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Proto Labs Wraps Up 2017 on a Strong Note

By Beth McKenna - Feb 9, 2018 at 5:06PM

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In the fourth quarter, the technology-enabled, quick-turn, on-demand manufacturer churned out year-over-year revenue and adjusted EPS growth of 30% and 41%, respectively.

Proto Labs (PRLB 1.17%) released robust fourth-quarter and full-year 2017 results before the market opened on Thursday. The quick-turn, contract manufacturer of prototypes and low-volume production parts posted revenue and adjusted earnings per share (EPS) growth of 30% and 41%, respectively.

The market's initial reaction was muted, with shares closing up 0.7% on Thursday. As of midday afternoon trading on Friday, shares are down about 5%. The overall market -- particularly the tech sector -- has been getting hit hard this week, so investors can probably attribute much to all of this decline to general market dynamics. A pullback amid tough market conditions isn't surprising, as Proto Labs stock has been having a fantastic run: It's gained 99% for the one-year period through mid-afternoon trading on Friday versus the S&P 500's 12.8% return. 

Proto Labs' key quarterly numbers


Q4 2017

Q4 2016

Year-Over-Year Change


$94.2 million

$72.4 million


GAAP operating income

$18.8 million

$14.8 million


GAAP net income

$14.3 million

$9.4 million


Adjusted net income

$15.7 million

$10.8 million


GAAP earnings per share (EPS)




Adjusted EPS




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

Quarterly revenue included a $3.6 million contribution from RAPID Manufacturing, the New Hampshire-based company that Proto Labs acquired on Dec. 1, 2017. Excluding this contribution, the impact of discontinued services, and the benefit from foreign currency exchange rates, revenue grew 26.1% year over year. The Tax Act of 2017 resulted in a net benefit of $1.9 million from the revaluation of deferred tax liabilities partially offset by deemed repatriation of foreign earnings. Excluding all one-time items, net income was $15.7 million, or $0.58 per share.

Proto Labs had forecast adjusted earnings per share (EPS) in the range of $0.52 to $0.58 on revenue of $85 million to $90 million, so it beat the upper end of its top-line guidance range and came in at the upper end of its profit-expectation range. For additional context -- though long-term investors shouldn't give too much importance to Wall Street's near-term estimates -- analysts' consensus estimate was for adjusted EPS of $0.56 on revenue of $91.34 million. So the company beat both expectations.

For full-year 2017, year-over-year revenue increased 16%, to $344.5 million, and adjusted EPS jumped 33%, to $2.14. The company generated $81.7 million in cash from operations during the year, up from $77.5 million in 2016, and ended the year with $131.2 million in cash and equivalents.

Industrial 3D printer printing an unidentifiable red plastic object.

Image source: Getty Images.

Revenue results by service provided

Manufacturing Service


Year-Over-Year Change

Injection molding (Protomold)

$50.2 million


CNC machining (Firstcut)

$30.4 million


3D printing

$11.3 million


Sheet metal

$1.8 million



$0.5 million



$94.2 million


Data source: Proto Labs.

Proto Lab's CNC (computer numerical control) metal-machining business continues to drive growth, as it did in the first three quarters of 2017. This business benefited from the company's acquisition of RAPID in the quarter. However, even excluding RAPID's one-month contribution to revenue, the CNC segment posted robust revenue growth of 38%, according to CEO Vicki Holt on the earnings call. For some context, this business grew 16%, 22%, and 25% year over year in the first, second, and third quarters, respectively, of 2017.

Growth nicely accelerated in the company's largest business, plastic-injection molding, which grew only 5% and 7% year over year in the second and third quarters, respectively. The 3D-printing segment's year-over-year revenue growth of 15% was a little higher than the third quarter's 13% growth, but lagged the 20% growth posted in the second quarter. This segment is still relatively small -- accounting for 12% of total revenue -- so quarterly results will be "lumpy." Moreover, Proto Labs is still working to incorporate the company's European 3D-printing acquisition of late 2015. Sheet metal is a new category in the fourth quarter, thanks to the RAPID acquisition.  

What happened with Proto Labs in the quarter?

  • In addition to acquiring RAPID, Proto Labs also acquired a small software company, whose manufacturing software it has been using. 
  • Year-over-year revenue grew 32% in the United States (26% excluding the contribution from RAPID), 28% as reported in Europe and 18% on a common-currency basis, and 8% as reported and 12% in constant currency in Japan. The company believes there's "significant opportunity" in Japan and is looking for a new country manager to replace the one with whom the company recently parted ways, Holt said on the conference call.  
  • The number of unique product developers and engineers served increased 20.9% year over year, to 16,985.
  • Gross margin increased to 56.2% from 55.7% in the year-ago period.
  • GAAP operating margin ticked down to 19.9% from 20.5% in the year-ago quarter. However, adjusted operating margin -- which is the better metric to consider -- increased to 25.1% from 23.1% in the fourth quarter of 2016.

What management had to say

Here's what CEO Vicki Holt had to say in the press release:

Proto Labs continues to demonstrate its ability to provide solutions to our customers to help them accelerate product development, reduce risk and optimize supply chains by delivering custom parts at unprecedented speeds. The fourth quarter was a strong ending to a great year. During the quarter, we delivered double-digit revenue growth in each of our services and in each of our regions on a constant currency basis. We were especially pleased with the growth of revenue from our CNC business, up 37.6 percent organically. We continue to enhance our technology to further expand the services that we can provide to our customers.

Looking ahead

Proto Labs posted another solid quarter, with 2017 wrapping up to be a much better year than 2016. Holt said on the call that the company's main focus in 2018 remains on expanding the solutions it can provide to customers. 

CFO John Way outlined the company's first-quarter and full-year 2018 outlook on the conference call as follows:


Revenue Guidance

Projected Year-Over-Year Change

Adjusted EPS Guidance

Projected Year-Over-Year Change


$101 million to $106 million

29% at the midpoint of guidance

$0.64 to $0.70

31% at the midpoint of guidance


$425 million to $450 million 

27% at the midpoint of guidance

$2.70 to $2.90

31% at the midpoint of guidance.

Data source: Proto Labs.

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