On-demand digital manufacturing provider Protolabs has reported that its 3D printing segment has returned to revenue growth within its Q3 2020 financial results.
The firm generated 3D printing revenue of $ 16.2 million during the third quarter of 2020, representing a 2.5 percent increase on the $ 15.8 million generated in the third quarter of 2019, and 6.5 percent as seen during the second quarter of 2020. There is a quarterly recovery from the decline.
Many companies have yet to report their Q3 figures, but Protolabs’ on-demand parts business fared better than Materialize, whose manufacturing revenue fell 41 percent in Q3 2020. Following the results, shares of Protolabs fell from $ 117.72 to $ 114.62. , But quickly reverted to $ 118.08, reflecting investors’ continued confidence in the firm’s steady revenue performance.
On a call with analysts and investors, Protolabs president and CEO, Vicky Holt, highlighted the flexibility of the company’s business model as a key factor in the relative success achieved during the third quarter.
Holt said, “I am pleased to state that we saw third-quarter revenue and earnings per share driven above expectations, improved productivity and lower costs.” “Our organization has continuously adapted to near-term changes, and the uncertainty of 2020 has led to rapid changes. Our partners have shown immense dedication and flexibility.”
Protolabs Q3 2020 Revenue Performance
During Q3 2020, Protolabs generated consolidated revenue of $ 107.5 million, constituting an 8% drop over the reported $ 117.5 million in Q2 2020. The figure can be divided into four major sections: injection molding, CNC machining, 3D printing and sheet metal.
The company’s injection molding business accounts for about half of its total revenue, but the division saw a slight decline in Q3 2020, falling from $ 55.1 million to $ 53.2 million reported in Q3 2019. Revenue from CNC machining also declined from $40.2 million generated in Q3 2019 to $33.1 million in Q3 2020, representing a decline of 17.6 percent.
In addition to 3D printing, as stated, Protolabs was the only area of business to report annual revenue growth, the firm also reported a decline in revenue from its sheet metal division. In Q3 2020, Protolabs’ sheet metal segment generated revenue of $ 5.2 million, a 25 percent drop on the reported $ 3.9 million in the third quarter of 2019.
Although the United States remained the firm’s largest market, generating revenue of $ 85.6 million during the third quarter of 2020, a 7.9 percent decrease from the reported $ 92.9 million in the third quarter of 2019. Europe was the second largest source of revenue with $ 18.8 million, while its revenues in Japan were $ 3 million compared to the third quarter of 2019, a drop of 8.8 and 21.5 percent, respectively.
Recovery from
During the earnings call, Holt attributed the company’s overall 8% revenue decline to “continued global economic challenges” and their impact on its customer base. Although Holt said Protolabs improved its performance sequentially from the second quarter of 2020, it acknowledged that US industrial activity remained well below pre-pandemic levels.
Since the third quarter of 2019, the firm’s best-performing division in the US was its aerospace business, which saw a substantial increase in the number of space exploration and satellite customers. Meanwhile in Europe, Protolabs’ on-demand manufacturing business saw a 13 percent improvement in revenue on a quarterly basis between the second quarter and third quarter of 2020, reflecting a broader European recovery.
During Q3 2020, Protolabs eliminated almost all of its discretionary expenses to manage costs due to the unpredictable financial environment. As a result, the firm’s operating expenses declined from 35.8 percent in the second quarter of 2020 to 34.4 percent in Q3 2020. The company increased its operating income from $14.4 million to $17.7 million during the same period.
Planning for Q4 2020 and beyond
Moving into Q4 2020, the company is set to focus on developing its upgraded ‘Protolabs 2.0’ e-commerce platform, which goes live in Europe in November, followed by the US debut in Q1 2021 is. The new system promises to offer an improved customer experience through increased functionality, and Protolabs predicts that this will lead to higher customer retention.
Despite the launch of its new platform in Q4, the company is forecasting a decline in its revenue during the quarter due to seasonal patterns, which saw its revenue fall by $ 5.5 million over the same period in 2020. Because of these trends and the surrounding uncertainty. In the US election, Protolabs has forecast a wide range for the rest of the year, and will continue to manage its costs closely.
In his closing remarks, Holt concludes that the company has done well to navigate a difficult year to date, and that an upcoming update to its web-based platform will provide growth opportunities in Q4.
