Protolabs revenue dips 2.9% in Q3 2022 despite the strong growth of its Hubs business

Digital manufacturing service provider Protolabs (PRLB) has reported a 2.9% revenue decline in its Q3 2022 financial results. 

During the third quarter, Protolabs generated $121.7 million in revenue, 2.9% less than the $125.3 million it reported in Q3 2021. Although the firm’s Hubs business brought in $12.1 million over this period, 38.5% more than it managed a year earlier, its Injection Molding income fell signficantly after seeing a lower level of follow-on orders.

“We experienced continued softening of our Injection Molding business, however, we are pleased with the continued growth of our other digital manufacturing services and Hubs business,” said Protolabs CEO and President Rob Bodor. “As we face an uncertain economic environment ahead, I am confident in our strategy and the value we bring to market, and the ability of our team to deliver long term revenue growth and profitability.”

An image of Protolabs HQ in Minnesota
Protolabs’ Minnesota HQ. Photo via Protolabs.

Protolabs’ Q3 2022 financials

Traditionally, Injection Molding is comfortably Protolabs’ highest revenue generator, but such was the division’s decline in Q3 2022, this only marginally remained the case. During the quarter, the segment generated just $48.9 million in revenue, 15.3% less than the $57.7 million it brought in a year earlier. On the firm’s earnings call, Bodor explained how this figure had been negatively impacted by the absence of several large orders that happened last year, as well as a lack of client follow-ups. 

Protolabs’ CEO added that hostile macroeconomic conditions have previously led many of its Injection Molding customers to build up excess inventory, as a means of insuring supply against inflationary pricing and supply chain issues. Given that these clientele have the “highest average number of parts per order” across the firm’s business, Bodor said this hit Injection Molding particularly hard in Q3. 

By contrast, the company’s 3D Printing division grew 6.5% between Q3 2021 and Q3 2022, from $18.6 million to $19.8 million. In part, Bodor attributed this growth to the launch of Protolabs’ first integrated Hubs offering, which now allows users to see part orders fulfilled “in a more unified way,” while benefiting from more lead time and pricing options. 

Over the same period, Protolabs’ CNC Machining and Sheet Metal manufacturing service incomes also grew, by 8.7% and 6.1% respectively. While revenue generated by the former’s long lead time offering grew by more than 40%, the latter would have achieved growth of 8.3% year-on-year, were it not for fluctuations in the value of currencies. 

Revenue ($) Q2 2022 Q3 2022 Difference ($) Difference (%)Q3 2021 Q3 2022 Difference ($) Difference (%)
Injection Molding 53.4m48.9m-4.5m-8.457.7m48.9m-8.8m-15.3
CNC Machining 48.2m47.5m-0.7m-1.543.7m47.5m+3.8m+8.7
3D Printing 20m19.8m-0.2m-1.018.6m19.8m+1.2m+6.5
Sheet Metal 5.2m5.2m4.9m5.2m+0.3m+6.1
Other 0.2m0.3m+0.1m+500.6m0.3m-0.3m-50
Total 126.9m121.7m-5.2m-4.1125.3m121.7m-3.6m-2.9

Meeting aerospace and medical demand  

Protolabs’ recent revenue growth may not have continued as seen in previous quarters, but on its earnings call, Bodor did allude to some of the areas in which it’s making continued progress. As part of a NASA contest, the firm has backed the efforts of teams at West Virginia University, the Stevens Institute of Technology, and the Colorado School of Mines, to develop a way of extracting water off-planet. 

In another competition, the US Department of Energy’s American Made Challenge, Protolabs has also supported a customer’s bid to come up with a sustainable geothermal energy solution. According to Bodor, “sustainability is another area in which there is a definite urgency in innovation and development,” and this is one of the main reasons clients turn to the company when ordering parts. 

Meanwhile, in CNC Machining, Protolabs has begun creating certain parts through a combination of its internal capacity and its manufacturing network. Though initially rolled out in Europe, the company plans to expand this integrated service to the Americas in early 2023, in a way that broadens its customer offering.

Concept Laser DMLS machines at Protolabs. Photo via Protolabs
Concept Laser DMLS machines installed at a Protolabs facility. Photo via Protolabs

Protolabs lowers guidance (again)

Having received feedback from key customers that demand is likely to be uncertain due to the challenging macro environment, Protolabs has lowered its Q4 2022 revenue guidance. Ahead of the last quarter, the company similarly chose to reduce its forecast to $121 million to $129 million, and it has now dropped its Q4 guidance to between $107 million and $115 million. 

In Q4 2022, Protolabs is also anticipating that currency rates will have a $4.2 million unfavorable impact on its revenue compared to the fourth quarter of 2021. However, the firm’s CFO Dan Schumacher says the cash it generated from operations last quarter, as well as its overall balance of $113.9 million, position it well for the challenges ahead. 

“Our financial position remains strong as we produced $20.5 million in cash from operations in the quarter,” said Schumacher. “As we monitor the economy, we are tightening our cost controls and will continue to focus investments to fuel the execution of our strategy.”

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Featured image shows Protolabs’ Minnesota HQ. Photo via Protolabs.