PRLB - Earnings call transcript Q2 2024

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Operator

Greetings. Welcome to Proto Labs Second Quarter 2024 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'll now turn the conference over to Jason Frankman, Vice President and Corporate Controller. Jason, you may now begin your presentation.

Jason Frankman

everyone, Labs' welcome, Earnings Quarter and Call. Conference you, to Second Proto XXXX Thank by President Rob Officer; today joined I'm Bodor, Schumacher, Financial and and Chief Officer. Dan Executive Chief

its ended June XXXX. Labs press issued company's This on is XX, for website. morning, quarter release The Proto announcing second the financial available a the release results

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

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

Now I'll turn Bodor. over to the call Rob? Rob

Robert Bodor

and in and environment and Labs' per activity grew for a X% our model produced joining grew Europe, improved of play non-GAAP manufacturing our immune which profitability. our our currently you second first algorithms, continue share resilient everyone, and revenue share market, managed from is in call. U.S. basis, the contracted industry-leading thank growth environment, AI-enabled factories, challenging macro the costs in has automation earnings XX%. In we Good in profitability. Despite on to improved earnings half has an manufacturing morning, operating pricing Thanks, improve our a volume. and the business with the but digital efficiency Jason. quarter year-over-year No in We've increased the XXXX Proto headwinds our and take at

quarter made we our increasing per higher orders. customers comprehensive the good using offer, In customer progress X XXXX, driving and our strategic of number through revenue second against the larger initiatives, of

Our through benefit adopt continue factory customers to and our from offer recognize, network. comprehensive fulfilled and both

offer As prototype enables from manufacturer of Proto discussed, customers as use end to comprehensive to Labs we our a the to previously life. product life production throughout single-source cycle

offer, long-term stages are the in growth combined presents an fully focused driving our on We still opportunity, incredible early and utilizing which we're of customers adoption.

In fact, over combined per customer year-over-year. We're is XX last the up the through across of XX% months, number services. using driving on higher offer focused in orders also revenue the larger customers

this first second over contact result. with to quantities as decreased While I'm revenue compared large quarter, the increased revenue fluctuations we onetime we customer year-over-year. orders shift and pleased per per to the There more to increase but term, X% strive production larger will quarter-to-quarter towards continue work, order be customer long slightly contact quarter in

the this with was prototype Let the water new product, that was the components. launch an were critical in of product to offices. dental phase Medical Time we our called share to market for production treatment company the important captured me for critical to learnings and bring capabilities. to a also was now these it transferred customers device working value SolmeteX example of unique

network. injection enabling combined production lead our XD production. digital fulfill SolmeteX printing We the network With model, with then world-class on through in Proto manufacture for SolmeteX' was factory molding our prototyping our both prototypes X through to molding injection was Labs factories, supplier fit. partner times. We the and and fulfillment looking quantities perfect innovation via through

production factory, the in through prototyping the network. So

fully utilizing which strategic to aligns Labs' offer Proto our with own their customers first is initiative. business, value to their SolmeteX add and combined

our has work. second our SolmeteX our customer for initiative, As also relationship strategic contact with of because increased revenue the production per

really and to gain wonderful combined single-source network example is product our Proto the life throughout as of customer enables factory So how offer using Labs manufacturer the a value this a cycle. by

volumes. Capturing seeing work number eventually a customers are massive production, existing we order many growth While Labs prototype from and from Labs their Labs. customers of for a are customers in go prototyping Proto to use procure both which prototypes still there Proto and additional growing production production for opportunity Proto is elsewhere cases

customers been an that manufactured including efforts, challenging factors, environment broad-based expenditures. higher macro by goods, reduced However, is interest capital rates, for cost-cutting have and we're in impacted operating moderating and currently demand

we earlier, XXXX, the while As Europe contracted. manufacturing U.S. of half and in grew mentioned I first activity

industrial just in what Despite deeper yesterday, the manufacturing to since contraction. activity these we U.S. focus can the core indices seen in control action fact, we learned and the have in XXXX. contraction consistently we our growth. the U.S. PMI into was as the the challenges, X-month X accelerate U.S., persistent And have In at last machinery, manufacturing manufacturing enters order on to durable low slowing are that other continue in and post-COVID goods, taking July Eurozone. In indicated we for and goods growth in for years capital surge orders continued

broader first and unique. faster the faster, the in the amidst in market capabilities Proto years, half we than environment, a manufacturing Labs operate showed large in Labs' grow not Proto year While believe are constrained much past few the in have am We growth addressable I fact. can we satisfied and of

unlock accelerated in to structure. So internal growth, our to changes we're making order

you to I'd in position better performance believe few business improved these for walk financial take changes will the through long minutes to that the term. a like we

separating forward, fulfillment operational revenue are Going the we generation and work. from

fulfilling be change ensures The on and factory global to teams org enables new seamlessly factory customer efficiently revenue to of best life of as focused across the and will us and engagement serving the regional on customer and entirely orders with single sole more Our needs. encompassing network. This part regional operations offering revenue will the production we and have operations network. serve revenue both customers' organizations responsibility a and more now our possible structure needs experience, allow ensuring a organization strategy customer global organization The integration focus between complete growth. also accelerating will the also product cycle executing unified

role, global team in strategy network. world-class manager on So through fulfillment transitioned I'm XX result Global named operations manufacturing focused our has XXXX. Kennison, the operations as years nearly eliminated and until as Mike of from manufacturing both and global the Mike this experience to Americas But GM created of we've factory XXXX impacting for this is members. of regional our leadership the Americas, a of position Head excited Labs the the in being X now about roles, Operations has change. executive of newly former a the responsible reorganization, GM general the Proto led Mike for Americas of organization. In

of So leadership, Mike he lead brings that person experience wealth confident I is organization. to right and am operational the the and operations a new

As European period, for best GM for Bjoern thankful endeavors. years, very personally our July we noted I X in his of filing that for his Bjoern our business leadership Bjoern's thankful longer him is Klaas no the XX, are and in almost led over future EMEA I region. and on contributions. truly our am SEC wish

potential organizations about drive. regional the excited I'm growth will that But our revenue new very

revenue of the his key he The Europe Sean driving draw successes will performed BXB leadership current the in strong Network, in records will Americas' Sean Sales Going several prior accelerate sales in and led org revenue. for our Pjotr well experience a joined he enable leadership with Pjotr, Horowitz, Farrell, experienced Labs be that VP Managing on very of in Proto leadership sales new forward, has Proto Pjotr's BXB And sales track under leadership. which this our organization teams our my in Director of roles. and growth, optimism The sales. Labs reason Sean reorganization XXXX. is Labs to joined be leaders will Network X by revenue led extensive XXXX role, in Americas. currently, of Proto by has will

we've phase and accelerate We that costs. believe drive continue strategy results, and growth, strong diligently support will improve our efficiency, our while next to strategy, bottom and aligned line managing our our of serve to top offerings. Labs. These comprehensive these confident enable prototyping from excited will even of changes customer our am I to to Proto about us customers make more future production changes of me and adoption accelerate org the

of delivered strong year-over-year Labs XXXX, despite flow the and and operating half first challenging a environment. cash Proto in profitability growth

customers for our we you As Proto and of and we intact, I year, marketplace. advantages continue strategy. the to our provide team's proud brand, to back offer, of half our our reliability combined priorities the very and quality dynamic employees. executing in deep will industry-leading to our commitment serving believe am a Thank remain on reputation unique move all Labs' incredibly and into

it I'll third our over for Dan? our Dan outlook quarter. well the cover as now hand in financials detail to to as

Dan Schumacher

Thanks, Rob, morning, and everyone. good

Our financial Page of slide results the presentation. on begin X

was XX.X% X.X% quarter, currencies. million, up in revenue grew million of year-over-year $XXX.X constant network Labs' quarter in $XX.X Second Proto revenue currencies. in the constant

X. growth constant revenue outlined by on Slide to currencies service Turning and

molding by Second year-over-year. through CNC Labs smaller while Machining network. flat continued was grow, project X% growth year-over-year, from orders quarter strong Injection continued revenue prototype driven orders to molding grew larger declined. injection Proto customers

the was first flat Sheet year-over-year Printing quarter. XD year-over-year. quarter to and up Second revenue grew compared revenue XX% X% Metal

to XX. Slide Turning

Second were was unchanged employee-related first XX.X% a quarter margin in points increase factory quarter was non-GAAP compared in in non-GAAP XX.X%, gross an operating margin XX decrease flat non-GAAP various up basis to network by gross was sequentially to expenses quarter, while discretionary XXXX, the from Labs' first Proto increased margin expenses offset Non-GAAP costs. of XX.X%. as sequentially. gross the

XXXX. The quarter net and was the $X.XX partially in slight second gross first top $X.XX of volume, the result, expectations margin. offset to down by at per a decline income quarter As diluted improvement sequential our share of lower a end compared due non-GAAP was to

earlier, our mentioned over XXXX. first the Rob increased XXXX of half XX% adjusted As half first EPS

to Labs by margins. first XXXX was Our half up and network basis both the improve gross of non-GAAP margin gross XXX points Proto increases driven in year-over-year, XX.X%, in factory year-over-year. industry-leading continues profitability Total

flow flow $XX.X million. to sheet on balance Cash highlights and Transitioning cash Slide operations from XX. was

On of $XXX.X June best-in-class quarter. and shareholders. investments and growth invest capital in Our and We shares X flows, cash in cash to business we us generates allowing debt. million million return XX, model had repurchased XXXX, of the $XX.X common to

XXXX outlook third across have reflects challenging a Customer pronounced Our This is outlook contraction Slide patterns quarters outlined for we in June, that manufacturing operate. has geographies than continued the more previous that we operating environment on July. softened in ordering and and XX. the quarter of in experienced

seen have million rates an acceleration revenue Order were to in $XXX $XXX Accordingly, and in U.S. September. guidance progresses. We Historically, generate between due million. August July quarter and rates low third expect the we daily the the in reflects pickup to as holiday. early a

have on foreign XXXX. a of impact the expect to to quarter revenue compared third We favorable currency $XXX,XXX

Moving to earnings guidance.

expect expense and include XX%. stock-based $XXX,XXX. $XXX,XXX Rob that non-GAAP We summary, In onetime to We we associated quarter $X.XX. expect add-backs and non-GAAP incur a third EPS of third in to and $X.X costs non-GAAP with quarter earlier. effective $X.XX the amortization anticipate estimate We the tax expense of rate reorganization mentioned XX% compensation between million currently of between

mentioned faster. and believe Labs our grow Rob satisfied performance not that reiterate, To are much can recent earlier we with Proto

We growth Regional action. in better the unified serve new single a As term. our described Rob new them a this to accelerate structure operations on taking The cycle. support experience result, will believe structure organizational offering strategy the revenue to we efficiencies via on will will customer product represent organization fulfillment changes be positioned and and focus a customer factory throughout the teams accelerate driving network. global and and as the revenue long The and growth. our life improve are focus

efficiencies across just Proto fulfillment. through on not focused Labs are We

we to preserve continue a advantage. and prudent with our Earnings will management profitability. and such, will that maintain As to our key Labs, and continue drive are we be differentiator best-in-class expense Proto for

prepared That line remarks. questions. the concludes please open for our Operator,

Operator

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

Brian Drab

was with start and could the caught I we sure not first it hoping reorg, just I'm time I all I of guess, the through.

you accelerates how could what if So and doing was growth? and the Rob, wondering, impetus is it on you're what elaborate it for just I

on follow-up it a is, and impact margins slightly what is sounds the term potential the is now, smaller like cost in then takeout? of the kind team medium like And or also

Robert Bodor

question, sure. Yes, Thanks for the Brian.

in the does of reorganization that even our and purpose the us several better really around it and to is So we than more holistically, have customer focus ways. been serving

all our were and really we where right, that So from market who general old in model overseeing regionally were of and from had And one, our business. that. the P&Ls U.S. Europe, regional to moving were regions the in we're came where organized, from managers, fulfilling in going the we factory

so now to bring operations whether customers and best our ensure where, the exposure in factory that We're to experience global full we're operations that a in is we we've way, from job moving drive comprehensive customer really capabilities right, to got giving we it's it opportunities a offer to unified organization, organization, every unified find productivity X standpoint then full can or can our that an our to and network, whose broad that.

on unified customers plans focusing demand had that teams region, in our standpoint, revenue been. unified more on From in than bringing they'll driving having incentive customer -- single now a effectively we've got even with really to customer-facing and on go-to-market a just way each offering focusing be we

rationale the and excited So it reorganization, we're internally. very here for the that's about

You asked about...

Brian Drab

that just suggesting Yes, just doing a the fast how work going of customer cost. provide for But get who an activity right at in network they're I'm I of they team it's production lot like experience moving then would for products same benefiting benefit there? something, production Like then it's asked customer a but and to Labs in example, more to Europe, to more move will maybe track this development the I that But seamless maybe I helpful. before and but volume picturing running Am be offered. customer factory, will customer, even and Proto is and about would done holistically maybe higher or you're and use maybe we the Asia a then network, guess? some be on just the all with the this there, the that all a reorg example from

Robert Bodor

got You right. it exactly

handoffs, it's removed the more and customer can unified We need serve So team. full scope. offer. we comprehensive X for that the with They're seeing just the therefore, efficiently

Dan Schumacher

the got Brian, it the team You've the -- that somebody it fastest And terms focusing out a customer. wants, might in just just our customers, of that that what They're I be customer in they our need be fulfillment prototype that out that would getting also be is what highlight: needs, could and speed or facility, who's could right? on the just of network. CNC what on of focused production

about, about I option is many are the through another," fulfillment our that possible efficient "Oh, in to need so broadest they're most of worried operations way into that scope The revenue want. then And options not getting what get X or fulfillment they're kind of organization fulfilling worried they available. just the customer

to our So organization to on the that customer. the focusing it things success drive narrowly matter is

Brian Drab

makes sense. it Yes,

right? strategy. been year-or-so, customer How The more it couple just going? the next foresee, I'll the able a going of but more know do X got customer total trend growing I've down. do that count like I revenue challenged, Because per your you're kind is to in of start to has the because that you that count But is that customer course Okay. be reverse ultimately questions, again? maybe get now. ask network in think nicely up and you your count customer

Robert Bodor

customer. per driving our Yes, right, our we growth, focus and driving that is revenue overall do, by on improving and absolutely

trade as because this uncertainty you Of they're because we interest cetera. who course, very uncertainty environment. difficult policy, et talk manufacturers, of inflation, all customers rates, dealing a of politically are macro is understand that our elections, with And to

in So having them time are many of period. difficult this a

customer seeing, macro. of attribute count, kind with reflection that I we're of And total what

can driving our what serving about we better, what driving around control throughout for we're drive and there being customers life cycle. we product them the So can

think tremendous we I forward. we go have growth a opportunity as for

for Last served customers. the us us to their They've year, XX,XXX we cycle. us told broadly to use They want product that prototyping. they life more came across

that. increase We way. in them get customers customer. and driving be to that per revenue year-over-year average a working in is growth hard our significant That us alone XX% using to are adopting We in saw leverage

really what customers. term, on that we're on now. right grow is reorganized the at that, can better So serving the us focused in our exceptional so We focus long we doing that's to make and

Operator

questions Cantor next with Our from Jensen of Troy Fitzgerald. line the are

Troy Jensen

in tough a on congrats Gentlemen, good a environment. QX

Robert Bodor

Troy. Thanks,

Troy Jensen

Daniel. Maybe or also absolute basis Brian's on down about following just talk Do a cost up, to going couple takeouts. what be is midpoint of September? sequentially questions flat, Then you in guidance is you on about Can question kind going for here an of QX? the gross range think margins for at look like think OpEx the you up to of

Dan Schumacher

Yes.

So with to slightly gross be I the middle margins down expect range, quarter-over-quarter. guidance of the would

are efficiencies, our from network to but automation some the and the going We volume. through algorithm pressure the factory, still working be is on pushing there continue side,

would see down gross quarter-over-quarter. the slightly So I margin

From expect slightly quarter-over-quarter down be an operating operating expense would as perspective, I well. expenses to

those in, the from if think our I EPS to factor you an middle of range guidance you perspective. get things

question second or it? did of a there Was that that answer part

Troy Jensen

$XX that, for there in actually. biggest Well, there we've competitor know Hubs is growing know, follow-up But a is I X Daniel, stuck been a quarters, you business. on growing I your the but last And year-over-year out basis, to of nicely, the of million $XX it's significantly million. kind to guys faster. just one been

about of talk fast as So share of as can shift there? you that others out why kind some maybe Hubs just the or growing isn't

Dan Schumacher

growth be that able to to continue or term the that to are customers. think us, that production believe really quite injection customer see network. in with think driving through CNC been our for I I And been So holistically in them. long the expose we successful on I that's that, we've serving strong really whether has our focus as going in we and molding to has that seen

right now, headwinds Of cases there's customers this in terms of in the adoption. their use course, clearly for and environment,

independent think And market. affecting that so that's the I right? We're not overall us, of

Operator

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

James Ricchiuti

we this process, having do opposed reorganization, the benefits or if as to appears at to go think anticipate about would how reorganization, resources you additional through -- this anticipate benefits? be think a we you of you And able more to the would of of So it to made? any the investments will redeployment be least as you see seeing

Robert Bodor

the Thanks Jim. question, for Yes.

full really make revenue reorganization, as that's operating really so term, the longer about fulfill effective So X and face is are orders believe customers that's and so better, our and resources and that that we're we key global So sure the we forth, up their purpose way, this We seamlessly is it capabilities, it's as to on of find us the it. would and will focused, growth set you... but work to and redeploying most what productivity really Dan, for in customer rationale serving again, right? about. the additional our we the focused our leverage team fully as

Dan Schumacher

grew Jim, customer And the satisfied us focused to and with right? grow had to grow; that extremely important through growth grow not when half the first through improved level meaningfully, of for things right experiences. only the for environment as realigning of Rob getting earlier, EPS we're I but on customer a growth. But the at order the production, X%, revenue growing through in us really And are tough it, year, in we XX% grew stated we look good. is organization

that growth larger. alignment as does in right, we our and this see a will pickup get growth, larger this. With time, over so numbers And margins

operations over and streamline would I into other efficiencies longer The a benefit will that see you term. unified the longer-term streamlining thing a we'll organization is have tell through

James Ricchiuti

terms called you wondering appears It regions. hearing it. be provide July, seems in you're color Got other be could verticals both additional geographic it to some pretty what I'm seeing But June and where that out out if of you consistent the in there. with could market you The in any we're slowing provide to your in major changes? Any color?

Dan Schumacher

Yes.

like, increasing the at people a saw their put at, Xth sitting the honestly, of happen. Then years. that not after to there'll we've seen slowing desk while did and go that they're was order Jim, in, the on beginning And holiday, I increasing the saw before holiday, not U.S. going be of that rates July, we some of okay, in the they was level prior before I orders really were well, July, to pickup we from June. after Xth So

as And closing other salespeople close As trying about in we an words, a is, answer to think on, project you more more we're to that go June, order. what continued generally what's and in our about with talk going type of approval so through delay hesitancy hearing I would starting cycles, it July. forth, to into a an talk in get customer

we're opportunities have are which as solving still And so in and in, driving growth there. many we on focused what problems that's the that environment the of playing we're our and with but the capturing customers'

Robert Bodor

So in you that industries seeing for most to the last our management serve. this years and half Jim, in I and add, discipline environment margins all the think grew proven can asked We've in affecting outperform in the of been been around also has about year. broad-based industries. I able and in U.S. pretty and of this we I this environment. would been X executing cost of would that We the environment. grew tough also year, this be just expand that a But this first we to last say that we're we we've Europe,

history if you economies, strong in by we GDP look think our in outperformed multiples. back I

think very robust we I So have a business.

profitable. are We

strong are debt. cash a carry no We generator. We

best the are and we serve possible. customers any focused sure driving we're macro our serving best possible in can to on as our what is we way economy, We customer control, make which in

when expect weather and improves, demonstrating cycle We we will be I will growth. this strong storm, the absolutely

Operator

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

Greg Palm

improvement was up on bit that think wanted it sounded, little in July was a in and July said maybe August because guidance to trends But exactly recovery pretty what awful. past answer, tie saw in were into July I orders that what dig out, Dan, picked based comment July. I an you and little don't September. a I based Those just assumes more. your that assume on think would the that in you bit

can maybe if you can? tie that just you So out

Dan Schumacher

we if trend I'm you had Greg. year-over-year, is September, seasonality that patterns Yes. down August and It's than year, guide What about base, if see be talking the a not what across draw on normal recovery. which lower why right, makes sense, last that and So a September right? will lower we that is is August

Greg Palm

I mean Okay. of could into the And baked you give what's quantifying or terms least the us of any guidance in like at sense ballpark? in July? declines sort

Dan Schumacher

guide just year-over-year. what month-to-month. is I we No, But right, the consistent in of not in general, decline July would on guide give middle with the on what quarter, say, the overall and is the specifically is

Greg Palm

about, and at processes? I'm what couple that structural was For on Just due certain from reasons? in stagnated focus cyclical figure little much is quarters. year that either basically away this to you there a of organizational Metal, I the since of to change walking bit here which guess every which you get good kind is, if would it's declining strategy out like this is And revenue and trying to curious, there. of further, more been grower how versus color how deemphasizing last under any does I'm back it a has business view And talked look instance, historically XD acquired, Okay. even new change that pretty Printing, by service? I Sheet was

Robert Bodor

question. for you Thank the Yes.

that bring as again, to others macro really market that that our be we to we in this overall of services where to and of all are and services possible. terms the revenue, meet market, change holistically are and reorganization, that's services is our some is. and are possible. how seamlessly focus can to It our working do customers have bringing customers able than drive the serve this want performing environment So improve not can my as does to be the to Certainly, better we about in needs continue we to and to as effectively organized efficiently how we we as

Greg Palm

mean, I of help So the do some then? in I guess, those of Is some activity organizational hope? that could reaccelerate segments the changes think lower-performing you

Dan Schumacher

Absolutely. Absolutely.

Operator

Thank you. also conference. This will and conclude concludes our session today's question-and-answer

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

Proto Labs (PRLB) 2 Aug 242024 Q2 Earnings call transcript