PRLB - Earnings call transcript Q3 2024

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Operator

Greetings. Welcome to Proto Labs Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Frankman, Corporate Controller. Thank you.

begin. may You

Jason Frankman

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

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

expectations. include release and SEC discussion today annual considered relating Our to that recent forward-looking our differ from and performance Please refer expectations and that from filings, actual statements for are will on many press materially be to statements on statements may cause report today. cause to certain earnings and differ uncertainties adversely to could our future or could to risks information risks subject XX-K that Form results any forward-looking made outcomes including materially actual and

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

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

Robert Bodor

results. solid quarter sector, operational third morning, financial Thanks, drove our the you coming earnings results and XXXX quarter resilient our in We above and the call. dynamic Jason. business solid expectations. joining disciplined challenges manufacturing everyone, in with Good for Despite and in had execution thank model approach continued

XX%. we've grown over non-GAAP Year-to-date, per earnings share

our in Hubs. the unique business generated since by of model. before XXXX backdrop, the and to quarterly any cash improvements in model continued the in operating XD driven third profitability driven highest Factory and Additionally, of Network its is testament against was by the macro margin quarter, a part Labs comprehensive gross acquisition fulfillment the Proto This flow our

our continuing growth is year-to-date, and under and flat growth we by invest I to our organizational strategy revenue priorities believe our structure. realigned our However, in the can accelerate execute

quarter, focus in a teams go-to-market new regional to regional As customers and a to and organization order in global drive our we realignment global last separating our fulfillment teams enable growth fulfillment. announced the reminder, efficiencies from to

the first Before priorities. cover to across expanding structure, like on progress realigned our I'd strategic made our

have made on We XXXX progress priorities substantial date. to our

XX grew our and As previously to mentioned, our using increasing customers is the the combined using months, offer Factory last of Network number the comprehensive across growth critical customers of number the In services year-over-year. strategy. XX%

still in are huge the offer the We Proto a growth exposing of for is to Labs. combined opportunity early customers, and full stages

is the revenue as strides Our ] customer per year Year-to-date, increase contract made our toward revenue [ other main well. to priority higher-value shift We've demonstrating here great production contact. up is X%, customer per on for orders. per progress

now using requirement life how progress for leading production. Proto me of the examples high Labs recent following Let with industries this in through needs bring customers are to

went to assist that earlier battery in a the multiple first the and integrated The fully market manufactured parts solar assembled to Labs customer customer world-class Proto clean year a comes production. this from and energy Factory example with system.

helped and we that the ever. more in way lead world-class Our win manufacturing times assembly That's than one complete just customer efficiently ramp production.

to had we strong a their Molding this on have production in key XD Proto medical Labs a for prototypes many supply high-profile mid-volume customer case, case, solve In instrumentation customer's parts. years a chain Injection to low- need another through relationship In supporting recent relied early Printing.

These product this win our customer, business benefit to were enable examples quality customers. brand speed our new production and keep with capabilities our prototyping allowed with inspection illustrate increased production in time us to and how from to quality grow and intact. in line position able their on focus expanded they recent existing established and Our us to launch

enabled highlight release learn, engineering I manufacture utilizes manufacture prototype, manufacturing to of recent with the has also September. a a components we which before quick Racing critical by but improvements in motorcycles press has has specialty parts and at Sunday in the global After following rapid the manufacturing and more finishes. partners a digital of for want using manufacturing team their collaboration Harley-Davidson Proto continuous This a complex end Proto only leveraged times race, parts. parts Racing, larger Labs' our next replace Factory Harley's not our materials, network racing and race week in race turn iterate, Labs' services in resulted all significant few detailed days. Proto team critical Harley-Davidson to the to year-over-year for weekend. Labs' Factory improvement for podium test, also

throughout of Labs power innovation, and the performance demonstrate to to enable accelerate the Proto production to examples prototype market These cycle. improve our time to customers drive

organization provide With on an Network realigned like regional different organizational and customer to newly operations generation, Now go-to-market on structure. fulfilling to created in the most orders update part focused Factory solely -- a now global teams I'd the the manner. revenue by

We involves continue leveraging consolidated of at unique and capabilities network factory own fulfillment it through partners. to others, to refine gross means At options our margin. times, the portfolio our optimize manufacturing this

organization ops improve find announcement to global begun customer ways of the our fulfillment last has to quarter, orders. already Since

operations reshaping Specifically, October, injection-molded parts better Europe. operational some we in efficiency. in fulfill orders Accordingly, metal-added to and streamline portfolio will leverage announced parts our our for we decisions customer to global

customers these The through only with including to realignment global Factory Europe, operation we the Molding strategy. committed to new to and across options. manufacturing DMLS, direct ] services in our consistent We will and Printing We in XD and through centering, are services existing manufacturing metal our molding fully Network remain fulfilled, facility in injection offering continue our close or Eshan factory how Europe. prototype discontinue all metal services laser [ in will Loe fulfillment changes a fulfillment Injection Germany, other

and take way lightly, impacted to all their in want The our discontinuation are taken reflection Proto was efforts. a of I a Labs and serving thank to to for moment no decision closure and employees commitment to their customers. This not

We the impacted truly best. all will those transition services and we provide wish to them

Looking global the we capabilities decisions these operational footprint fulfillment to our bringing operations our will of improve full while and believe efficiency ahead, customers.

We with continue customer unique profitability are acting urgency and growth on drive our cash capitalize ability meet and to industry-leading our to accelerate flows. needs, to

ongoing structure. our third posted end quarter second at manufacturing as of we summary, continuing highlighted manage the committed solid challenges. we by In accelerating sector to our initiated through to actions the while remain We the results quarter internal to reorganize growth

production, and X That of end examples Proto continued term. using illustrated creation Labs the long win the to better for high in as will customers company continue requirement over growth value shift I position for We use parts.

I clear increasing the our and shareholders. value execute on our for efforts flow our priorities Labs best executing to accordingly. are We tireless entire leader cash in to profit to the and Proto team and customers industry thank committed the are want serve and for

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

Dan Schumacher

Rob. Thanks,

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

the than above sequentially through anticipated from range September. third was flat slightly and revenue revenue achieved Third year. and was quarter August decline last our record up a X% order guidance as the $XXX.X in quarter representing we more Revenue rates million, of picked

on by service revenue Turning X. Slide to

in as molding, making constant and year-over-year industrial saw are revenue Third constant consumer To quarter in in regional drive weakness currencies. in Injection XX% priority. year-over-year flat Molding teams saw capabilities in in declined business. machining network production to new continue currencies go-to-market strong electronics our CNC growth our and invest the We verticals. we growth we a CNC business production was

declined Metal Printing XD and declined year-over-year. quarter constant revenue currencies XX% year-over-year Third in X% Sheet revenue

order the our declined contacts service. X% in customer per largely third XX,XXX Molding year-over-year, Revenue to value contact Injection the served highest revenue, decline quarter. We due in customer per

a As respect, ours, up growing priority of customer revenue bumpiness from customer shift year-to-date per Rob XXXX. we revenue discussed, In to is work. production may be that X% per quarter-to-quarter there more as is yet over long-term

and with algorithms. in was XX%, volumes. quarter, driven driven to from plant non-GAAP the and the gross was margin sequentially Network XX.X% XX.X% gross with the second XX.X% quarter improvements improvements and in up Factory our work Third basis XX by Network. points margin margin automation in XX% Factory gross increased by third sequentially from up quarter align both sourcing Protolabs continued pricing consolidated staffing to management teams by AI-powered excellent our the

non-GAAP Year-to-date, points XXXX. the margin XXX compared basis first gross quarters is to X XX.X%, of up

and both gross other match space our improvement, our digital combined margin to resilient, the testament our hardworking Network in a model. We No profitable employees can pleased of services Factory manufacturing business the and our model. are profile company margin with very

of quarter non-GAAP operating to million declined XXXX. $X.X second expenses Third the compared quarter

the of As primarily per expenses a $X.XX XX.X% flat $X.XX decreased prior revenue operating share driven sequentially XX.X% earnings up summary, percent non-GAAP In by incentive from lower on compensation. non-GAAP quarter, were third to growth. revenue, quarter in

is XX% As year-to-date earlier, Rob adjusted over year-over-year on flat up mentioned revenue. EPS

through profits further continue enabled realignment. future priority drive growth previously will our invest We the to addressed our areas by to

flow since acquisition on Slide to balance was and Cash cash XXXX XX. $XX.X to Transitioning sheet prior quarterly flow highlights of highest Hubs. the figure XD our million, from operations

we our the September and shares As in the industry-leading us repurchased to investments debt. sheet on common XXXX, XX, shareholders. we on return allowing model quarter. growth in cash call, X On of I million business million capital every flows, $XXX.X generates and end, organic balance that invest to and say of third earnings cash XX had To

fourth Our on of outlined outlook for the Slide XXXX is quarter XX.

order in holiday trends in quarter. due through sequential million and to orders revenue seasonality corporate during lower X generate a between fourth our is and quarter the the guidance This expect $XXX of revenue revenue decline the and business Further, fewer normal days to $XXX We the in first million. season. working fourth weeks

revenue currency add million of fourth foreign the compared expect XXXX. $X approximately impact to on We to favorable quarter an

$XXX,XXX. the ]. a expense $X.XX earnings $X.X anticipate points summary, per non-GAAP fourth we effective non-GAAP compensation amortization $X approximately between We guidance. $X.XX. plus million quarter to add-backs stock-based XX expect million, basis tax include to in closure We and fourth estimate In rate [ currently share of non-GAAP of quarter earnings expenses of XX% Germany expense of Moving and

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

Operator

Brian Blair. first William with Our is question Instructions] from Drab [Operator

Brian Drab

while. be how quarter and wanted been Where see a how And just it's The on you that? gross do margin the solid gross like of sustain do start expect fourth I you is -- in able you Rob, in terms to than margins. margin? do to gross pretty higher to

this And growth I'm gross the some. there which and asking it decelerated also then question, lower somewhat is, margin, Network, of course, at looks looking like

gross wondering the Network margin between from don't rate growth on growth Factory convergence of have Network maybe just -- you're maybe headwind I'm a the eventually the business faster and if in overall the you the in the in So the side? in seeing this here terms and

Dan Schumacher

Yes.

-- think me Let there. I Brian, questions in there's X

I'll growth and one's the to I margin one's both is Network. margin about Factory Yes, margin in think first. I gross from the take gross what I one as gross the would the tell related the improved, and Network. said, percent you the

so really happy algorithms with we're the about And Network range that drive as talked through able model that above are gross given. we're profitability that the area. we've our in experiencing more sourcing margins, how terms we're that gross we've and margins to before, use to of And

change would a our at to that Network fourth to XX% We're in contract. keeping above margins XX%, to range state continues the which but gross quarter. Now in it's expect on I we've we're XX% to much going manufacturing in the be I that though at conditions expect don't even quarter-over-quarter. range been

we're Factory job in a As terms to it to Factory costs we doing automation side as the to relates goes improvements, our continue of through. of better labor managing and business add the that

there So well. as there's improvement

Factory high So margins not alluded if that. kind which gross there be it year, there last both But the and Network look at I in a Network as may margins be gross was improving. the are some is to, as you know mix may core, to the you aspect of growing the

Now Rob, take on to question the did Network you want growth?

Robert Bodor

for question. Brian, you, Thank certainly. Yes, the

look, absolutely in last stupendous right, in growth so yes. the XX%. of I Yes, QX So saw north year, Network, we think, of

upon comparison, On context grew macro. that. did building year, in that the the the third the we a XX% And Network difficult in quarter of we year-over-year of this

XX of we're read now I contraction consecutive think I in months report, at manufacturing. the

I'm confident And can the higher so it. very pleased grow the with even that I'm Network in we future.

the Network that engine business. be so we to expect strong And continue going growth our to for is a

Network. And adopting offer, adopting we we're seeing the right? year-over-year mean customers growth had it, in I our more XX% buying comprehensive customers

a be with would continue expect pleased and I'm that it growth engine to strong us. So do for

Dan Schumacher

margin One Brian, We do gross question margin. your to down gross more that not in thing, expect on quarter-over-quarter. did was come that cover

a inefficient into we're ends you using volume with season, we through our such period. up the a little and we're holiday uneven the as contractors little that as go holiday As more labor go more and being

would expect QX. to gross QX down just we come So the margin to

Brian Drab

Right.

Okay. that's fourth obviously, And that's typical what see. in mean, you. I quarter I for the

Dan Schumacher

Yes, it's typical.

Brian Drab

people getting opportunity, services, contacts -- are Right. you the right? about Rob, on percentage early the the single-digit very where of idea is using services? me of the low more of blend it a what in terms now Is like that in that customer stands blend that tell that using where you're the can still of both

Robert Bodor

innings early with absolutely. still this, We're Yes. in

of But business. adoption and more them, and examples offer terms value see the I'm the pleased So growth buying really see remarks. the that also I as for rate we're more using of quite to our us continued production in in I to a prepared it like that customers customers for comprehensive getting and the big in shared bringing opportunity

we're But customers. early innings. in X% consider less yes, than still I of the would overall,

for teams are of our that's us focused on. to lot a there's penetrate opportunity continue and So go-to-market to what

Brian Drab

and Great. then then I'll Okay. more just maybe And it one on. ask pass

You in touched prepared the on remarks. it

guys revenue inspection the is and bit the to the it's getting a you up. -- strategic it's think work? difference. and that's increased you Can -- little initiative the you've the that a that mean, Because got like have, from more that it Revenue about you're making key still environment is seems down, capabilities seeing talked and a about traction I've the you obviously, a capabilities challenging per high-volume in. talk the a impressive, that that just I operating in I facility, customer you're but lot

pulling volume orders about like in. this just through you're you you're that? key a Can And so is traction lever that the talk in higher getting

Robert Bodor

Yes.

going been cycle. their our And life them. and through serve to So course, really across that for started end customers to we've this doing means we more with that production product more and production prototyping right, work end to drive of transformation, entire given

documentation of offerings, ability to able capabilities range inspection they needs a in and the And around also the other control that been important so expect adding do comprehensive produce process to like production being much parts the their and and broader documentation, have additions.

seeing growth that forward, been drives and And the continued adopting year-over-year industry, it, customers XX% and growth that seeing seeing our as customers to nice per we're we've of number production. we're customers of as there. average more highest quarter. buying in comprehensive That terms brought grow last the in that kind have think, adopting and customer our revenue more our be, I offer the are in we're And

it. with pleased I'm So

and think to I -- customer it's seeing driving we're the positive in and again, stages. strong We're we're early response. really it. grow

focused. going So think right on keep track I we're and we're the to

Operator

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

James Ricchiuti

way. Congrats far it showing like slowing in in trending bit your pickup back what pace daily go it August, market, little picked sounds that the you've of has done? August, to seen about if overall rates, on are as activity, to the been drove up just that I'm Any the some sense to we thus If Was things the a and quarter, traditional that you wondering by talked some just that, expectations. the relative September? how of And in you've that October? the

Dan Schumacher

that tell in very is you. playing I uneven market the Jim, Yes. is what we're would

higher we than point, see, we normal did September. that in order a about your to July, was the seasonality lower in because is order August did into rate and revenue we from But starting saw pickup talked June we see in obviously, And rate. remarks, I really our that As really historical, a and what a data point was of perspective than July down. on was that lower reported prepared

would July. from guide to see. that of around the would QX at normal better anything I'm really would in there point out. September. I particular just general So low pickup I to June we I'm that see nice that what a it responded were shipments August would seasonality decline say data the orders guide, say and say I was than and in business -- I is quarter-over-quarter, kind showing QX have creating again, looking weeks the a we of X the And and as to wasn't normally

Robert Bodor

traction, quarter. of would kind say go-to-market ended get right, to the as better-than-expected just able were I I'm the pleased we that teams

James Ricchiuti

Got sequential And organization that it. would much gross if the of revenues nice mainly way it? of a operations, with us alignment. a wondering in at for margins in to is in improvement the a to yes, stop global operating you this well. there's as in up solid You just And range? the saw help I'm How function, margins end Or nice came upper attribute some you the the quarter.

Dan Schumacher

to to tools the Yes. volatile. What in a is putting gross of algorithms that the can pricing And that one is, how in in I that an kind of terms environment respects, to it. model. our about plant-by-plant automation on be say repeat and really improve being the X which we're that's to to and in areas drove which volume margin, our our improve those really improve the gross perspective continue we margin, the in second within would what manage the and in We that Network sourcing aspects is again, using just costs those continue we're

the to new organization, talk In terms of Rob that. I'll let

Robert Bodor

Yes.

global our full term, we've we think capabilities manufacturing I there things. to region be serve to got a want able every bring capabilities wherever we want few to look be again, So capabilities, that the they're One, at in strategy bring we to to to our longer was as able regardless of able So to them those full of customer world, and what the best ability. fully to the that around be right?

allows have freedom now -- structure can margins, or operation We where of reduce to maybe us we're right? operating not redundancy we areas also to that. of healthy that optimize degrees Secondly, more at the some of really parts

is that And our and that see to I of so healthy And both drive from the think more serving fully you'll possible. you're to also for as our seeing make opportunity but over these sure as more of example optimize standpoint kind one operations us business, we're recent announcements time, for profitability that. customers

Operator

question Cantor Jensen next with Fitzgerald. is Troy Our from

Troy Jensen

great Congrats controls cost here. on and margins the

Dan Schumacher

Thanks, Troy.

Troy Jensen

maybe start Was deal -- first I'll update. mainly in out Alphacam was German the So acquisition, ] off with facility the this it additives [ Germany?

Robert Bodor

Yes, that's right.

So these Alphaform [ were the of a we of couple ] that from business years components acquired ago. the

Troy Jensen

right. and all okay. metals you Europe? polymers it in DMLS Alphaform, you Did All Raleigh? in mostly do much is Or did

Robert Bodor

Yes.

DMLS. So Europe and to this -- metal metal polymers we was manufacturing additive have in [ ]. both the Pittsboro and specific And announcement the

be and we'll of fulfillment that combination of out it in a North Germany our so and through our phasing partners. And from network capabilities instead fulfilling Carolina

Dan Schumacher

Troy, But business the the not our operation, the DMLS chunk a similar but either of business, of is it's Raleigh in majority what you, would to I good tell location.

Troy Jensen

much Okay. help in next All that I year? the guess, out know of probably come QX, questions how savings? or like you March quarters Can in with right. it me I we won't June the OpEx X reduce see this to well, but will OpEx then.

Dan Schumacher

Listen, Troy.

is than from savings from more is it perspective OpEx perspective. gross a a margin this of an So

For we're still facility. instance, in -- the maintaining

partners our both differently, through We fulfilling and the also Raleigh. are just through manufacturing DMLS

Troy Jensen

Yes. relying... Understood. facility, shuttering it's just That's kind the but of

Dan Schumacher

so the facility that are injection one facility do molding is that we and closing. -- another precision the we -- have facility So so

Troy Jensen

that Metal. segment you're that margins sense primarily kind I . me, because that I gross a like guess there's get wondering also. makes better that kind network. get that's portfolio Sheet the of I lower Network run through I'm business doing hasn't for can guys see grown of your to you make if running Cool. margin through in other would sense. about it products the And this Okay. it, Curious product and you to

Robert Bodor

Yes.

a you of remind So lot Sheet seen and we several quarter, quarters last think our the segment, Metal. exposure computer slowing we've I'll see headwinds I last which kind electronics saw smallest headwinds in that's to for quarter, service yes, and now. of did it's definitely actually, got

that business. it you taken we've it We've remind I'll operating rightsized very We're monitoring there. closely. and that action

So haven't some of I structure degrees things I all before. global these that freedom go the as us would And we around have we forward. we're new say enables that this had to, considering think,

Operator

Group. Our from Greg next question is Palm Craig-Hallum Capital with

Greg Palm

kind like of of outperformance the bit can just any it outperformance. realignment? I'm sort if maybe Maybe hint little with that the attribute to Rob, the was to maybe of that. you that, sounded the starting curious of a

they be gauge up at just to to clear, just X of up for said stayed trying pick Have is you the guide the of rates order the quarter. then similar first relates October? trends, those normal where to as the in of September. it And picked kind kind order seasonality August, in what rates? I'm Have are versus weeks

Robert Bodor

within the Sure. were our to see and team quarter do we focusing growth continue The through we to expectations. forward our the that work their and demand believe Thanks teams Greg. that the end region, second was customers as go-to-market our provide to with quarter beat expect as focused for of in specialize model. reorganization, do focus great them in able teams to benefits to with did to terms believe this of helped on see. that, for I'm to allowing go go-to-market the the I that our help driving question, half this I and how on pleased Yes, continue we

Dan Schumacher

to a have On soft, August no, would September. then July seasonality June of we normal picked say rate question, more kind and that I they up. not were the in and more and got it's order

hasn't pickup reflected and guide. that's in October, been a there the So in

Greg Palm

just of of I'm in, fact the on year-to-date, sourcing have impressive. quarter, the not changed byproduct a the you're more we're margin suppliers way this open lot side, is attribute the the some right environment algorithm the the performance of all a now? just And outperformance, capacity Network that that but you of curious have Or Okay. you more stuff? was do

Robert Bodor

Yes.

right. you're think I

X I play we X.X pricing is out And algorithm So a in think improvements then of the and it you're things. was about -- One attribute in it ago, to that over margin. our we make I years significant terms which that improvement, to continue period. launched incremental seeing this

As we externally, it that increase we look be rates, of at competitive that and are margin algorithm the get ] we've is we're close very believe So we the very to but able got [ are seeing pricing our because we're to we the strong gross right? -- to terms in very competitive of way yet continue working.

So with front. manufacturing with in that that excess that. in, get to in right factoring quite clearly you macro would we're the pleased to able At capacity margins is seeing time, we're the I now right, that same and this agree

Greg Palm

Yes.

the sense. impact able Makes What European the And of on doesn't expected all? like relates I news clear of as it is P&L to but recent I just some potentially -- an quantify sort savings. Okay. the it facility. guess, much of sounds anything around lastly, So want you P&L Are sure I like I'm sound the it at COGS just make impact, to guess? OpEx,

Dan Schumacher

it some the specific we're part to going come to that will a that in of business able but through of will of out be some Network, the fulfilled be not. numbers, Nothing molding of Yes. business that and there's terms with precision specifically

that our some for business strategy. strategic is that as [indiscernible] there production wasn't we at of looked So

because gross that it's be revenue see businesses are. would there. is some size so the I we of amount say won't improvement And overall. those margin of what huge there not a some But should relative

Greg Palm

maybe the millions? versus revenue Or... got like mean, assume more I lost the business it's And in of that thousands hundreds of I impact,

Dan Schumacher

Yes. difficult not way a more would was to I Yes. It's were production. to but doing is it And business what they that was the say doing amount. it take complex huge very molds, what much that

take can more network tools production so complex that we're type then our molds part from is those prototype of steel so And other and to what we using that through shifting customer as strategy. doing of a the

although more a term, short-term that, is term. move over to feel aligns production longer better from long to our from with we what be So might much there it's the strategy impact the

Operator

questions, conclude no With further will today's conference. this

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

Proto Labs (PRLB) 1 Nov 242024 Q3 Earnings call transcript