• Fourth Quarter Revenue: $121.8 million, down 3.1% year over year in constant currencies.
• Revenue from Proto Labs Network: $26.5 million, up 17.7% in constant currencies.
• Fourth Quarter Non-GAAP Gross Margin: 43.4%, decreased 280 basis points sequentially.
• Fourth Quarter Non-GAAP Earnings Per Share (EPS): $0.38, down $0.09 sequentially.
• Full Year Revenue: $500.9 million, down 1% from 2023 in constant currencies.
• Revenue from Proto Labs Network (Full Year): $100.4 million, up 21.3% year over year.
• Full Year Non-GAAP Gross Margin: 45.2%, increased 50 basis points.
• Factory Gross Margin (Full Year): 48.3%, increased 90 basis points year over year.
• Network Gross Margin (Full Year): 32.9%, increased 230 basis points.
• Full Year Non-GAAP EPS: $1.63, grew 3% year over year.
• Cash from Operations (Full Year): $77.8 million, up from $73.3 million in 2023.
• Shareholder Returns: $60.3 million returned in the form of repurchases, 88% of free cash flow.
• Cash and Investments (End of 2024): $120.9 million, with zero debt.
• First Quarter 2025 Revenue Guidance: $120 to $128 million.
• First Quarter 2025 Non-GAAP EPS Guidance: $0.26 to $0.34.

• Warning! GuruFocus has detected 6 Warning Signs with PRLB.

Release Date: February 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Proto Labs Inc (NYSE:PRLB) closed out the year with fourth-quarter financial results above expectations, generating strong earnings and cash flows.
• The company expanded its consolidated gross margin and increased earnings per share in 2024, generating $78 million of cash from operations.
• Customers using the combined offer grew by 50%, and revenue per customer expanded, with production use cases outgrowing prototyping.
• Proto Labs Inc (NYSE:PRLB) is investing significantly in marketing to build its brand as a production manufacturer, aiming to drive revenue growth in 2025 and beyond.
• The company has reorganized its structure to better serve customers, with a new global operations team optimizing the manufacturing footprint and ensuring global capabilities are available to customers.

Negative Points

• Revenue growth in recent years has not met expectations, prompting the company to make strategic investments to drive future growth.
• Fourth-quarter revenue was down 3.1% year over year in constant currencies, with a sequential decline in non-GAAP gross margin.
• The company faced $5.6 million in costs related to the closure of an injection molding facility and discontinuation of select 3D printing operations in Germany.
• Proto Labs Inc (NYSE:PRLB) anticipates higher operating expenses in the first quarter of 2025 due to investments in marketing and sales enablement tools.
• The company is experiencing a prolonged period of manufacturing contraction, impacting prototyping demand and contributing to a cautious revenue outlook for the first quarter of 2025.

Q & A Highlights

Q: Can you provide more details on the marketing and sales enablement spending for 2025? A: Dan Schumacher, CFO, stated that operating expenses are expected to increase by over $2.5 million quarter over quarter. The company is investing in growth and will monitor the traction and return from these investments, adjusting spending as needed to drive revenue growth.

Q: What is the current mix of production versus prototyping revenue, and how are the margins for each? A: Robert Bodor, CEO, explained that prototyping accounts for about two-thirds of revenue, with production making up the remaining third. Production is growing well, and the margin profiles are healthy. The company is confident in the growth of its production business, which is expected to drive future growth.

Q: How is the closure of the German plant affecting the injection molding business? A: Robert Bodor clarified that the closure of the German plant is not impacting the injection molding business. The decline in injection molding is attributed to macroeconomic factors affecting prototyping, such as manufacturing contraction and price sensitivity among customers.

Q: What percentage of customers are using both the factory and network services, and what is the potential for cross-selling? A: Robert Bodor mentioned that just over 5% of customers currently use both services, indicating significant potential for cross-selling and growth in this area.

Q: What is the outlook for revenue growth in 2025, given the Q1 guidance shows a year-over-year decline? A: Robert Bodor expressed confidence in returning to growth due to traction in the production business and customer adoption of combined offerings. Dan Schumacher added that the company expects growth to pick up in the second half of the year, driven by the reorganization and investments in production.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.