Proto Labs (NYSE: PRLB) announced a strong performance in its third-quarter earnings, with its revenue hitting an all-time high of $130.7 million. Particularly noteworthy is the exponential 87% year-over-year increase in “network revenue,” reaching $22.6 million, through its digital network powered by Hubs–the online manufacturing platform acquired in 2021. As the industry navigates through a fluctuating economic landscape, the company’s 3D printing sector has contributed to this success by yielding $21.6 million in revenue for this quarter alone. This figure represents roughly 16.5% of the total company revenue.
Delving deeper into the financial details, Proto Labs’ third-quarter performance posted a 7.4% increase in total revenue compared to the same period last year. Moreover, the revenue generated from 3D printing services during this period has grown nearly 9.1% from the previous year’s $19.8 million. And with earnings per share (EPS) of 51 cents, Proto Labs exceeded market expectations, attributing its success to the “synergistic integration of its digital factory and network models,” which continues to draw customers.
Proto Labs’ President and CEO, Rob Bodor, credited the company’s financial performance to its unique hybrid model that “seamlessly blends the digital factory with a growing digital network.” This model has resonated with customers, resulting in increased demand for the company’s manufacturing capabilities.
“Our digital network powered by Hubs continues to take share in the market at an outstanding pace,” said Bodor during an earnings call with investors on November 3, 2023. “Our digital factory business fulfilled through our internal factories, rebounded nicely from the second quarter with sequential growth. We continue to accelerate innovation for customers with the fastest and most reliable lead times in the industry. Our strategy is working. Record revenue in an uncertain macro climate demonstrates this. Proto Labs is becoming a one-stop-shop for custom prototypes and low-volume production parts.”
Revenue uptick
With the injection molding, CNC machining, and sheet metal services also factored in, Proto Labs served 23,080 product developers during the quarter. Gross margin saw an increase, rising to 45.4% from 43.4% in the previous quarter. Moreover, a deeper look into the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) reveals a robust 14.9% of revenue, an improvement from the 9.3% witnessed in the second quarter. As for adjusted EBITDA, it reached an impressive 18.3% of revenue. This solid financial position allowed Proto Labs to generate $24.2 million in cash flow from operations and repurchase $9 million in shares.
Proto Labs’ relentless drive for innovation in the 3D printing space has not gone unnoticed. It won a 2023 IDEA Award for its instant design for an additive manufacturability analysis tool. This proprietary software provides customers with “rich design for manufacturability feedback to help them design the best 3D printed parts, and it does so instantly,” explained Bodor.
Also, during the earnings call, Chief Financial Officer (CFO) Dan Schumacher highlighted the strategic value of expedited part orders, which have become a competitive edge for the company, allowing it to leverage its best-in-class lead times and reliability.
Defying manufacturing headwinds
In line with its commitment to innovation and customer service, Proto Labs opened a new metal 3D printing facility in North Carolina last month. This 120,000-square-foot site is anticipated to meet the demand for metal 3D printing applications. With a team of over 75 specialists dedicated to direct metal laser sintering (DMLS), the facility is a powerhouse for innovation and precision manufacturing. It also broadens the material selection to six different metals. It breaks new ground with its large-format metal 3D printing capabilities, enabling the production of substantial parts up to the size of a watermelon.
While the broader economic scenario presents mixed signals for the manufacturing sector, Proto Labs’ third-quarter results are helping it weather the economic storm, emerging particularly stronger in its 3D printing services. Stock-wise, Proto Labs rebounded since announcing its latest quarterly earnings. Financial analysts like Simply Wall Street have been following Proto Labs and state the company’s stock price has declined 76% over the last three years. The latest soar in share price is a breath of fresh air. However, investors might wonder if Proto Labs will be able to keep it that way. With a clear strategy of capitalizing on its “hybrid model,” Proto Labs could continue making the most of the expansive opportunities within the 3D printing landscape.