On-demand digital manufacturing provider Protolabs has reported that its 3D printing segment has returned to revenue growth within its Q3 2020 financial results.
The firm generated 3D printing revenue of $16.2 million during Q3 2020, representing a 2.5 percent increase on the $15.8 million generated in Q3 2019, and a quarterly recovery from the 6.5 percent decline seen during Q2 2020.
Many companies haven’t reported their Q3 figures yet, but Protolabs’ on-demand parts business performed well compared to that of Materialise, whose manufacturing revenue fell by 41 percent in Q3 2020. Following the results, Protolabs’ shares fell from $117.72 to $114.62, but quickly recovered to $118.08, reflecting the continued confidence of investors in the firm’s stable revenue performance.
On a call with analysts and investors, Vicki Holt, the President and CEO of Protolabs, highlighted the flexibility of the company’s business model as a key factor in the relative success it had achieved during Q3.
“I’m pleased to share that we delivered third quarter revenue and earnings per share above expectations, driven by improved productivity and lower costs,” said Holt. “Our organization has continually adapted to near term changes, and the uncertainty of 2020 has sparked rapid change. Our colleagues have shown extreme dedication and resilience.”
Protolabs’ Q3 2020 revenue performance
During Q3 2020, Protolabs generated a consolidated revenue of $107.5 million, constituting an 8 percent decline on the $117.5 million reported in Q2 2020. This figure can be broken down into four key segments: Injection Molding, CNC Machining, 3D Printing, and Sheet Metal.
The company’s Injection Molding business accounts for nearly half its total revenue, but the division saw a slight decline over Q3 2020, falling to $53.2 million from the $55.1 million reported in Q3 2019. Revenue from CNC machining also decreased from the $40.2 million generated in Q3 2019, to $33.1 million in Q3 2020, representing a fall of 17.6 percent.
In addition to 3D printing, which as stated, was the only area of Protolabs’ business to report an annual revenue increase, the firm also reported a revenue decline from its Sheet Metal division. In Q3 2020, Protolabs’ Sheet Metal segment generated $5.2 million in revenue, a fall of 25 percent on the $3.9 million reported in Q3 2019.
Although the United States remained the firm’s largest market, generating $85.6 million in revenue during Q3 2020, this was a reduction of 7.9 percent on the $92.9 million reported in Q3 2019. Europe was Protolabs’ second highest source of revenue with $18.8 million, while its revenue in Japan was $3 million, constituting falls of 8.8 and 21.5 percent respectively compared to Q3 2019.
|Revenue (USD)||Q3 2020||Q3 2019||Difference (%)|
Continuing the recovery from COVID
During the earnings call, Holt attributed the company’s overall 8 percent revenue decline to “continued global economic challenges,” and their impact on its customer base. Although Holt said that Protolabs had improved its performance sequentially since Q2 2020, she admitted that US industrial activity remained far below pre-pandemic levels.
Since Q3 2019, the firm’s best performing division in the Americas was its aerospace business, which saw a considerable increase in the number of space exploration and satellite clients. In Europe meanwhile, Protolabs’ on-demand manufacturing business saw revenue improve by 13 percent on a quarterly basis between Q2 and Q3 2020, reflecting the broader European recovery.
Over the course of Q3 2020, Protolabs eliminated nearly all of its discretionary spending in order to manage costs due to the unpredictable financial climate. As a result, the firm’s operating expenses decreased as a percentage of revenue from 35.8 percent in Q2 2020 to 34.4 percent in Q3 2020. The company also improved its operating income from $14.4 million to $17.7 million during the same period.
Planning for Q4 2020 and beyond
Moving into Q4 2020, the company is set to focus on the development of its upgraded ‘Protolabs 2.0’ e-commerce platform, which goes live in Europe in November, followed by a U.S. debut in Q1 2021. The new system promises to offer an improved customer experience via enhanced functionality, and Protolabs anticipates that it will lead to higher client retention.
Despite the launch of its new platform in Q4, the firm is anticipating a decline in its revenue during the quarter due to seasonal patterns that saw its revenue fall by $5.5 million in the same period in 2020. Due to these trends, and the uncertainty surrounding the US Election, Protolabs has forecast a broad range for the remainder of the year, and will continue managing its costs closely.
In her closing remarks, Holt concluded that the company had done well to navigate a difficult year to date, and that the upcoming update to its web-based platform would provide opportunities for growth in Q4.
“We will continue to adjust our cost structure and prudently manage the business performance in the short term,” said Holt. “However, we will continue to drive the business ahead and invest, as we revolutionize the industry we created, along with a new and improved customer facing e-commerce platform.”
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Featured image shows a row of Concept Laser DMLS machines at Protolabs. Photo via Protolabs.