PRLB - Earnings call 3 2020 | Proto Labs, Inc.

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Dan Schumacher

Ladies and gentlemen, this is Dan Schumacher, Director of Investor Relations at Proto Labs. Thank you for your patience this morning. We experienced technical difficulties with our conference call service provider.

As a result, we have recorded our call today.

With me is Vicki Holt, our President and Chief Executive Officer; and John Way, our Chief Financial Officer. market financial Labs quarter results XX, the release a ended before XXXX. its announcing for morning, opened, issued Proto press September This the third company's is at on release the The protolabs.com. available website

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

uncertainties our forward-looking to differently considered to Please on earnings performance begin, expectations. that and certain recent adversely actual I from that statements are and to for differ could forward-looking statements any subject include that SEC XX-K, including or remind refer like risks we will made results and report relating our annual be statements actual today. to press cause expectations could and outcomes risks our and Before everyone release that additional may to would discussion filings, cause to future materially Form material from

consistent practice. complete release results guidance section financial non-GAAP we will discuss Investor a the company accompanying our of GAAP results. press to non-GAAP of include to Relations our past website with measures and presentation within refer for The reconciliation our slide the and Please

Executive over With President Chief Holt, the Labs. Officer Vicki? that, of recording to and Proto I turn will Vicki

Vicky Holt

Thank everyone. for call. morning, good for quarter And earnings Dan. joining us today you third Thanks, our conference

outlook our additional quarter. our our results on will to John includes through update over the manage systems our to and insight for agenda as third overview business the as turn into financial how X.X of an then a continue we quarter call project. financial COVID-XX Our brief performance for fourth and and the during the Protolabs well I pandemic,

and teams I how and financials to challenging I'd environment. like I complex perform and express our how together on am proud Before worked a to continue performance, in touch business with have our

services. As our communities our delight digital customers manufacturing customers to the employees, with our throughout case market-leading our continuing and top while has XXXX, is keep priority safe, to been

to adapted values and continually our Our near-term trust organization changes, of core has teamwork, by achievement. guided

our colleagues every of our to The uncertainty for control and Proto XXXX Labs and dedication extreme I focus has such each as of global within everything continue we they our this shown resilience have thank to what one want can on employees do to change, and rapid business great during pandemic. sparked a we company. make

costs. to pleased to that high we Turning reported of of end of a of third our lower the We and quarter I'm third by per second impacts at compounding for a and revenue $XXX third delivered million, over driven quarter quarter year-over-year guidance results decline our X% financial above share XXXX. representing range, revenue of productivity improved and quarter. the increase earnings expectations, revenue the X% the share

their economic and impact Our continued result our decline of base. the a revenue global challenges year-over-year on customer is

in COVID-XX $X the from second was the related third quarter quarter. million, revenue down in $XX million

our As personal ventilators reminder, include orders equipment equipment related providers. protective parts a for care to well as and for health as diagnostic COVID-XX

the contribute we to COVID-XX. been grateful are We to to have able response

and project month-to-month. down This levels. orders, and industrial in revenue of third our companies developers customer the yet effect many from with some timing decreased and well continue global many different reductions third funding industries. global XX,XXX Within the base, are delays. data different operations. saw in their macroeconomic broad closures the trend from remain a resulted of recovery, stay-at-home very back mandated demand as to as But in gradual U.S. quarter below to indicates in manufacturing served product normal slight companies for most which which progressive sizes recover representing many trickle of products improvement the we activity sequential During continued improvement unique pre-pandemic nearly and quarter, aligns quarter, We recent

The therefore, to COVID revenue this declined transition And million second QX. the X of in X% the impact region by of saw will compared to were orders of decline Americas to Americas. XXXX. greatest $X COVID-related from generated XXXX presentation. the majority third I the from quarter revenue on geography, our Now vast highlighted earnings Slide QX our quarter orders in

U.S. showed COVID flat Excluding trend third quarter. markets as in the business of underlying the orders, challenges our were improvement. sweeping in all year-over-year the down are or Americas The economic progressive broad end top customer

be in year. to funding customers a industry manufacturing that From at satellite a digital Space for been and valuable in aerospace our continue best-performing industry. year-over-year perspective, this continues exploration our projects quick-turn services growth has rapid the and extremely customer Americas And pace.

Europe constant third recover. markets in XX% quarter European to improved but as revenue declined XX% currency, begin X% sequentially year-over-year the or

industry customer flat, customer remaining medical year. to compared industries the declined European top Our was while last

our currencies the revenue constant the country's economy a declined now third Japan, XX% with quarter business constant currencies. Purchasing the trends. Index to indicates sequentially of sector underlying In continues business year-over-year contracted X% and declined during Overall, Managers' XXXX, improved in macroeconomic Japan's manufacturing but in for XX in struggle, row. the months performance has

the quarter our declined Molding Injection in on compared Revenue period revenue for presented presentation. service X% is third the XXXX. to earnings by of Slide same X

quarter the double third business very XXXX Metal Sheet with XX% digits and of quarter, declined year-over-year, sequentially. both Printing second XD consistent X% well Our performance. quarter in performed CNC growing the and over

of expense what side, the continue, uncertainty control. the focused can challenges we as and remain XXXX we on On

daily of that experience We basis. on the level demand are costs we managing to a

increased execution excellent significant levels. non-GAAP basis. and costs manufacturing margin from resulted managers to the improvement quarter second our focus an a in on teams customer job responding our controlling demand, done plant to gross of Our facilities XX.X% staffing predicted have in on ordering quickly actual and then XX.X% operations This to

quarter of Turning to reported XXXX. earnings. We up non-GAAP $X.XX share, EPS of quarter third second $X.XX from the per

up the diligent were earnings to management sequentially the cost business. Our in due throughout third quarter

and our quarter Proto our performance John are the teams call. a further into in at drive order to later will all evaluating customers. working little Labs Our among carefully new financial the third provide considering environments in spending efficiency, insights

to testing. was top X.X, entering The a evolution XXXX initiated by of our Our a was that meant of back-end customers. and our this environments. at platform ahead project, the continued November, remote work organization, to priority the an X.X Thanks on our go with strategic of executing a on an debut global Labs track desire the Proto better emergence are and quoting We've dedicated forging serve priority Protolabs in the development, e-commerce our QX. systems by in and significant to Protolabs we training communities to documentation, top and first pace U.S. live shifted our became employees, quarter priorities teams safety to work to in have adapt hard while having energetic that despite dynamic health Europe investing our in on customers, followed of and validation, in pandemic our continued working

our quoting of And extremely experience customers. to new anxious excited employees introduce operations. our our the that e-commerce our are support back-end with to digital to are and our working functionality systems interconnectivity begin manufacturing We improved

an Protolabs an experience. fewer is to customer our new clicks experience. a much and better improved X.X with platform will offer place buying required The more platform, than online order legacy overall intuitive quoting

their platform provides addition modern with and easier the new orders. new manage colleagues project levels into of their ability the requirements, to a better to experience In interface, collaborate e-commerce transparency users for user-friendly

is intuitive more our or DFM, than manufacturability, signature analysis design interactive addition, before. In ever for

extend serve forward. and automating its and expect new the satisfaction we moving decades and gradual As the to customer recovery higher by continues With experience manufacturing a revolutionized manufacturing. maintain revolutionize manufacturing and platform, buying new experience, economy this we the leader X up allow continue customer improved retention customers. our the process. we'll We traditional in ago position will our as Protolabs X.X us to digital for

flows our balance to sheet in in solid uncertain financial business produce enabled strong future In model foundation to have healthy and continue this summary, our environment. to cash our continues us invest and

demand. flex to costs to we can continue will where match We

We Protolabs demand reaccelerate will in efforts help experience, will and our recovery. company. and X.X improved additional growth our our continue long-term customers projects have development customer capture builds demonstrated new we as momentum the our the individuals companies to and With invest that as succeed of in through we

look our the as I'll quarter XXXX. in final third of quarter turn for and John financial Now as the over an in-depth for our the call outlook John? well performance to

John Way

Thank you, Vicki.

We or X.X% million financial Page on of begin results quarter $XX revenue XXXX. X quarter the quarter presentation. third of of same third reported our over in Our a decrease million, $XXX.X

Our a XX%, sequential revenue the $XXX,XXX declined developers X.X% an currency in XX% year-over-year year-over-year. but served in in quarter, product XX,XXX constant currencies of We represented as foreign third increase quarter. the down unique benefit

returned demand levels As normal seeing many to their mentioned, production, to some impacts though are customers and Vicki still businesses. have continued of

Turning detailed income to statement. Slide our and XX

sequentially. $XXX,XXX manufacturing of teams the staffing variability decreased $X.X focused revenue Our to quarter, revenue non-GAAP the million demand cost align services. improvement while second our to increased our our across compared in efforts reflects operations to daily of This

with was margin customers, operations gross our on-time quarter standards. Labs in continuing teams in to par while done compared the the Proto second managers XXXX. XX.X% non-GAAP delivery proud work and and in have control our plant I'm of and third the Our very quarter on XX.X% to quarter costs delight the maintaining to of XX.X% quality

expenses. operating Turning to

total operating million $X.X $XX.X down non-GAAP the quarter, Our sequentially. totaled expenses in million

operating the costs expense we have nature second discretionary calls, given quarter. current our As XX.X%, in of last managing spend described the we and prudently first as a demand all uncertain percent and environment. revenue quarter XX.X% essentially industrial from eliminated down our of Non-GAAP was in quarter are of the

of on are and the reductions million while marketing, third in accruals. on expenses usage, $XX.X revenue continue the timing were we sales by compares was second lower In predominantly operating and vacation to back or environment. XX.X% compensation that to The pulling activities most is of marketing remaining This million effective spend expenses sequential quarter. GAAP in inefficient that incentive operating in current the the income lower focus in quarter. medical $XX.X driven

by in $XX.X XX.X% up million significantly X.X. non-GAAP financial $XX.X our revenue, continuing management while of operating million to income cost invest or in the driven performance Adjusted was future quarter. prior was This strong Protolabs prudent through from

up was XX.X% the revenue, of Third revenue period from and same $XX quarter in adjusted XX.X% second up the EBITDA of in or in year XX.X% quarter. from prior the million

with slightly from XX.X% of in Our was rate and consistent up expectations third XX%, the quarter XXXX. third our tax quarter non-GAAP

share year were cost of totaled of On the Adjusting earnings a share. of the our the a diluted quarter and diluted per decrease $X.XX. share stock for earnings in sequential increase after-tax million, $X.XX non-GAAP foreign net per a share prior in of compensation, currency basis, unrealized from representing intangibles income and GAAP $X.XX per $X.XX, amortization gains, reporting resulting $XX.X per

partially were further. earnings of per Breaking gross effective Improvements lower per These share $X.XX of down tax offset benefit the operating related $X.XX QX. $X.XX in increase a a by in the per rate to higher per share. represented sequential increases benefit and delivered share margin than expenses share

Now Capital turning We during X.X. $X.X Slide was operations cash quarter. on third in the million to generated in spend cash $XX quarter XX. Protolabs including flow million, investments continued in from the

business digital produces growth to less due for Our strong levels historical when at required operations our the very of even investment manufacturing is and cash revenue additional flows free not equipment. the nature

at Our exceeds balance the now up marketable $XXX our Consistent of the end quarter. and debt. second securities cash remains free million previous quarters, balance sheet of million, from with $XXX

Now along costs summary in July, provide to in revenue quarter with call quarter Consistent our for fourth turning the guidance of expectations our formal fourth earnings quarter XXXX. second guidance. qualitative of with we'll

quarter Slide on million revenue quarter. XX. in of Our We million currently $XXX.X summarized fourth to compared million fourth to be $XXX range expect $XX in third the quarter to is the guidance

in The fourth revenue COVID-related expect third million orders quarter we COVID-related included the quarter. of and less $X

be part lower the our than to to caused holiday our pattern in Additionally, due the normal quarter revenue season. fourth third seasonality quarter tends by

a experienced $X.X QX we QX. decline sequential revenue in XXXX, In to from million

improvement October mentioned, through consistent slight revenue trends fairly remained quarter. Vicki we saw have As month-to-month progressive with third September. a the

of customer quick-turn business, ongoing on uncertainty and related base, forecast remainder continue our broad year. the to presidential the nature we the election, with range impact and With the for global U.S. combined its the pandemic of to Brexit our a the

expenses. Now turning to

in did our continue the manage third we cost in in levels structure we of our to As services. revenue to each the quarter, will response

or plus We non-GAAP XX%, XX expect margin fourth approximately basis. our quarter gross be to minus

the revenue, margin QX Europe working we with gross the as new begin inefficiencies lower lower forecast is teams in potential pay factor seasonally slightly our Our in and than systems. our operations in Holiday as

operating to Turning expenses.

quarter in administrative as $XXX,XXX the consisting cost and and These of Protolabs on system the general working of convert the between the working We expect in employees contractors be amount when to individuals projected million. is to placed and the non-GAAP million launch, in into our with launch include $XX overtime the selling, in $XX related to and the the $X placed is expenses system spend ease depreciation The remaining new expense systems. of expenses The fourth related $X approximately associated X.X, service. service to million to employees capitalized of million will the working system to project project. quarter the and prior approximately the but of the to of consists in transition was training

Outside Protolabs X.X in third generally to expect non-GAAP costs of with the we our manage costs, quarter line levels. operating

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

X.X want XXXX. Protolabs on the depreciation million quarterly of outline I QX, the in will expense be first of anticipate impact We expense in operating of the the quarter to XXXX. addition approximately in $X.X beginning our also expenses In to

currently the expensed million approximately will In from $X the employee full these to for contractor with and addition, quarter. first increase we expenses resources quarter in estimate the $X million

we will to employees while shift Labs As off. year, contractors many will our roll projects the Proto R&D of the through progress other

final will over comments. turn now to some the I call for Vicki

Vicky Holt

Thank a us. many you, difficult John. year XXXX has for been of

of Labs, manufacturing customers of new services working, Labs. have expect to methods world-class our from to have continuing Proto come For provide all to Proto with they adapted employees the digital while

in a the have created job We to done wonderful adapting volatility XXXX.

structure continue and As manage the remains cost to our will we demand short performance uncertain, term. business prudently adjust the in future

allowing the and will continue business manufacturing ahead resilient manufacturing digital as manufacturing leader business we ensure differentiated created. as the the e-commerce low-volume truly digital improved digital model. to Along as will competition However, the manufacturer with X.X revolutionize and using Protolabs the to and only drive processes, build separate are on our invest platform, with to XX-year industry a strong, us from we prototype customer-facing position we we leader. our the new history -- manufacturing a

this also I efforts for and support. time first of Proto morning to X -- to the for want thank customers for to during their our XXXX thank employees these everyone you extraordinary your through and quarters I uncertain their I want continued want for the Labs and thank times.

customers and We offering our our will continue efforts financial our performance. to improve to

We we value. and our reporting term, are during serving on call. Over you to our our to you the long very customers Thank next progress shareholder committed to driving look forward much.

Proto Labs (PRLB) 29 Oct 202020 Q3 Earnings call transcript