3D Printing Financials: Services Bureau Proto Labs Reports Earnings Beat, In-Line Revenue for Q2

Proto Labs (NYSE: PRLB), the Minnesota-based manufacturing services bureau specializing in 3D printing solutions, announced its Q2 2023 earnings on Friday, August 4, reporting quarterly earnings per share (EPS) of $0.33. While significantly lower Year-Over-Year (YOY) — in Q2 2022, the company reported EPS of $0.46 — Proto Labs also handily beat its consensus estimates, exceeding expectations by over 10 percent.

Q2 revenue results for 2023 were slightly mixed, with analysis from financial publication Seeking Alpha determining that Proto Labs’ $122.27 million revenue, down 3.6 percent YOY, missed estimates by .67 percent. On the other hand, financial publication Zacks reported Proto Labs’ revenue as a .12 percent beat of its consensus estimates. Since the difference is quite minimal from either angle, it’s fair to consider Proto Labs’ Q2 revenue as having met expectations, along the lines of what the company’s president and CEO, Rob Bodor, noted in Proto Labs’ earnings call.

Proto Labs’ largest-ever printed metal part, produced for geothermal energy extraction

During Proto Labs’ Q2 2023 earnings call, Bodor stated, “This morning, we reported revenue and earnings within our guidance range. While economic conditions are challenging, amplified by the continued contraction of global manufacturing, our uniquely broad customer offering fulfilled through the combination of our internal digital factories and network manufacturing partners allow us to offer customers a differentiated value proposition and serve their various needs despite the economic pressures our customers are facing.”

Bodor also offered some insight into what he anticipates could be in store for Proto Labs in coming months: “As global manufacturing conditions improve, we expect growth in both network and factory offers. In order to continue to drive growth and maintain or improve our profitability in this challenging environment, we are focusing on items we control. First, we will continue to drive growth in our longer lead time lower priced offerings through both the Hubs network and the factory. …Next, we continue to invest to innovate and expand our customer offer through [R&D] initiatives.”

A Proto Labs factory

Back in April, 2023, the company announced the incorporation of the “longer lead time, lower priced” option into its business model, with Bjoern Klaas, the VP and Managing Director of Proto Labs Europe, explaining, “Whether in Europe or worldwide, customers have told us that speed is still a priority when producing parts to support their product innovation or mitigate supply chain pressures. However, with the pressure of reduced budgets comes an increased demand for cost-efficient parts, particularly at higher volumes and longer lead times. Our digital network directly addresses that need.”

In response to the earnings report, Minneapolis-based investment firm Craig-Hallum Capital Group upgraded its rating on Proto Labs from a “Sell” to a “Hold”. Greg Palm, a Craig-Hallum analyst who participated in the call, said, “While we don’t see investors getting excited until growth in revenue and profitability returns, we don’t see any significant negative catalysts in the near term.”

With all of the mounting buzz about mergers in the additive manufacturing (AM) sector, it will be interesting to see if the idea of consolidating service bureaus starts to pick up steam. This could make sense particularly insofar as combining different networks would be a straightforward way to synergize and streamline. Moreover, the latest phase of the Biden administration’s domestic manufacturing push could also catalyze activity in that direction. Even without the consolidation angle, the emerging need to coordinate activities across many different R&D ecosystems within the federal government suggests new areas of growth potential are on the horizon for companies like Proto Labs.

Since I’m always keeping one eye on geography, it seems worth pointing out that Duluth, MN — only two and a half hours from Proto Labs’ headquarters — is one of the 16 cities that in May was named to participate in the White House’s Good Jobs, Great Cities Academy. This program is poised to be a major force in occupational development for next-generation manufacturing jobs in the US. It will also be impossible to implement without heavy private-sector involvement.

Images courtesy of Proto Labs