Proto Labs\' Earnings Slip on Challenges in Acquired Business

Proto Labs (NYSE: PRLB) released frail first-quarter 2019 results ago the impartial opened above Thursday. 

Shares of the quick-turn, press manufacturer declined 5.5% above Thursday. We can peculiarity the market's reaction ought both first-quarter revenue and earnings falling short of Wall Street's expectations, over with second-quarter guidance although both the peak and bottom lines because sound coming at lighter than what many investors were responsible anticipating.

Here's how the piece worked out although Proto Labs and its investors.

Image source: Proto Labs.

Proto Labs results: The key numbers

Data source: Proto Labs. GAAP = mostly accepted accounting principles. EPS = earnings per share.

earnings call. " data-reactid="30">Revenue growth at the company's legacy affair (which excludes the services provided by quick Manufacturing, which Proto Labs acquired at Dec. 2017) was almost 11% at successive currency, CEO Vicki Holt said above the earnings call. 

The company generated $18 million at cash from operations during the quarter, compared with $26.1 million at the year-ago period, and ended the piece with cash and cash equivalents of $85.4 million.

Proto Labs had guided although adjusted EPS at the mountain of $0.65 ought $0.73 above revenue of $113 million ought $119 million. So, its earnings came at can the midpoint of its expectation range, and its revenue landed can the low target of its expectation range. although extra context (though long-term investors shouldn't call also much importance ought Wall Street's near-term estimates), the motorway was looking for adjusted EPS of $0.70 above revenue of $115.6 million. So, the company slightly missed above the bottom queue and fell short above revenue. 

For farther context, at the previous quarter, Proto Labs grew revenue and adjusted EPS 19.7% and 27.6%, respectively. 

Revenue results by service provided

Data source: Proto Labs. *New class stemming from the acquisition of quick Manufacturing at Dec. 2017. 

Proto Labs' "legacy CNC [computer numerical control] operations grew 8% at the first piece of 2019 backward experiencing gigantic growth of can 40% at the first piece of 2018, creating a difficult year-over-year comparable," Holt said above the earnings call. 

See beneath although Holt's in-depth comments almost the subpar deed of the acquired quick business, which includes the entire sheet-metal affair and isolate of the CNC metal-working business. 

What happened with Proto Labs at the quarter?

• Revenue grew 4.3% year can year ought $87.8 million at the U.S., rose 6.6% (14.8% at successive currency) ought $21.3 million at Europe, and surged 20.8% (23.2% at successive currency) ought $4.4 million at Japan. The tepid U.S. deed was greatly because of weakness at the company's quick sheet-metal service and expanded CNC offering. at the U.S. legacy business, revenue grew 9.3% year can year, Holt said above the earnings call.
• The quantity of sole manufacture developers and engineers served increased 9.3% year can year to 20,573. 
• Gross verge declined ought 51.9%, from 53.7% at the year-ago period. It because sound declined sequentially, because it was 52.5% at the fourth piece of final year.

What management had ought say

On the earnings call, Holt reiterated Proto Labs' four headmaster priorities although 2019, the first and final of which are focused above improving the deed of the quick services: "continue ought evolve our go-to impartial model, intensify our guest experience, better our overall efficiency because a company, and better the deed of the acquired quick operation." 

She went above ought draft the four capital actions the company is taking ought better its performance, based above its experiences at the first quarter:

 

First, at the first piece we restructured the quick sales organization, including changes at sales leadership. Our New Hampshire sellers are getting comfortable with the new books of affair and selling complete of Proto Labs' services. at Q2, we will thrive ought teach and fraction best practices ought better our go-to-market success. Second, we will thrive ought invest at marketing ought highlight the availability of our expanded service offerings ought motivate increased demand. Third, we will diminish the published guide time of the Sheet Metal business. We are able ought discharge this based above automation and genius investments we've made at the business. This oath of unprecedented accelerate is something our customers eat learned ought desire from us and allows us ought accept fraction from the market. And finally, we thrive ought analyze our news and shriek on opportunities ought equipment value-based pricing and better leverage our quoting machinery ought better end rates.