Proto Labs(US:PRLB)2023-02-10 15:46Financial Data and Key Metrics Changes - Fourth quarter revenue was $115.6 million, representing a 1% decrease year-over-year in constant currencies and excluding Japan [27] - Non-GAAP gross margin decreased by 200 basis points sequentially to 42.8% due to lower volume and growth in longer lead time offerings [32] - Full year 2022 non-GAAP diluted net income per share was $1.50 compared to $1.55 in 2021, reflecting lower gross margin partially offset by lower operating expenses [37] Business Line Data and Key Metrics Changes - Injection Molding revenue declined approximately 12% year-over-year at constant currencies and excluding Japan [31] - CNC Machining revenue grew double digits year-over-year at constant currencies and excluding Japan, driven by outperformance in longer lead time offerings [31] - Hubs revenue in the fourth quarter was $14.8 million, representing year-over-year growth of 49.6% or 56.5% in constant currencies [27] Market Data and Key Metrics Changes - In the Americas, fourth quarter revenue decreased 5.8% year-over-year, primarily due to weakness in Injection Molding parts orders [30] - In Europe, fourth quarter revenue grew 19.9% year-over-year in constant currencies, driven by strong growth in CNC Machining and 3D Printing services [30] Company Strategy and Development Direction - The company is focusing on two priority areas for growth: Injection Molding and CNC services, aiming to drive growth through a sharper focus on fewer priorities [7][15] - The strategy includes accelerating the innovation pipeline and launching new offerings at a faster pace [9][20] - The company plans to return capital to shareholders at an accelerated rate through stock repurchases, reflecting confidence in the long-term outlook [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2023, citing focused investments and positive momentum in key areas [9][24] - The company acknowledged challenges in 2022 due to macroeconomic factors and internal issues but is committed to improving earnings and operating margins [8][21] - Management highlighted the importance of addressing customer needs and enhancing service offerings to drive growth [14][58] Other Important Information - The company incurred $534,000 in GAAP operating expenses related to the closure of its Japan business during the fourth quarter [28] - A noncash goodwill impairment charge of $118 million was recorded due to rising interest rates and macroeconomic challenges, which does not impact cash position [35] Q&A Session Summary Question: Comments on revenue guidance and January performance - Management noted solid customer return in January, reflecting in the revenue guidance [45] Question: Turnaround for Injection Molding business - Management discussed the cyclical nature of the Injection Molding business and the need to drive growth through molds and new capabilities [46][49] Question: Impact of lower priority areas on profitability - Management clarified that while investments are being made in other services, the focus is on higher-margin areas to drive overall business growth [51][53] Question: Progress on customer understanding of longer lead time orders - Management indicated that sales teams are actively promoting the ability to compete for longer lead time orders, with traction expected to increase [79] Question: Outlook for gross margins and Hubs business - Management expects flat to slightly up margins in Q1, with potential risks from a mix shift towards lower margin areas [60][71]