PRLB - Earnings call transcript Q2 2021

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Operator

Greetings, welcome to the Protolabs Second Quarter 2021 Earnings Call. [Operator Instructions]. I will now turn the call over to Dan Schumacher.

You may begin.

Dan Schumacher

Thank you, Stacy, and good morning, everyone. Rob Way, President our are Officer; Chief today John and Chief me Bodor, and Protolabs' Executive With Financial Officer. issued second XXth, Protolabs results morning, a announcing release This its for the quarter XXXX. June ended press financial The website. available release on is company's the

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

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

a Bodor, Now second Rob? call I'd the like summary of our for turn to Rob over performance. to quarter

Robert Bodor

second second results and performance. commentary joining overview outlook you the financial will industry today quarter our Call. recent Quarter Thank Thanks, our everyone. on provide will Earnings third details John for us our I on Dan, good business an our then with and morning, quarter developments of and for Conference quarter. XXXX for begin Second

of unexpected of to space entered announced manufacturing not During the It's XXXX, access further markets. both in remain the parts remains the to most fastest manufacturing contract attractive data over created revolutionize custom manufacturing began us that to the to We to emerging manufacture trends processes, to years in only world. to reliable additive have in XXXX. digitally online services, and processes. in Protolabs the manufacturing be enabling This Protolabs very in manufacturing recent across plans and these enter or and is We digital public given toward and improvement several our the continuous transformed companies These and manufacturer recent only the and parts offer industry half developments years. unique. range company have experience highlight of that company XXXX, systems X.X manufacturing drive traditional. have of XX the first

digital sustainable by driven our offerings. financial We best-in-class broadest and X the existing customers. superior our the new capabilities, software and to serve market our decades in internal cases, with the expansion the the customers turn our further we unique use manufacturing, is acquisition the lead Hubs' also offer network. to shareholder and digital to believe of customers combining Hubs customer manufacturing network combination customer provides speed of the set and digital offer offerings, partners manner internal world. Protolabs integration of our in the capabilities a ago. manufacturing has times to Hubs a competing long-term focused will to manufacturing and continued We manufacturing year, and network serve capabilities superior have the of We're on in us visual serving earlier deliver nearly consistency of premium the all of in manufacturing profile, Hubs invented space broadest With thread of partners ability with allow will this market-leading our premium that attract enabled value. will Through by Protolabs'

the winning we is for thread digital in will space, digital other the companies outperform of combination model, and the Our and network premium manufacturing long-term. our

future. excited are We about very the

of quarterly to record Turning within performance. resulted $XXX growth range year-over-year second our order in Strong quarter now our million of representing guidance growth revenues XX.X%. and

quarter revenue applications, in including generated from medical As $XX XXXX, the COVID-XX of and personal related of devices. with million second parts we testing equipment, protective a reminder, life-saving supplies,

Excluding that XX%. was revenue, growth year-over-year

supply Despite Our volumes. the difficulties record a revenue second revenue Continuing we in enabled to by second $X.X include a results XX% in quarter a XX%. related with in Molding and we Hubs. markets our in shortages, demand, Labor the labor service tight to in businesses slides far the especially order and staff of for in at wage and grew second outlined due our service COVID-XX Injection full have recent software that to the certain contributed quarter. also of led with large excluding processes quarterly XXXX. growth quarter $XX.X peers'. that many acquisition record intensive part million challenges, the are have are revenue from materials. Molding revenue the U.S. year well-documented X, second in on quarter, labor showed and of revenue healthy and revenue strong Injection the manufacturing digital service over million generated was in This X Hubs adding than Consistent less been surging performance inflation our the experiencing our are quarter prior

in demand Molding experience our business. high We very continue to Injection

the million market XX% of volume in our Machining CNC was revenue of value period CNC this our have The of in substantial historic of creating shortages business, tight quarter most backlog been material lead CNC $XX.X legacy XXXX. over was the a has revenue customers. second times due in with business improve XXXX, XX% from supply, our of lows labor up carry a next quarter record strong the to Molding grew we Hubs, demand Machining Injection of order pronounced proposition excluding orders that During continues and quarter. the second to quarter. best-in-class impacts Machining resonated the as into

Protolabs continued a was an in market the time our times and offer and XD XD to new that case. XX% Hubs, Additionally, provides standard their to increased Printing the benefited this that broader than our options, lead environment. and our options, demand Printing with Furthermore, customers make revenue decision to We lead suits specific through this offer lead new best with fastest Protolabs economy from the now second in CNC and a second the market the flexible still our offer launched we during allows in quarter. expanded we've have manufacturing expedite quarter, X.X service. a in X.X time -- use been and year-over-year prior new enabled our strong suits launch the of CNC for them our record offering possible the best platform. would price point services. make expansion faster range at Protolabs that revenue decision XX%, XD excluding indicating million offerings Printing $XX.X high or us option

Lastly, Sheet increased Metal X% year-over-year.

our for help During in benefits provide revenues briefly create move lead efficiencies. quarter, we New operational operations forward. impacted during second will -- business the Sheet Sheet This one this Metal facility quarter, consolidated second Metal our to improve Hampshire going but into and the times

emerge than economic certain we global to earnings resin earnings. as in quarter to second Due shipments medical We of guidance lower of the Labor second and the pandemic, continue higher-than-anticipated expenses, non-GAAP labor constrained availability share have diluted non-GAAP earnings quarter our per and margin to costs from Moving impacts impacting range $X.XX. both reported our product quarter. was we reported gross May. revenue the this and provided issues

and to operations openings deliver quality As innovative our we in our to deploy move manufacturing strategies forward, we build will customers. continue to parts

services premium in with brand full this. partners. had early and Protolabs' before their offered. to cost capabilities through dropped rebrand name. manufacturing In occurred acquired in thank acquisition continue its to operating team working on evolved manufacturing been addition, range mitigate better XXXX of planned its efficiencies. the pricing business via range full how Hubs, to in a Since impacts the great founding and and a The labor May for manufacturing rebranded January. in and went, January. and XD recently of from the other material want we We're has Hubs the excited reflects as very printing currently the peer-to-peer The rebranding Hubs will service, of to since XD Transitioning and services the Hubs I work network now actively we offer Hubs

In customer offering. broader addition into to launching integration the After is rebrand, priority our capabilities priority year. is the X.X our the of first now top integration of for in XXXX, the Protolabs Hubs the the remainder our of quarter

Investor in to Day, continue the capabilities strategy experience, semi-independently on for unified custom insight respective we continue broadest our organizations operate their the further as on the provide long-term financial While incorporate Hubs over as At 'XX, a presentation great work was next together business with and first a of execution we included into forward-looking offer seamless strategy, of our event our May years. supporting Virtual prepared for customer parts This members Day live included our to X one late and execute to world. remarks and our we slides manufacturing to provided digital both team. The well plan several Q&A with leadership XXXX, our since Investor targets. session executive XX-minute with including amount detail plans,

I via this not of Relations you section to the which access welcome you've it, you Investor watch already website. recording can our If seen presentation, the of

John? well of financial outlook summary as detailed as the quarter for quarter. a provide will John Now, our second third our performance

John Way

Thanks, Rob.

second detailed our begin presentation. results quarter of on financial XX Our Page

the acquisition the the this With occurring full our Hubs Hubs quarter first reflecting impact first quarter, of during was financials. the

results, revenue, served X% XX% Year-over-year million or business. by million the served of the this on with of in legacy X.X% representing Hubs revenue growth $X.X quarter product and up XX,XXX driven $XXX year-over-year quarter, strong foreign XXX product our approximately favorable the increase in a revenue platform second growth produced We X,XXX expectations. growth the growth Changes a with developers year-over-year, organic in $X.X in XX.X% on unique XX% of X,XXX million quarter, represents impact in contributing in second or was developers in the remainder had currency business. our representing constant sequentially. and Hubs developer quarter second currencies. Second line or

XX income statement. to our Slide detailed Turning and

to Our first gross margin in guidance to the quarter quarter XX.X% our and XX.X% non-GAAP of compares XX.X%. in XX.X% range XXXX, the of of

facilities markets, gross due personnel manufacturing and Our the in the higher in of earlier by impacted call. our spend margin referenced was tight in medical and costs as to second overtime labor form Rob the contractor costs quarter

freight than projection basis for second business at global gross slightly In addition, margin quarter XXX Hubs due gross our including remained levels. lower nature a quarter of headwind was point the as Overall, logistics on model. second Hubs lower manufacturing to the represented margins costs, margin costs, and customs this outsourced elevated

$XX.X expenses $XX.X our the and slightly million, operating quarter were XXXX. non-GAAP in below expectations with million total first Our of consistent

million $XX.X investment XXXX. Protolabs R&D The operating X.X of million second the expense from increased million, $X.X in included of and in million. $X.X increases investment Other in million, Our quarter the expenses added non-GAAP depreciation $X.X operating and in of of marketing $X.X sales Hubs quarter. acquisition of year-over-year

operating with concludes at financials. the Our associated revalue expenses consideration the end second GAAP of of until XXXX, in revaluation Hubs acquisition. contingent which some that regulations the quarter a consideration quarterly introduce may the the require GAAP our in contingent we include impact basis on accounting contingent period the a volatility of GAAP consideration

We as this benefit business. ongoing financial the our relate revaluation reporting non-cash the does and have of the a adjusted not the of non-GAAP to operations impact in is

Moving to taxes.

was and to a in per deferred in tax share $X.XX, from expectations share. earnings $XXX,XXX. in changes representing a share a our the sequential in due per XX% the The second of requires tax decrease rate change effective expense to resulted above the tax in XX.X% tax tax in in XX.X% XXXX. prior increasing rate of second non-GAAP XXXX. of law from net U.K., quarter the $X.XX This from and sequential The up result XX% decrease law Our per year of onetime quarter to tax liabilities, rate in assets non-GAAP prior effective $X.XX our the and and XX.X%, us diluted revalue the quarter our the primarily increase the quarter, was and was

presentation. $X.XX are following the Hubs per business $X.XX by margin The $X.XX per in year-over-year gross partially first, per with change the we our practices, per consisted The earlier, prior a of a consideration The year-over-year continue represented of that adjustment in in the addition share. legacy depreciation compression of earnings non-GAAP volume Our our to and of and per $X.XX are share our with a the impact. invest non-GAAP increase scale as decrease business contingent increase of share, described in offset consistent X.X adjustments represented components, share represented Protolabs in of business. share detailed the addition appendix

the R&D now a operations summarized decrease. in investment generated impact balance quarter. $XX.X the unfavorable in the And a in increase on in cash Slide share to $X.XX per million per and second the quarter. statement increased flow had finally, We in the resulted share effective in $X.XX rate tax Our Transitioning from sheet, cash XX.

Our flow an model our build quarter increase as timing and this working investments partner balance. resulting payments, and an and operating by receipts out receivable as our cash our accounts to impacted manufacturing cash in product of including capital, our to increase continue well was scale offering, in in

debt. On in was repurchased repurchase investment $XX stock also $X.X June sheet and free our balance of We balance the million, program our quarter. XX, and million cash under our remains

past third revenue for the our on will Slide outlook now quarter outlined for XX. qualitative practice, with as and Turning expectations our range we summary a Consistent quarter of of formal XXXX. provide cost to the

produce expect the quarterly $XXX growth growth XX% to million, record quarter to and in range to sequential third We of up in representing of X%. revenue to of million XX%, $XXX the year-over-year

an million rates currency impact prior $X.X compared remain at favorable current assuming approximately on foreign to levels. currency to foreign expect the We revenue year, have

to turning Now expenses.

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

quarter gross costs, pricing efficiencies. continued margin which wage we to through in our material other remains working mitigate are anticipate actively with and and results line Our we second projection operating raw inflation as

addition mix of internal the our as gross margin with manufacturing is manufacturing As carries outsourced than model Hubs, gross a a performance lower larger business the in variable reminder, margin operations. a

to Turning operating expense.

our rate remarks. and to effective $XX non-GAAP That prepared between selling, administrative approximately estimate general non-GAAP concludes XX million. be be total expect We to expenses our we tax XX%. and And currently

take Q&A? open Can and for you the line Now I please will your Rob gladly questions. up

Operator

Instructions]. [Operator

Capital with Our first question Craig-Hallam Greg Palm Group. comes from

Danny Eggerichs

appreciate for Danny looks I of in shortage, a kind little is bit Greg guess, that on, This I Eggerichs gross QX compressed I in margin labor guess Obviously, just the more. be inflation, today. on digging into color the stuff. wage drivers to necessarily the going what's guess What's to -- mean, beyond that QX. again to just revenue that towards not starting it's that, same growth. XX%? a the looking expand more to if I I behind out be going be

John Way

manufacturing a gross stated the our before, think is we mix to and bigger our outsourced go gross role margin than as business model I Danny, lower in I going And play Hubs carries Yes, as margin profile a forward. the internal operations.

and look you nicely, and is expect -- mix continue. So as at that business to growing that we

in growth pure going to pressure is look business that number. gross percentages, So that margin on put as you that at just

through actively the well we as inflationary expect customers some as we're costs to the and efficiencies I both operations, internal as in materials. do And stated, think this. and look at our to we so manage we are internal experiencing of some labor as pricing continue working we on with as

Danny Eggerichs

how you're Hubs into Any jumping synergies just guess base? realizing? that about now initial the I feedback should helpful. progressing, think customer I from and That's guess, we Okay. initial that integration,

Robert Bodor

Yes, sure. I take can that.

integration X teams integration plan. has the Hubs together working the gone So are well. on

this, incrementally. great you objective we're really that to rolling customer-facing capabilities going customer As And our to make be it's is and think primary a out seamless about experience. sure

that. growth companies the working, with in their those still quarter. that towards. that They we're And At targets set grew same are last happy the the own time, working the pretty so running we're And has Hubs right just now we're things together. they're independently. XX% of

doing parallel incrementally the our in and capabilities the So on customers present able and service. front through to to systems end, that we're working be by we'll X these we as to be work the backend

Dan Schumacher

Yes. contribution thinking the that you're way XXXX? about Any in change for Hubs

John Way

No.

think growth I that about, with trending. we growth the in XX% of quarter, our line talked expectations, this is it's kind and

gross the softer bit through we're think that had anticipated, challenge. a I little and originally than are working margins solving we

Operator

[Operator Instructions].

Road Research. Rose, next comes Your from Battle Ben question

Ben Rose

for highlight Ben. in Rowe order during in trends average just you Protolabs Jonathan if QX? is at wondering This filling size any I'm can

John Way

We sorry, had hearing repeat I'm could you that? you. trouble some

Ben Rose

Yes. Can you now? me hear Yes.

John Way

Yes.

Robert Bodor

Yes.

Ben Rose

size trends you can average any if I'm highlight QX? So in wondering order during

Robert Bodor

Trends in order size. average

Ben Rose

Yes, yes.

John Way

Yes.

are the line pretty look So much I it that would I orders are our individual and in be the and of bit -- been the consistent. would size order with historically. to a mix bit you little look the and service, a in size, way at average remain strong it's quantities think we've we what larger a in average our services up in the they this experiencing say of I on backlog, Injection at shift have services the orders, those sizes individual and order Molding tend But quarter. built that the remaining during underlying little given data, kind relatively as

Ben Rose

then parts And I'm Great. pay being turnaround customers wondering Okay. a to or premium recent willing there's for been trends towards any faster just if different on prototypes?

Robert Bodor

times is as our model that Well, speed offer of mean, pricing premiums delivery. historical you have the fastest I the in increase world. And standard to does our the lead

in or Printing So a XD whether that's or Injection Sheet there's Metal, Molding premium. CNC or

For X-day And to from premiums move for to example, us. there. day, X-day X-day there -- that's you at CNC, standard to as every very level in so same are

Operator

from Brian Your next Drab question William with Blair. comes

Brian Drab

Okay. in. had to dial I back

you the seems, have second here. Hubs, what in you quarter? Some tell margin you what was us mentioned it John, haven't On or gross technical difficulties gross margin the can got,

John Way

low Yes. gross margin the in was teens.

that to quarter. range, in XX% XX% this Brian, little lower. So A

Brian Drab

are that again? issues? is What why the And Okay. main

John Way

we're due costs the are to that The and main and customs freight issues these incurring. things

Brian Drab

I SG&A? mean, sorted the at doesn't These some that And COGS between -- point any out have sorted the is the of are... of movement you and out? this of include like Okay. costs that

John Way

report with our That's gross we how margin. Yes. consistent

Brian Drab

Got it.

remind for something, so I at company me this revenue right? in $X.X the So or it mean part all I when but quotes, just the a at number. to does to mean, point? I that platform order I Can of is are it look to their like how at Hubs Protolabs still not -- go go explain being you from million to need the quarter? how independent company, is still or think an they part Hubs benefiting from And do is you of Protolabs Protolabs the solid looks Okay. -- company, benefiting being website Is

Robert Bodor

Yes.

X through still working So about Brian, it, we're platform independently we the them. to talked as as running we're integrate the

is to the and on the through customers we'll capabilities Protolabs right Protolabs expose So that bring those them plan the website.

done stage That's the have not We not that yet. we're that at.

So, they're this independently point. at operating

Brian Drab

Are to of additional they though, the Protolabs able capabilities services, any -- being family offer being now? and part

John Way

working being the we're At and most are part, passed I the There's But are plug both few organic and QX. forth. through still to in think that orders how this integration for that in effectively. stage, those a relatively back businesses

Brian Drab

the reasons but on Metal, should what maybe you sequentially, it. Got us Protolabs I also X.X? And just were down missed tied also, Sheet that? be then to quickly was remind why when And on could Okay. I'm in that just if that the elaborate wondering

Robert Bodor

Yes.

we I us a disruption right first Yes. is which facilities. quarter, We also really that. lead back. our question revenue We over But lead that times times So improve on And we'll X last fully can then be some improve question, the a long-term operations We're period. now cause of in able think move X.X. as we which did consolidated that out impacted believe for that the operational the result for quarter. on of the in to our one, efficiencies, and Sheet into the so operating consolidated were Metal and

Right The the and into we're across, evaluating through the we Sheet offer Hubs. of a Metal including Metal planning, working with that have plan integrate X.X now, and that. we're integration prioritization integrating Sheet So that. is will consolidated

now not of so announcing -- I'm we're that And right. not timing as

Brian Drab

Protolabs Right. what's X.X? biggest the the incorporating And in challenge Metal Rob, Sheet in

Robert Bodor

scoped into Well, on Metal it. prioritization. we when end. set the resources And legacy and to working out launched to Hubs front building got We've was that want that it. the it's that have X.X, not of include simply Remember to Sheet at a of business a into time. matter we add We the want are

with launched our and Metal the Sheet our plan. we've that's -- So in X first services. still to always follow-on, was going

Brian Drab

just then And it. question. last a Got

fourth you gave of bit we the gross can year? somewhat expect the In -- growth continue Or quarter, gross Hubs the quarter You you should how about for guidance they the to improve? do little think kind you of I mean margin gross do balance margin. and margin margin farther the weighing for a look as third the are, gross to on. lower on like through

John Way

Yes.

at -- dependent. I mix will gross it's that think we to think Brian, I into introduce it And yes, think as look margin variability to be going continue I projections.

So will rates that depending things on those and growth like impact percentages.

of overall I that what to the through is, our and businesses, in and business. stable we then Hubs be the we're of say we mitigate that inflationary would from there would labor I strong incurring headwinds year growth the remainder anticipate to we're in margins relatively the seeing internal work the will think gross some be some as costs

Operator

turn will closing to over Rob remarks. for now the Bodor I floor

Robert Bodor

morning. integration improvements our on to for continued I around of to remain their much. for into We're your and Protolabs. time with thank performance very in like value next the we Thank objectives. shareholder updating our XXXX, Have Hubs confident customer you very efforts look to our great want day. our to a their year second on continued you for I'm important long-term long-term thank shareholders also as of half creating to globe a the through of second support continued and business. forward employees you move pleased quarter. We quarter for the our strategic XXXX, our I'd focused performance our offer. in Thank this

Operator

today's conference. concludes This

disconnect you time, You participation. your at and lines thank this your may for

Proto Labs (PRLB) 29 Jul 212021 Q2 Earnings call transcript