Proto Labs (NYSE:PRLB) released solid fourth-quarter and strong full-year 2018 results before the market open on Thursday.

For the quarter, the technology-enabled, quick-turn contract manufacturer posted revenue and earnings-per-share growth of 19.7% and 34% year over year, respectively. Adjusted for one-time items, EPS jumped 27.6%.

Shares plummeted 21.8% on Thursday. We can attribute the market's reaction to fourth-quarter revenue missing the company's guidance and both revenue and adjusted earnings falling short of Wall Street's estimates, along with first-quarter guidance for both the top and bottom lines coming in weaker than many investors were likely expecting. 

A worker standing next to a 3D printing machine inside a Proto Labs facility.

Image source: Proto Labs.

Proto Labs' key quarterly numbers


Q4 2018

Q4 2017

Year-Over-Year Change


$112.8 million

$94.2 million


GAAP operating income

$20.2 million

$18.8 million


GAAP net income

$19.3 million

$14.3 million


Adjusted net income

$20.3 million

$15.7 million






Adjusted EPS




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

The company generated $38 million in cash from operations during the quarter and ended the period with cash and cash equivalents of $155.4 million. 

For full-year 2018, revenue increased 29.3% to $445.6 million. This growth includes the contribution from Rapid Manufacturing, which Proto Labs acquired in December 2017. Net income soared 47.9% to $76.6 million, or $2.81 per share. Adjusted net income surged 44.2% to $82.8 million, or $3.04 per share. 

For the quarter, Proto Labs had guided for adjusted EPS in the range of $0.77 to $0.83 on revenue of $112 million to $117 million. So it missed its earnings expectation and came in at the low end of its outlook range for revenue. For additional context (though long-term investors shouldn't give too much importance to Wall Street's near-term estimates), the Street was looking for adjusted EPS of $0.80 on revenue of $115.4 million. So the company missed both estimates, as previously mentioned.

Revenue for the quarter was negatively affected by several factors that management outlined on the earnings call: foreign currency headwinds ($500,000); a new revenue recognition accounting standard adopted in the beginning of 2018, which had the effect of pushing revenue from the fourth quarter into the third quarter; Rapid performing below the company's expectations; and a slowing of overall demand in December. 

Earnings were negatively impacted by revenue coming in lower than anticipated, by a greater-than-expected negative impact on productivity during the company's move of its North American CNC operation into a new facility, and the need to invest in capacity at Rapid ahead of anticipated growth in demand.

Check out the latest Proto Labs earnings call transcript.

Revenue results by service provided

Manufacturing Service


Year-Over-Year Change

Injection molding (Protomold)

$53.9 million


CNC machining (Firstcut)

$38.2 million


3D printing

$13.9 million


Sheet metal*

$6.0 million






$112.8 million


Data source: Proto Labs. *Relatively new category stemming from the acquisition of Rapid Manufacturing in December 2017. 

Management was generally pleased with the performance of its legacy business, but not satisfied with that of Rapid. The sheet metal business came entirely from the acquisition of Rapid, which also expanded Proto Labs' existing CNC (computer numerical control) metal-working capabilities.

What happened with Proto Labs in the quarter?

  • Revenue jumped 23.9% year over year to $89.3 million in the U.S., edged up 2.8% (5.6% in constant currency) to $19.5 million in Europe, and surged 26.5% to $4.0 million in Japan. CEO Vicki Holt attributed the revenue softness in Europe to "a slow December and slower than expected demand for our injection molding service, particularly in the automotive industry."
  • The number of unique product developers and engineers served increased 18.2% to 20,403.
  • Gross margin declined to 52.5%, from 56.2% in the year-ago period

What management had to say

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

Protolabs had another quarter of strong revenue growth, however, fourth quarter financial results were below our expectations. We experienced a strong start to the quarter in terms of revenue, followed by a weak December. In addition, our recent acquisition of Rapid Manufacturing is performing below our expectations. These factors, combined with the relocation of our CNC facility in the United States impacted our productivity during the quarter, negatively affecting our operating earnings.

Looking ahead

Proto Labs' quarterly results fell short of its and Wall Street's expectations, but the company nonetheless posted solid revenue and adjusted EPS growth to cap off a strong year.

On the earnings call, CFO John Way outlined the company's tepid first-quarter 2019 outlook. 


Revenue Guidance

Projected Year-Over-Year Change

Adjusted EPS Guidance

Projected Year-Over-Year Change


$113 million to $119 million

5% to 10%

$0.65 to $0.73

(8%) to 3% 

Data source: Proto Labs.

Going into earnings, Wall Street was looking for adjusted EPS of $0.80 on revenue of $120.1 million in the first quarter of 2019.

On the call, Way said that the two main reasons for the light outlook are:

  • The early results of the company's training of its sales force on its sheet metal services (obtained in the Rapid acquisition) are "not progressing as [fast as] expected."
  • The "uncertainty in the regions we operate related to Brexit in Europe and tariffs and the potential impact to our customers."

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