In its first quarter financials, Protolabs reported $116 million in consolidated revenue, 10% more than the $105 million generated during Q4 2020. The company’s decision to buy 3D Hubs has allowed it to reap almost immediate rewards in Q1 2021, increasing the firm’s addressable market by 25%, and its number of unique product developers to 22,605.
However, when compared to the $115 million Protolabs generated in revenue over the course of Q1 2020, it only managed to muster annual growth of around 1%. Based on the firm’s share price, a case could be made that investors have chosen to fixate on this longer-term trend, as they’ve dropped by 4% since results were first published.
According to Rob Bodor, CEO of Protolabs, the company’s recent investments, both in its existing portfolio and new acquisitions, have positioned it well for post-pandemic growth. “During the first quarter of 2021, we achieved two very important milestones, the successful launch of Protolabs 2.0 and the transformative acquisition of 3D Hubs, which will enable us to accelerate growth,” said Bodor.
“I am very pleased that we also delivered strong first-quarter financial performance within our expectations,” he added. “As the COVID-19 vaccine rollout progresses, and global demand continues to recover, our best-in-class digital manufacturing model positions us to expand our leadership position.”
Protolabs’ Q1 2021 financials
Protolabs reports its financial results across four main segments: Injection Molding, CNC Machining, 3D Printing and Sheet Metal. The company’s Injection Molding division remained its highest earner during Q1 2021, generating $56 million in revenue, representing 48% of its overall turnover for the quarter, and 2% more than the $55 million reported in Q1 2020.
Likewise, Protolabs’ 3D Printing revenue also grew over the same period, rising 6% from the $16 million generated in Q1 2020, to $17 million in Q1 2021. Although the firm hasn’t broken down exactly how many additive manufacturing-related sales have resulted from its 3D Hubs acquisition, it’s understood to have brought in $5.8 million, potentially making it a significant growth-driver in this area.
By contrast, the company’s CNC Machining and Sheet Metal segments performed less well during Q1 2021, as their revenue fell by 3% and 7% respectively compared to Q1 2020. What’s more, while Protolabs’ latest figures represent a continuation of the recovery that started mid-last year, its recent revenue growth hasn’t spread evenly across its business.
The U.S, for instance, continues to be the firm’s happiest hunting ground, generating $91 million in revenue during Q1 2021, but this was only a slight 1% rise compared to Q1 2020, and its European arm grew by 3% in the same period. Protolabs’ Japanese business also struggled disproprotionately in the first quarter, with its revenue declining to $3.6 million, 15% less than the $4.2 million reported in Q1 2020.
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According to Bodor, Protolabs’ acquisition of 3D Hubs in January 2021 enabled it to build “a complementary network of manufacturing partners,” that not only allowed its new subsidiary to generate 35% higher revenue in Q1 2021 than it did in Q1 2020, but to incorporate 3D Hubs’ network of 240 partners and wide machine portfolio into its own, extending its customer reach and manufacturing capabilities.
Additionally, the deal has been structured to incorporate strict performance-related goals, that allow Protolabs to hedge its bets and insure itself against future market volatility. Of the $280 million purchase price, only $130 million has been funded in cash, with the remaining $150 million being paid in stock. A further $50 million could also be forked over should 3D Hubs meet targets during the next two years.
Elsewhere, the company has successfully launched Protolabs 2.0, and while this may not yield immediate revenue gains, the platform upgrade is expected to improve client retention moving forwards. By adding new features, including the roll-out of its heat metal service later this year, Protolabs also stands to incrementally build a more complete offering, that in turn, will generate higher future sales.
As an added benefit, the introduction of Protolabs 2.0 effectively provides the company with a USP over its market rivals, something it could need considering the potential growth of service bureau Shapeways after its imminent $605 million SPAC merger. In the past, the firm’s ex-CEO Vicki Holt has urged Protolabs to be a “leader in the eCom B2B supply of custom parts,” and its upgraded platform will be central to these ambitions.
In terms of facilities, the firm also invested $47 million in a UK factory last year, and opted to expand its 5,000 ft German complex, serving to build on its production capacity. Along with the new Carbon DLS and GE Additive X-Line 3D printers installed during 2020, the company’s improved manufacturing capabilities should provide it with the facilities needed, to meet an anticipated recovery in client demand later in the year.
Protolabs’ FY 2021 revenue prospects
During Q2 2021, Protolabs expects to generate $117 million to $127 million in revenue, which would represent sequential quarterly growth of 9%. The company’s CFO John Way has attributed this optimistic outlook to what he describes as a “continued recovery in the macro environment.” Additionally, in late-March 2021, Protolabs saw a surge in orders, which has created a backlog in the firm’s Injection Molding division that could help sustain its growth into Q2 2021.
Protolabs also upped its R&D expenditure in Q1 2021, investing $12 million, a significant increase on its pre-pandemic spending levels of $8 million in Q1 2019 and $9 million in Q1 2020. As a result of this continued investment in its Protolabs 2.0 platform, the firm expects to see higher user retention in the near future.
Similarly, the company ploughed a net total of $90.3 million into its expansion during Q1, serving to widen its pool of customers, while still leaving it with a balance of around $44 million in cash as of March 31 2021.
“We managed our financial performance very well in the first quarter through the Protolabs 2.0 systems launch and acquisition of 3D Hubs,” concluded Way. “Our balance sheet remains very healthy with $93 million in cash and investments and no debt, providing flexibility and allowing us to continue to invest to serve our customers and drive future growth.”
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Featured image shows a Protolabs engineer preparing a DMLS 3D printed part. Photo via Protolabs.