Proto Labs Inc., a provider of digital manufacturing services that it sells primarily through its ecommerce site, Protolabs.com, said revenue for the first quarter increased 5.3% to $133.45 million. Although sales were not as strong as expected across all areas, the company is using the extensive customer data it gathers through its ecommerce business model to improve sales operations, CEO Vicki Holt said.
Proto Labs breaks out revenue across five manufacturing areas. It said first-quarter revenue increased year over year in three of them: 7.7% to $55.31 million in injection molding, 3.1% to $37.87 million in CNC machining, and 17.5% to $14.48 million in 3D printing.
In the other two areas it reported revenue declines of 19.5% to $5.03 million in sheet metal services and 30.9% in “other” products and services.”
“Proto Labs reported another quarter of top-line growth with record revenue in our 3D printing and injection molding services,” Holt said in the company’s Q1 financial report. “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.”
‘Tremendous amount of data’ from ecommerce
But stronger overall sales are ahead, thanks in a big way to the company’s ability to use ecommerce data, Holt said on an April 25 earnings conference call with stock analysts. Proto Labs’s ecommerce-based model, with its ability to gather extensive data on customer activity, was helping the digital manufacturer to better learn customer demand and adjust to it, she said.
“One of the great things about Proto Labs’s business is we get a tremendous amount of data coming from our ecommerce web-based model,” she said on the conference call, according to a transcript of the call from Seeking Alpha. She added that Proto Labs uses that data to understand how its pricing algorithms and service offerings affect its sales and its standing among competitors.
“So that’s really good information that’s going to allow us to hone this and learn more and get better,” she said,
Proto Labs attributed the decline in sheet metal services and the small increase in CNC manufacturing partly to its 2018 acquisition of Rapid Manufacturing.
Improving the Rapid Manufacturing business
Holt said that Rapid’s business model of operating as a “traditional machine shop” producing non-standardized products was difficult to manage and not scalable, resulting in less than expected sales to Proto Labs’s legacy customers. Orders placed with Rapid “often resulted in late deliveries, extended lead times” and “dissatisfied customers,” Holt said.
But she said that Proto Labs has been working with the Rapid unit to develop a “standardized product offer to ensure we could consistently and reliably meet our delivery commitments at scale.”
Proto Labs, with manufacturing facilities in the United States, Europe and Japan, sells to customers worldwide several types of custom manufacturing that customers can order online: 3D printing, which uses digital blueprints to construct items by adding or removing materials layer by layer; additive manufacturing, a form of 3D printing used to add materials to build products; injection molding, a process by which material is forced into a mold to form a product; and CNC, or computer numerical control, a process by which machining or milling tools operate via computer programming.
For the first quarter ended March 31, Proto Labs reported:
- Gross profit increased 1.6% year over year to $58.86 million, resulting in a profit margin of 51.9%, down from 53.7%;
- Net income declined 14.0% to $15.51 million, partly due to an increase in stock-based compensation and amortization expenses, and changes in income tax, the company said.
- The number of product developers and engineers it serves through its ecommerce site increased 9.3% to 20,573.
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