one or both of their websites by the middle of August and we will provide a link to the report by visiting our website and clicking on the investors tab.

Thanks, Rob, for the great summary. Last quarter in our call we discussed our plans to open additional factory capacity in the US in support of our first cut operations. We indicated a need to have space on line by the end of the fiscal year. Recent productivity improvements especially in regards to the amount of parts we can produce with our current inventory of CNC mills have given us some additional room for growth which pushed out our time line for this space. We are close to making a facility decision and may be able to announce something soon.

If we are successful in finding space with reasonable retrofit requirements our move will occur in the second quarter of 2014. We do not expect that this timeline will have any negative impact on our ability to fulfill customer orders. We will give additional information on this when the new building is purchased and the short term cost of the move can be better estimated.

Our Cool Idea! program continues to attract interest from product developers and entrepreneurs both here in the United States and Europe. So far this year the program has received close to 100 idea submissions and four awards have been granted. The Cool Idea! program continues to be a reliable source of media exposure for Proto Labs services. The flip out Tantrum electric screwdriver which was named a Cool Idea! winner in May was awarded tooling and initial production run of parts to help launch the product and was featured in USA Today's top ten gadget gifts for Fathers Day.

This past quarter our Firstcut machine service also attracted the attention of Jamie Hyneman executive producer, host and engineer of the popular Discovery Channel series Mythbusters. Working on a personal project, Jamie turned to Firstcut for prototype parts for a cutting edge product that has not yet been released to the public. Here is a quote from Jamie describing his experience with Proto Labs.

"Proto Labs has set up an unprecedented process that not only allowed me to take a concept to completion in a very short time, but the way they have automated everything turned out to be surprisingly helpful. In particular their estimation process allowed me to instantly compare costs for alternative materials and processes. With a click on a menu, I could tell how much a part would cost me in any number of materials. I could also find out how much it would cost for a CNC part versus an injection molded part.

This is a huge asset when trying to plan for a complicated project. The parts they produced were flawless, perfectly finished and arrived on time exactly as requested. Once you have sent a file to them, a few mouse clicks and the parts arrive almost overnight if you want." Thank you, Jamie, for the nice words.

Now I would like to do a deeper review of our financial results. Revenue in our second quarter of 2013 was $39.7 million an increase of $9.8 million or 33% over second quarter 2012 revenue. Protomold revenue during the just completed quarter was $27.9 million and Firstcut revenue was $11.8 million. During the quarter, Firstcut revenue represented 30% of total revenue compared to 28% during the second quarter of 2012.

Our international revenue was $9.6 million or 24% of total revenue during the second quarter of 2013 compared to $7 million or 24% of revenue during the same period in 2012. The negative effects in currency were more significant this past quarter than in previous periods, $515,000. If foreign currency exchange rates would have been the same this past quarter as one year earlier, our revenue this past quarter would have been $40.3 million for a growth rate of 34%.

As reviewed earlier we are transitioning from looking at revenue growth from customer companies to the number of product developers we do business with each quarter. This new measurement shows we did business with nearly 6,900 product developers in the just completed second quarter compared to 5,600 the previous year. Our average revenue per product developer also increased during this same period by 8%.

Our gross margin in the second quarter of 2013 was 62.5%. This marks the third consecutive quarter of above target model gross margins. These higher gross margins reflect the success in our factories of growing revenue, quality improvements and effective forecasting of labor. Operating income was $12.6 million or 31.8% of revenue in the second quarter. During the second quarter of 2012 our operating income was 24.9%. This increase in operating margin was driven both by higher gross margins and leveraging our marketing and general and administrative operating costs. Companywide at the end of June, we had 699 total employees versus 622 at the end of December 2012.

Diluted earnings per share in the second quarter of 2013 were $0.33 per share. Adding back the after tax cost of stock compensation our non-GAAP diluted earnings per share in the quarter were $0.36 per share. A reconsolidation of net income and EPS to non-GAAP net income and EPS was included in our earnings release this morning.

At the end of June 2013, our cash and investments totaled nearly $120 million. Capital spending so far in 2013 totals $6.1 million all of which was spent on production equipment technology infrastructure to support our revenue growth. The capital we spend supports future growth and pays for itself in quarter not years.

I would now like to provide some guidance into our projected results for the third quarter of 2013. We currently expect revenue in the current quarter to be between $40 million and $43 million. Stock compensation costs in the current quarter will be approximately $1 million. We estimate our tax rate for the full year 2013 to be approximately 31%, and our tax rate in the third quarter to be higher than the just completed quarter.

Taking the above factors into consideration, our quarterly non-GAAP EPS adding back the after tax cost of stock compensation is expected to be between $0.33 and $0.37 per share. We expect our 2013 CapEx will be between 8% and 12% of revenue before our buildings decision gets made. We currently do not expect our 2013 results will be impacted by our anticipated factory expansion strategies.

This concludes our prepared remarks. Operator , we will now open up the call for questions.

Thank you. (Operator Instructions). Your first question comes from Troy Jensen from Piper. Please go ahead.

Nice results gentlemen.

Thank you for being on the call, Troy.

So, Jack, if you look at gross margins here, the last three quarters it seems like they have really kind of stabilized at 62.7. Thoughts going forward second half of the year, do you see any reason we would deviate from that level given you are not adding capacity now until Q2 of next year.

I think our gross margins will be top end of our target model for the next couple of quarters; you are correct. That, of course, assumes that we do a good job on managing our labor and that our orders flow in patterns that would equal or be similar to past times.

Okay. Perfect. How about -- two more questions. Traction with some of the new metals, could you touch on that please?

I think our progress on the R&D side is going forward as expected. We still are very much on a beta side on both MIM and (Inaudible) Magnesium. I would say our stainless steel continues to track forward but there would be no material announcements or levels of business on stainless steel that would be worth reporting right now.

Okay. Last question. Can you let us know what Larry's involvement is going to within the Company going forward now?

Larry is still very involved to a similar level that he was before Rob got the new responsibilities and the new job title. So Larry is still very much involved. He just stepped aside from the role of Chief Technology Officer so Rob is probably more involved on the R&D side than he was before. And l still want to emphasize that he still is the Chairman of the Board?

Okay, perfect. Good luck to Brad and good luck in the second half.

Thank you.

Thank you. And your next question comes from Nicole DeBlase Morgan Stanley. Please go ahead.

Good morning, Jack.

Good morning, Nicole.

Can you just talk a little bit about how volumes trended during of the quarter? Did you guys see sequential acceleration within the months or was the volume pretty steady?

We generally have not commented in the past about how orders flow from month to month in the quarter, because again the nature of our business is a quick turn so our business can vary or be volatile week to week very easily. I don't think I want to comment explicitly on your question there.

Okay fair enough. I will use a different one then. Europe looks like it strengthened quite a bit this quarter. Can you just talk about the key drivers and what you are seeing in the region?

I'm glad that you noticed that Europe did take good job and a special thank you to that team over there that they have gone through about five or six quarters now of some awfully hard work to be able to keep the business on track with some tougher economic situations in the Euro zone. But I think the key for Europe has been the same thing it always has been is going off and finding new customers, new product developers doing a good job on everything they do, getting their product out the door. The same blocking and tackling that is there to grow the business when revenue rates were growing faster. So nothing new explicitly, Nicole.

Understood. I will ask one more and then I will pass it on. The G&A expenses is pretty flat q-on-q. You did a good job managing that despite the pretty nice increase in sales. I'm curious at what level do you think -- of sales growth do you think you need to start adding overhead?

I think our G&A is pretty solid where it is at. We have added overhead. There is a little bit of seasonality that can go on in G&A. Second quarter would be a little bit less G&A expense than the first quarter, but I do not see any large increase in the next year or two years on G&A for growth in our revenue.

Great. Thank you, Jack.

Thank you.

Thank you. Your next question comes from Brian Drab from William Blair. Please go ahead.

Good morning.

Good morning, Brian.

First question on new customer revenue. It's clear why the existing customer revenue is improving given your targeted marketing strategy to dig deeper. What is driving the new customer revenue growth because that's really accelerated in 2013?

Let me see if I understand the question. So you are --?

The revenue per new customer.

Customer company or product developer since we gave both metrics?

Let me restate it again revenue per new customer compnay which is up 12%. It was up 12% in the first quarter up 12% year to date.

I think an awful lot of our initiatives are on marketing. The trade shows we attend, the development of our website, the new products and services definitely our sales group going out and doing cold calls and asking for more referrals within product developers all those things together really are necessary and are part of our growth strategy to finding new companies to do business with.

Is there anything you can point to though, Jack, that's different this year from last year given the same metric revenue per new customer company was down 2% last year which I always ascribe to increasing mix toward Firstcut which had somewhat lower price point but the mix this year even leans a little bit further in the first half of the year to Firstcut than it did last year. So is there anything that is particularly different this year?

Well, I think you are seeing us having far more infrastructure in the sales team then we had a year ago. I will just pick a number off the top of my head but it might be 25 people more in our sales organization if you include the support functions besides just the people that are on the phone every day. So there is definitely more people making call every day.

Okay, great. And then on Japan, the revenue has been flat there for about three quarters. Is there anything in particular that would be restraining the growth there?

Are you talking sequentially flat or are you talking year-over-year flat?

I'm not looking at the growth rates. I'm just looking at the absolute dollars in Japan, and it's been $1.4 million, $1.3 million for fourth quarter, first quarter and second quarter.

We are pleased with the Japan results this past quarter. They grew nicely year over year. And Japan has more seasonal influence than the rest of our markets. And then also you need to take into effect FX, the foreign currency, it was quite dramatic in Japan this quarter. Most of that $515,000 was really in Japan. So on a constant dollar basis the growth rate would be higher. Constant yen basis I guess would be a better way to put it.

Okay, got it. Right. Congratulations on the great results.

Thank you.

Thank you. Your next question comes from Jim Ricchiuti from Needham & Co. Please go ahead.

Thank you. Good morning. Jack, I'm looking at this new data that you are providing the unique product developers serve data. And I'm wondering, can you tell us approximately how many organizations these 6,900 product developers represent? You always want more, right?

Probably I could if I had a spreadsheet in front of me right now. But in our press release, we give year to date product developers that we have done business with, and that you would then have to put that number against the year to date numbers for customer companies that we did business with.

Okay.

So you have to look at year to date customer companies though, because we don't provide detail on a quarterly number for that. So look at year to date product developers against year to date customer companies, and I think you are going to see is that roughly maybe two-thirds of our business comes from distinct companies and the other third of our business comes from multiple product developers in the same customer company.

Got it. Okay. And then I have another question on Europe. And as I look at what I think is pretty successful results out of Europe considering the macro environment, what I'm wondering is if we look at Europe versus the US, is it a case where your business in Europe is more heavily skewed toward new customers as opposed to the US which perhaps is more skewed toward existing customers or is the profile similar?

The profiles are very similar. We run our worldwide sales and marketing organizations relatively consistent no matter what the geography is. We do small tweaking for the cultures of different countries, but the strategy behind growing Europe is the same strategy as we have here in the US and the sales and marketing teams that are based out of England, Germany, France, Italy, are all trying to get business the same way as here.

Okay. And just on that last note, sales and marketing and R&D, can you give us any sense as to where you see headcount going and maybe if you have any of those numbers, I'm not sure if you gave any of those.

I don't have any, we didn't provide the exact numbers for those teams in our press release. But those teams have had experienced expansion this year as you would expect, and I think and I expect that especially in the sales area that we will continue to do aggressive hiring in the coming quarters.

Okay. Thank you.

Thank you. Your next question comes from John Baliotti from Janney Capital Markets. Please go ahead.

Good morning, Jack.

Good morning, John.

It looks like if you look at the number of new customer companies I know that was a question last quarter because it was as you pointed out before that it's been fairly flat over a long time. It looks likes sequentially that picked up about 2%. I'm curious is that marketing effort or as you pointed out a couple of things you are doing on the marketing side and the marketing dollars were a little bit higher even though as a percent of sales they were more efficient that was my first question.

I think John we go back to what we have talk about this in past quarter, is that most of our marking and selling efforts go product developers and companies tend to flow out of that versus start the process. So little movements up or down in percentages tend to be more random. I think this past quarter you can see more the effects of our sales and marketing by how we look at the number of product developers that we did business with.

Keep in mind that if somebody on our sales team finds a new customer company to do business with, one of the first things they do is try to leverage that one relationship into greater and more quantity relationships with other engineers and product developers in that company. And so the success of their efforts don't always show up in customer companies but they do show up in product developers.

Okay. Great. And to that point of the revenue per product developer, you pointed out was up about 8% year over year. Any color on what those developers are they more of if they are Firstcut customers more of that or are they switching back and forth to Protomold? Do you get any sense of what's driving that increased revenue?

I think the way to put that would be our sales force being successful in selling both services. If a product developer comes in and buys a couple Firstcut parts from them, we are back on the phone with them making sure they know about injection molding. If they are getting injection molded parts we make sure they know they can get aluminum parts on Firstcut, so it is an expansion of services. It's also a reflection of our parts business being able to get parts businesses off of molds. That is a significant part of our business and we don't want to forget that.

Right. You pointed out earlier that you have been able to find additional capacity through just better utilization of your equipment do you feel that -- it looks like this is being pushed out to about the middle of 2014 which I understand given the progress you have made. Do you feel that there's still even what you have been able to do for the first six months of the year that there's still more as these revenues continue to ramp that there is additional capacity if you can find through greater efficiency in the system?

I'm an optimist so I always say that our systems can provide greater efficiency and we get by with less staffing and less equipment with the same revenue level. I can tell you what's happened it in the past six months the past nine months is more of a step function in terms productivity and the next productivity improvements will not have that kind of a step. But I am very positive and bullish on our manufacturing operations worldwide.

Great. Thanks, Jack.

Thank you. And your next question comes from Steve Dyer from Craig-Hallum . Please go ahead.

Thanks, good morning, Jack.

Good morning.

Just one question most of mine had have been answered. Your margins would suggest that you are not seeing a lot on it the competitive front. You are still able to be relatively selective get the margins you want, take the projects you want, et cetera ; is that a fair assessment? Anything new that you are seeing there?

I would change the way you referred to our business slightly different. I agree with you we are still not aware of anybody at scale anywhere in the world that can do what we can do. But I would say we have discipline with pricing and discipline to stay within the box of parts and services that we can provide really, really fast. I wouldn't say that we try to exploit pricing on a part by part basis. That would be virtually impossible to do with the number of different orders that we take every day. But I think that discipline to our model is still very, very important for us to maintain the margins that we have.

Okay. Thank you.

Thank you. Your next question comes from Peter Misek from Jefferies. Please go ahead.

Thank you. Just a couple questions digging a little deeper in to the new versus existing customers. Any ability to give us margin profile? Would agree that really that new customer ramp is a nice acceleration, love to understand if there is any kind of margin difference. And then penetration within companies, are they actively promoting you folks within the company, is it word of mouth? How do you radiate when you get into a new company, I would be curious to understand that dynamic a little bit better.

Let me see if I got both questions correct. Regarding margins our business is designed really to have very similar margins whether you buy Firstcut service Protomold services, whether you buy production parts from us and it is whether you are new customer or an existing customer the margin profiles are all designed to be the same. We don't change our pricing model at all on a daily basis or on a customer by customer basis. And again, every part is unique, so it isn't as if one can compare a part today against a part in a week. The second part of your question, again, was how are we being successful in getting our existing product developers to do more business with us?

Well, it was more within a company. Let's say you are doing work with Tesla for example. You have one product engineer at Tesla using your services and suddenly you have ten product engineers doing it. I know that's a dream, but I'm curious to see how that evolves whether it's a word of mouth, is there a way that you get one lead and your sales person says hey, is there anyone else in your firm? I would just love to understand that a little bit.

I think you are talking about viral marketing and I can't think of anything that is more important to us than one product developer saying I can't believe how lucky I am that I found you guys, I got to tell my coworkers about that, and then they go down at lunch time phone numbers are passed out to us, we make phone calls, we introduce (Inaudible). Trying to dig deeper and wider within companies and finding more product developers is one of the key ways that our sales force is successful and they grow their business. In the United States here --.

I am going to try this question again in terms of a lead time or ability to forecast. Clearly you guys have had some great results here. Any other gauges or metrics that you could help us understand how we should look at or think about this into the future, any indicator, industrial production globally seems to be rebounding here a little bit. Should we be thinking of that as helping you folks or providing a tailwind into the end of the year? And that's it for me. Thank you.

I wish there was something that gets published by the government or whatever that could you go look and you could really use to help predict revenue. I do believe that a healthy economy surprise, surprise, helps us. But I don't think that that alone should allow you to be much better of a forecaster. We still live internally with 15 days worth of orders in our business at any one given time. We have great confidence in our ability to extend our growth curve and we are in kind of the same position. I can say that we are very happy that Rob's work in talking about our TAM, that it did confirm that our TAM is very, very large and that we still have a lot of opportunity to grow. So we are very happy that those results are out there.

Great, thank you.

Thank you. You next question comes from Greg McKinley from Dougherty. Please go ahead.

Great. Thank you. Jack, the customer count metrics and then the product developer metrics you have shared, I wonder if it's suggesting that maybe there's a trend change in the sense that Proto Labs is doing business with larger and larger companies simply because it would suggest that these are companies with bigger product development staffs. Is that a fair observation and is there any way you can describe if there's been a shift in the profile of the customer companies you are working with?

I don't think the shift is enough to really notice. It could be that material. But we do have a good hunk of our resources that are calling into organizations that have hundreds and thousands of product developers, and that's why I think that we going to try to emphasize more of this customer metric that's around product developers versus companies because I think it's more meaningful to the market.

But you wouldn't necessarily call that out as a change in the how you describe your customer companies from say 12 or 24 months ago, it's just more effectively selling within those larger organizations?

No, I don't think there's anything that would be new or different in the last few quarters than there was before.

Okay. Thank you.

Thank you.

Thank you. Your next question comes from Toms Hayes from Thompson Research Group. Please go ahead.

Good morning, Jack.

Good morning.

Most of my questions have been answered. I was wondering about the business in Europe. You guys are susceptible to a lot of the seasonality that a lot of the manufacturing businesses experience in the third quarter was typically one of the seasonally challenged quarters.

We will experience some slight seasonality in Europe here in the month of August. We know it, we expect it. It is not as significant as other businesses have in Europe. It will be a touch. But it really does not affect our business overall consolidated especially for the quarter.

Great. Thank you.

Thank you. And your next questions come from Brian Drab from William Blair. Please go ahead.

Hi, just one more quick question.

Hi, Brian.

That study that you did that concluded 6 billion global market size, 2.6 billion US that's a very exciting estimate. I'm wondering is that a number you would expect is going to actually increase quite a bit as you expand the part envelope? As I understood it I need to go back to the transcript, it sounded like this market estimate is very specific to your capabilities to your part envelope and as you are expanding that, I imagine that 6 billion could move up.

Thank you for asking a question on the study. When we were preparing for this call, we were wondering where the emphasis would be on questions and I was surprised that we haven't had anything on that. So I'mgoing let Rob talk about this since he did about 99.7% of the work.

Yes, thanks Brian. Good question. The answer is yes. We designed the study to focus on the existing capabilities with the intention that as we extend our capabilities such as our part envelope and other services that there would be a corresponding increase in the total addressable market size. So we do expect that, that number could go up in the future as we do that.

Is this a number that you will be able to update us on quarterly or annually.

Yes, we will able to update you on those in the future. I'm not certain about what the cadence would be.

Right. Okay. Thanks very much.

Thank you, thanks Rob.

Thank you. (Operator Instructions). No further questions have come through. I would now like to turn the call over to Jack Judd for closing remarks.

Again everybody thank you for joining us today. We really enjoy doing these calls and getting a chance to talk about our fine business. And I hope we have portrayed and conveyed a sense of confidence in our continuing strength of Proto Labs' business model and our excitement about the growth opportunities ahead for us. We look forward to updating you on our progress during our third quarter conference call at the end of October. Thank you everybody.

Thank you, and thank you for your participation in today's conference. That concludes the presentation. You may now disconnect, and have a great day.