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Protolabs reports 5% revenue decline in FY 2020 financials despite beating Q4 forecast


On-demand digital manufacturing provider Protolabs has reported a 5% fall in revenue within its FY 2020 financials, despite beating analyst expectations over the last quarter of the year. 

During Q4 2020, the company generated $105 million in revenue, which was 2% less than the $107 million reported in Q4 2019, but still enough to beat analyst guidance by $2.8 million. However, in terms of Protolabs’ full-year financials it earned just $434 million in revenue, 5% less than the $458 million generated in FY 2019. 

The results represent a return to annual revenue decline for the company, after it managed to achieve growth between Q2 and Q3 2020 via a 6.5% quarterly rebound. Predictably, Protolabs’ shares fell slightly by 2.1% following the publication of the results, declining in value from $200.26 to $195.96 by midday trading on Friday.

According to outgoing Protolabs CEO and President Vicki Holt, the firm’s employees showed great resilience during 2020, especially given the challenging COVID-hit macroeconomic climate. “Protolabs responded very well in the face of unforeseen challenges driven by the emergence of the global pandemic,” said Holt. 

“As an organization, we prioritized the health of our employees, while continuing to serve our customers and advance our long-term business opportunities,” she added. “Our digital manufacturing model allowed us to help our customers produce parts at market leading turnaround times to respond to COVID-19.”

Protolabs' Minnesota HQ.
Protolabs beat its revenue guidance in Q4, but still reported an annual decline of 5%. Photo via Protolabs.

Protolabs’ FY 2020 financials 

Protolobs broadly reports its financial results across four key segments: Injection Molding, CNC Machining, 3D Printing, and Sheet Metal. In terms of net revenue contribution, Injection Molding remains the company’s biggest earner, and over the course of 2020 it generated $218 million, marginally more than the $217 million reported in FY 2019. 

With regards to 3D printing, the division’s revenue also increased, rising from $61 million in FY 2019 to $62.5 million in FY 2020. This moderate growth was evident in Q4 2020 as well, as the segment’s revenue rose from $15.7 million in Q4 2019 to $16 million, showing that demand in one of Protolabs’ key verticals is still going strong. 

The majority of the company’s revenue decline originated in its CNC Machining division, which generated just $132 million across FY 2020, 15% less than the $155 million reported in FY 2019. Protolabs’ Sheet Metal revenue also fell during the same period from $21 million to $19 million, a comparative reduction of around 10%. 

When sorted by geographical area, the United States remains the firm’s best revenue driver, bringing in $346 million over the course of FY 2020, but this still represents a 4% decline. Elsewhere, Protolabs generated $75 million in revenue from its European business and $14 million in Japan, constituting annual decreases of 11% and 14% respectively. 

Revenue Stream (USD) FY 2019  FY 2020 Variance (%)  
Injection Molding 217.4m 218m  +0.2
CNC Machining 155m 132m -15
3D Printing  61m 62.5m +2.5
Sheet Metal  21m 19m -10
Other 3.5m 3.5m
Total 458m 434m -5

Breaking down a difficult 2020

During an earnings call with analysts and investors, Holt emphasized that despite the ongoing uncertainty caused by COVID-19, the company’s new manufacturing service holds the potential to return it to revenue growth. “We accomplished our number one priority entering 2020, the successful launch of Protolabs 2.0,” said Holt. 

“Protolabs 2.0 offers a much-improved customer experience that will allow us to maintain and extend our position as the leader in digital manufacturing,” she added. “The launches went as expected, and initial customer feedback has been very positive. As the economy continues its gradual recovery, we expect higher retention moving forwards.”

The company’s CFO John Way added that while its number of developer clients fell by 15.7% in 2021 to 40,267, this wasn’t related to the decline seen in its CNC Machining revenue. In fact, Protolabs has invested $47 million in a dedicated UK complex as well as its expanded 5,000 ft German facility, which should see the division’s revenue begin to recover. 

Elsewhere, Protolabs extended its production capacity by installing both Carbon DLS and GE Additive X-Line 3D printers at its factories earlier this year. The company also grew its material offering by launching a cobalt chrome superalloy for its oil and gas clients, something which no doubt helped to boost its 3D printing revenue.  

The construction site at Protolabs' new German facility.
Protolabs has invested $47 million in the expansion of its facilities in Germany and the UK. Photo via Protolabs.

New year, new CEO, new direction?

For the first time in seven years, Protolabs is heading into a new fiscal year with a fresh CEO. Robert Bodor, who takes over the reigns from March 1st 2021, thanked Holt on the call for her “passionate leadership,” and expressed a desire to continue growing the business following the firm’s $280 million acquisition of 3D Hubs

“We’ve built our business by adding new services, and expanding our envelope to manufacture a broader range of parts,” said Bodor. “Our customers value this and continue to ask us to add more services and capabilities. With the launch of Protolabs 2.0 and the addition of 3D Hubs, we are uniquely-positioned to capitalize on this.”

Moving forwards, the company has promised to add new features to Protolabs 2.0, and roll-out its heat metal service on the platform. Later this year, Protolabs also intends to integrate 3D Hubs’ network into its offering as a means of maximizing part availability, although the firms will remain separate for the time being. 

“The addition of 3D Hubs will allow us to expand how we serve customers. If we can’t make it, we’ll find the right manufacturer to make it for you,” concluded Bodor. “This is a truly exciting market-leading vision for digital manufacturing. We will bring the two organizations together to provide a single unified customer experience.”

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Featured image shows Protolabs’ Minnesota HQ. Photo via Protolabs.

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