PRLB - Earnings call transcript Q1 2019

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Operator

Greetings, and welcome to Proto Labs First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. FP&A Relations. of Director Schumacher, and Investor Daniel Thank you.

may begin. You

Daniel Schumacher

Way, protolabs.com. and morning, you, XX, company’s is Chief at me Labs Officer. issued John its opened, today March release results the Thank morning, Executive Chief With on before available website This and a and is good ended Proto President release for everyone. the the operator, XXXX. market quarter Financial The our Vicki Officer; announcing press our financial Holt, first

In slide in at press prepared addition, web release. the online a available is presentation address our provided

remind actual Before relating that we Please from cause release information begin, differ risks expectations be I would annual earnings performance subject including press future the statements discussion that risks like outcomes practice. our a made and non-GAAP that for from and Relations could that actual certain our include with results statements refer recent financial our past on and expectations. to on materially to include SEC forward-looking measures or guidance filings, report may and our statements The results to could non-GAAP everyone consistent any today. materially release considered will will and are to slide our results. XX-K, to to website adversely press GAAP Investor to discuss forward-looking and to differ we many refer Form within presentation complete the section and company Please our uncertainties of of accompanying for cause reconciliation

Officer Executive over to Holt, like and Vicki of Chief Labs. I’d the Proto call Vicki? to Now turn President

Vicki Holt

on revenue over call. morning everyone. million, growth of morning, we X.X% currencies. Thank reported X% us our quarter first conference quarter Good This or constant of Dan. $XXX.X representing in first XXXX you for Thanks, joining

representing $X.XX, were share XXXX. to quarter decline per compared per $X.XX earnings adjusted the first share of Our

currencies. The Rapid in the quarter earnings to services our the in approximately challenges analyzed The constant first performance this our in services acquisition acquisition. our revenue legacy we XXXX, meet related our first the did Rapid not was quarter. acquired growth XX% Manufacturing revenue of of and in experienced Manufacturing in we expectations from quarter primarily As the growth the

call did the we demand metal X, and discussed on to on the Labs’ the not CNC February these we customers experience earnings acquired January increase for began we services our in expanded in services, Proto when legacy As X. selling sheet

the million fact, In to in the acquired from XX% $X.X or services the revenue declined first compared the produced XXXX. of facilities quarter

standardized our Rapid orders our these standardized offer accepting to a integrated that we standard earnings extended on fourth that account manager deliveries, throughput our and times allow two be disrupted the of improve sales we of the late by often realigning non-standard acceptance operated historically distributed distributed rather the by frequently offer, as machine dissatisfied is lead managed One teams, to customers – operations. is we a traditional other sales when reliability in As scalable. the factor discussed and to The in we call, two. without customers. accounts and not resulted quarter entire organization orders work shop than one accounts

call. time our will scale, services to are opened meet the when products Proto reliability, anticipating was up in customers. could anticipated. quality, to we product speed. have that the resulted greater that delivery. we base value this demand services Labs taking us we delivery and order to legacy we quality the customers the Labs on discuss our the Our approach Rapid I customer commitments than reliably the We and in right This and on told the believe focus in all is as consistently over servicing drive demand the of turnover In some customers they stronger long-term later we reliably actions change standardized in with Proto ensure offer at

Revenue our prior primary growth growth legacy as slow year. up in of revenue by of year-over-year the nicely services was Americas, revenue America’s growth at or rate of Rapid was look produced X.X% the we X.X%. Europe even our purchasing lower produced Brexit. first driver geography, As quarter compared the periods. rebounded currency. uncertainty after XX.X% the Europe’s our picked the the over a growth in market, to constant prior with services December of X.X% growth largest revenue customer

region XX.X% constant in grew or Japan XX.X% Our currency.

total, business distribution in the partnership constant our Japan in currency. X.X% demand Our with Misumi continues to grew region. accelerate in In

molding by was Moving growth CNC X.X%. increased first injection quarter the to compared to X.X% XXXX. revenue machining year-over-year and service, produced revenue record of

CNC service was acquired acquired $X.X The out offer the revenue the transaction. an year. to in Rapid of down compared Our expanded produced includes the million operations prior

quarter X% the grew tremendous in operations first CNC after first quarter growth of in comparable. year-over-year a creating legacy XXXX, XX% Our difficult the of of over XXXX experiencing

quarter a both revenue printing First and growing with similar Americas Europe the rates. year from XD prior also increased at record XX.X% and was the

ever most combined like of MIT’s growth joining quarter, with follows Associates to and and up this develop immersive and bringing This member thought of for a Wohlers design a Production manufacturing engineers Digital course, announce our in technologies. of Center get to methods Additive manufacturing. The additive minded partner teamed previous Advanced a XD founding in Additive is expanding strategies leadership we becoming decades GE and the Technologies. announcements Our representative different organizations additive new network two the printing space. quarters experience are to for from designers and help of In

quarter sheet a newest year-over-year. in representing million of of XX.X% the $X revenue contributed Finally, decline service metal our

share share. we representing first non-GAAP quarter earnings, decline $X.XX per a EPS Turning $X.XX of reported to per year-over-year of

the than to Rapid Our and services and making current research sales period our of earnings and facilitate in our were investments development impacted by anticipated and lower we’re volumes marketing, growth. areas

fastest largest digital the manufacturing production. on source Our Rapid investments world’s continuing and to focused for and prototyping on are be demand

quarter for its to In outstanding first quarter, and continue manufacturing recognized National exception. engineering the winner in awards Proto a be was technology. of as recognized achievement this Association in Labs leadership the and production no Manufacturers Our achievements space

engineers developed software without surface manufacturing tool milling mold increasing achieved Our generation time. that finishes extremely injection for smooth path

continued times to part in and expand advancements We to digital our services shorten in our make lead a envelope our manner.

Now update for an on priorities. XXXX our

as our continue in calls, As overall for Rapid have company; year; we last we discussed experience; our our go-to this improve market acquired evolve earnings the of improve model; customer four performance efficiency our and priorities the a to operations. enhance

on priorities Our efforts first focused are improving Rapid of performance related to last the and the services. the

are we capabilities expand planned it the our are services differentiated management of customer Based there generate has these first were to to quarter, our of experiences launch full very the our offer taking and primary the improve had of breadth services realize of and my actions to continue full As focus on team a management the potential we team, in and we to to existing not The excited the did new offerings. these four volume promise base. performance.

changes the in First, first Rapid sales including the restructured sales in quarter leadership. we organization,

train all success. In a comfortable QX, sellers business we continue and practices Our go-to-market to new share selling our and getting of are improve Proto services. best to our books with Labs New will Hampshire

continue drive increased to invest of demand. in to will Second, we offerings marketing availability our highlight service the to expanded

sheet lead Third, publish reduce times metal the we business. of will the

And win We automation market. This share business. pricing capacity customers has something based engine and the of speed take changed, quoting see have and not in investment we’ve us to us thesis are promise finally, In to implement to we do continue analyze expect from the better learned opportunities unprecedented and XX% based take to our advantage and quarter, leverage our of the on of from this to investments close value The our rates. able is made metal use to services. customers improve opportunities allows to business. and sheet our we continue data will these more

for services not excitement these Our new has diminished.

and to will grow go-to-market improvements operations our and our to customers We delight business. this drive offerings continue strategy, in

that to our being efficiency, improve priorities other R&D are experience Our software by customer worked and continue to our overall include teams. our and projects enhance

will updates these further the priorities We provide progresses. year on as

would first remain not of opportunities call as execution focus business priorities will over the With the that, to to continue drive quarter John. to growth on future we our our liked, to we in the and performance. While was turn I like have strong strong as would

John Way

you, quarter in Revenue the Vicki. was million increase same Thank the $X.X of first in a over million, or XXXX. an $XXX.X quarter X.X%

representing impact Foreign a a $X.X the larger slightly currency in expected, headwind million quarter. we than had negative

the prior of profit fourth Turning quarter year. a year. This gross decrease to million, we XX,XXX an first increased unique in to X% the prior factors. to due in $X developer first Gross product for over reported to quarter growth, compared developers margin margin $XX.X XXXX. quarter the Year-over-year increase first quarter the was the year. of the compares XX.X% XX.X%, was following in the quarter was or with from million of comparison quarter comparable served Gross growth product sequential the XX.X% last our the

the our we to Rapid an the the the XXXX XXXX. than with first of margins quarter headwind the consolidated point XX first investment in of First, expanding gross made capacity lower combined anticipated to in compared drove operations basis volume quarter of

margin. Next facility in with point created gross costs CNC facility associated XX basis new a our higher decrease

annual wage related number was expand of earnings remaining factors was first the from XXXX. of a $X.XX and to and The of expanded volumes and rate was operating Sales full the of first increase of prior and anticipated and tax including each X.X% was with Research expenses a non-GAAP Operating in XXXX, Rapid income expenses X.X% XX.X% each XX.X% compared variable. based our prior year. XX.X% in stock sales decrease to rate was quarter the inflation. in voice research to up end the is On investment million, to and decline diluted service drive compensation, revenue quarter and revenue. – to the a Adjusting of to XX.X% building their the On compared totaled investments in marketing revenue share increased growth, sequential evaluate operating it resulting driven impacted customer Finally, XX.X% related of GAAP development. technologies continuing developing or in placed being XX.X%, our acquired GAAP intangibles the The quarter in was revenue expense million, the the CNC services $XX.X new cost currency after-tax engineering basis, staffing a totaled expenses quarter with of new XX XX.X% add In in share compensation quarter The was quarter by These CNC to share. and or of in of the year. income or in revenue in and and future printing. of million to to revenue the from net $X.XX. representing XX.X% basis fourth compared performance tax year was growth, the services that XD materialize. in $X.XX prior and $XX.X an was the of did factors up tax per and sales by quarter income force headcount amortization $XXX,XXX envelope of earnings metal stock significant or this $XX.X to million rate capability. or quarter the marketing basis, per a and mix up non-GAAP of for support integrating year. influenced the a investments and $X.XX, Adjusted XX.X% business basis, reporting decrease by $XX.X total at in losses, inclusion the the of exercise GAAP development QX. facility, our of increase the to summary, stock in non-GAAP prior number associated our quarter. long-term on quarter first foreign a of a investments financial from in timing a capacity the first in investments GAAP talent our not On for part per of diluted point unrealized sheet

We to from million $XX cash flow. generated cash Now during the turning operations quarter. in

certain to operations lower in IT of in was liabilities incentive $XX.X from payments Capital compensation. recent million, and spend mainly infrastructure. cash quarters, Our than first by due including quarter primarily for investments equipment, the annual driven systems timing of

the We first repurchasing by $XX.X common down a shares cash balance million, ended at of $XXX stock. of XXX,XXX or also $XXX from returned capital with shareholders million, the marketable securities the We to of end quarter million XXXX. and

to to quarter the estimate expect factors. guidance will $XXX on Rapid services the X% following of but in QX range of business for the QX to like $X This in be second will revenue to likely The the improve the will revenue foreign our XXXX. our negative to I’d Now, $XXX We down of impact We million reflects currency provide the currently revenues of approximately X%. compared expectations Manufacturing million, growth million year-over-year. prior our be sequentially year. have range

Moving sales shows. marketing QX estimate and higher to expense be operating of earnings normal We to than costs, trade due guidance. including our seasonality will

remarks. $X.XX quarterly share non-GAAP to of Our include the we in be expect QX. tax all per That of currently amortization between for $X.X our non-GAAP to quarter. add-backs costs for We will approximately approximately formal XX% rate to and above, in compensation Taking our XX% into second quarter the non-GAAP stock estimate $X.XX consideration the $XXX,XXX. our million EPS and be concludes

would happy your line to I take Q&A? please Operator, open and the Vicki questions. be up you for Now can

Operator

Our proceed & with your question from question. first William Please Instructions] Company. [Operator Drab Brian comes with Blair

Brian Drab

morning. questions. taking for good Hey, Thanks my

Vicki Holt

Brian. morning, Good

Brian Drab

I start guess, of please. course, let’s with Rapid, just

a into, into since of here, questions. only roll I’ll got two So allocated I’ve ones couple questions

more on CNC metal that performance metal us And in give side? and there versus you now. and comment it in saw update an on customer can more business what on in So there the last leave I’ll on for last April maybe you days? can just the was sheet detail the year, you XX sequentially, maybe turnover side And the then base or sheet the the

Vicki Holt

Yes.

see to both metal – sheet on in revenue but expect our so the CNC, and to it sequential CNC QX. both and and new is improvement Rapid we Manufacturing of in gradual of gradual continued all in in improvement metrics we our improvement sheet in offer see So sales out metal do

be the both continue better mentioned, Although, way as during we what slightly team we’ve implementing and refine execute the first but sales than that as the the strategies identified offer, probably the quarter still and pricing it’ll on actions year-over-year, negative experienced we to we the the that with the customer. is

So that continue. we to see expect to

your In which of the of terms part was… question, second

Brian Drab

turnover, more metal About in was sheet CNC? or the it in

Vicki Holt

often in with scale. of of the would capable really Brian. in and offer that gone And a deliveries. operation shop have sales think And team offering it to they those way, between is at all. of on-time entire this no, was And machine disrupt them. we really split to a Yes, would traditional flow orders to drop out were both optimize did a scalable, now machine a shop. standard about so They in traditional continue this the scope that have and standard the flow. And reliable We’ve a not come something

we As you delivery as know, customers expect on-time our routinely XX% even scale.

that customer part a deliver. manufacturing. we or that’s type different so deliver a the And us traditional philosophy, different is or a approach CNC a that’s of operation customers will satisfaction the that value allows than of tell managing to there. our us metal That’s to machining operation what sheet And

the very expectations they for forward the felt – turning place that that can very us Proto it and put we that of in meet new and Labs very, of so in sales this we offer Proto the those offer, important brand customers on Proto So have the experiences Labs organization to with moving with the to engine advance Labs promise. ensure was

not this to but also thing as we to pick as rapidly. turnover both see had growth businesses the those over expected long-term the right it confident revenue of do I’m in and up So did is customer we do, the did

We expected that.

Brian Drab

it conscious wanted been in the that in is the move anymore? decline what is bigger business or that not you’re in and that non-standard of force from has the just issues disruption non-standard those you making year-over-year sales that was of the factor So you it Is decision the the business Rapid Which though bigger? business? doing what away percentage to

Vicki Holt

Yes.

factor. a both they’re think I

So way to standard into trying The and taking offer to work. you in Hampshire New make is selling out it team think now there of fit about a it, maybe box it different and that selling. a anything a as opposed sales it’s just

a have to they offer. sell standard Now

different So to it’s to go a way market.

and in as of really So sales is to of way, New well. some that team, had doing a that in that with go our Hampshire to struggle is that a how bit training, of is to unexpected – causing team change not little the market turnover in lot which a sales

but really there it scalable, across into range. which offer tease now standard doesn’t fit business So those is the some we happening to apart, two both it’s not the which and and – difficult services of is is is, there’s which outside really

Brian Drab

have Thank I’ll for you. Thanks. now. to pass it Okay. along

Operator

you. Thank

Our Please next with DeGasperi Andrew question proceed Capital. with comes from the Berenberg line question. your of

Andrew DeGasperi

just CNC weaker. Good that same the It is with issues expanded isolated I the seems secondly, could first growth morning. bit about that Are guess Europe? generally. a was mean, sheet flagged just And you is on talk given account the then you business that it question region obviously to or maybe I metal been really efforts. the consolidation? weak, has surprising you have the they

be that Just comments on additional some would appreciated.

Vicki Holt

Yes.

both standard the we that of that mean, operations. Brian, changes So take, the I I to offers. to hard approach to piece standard in has the big two of offer, tease to the by sales taken is as the in everything, but across you’ve going to market offer was it – the mentioned go apart a mean model, really other initiated, did disruption that And it’s we business that is impact is part of happen market. and a so the times And the and way different I which standard that got the have lead a

have that’s way in customers standard and scale offering offer that work we service the a standardized with a market. standardized So with metal our approach what part Proto – scale we the we standard change. can do, of we Labs now why have sheet and and the a of a and That’s lead times CNC is expanded standardizing reliability offer with that’s the level non-standard to

executing In and with is our terms identifying approach model different to some at engaging of Europe, market customers on European – go really targeted with executing customers those Europe an strategically focused on of team levels. is

rates some provided last So there’s focused good XD been printing. over happening on there. growth teams things The we year the of have the that

As services printing number XXXX. the in of know, of in second we a you half XD added

We’re some we go adds of now beginning XXXX. to see benefits as the of those into

So, is yes, this start growth of good strong I good year and in Europe. agree, the

Andrew DeGasperi

Great. And one last question.

timing flat of terms think to of versus to this you do a They this Rapid, effort least at still event? year? is get a XXXX turn around last could In

Vicki Holt

Oh prior this we’ll you the in improving of slightly the to by second the starting think negative. yes, be look be – versus be year, some I as quarter. It’s think second may point, I it fourth definitely. think quarter the I see at growth particularly we’ll half year, At

Andrew DeGasperi

Thank you. it. Got

Operator

Thank you.

line Troy Jaffray. next proceed with your Please question Jensen the Our from Piper question. with comes of

Troy Jensen

and morning taking Good thanks for Hi. my questions.

Vicki Holt

Good morning, Troy.

Troy Jensen

Hey, like the just I on focus you, organic Vicki. – business. I’d just with kind Maybe to start Vicki, to just of

and it a X% is digits rate like you injection for can mid-teens currency. core? is you organic growth the a heard about; do say low-double you kind CNC XX% for was I think or But digits molding, plans? you think I the What growth constant kind of to business high-single sustainable maybe with maybe talk do just is, it and of is the part of that think hitting it

Vicki Holt

Yes.

we’ve said what what to the is is low- sustainable think long-term. mid-teens we the is over core for I think

our growing so some we part see of business. XXXX. that, was going in I growing on growth legacy offer, top the of actually growth really organic You’re Yes, to legacy expanded CNC with not the the of saw X% in XX% but fluctuations. a that part the legacy pleased

those XXXX, large we that and executed that means that held gain continue on So customers to very we to in grow. share

So that good. looked

on a the We is traction services on manufacturing – a said of it’s steady services before, are – improvement. all as across our we’ve getting demand

our injection molds molding we’re in that seeing through a demand seeing the with coming We’re bit business that little manufactured growth there. on in

– good and there. but it see So sales some we’re are but to those a long-term progress starting term is strategy, longer

comparable I the good over XXXX in actually XX% So pretty growth felt in in was a tough what legacy pretty currency constant about business.

Troy Jensen

Fair.

to of or? we’re going mid-teens, aspect need but a the really little to bit of a then, sustain to demand kind So improve more guys for you really on a kind

Vicki Holt

metal Maybe we and around be customers turn those on that of we demand, and and will still gain to the expanded our offer acquisition sheet thesis share in CNC the services and believe we on need is markets. the metal able Rapid Rapid those sheet and strategy, to Manufacturing investment that legacy Manufacturing the in

we’re businesses So augment growth to over term, the that. those longer looking for from

Troy Jensen

right, Good All All perfect. you. luck. right. Thank

Operator

you. Thank

Our proceed line next Company. question Needham your with Ricchiuti the from & with Jim of Please comes question.

Jim Ricchiuti

Yes, Thank focus to I you. just on morning. Rapid business. want Good gross the in margins

So of in around they the acquisition at so. the – time XX% were think or I

see As talk move about room there to margins little of also up? either or having, today. the the business is, Rapid follow-up you the margin bit in light Maybe service, those of in pressures there a just legacy is could just that question you’re you’re then profile And a I any business out more business? are to a there think standardized that seeing go the the problems is competitive you of

John Way

Jim, one. Yes. let the is first the one I’ll and take John. this then I’ll second Vicki take

part margins So to margins, we that more those for yes, the consistent strategy the opportunity as of doing them. the improve in we volume through we’re get software over get yes, gross the where both and that gross that XX% be is volume margins pull think streamlining gross the it that’s there. we largely we throughput gross utilizing mean, to flowing above up. time, increase And Right what need right? margins operations, volume, with I those the acquire to So, is those to now the operations,

Vicki Holt

focused CNC environment, Jim, the question sheet in on And and on or metal general? that specifically offer is expanded competitive your the the

Jim Ricchiuti

actually both areas, in It’s Vicki.

business, thought as look at stronger I you little legacy the economy might because this a kind of an seeing Just would be I growth.

in a the So both it’s environment areas. question competitive actually on

Vicki Holt

Okay.

as happening to going analyzing at what’s belt data close our in the comes to that’s allow to able more based that business. And metal be the able rates with now with of we lot have and market So going our market. I competitive and to with look new that the to even months to better us offer, data three we’re a win understand under sheet CNC and quoting that exactly approach, to learn environment more tailor engine and value pricing about in to be some of our offer order

a quarter, April the taking second been March, big move we’ll refine that of some we’ve that that’s going timeframe, as we of through the as actions doing into to So been we’re we’ve that. part

our get understand things Proto and tremendous able of uploads about business great being we with algorithms environment. our all model competitive impacts the coming is the to web-based get Labs the a One we and and e-commerce data how and the our offering amount of market from pricing

So And that’s and and out to allow there. is learn that’s to this us more good really hone going get there competition information better.

mentioned share environment model actually well. service We at as our As and on call our in do I that last you quarter I the business that’s way. think doesn’t competitive When take at the fourth we’d this, and out additional you and more look there think, the efficiently really create demand effectively more whole demand. call than know, the business general,

like that competitors, compete also are exactly an emerging see Labs, you closely. technology better they change technology their have seeing follow traditional very both the business Labs looking to market. are companies some trying Proto are find We that manufacturers to to but Proto technology ways like with then We emerging disruptive – not And companies business can them in impact.

to of We’re to we’ve leading R&D the remain with which of digitally e-commerce order investments of continue our we but appropriately in look custom are an prototypes mentioned, model. believe on-demand that and enhance we’re to that sure We manufactured doing that software manufacturer and with to at work experience, is customer’s our model. ahead in what and some we paranoid of leader continuing we parts to enhance are that make ways to what today, stay

Jim Ricchiuti

very Thanks Okay. much.

Operator

you. Thank

Your with your the comes with next Craig-Hallum. proceed line of from Greg Please Palm question. question

Greg Palm

geographies Yes, thanks. in off if of so that Brexit? which by builds we’re strongest any more there are from, earlier whether curious companies question stockpiling an wanted Good was morning. I region, have on piggyback from to you and you preparation for and I’m I if call within information geography, benefit think inventory Europe. don’t UK

Vicki Holt

our our good is was our it all with regions, probably – regions. Italy, growth Spain. than is all pretty well But across better So the which in central France, Southern, northern pretty doing Yes. what costs across generally

I parts, of see stockpiling think our terms In don’t in we much. that business very

and low pretty for supplier. specific you know, demand we and prototype volume low we’re So did of volume customers not see huge sales on specific, as in increases production

we with I impact So any inventory saw big built. think don’t

Greg Palm

quarters. kind I question It. growth of as that, that product rate Got was second relates rates the And, six guess developers eight it specifically to from just, to the for my unique the previous what decelerated

just or about that execution So on if down the of something slow if you’ve there? there’s most talked attribute some of to that of kind you else was going wondering issues

John Way

No.

as think I developers growth over and XX% year, CNC quarter related very grew the to to just it the And growth. was, business the said last see before, is was strong, this largely we’ve of number the continued in we QX that as in well. and CNC CNC grew of

that at that sizable we year. rate in not had a the experienced Just prior

Greg Palm

hop I’ll Thanks. back Okay. in.

Operator

Thank you.

proceed Our your with next question comes Research. from the question. line Road of with Ben Battle Rose Please

Ben Rose

Vicki good morning John. Good and morning Yes.

your – this Did of all as place, that this pertains think was quarter. kind to I Just CNC or that CNC new at in mentioned, know it quarter? any in this that during I kind it have core there first question impact legacy a on put facility during revenue the CNC machining Minnesota CNC core was machining. a the you on of

Vicki Holt

some impact it It have did the the on revenue, on have not impact did margin.

of location is the But fourth customer a over in quarter. bit Park, It a So north times, delivery Minnesota. transition. little team throughout the a moves very margin. XX% called did an our impact city. have It well, time in maintained executed. satisfaction, to the that in a injuries. it awesome place Minnesota, It’s strong but Brooklyn an on that moved We the on which whole strong is No it’s on operating was

Ben Rose

Could And early respect mentioned examples the particular? new side terms you Okay. mold in on-demand some was think there you adopters, on some still there. I about some industry think the mentioned of molding, manufacturing I to in for you progress there Vicki, was with relatively injection activity talk maybe

Vicki Holt

Well, I’d about that sure about. got have to I customer approval I’ve talk the from something Yes. would to make talk

And don’t that of head. my the so top off have I

volume there. use where brings production important, that some but have med We is again, to in up tailored had to Rapid customer our there’s fashion really needs model that’s just where, very success, a nice important and is launch because business space able time of meet market – also device specific to with lot awesome individual are And our low particularly really solutions there, a in cases. getting medical being devices

tailored wins So We’ve some are products seeing we’ve cases nice very use where coming seen good with some consumer areas product seen device Again, uncertain that we’re wins. some in demand. across Med some to. specific

lower vendor, particularly launch than, you to and total to with And of a able be Proto with allows other cost really demand. Labs with launch it so to uncertain rather production,

really use solution those and two cases. good a we’re So

Ben Rose

very Thanks much. Okay.

Operator

you. Thank

William is Blair Company. Our from follow-up a next Please Drab & your proceed question with with question. Brian

Brian Drab

you. Thank Okay.

margin tell in first just a – follow-up gross us performed you few questions. John, quarter? the have So was can the what

John Way

the basis XXX So a gross the on margin. overall was points impact

So XX% high the that it just in teens. puts below

Brian Drab

incremental partnership? that that gross Okay, the been maybe generating Japan well. thanks. initiative, the be Japan and the that of opportunity volume going through And the strategy or you’re new also that for partnership seems margin type and just you then, And what the expanding in business and through to incremental partnership can the on on comment what that is, really has

John Way

earnings let on So in just in comment total, to Japan continue me total, earnings improve. in to our the first

being brought is business that the as which both is volume in incremental the by well. the from lot a growing partnership helped it’s core as well think as I

that feel if really talking with the I well. that really services be of well. The it’s are But can the to to Currently Japan, bring we’ve approaches had efficiently injection molded molding injection purchase collaboratively Misumi with there as very in take to products partnership some relationship to So in take focused Proto some are that Misumi base we we able CNC long-term with going business. on to overall from is advantage see customer got Labs also comfortable to margins, they’ve allowing their their base customer machining. and

that’s, we’re looking So if value. that’s approach bring an see to that can some

I Beyond that, at number very does point this but I Misumi know about position I a Asia, can’t strong have regions throughout that that that will won’t Japan. further comment. you comment tell beyond I of in taking

Brian Drab

and first question it And, $XX the but, Okay. to conference back for second in basis I my going and related Rapid just that. selling third up fourth modeled ask the on I and on we’ll that a sure make million comes but about is now – to in and sounds terms I quarter. just just last guess Then $XX to the Korea, about and won’t the we activity and other quarter ask then marketing, talking I’m dollars quarter later. in want the talk million of John, I’m on maybe it that in some like next non-GAAP down slightly question

John Way

that can history, back you then think we I have in back over quarter down. And comes the tradeshow look uptick Yes. if second it the you see

yes, got that So you’ve right.

Brian Drab

for saw the that to out around that in of is in level the revenue for quarter, something percentage XX% like work and non-GAAP – And year terms marketing, to the first this of we selling the going level? Okay.

John Way

we’re That’s Yes. where currently XX%

Brian Drab

Okay. Thank you.

Vicki Holt

you. Thank

Operator

Thank like to turn no you. any questions Ms. closing Vicki back remarks. There Holt would at are this the call for over time. to further I

Vicki Holt

joining for confident you Thank Proto for again We excited Labs. us remain and today. the about outlook

market current our are trends As to and our that ahead, favorable strengths model. we business look the confident we’re

and technology faster their to help digital products manufacturing entrepreneurs differentiated to get platform their market Our the has enabled companies ability than demonstrated competition.

for in customers our our I Labs for to Proto efforts technology to continue to enhance their our I employees want want features We thank innovate XXXX. offerings customer’s and and service their the thank also interface to experience. support. with

to we you Thank We driving look during the And forward in very committed to progress and over are call. greater much. next to XXXX our shareholder reporting long-term. our on value you

Operator

This teleconference. you. concludes today’s Thank

your lines may disconnect your participation and You for at this Thank wonderful time. you have a day.

Proto Labs (PRLB) 25 Apr 192019 Q1 Earnings call transcript