PRLB - Earnings call 4 2023 | Proto Labs, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to Proto Labs Fourth Quarter and Fiscal Year 2023 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.At this time, I'll now turn the conference over to Jason Frankman, Vice President and Corporate Controller. Mr. Frank, you may begin.

Jason Frankman

welcome, XXXX Proto Earnings and and Fourth Rob, Year Full Conference you, everyone, Labs to Quarter Thank Call. Proto Chief I'm President joined results ended Officer.This for Schumacher, full quarter its December and Bodor, a morning, Financial year Chief Executive the release today Officer; and financial by announcing Labs issued Rob XX, and press fourth Dan XXXX. on The website. release the is company's available

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

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

Robert Bodor

year Thanks, earnings for our call. Jason. joining fourth quarter Good morning, XXXX and full and everyone, you thank

financial a our resulting and record strong priorities and We through continue the in on to operational results. quarter, execute year well fourth

most day improved to the solutions $XXX most comprehensive while examples we Proto XXXX, fastest across digital market complex the Labs share guided to the is year innovative for few manufacture now Proto time innovative high-quality enable offering challenges.I'll custom our for robust manufacturing to returning new flow by their parts to empower to were we For bring and delivering We world's cash the by industries. Labs how customers shareholders.Every first which companies pioneering capital of million substantial to accelerate XX-year innovation the mission, revenue at service. in and generated above of history, the earnings, a ideas full generation next world's

network, First, EV the to supply a customer This and introduce sector help I complexity. quality Proto we and growing vehicle partner hubs electrification Proto size Proto them fulfilled their capabilities for various which recently of parts, new Labs to sustainable chain to been a Labs the through fast which through order our move vehicles as injection manufacturing received January.Proto from molded bridge rebranded beyond times factories want they and our with examples has our network more due Labs our manufacturer business. share involved and manufactured lead has in heavily first as network X which their were challenges rapid from of options. electric Labs prototype been creating vehicles One factory prominent is customer a future customers. reliable in industry, years

need. have manufacturers adaptability very auto EV our provides the offering of and and requirements supply EV the agility manufacturers, As traditional flexibility different that development combined manufacturers chain and

to the our power-to-weight improves digital our that factory and leveraged printed manufacturing aircraft, the narrow-body and capabilities complex electric Hinetics, We and the precision surface complex XD industry. aerospace in digital are through future incredibly excited an more vehicles.In electric manufacturing with create emissions-free to part advanced to design and company also was a jets regional that have its speed component maximize manufacturer. commercial new sustainable cars, continue a has innovation our support our ratio. this to due metal customer for motor work developed This help a area addition electric in

market Our Hinetics exploration sector accelerate in innovation speed aircraft is involved the to rapid motors.Proto Labs critical. services where commercial in space innovation allow is to in also

develop time comprehensive We leading CNC recently arise to expediting example turnaround of technology. demonstrated growth successful right successfully network and share manufactured the This offering. that our a like Labs an say by enabled elements to Space today progress manufacturer and Labs track. final XX,XXX comes the industry. many to we with available agriculture. contraction Inventor executing continued unexpected Labs to a the When are precision and just experienced that is offering X that components Proto Inventor's environment priorities.XXXX of and the capacity our machined cost-efficient These XXXX satellites. to machined ability program gates Labs a and provide to combine equipment which to Proto continue meet Proto companies an confirm over challenging was has this examples different through supplier. strategy drives year, take for to presence quickly to in short a positively critical highlight comprehensive stringent industries, brackets XXXX, against We advanced applications. in while every sustainable systems accelerate chain existing Our impact the I'm meet day Labs. provide customer had customers we proud customer high-quality our significantly worked Labs lines. supply phase good, structural offering world. and empowered several design combined we from We a their in Crucially, global Proto satellite ensure machinery components, Proto Space that our parts the services to to process.One turned agricultural manufacturing speed throughout contributed our in customer both in a in arise, specialized the materials to factory the XX% with offers in exciting on rapidly Labs quality, quality greater and In always comprehensive network.Proto innovations served variety CNC business the one, aerospace manufacturing network factory while of Proto and delivered to adoption market. We at in the get delay can customer manufactured industry-leading of Inventor scheduled components demand allow innovate. keep complex Space for innovations through times, order project in allows the customers and disruptions

leadership entered Our what you'll priority and our areas. we of team with executed strategic I'm objectives, recall, X proud on we accomplished.As XXXX

Investments in orders. transforming orders those Molding to increased for we Injection have Injection Machining; stated report a supplier, have driven key success Labs drive our allowing customers. that growth with narrow part in Proto business, year strategic the customers. value we our CNC true strategic we Collectively, that to profitability. Molding competitive winning X services, pleased and fourth these consultative on delivered We our molded investments both digital year-over-year for First, second, revenue growth growth priorities.On expected with X contributed largest successfully goal partner Molding to Molding to production-oriented to pricing value by of to we our XXXX, and injection been Injection and improve earnings to full through our Injection shareholder design larger year. larger our am serve quarter as achieving as quality, source provide focus I single the in of a call ago, services met in

times, our benefit successfully CNC took combined XXXX. Labs from more the through revenue and complex priority grew fulfilled where by our CNC part Customers the continue factory tolerances, we offer comprehensive improve fulfillment.In growth options lower leveraging more offer, win in customers longer Molding Machining, finishing complete through network growth in Proto greater the to lead orders Injection and other the network potential advantage addition, part most at unlocked and XX% In area, we and network. designs broader industry. Labs the combined Machining of Proto larger prices

anodizing We plating at factory, expand offer CNC best-in-class times. also scale invested to in launching the digital our lead our and

cash $XX cash drove through to year. in capital repurchases. per non-GAAP operations, margins through we in million profitability improved We and shareholders.Proto over factory throughout and network profitability the value and Both from grew the year-over-year free highest earnings XXXX, $XX we significant generated back in Finally, million cash X% business and our XXXX Labs shareholder improved in differentiated share flow model and our flow gross share returning to generated industry, of paid XX% shareholders XXXX.

priority customers improved by continued drive customer number orders per factory in and financial revenue creation. growing in execution Success for lead continued shareholder strong foundation a of set we and offer. areas priorities so, all in will value strategic And success the using our the are will second, we on at strive Our out year, to expect robust will XXXX provides the to areas XXXX we as of To XXXX.This beginning network the do services. increase follows: first, priority larger to revenue. grow performance these combined

and the driving increased we're growth offer, growth network. drive through combined which the and of Specifically, will on factory XXXX, This revenue in substantially the significant in I expect focused XXXX. number users in both

well teams the and prototyping includes both the a Our network existing orders factory from are production, go-to-market equipped larger to offer is customers.Next, new larger overall the to which on our emphasis sell and market. combined promote aligned to a through and driving and shift

expand continuing to public Since need. the generates in focus Injection offer, the XXXX, in was importance serve our customer. lead Labs Molding, we and factory, network share on price, satisfying customers, increasing services, these order on X highest will to our of With which orders needs production our our the value lower of customer for XXXX.These will areas while of its average offering in of times higher existing wallet. time highlight Proto customer in we customers Specifically emphasis the larger through new their the has focus network of per the of revenue longer the add primary initial

resource, this will talent Labs XXXX, with rewards. parts work, with accelerating continued revolutionizing as focus custom acquisition, a and their investments the single-source internal continue also strategic enabled Proto will to our through While great people. to total deeper and important customers in larger combined training to and Proto production and important, offer development we is serve improve employee we the go true to is continue more areas a place is invest needs to us most experience Labs employees innovation. like in supplier.In manufacturing prototype of still our our and

despite values to Labs our delivering XX we doing market, from more us the partner take to than to for industry-leading set the in We remain for to and few share first our our employees X,XXX have increasing value for the XXXX company right refreshed Just strategic and on meet at Resilient thank in success. excellent look We at world's we to contraction. becoming shareholders.I headwinds investing model the future. maintaining strategy time by annual introduced manufacturing this for into innovators, our more us in positioning focused and financial and over results in the in fully now provide for XXXX meetings, will the enabled priorities commitment weeks execution continued talent want encouraged first believe creation company as Proto of beyond.We and for and beyond. XXXX well amazing fourth commitments for information year in place outlook quarter XXXX and Thank the quarter are year success XXXX. to our help financial for forward Dan? your as strong continued value years Labs.Dan of a and our guide full a the you Proto kickoff ago and and our to our finish

Dan Schumacher

good morning, everyone. and Rob, Thanks,

results begin Slide of Our the on financial presentation. XX slide

quarter. we X.X% continued performance. in Revenue an quarter X% Injection was revenue in at grew year-over-year quarter network XD in XX% Slide constant parts XX. currencies quarter Fourth of driven Labs margin X% in $XXX up sequentially several decreased EPS grew net came gross on year-over-year growth to in currencies. income fourth revenue higher primarily quarter our service was orders. at guidance the network volume. Revenue in XX.X% $X.XX Molding the through XX% Sheet Proto higher-than-expected non-GAAP grew quarter, basis the Metal Fourth Labs constant $X.XX. third to million for non-GAAP per in larger Fourth factory currencies, compared to Labs points volume. revenue due network. revenue grew currencies. constant margin million CNC as end revenue in share quarter came Printing currencies.Looking of non-GAAP constant than by first currencies.Fourth approximately range. diluted in in our gross was guidance reasons.First, XX Adjusted declined lower XX.X%, of by saw Proto increase $XX.X Proto Machining year-over-year in constant top Fourth at year-over-year midpoint year-over-year X% XX.X% quarter constant Looking

Injection fourth stronger-than-anticipated one services. the Molding revenues due our in quarter in Next, expectations gross largely margin to of exceeded our higher-margin

cash general below lower our Slide quarter compensation.Turning and million on revenue million, driven at in XX, At results our in fourth currencies look repurchased of and incentive increased let's some total balance quarter. on we cash to XXXX increased Total and administrative by $X.X was sheet Cash operations of XX. sheet million, $XXX December were $XX.X and begin year-over-year. constant full Both margins had excluding On X year, factory partially network from first gross for of Lastly, surpassed highlights the million and $XXX investments debt.Now in and shares the flow balance XX. on fourth we $XXX.X selling, the flow expenses over XXXX, forecast, Japan. Slide which and X% revenue time history. for our million these common

a of Proto in constant We grew gross XXXX. contacts from full was revenue customer in were margin in GAAP $XX.X adjusted gross served currencies. increased generated XXXX network million Cash $XX.X XX.X% over the for to in of X% higher And million from However, X% we operations compared in network year-over-year earnings was XX,XXX per increased total and million, Labs flat $XX.X revenue XXXX.XXXX up mix due in million at revenue.XXXX share XXXX, XX.X% $X.XX, generated per XX.X% network to to non-GAAP XX% company year contact EBITDA. XXXX. $XX.X and margins

to Our allowing flows, model capital generates in return cash to business and growth organic industry-leading shareholders. us invest

to our repurchases.Turning to free During flows shareholders we now paid XXXX, XX% guidance. share forward-looking through of cash

guide to due our nature uncertainty. basis macroeconomic of and the quarterly continue We to continued a turn on quick will business

guidance the Slide outlined on is for quarter Our first XXXX of XX.

We levels reflects than million expect periods. due first guidance quarter $XXX to lower a start between to order XXXX being December January generate This revenue $XXX XXXX and and softer to million. historical early

will been through has trends end more with the our continue March. guidance performance and that recent line of However, historical in assumes

$X compared In $X We plus prepared quarter to We currency concludes points of million remarks. stock-based of basis quarter guidance. favorable rate expect between the add-backs expect and $X.X of on a Operator? non-GAAP or we between expense summary, effective minus to impact expense foreign million to earnings have first estimate million. currently XX%, earnings XX tax non-GAAP quarter. first amortization our of XXXX.Moving first $X.XX per revenue in $XXX,XXX share the first non-GAAP anticipate the a $X.XX.That and We quarter to and include approximately in compensation

Operator

first question of from our line with comes And Brian Drab Instructions] Blair. [Operator the William

Brian Drab

solid on Congratulations a really year in a tough environment.

-- no there's difference from more I in really with or changes developers product just in served. terms? engineers -- just first, significance it's customer So is the terminology contacts words you're efficient using as those unique guess now previously being and longer-term there any there a

Robert Bodor

business that I is in what our primarily was and our engineers think that looking prototyping were signal while we're is designers the a what we're to past, seeing given customers business. primarily product

increase in been prototyping 'XX through of more for higher see us that came volumes into using the and used from deeply that lot for production, and us in converting business customers using our us staying product can the taking production they've with life right, that growth cycle. You to a and

And found customers' we naming product right? change. is probably so why just that our we not So designers that's correct made all that anymore,

Brian Drab

a work. enterprises look at the up guess, next that that it's guess a deeper the production going we customers you Is is when with doing should big I your contract, continue. that's year that with deeper then Yes. mainly to attributable success sense. and XX%. And these per No trend, that good more going my I segue is question that this into makes revenue And

expect could in you contact again looking you that per XXXX? you're now, that revenue substantially into grow As XXXX do

Robert Bodor

XXXX. very increase per I'm with revenue absolutely. our customer Yes, in pleased in

of us of I strategy. in right? they're marketing think our it's capabilities both of our that The made production, aware they've in I our that the a how sales And our terms strong want indication to sure investments engaged the work of of to broader customers success the teams we've make and terms expanding recognize to work offering, in customers us of our partnering into outside relying can production our with And that to transition on and traction their into last now network work, factory allow work to good starting we're customers with and We've and now served prototypes. for with year, customers us -- of prototyping. in our XX,XXX we prototyping used had the we that. are and in see

that average report driving will are and we number. to per revenue continue So increase to customer

Brian Drab

And to it. I'm Great. I make then just Okay. be or on that on clear want really clear sure this

you softness what the March. guidance saying you your the seasonal -- that seasonal and saw don't in and guidance said typical that you're the you're January seasonal assuming the uptick that think I -- December is in typical assumes in You see

quarter. softness that You're seasonal that understanding persists kind through assuming Am the that, of first I right?

Dan Schumacher

Brian, this Dan. is

reframe. me Let

we saw mid-December. So that like lower January. starting into to levels than And historical then persisted

so pick did assumes And a and where happy later from with but than the up quarter. things we're at both levels the levels now, the we'll the was order perspective that historical usual, through It time. same quoting not are guidance at be and those an

Brian Drab

a that saw you typical? lower than December So was

Dan Schumacher

U.S. was we but of they a close lower was new the from year it than talking dip, their for were within period don't to a But see where Second the than of year. as in what seasonal of of started historical, had if right, lower dip do we -- prior it time normally that that holidays the they work and budgets, with had the years. December, away been of than longer to I customers, a I Brian, half know, something them don't Europe were lot and timing know the both

on... back we're Now

Brian Drab

Yes.

Okay.

at when the closing quarter. done the then fourth I the growing in the say in just $XX you've want the an were just talking Injection Injection we of for year, just beginning me, year, Molding business And about to full and for Okay. Molding million

lot a people of were think I skeptical.

So a talk seems congrats stretch you on achieving that like more later. time. It I'll to goal at goal. the

Operator

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

James Ricchiuti

I off. Dan, go back just started the want to to way QX

in production-oriented to some And of the the sounds respect just the almost any And similar the talked you're seeing early part You quarter. as production of change more of some then things in shifting about wondering, on in current picked like toward slowing clearly, side it there up. the with the activity business, October. you're business? you're Is linearity quarter doing trends in what I'm

Dan Schumacher

Dan. Yes. This is

of normally slower sure, rebound we're of to we of larger about kind kind Let disrupt as in coming into When me seeing the orders were the quarter, a what from that lower and as As what quarter, Injection Molding in on talking and January.In quarter, I the last was of we get what holiday softness really we these seasonality right? CNC we to through seeing. pointed fourth see out was we in see for out. of walk trends in specifically seeing, you you like is as what I I then been just what were that dip are some as some But it orders Brian in, we quarter strength terms talked had and maybe that larger orders was than the was seasonal results, area. the strong could had call, closed the can it

what little Let to we're seeing those production about in bit Rob me talk quarters. a flip to it over

Robert Bodor

and have I with in could kind I'm And And glad QX pleased as think our will as for in that be of we of think able with that's contraction our orders. as our a with we to production the with look in right? help those to Injection really forward, we our work going forward. more overall presence and customers whole, have it services of our of will particularly look more at more been growth seeing have that particular, I all those that right? XXXX, there. in more orders, business Yes. to more I And saw and create expect growth. But in Molding, manufacturing in the consistency, done I more the ability right, I we sector, the across us of to attribute that larger customers to mean, and performance that do we successful performance larger I'm that of And

James Ricchiuti

you're feel other a Rob, I'm accelerating been growth quite the the struck the seems -- got some which, really driving this or growth the And rate the been, shown is and growth have in a thing you've is by, U.S. in time. it It picked what frankly, as up assume describing I I is somewhat the strongest tepid so U.S. And for like the to over U.S., last has in year bit. like that's

Robert Bodor

a strategy, getting that with fact Yes, pleased this our of I'm very we're customers with the result so... traction as

James Ricchiuti

seeing of but driving Where these verticals? you think highlighted about in you use the production company think of if cases. your -- yes, last you the through if network. to terms more do traction production through some me, You question about in business -- are Which terms for most trying you're of what the

just to one thinking, if market more vertical, this? receptive general, I'm in is So vertical any

Robert Bodor

saw remarks. cases automotive, And in shared medical the the in of use I the strength us. the we In fourth Yes. per with prepared examples continued kind of aerospace that and quarter, with for some

Operator

is The Capital. [Operator with question Greg the Palm of next from Craig-Hallum Instructions] line

Greg Palm

of congratulations a offer for or bridge the revenue bit, EPS but sort whether we to implied well I'm I'll the little down flat and pretty curious, my QX, from to good QX it's end the as QX to guide specifically EBITDA QX. the year. to from a substantially as midpoint, down about profitability, at think

that lower that? Is with takes of maybe help puts So higher is can margins, you associated just the understand that maybe and us some OpEx?

Dan Schumacher

Yes. Great.

to a expect couple that. come quarter-over-quarter. do a couple There's are of reasons quarter-over-quarter. gross down of going on things So we One, margin for

business factory that to mix business softening higher start the of at First, we talked the a January When the factory end have quarter about to the compared business. impacted of expect December the more the network it fourth that impacted the I of first more network impacted blip business than that's in quarter.

have from volume, we a So midpoint saw. we're a expect down be volume we you the going it of because headwind but to mentioned the to softness mix at that the perspective.Second, quarter-over-quarter

because little lower is to be a fourth going be lower, quarter-over-quarter. first addition, a volume their because be much business the then bit of to SG&A little to not factory as from last, bit are In to those going softer, quarter absorb costs.And will up margins having

timing some off have the year. we start things We as

of tax things it accounting-ish as Some increased well dealing Those vacation a are SG&A. with those in of quarter-over-quarter network accruals, things those incentive comp, as investment payroll in the accruals, grows. in terms of type as headwind create

Greg Palm

the Okay. if that? not didn't you comment think think you Rob, care EPS So sure grow on basis? or to color. missed I I expect you whether on a profitability, but revenue prepared basis. heard I year-over-year that on And in I'm helpful commentary whether That hear EBITDA that any it's on growth I it, do also a will mention year-over-year do you is

Robert Bodor

Sure. Yes.

revenue in expect so So to coming sector, of which and that, on manufacturing were contraction a that respond very last off Dan I'll the yes, conditions year. Dan able we share we're year, grew, regarding I'm I'll despite right, pleased with do economic to XXXX. -- again we take with let talk in and EPS. in we side, challenging let the strong

Dan Schumacher

factory From automation in we're played we perspective, improved network. factory. margin, gross XXXX out, When had the our about into a factory the of the more terms in the deploying I talked and in and on more how both call

through allow AI-enabled pricing in through.On network. our that more side, vary we have going that within us algorithms labor are on that's We within our the XXXX, network the our also to volume improved factory our robotics in comes margin have that and improvements we as

We there's expect into to factory. the Greg, do automation we basis, bring that right? more can in next So a similar year,

productivity also maximize the our them going in work that continue in you last the algorithms expect margin factory make margin the noticed to was to said, to to And to those environment.Now flat. AI on more more have on have We we're we this projects year, network continue that being we if side overall efficient.

grow depending to expect flat margins what want best are to that driving factory plays feel is the to or tell of the offer kind go right? on in And how the ]. they do solution way more the stay And network the we [ So that customer our us to this that That in not, may than business the XXXX. for but to is going XXXX margin impact us out, through some of is time. So if we're have as period model. grow, that we we on we'll

Greg Palm

lastly, some wallet share of do existing Is Okay. to tracking new initiative, customers? Is as and success growing you Understood. it with that. relates data of this more are And important? accounts? this then the for it sense How of metrics that? combined offering a the kind strategy success with that or it you associated you kind I broader of strategic mean what -- gives view what's like growing sort

Robert Bodor

Yes. Great question.

And got the is of the to the what customer both teams serve customer we customers would on in our we our entrepreneurs new and of on in course, to year, customers both in Fortune customers. XX% of salespeople largest focused XXX, XXX, marketing want driving we I But we've Last from those. existing right, and Fortune our companies base place we've grow our industries. served So an the our got standpoint from existing target industry. and initiatives really XX,XXX are say our individual within

that years serve customers had that offers haven't to now to customers.And innovative I had more that grow customers. for base think They've end us network them prototyping. us and factory customer to top right? in of life average of that sure a got they'd for together we're X so through past. grow past. investments us for customers.I put production per telling for measuring our base, the to to customer or their X customer. that used that, of opportunity relying are in tremendous for them tremendous us just revenue And and quantity about a to we've on what expand great about use with there's think us production And the that existing of existing right? we the and them on We our the talked Our to allows within haven't mean, for we there's been number so I prototype from make opportunity offerings quantity between love the just in We We've use allow we're talked go us through million, capability our

are right, and We the also pleased kind talked to we're that there's that other make But the last buying the these that progress year we along number look about we that this network. offerings, customers with showed internally combined the quite of making from progress. And factory at using of lines. sure I'm things tracking the of both a number

Greg Palm

associated At either KPIs the something or both services? Is point, of start might disclosing? with a some some of that that those of you number customers using

Dan Schumacher

answer Great. yes. is Yes. The

new customers profitable think space, to share term of continue year. generate able this having existing business of get the in customer every going more wallet I this our industry, to serve long more, a is than at in to customer right, chase more a to their being rather

these But grow that. of to for doing the Of some course, we're in going new we still share future, will We're sure, customers. metrics.

Operator

also We've end our This question-and-answer of will reached the conference. session. today's conclude

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

Proto Labs (PRLB) 9 Feb 242023 Q4 Earnings call transcript