PRLB - Earnings call transcript Q4 2019

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Operator

Greetings. Welcome to Proto Labs Fourth Quarter and Full Year 2019 Earnings Call.

At this time, all participants are in listen-only mode. [Operator Instructions] Please note that this conference is being recorded. At this time, I will turn the conference over to Dan Schumacher, Director of Investor Relations. Mr. begin. may you Schumacher,

Daniel Schumacher

Chief and our everyone. Officer; President Financial Baker, our Rob is John me Vicki Chief our Rich and Holt, and Officer Officer. good you, With morning, today Way, Technology Thank Chief Executive

Labs available This release a website on the quarter the announcing opened, XXXX. XX, protolabs.com. for press ended results company’s issued December morning, financial The market before fourth the Proto its release at is

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

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

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

Vicki Holt

our of provide I'll quarter our you begin us a performance in John call. the fourth conference morning, detailed our Good Thank business everyone. on Dan. joining overall Thanks, with an overview of and quarter for quarter and with major Rich year John a outlook. provide look initiative overview an Baker and at will performance. XXXX conclude for I financial finally, will then and our financial fourth full

with currency, constant of per or out $XXX ranges reported quarter we in of guidance economic QX share in environment. The million quarterly global our of annual fourth midpoint call growth revenue and at X% despite $XXX we XXXX we a the the of revenue morning played expected million $X.XX challenging This provided of as earnings

various all activity headwinds our XXXX. operate customers in in Macroeconomic and geographies resulted the industries have we from across less in

expected we see by did As projects customers push the complete year fourth the softer end resulting the the of with relatively year, a not we to in demand a through quarter. weak from

by Investor on in revenue in relatively sluggish X% fourth-quarter highlights further revenue declined the in Demand mid-teens QX. our X% automotive currency. largest the market, in Presentation grew quarter, XXXX. in comparable easy down while was geography. year-over-year in X and manufacturing especially constant end the the markets Providing was Revenue our as color Slide aerospace prior versus our American

of revenue Our growth region growth consumer strong produced showed European our market year-over-year currency. electronics constant X% while and in Revenue declined. end in QX medical automotive

currency US with Our quarterly environment having in war Japan between XX% weakened business revenue have exports China impact. an constant and the and region Japan declined trade

latest recent the industrial indices in purchasing in Softer production both business spending managers has is declined months. evident and

services XD on service fourth true by the relatively Slide in last printing the year. of the revenue revenue parts. is for It cases as stated into XXXX all can demand where That production in weak Transition earlier, the specific in are increased our more understanding the we over their utilized across product of experienced clear quarter quarter XD printing our be XD development utilizing XD X, ran that XX% customers printing. used except printing and prior year.

the revenue technology X% fourth tougher year-over-year by year-over-year ringing up the in with true the portion machining market revenues relatively compared remainder Injection future continue capitalize strong QX. year-over-year economic in sector. XXXX quality consumer were to of this growth even CNC in positions producing molding in and decline driven this driven high on in us in position the XXXX. X.X% of Our environment is this declined to is as quarter a leadership advance. parts QX by and A change aerospace industry to

decline Lastly, $X.X previous service contributed the with quarter representing million revenue in sheet-metal of talked challenges our XX% sheet-metal about year-over-year. We a in of our calls.

that sheet-metal the revenue year-over-year, QX have signs was with down showing this we While revenue flat was service. stabilized our

evolve XXXX a in Proto in better our to full needs our macroeconomic Moving to the serve to Labs year customers performance; continue challenging of environment.

constant full in currency represent over X% as year was Slide growth XXXX million on $XXX shown XXXX nine. Our revenue

$X.XX non-GAAP Our was full year XXXX. EPS down versus X%

operation we matching for expanded printing, addition carbon color technologies served expanding and by production in precision light other launching through in molding XXXX printing how developed and XD such [ph] injection engraving laser manufacturing pad we synthesis customers the such introducing have of recent on-demand technology. we expansion XD for These threaded that In are secondary part for digital injection addition to our as X-D molded capabilities insertion. envelop printing, as and history

able returns we Our on not service expansions. realize have been to challenges fully the that

systems. ourcustomers of from also us our acquisition Our expansions ability ability system grown our our to full to to provide on Rapid of expect limitations the has offerings the limitations have of of have impaired Manufacturing. customer benefits the core to The experience due impacted our realize been service

line. able manual and be processes is have address the discussed market challenges. these result the add we for to while we're we'll these we cost services increasing fully Later to also not demand that addition, what support In structure impacting to in the offers. process, the to expanded net doing support manual capture our call, top are to bottom The both

continue the we confident space. we expand future recognized are in our and leader Although XXXX to difficult position was a will rapidly our manufacturing as digital a year evolving in

John in-depth QX John? now XXXX provide at our will full-year an financials. and look

John Way

X.X% a the to XXXX. the quarter start Thank XXXX. then I'll fourth of transition fourth in financial results quarter $XXX.X full or to with Revenue million our you, year Vicki. QX $XXX,XXX and of results compared was the for decrease

represented currency the to dollar. the $XXX,XXX the in US of quarter Foreign relative headwind a due strength

or to to of product XX,XXX prior Our serve fourth compared growth quarter unique year. increased X% developer the

look As expense and statement, as cost sales Certain presented performance best the long-term more go XX. we goods are sequential it investment to look flex of quarter-to-quarter is on income we the Slide attempt at at volume sold as costs as portion the from of of R&D. the others we while such like with to

$XX.X with non-GAAP in down sold goods our the Our we in as was million, gross cost adjusted of from revenue. quarter of XX.X%, margin the managed XX.X% for sequentially XXXX profit resulting of gross quarter the to correspond third

expenses and total $XX.X or for to revenue quarter to base. XX.X% of fourth or or of of a quarter. the third million in in XXXX. This marketing Adjusted XX.X% flat revenue revenue revenue the quarter. totaled compares sales of $XX the Adjusted operating million the $XX.X expense quarter, expense XX% revenue lower was percent The with due the of was increased as but third million

with $X.X R&D third quarter at Adjusted consistent expense million. was

support the research We capabilities at and to growth this improve and to order in experience business. systems our invest all development continue expand to internal level future in in and of our the services customer

X.X% XX.X% of in up as of consulting such revenue audit in Adjusted quarter, and legal, general was the certain timing administrative and from by largely the expenses driven expenses. expense third quarter, fourth

shares. reduction revenue QX of On the the the quarter. net $XX.X XX.X% of in a adjusted $X.X XX.X% to or GAAP of the revenue performance result valuation basis, related of million EBITDA of of third to quarter in the The XXXX we million benefit realized in was in compared

quarter of the tax fourth effective in year. was prior the in XXXX XX.X% rate non-GAAP Our XX.X% to compared

factor fourth the quarter at After adjustments, our quarter. our with We cost and were the in main non-GAAP million a $X.X $X.XX, was margin share guidance goods in percentage decline. share hold from relatively this the of sequential at decline diluted of able flex our third $X.XX declining was The flat. midpoint the gross earnings per per sold volume, representing revenue to range

the However, in volume share an lower $X.XX impact. per resulted

EPS the share per $X.XX decrease represented share was rate of last per tax cost margin following the our The factors; in late in CNC impact by XXXX; EPS effective declined resulting year-over-year share benefit year. quarter year-over-year, Non-GAAP The in the in down was fourth lower investments compared expand XXXX. addition $X.XX XXXX capacity, our remaining we revenue made to compression. per share our including from gross manufacturing while increasing $X.XX of per facility structure, a first, a new driven $X.XX to

also investment $X.XX our in our our envelope in impact. We resulting improve and increased R&D product experience, e to share per expand a commerce

items Slide cash on balance XX. Now turning sheet flow to and

production consisting strong and the $XXX marketable quarter including and Capital quarter. business totaled investments equipment. cash fourth support with operations securities in from $XX.X in the IT to to growth, a million during of produce systems continues flows, the infrastructure, facilities cash and investments of We in $XX.X ended balance million Our expenditures drive fourth future quarter, generating million. cash

year the XXXX. in currencies. XX; X,XXX an was $XXX.X XXXX X% results Slide X% increase or million, We increase growth Shifting over X% revenue XX,XXX during now on of XXXX, to served our product constant for full full developers unique or a over year

margin was factors; our negative addition by impact had those consolidated XX point gross revenue driven in compared impact the a CNC was The XXXX. our Non-GAAP on XX.X% XXXX driven to The in in our gross XX% year-over-year in by point basis facility of XXXX. margin of volume of rapid margins gross XX had following a services. compression manufacturing margin, adjusted on gross year-over-year revenue lower Minnesota in basis

able time, CNC As fixed service over grow this be leverage we to our cost.

XX Labor point increases contributed a impact. basis

percent and Our in services. wage a support to put revenue we to processes inflation labor due to had as increased our of place manual new

of on an Mix impact gross business had margins. our also

business services. through lower growth this were past, we created improvements. Molding strong able the our to printing our our in a stated margin. As We gross has mitigate and XD a headwind operates gross at headwind margin Injection on CNC than printing in XD The operational have

impact our margins. However, XX compression point basis gross a overall from operations. in our result basis The investments was the XX other came point negative remaining to net

and the expenses fewer totaled projects year. during Non-GAAP million adjusted operating $XX

result, marketing customers. to sales increased our we and As more investment new a attract

costs, sales this customers marketing While in of continue the us will increased the future and in in do short many to term these with believe we business years. our

will industrial customer As years the more a in reap the projects, benefits improves larger these have we to come. of sector base and the engineers

or million compared $XX.X million X.X% Adjusted revenue was of or of R&D X.X% XXXX. $XX.X in revenue to expense

software stated and details minutes. of and a new e-commerce in have existing in Vicki investments services materials; and our Rich we improve and consist by few systems. envelope provide additional internal platform, the system to activities will our our our investments R&D software their past, to As expand on supporting adding manufacturing development, services investments

of administrative X.X% general of in million, XXXX XXXX. Adjusted in representing revenue and at and $XX.X X.X% expenses was flat revenue

reduction the to $XXX.X of of operating incentive revenue XXXX. to During our EBITDA result in of XX.X% adjusted or XX.X% included revenue G&A, of of all a related was including net XXXX compared in XXXX, The compensation to costs, compared benefit XXXX. million

compared tax investments the account, year-over-year XX.X% in non-GAAP XXXX, year. XX.X% all per Our in to down we rate gross our discussed development. decline $X.XX sales effective to share the compared marketing was in into driven prior was non-GAAP compression margin $X.XX research EPS this was by year. earlier of in continued and XXXX The and and Taking prior the and

operations economic Capital the million $XXX.X generated we spending in million. was during Despite $XX.X the from cash year. environment,

program. common returned by buyback this year repurchasing $XX have under program $XXX and also capital stock million $XX.X remaining stock We our million million the under of to during shareholders

million the cash and XXXX. marketable up at from Our $XXX of of balance $XXX securities end is million

to back to top over I'd priority of XXXX. Vicki, for Now our an turn overview call the like in

Vicki Holt

Thanks, John.

more enter is Labs long-term As for than XXXX, future exciting Proto we ever. the

low-volume Manufacturing at needs Our ability to our e-commerce puts of and solution X.X us and revolution. unique forefront digital our prototyping the manufacturing through manufacturing fulfill customers' the

and However, more. services they of in They telling in experience terms have more offer. of our capabilities, been more they want terms us the e-commerce customers want want and we

with difficult founded of their Proto years to ago, obtain who injection-molded it custom advance mission prototypes Labs to entrepreneurs providing was found XX the inventions. to parts

in broadened, services product also As progressively customer consisting serve we added now servicing to addition of parts are multiple has evolved base that have capabilities, more services. individual our we on developers projects products, making working individual and in and companies different

provide customer and model, our Ecommerce we the to the for essential continue digital cases used our our engage supporting evolve With to experience customers, interface and we system customer to order broad excellent the of need are to serve our way In customers. an experience.

needs we long beyond to term opportunity we on the have forward new we our systems As the serve to realized need that customers. look decade and properly of our to evolve the and capitalize market

the turn that about Proto speak and Technology Labs development will to over I Rich exciting XXXX impact that, to With going call Officer am to beyond. Rich? Baker, for Chief an

Rich Baker

change the am morning digital here everyone X. our project, Vicki is and the thread, which call, to call. on good discuss Labs Thank Proto to you, in step a I we

a Proto been past. strategy and Vicki for X.X mentioned, support responsible right to been to in beyond. the to processes critical are decade success. enhance customers project Labs As sales architecture that undertaken the for and experience, our and effectiveness is evolve and and having next financial systems systems I've the we've systems -- and our seen that re-architecting our customer We've

expand I've off offerings X.X interface at our customer a the to systems to well Labs and as to supporting of aware the update the Labs is of potential much Labs' will the the efficiently. Proto that better offerings. digital model the capabilities was customers. been Labs joined I limitations Proto I in XXXX. company us serve so XXXX the manufacturing saw as I expand of Proto well Proto allow that because core and since customer business

After small manufacturing an I and Labs, to over did pretty came relatively years, joined resources even Labs' to to the to struck assessment changes narrow evolved homegrown, initial of our Proto of systems. was I that tied I state of largely required of process. concept offering. realize by Proto quickly the systems, energy amount the our the make a past I had mostly XX

have our -- created been evolve. that debt. needs maybe evolve this was support the a even so down a approach would expanded needed could system different and as But customer slower, incrementally The path systems this We fashion. company's and painfully refactored Continuing functionality capabilities impossible. in technical evolving scalable

of our exciting support back-end we X.X; parts some operations. this our So Labs now second interface main this two and There e-commerce, the to year. customers; of launch is in systems, project, share which of Proto which me the is the half details to let with first are the plan second the

moving are development advanced software to and a We architecture modern practices.

digital is Our for on the our approach our e-commerce the We benefit unique will focus started to software threat, development integrate is Then commercial the business. with because which of these Labs. the to and most packages customers Proto are greatest standard this with to pieces functionality. we will provide building to impactful

systems our our in capabilities, the going As improvements we're we in were as an we change, to well. making architecting require realized this we're advancement presenting back-end support

to me we've capabilities, architecture and this, This art the approach, talking this techniques, in of contextualize three Help in we're change, what expertise, well resources both brought leadership development leveraging the we let with and knowledge need do as expanding to and why then transferring staff staff. help our about give software examples. to thought To our as augmentation. gain approach accelerating allows state us to

current support Our prototype to ordering individual unique system built was service. X in an one part

and from different prototype through requirements, additional parts multiple production. support digitally will managing are Labs supporting production Our services, currently business to has growing X.X which enabled. customers, Proto not projects

with information production to customers an is important less the future quality, front-end intuitive to making. which [indiscernible] and parts but orders. for will we flow required of platform our advances Our prototype system interface manage to has this for through limited manufacturing The offer associated capture current from information ability are approach allow is

and micro all ideas. customer and experienced the website. capabilities progressing services e-commerce cloud Utilizing hybrid be to allow benefit a us existing Our the sustain will in cannot needs able test broad software of from base. architecture We'll your to our e-commerce evolve continuously favorite you architecture modern

capabilities us outside on can our allowing Proto focus new manufacturing for to our model. standard to specific from digital resources utilize Labs We enhancements functionality,

our It for well from advancements platform into as environment. offers of new moving this that the us the to existing in services possible will into allow of smooth existing e-commerce. as also our acquisitions path All not R&D the integrate existing was

that enhances Ultimately, support we provide the well for Proto the turn, business customers, services Labs X.X growth value which, our much These will us want additional the in to customers. faster, future. the to improvements of enables deliver into they our which

Now Labs the benefits discuss long-term Vicki Proto X.X. of will

Vicki Holt

share am some the you very to with I excited Proto of X.X. benefits Thanks, of Labs Rich.

XX As outlined on our presentation. earnings Slide of

described, this expanded to was was our employees. by customers Rich desire our our initiated when better serve to and project I opportunities presented As serve the better

We and future. systems are the into building and support now back-end strategy out a to customer-facing our

The business benefits insights. long-term of our important include improvements this tremendous customer internal internal of project speed and expanded in productivity, experience, the the business scalability the and

much improved experience. will The offer X.X a first is benefit Labs customer Proto

Labs' to strategy legacy project fewer an order place to intuitive clicks Proto go-to-market the more overall to and platform be buying of continues example The that. an platform be more better than required is e-commerce this and will new experience. an with evolve customer-focused,

Proto improvements enhancements, how managing their valuable take customers improvements we're projects to retention. We're needs. to of adding make and when The their will business their improved listening ideas are to customers our our rewards will be satisfaction these customer from to Labs executing also which concept support evolving and more to customer of our These higher examples production. and

Proto time. internal improved Labs efficiencies enable will over also X.X

expansion. addition which improving with improvement do X.X support is to customer our One experience see efficiently to in employees associated Proto customer in functions the their manual more and equip sales the In in work Labs' these reduction our we jobs. area with will service

the allow had we've recent the on enhancements eliminate system's place Additionally of expansions. to couple will some in us process of manual

rapid our on on finally teams structure. software future time manufacturing, providing will architecture maintenance environment requiring also it also And of the more productivity and our to spent including and integrate make growth. less easier will cost resources updated system our new innovation the Our resource allowing improve with acquisition leverage to focus

scalability to X.X Proto improve the will be our speed business. of Labs' the of and ability benefit Another

new to existing launch allowed we offerings and live, additional to complexity a expand a fraction architecture, be of to able customers by able new our will online our services at After With launch the offerings systems. system is and envelope more efficiently. our service be existing we'll and time new

we only support intuitive efficient. to be more be the the in offering the service will more Not at speed support delivery will customer will the the back improved, publish to user the of interface which end the system

of and Lastly to will insights. improved easier will insights. customer our value enable providing driving business business provide marketing additional added Labs Proto the will platforms access enterprise, Labs' Proto X.X analyses. This system data the integration across project focus X.X our CRM provide

the improved services expansion We'll our including improve able will the reporting. and customers. process and offering in later improvement services workflow our be in of The and to also allow continually for operational to evaluate marketplace

for regarded business In summary knew the future industry.. be Proto leader manufacturing to was remain leading model exciting continues novel Since a Labs' Labs an the enabled innovator digitally and we custom in Proto we and Proto supplier revolutionary in the To founded X.X to evolve. and Labs and XXXX change parts was it Proto. service, had represents absolutely and as of e-commerce

will date of continued manner. the As in of I as our Proto work future live diligent our much very to our extremely efforts approach for to on their go and our excited X.X better and the year. our half build I Labs the strategy. their to further thank support to am teams systems hard Proto about broader would second like plan we and our for Rich to a customers serve X.X Proto in out stated, the customers Labs' opportunity and Labs'

financial for will the of quarter outlook provide Now XXXX. John? our first John

John Way

Thank you, Vicki.

XXXX million. range estimated the on the significant muted the for a to summarized be data. guidance to first revenues in Our expect revenue revenue of quarter increase economy, will also guidance foreign not the million manufacturing XX. first We $XXX first specifically $XXX industrial to production This currently the the is currency quarter year. reflects Slide current and prior have our on quarter of global We've compared

sequentially these to to The and the begin The of estimated incentive Moving a increase. the quarter will annual of we of to $X.XX currently our share. year. recurring taxes payroll items earnings as first closer seasonality guidance, is partial impact increase in the new our compensation compensation target per expense $X.XX quarter at driven merit by

add approximately in cost to tax for include estimate We amortization rate currently be our and XX% backs quarter approximately million to the non-GAAP compensation the stock XX% approximately Our non-GAAP first will of $X.X quarter. of $XXX,XXX.

and of consideration all to of above, Taking quarterly first share between non-GAAP into quarter. per in $X.XX expect our the we the be $X.XX EPS

first want approximately year. in on the the million we guidance of to provide also second estimate expenses Labs during addition guidance, to of the launch of result $XX course that half in increased Proto In we will some XXXX. the as project financial the X.X to We quarter impacts of prepare the

leading training of These will for to we also expenses travel live. and be preparedness up consist a to system period. of capitalized we expense will go include such contractor management until the including activities, support. the These change period overtime, we after related consultant costs as and time incur support costs and during system They launch live support largely go

we We on $X.X software million when is system in quarterly the recurring will amortization million. service. The is a asset that that estimated will amortizing placed our approximately $X.X at have will we begin million $XX estimate sheet to balance be

minimal with amount expected due half the Earlier be associated XXXX call, nature benefits to in to discussed timing with in are second system launch. realized of the the project. These benefits in this longer-term Vicki the the

the We for business the term. managing are long

Proto on market project in XXXX. serve to embarked us opportunities. on Labs' and impact will have and more X.X our provide expanding Proto to financial the the our foundation the performance current X.X customers allow capitalize will Labs' that We holistically

us However, to a full the for project our realize is potential business. as necessary

formal That concludes our remarks.

take to you Rob, your happy open can session. be please line up questions. we'd question-and-answer Now

Operator

Blair. William Our first Drab of is the [Operator from line Brian instructions] question with

Brian Drab

related comments of question, your to first John, there. last just So one

Labs' in would performance affect that Proto said financial XXXX. your in X.X You

a how broadly? affects revenue but take mean, it financial affect the performance growth gross more gave broadly, can it I financial and you little performance, expense, does just You this to going how margin? in $XX bit more off of focus of talk is some million the

John Way

Yes.

throughout direct year company. think And project. So be it for kind and significant project as will of had I've got the a the approach resources on is that, impact well. go-live XXXX on the that of out with we've we in it, I've It spread resources And date. quantified as I the the

the does it business. an have So impact to

parts are serving sure and around keep deliver We to customers We the delivering and making focus we continuing manage it. our still are there.

Vicki Holt

add we continue to for because Brian. we company a transformational I'll And necessary little next be want our for color to have they able that, a be way that from the expect going us also that's the to set to for to up our is serviced project our growth prioritized customers be service it's This to the company. to this us one the is decade. expand know that it for and able that service investors offering

prioritized other be XXXX. same in in XXXX. priorities doing And over, So we'll frankly, that we the

service realize that's we've that the to of have say us to Now to our the benefits fully Proto create we outlined, that been of fact not the ability from seamless those our we've expansions continued impacted systems -- the Labs. to not kind -- have but as experience allowed that as add customer expect by offerings service your customers have

deficiencies added side, system on more system. the in do processes us manual had allow that, that of So the our to the created. things, to offerings service the have allow to us opportunity margin then we've as place we've put to supplement And this on capitalize new these some market will

manual X.X, in us as sales some side, be service that really productivity margin. that of both well automate Labs' a that's drive end of back able customer and lot those in Proto to improvements to are to processes, as fulfillment, we'll to the begin the give going With some

reasons up this and to the next very decade. So yes, for for a us we've good prioritized set very,

Brian Drab

All Or can this is? right. project and implemented? the get what timing it's fully And just again say completed you when does

Vicki Holt

Yes.

second as milestones, clear, we're you'll able to that. the still live throughout be about hear And more be to proceed we'll year and and So expected we the half. more in meet

Brian Drab

-- this XXXX, year? is to going isn't that project would this to this the this done on be But expect into work to you continuing something get something Okay. XXXX, you're

Vicki Holt

year. The go-live will this be

always there's go live. we Now work once

scope about will much for is more talked the manufacturing fact go-live acquisition this the So example, on that us after acquisitions to not that rapid system allow we've efficiently. will in integrating come

to we sense get before put we that made place in -- it integration. So this did

quoting rolled been we addition, that business some into we've be software go-live. handle that after working into of be fold the business and able metal on the that to when will bring in and the In enhancements sheet the

Brian Drab

Okay. then to And follow-up one that. just related

just us of saying as you're acquisitions. the it's be little acquisitions. integration of Can last to the easier One benefits with two you'd looking about types challenges be been of is at going point? Obviously, some here you acquisitions tell a bit this what

would And can And I'm at services just that acquire added you a any also, as now. service I'd base that smaller what addressable by to have definition, the ones thinking than given off new this just you look answer that, about add imagine market point, the than you're operating and a bigger out much would in go past? lower would be, things you've you -- that

Rich Baker

So I'll take that, Brian.

done. getting right our think now, project on focus I is So this

strategy, our get how ultimately, our them could There's helping a We of serve and better at into go over the customers products are look in lot long-term market. to things that. to that we continuing their

As we be our primary The to But be this look focus going at is primary up. we'll acquisitions I focus. wouldn't those expect now, evolve getting continue right on project that. to strategies, to

Operator

Next Andrew the question of with DeGasperi is line Berenberg. from

Andrew DeGasperi

Yes. hear you me? Can

Rich Baker

Yes.

Andrew DeGasperi

Will in outbreak, on was seeing longer your impact on any you already, help Labs then even one quickly X.X. accelerate in you're Proto I I the follow-up though of demand you term? someone this potentially ask on addressed to just China? on-demand And coronavirus the secondly, not business another from sure that wanted call. if I'm Are not terms

Vicki Holt

Yes.

particularly talk take to a developer. service the we as might Rich, just service of the you X.X in a add you at addressing business. personas, we're as product one production Okay. business. a things is that Clearly, more stab the the into Proto I'll the number we some about than We that, additions launch fact experience of want Labs production e-commerce

we So new way we those the way, up buyers. supply and offer procurement our the understood by by chain to that's and, need -- managers in a serve in serve production

coming to production? the So anything for know in. it it. the of our And experience we've advantage designed don't that Rich, you those we I enhancements manufacturing make to new offer and on to or understand want offer take on-demand knew buy kinds to e-commerce add to of in that to if customers the easier

Rich Baker

are to a couple A of lot requirements directly produce. are Vicki. the not related things. there part that One, Thanks, that of we production for

of of the kept But that produce up, production, all certifications that you've can't are we in your you managed. to supply And demonstrate documentation and you chain. that things represents part that and quality So their go someone you under back into the be to process risk control, quite to good. quality related is lot have a need if for there once

we so those those our to in type to deliver And also need other way. of things chain need, able on digitally we show enabled that all to a able back-end need be be and supply people to

building out here. And so that's what we're

adding And us production should capabilities. across help so that all services,

Vicki Holt

then coronavirus. And just I'll Good. Yes. address

model supply the saying, turn by an customers you to advantages the respond So ability Proto let is as answer rapid provides that disruptions. that our know, just of to one me chain Labs'

that's deliver clearly we that proposition So a value customers.

are presents help country. injection have do do rapidly. as because that that -- respond a in And That them, can we not mold something have can want all disruption a Corona that should is our this pretty being to supply tooling, impact make they injection CNC we challenges of major mold result virus. but date, this to parts, a parts, we as understand our seen because the we said, customers We our made of chain sure

Operator

is from next with line Craig-Hallum. of Palm Greg question the Our

Greg Palm

details So Labs thanks for all the X.X. on Proto

So think, why enough of mean, this the I given I us you've sense. where not entirely makes clear It's now. why the behind

on be a this color really why the a bit there would was So little maybe that announcement? specific Or the helpful? timing of influenced more trigger now

Vicki Holt

The back to Why really recognized, working XXXX, on for our a e-commerce experience. needed We the been announcement? while. in why, this evolve we we've

some for we've project -- time. to be now The going been we've really why we're year. has this going on live so bought we're -- And this working a is been

how wanted we're next decade aware really so how financial about for us well. excited talk this be you to performance. We impact it's our as up to also, XXXX going will But event the to of set

now So want the firm impact add as for our to line we're know it's pretty I John, it's is you go-live, that? to where time if on don't and why -- going anything to performance.

John Way

No.

it. think that's covers -- I that

Greg Palm

past few just I but sounds making yes, things certainly big over investments here announcement, investment the spend. not accelerating you're you've pretty been more in Well, necessarily sorry, with a curious, [indiscernible], quarters, just the like I'm guess it some --

along? So the of question is why this now all plan the in accelerating Or was investments? really of terms sort those

John Way

Yes.

mentioned, Vicki foundation. stable was changes, make building system. this as trying addressed think, I call and not on to looking are cumbersome the weren't And we Rich at and changes, we're as on it we the trying a as And just to were we well, efficient. make as

turn add it some I'll color. Rich, you So further I over maybe, let to you think and

Rich Baker

this either is. business what So good an call a about so investor, appreciate being investor everyone we it an or and all thinking on is

has we do that margins, business will help more that can more expand thing we are of and for. that of a how business? and core nice get then is So customers This that asking us get that

fast produce of types these been have it's and validate can but test would sooner you So business and better, only systems. so

full we're the and year. now can at what the confidence where point and we so we have we have And on impact some dates estimate a is

to it's And would say, we've talk is so it. about as And prudent. I about time as going, fast been

a done we've accelerate in. with other with of we augmentation mentioned, things staff I brought lot that people to As

It So X better it possible. can't have I X to or time years been but as have years ago, even -- machine. done gone would ago have fast as we've don't about I a

Vicki Holt

The not going e-commerce other of is startup just this is that thing digital we're atypical transformation I'll add to businesses.

a XXXX, software start basically we and base. You often homegrown back started a it in was business, architecture and and

years. -- evolved last been there's Now the XX technologies over

and are to a that to BXC be that. in that we able and deploy that's ability this going a BXB e-commerce definitely technology state-of-the-art respond and technology, in do can really be expected position more in And robust that modern to leading we're really to world. we customers, world, be our more, to going up to there's excited And a experience they speed build

Greg Palm

expecting implications, line too Okay. John, are that Or of performance we I to sense. And this? in terms Makes estimate? really to make it top mean, from be any financial is hit clear, early

John Way

Yes.

tough to think it's provide our quarterly I we assess that now. right And guidance.

looking I But right We'll of a now, think updated assess as be. the at customers. we're how as on it benefit what markets keep will we as go that you through for and the performing. guidance year

the the we'll I but assess in think like that. they continue changes will to experience,

Greg Palm

Okay.

revenue, inherent And 'XX positive negative? no guidance so for the or there's either impact, QX

John Way

at No. it won't That's impact correct. QX No, all.

Vicki Holt

in the X-day as No, forecast we're And with time, based where is point in best know, our no. an upon only a on backlog. we at quarter. manufacturer to QX this on-demand you available based information X- are

a the So other forecast we which in believe we up best based sit we operate come number activity. indicators where In the projections look industrial at on in the we of with is today. to revenue regions in what quarterly

Greg Palm

last just macro in order of relative one to And QX? least on broader of change sort I follow-up as in Okay. saw at you any that. the or what mean, environment kind a

Vicki Holt

the starts only our as -- week, seasonality, January pretty you Yes. where this holidays soft. And say was is, typically, in The week fell, we soft. the thing incredibly first January of I'll

in in if from don't So have quarter. you total, haven't John, were bib where to know fourth we pick on? I we really, add seen anything up the a

Rich Baker

the we to We other January what's ramp quarter? quarter. us is the visibility great think that starts only a ramps the always for is have slow atypical from not year. go that's through don't I'd us add through I They're difficult. Part slope thing the of little March. it as and any for

So yes, information the now. we right have we've you given best

Operator

line is next Our Needham of Company. the from question Jim Ricchiuti with &

Jim Ricchiuti

So X.X that Or being looking I understand live, really from sounds anticipating you're this benefit benefit you you're I out why. the is on some when this like think Would in QX? goes is it this can anticipate big purposely to XXXX?

John Way

Yes.

I we long term. always will right? positive over like don't our as I think a beginning. think in the at But for -- customers. be think change we change, will view the people general, a And do it, it be it again, They change

I'm modeling said I And XXXX. I benefit for we're our as purposes, looking not think anticipating it. as remarks, in prepared a at big in

the think in benefits I XXXX will and beyond. come

Jim Ricchiuti

going phased this to is in. be And

I business? think Do mainly if the this XXXX. of I in heard core on the you correctly having really earlier, the printing phase business? the will focused this is implemented anticipate you for rapid in piece legacy of portion Or XD this be

Vicki Holt

store Yes. for is in like. XD the printing

[ph] So the our that the with -- benefits in first. system C&C which just manufacturing beginning. be integrated It's we'll rapid will the be see and the customers that will expanded of integrated from offering metal from right sheet

Jim Ricchiuti

Okay. in say your million QX? thought which I guidance heard to the course expense this $XX earlier as associated XXXX for being incurred some some is expense And you relates out I John I some heard us the as Can of over with call guess of spread you I is you give sense that the that you year. that that to it

John Way

back as for to and of right amortization. live testing live bit a support in in ready Yeah it you’ve then and period actually the up in there during got doing getting expense pick more go go period after we're training QX the and and the half little starts is QX, a

provide So get we guidance move into QX. the as we able more I think we'll be as go through color visibility and to the year for

Jim Ricchiuti

and being outside this implemented Europe. is the And of US

Vicki Holt

Europe phase, it North second will so Japan America. in Europe North in will implemented and be be would so the in and Yeah, just America.

Jim Ricchiuti

the timeline Europe the North same for is And as America?

John Way

further live details those provide and our as go we go progress date. We'll towards

Operator

this closing remarks. we'll for Thank time you. At turn

Vicki Holt

for Great. today. Thank joining you us

We model. of prospects our business are confident strength long-term the in the and

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

continue Proto Labs updating their our call. progress We experience. continued our I forward X.X, to and enhance their Thank our during look thank interface for as our technology Labs' you want efforts innovate the customers to next service as to you. on customer's Proto our With we with for offerings support. to employees well

Operator

This you. conference. Thank today's concludes

lines at may Thank for You time. this your participation. you disconnect your

Proto Labs (PRLB) 6 Feb 202019 Q4 Earnings call transcript