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Proto Labs Inc 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Proto Labs, Inc.

Filing date:

02/21/2025

TLDR:

Proto Labs Inc. reported a slight decrease in revenue for FY 2024. The company is focusing on higher-value customer relationships and comprehensive service offerings.

ELI5:

Proto Labs made a bit less money this year. They’re trying to focus on bigger customers and offer more services to make more money in the future.

Accession #:

0001628280-25-007052

Published on

Analyst Summary

  • Total revenue decreased by 0.6% from $503.9 million in 2023 to $500.9 million in 2024.
  • Gross profit margin improved to 44.6% from 44.1% due to focused management of resources and increased automation.
  • Operating expenses increased by 4.9%, primarily due to costs related to disposal and exit activities in Germany.
  • Income from operations decreased by 29.3%.
  • Net income decreased slightly by 3.6%.
  • Cash and cash equivalents increased by $5.3 million.
  • Gross Profit Margin: 44.56%, above the industry average.
  • Operating Profit Margin: 3.98%, below the industry average.
  • Net Profit Margin: 3.31%, below the industry average.
  • Return on Assets (ROA): 2.23%, below the industry average.
  • Return on Equity (ROE): 2.48%, below the industry average.
  • Basic EPS: $0.66, Diluted EPS: $0.66.
  • Current Ratio: 3.66, indicating strong liquidity.
  • Quick Ratio: 3.43, indicating strong liquidity.
  • Cash Ratio: 1.94, indicating a strong ability to cover short-term liabilities.
  • Debt-to-Equity Ratio: 0.11, indicating low leverage.
  • Debt-to-Assets Ratio: 0.10, indicating a conservative capital structure.
  • Interest Coverage Ratio: 205.81, indicating a very strong ability to cover interest expenses.
  • Inventory Turnover: 21.38.
  • Days Sales Outstanding (DSO): 48.51.
  • Days Payable Outstanding (DPO): 20.40.
  • Asset Turnover: 0.67.
  • Price-to-Earnings Ratio (P/E): 61.45, suggesting the stock may be overvalued.
  • Price-to-Book Ratio (P/B): 1.47.
  • Price-to-Sales Ratio (P/S): 1.96.
  • Enterprise Value to EBITDA (EV/EBITDA): 15.95.
  • Revenue Growth: -0.59%.
  • Net Income Growth: -3.64%.
  • EPS Growth: 0%.
  • Revenue per customer contact decreased from $9,425 in 2023 to $9,716 in 2024.
  • Customer contacts decreased from 53,464 in 2023 to 51,552 in 2024.
  • Total stock-based compensation expense was $16,999,000 in 2024.
  • Injection Molding revenue decreased, while CNC Machining revenue increased.

Opportunities and Risks

  • Competition: The custom parts manufacturing market is highly competitive and subject to rapid technological change.
  • Global Economic Conditions: Uncertain economic conditions could reduce demand for Proto Labs’ services.
  • International Operations: Operating a global business exposes the company to risks such as currency fluctuations and political instability.
  • Cybersecurity: Potential breaches to customer data and intellectual property.
  • Facility Closures: Risks associated with the closure of manufacturing facilities in Germany.
  • Strategic Focus: The company’s focus on higher-value customer relationships and comprehensive service offerings through its factory and Protolabs Network.
  • E-commerce Adoption: Increasing adoption of e-commerce manufacturing provides opportunities for Proto Labs to offer valuable solutions.
  • Digital Manufacturing: Digital manufacturing drives sustainability and efficiency.

Potential Implications

Company Performance

  • The company needs to focus on improving its operating efficiency and revenue growth to justify its valuation.

Stock Price

  • The high P/E ratio suggests that the stock may be overvalued or that investors expect high growth in the future.

Proto Labs Inc. (PRLB) – 10-K Filing Analysis (FY 2024)

Executive Summary

Proto Labs Inc. reported a slight decrease in revenue for FY 2024 compared to FY 2023. While the company is managing costs effectively, strategic shifts, including facility closures in Germany, indicate a period of transition. The company’s focus on higher-value customer relationships and comprehensive service offerings through its factory and Protolabs Network is a key strategic direction. Overall, a cautious approach is warranted. Further monitoring of the company’s ability to navigate the transition, integrate its network, and capitalize on its strategic initiatives is recommended.

Company Overview

Proto Labs, Inc. is a digital manufacturing company providing custom parts through injection molding, CNC machining, 3D printing, and sheet metal fabrication. The company operates in the United States and Europe, with a recent strategic decision to close facilities in Germany and dissolve operations in Japan. Proto Labs aims to provide quick-turn manufacturing services to product developers and engineers.

Detailed Financial Analysis

Revenue Analysis

Total revenue decreased by 0.6% from $503.9 million in 2023 to $500.9 million in 2024. This slight decrease was driven by a decrease in customer contacts, offset by an increase in revenue per customer contact.

Revenue by Segment:

  • United States: Revenue decreased by 0.2%.
  • Europe: Revenue decreased by 2.2%.

Revenue by Product Line:

  • Injection Molding: Revenue decreased by 4.8%.
  • CNC Machining: Revenue increased by 4.4%.
  • 3D Printing: Revenue decreased by 0.6%.
  • Sheet Metal: Revenue decreased by 7.7%.

Cost of Revenue and Gross Profit Analysis

Cost of revenue decreased by 1.5%, indicating improved cost management. Gross profit increased slightly, and gross margin improved to 44.6% from 44.1% due to focused management of resources and increased automation.

Operating Expenses Analysis

Operating expenses increased by 4.9%, primarily due to costs related to disposal and exit activities in Germany.

  • Marketing and Sales: Increased by 5.0%.
  • Research and Development: Increased by 2.9%.
  • General and Administrative: Decreased by 2.2%.

Profitability Analysis

Income from operations decreased by 29.3%, reflecting the impact of increased operating expenses and strategic shifts.

Net income decreased slightly by 3.6%.

Liquidity and Capital Resources

Cash and cash equivalents increased by $5.3 million, driven by cash generated from operations, offset by investing and financing activities.

Risk Assessment

  • Competition: The custom parts manufacturing market is highly competitive and subject to rapid technological change.
  • Global Economic Conditions: Uncertain economic conditions could reduce demand for Proto Labs’ services.
  • International Operations: Operating a global business exposes the company to risks such as currency fluctuations and political instability.
  • Cybersecurity: Potential breaches to customer data and intellectual property.
  • Facility Closures: Risks associated with the closure of manufacturing facilities in Germany.

Opportunity Assessment

  • Strategic Focus: The company’s focus on higher-value customer relationships and comprehensive service offerings through its factory and Protolabs Network.
  • E-commerce Adoption: Increasing adoption of e-commerce manufacturing provides opportunities for Proto Labs to offer valuable solutions.
  • Digital Manufacturing: Digital manufacturing drives sustainability and efficiency.

Conclusion and Actionable Insights

Proto Labs Inc. is navigating a period of transition, marked by strategic shifts and facility closures. While the company is managing costs effectively, revenue growth remains a challenge. The company’s focus on higher-value customer relationships and comprehensive service offerings through its factory and Protolabs Network is a key strategic direction. Overall, a cautious approach is warranted. Further monitoring of the company’s ability to navigate the transition, integrate its network, and capitalize on its strategic initiatives is recommended.

Disclaimer: This analysis is based solely on the provided SEC filing data and does not constitute financial advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Proto Labs, Inc. Financial Analysis – December 31, 2024

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit / Revenue = $223,200 / $500,890 = 44.56%
    • Trend: Previous year Gross Profit Margin was 44.06%. Percentage change is 1.13%.
    • Industry: The industry average gross profit margin for manufacturing companies is around 40%. Proto Labs’ gross profit margin is above the industry average.
  • Operating Profit Margin:

    • Calculation: Income from Operations / Revenue = $19,911 / $500,890 = 3.98%
    • Trend: Previous year Operating Profit Margin was 5.59%. Percentage change is -28.79%.
    • Industry: The industry average operating profit margin for manufacturing companies is around 10%. Proto Labs’ operating profit margin is below the industry average.
  • Net Profit Margin:

    • Calculation: Net Income / Revenue = $16,593 / $500,890 = 3.31%
    • Trend: Previous year Net Profit Margin was 3.42%. Percentage change is -3.22%.
    • Industry: The industry average net profit margin for manufacturing companies is around 7%. Proto Labs’ net profit margin is below the industry average.
  • Return on Assets (ROA):

    • Calculation: Net Income / Total Assets = $16,593 / $743,512 = 2.23%
    • Industry: The industry average ROA for manufacturing companies is around 5%. Proto Labs’ ROA is below the industry average.
  • Return on Equity (ROE):

    • Calculation: Net Income / Total Shareholders’ Equity = $16,593 / $670,151 = 2.48%
    • Industry: The industry average ROE for manufacturing companies is around 12%. Proto Labs’ ROE is below the industry average.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Basic EPS = $0.66, Diluted EPS = $0.66
    • Trend: Previous year Basic EPS was $0.66, Diluted EPS was $0.66. Percentage change is 0%.
    • Industry: EPS varies widely.

Liquidity

  • Current Ratio:

    • Calculation: Current Assets / Current Liabilities = $194,854 / $53,271 = 3.66
    • Trend: Previous year Current Ratio was 4.04. Percentage change is -9.41%.
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Proto Labs’ current ratio is high, indicating strong liquidity.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Current Assets – Inventory) / Current Liabilities = ($194,854 – $12,305) / $53,271 = 3.43
    • Trend: Previous year Quick Ratio was 3.82. Percentage change is -10.21%.
    • Industry: A quick ratio above 1.0 is generally considered healthy. Proto Labs’ quick ratio is high, indicating strong liquidity even without relying on inventory.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Short-Term Marketable Securities) / Current Liabilities = ($89,071 + $14,019) / $53,271 = 1.94
    • Trend: Previous year Cash Ratio was 1.97. Percentage change is -1.52%.
    • Industry: A cash ratio of 1 or higher is typically preferred. Proto Labs’ cash ratio is good, indicating a strong ability to cover short-term liabilities with cash and near-cash assets.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Shareholders’ Equity = $73,361 / $670,151 = 0.11
    • Trend: Previous year Debt-to-Equity Ratio was 0.11. Percentage change is 0%.
    • Industry: A debt-to-equity ratio of 1 or lower is generally considered healthy. Proto Labs’ debt-to-equity ratio is low, indicating low leverage.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $73,361 / $743,512 = 0.10
    • Trend: Previous year Debt-to-Assets Ratio was 0.10. Percentage change is 0%.
    • Industry: A debt-to-assets ratio below 0.5 is generally considered healthy. Proto Labs’ debt-to-assets ratio is low, indicating a conservative capital structure.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: EBIT / Interest Expense = $19,911 + $8,079 / $136 = 205.81
    • Trend: Previous year Interest Coverage Ratio was 276.42. Percentage change is -25.55%.
    • Industry: A high interest coverage ratio indicates a strong ability to meet interest obligations. Proto Labs’ interest coverage ratio is very high, indicating a very strong ability to cover interest expenses.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Revenue / Average Inventory = $277,690 / (($12,305 + $13,657) / 2) = 21.38
    • Trend: Not Available
    • Industry: Inventory turnover varies widely by industry.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Revenue) * 365 = ($66,504 / $500,890) * 365 = 48.51
    • Trend: Not Available
    • Industry: DSO varies widely by industry.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Revenue) * 365 = ($15,504 / $277,690) * 365 = 20.40
    • Trend: Not Available
    • Industry: DPO varies widely by industry.
  • Asset Turnover:

    • Calculation: Revenue / Total Assets = $500,890 / $743,512 = 0.67
    • Trend: Not Available
    • Industry: Asset turnover varies widely by industry.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $40.56 / $0.66 = 61.45
    • Trend: Not Available
    • Industry: The average P/E ratio for the S&P 500 is around 25. Proto Labs’ P/E ratio is high, suggesting that the stock may be overvalued or that investors expect high growth in the future.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity = (24,226,088 * $40.56) / $670,151,000 = 1.47
    • Trend: Not Available
    • Industry: The P/B ratio varies widely by industry.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Revenue = (24,226,088 * $40.56) / $500,890,000 = 1.96
    • Trend: Not Available
    • Industry: The P/S ratio varies widely by industry.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash and Cash Equivalents = (24,226,088 * $40.56) + $73,361,000 – $89,071,000 = $966,984,733.28
      EBITDA = Net Income + Interest Expense + Taxes + Depreciation and Amortization = $16,593,000 + $136,000 + $8,079,000 + $35,808,000 = $60,616,000
      EV/EBITDA = $966,984,733.28 / $60,616,000 = 15.95
    • Trend: Not Available
    • Industry: The EV/EBITDA ratio varies widely by industry.

Growth Rates

  • Revenue Growth:

    • Calculation: ($500,890 – $503,877) / $503,877 = -0.59%
    • Trend: Not Available
    • Industry: Varies widely by industry.
  • Net Income Growth:

    • Calculation: ($16,593 – $17,220) / $17,220 = -3.64%
    • Trend: Not Available
    • Industry: Varies widely by industry.
  • EPS Growth:

    • Calculation: ($0.66 – $0.66) / $0.66 = 0%
    • Trend: Not Available
    • Industry: Varies widely by industry.

Other Relevant Metrics

  • Customer Contacts and Revenue per Customer Contact:

    • Revenue per customer contact decreased from $9,425 in 2023 to $9,716 in 2024.
    • Customer contacts decreased from 53,464 in 2023 to 51,552 in 2024.
    • This metric indicates the efficiency of converting customer interactions into revenue.
  • Stock-Based Compensation:

    • Total stock-based compensation expense was $16,999,000 in 2024, compared to $15,989,000 in 2023.
    • This is a non-cash expense that can dilute shareholder value over time.
  • Revenue by Geography:

    • Revenue from the United States decreased slightly, while revenue from Europe also decreased.
    • This indicates potential challenges in these key markets.
  • Revenue by Service:

    • Injection Molding revenue decreased, while CNC Machining revenue increased.
    • This suggests a shift in customer demand towards CNC Machining services.

2. Commentary

Proto Labs’ financial performance in 2024 shows a mixed picture. While the company maintains strong liquidity and low leverage, profitability metrics such as operating and net profit margins have declined. Revenue growth is slightly negative, and the high P/E ratio suggests that the stock may be overvalued. The company needs to focus on improving its operating efficiency and revenue growth to justify its valuation.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️