Protolabs reports another record quarter for 3D printing, awaits Rapid Manufacturing performance

On demand digital manufacturing provider Proto Labs, Inc. (NYSE:PRLB), headquartered in Maple Plain, Minnesota, has announced its financial earnings for the first quarter of 2019.

With a headline revenue of $113.5 million for Q1 2019, the company was within its target growth guidance set in Q4 2018, attaining a 5.3% increase in revenue over Q1 2018 which was $107.7 million. The quarter was another record period for the 3D Printing segment of the business, however the company is still waiting for the expected revenue impact from its acquisition of Rapid Manufacturing.

Vicki Holt, President and Chief Executive Officer of Protolabs, comments, “Protolabs reported another quarter of top-line growth with record revenue in our 3D printing and injection molding services. ”

“We had strong growth in Europe and Japan; however, we had some challenges with our sheet metal service and expanded CNC offering acquired with the Rapid Manufacturing transaction.”

Vicki Holt, President and Chief Executive Officer of Protolabs. Photo by Thomas Strand, Forbes
Vicki Holt, President and Chief Executive Officer of Protolabs. Photo by Thomas Strand, Forbes

3D Printing claims another record quarter at Protolabs

As well established services within Prototlabs, Injection Molding and CNC Machining constitute the lions share of revenue reported by the company.

Constituting almost half the total revenue for Q1 2019, Injection Molding revenue was reported at $55.3 million, an increase of 7.73% on Q1 2018 which was $51.3 million. CNC Machining revenue was $37.9 million for Q1 2019, compared to $36.7 million in Q1 2018.

After these two segments, we come to 3D Printing’s record quarter. In Q1 2019 Protolabs’ revenue from 3D Printing was reported at $14.5 million, representing a 17.48% increase on the same period in 2018 which was $12.3 million.

Lastly for Q1 2019, Sheet Metal reported a revenue of $5 million, a 19.48% decrease on Q1 2018 which was $6.2 million, and Other revenue for Q1 2019 was $7.6 thousand, compared to $1.1 million in Q1 2018..

Revenues Q1 2019 Q1 2018 Variance $ millions %
Injection Molding 55,311 51,343 3,968 7.73%
CNC Machining 37,872 36,731 1,141 3.11%
3D Printing 14,480 12,325 2,155 17.48%
Sheet Metal 5,025 6,241 -1,216 -19.48%
Other 764 1,105 -341 -30.86%
Total revenue 113,452 107,745 5,707 5.30%

Rapid Manufacturing should contributed to a notable expansion in Protolabs’ Sheet Metal and CNC Machining services. As Holt explains though, “The revenue and the earnings growth from our acquisition of Rapid Manufacturing did not meet our expectations this quarter.” After integrating Protolabs and Rapid sales teams to make things easier for the customer, as Holt explains “we distributed accounts and disrupted the entire sales organization by realigning accounts.” Protolabs is also undertaking a process of standardization across Rapid’s business ensuring it meets Protolabs’ core competencies of “reliability, quality and speed.” “In that order,” Holt adds, “we standardized the product offer to ensure we could consistently and reliably meet our delivery commitments at scale, anticipating stronger demand when we opened up the services to all of the legacy Protolabs customers.”

Though this has caused some challenges for the business, Holt adds, “We believe this is the right approach over the long term as we focus on reliably servicing our customers with quality products and on-time delivery.”

Europe rebounds revenue in spite of Brexit uncertainty

Geographically, the U.S. remains Protolabs’ strongest contributor to revenue. In Q1 2019, the region contributed $87.8 million to the total revenue, an increase of 4.33% on the same period in 2018 which was $84.1 million.

As highlighted by Holt’s comments, the company is also pleased with its growth in Japan, having seen a 20.75% increase in Q1 2019 compared to Q1 2018.

Interestingly, Europe has seemed to bounce back in the first quarter of 2019 despite the region’s uncertainty surrounding Britain’s formal exit from the EU. In Q1 2019, Europe reported a revenue of $21.2 million, compared to $19.9 million in Q1 2018.

Holt comments, “Europe produced year-over-year revenue growth of 6.6% or 14.8% in constant currency.”

“Europe’s growth rebounded nicely after a slow December as customer purchasing picked up even with the uncertainty of Brexit.”

Revenues Q1 2019 Q1 2018 Variance $ millions %
United States 87,811 84,167 3,644 4.33%
Europe 21,254 19,945 1,309 6.56%
Japan 4,387 3,633 754 20.75%
Total Revenue 113,452 107,745 5,707 5.30%

A four part action plan for Q2 2019

Overall, $53.6 million attributed to the cost of revenue in Q1 2019 led to a gross profit of $58.9 million. This can be compared to a gross profit of $57.9 million in Q1 2018, with $49.8 million for the cost of revenue.

Non-GAAP net income for the three months ended March 31 2019 was reported at $18.7 million, compared to a Non-GAAP net income of $19.2 million in Q1 2019. The net income for Q1 2019 was $15.5 million, compared to $18 million in Q1 2018.

After beginning the period with $85 million in cash and cash equivalents, Protolabs ends Q1 2019 with $85.3 million.

Holt ended her statement at the beginning of Q1 2019’s earnings call with the statement, “While the growth in the first quarter was not as strong as we would have liked, our future opportunities remains strong and we will continue to focus on execution of our priorities to drive business performance.”

Going forward the company plans to take four key actions to improve performance, including continuing the training of Rapid’s sales team, further investment in marketing, reducing lead times in Sheet Metal and implementing value-based pricing.

Protolabs full financial results for the first quarter 2019 can be found online here.

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Featured image shows a bed of DMLS 3D printed parts. Photo via Protolabs