Proto Labs (NYSE:PRLB) released second-quarter 2018 financial results before the market open on Thursday. The technology-enabled, quick-turn, contract manufacturer of prototypes and low-volume production parts posted revenue and earnings-per-share growth of 34% and 52% year over year, respectively. EPS adjusted for one-time items also increased 52%. 

The market's reaction was muted, with shares closing down 0.4% on Thursday. The stock is up more than 91% over the last year, through Thursday, far outpacing the S&P 500's 16.8% return.

Male worker standing at a 3D-printing machine in a Proto Labs' production facility.

Image source: Proto Labs.

Proto Labs' key quarterly numbers


Q2 2018

Q2 2017

Year-Over-Year Change


$109.7 million

$82.0 million


GAAP operating income

$22.0 million

$16.4 million


GAAP net income

$18.3 million

$12.1 million


Adjusted net income

$19.9 million

$13.1 million


GAAP earnings per share (EPS)




Adjusted EPS




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

Revenue got a boost of approximately $1.5 million from foreign currency gains. Due to the intermingling with its existing business, the company isn't able to break out revenue in the quarter attributed to RAPID Manufacturing, which it acquired in December. However, CFO John Way said on the earnings call that RAPID had sales of $11.3 million in the year-ago quarter. That means organic revenue growth on a constant-currency basis was somewhat less than 19%. 

Earnings benefited from a lower tax rate due to U.S. tax reform. On an adjusted basis, the company's tax rate was 22.5% compared to 31.3% in the second quarter of last year.

The company generated $33.2 million in cash from operations during the quarter, and ended the period with cash and cash equivalents of $144.9 million.

Proto Labs had guided for adjusted earnings per share (EPS) in the range of $0.69 to $0.75 on revenue of $107 million to $112 million, so its earnings came in above the midpoint of its guidance range, while revenue came in roughly at the midpoint of its outlook. For additional context -- though long-term investors shouldn't give too much importance to Wall Street's near-term estimates -- analysts were looking for adjusted EPS of $0.72 on revenue of $110.5 million. So the company fell a bit short on the top line, but slightly beat on the bottom line.  

Revenue results by service provided

Manufacturing Service


Year-Over-Year Change

Injection molding (Protomold)

$51.6 million


CNC machining (Firstcut)

$37.8 million


3D printing

$13.2 million


Sheet metal*

$6.3 million



$0.7 million



$109.7 million


Data source: Proto Labs. *New category stemming from the acquisition of RAPID Manufacturing in December 2017. 

Proto Labs's CNC (computer numerical control) metal working business continues to power growth, as it did in the first quarter and throughout last year. This business has been getting a boost in 2018 from the RAPID acqusition.

What happened with Proto Labs in the quarter?

  • Revenue surged 36% year over year to $86.4 million in the U.S., increased 25% to $20.2 million in Europe, and grew 21% to $3.1 million in Japan. In constant currency, revenue in Europe and Japan increased 16% and 19%, respectively. 
  • The number of unique product developers and engineers served increased nearly 18% to 19,198. (This doesn't include customers served on the RAPID system.)
  • Gross margin declined to 54% from 56.5% in the year-ago period. The company attributed the decline largely to the acquisition of RAPID.
  • GAAP operating margin was flat with the second quarter of 2017 at 20.2%, while adjusted operating margin ticked up to 23.3% from 22.9%.
  • The company divested RAPID's wire and cable business in April; this business had been generating about $500,000 in sales per quarter. 

What management had to say

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

For the second straight quarter, Protolabs delivered 34% revenue growth over 2017. Through the first half of the year, our CNC Machining business has experienced explosive growth in excess of 60%. Our ability to serve our customers with this level of growth demonstrates the tremendous value and scalability of our digital business model.

Looking ahead

In short, Proto Labs posted another robust quarter.

CFO John Way outlined the company's third-quarter 2018 outlook on the earnings call. Management didn't makes any changes to the previously issued full-year guidance.  


Revenue Guidance

Projected Year-Over-Year Change

Adjusted EPS Guidance

Projected Year-Over-Year Change


$110 million to $115 million

25% to 31%

$0.71 to $0.77

27% to 38% 


$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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