Proto Labs Inc. accomplished in the second quarter what it has done repeatedly in prior quarters: it posted record quarterly sales, bringing Q2 revenue to $115.9 million.

The pace of record growth isn’t about to slow down any time soon, CEO Vicki Holt said yesterday.

Vicki Holt, CEO, Proto Labs Inc.

With Industry 4.0 “megatrends” disrupting traditional production processes and driving demand for the multiple forms of on-demand manufacturing that Protolabs offers, the company is primed to continue benefiting from its position as a pioneer-turned-veteran in the growing digital manufacturing space, Holt said on a conference call with investment analysts, according to a transcript from Seeking Alpha.

“Protolabs stands to benefit from these megatrends,” she said.

Holt pointed specifically to three trends related to Industry 4.0—a term used to describe the increasingly widespread use of data and internet-based technology to more accurately predict and match supply and demand—for which she says Protolabs is set up to serve with on-demand digital manufacturing.

She described the three trends as:

• Shorter product lifecycles, which have increased the importance for Protolabs’ customers of being first to market with new products;
• The increasing adoption of internet-of-things technology, which requires rapid on-demand product development to support design changes in products connected through IoT systems;
• The increase in demand for more customized products produced in limited quantities, resulting in shorter production runs and just-in-time manufacturing.

“These trends offer significant opportunities for continued long-term growth for our business,” Holt said. “And Protolabs is extremely well-positioned through our mission of helping companies accelerate product development, reduce risk and optimize their supply chains.”

Although Q2 revenue increased by a modest 5.7% year over year, the increase came amid an overall softening in several of its customers’ markets. This year’s Q2 financials also followed a particularly strong year-earlier period that made for a tough comparison, Holt said. In addition, the increase was offset by international currency fluctuations and by an 8.6% decline in revenue at Rapid Manufacturing, a company Protolabs acquired in 2017.

Aerospace and medical spark growth

Protolabs, 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.

Holt said Q2 revenue growth was particularly strong in 3D printing, which is becoming more prevalent in production in “many of our largest end markets,” she said. She added that the company has been gearing up to meeting increased demand for metal production parts as well as its more traditional market for non-metal prototype parts.

Among the multiple manufacturing industries Protolabs serves, medical and aerospace have led the company’s so far this year, Holt said.

But Protolabs isn’t taking anything for granted. “We are investing in voice-of-customer capability to develop deeper understanding of how we can serve our customers better,” she said.

3D-printing buzz at the Met Gala

Protolabs has also continued to upgrade its ecommerce platform to improve online customer experience, “to ensure that our customer experience remains intuitive and engaging,” Holt said, adding: “We continue to invest in making our processes and systems more efficient in order to scale our operations and support future growth.”

Fashion model Jourdan Dunn at the Met Gala in a dress produced through 3D printing by Protolabs and GE Additive.

To prod growth, it has increased investment in search optimization and pay-per-click advertising, “driving increased impression share and customer conversions,” Holt said.

The provider of on-demand manufacturing is also finding new ways to develop its brand awareness among manufacturers. “We continue to find new and innovative ways to create buzz about Protolabs,” she said.

For example, in the second quarter Protolabs collaborated with fashion designer Zac Posen and manufacturer GE Additive, a unit of the General Electric Co., to use 3D printing to produce dresses and accessories made of plastic and other synthetic and natural materials for the 2019 Met Gala, an annual fashion event at New York’s Metropolitan Museum of Art featuring such celebrities as entertainer Lady Gaga and fashion model Jourdan Dunn.

The Posen dresses produced with Protolabs and GE Additive included a “rose gown,” worn at the Met Gala by Dunn, which consisted of 21 plastic petals fastened in place by a modular cage, which was printed in Titanium for strength and lightweight. “Our 3D printing team in North Carolina did a wonderful job producing the dresses, and the event generated significant media attention displaying our thought leadership in 3D printing,” Holt said.

For the second quarter ended June 30, Protolabs, which does virtually all of its sales through ecommerce, reported:

• Revenue increased 5.7% year over year to $115.93 million;
• Gross profit increased 1.7% to $60.24 million, resulting in a gross profit margin of 52%, down from 54%;
• Net income declined 11.7% to $16.17 million,

For the first half, Protolabs reported:

• Revenue increased 5.1% year over year to $229.38 million;
• Gross profit increased 1.7% to $119.10 million, resulting in a gross profit margin of 51.9%, down from 53.9%;
• Net income declined 12.9% to $31.68 million.

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