Manufacturing services provider Proto Labs (NYSE:PRLB) reported Q1 CY2025 results exceeding the market’s revenue expectations , but sales fell by 1.3% year on year to $126.2 million. Guidance for next quarter’s revenue was better than expected at $128 million at the midpoint, 1.3% above analysts’ estimates. Its non-GAAP profit of $0.33 per share was 13% above analysts’ consensus estimates.

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Proto Labs (PRLB) Q1 CY2025 Highlights:

Revenue: $126.2 million vs analyst estimates of $123.7 million (1.3% year-on-year decline, 2% beat) Adjusted EPS: $0.33 vs analyst estimates of $0.29 (13% beat) Adjusted EBITDA: $17.39 million vs analyst estimates of $16.47 million (13.8% margin, 5.6% beat) Revenue Guidance for Q2 CY2025 is $128 million at the midpoint, above analyst estimates of $126.4 million Adjusted EPS guidance for Q2 CY2025 is $0.34 at the midpoint, above analyst estimates of $0.33 Operating Margin: 3.6%, down from 5.3% in the same quarter last year Free Cash Flow Margin: 13.6%, down from 14.7% in the same quarter last year Market Capitalization: $851 million

“Protolabs started the year strong, with revenue and earnings per share near the top of our guidance range and increases in both the number of customers utilizing our combined factory and network offer and spend per customer,” said Rob Bodor, President and Chief Executive Officer.

Company Overview

Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE:PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Proto Labs’s 1.6% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a poor baseline for our analysis.Proto Labs Quarterly Revenue

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Proto Labs’s recent performance shows its demand has slowed as its revenue was flat over the last two years.Proto Labs Year-On-Year Revenue Growth

We can better understand the company’s revenue dynamics by analyzing its three most important segments: Injection Molding , CNC Machining , and 3D Printing, which are 38.6%, 41.9%, and 16% of revenue. Over the last two years, Proto Labs’s Injection Molding revenue (injection molds and parts) averaged 1.8% year-on-year declines, but its CNC Machining (custom CNC-machined parts) and 3D Printing (custom 3D-printed parts) revenues averaged 5% and 1.2% growth.

Story Continues

This quarter, Proto Labs’s revenue fell by 1.3% year on year to $126.2 million but beat Wall Street’s estimates by 2%. Company management is currently guiding for a 1.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

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Operating Margin

Proto Labs was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.6% was weak for an industrials business. This result is surprising given its high gross margin as a starting point.

Looking at the trend in its profitability, Proto Labs’s operating margin decreased by 7.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Proto Labs’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.Proto Labs Trailing 12-Month Operating Margin (GAAP)

In Q1, Proto Labs generated an operating profit margin of 3.6%, down 1.7 percentage points year on year. Since Proto Labs’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Proto Labs, its EPS declined by 10.4% annually over the last five years while its revenue grew by 1.6%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.Proto Labs Trailing 12-Month EPS (Non-GAAP)

Diving into the nuances of Proto Labs’s earnings can give us a better understanding of its performance. As we mentioned earlier, Proto Labs’s operating margin declined by 7.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Proto Labs, its two-year annual EPS growth of 5.1% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q1, Proto Labs reported EPS at $0.33, down from $0.40 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Proto Labs’s full-year EPS of $1.56 to shrink by 5.6%.

Key Takeaways from Proto Labs’s Q1 Results

We enjoyed seeing Proto Labs beat analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $35.78 immediately after reporting.

So do we think Proto Labs is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.

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