Proto Labs shares jump 5.3% on earnings and revenue

Proto labs (NYSE: PRLB) released better-than-expected fourth-quarter and full-year 2021 results ahead of Friday’s market open.

Shares of the fast-moving contract manufacturing company jumped 5.3% on Friday. This performance is stronger than this number suggests because the market was under pressure. Friday, the S&P500 and heavy tech stock Nasdaq Compound fell by 1.9% and 2.8% respectively.

The positive market reaction to the release was driven by fourth-quarter revenue and earnings easily beating Wall Street consensus estimates.

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Quarterly key figures

Metric

Q4 2021

Change from year to year

Income

$123.6 million

18%

GAAP operating profit

$13.1 million

19%

GAAP net income

$11.9 million

24%

Adjusted net income

$11.4 million

(15%)

Earnings per share (EPS) GAAP

$0.43

19%

Adjusted EPS

$0.41

(18%)

Data source: Proto Labs. YOY = year after year. GAAP = generally accepted accounting principles.

3D Hubs, an online manufacturing platform acquired by Proto Labs in January 2021, generated $9.9 million in revenue in the fourth quarter. Excluding its contribution and the foreign currency effect, Proto Labs revenue increased 8.6% in the quarter.

For the quarter, Wall Street was looking for adjusted EPS of $0.27 on revenue of $117.4 million, as shown in my earnings overview. Thus, the company far exceeded both expectations.

For context, in the third quarter, Proto Labs revenue grew 17% year-over-year to $125.3 million. Excluding the contribution of the 3D Hubs, revenue increased by 8.4%. Adjusted for one-time items, net income was $9.7 million, or $0.35 per share, down 48% year-over-year. This result missed the $0.43 that Wall Street had expected.

For the year 2021, Proto Labs generated $55.2 million in cash from operations, compared to $107 million in 2020. It ended the year with $77.5 million in cash, cash equivalents and short-term investments.

Quarterly revenue by service

manufacturing service

Q4 2021 revenue

Change from year to year

Injection molding

$53.9 million

3.5%

CNC machining

$44.9 million

41%

3D printing

$18.7 million

17%

Sheet metal

$5.6 million

24%

Other

$485,000

(36%)

Total

$123.6 million

18%

Data source: Proto Labs. YOY = year after year.

By geography, fourth-quarter year-over-year revenue increased 18% to $97.9 million in the United States, 20% to $22.1 million in Europe and 3% to $3.5 million in Japan.

3D Hubs contributed $5.1 million to US revenue and $4.8 million to European revenue.

Organic revenue for the quarter (which excludes the contribution of 3D hubs and foreign currency effects) increased 12% in the United States, decreased 4% in Europe and increased 5% in Japan.

On the earnings call, interim chief financial officer Dan Schumacher attributed the drop in European revenues to “ongoing supply chain challenges in the overall European manufacturing environment, particularly accentuated in automotive”.

Guidance for the first quarter of 2022

On the earnings call, Schumacher reported first-quarter revenue of $116 million to $126 million, representing year-over-year growth of up to 8%.

Going into the report, Wall Street had modeled first-quarter revenue of $125.9 million, which is the high end of the company’s outlook range.

Schumacher explained the reason for the relatively light revenue forecast:

We saw a slow first quarter start to our legacy business as the omicron variant slowed manufacturing demand, reflected by US manufacturing activity falling to a 14-month low in January. However, as the quarter progressed and the omicron wave began to recede, our orders began to pick up, creating optimism for the second half of the quarter and the remainder of 2022.

In short, Proto Labs had a strong fourth quarter. The first quarter revenue forecast was a bit on the light side, but there was a good reason for that.

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