Proto Labs delivered a resilient Q2 2024 in a challenging macro environment. Revenue of $125.6 million rose 2.8% year over year in constant currencies, driven by continued strength in the Proto Labs Network (revenue of $24.7 million, up 22.7% YoY in constant currencies) and ongoing adoption of the company’s comprehensive factory-and-network offer. Non-GAAP gross margin expanded modestly to 45.7%, supported by higher network gross margins (32.8%, up from 31.7% in 1Q24) and stable factory margins. Operating margin remained modest at ~4.8%, reflecting disciplined cost management against a backdrop of volume volatility. Net income was $4.54 million, with non-GAAP diluted EPS of $0.38, at the top end of guidance, despite a sequential headwind from lower volumes. The company generated $14.4 million of cash from operations and ended the period with roughly $112.9 million in cash and investments and no debt, underscoring a strong balance sheet and ample liquidity for growth initiatives and buybacks.
Management underscored a strategic reorganization designed to turbocharge growth by separating revenue generation from fulfillment, creating a global operations organization and regional revenue teams aligned to the product life cycle. Management highlighted a >50% YoY increase in customers using the combined offer and a 7% YoY rise in revenue per customer contact, signaling progress toward higher wallet share per customer as production work expands. While the macro environment remains challenging—with continued manufacturing contraction in the U.S. and Europe—the company views the addressable market as large and believes its differentiated model and brand equity will support above-GDP growth when cycle conditions improve. The upcoming quarter (Q3) guidance implies modest seasonality-adjusted growth and ongoing discipline on costs, with a non-GAAP EPS guided in the range of roughly $0.29–$0.37 and a revenue range of $117–$125 million, including a small hedged FX tailwind and a modest charge related to the reorganization.
Takeaways for investors: (1) The combination of a broadening life-cycle offering and a unified global operations function is intended to lift both revenue growth and efficiency; (2) Cash generation remains strong, with net cash position and no debt enabling potential strategic investments or buybacks; (3) Near-term volatility persists, but the long-term growth trajectory hinges on customers expanding from prototyping to production using Proto Labs as a single source supplier across the product lifecycle.