CEO Exclusive: How Proto Labs Inc. Differentiates Itself From the Competition

In an effort to expand the breadth of its rapid manufacturing services, Proto Labs (NYSE: PRLB  ) recently acquired Fineline Prototyping, a leading 3-D printing services provider. Investors can think of the 3-D printing services space as the Kinko's of 3-D printing, where product designers can take advantage of 3-D printing without the necessary expertise. This model has proven very effective for 3-D printing companies 3D Systems and Stratasys, which generate a significant percentage of their revenues from 3-D printing services.

I recently had the opportunity to speak with Proto Labs CEO Vicki Holt over email about the acquisition and the company's future 3-D printing plans. Below is an excerpt from our conversation about how Proto Labs differentiates itself from the competition, 3-D printing, and otherwise. Going forward, Proto Labs investors should track the company's gross profit margin over long periods of time to help determine if its service offerings continue to remain differentiated from the competition. A sustained or rising gross profit margin would help indicate that its services are in fact differentiated in the marketplace.

Steve Heller: How will Proto Labs compete with what seems to be an ever-growing number of 3-D printing service providers? What makes Fineline unique?

Vicki Holt: There are three things that differentiate us.

First, we've acquired an additive manufacturing [3-D printing] service bureau that we think has the most advanced capabilities in the world when it comes to high-quality, precision and reliable part production. It's the investment that we made, with the type of company that we brought in, that has that industrial product developer in mind.

The second thing that sets Proto Labs apart is our speed and breadth of services. We can take our customers from idea to market, from concept model to mid-volume production, all in one place through a number of prototyping and production options. And we'll do it very fast.

Finally, our information technology on the front end differentiates us. Proto Labs does what nobody else does for the product development engineer because of our customer service and the manufacturability design analysis that we provide directly within our quoting system as well as with actual customer service engineers. As we become more consultative in person and on our website, we'll become an even more powerful tool for customers to use.

Heller: It appears that Fineline only executes product designs on behalf of customers. Are there any future plans for Fineline to begin helping customers design products and become more of a design firm as well?

Holt: Proto Labs has no intention of becoming a design firm. We're focused on producing parts for our customers. We do love working with design firms because that gives us the broad reach that we need. Sometimes companies have their own in-house design firms, sometimes they use external design firms. We'll work with either of them.

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