Q2 2024 Proto Labs Inc Earnings Call
Operator: Greetings. Welcome to Proto Labs' second quarter 2024 earnings call. At this time, all participants are being placed in listen-only mode; a question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I will now turn the conference over to Jason Frankman, Vice President and Corporate Controller. Jason, you may now begin your presentation.
Greetings.
Greetings welcome to Proto Labs' second quarter 2024 earnings call. This.
Operator: Welcome to Proto Labs 2nd quarter 2024 earnings call. At this time, all participants are being militantly mowed. A question and answer session will follow the formal presentation.
Speaker Change: At this time, all participants are being Olson only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Operator: If anyone today should require our British assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Speaker Change: Please note that this conference is being recorded.
Jason Frankman: At this time, we'll now turn the conference over to Jason Frankman, Vice President and Corporate Controller.
Speaker Change: At this time I'll now turn the conference over to Jason <unk>, Vice President and corporate controller, Jason You May now begin your presentation.
Jason Frankman: Jason, you may now begin your presentation. Thank you and welcome everyone to Proto Labs' 2nd quarter, 2024 earnings conference call. I'm joined today by Rob Bodor, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning, Proto Labs issued a press release announcing its financial results for the 2nd quarter ended June 30, 2024. The release is available on the web address provided in our press release.
Jason Frankman: Thank you and welcome everyone to Proto Labs' second quarter 2024 earnings conference call. I'm joined today by Rob Bodor, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning, Proto Labs issued a press release announcing its financial results for the second quarter ended June 30, 2024. The release is available on the company's website.
Speaker Change: Thank you and welcome everyone to Proto Labs' second quarter 2024 earnings Conference call I'm joined today by Rob Manure, President and Chief Executive Officer, and Dan Schumacher Chief Financial Officer.
Speaker Change: This morning, Proto labs issued a press release announcing its financial results for the second quarter ended June 30, 'twenty 'twenty four the release is available on the company's website.
Jason Frankman: In addition, a prepared slide presentation is available online at the web address provided in our press release. Our discussion today will include statements relating to future performance and expectations that are, or may be considered, forward-looking statements and are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.
Speaker Change: In addition, a prepared slide presentation is available online at the web address provided in our press release.
Jason Frankman: Our discussion today will include statements relating to future performance and expectations that are or may be considered forward-looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. The results and guidance we will discuss include non-GAF financial measures consistent with our past practices. Please refer to our press release and the accompanying slide presentation at the Investor Relations section of our company website for a complete reconciliation of GAF to non-GAF results.
Speaker Change: Our discussion today will include statements relating to future performance and expectations that are or may be considered forward looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations.
Speaker Change: Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.
Jason Frankman: The results and guidance we will discuss include non-GAAP financial measures consistent with our past practices. Please refer to our press release and the accompanying slide presentation in the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results. Now, I'll turn the call over to Rob Bodor.
Speaker Change: The results and guidance, we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation to the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results.
Jason Frankman: Now I'll turn the call over to Rob Bodor.
Speaker Change: Now I'll turn the call over to wrap the Dora Roberts.
Rob Bodor: Rob. Thanks, Jason.
Dora Roberts: Thanks, Jason.
Rob Bodor: Jason, good morning everyone, and thank you for joining our second quarter earnings call. Despite operating in a challenging macro environment, on a year-over-year basis, Proto Labs' first half, 2024 revenue grew 2%, and non-GAAP earnings per share grew 25%. In an environment in which manufacturing activity has contracted in the U.S. and Europe, we continue to take share and improve our industry-leading profitability. We've improved the efficiency of our AI-enabled pricing algorithms, increased the automation in our digital factories, and managed our costs through volume. No business is immune from the manufacturing headwinds currently at play in the market.
Rob Bodor: Good morning, everyone, and thank you for joining our 2nd quarter earnings call. Despite operating in a challenging macro environment, on a year-over-year basis, Proto Labs' first half, 2024 revenue grew 2%, and non-GAAP earnings per share grew 25%. In an environment in which manufacturing activity has contracted in the US and Europe, we continue to take share and improve our industry-leading profitability. We've improved the efficiency of our AI-enabled pricing algorithms, increased the automation in our digital factories, and managed our costs with volume. No business is immune from the manufacturing headwinds currently at play in the market, but our resilient model has produced growth and improved profitability.
Dora Roberts: Good morning, everyone and thank you for joining our second quarter earnings call.
Despite operating in a challenging macro environment on a year over year basis pretty labs first half 'twenty 'twenty four revenue grew 2%.
Speaker Change: And non-GAAP earnings per share grew 25%.
In an environment in which manufacturing activity has contracted in the U S and Europe, we continue to take share and improve our industry leading profitability.
Speaker Change: We've improved the efficiency of our AI enabled pricing algorithms increased the automation and our digital factories and managing our costs with volume.
Speaker Change: No business is immune from the manufacturing headwinds currently at play in the market.
Rob Bodor: But our resilient model has produced growth and improved profitability. In the second quarter of 2024, we made good progress against our two strategic initiatives, increasing the number of customers using our comprehensive offer and driving higher revenue per customer through larger orders. Our customers continue to recognize, adopt, and benefit from our comprehensive offer fulfilled through both Bakri and the network.
But our resilient model has produced growth and improved profitability.
Rob Bodor: In the 2nd quarter of 2024, we made good progress against our two strategic initiatives, increasing the number of customers using our comprehensive offer and driving higher revenue per customer through larger orders. Our customers continue to recognize, adopt, and benefit from our comprehensive offer fulfilled through both factory and network. As we previously discussed, our comprehensive offer enables customers to use Proto Labs as a single source manufacturer throughout the product life cycle, from prototype to production to end of life. We are still in the early stages of customers fully utilizing our combined offer, which presents an incredible long-term growth opportunity, and we're focused on driving adoption.
Speaker Change: In the second quarter of 2024, we made good progress against our two strategic initiatives.
Speaker Change: Increasing the number of customers using our comprehensive offer and driving higher revenue per customer through larger orders.
Speaker Change: Our customers continue to recognize adopt and benefit from our comprehensive offer fulfilled through both factory out network.
Rob Bodor: As we previously discussed, our comprehensive offer enables customers to use Proto Labs as a single source manufacturer throughout the product life cycle, from prototype to production to end of life. We are still in the early stages of customers fully utilizing our combined offer, which presents an incredible long-term growth opportunity. And we're focused on driving adoption. In fact, in the last 12 months, the number of customers using the combined offer is up over 50% year over year. We're also focused on driving higher revenue per customer through larger orders across services. While large one-time orders decreased slightly compared to the first quarter, second quarter revenue per customer contact increased 7% year over year.
As we previously discussed our comprehensive offer enables customers to use Proto labs as a single source manufacturer throughout the product lifecycle from prototype to production to end of life.
Speaker Change: We are still in the early stages of customers fully utilizing our combined offer which presents an incredible long term growth opportunity and we're focused on driving adoption.
Rob Bodor: In fact, in the last 12 months, the number of customers using the combined offer is up over 50% year over year. We're also focused on driving higher revenue per customer through larger orders across services. While large, one-time orders decreased slightly compared to the first quarter, second quarter revenue per customer contact increased 7% year over year. There will be fluctuations in larger order quantities, quarter to quarter, as we continue to shift toward more production work. But we strive to increase revenue per customer contact over the long term, and I'm pleased with this result.
Speaker Change: In fact in the last 12 months the number of customers using the combined author is up over 50% year over year.
Speaker Change: We're also focused on driving higher revenue per customer through larger orders across services.
Speaker Change: While large one time orders decreased slightly compared to the first quarter second quarter revenue per customer contact increased 7% year over year.
Speaker Change: There will be fluctuations in larger order quantities quarter to quarter as we continued to shift towards more production work.
Speaker Change: But we strive to increase revenue per customer contact over the long term and I'm pleased with this result.
Rob Bodor: Let me now share an example of the value we bring to customers with our unique capabilities. Medical device companies, called SOMETX, was working to launch a new water treatment product for dental offices. Time to market was critical for this product, and it was also important that the learnings captured in the prototype phase were transferred to the production of these critical components. SOMETX was looking for one supplier to partner with on prototyping through production. With our combined factory and network fulfillment model, Portal Labs was the perfect fit. We manufactured prototypes through both 3D printing and injection molding in our digital factories, enabling SOMETX's innovation through our world-classly times.
Rob Bodor: There will be fluctuations in larger order quantities, quarter to quarter, as we continue to shift toward more production work. But we strive to increase revenue per customer contact over the long term, and I'm pleased with this result. Let me now share an example of the value we bring to customers with our unique capability. A medical device company called SolMedics was working to launch a new water treatment product for dental offices.
Speaker Change: Let me now share an example of the value we bring to customers with our unique capabilities.
Speaker Change: Medical device company called saw medics was working to launch a new water treatment products for dental offices time.
Rob Bodor: Time to market was critical for this product, and it was also important that the learnings captured in the prototype phase were transferred to the production of these critical components. So Almedics was looking for one supplier to partner with on prototyping through production. With our combined factory and network fulfillment model, Proto Labs was the perfect fit. We manufactured prototypes through both 3D printing and injection molding in our digital factories, enabling Solimetics' innovation through our world-class lead time.
Speaker Change: Time to market is critical for this product and it was also important that the learnings captured in a prototype phase were transferred to the production of these critical components.
So on <unk> was looking for one supplier to partner with on prototyping through production.
With our combined factory in network fulfillment.
Speaker Change: <unk> labs is the perfect fit.
Speaker Change: We manufactured prototypes through both three D printing and injection molding in our digital factories, enabling telematics is innovation through our world class fleet types. We then fulfilled injection molding production quantities by the network.
Rob Bodor: We then fulfilled injection molding production quantities by the network, so prototyping the factory production through the network. SOMETX is fully utilizing Portal Labs combined offer to have value to their customers and their own business, which aligns with our first strategic initiative. As for our second strategic initiative, our relationship with SOMETX has also increased our revenue per customer contact because of the production work. So this is really a wonderful example of how our combined factory and network offer enables a customer to gain value by using Portal Labs as a single source manufacturer throughout the product lifecycle.
Rob Bodor: We then fulfilled injection molding production quantities via the network. Thus, prototyping the factory production through the network. Solmedex is fully utilizing Proto Labs' combined offer to add value to its customers and their own business, which aligns with our first strategic initiative.
Speaker Change: So prototyping the factory production through the network.
Speaker Change: So all medics is fully utilizing proto labs combined offer to add value to their customers and their own business, which aligns with our first strategic initiative.
Rob Bodor: As for our second strategic initiative, our relationship with Solmedex has also increased our revenue per customer contact because of production. So this is really a wonderful example of how our combined factory and network offer enables a customer to gain value by using Proto Labs as a single source manufacturer throughout the product life cycle. While we are seeing a growing number of customers use ProtoLabs for both prototyping and production, there are still many cases in which customers order prototypes from ProtoLabs and eventually go elsewhere to procure their production volumes.
Speaker Change: As for our second strategic initiative, our relationship with Telematics has also increased our revenue per customer contact because of the production work.
Speaker Change: So this is really a wonderful example of how our combined factory network offer enables a customer to gain value by using Proto labs as a single source manufacturer throughout the product lifecycle.
Rob Bodor: While we are seeing a growing number of customers use Portal Labs for both prototyping and production, there are still many cases in which customers, or the prototypes from Portal Labs, eventually go elsewhere to procure their production volumes. Capturing additional production work from existing prototype customers is a massive growth opportunity for Portal Labs. However, we are currently operating in an environment that is challenging, and customers have been impacted by macro factors, including higher interest rates, reduced demand for manufactured goods, broad-based cost-cutting efforts, and moderating capital expenditures. As I mentioned earlier, we grew in the first half of 2024, while U.S.
Speaker Change: While we are seeing a growing number of customers use Proto labs for both prototyping and production. There is still many cases in which customers order prototypes for Proto labs, and eventually go elsewhere to pick.
Speaker Change: Procure their production volumes.
Rob Bodor: Capturing additional production work from existing prototype customers is a massive growth opportunity for ProtoLabs. However, we're currently operating in an environment that is challenging, and customers have been impacted by macro factors including higher interest rates, reduced demand for manufactured goods, broad-based cost-cutting efforts, and moderating capital expenses. As I mentioned earlier, we grew in the first half of 2024, while U.S. and European manufacturing activity contracted. In fact, manufacturing indices have indicated contraction consistently for the last two years in the U.S. and the Eurozone.
Speaker Change: Capturing additional production work from existing prototype customers is a massive growth opportunity for Proto labs.
Speaker Change: However, we're currently operating in an environment that is challenging and customers have been impacted by macro factors, including higher interest rates reduced demand for manufactured goods broad based cost cutting efforts and moderating capital expenditures.
Speaker Change: Yeah.
Speaker Change: As I mentioned earlier, we grew in the first half of 2024.
Speaker Change: While U S and Europe manufacturing activity contracted.
Rob Bodor: and Europe manufacturing activity contracted. In fact, manufacturing indices have indicated contraction consistently for the last two years in the U.S. and the Eurozone. In the U.S., we have seen continued slowing growth in orders for core capital goods, industrial machinery, and other durable goods since the post-COVID surge in 2021. And just yesterday, we learned that the U.S. manufacturing PMI in July did eight months low as manufacturing activity enters deeper into contract. Despite these persistent challenges, we continue to focus on what we can control and are taking action in order to accelerate our growth. While we showed growth in the first half of the year amidst the constrained, broader manufacturing environment, I am not satisfied and believe Proto Labs can grow much faster.
Speaker Change: In fact manufacturing indices have indicated contraction consistently for the last two years in the U S and the eurozone.
Rob Bodor: In the U.S., we have seen continued slowing growth in orders for core capital goods, industrial machinery, and other durable goods since the post-COVID surge in 2021. And just yesterday... We learned that the U.S. manufacturing PMI in July hit an eight-month low as manufacturing activity enters deeper into contraction. Despite these persistent challenges, we continue to focus on what we can control and are taking action in order to accelerate our growth. We showed growth in the first half of the year amidst the constrained broader manufacturing environment.
Speaker Change: In the U S. We have seen continued slowing growth in orders for cat for core capital goods industrial machinery and other durable goods since the post COVID-19 surge in 2020 one.
Speaker Change: And just yesterday.
Speaker Change: We learned that the U S manufacturing PMI in July eight months low as manufacturing activity interest deeper into contraction.
Speaker Change: Despite these persistent challenges we continue to focus on what we can control and are taking action in order to accelerate our growth.
Speaker Change: While we showed growth in the first half of the year amidst the constrained broader manufacturing environment.
Rob Bodor: I am not satisfied and believe Proto Labs can grow much faster, faster than we have in the past few years, in fact. We operate in a large addressable market, and Proto Labs' capabilities are unique. So, in order to unlock accelerated growth, we're making changes to our internal structure. I'd like to take a few minutes to walk you through these changes that we believe will better position the business for improved financial performance in the long term. Going forward, we're separating revenue generation from operational and fulfillment work.
Speaker Change: I am not satisfied and belief Proto labs can grow much faster.
Rob Bodor: Faster than we have in the past few years, in fact. We Proto Labs capabilities are unique.
Speaker Change: Faster than we have in the past few years in fact.
We operate in a large addressable market and Proto labs capabilities are unique.
Rob Bodor: So, in order to unlock accelerated growth, we're making changes to our internal structure. I'd like to take a few minutes to walk you through these changes that we believe will better position the business from approved financial performance in the long term. Going forward, we're separating revenue generation from the operational and fulfillment work. Our regional organizations will now be entirely focused on revenue and, in turn, the best possible customer engagement and experience. We will have a global operations organization with the sole responsibility of seamlessly fulfilling customer part orders as a single unified offering and comforting both factory and network.
Speaker Change: So in order to unlock accelerated growth, we're making changes to our internal structure.
Speaker Change: I'd like to take a few minutes to walk you through these changes that we believe will better position the business for them.
Speaker Change: <unk> financial performance in the long term.
Speaker Change: Yes.
Speaker Change: Going forward, we're separating revenue generation from the operational and fulfillment work our regional organizations will now be entirely focused on revenue and ensuring the best possible customer engagement and experience.
Rob Bodor: Our regional organizations will now be entirely focused on revenue and ensuring the best possible customer engagement and experience, and we will have a global operations organization with the sole responsibility of seamlessly fulfilling customer part orders as a single unified offering encompassing both factory and network. This change enables the regional revenue teams to focus on executing our strategy of serving more customer needs across the product lifecycle and accelerating revenue growth. The new organizational structure also ensures complete integration between the factory and the network.
Speaker Change: We will have our global operations organization with the sole responsibility of seamlessly fulfilling customer part orders as a single unified offering encompassing both factories and network.
Speaker Change: Yeah.
Rob Bodor: This change enables the regional revenue teams to focus on executing our strategy of serving more customer needs across the product life cycle and accelerating revenue growth. The new work structure also ensures complete integration between factory and network. The global operations organization will also allow us to more efficiently serve customers' production needs.
Speaker Change: This change enables that regional revenue teams to focus on executing our strategy of serving more customer needs across the product lifecycle and accelerating revenue growth.
Speaker Change: The new Org structure also ensures complete integration between factory in network.
Rob Bodor: The Global Operations Organization will also allow us to more efficiently serve customers' production, so I'm excited about this change. But as a result of the reorganization, we've eliminated the regional general manager roles, impacting two of our executive team members.
Speaker Change: The global operations organization will also allow us to more efficiently service customers production needs.
Rob Bodor: So, I'm excited about this change, but as a result of the reorganization, we've eliminated the regional general manager roles, impacting two of our executive team members. Mike Tennyson, former GM of the Americas, has transitioned to a newly created position as head of the global operations organization. In this role, Mike is now responsible for a global manufacturing strategy focused on world-class global fulfillment through both factory and network. Mike has nearly 30 years of manufacturing operations leadership experience and led operations for Probel Labs in the Americas from 2006 until being named the GM of the Americas in 2021.
Speaker Change: So I'm excited about this change.
Speaker Change: But as a result of the reorganization we've eliminated the regional general manager rules impacting two of our executive team members.
Rob Bodor: Mike Kennison, former GM of the Americas, has transitioned to a newly created position as head of the Global Operations Organization. In this role, Mike is now responsible for our global manufacturing strategy focused on world-class global fulfillment through both factory and network. Mike has nearly 30 years of manufacturing operations leadership experience and led operations for Proto Labs in the Americas from 2006 until being named GM of the Americas in 2021. So he brings a wealth of experience in operational leadership, and I am confident that he is the right person to lead the new operations organization.
Speaker Change: Mike Kennison, former GM of the Americas has transitioned to a newly created position as head of the global operations organization.
Speaker Change: In this role Mike is now responsible for our global manufacturing strategy focused on World class Global fulfillment through both factory out of network.
Speaker Change: Mike has nearly 30 years of manufacturing operations leadership experience and let operations for Proto labs in the Americas from 2006 until being named the GM of the Americas in 2021.
Rob Bodor: So, Mike brings a wealth of experience and operational leadership, and I am confident that he is the right person to lead the new operations organization.
Speaker Change: So Mike brings a wealth of experience and operational leadership and I'm confident that he is the right person to lead the new operations organization.
Rob Bodor: As noted in our SEC filing on July 24, Bjorn Klaus is no longer GM of our Mere region. Bjorn led our European business for almost seven years, and we are very thankful for his contributions. I am personally thankful for Bjorn's leadership over that period, and I truly wish him the best in his future endeavors. But I'm very excited about the potential growth that our new regional revenue organizations will drive. Going forward, the Americas revenue organization will be led by Sean Ferrell, our current VP of Sales in the Americas. Sean joined Probel Labs in 2023 and has extensive leadership experience in B2B sales.
Rob Bodor: As noted in our SEC filing on July 24th, Bjorn Kloss is no longer GM of our EMEA region. He led our European business for almost 7 years, and we are very thankful for his contribution. I am personally thankful for his leadership over that period, and I truly wish him the best in his future endeavors.
Speaker Change: As noted in our SEC filing on July 24th Bjorn clause is no longer G N of our EMEA region.
Speaker Change: Okay.
Speaker Change: Bjorn led our European business for almost seven years, and we're very thankful for his contributions.
Speaker Change: I am personally thankful for the Orange leadership over that period.
Speaker Change: I truly wish him the best in his future endeavors.
Rob Bodor: But I'm very excited about the potential growth that our new regional revenue organizations will drive. Going forward, the Americas Revenue Organization will be led by Sean Farrell, our current VP of Sales in the Americas. Sean joined Proto Labs in 2023 and has extensive leadership experience in B2B sales. The Europe Revenue Organization will be led by Piotr Horowitz, currently managing director of Proto Labs Network, which he joined in 2022.
Speaker Change: But I'm very excited about the potential growth that our new regional revenue organizations will drive.
Speaker Change: Going forward the Americas revenue organization will be led by Sean Farrell, our current VP of sales in the Americas.
Speaker Change: Sean joined Proto labs in 2023, and has extensive leadership experience and b to B sales.
Rob Bodor: The Europe Revenue Award will be led by Pielder Horowitz, currently Managing Director of Proto Labs Network, which he joined in 2022. Proto Labs Network has performed very well under Pielder's leadership, and in his new role he will draw on prior successes in several B2P sales leadership roles. The leadership of Schumacher and Pielder to experience sales leaders with strong track records of driving growth is a key reason for my optimism that this reorganization will enable our sales teams to accelerate our revenue. We believe our strategy will continue to drive strong top and bottom line results, and we've aligned our org to support that strategy, accelerate our next phase of growth, and improve efficiency while diligently managing our costs.
Speaker Change: The Europe revenue Org will be led by pillar Horowitz.
Speaker Change: Currently <unk>.
Pilar Horowitz: Managing director of Proto Labs' network, which he joined in 2022.
Rob Bodor: Proto Labs Network has performed very well under Piotr's leadership, and in his new role, he will draw on prior successes in several B2B sales leadership roles. The leadership of Sean and Piotr to experienced sales leaders with strong track records of driving growth is a key reason for my optimism that this reorganization will enable our sales teams to accelerate our reputation. We believe our strategy will continue to drive strong top and bottom line results, and we've aligned our organization to support that strategy, accelerate our next phase of growth, and improve efficiency while diligently managing our costs.
Pilar Horowitz: Proto Labs network has performed very well under <unk> leadership and in his new role he will draw on prior successes in several BW sales leadership roles.
Speaker Change: The leadership of Shawn and killed or two experienced sales leaders with strong track records of driving growth is a key reason for my optimism that this reorganization will enable our sales teams to accelerate our revenue.
Speaker Change: We believe our strategy will continue to drive strong top and bottom line results and we've aligned our org to support that strategy accelerate our next phase of growth and improve efficiency, while diligently managing our costs.
Rob Bodor: I am confident these changes will enable us to serve customers from prototyping to production and accelerate customer adoption of our comprehensive offerings.
Rob Bodor: I am confident these changes will enable us to serve customers from prototyping to production and accelerate customer adoption of our comprehensive offering. These changes make me even more excited about the future of Proto Labs. Proto Labs delivered year-over-year growth and strong profitability and cash flow in the first half of 2024, despite a challenging operating environment. As we move into the second half of the year, our priorities remain intact, and we believe our unique combined offer, industry-leading brand, and reputation for reliability and quality will continue to provide advantages in a very dynamic marketplace.
Speaker Change: I'm confident these changes will enable us to serve customers from prototyping to production and accelerate customer adoption of our comprehensive offerings.
Rob Bodor: These changes make me even more excited about the future of Proto Labs. Proto Labs delivered year-over-year growth and strong profitability and cash flow in the first half of 2024, despite a challenging operating environment. As we move into the back half of the year, our priorities remain intact, and we believe our unique combined offer, industry-leading brand, and reputation for reliability and quality will continue to provide advantages in a very dynamic marketplace. I am incredibly proud of our team's deep commitment to serving our customers and executing on our strategy. Thank you to all Proto Labs employees.
Speaker Change: These changes make me even more excited about the future of Portland.
Speaker Change: Proto labs delivered year over year growth strong profitability and cash flow in the first half of 'twenty 'twenty four despite a challenging operating environment.
Speaker Change: As we move into the back half of the year, our priorities remain intact and we believe our unique combined offer industry, leading brand and reputation for reliability and quality will continue to provide advantages in a very dynamic marketplace.
Rob Bodor: I am incredibly proud of our team's deep commitment to serving our customers and executing on our strategy. Thank you to all Proto Labs employees. I'll now hand it over to Dan to cover our financials in detail, as well as our outlook for the third quarter. Dan?
Speaker Change: I am incredibly proud of our team's deep commitment to serving our customers and executing on our strategy.
Speaker Change: Thank you to all Proto labs employees.
Dan Schumacher: I'll now hand it over to Dan to cover our financials in detail, as well as our outlook for the third quarter.
Speaker Change: I'll now hand, it over to Dan to cover our financials in detail as well as our outlook for the third quarter.
Dan Schumacher: Thanks, Rob, and good morning, everyone. Our financial results begin on page 7 of the slide presentation. Second quarter revenue of 125.6 million grew 2.8% year-over-year in constant currencies. Proto Labs network revenue was 24.7 million in the quarter of 22.7% in constant currencies. Turning to revenue growth by service in constant currencies outlined on slide 9. Second quarter injection-molding revenue was flat year-over-year. Injection-molding orders from larger project customers continued to grow, while smaller prototype orders declined. CNC machining grew 6% year-over-year, driven by continued strong growth through Proto Labs network. Second quarter 3D printing revenue grew 1% year-over-year.
Dan Schumacher: Thanks Rob and good morning everyone. Our financial results begin on page 7 of the slide presentation. Second quarter revenue of $125.6 million grew 2.8% year-over-year in constant currency. Proto Labs network revenue was $24.7 million in the quarter, up 22.7% in constant currency. Turning to Revenue Growth by Service and Constant Currencies, outlined on slide 9, second quarter injection molding revenue was flat year-over-year. Injection molding orders from larger project customers continued to grow, while smaller prototype orders declined. CNC machining grew 6% year-over-year, driven by continued strong growth through Proto Labs' network.
Dan: Thanks, Rob and good morning, everyone. Our financial results begin on page seven of the slide presentation.
Dan: Second quarter revenue of $125 6 million grew two 8% year over year in constant currencies.
Dan: Proto Labs network revenue was $24 7 million in the quarter up 22, 7% in constant currencies.
Dan: Turning to revenue growth by service and constant currencies outlined on slide nine.
Dan: Second quarter injection molding revenue was flat year over year injection molding orders from larger project customers continued to grow while smaller prototype orders decline.
Dan: CNC machining grew 6% year over year, driven by continued strong growth for Proto Labs network.
Dan: Second quarter, a three D printing revenue grew 1% year over year.
Dan Schumacher: Sheep metal revenue was flat year-over-year and up 10% compared to the first quarter. Turning to slide 10, second quarter non-GAAP growth margin increased 10 basis points sequentially to 45.7%. Proto Labs' network non-GAAP growth margin was 32.8%, up from 31.7% in the first quarter. While factory non-GAAP growth margin was unchanged sequentially. Non-GAAP operating expenses were flat compared to the first quarter of 2024. As a decrease in employee-related expenses was offset by an increase in various discretionary costs. As a result, second quarter non-GAAP diluted net income per share was 38 cents at the top end of our expectations and down 2 cents compared to the first quarter of 2024.
Dan Schumacher: Second quarter 3D printing revenue grew 1% year over year. Sheet metal revenue was flat year over year and up 10% compared to the first quarter. Turning to slide 10, second quarter non-GAAP gross margin increased 10 basis points sequentially to 45.7%. Proto Labs' network non-gap gross margin was 32.8%, up from 31.7% in the first quarter, while factory non-gap gross margin was unchanged sequentially. Non-GAAP operating expenses were flat compared to the first quarter of 2024 as a decrease in employee-related expenses was offset by an increase in various discretionary costs.
Dan: Sheet metal revenue was flat year over year, and up 10% compared to the first quarter.
Dan: Turning to slide 10 second quarter non-GAAP gross margin increased 10 basis points sequentially to 45, 7%.
Speaker Change: Core Lab's network non-GAAP gross margin was 32, 8% up from 31, 7% in the first quarter, while factory non-GAAP gross margin was unchanged sequentially.
Speaker Change: non-GAAP operating expenses were flat compared to the first quarter of 2024 as a decrease in employee related expenses was offset by an increase in various discretionary costs.
Dan Schumacher: As a result, second quarter non-GAAP diluted net income per share was $0.38, at the top end of our expectations, and down $0.02 compared to the first quarter of 2024. The sequential decline was due to lower volume, partially offset by a slight improvement in gross margin.
Speaker Change: As a result second quarter non-GAAP diluted net income per share was 38 at the top end of our expectations and down to.
Speaker Change: Compared to the first quarter of 2024.
Speaker Change: The sequential decline was due to lower volume, partially offset by a slight improvement in gross margin.
Dan Schumacher: As Rob mentioned earlier, our first half 2024 adjusted EPS increased 25% over the first half of 2023. Our industry-leading profitability continues to improve year over year driven by increases in both factory and network gross margins. Total Proto Labs non-GAAP gross margin in the first half of 2024 was 45.6%, up 190 basis points year-over-year. Transitioning to cash flow and balance sheet highlights on slide 11. Cash flow from operations was $14.4 million.
Speaker Change: As Rob mentioned earlier, our first half 2024, adjusted EPS increased 25% over the first half of 2023.
Dan Schumacher: Our industry leading profitability continues to improve year over year, driven by increases in both factory and network gross margins. Total Proto Labs non-GAAP gross margin in the first half of 2024 was 45.6%, up 190 basis points year over year.
Speaker Change: Our industry, leading profitability continues to improve year over year, driven by increases in both factory and network gross margins.
Speaker Change: Total Proto labs non-GAAP gross margin in the first half of 2024 was 45, 6% up 190 basis points year over year.
Dan Schumacher: Transitioning to cash low and balance sheet highlights on slide 11. Cash low from operations was 14.4 million. Our business model generates best-in-class cash flows, allowing us to invest in growth and return capital to shareholders. We repurchase 10.9 million of common shares in the quarter. On June 30th, 2024, we had 112.9 million of cash and investments and zero debt.
Speaker Change: Transitioning to cash flow and balance sheet highlights on slide 11.
Speaker Change: Cash flow from operations was $14 4 million our business model generates best in class cash flows, allowing us to invest in growth and return capital to shareholders, we repurchased $10 9 million of common shares in the quarter.
Dan Schumacher: Our business model generates best-in-class cash flows, allowing us to invest in growth and return capital to shareholders. We repurchased 10.9 million common shares in the quarter. On June 30, 2024, we had $112.9 million of cash and investments and zero debt.
Speaker Change: On June 32024, we had $112 9 million of cash and investments and zero debt.
Dan Schumacher: Our outlook for the third quarter of 2024 is outlined on slide 13. This outlook reflects a more pronounced challenging operating environment than we have experienced in previous quarters and manufacturing contraction across geographies that we operate. Customer ordering pattern softened in June, and that has continued in July. We expect to generate revenue between 117 and 125 million. Order rates in early July were low due to the U.S. holiday. Historically, we have seen an acceleration in daily rates as a third quarter progresses. Accordingly, the guidance reflects a pickup in August and September. We expect foreign currency to have a $200,000 favorable impact on revenue compared to the third quarter of 2023.
Dan Schumacher: Our outlook for the third quarter of 2024 is outlined on slide 13. This outlook reflects a more pronounced, challenging operating environment than we have experienced in previous quarters, and manufacturing contraction across the geographies that we operate. Customer ordering patterns softened in June, and that has continued in July. We expect to generate revenue between $117 million and $125 million. Order rates in early July were low due to the U.S. holiday.
Speaker Change: Our outlook for the third quarter of 2024 as outlined on slide 13.
Speaker Change: Outlook reflects a more pronounced challenging operating environment than we have experienced in previous quarters.
Speaker Change: In manufacturing contraction across the geographies that we operate.
Speaker Change: Customer ordering patterns soften in June and that has continued in July we.
Speaker Change: We expect to generate revenue between 117 and $125 million.
Speaker Change: Order rates in early July were low due to the U S. Holiday historically, we have seen an acceleration in daily rates as of third quarter progresses. Accordingly, the guidance reflects a pickup in August and September.
Dan Schumacher: Historically, we have seen an acceleration in daily rates as the third quarter progresses. Accordingly, the guidance reflects a pickup in August and September. We expect foreign currency to have a $200,000 favorable impact on revenue compared to the third quarter of 2023. Moving on to earnings guidance. We expect to incur $500,000 of one-time costs associated with the reorganization that Rob mentioned earlier. Additionally, we anticipate non-GAAP add-backs in the third quarter to include stock-based compensation expense of $4.4 million and amortization expense of $900,000. We currently estimate a non-GAAP effective tax rate between 22 and 23 percent. In summary, we expect third quarter non-GAAP EPS between 29 and 37 cents.
Speaker Change: We expect foreign currency to have a $200000 favorable impact on revenue compared to the third quarter of 2023.
Dan Schumacher: Moving to earnings guidance, we expect to incur $500,000 of one-time costs associated with reorganization that Rob mentioned earlier. We anticipate non-GAAP addbacks in the third quarter to include stock-based compensation expense of $4.4 million and amortization expense of $900,000. We currently estimate a non-GAAP effective tax rate between 22 and 23%. In summary, we expect third quarter non-GAAP EPS between 29 and 37 cents. To reiterate, Rob mentioned earlier that we are not satisfied with our recent performance and believe Pro-labs can grow much faster. As a result, we are taking action. The organizational changes Rob described represent a new structure to support our strategy and accelerate our revenue growth in the long term.
Speaker Change: Moving to earnings guidance, we expect to incur to incur $500000 of one time costs associated with the reorganization that Rob mentioned earlier.
We anticipate non-GAAP add backs in the third quarter to include stock based compensation expense of $4 4 million in amortization expense of 900000.
Speaker Change: We currently estimate our non-GAAP effective tax rate between 22 and 23% in.
In summary, we expect third quarter non-GAAP EPS between 29 and 37 cents.
Operator: To reiterate, Rob mentioned earlier that we are not satisfied with our recent performance and believe Proto Labs can grow much faster. As a result, we are taking action. The organizational changes Rob described represent a new structure to support our strategy and accelerate our revenue growth in the long term. Regional revenue teams will be better positioned to focus on the customer and serve them throughout the product life cycle. The Global Operations Organization will focus on driving efficiencies and fulfillment as a single unified offering via factory and network.
Speaker Change: To reiterate Rob mentioned earlier that we are not satisfied with our recent performance and believe Proto labs can grow much faster as a result, we are taking action. The organizational changes Rob described represent a new structure to support our strategy and accelerate our revenue growth in the long term.
Dan Schumacher: Regional revenue teams will be better positioned to focus on the customer and serve them throughout the product life cycle. The global operations organization will focus on driving efficiencies and fulfillment as a single unified offering via factory and network. We believe this new structure will improve the customer experience and accelerate growth. We're focused on efficiencies across Proto Labs, not just through fulfillment. As such, we will continue to be prudent with our expense management and maintain best-in-class profitability.
Speaker Change: Our regional revenue teams will be better positioned to focus on the customer and serve them throughout the product lifecycle.
Speaker Change: The global operations organization will focus on driving efficiencies in fulfillment as a single unified offerings via factory in network.
Operator: We believe this new structure will improve the customer experience and accelerate growth. We are focused on efficiencies across Proto Labs, not just through fulfillment. As such, we will continue to be prudent with our expense management and maintain best-in-class profitability. Earnings are a key differentiator for Proto Labs, and we will continue to drive that and preserve our advantage. That concludes our prepared remarks. Operator, please open the line for questions.
Speaker Change: We believe this new structure will improve the customer experience and accelerate growth.
Speaker Change: We are focused on efficiencies across Proto labs, not just through fulfillment as such we will continue to be prudent with our expense management and maintain best in class profitability.
Speaker Change: Earnings are a key differentiator for Proto labs, and we will continue to drive that and preserve our advantage.
Speaker Change: That concludes our prepared remarks, operator, please open the line for questions.
Dan Schumacher: Thank you.
Speaker Change: Thank you.
Operator: We'll now be conducting a question and answer session. If you would like to ask a question at this time, please press star one from your telephone keypad, and the confirmation tone will indicate your line in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, will we pull for questions.
Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: We'll now be conducting a question and answer session.
Speaker Change: Can I ask a question at this time. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to withdraw your question from the queue.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. Thank you. And our first question will be coming from the line of Brian Drab with William Blair. Please proceed with your question.
Speaker Change: One moment, please while we poll for questions. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you and our first question will be coming from the line of Brian Drab with William Blair. Please proceed with your questions.
Brian Drab: Our first question will be coming from the line of Brian Drab with William Blair. Please excuse your questions. Morning. Thanks for taking my questions.
Brian Drab: This morning, Thanks for taking my question. I just was hoping we could start with the reorg, and I'm not sure I caught all of it the first time through, so I was wondering, Rob, if you could just elaborate on what you're doing and what the impetus is for it and how it accelerates growth. And then, like a follow-up also is, you know, what it sounds like the team is slightly smaller now and what, kind of, what is the... Potential impact in the medium term on margins or cost take-out
Brian Drab: Good morning, Thanks for taking my questions.
Brian Drab: I guess I just was hoping we could start with the reorg, and I'm not sure I caught all of it the first time through. So it's only Rob. If you could just elaborate on what you're doing and what the impetus is for it and how it accelerates growth. And then, like a follow-up also is, you know, what it sounds like the team is slightly smaller now and what kind of what is the potential impact in the medium term on margins or cost takeout. Yes. Sure. Thanks for the question, Brian. So the purpose of the reorganization is to really focus us around serving our customer even better than we have been and more holistically, and it does that in several ways.
I guess I just was hoping we could start with the.
Brian Drab: The re org and I'm not sure I caught all of it the first time through so I was wondering Rob if you could just.
Speaker Change: <unk> and what Youre doing and what the impetus is for it and how it accelerates growth in.
Speaker Change: And then like a follow up also.
Speaker Change: What it sounds like the the team is slightly smaller now and what kind of what is the.
Potential impact in the medium term on margins or cost takeout.
Rob Bodor: Yeah, sure. Thanks for the question, Brian. So the purpose of the reorganization is to really focus us on serving our customers even better than we have been and more holistically, and it does that in several ways.
Speaker Change: Yes sure. Thanks for the question, Brian So the purpose of the reorganization is to really focus around serving our customer even better than we have been and more holistically.
Speaker Change: And it does that in several ways. So one we've we've got we're moving from regionally organized where we had.
Rob Bodor: So one we've we've gone we're moving from regionally organized where we had our PNLs were regional in the US and in Europe. And we had general managers, right, who are overseeing that, and that came from our old model of really fulfilling in the regions where we were going to market from the factory business. We're now moving to a global operations organization right where whether it's factory or network, we've got one unified organization whose job it is to bring our broad comprehensive offer to every customer in a unified way so that we can really ensure that we're giving our customers the best experience and full exposure to our full capabilities from an operation standpoint and that we can then, you know, find opportunities to drive productivity.
Speaker Change: All our P&L is where regional in the U S and in Europe.
Speaker Change: And we had general managers right, who are overseeing that and that that came from our old model of.
Rob Bodor: So one, we're moving from regionally organized, where all our P&Ls were regional in the US and in Europe, and we had general managers, right, who were overseeing that. And that came from our old model of really fulfilling orders in the regions where we were going to market, from the factory business.
Speaker Change: Really fulfilling in the regions, where we were going to market.
Speaker Change: From the factory business.
Rob Bodor: We're now moving to a global operations organization, right, where... Whether it's factory or network, we've got one unified organization whose job it is to bring our broad, comprehensive offer to every customer in a unified way so that we can really ensure that we're giving our customers the best experience and full exposure to our full capabilities from an operations standpoint and that we can then, you know, find opportunities to drive productivity in that way.
Speaker Change: We're now moving to a global operations organization right where.
Speaker Change: Whether it's factory or network, we've got one unified organization, whose job it is to.
Speaker Change: Bring our broad comprehensive offer to every customer in a unified way. So that we can really ensure that were giving our customers. The best experience in full exposure to our full capabilities from an operation standpoint, and that we can then.
Speaker Change: Find opportunities to drive productivity in that.
Rob Bodor: From a go to market standpoint, now we've got revenue and customer facing teams in each region focusing on driving customer demand in a unified way with, you know, they'll be having single unified incentives plans and really just focusing on bringing that offering to our customers even more effectively than we had been. So that's the rationale for the reorganization, and we're very excited about it here internally. You asked about my... Yeah, I asked about the cost, but before I get to just... Sure. Maybe an example of a customer benefiting from this reorg would be helpful. Is it just how this would benefit Proto Labs and the customer, I guess?
Rob Bodor: From a go-to-market standpoint, now we've got revenue-facing teams in each region focusing on driving customer demand in a unified way with, You know, they'll be having single unified incentive plans and really just focusing on bringing that together, offering to our customers, even more effectively than we had been. So that's the rationale for the reorganization, and we're very excited about it here internally. You asked about the cost, but before we get there, just maybe an example of a customer benefiting from this RE-ORG would be helpful. Is this it?
Speaker Change: From a go to market standpoint, now we've got revenue on customer facing teams in each region, focusing on driving customer demand in a unified way with.
Speaker Change: There'll be having single unified incentive plans and really just focusing on bringing that up.
Speaker Change: Offering to our customers.
Speaker Change: Even more effectively than we had been so that's the rationale for the the reorganization.
Speaker Change: And we're very excited about it here internally.
Speaker Change: You asked about my yeah.
Speaker Change: He asked about the cost with it before he gets it just sure maybe an example of a customer.
Speaker Change: Benefiting from this re org would would be helpful. As it is.
Brian Drab: or just how this would benefit Proto Labs and the customer, I guess. I'm just picturing maybe it's a customer in Europe, for example, who is doing a lot of product development activity and running fast with the factory, but then they're moving to production, and then, you know, maybe you're going to use the network and that same team. Then we'll provide a more seamless customer experience and suggest that they move, you know, to the network for some higher volume, production work that maybe will be done even in Asia or something, but it's more holistically offered. Am I on the right track at all there?
Speaker Change: Just how this would benefit Proto labs, and the customer I guess, but.
Rob Bodor: I'm just picturing maybe it's a customer in Europe, for example, who is doing a lot of product development activity and running fast with the factory, but then they're moving to production and then, you know, maybe you're going to use the network and that same team then will provide a more seamless customer experience and suggesting that they move, you know, to the network for some higher volume production work that maybe will be done even in Asia or something, but it's all more holistically offered. Is that kind of in the right track at all there? You've got it exactly right, so it's one unified team; they're seeing the full scope. You know, we remove the need for hand-offs, and therefore we can just serve the customer more efficiently with that comprehensive offer.
Speaker Change: I'm just picturing like maybe it's a customer in <unk>.
Speaker Change: In Europe for example, who.
Speaker Change: He's doing a lot of product development activity and running fast with the factory, but then they're moving to production and then you know maybe youre going to use the network in that same team.
Speaker Change: Then, we'll provide a more seamless customer experience and suggesting that they move to the network for some higher volume.
Speaker Change: Reduction work that maybe it will be done even in Asia or something but its all more holistically offered is that kind of in mind. The right tracking all there you've got it you got it exactly right. So it's one unified team theyre seeing the full scope.
Rob Bodor: You got it exactly right. So it's one unified team. They're seeing the full scope. We remove the need for handoffs, and therefore, we can serve the customer more efficiently with that comprehensive offer.
Speaker Change: We removed the need for Handoffs and.
Speaker Change: And therefore, we can just serve the customer more efficiently with a comprehensive offering.
Rob Bodor: Brian, what I would also just highlight is that you've got a team that is just focused on the customer. They're just focusing on getting the customer what it..., what it wants, right? And that could be, you know, in terms of our customers, that could be the fastest speed prototype out of our CNC facility, or that might be somebody who's in production, and they need that fulfillment out of the network. They're not worried about, oh, I need to get so much revenue into one fulfillment option or another.
Rob Bodor: Brian, what I would also just highlight: you've got a team that is just focused on the customer. They're just focusing on getting the customer from what it means, what it wants, right? And that could be, you know, in terms of our customers, that could be the fastest-speed prototype out of our CNC facility or that might be somebody who's in production and they need that fulfillment out of the network. And they're not worried about, oh, I need to get so many revenue into one fulfillment option or another; they're just worried about getting the customer what they want.
Brian What I would also just highlight you've got a team that is just focused on the customer.
Brian Drab: We're just focusing on getting the customer and what it means what it wants right and that could be.
Speaker Change: <unk> of our customers that could be the fastest speed prototype out of out of our CNC facility or that might be somebody who is in production and they need that fulfillment out of the network.
Speaker Change: They're not worried about Oh I need to get so so many revenue into one fulfillment option or another they're just worried about getting the customer what they want.
Rob Bodor: They're just worried about getting the customer what they want. The operations organization is then fulfilling that in the most efficient way possible through our broadest kind of scope of fulfillment options that are available. So it is narrowly focusing our organization on the things that matter to drive success for the company.
Rob Bodor: The operations organization is then fulfilling that in the most efficient way possible through our broadest kind of scope of fulfillment options that are available. So it is narrowly focusing our organization on the things that matter to drive success to the customer.
Speaker Change: The operations organization is there.
Then fulfilling that in the most efficient way possible through our broadest kind of scope of fulfillment options that are available. So it is narrowly focusing our organization on the things that matter to drive success for the customer.
Brian Drab: Yeah, it makes sense. Okay. Thank you. I've got a couple more questions, but let me just ask one more now. How do you foresee the trend in your customer count in the next year or so?
Speaker Change: Uh-huh.
Rob Bodor: Yeah, it makes sense. Okay, thank you. I've got a couple more questions, but let me just ask one more. Now, how do you foresee in the next year or so the trend in your customer count going? Because it has been challenged, right? The customer count is down. I know that your revenue for customers up nicely because of the network strategy. But do you think that ultimately that you're going to be able to get that total customer count kind of reverse course and start growing again? Yeah, we absolutely do. And our focus is on driving that and driving overall growth, right?
Speaker Change: Yeah. It makes sense okay. Thank you.
Speaker Change:
Speaker Change: And I've got a couple more questions, but I'll just ask one more know how.
Speaker Change: Do you foresee in the next year, so the trend in your customer count.
unknown: Go to www.thevenusproject.com to purchase a copy.
Speaker Change: Going because it.
Speaker Change: It has been challenged right.
Speaker Change: The customer count is down I know that your revenue per customer is up nicely.
Speaker Change: Because of that.
Speaker Change: Network strategy, but do you think that will ultimately.
Speaker Change: That you're going to be able to get that total customer count kind of reverse course and start growing again.
Rob Bodor: Yeah, yeah, we absolutely do, and our focus is on driving that and driving overall growth right by improving our revenue per customer. Now, you know, we all understand that this is a very difficult macro environment, and you know, as you talk to our customers who are manufacturers, they're dealing with interest rates, inflation, political uncertainty because of elections, uncertainty because of trade policy, etc., you know, many of them are having a difficult time with this in this period.
Speaker Change: Yes, Yeah, we absolutely do and our focus is on driving that and and driving overall growth rate bye bye.
Rob Bodor: By improving our revenue per customer. Now, you know, of course, we all understand that this is a very difficult macro environment. And as you talk to our customers who are manufacturers, they're dealing with interest rates, inflation, uncertainty politically because of elections, uncertainty because of trade policy, et cetera. So many of them are having a difficult time in this period. And, you know, I attribute what we're seeing with total customer count, you know, a reflection of that kind of macro. So we're driving what we can drive and driving what we can control around serving our customers better, about being for them, being there for them throughout the product life cycle.
Speaker Change: By improving our revenue per customer.
Speaker Change: Of course, we all understand that this is a very difficult macro environment and as.
Speaker Change: As you talk to our customers who are manufacturers, they're dealing with interest rates inflation uncertainty politically because of elections uncertainty because of trade policy et cetera.
Speaker Change: So.
Speaker Change: Many of them are having a difficult time in this in this period.
Rob Bodor: And, you know, I attribute what we're seeing with total customer count, you know, a reflection of that kind of macro. So we're driving what we can drive and driving what we can control around serving our customers better by being there for them, being there for them throughout the product lifecycle. I think we have a tremendous opportunity for growth as we go forward. Last year, we served 53,000 customers.
Speaker Change: Uh huh.
Speaker Change: I attribute what we're seeing with total customer count.
Speaker Change: Reflection of that of that kind of macro so we're driving what we can drive and driving what we can control around serving our customers better about being for them.
Speaker Change: Being there for them throughout the product lifecycle, I think we have a tremendous opportunity for growth as we go forward.
Rob Bodor: I think we have a tremendous opportunity for growth as we go forward. Last year, we served 53,000 customers. They came to us for their prototyping. They've told us that they want to use us more broadly across the product life cycle. We are working hard to, you know, to get them to be adopting that. We saw 50% growth year over year in customers using us in that way. That alone is driving significant leverage. And increase in our average revenue per customer. So our focus is on, you know, better serving the customers. We reorganized to really make us exceptional doing that so that we can grow in the long term.
Speaker Change: Last year, we served 53000 customers that came to us for their prototyping, they've told us that they want to use us more broadly across the product lifecycle, we are working hard to.
Rob Bodor: They came to us for their prototyping, and they've told us that they want to use us more broadly across the product lifecycle. We are working hard to get them to adopt that. We saw 50% growth year over year in customers using us in that way. That alone is driving significant leverage and an increase in our average revenue per customer. So our focus is on better serving the customers. We reorganized to really make us exceptional at doing that so that we can grow in the long term, and that's what we're focused on right now. Thank you.
Speaker Change: To get them to be adopting that we saw 50% growth year over year and customers using us in that way that alone is driving significant leverage in.
Speaker Change: Increase in our average revenue per customer so our focus is on <unk>.
Speaker Change: Serving the customers, we reorganized to really make us exceptional at doing that so.
Speaker Change: So that we can grow in the long term and that's what we're focused on right now thank.
Brian Drab: And that's what we're focused on right now. Thank you. Right. Okay. Thank you very much. Thanks, Brian.
Brian Drab: All right. Okay. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Okay. Thank you very much thanks.
Brian Drab: Thanks, Brian.
Troy Jensen: Our next questions are from the line of Troy Jensen with Candor of Cheryl.
Operator: Our next questions are from the line of Troy Jensen with Candor Fitzgerald. Please proceed with your questions.
Speaker Change: Our next questions are from the line of Troy Jensen with Cantor Fitzgerald, especially with your questions.
Troy Jensen: Is this you with your questions? Hey, gentlemen, congrats on a good key to you in a tough environment. Thanks, Greg. Maybe just a couple of questions. No, you're very welcome for Daniel. Can you talk about what you think gross margins is going to look like the kind of the midpoint of the guidance range for Q3. Then also find out following up on Brian's question about cost takeouts. Do you think OpEx is going to be, you know, up, flat, or down sequentially on an absolute basis here in September? Yeah. So, you know, with the middle of the guidance range.
Troy Jensen: Hey gentlemen, congrats on a good Q2 in a tough environment, maybe just a couple questions, you're very welcome, for Daniel though. Can you talk about what you think gross margins are going to look like with kind of the midpoint of the guidance range for Q3, then also follow up on Brian's question about... Cost Takeouts. Do you think OPEX is going to be up, flat, or down sequentially on an absolute basis here in September?
Troy Jensen: Hey, gentlemen, congrats on a good Q2 in a tough environment.
Troy Jensen: Maybe just a couple of questions.
Daniel: Very welcome for Daniel.
Troy Jensen: Can you talk about what you think gross margins is going to look like kind of the midpoint of the guidance range for Q3 and also find out following up on Brian's question about.
Speaker Change: Cost take outs do you think opex is going to be.
Speaker Change: Up flat or down sequentially on an absolute basis here in September.
Dan Schumacher: Yeah, so, um, and, you know, with the middle of the guidance range, I would expect gross margins to be down slightly quarter over quarter. You know, we are still pushing efficiency automation through our factory, and we continue to work the algorithm on the network side. But, you know, there is going to be some pressure from the volume.
Speaker Change: Yeah. So.
Speaker Change: Yes.
Speaker Change: The middle of the guidance range.
Dan Schumacher: I would expect gross margins to be down slightly quarter over quarter. You know, we are still pushing efficiencies, automation through our factory. You know, and continue to work the algorithm on the network side that, you know, there is going to be some pressure from the volume. So I would see the gross margin down slightly quarter of a quarter from an operating expense perspective. You know, I would expect operating expenses to be down slightly quarter of a quarter as well. I think if you factor those things in, you get to the, you know, the middle of our guidance range from an EPS perspective.
Speaker Change: I would expect gross margins to be down slightly quarter over quarter.
Speaker Change: We are still pushing efficiencies automation through our factory.
Speaker Change: Yes.
Speaker Change: And continuing to working the algorithm on the network side, but there.
Speaker Change: There is going to be some pressure from from the volume. So I would see the gross margin down slightly quarter over quarter from an operating expense perspective.
Dan Schumacher: So I would see the gross margin down slightly quarter over quarter. From an operating expense perspective, you know, I would expect operating expenses to be down slightly quarter over quarter as well. I think if you factor those things in, you get to the, you know, middle of our guidance range from an EPS perspective.
Speaker Change: I would expect operating expenses to be down slightly quarter over quarter as well.
Speaker Change: If you factor those things and you get to the.
Speaker Change:
Speaker Change: The middle of our guidance range from an EPS perspective.
Dan Schumacher: Okay. Was there a second part to that question, or did I answer it? Oh, well, there's a follow-up.
Dan Schumacher: Was there a second part of that question, or did I answer it?
Okay was there a second part to that question or did I answer although there is a follow up to that Danielle.
Dan Schumacher: Well, there is a follow-up for that, Daniel. Okay. But just the hubs business, you know, I know on a year-over-year basis, it's been growing nicely. But the last four quarters, we've been stuck in kind of 23 to 25 million. You know, your biggest competitor out there is growing significantly faster.
Troy Jensen: Oh, well, there's a follow-up to that, Daniel, and one of you guys actually... But just the hubs business, you know, I know on a year-over-year basis, it's been growing nicely. But the last four quarters, we've been stuck in kind of 23 to 25 million, And I know your biggest competitor out there is growing significantly faster. So you just talk about, you know, share shifts or kind of why Hubs isn't growing as fast as maybe some of the other
Danielle: Hey, Good morning, you guys actually.
Danielle: But just the hubs business you know I know on a year over year basis, it's been growing nicely, but the last four quarters, you've been stuck in kind of $23 million to $25 million.
Speaker Change: Your biggest competitor out there is growing significantly faster. So can you just talk about you know that share shifts or kind of what why husbands isn't growing as fast as maybe some of the other subject.
Dan Schumacher: So you just talk about, you know, share shifts or kind of why hubs isn't growing as fast as maybe some of the others out there. So I think our focus has been on really serving the customer holistically and driving production with them. And I think we've seen that that has been quite successful for us, whether that's in injection molding or in CMC through the network. I believe that long term we are going to be able to see really strong growth in that as we continue to expose that to our customers. Of course, right now in this environment, there's clearly headwinds for customers in terms of the use cases and their adoption.
Rob Bodor: So I think our focus has been on really serving the customer holistically and driving production with them. And I think we've seen that that has been quite successful for us, whether that's in injection molding or in CNC through the network. I believe that, long-term, we are going to be able to see really strong growth in that as we continue to expose it to our customers. Of course, right now in this environment, there's clearly headwinds for customers in terms of the use cases and their adoption. And so I think that that's affecting us, right? We're not independent of the overall market.
Speaker Change: So I think our focus has been on really serving the customer holistically and driving production.
Speaker Change: With them and I think we've seen that that has been for quite.
Speaker Change: Quite successful for us.
Speaker Change: Whether that's in injection molding or in CNC through the network.
Speaker Change: I believe that long term, we are going to be able to see really strong growth in that as we as we continue to expose them to.
Speaker Change: To our customers.
Speaker Change: Of course right now in this environment.
Speaker Change: There's clearly headwinds for customers in terms of the use cases in their adoption.
Dan Schumacher: And so I think that that's affecting us, right, we're not independent of the. Real Market.
Speaker Change: And so I think that that's affecting US right, we're not independent of the of the overall market.
Troy Jensen: Gotcha, that's fair. Okay, so good luck here in Q3.
Jim Ricchiuti: Okay, it's a good look here in T3D. Our next question to the line of Jim Ricchiuti with Need of a Company. Could you see your questions? Hi, thanks. Good morning.
Speaker Change: Got it that's fair Okay. So good luck here in Q3.
Greg: Thanks, Greg.
Operator: Our next question is in the line from Jim Ricchuti with Needham & Company. Please submit your questions.
Speaker Change: Our next question is from the line of Jim Ricchiuti with Needham and company. Please proceed with your questions.
Jim Ricchiuti: Hi, thanks. Good morning. If we think about this reorganization, it appears to be more of a redeployment of resources as opposed to, you know, as you go through this process, would you anticipate any additional investments having to be made? And how soon do you think you would anticipate seeing the benefits of the reorganization, or at least we'll see some of it, be able to see the benefits?
Jim Ricchiuti: Hi, Thanks, good morning.
Jim Ricchiuti: So, if we think about this reorganization, it appears to be more of a redeployment of resources as opposed to, you know, as you go through this process, would you anticipate any additional investments having to be made, and how should you think you would anticipate the seeing the benefits of the reorganization, or at least we all see some of it be able to see the benefits? Yeah, thanks for the question, Jim. So, the purpose of the reorganization, again, is really a revenue focused, and it is about redeploying our resources in the most effective way. Make sure that we are operating seamlessly as one team, as we face the customer, and as we work to fulfill their orders and fully leverage our full global capabilities, right?
Speaker Change: If we think about this this reorganization.
Jim Ricchiuti: Yeah.
Speaker Change: Appears to be more of a redeployment of resources as opposed to you know as you go through this process.
Speaker Change: Would you anticipate.
Speaker Change: Any additional investments having to be made and how soon do you think you would anticipate seeing the benefits of the reorganization there or at least we'll see some of it that'd be able to.
Speaker Change: See the benefits.
Rob Bodor: Yeah, thanks for the question, Jim. So the purpose of the reorganization, again, is really revenue focused. And it is about redeploying our resources in the most effective way, making sure that we are operating seamlessly as one team, as we face the customer, and as we work to fulfill their orders and fully leverage our full global capabilities, right? So that's really what it's about. We believe that, longer term, this will set us up to find additional productivity and so forth, but we're focused on growth and serving our customers better. And so that's really the key rationale for it. Daniel, yeah. Jim, when I-
Speaker Change: Yes. Thanks for the question Jim So the purpose of the reorganization again is really our revenue focused and it is about redeploying our resources in the most effective way to make sure that we are operating seamlessly as one team as we face the customer and as we work to fulfill their orders and fully leverage our full global.
Speaker Change: Abilities right. So that's really what it's about.
Rob Bodor: So, that's really what it's about. We believe that longer-term this will set us up to, you know, find additional productivity, and so forth, but we're focused on growth and serving our customer better, and so that's really the key rationale for it.
Speaker Change: We believe that longer term this will set us up to find additional productivity and so forth but.
Speaker Change: We're focused on growth and serving our customer better and so that's really the key rationale for Donald yet Jim when I when I look at we grew EPS, 25% through the first half of the year, but we only grew revenue, 2% right and growing in a tough environment is good but as Robin stated earlier, we're not satisfied with that level.
Dan Schumacher: Then what was that? Jim, when I look at, you know, we grew EPS 25 percent to the first half of the year, but we only grew up there 2 percent, right? And growing in the tough environment is good, but as Robin stated earlier, we're not satisfied with that level of growth, and realigning and getting the organization focused on the right things for the customer is extremely important to us in order for us to really grow. Grow meaningfully, grow through production, grow through improved customer experiences, and so this alignment does this. With that growth right over time, we will see a pickup in margins as our growth numbers get larger and larger.
Dan Schumacher: Jim, when I look at, you know, we grew EPS 25% through the first half of the year, but we only grew revenue 2%, right? And growing in a tough environment is good, but as Robin stated earlier, we're not satisfied with that level of growth. And realigning and getting the organization focused on the right things for the customer are extremely important to us in order for us to really grow meaningfully, grow through production, and grow through improved customer experiences.
Speaker Change: Of growth and.
Speaker Change: Realigning and getting the organization focused on the right things for the customer are extremely important to us in order for us to really.
Jim Ricchiuti: Uh huh.
Speaker Change: Grow.
Speaker Change: Grow meaningfully grow through production growth through improved customer experiences and so this alignment doses.
Dan Schumacher: And so this alignment does. With that growth right, over time, we will see a pickup in margins as our growth numbers get larger. The other thing I would tell you is streamlining into a unified operations organization will have a longer-term benefit, and we'll see efficiencies through that streamlining over the longer term.
Speaker Change: That growth rate over time, we will see a pick up in margins as as our growth numbers get larger and larger the other thing I would tell you is <unk>.
Jim Ricchiuti: The other thing I would tell you is, you know, streamlining into a unified operations of organization will have a longer-term benefit, and we'll see efficiencies through that streamline over the longer term. Got it. Thank you.
Speaker Change: Streamlining into a unified operations organization will have a longer term benefit.
Speaker Change: And we will see efficiencies through that streamline.
Speaker Change: Over the longer term.
Jim Ricchiuti: Got it. Thank you. The slowing that you called out in June and July seems to be pretty consistent with what we're hearing out there, but I'm wondering if you could provide any additional color. It appears to be in both your major geographic regions. Any other color you could provide in terms of the market verticals where you're seeing some changes?
Speaker Change: Got it thank.
Speaker Change: Thank you.
Jim Ricchiuti: You know, the slowing that you call about in June and in July seems to be pretty consistent with what we're hearing out there, but you know, I'm wondering if you could provide any additional color. It appears to be in both your major geographic regions. Any other color you could provide in terms of the market verticals where you're seeing some changes? Yeah, so, you know, Jim, we saw a slowing at the beginning of June, and honestly, from the desk I was sitting at, I was like, okay, well, there'll be some pickup before the 4th of July, before people go on holiday, they're going to put their orders in, and that really did not happen.
Speaker Change: The slowing that you called out.
Speaker Change: In June.
Speaker Change: June.
In mid July it seems to be pretty consistent with what we're hearing out there, but I'm wondering if you could provide any additional color there is.
Speaker Change: It appears to be in both your major geographic regions any other color you could provide in terms of.
The market verticals, where you're seeing some changes.
Dan Schumacher: Yeah, so, you know, Jim, we saw a slowdown at the beginning of June, and honestly, from the desk I was sitting at, I was like, okay, well, there'll be some pickup before the 4th of July. Before people go on holiday, they're going to put their orders in, and that really did not happen. Then after the 4th of July, while we saw increasing order rates, you know, after that U.S. holiday, they were not at the increasing level that we've seen in prior years.
Speaker Change: Yes, so Jim we saw a slowing at the beginning of June.
Speaker Change: And.
Speaker Change: Honestly from the desk I was sitting at I was like okay, well there'll be some pickup before the fourth of July before people go on holiday Theyre going to put their orders in and that didn't that really did not happen.
Rob Bodor: Then after the 4th of July, while we saw increasing order rates, you know, after that U.S. holiday, they were not to the increasing level that we've seen in prior years. As we talk to our salespeople about what's going on, I think generally what we're hearing is, you know, starting in June, as you talk with a customer about, you know, closing a project and so forth, it would go through more approval cycles; you know, there was more delay and trying to get an answer to close an order, and that type of, you know, hesitancy, you know, continued into July.
Speaker Change: Then after the fourth of July while we saw increasing order rates.
Speaker Change: After that U S holiday.
Speaker Change: They were not to the increasing level that we've seen in prior years as we talk to our salespeople about what's going on I think generally what we're hearing is starting in June as you talk with our customer about closing a project and so forth.
Dan Schumacher: As we talk to our salespeople about what's going on, I think generally what we're hearing is, you know, starting in June, as you talk with a customer about, you know, closing a project and so forth, it would go through more approval cycles, you know, there was more delay in trying to get an answer to close an order. And that type of, you know, hesitancy, you know, continued into July. And so that's the environment in which, you know, we're playing in, but we're still focused on solving our customers' problems with, you know, the pandemic, you know, with what we have and driving growth and capturing as many of the opportunities that are available.
It would go through more approval cycles.
Speaker Change: There was more delay and trying to get an answer to close an order and that that type of hesitancy.
Speaker Change: Continued into July and so that's the environment in which we're playing in but we're still focused on <unk>.
Rob Bodor: And so that's the environment in which, you know, we're playing in, but we're still focused on, you know, solving our customers' problems with what we have and driving the growth and capturing as many of the opportunities that aren't there. So you asked also about industries. I would say that we're seeing this to be pretty broad-based and affecting most of the industries that we serve. But I would just also add, Jim, that this has been a tough environment for the last two years in the U.S. and in Europe, and I think we've proven that we can outperform in this environment.
Speaker Change: Solving our customers' problems with.
Speaker Change: With what we have and driving the growth and capturing as many of the opportunities that are there. So you asked also about industries I would say that we're seeing this to be pretty broad based been affecting most of the industries that we serve.
Rob Bodor: So, you asked about industries. I would say that we're seeing this to be pretty broad-based and affecting most of the industries that we serve. But I would also add, Jim, that this has been a tough environment for the last two years in the U.S. and in Europe, and I think we've proven that we can outperform in this environment. We grew all of last year; we grew in the first half of this year, too.
Speaker Change: I would just also add Jim that.
Jim Ricchiuti: This has been a tough environment for the last two years in the U S and in Europe, and I think we've proven that we can outperform in this environment. We grew all of last year. We grew in the first half of this year.
Rob Bodor: We grew all of last year. We grew in the first half of this year. We've been executing our discipline around cost management and been able to expand margins in this environment. I think if you look back in our history in strong economies, we outperform GDP by multiples. So I think we have a very robust business. We are profitable. We are a strong-cast generator. We carry no debt. We are focused on serving our customers best as possible in any macro economy. And we're driving what we can control, which is to make sure we serve our customer in the best way possible.
Rob Bodor: We've been executing our discipline around cost management and been able to expand margins in this environment. I think if you look back at our history in strong economies, we outperformed GDP by multiples, so I think we have a very robust business. We are profitable. We are a strong cash generator. We carry no debt. We are focused on serving our customers as best as possible in any macro economy. And we're driving what we can control, which is to make sure we serve our customers in the best way possible. We will absolutely weather this storm. And when the cycle improves, I expect we will be demonstrating strong growth.
Jim Ricchiuti: <unk> been executing our discipline around cost management and been able to expand margins in this environment I think if you look back.
Jim Ricchiuti: In our history.
Jim Ricchiuti: And strong economies.
Jim Ricchiuti: We outperformed GDP by multiples.
Jim Ricchiuti: So I think we have a very robust business, we are profitable strong cash generator, we carry no debt.
Jim Ricchiuti: We are focused on serving our customers best as possible in any macro economy, and we're driving what we can control which is to make sure we serve our customer and the best way possible, we will absolutely weather this storm and when the cycle improves I expect we will.
Jim Ricchiuti: We will absolutely weather this storm, and when the cycle improves, I expect we will be demonstrating strong growth. Got it. It's helpful. That's the luck going forward. Thank you.
Jim Ricchiuti: Demonstrating strong growth.
Jim Ricchiuti: It's helpful. Best of luck going forward. Thank you.
Speaker Change: Got it that's helpful Best of luck going forward. Thank you.
Thank you.
Greg Palm: Any questions from the line of Greg poem? Greg Helen Capital. Please just use your question.
Operator: Our next question is from the line of Gregg Palm with Gregg Hallam Capital.
Speaker Change: Our next question is from the line of Greg Palm with Craig Hallum Capital. Please proceed with your question.
Greg Palm: Yes, morning. I wanted to just dig in to that July comment a little bit more. Dan, it sounded like, you know, it sounded based on your past answer that maybe orders picked up a little bit in July. But you know, I think what you said was the guidance was based on what you saw in July and assumes an improvement or recovery in August and September. Those don't exactly, you know, tie out because I think that would assume that July trends were pretty awful. So can you maybe just tie that out if you can? Yeah, it's not a recovery.
Gregg Palm: Yeah, good morning. I wanted to just dig in to that July comment a little bit more. It sounded like, you know, based on your past answers that maybe orders picked up a little bit in July, but, you know, I think what you said was the guidance was based on what you saw in July and assumes an improvement or recovery in August and September. Those don't exactly, you know, tie out because I think that would assume that July trends were pretty awful. So can you maybe just tie that out, if you can?
Greg Palm: Yeah. Good morning wanted to just dig in.
Greg Palm: To that July comment a little bit more.
Dan: Dan It sounded like.
Greg Palm: So based on your past answer that maybe orders picked up a little bit and in July but you know I think what you said was the guidance was based on what you saw in July and assumes an improvement in recovery.
Speaker Change: In our August and September those don't exactly tie out because I think that would assume that July trends were pretty awful. So can you maybe just tie that out if you can.
Dan Schumacher: Yeah, it's not a recovery. What I'm talking about is normal seasonality patterns that we see on a lower base, right? So if you draw that trend across August and September, right, August and September will be lower than what we had last year, which is why the guide is down year over year. If that makes sense, Greg.
Greg Palm: Yes.
Not a recovery.
Dan Schumacher: What I'm talking about is normal seasonality patterns that we see on a lower base, right? So if you draw that trend across August and September, right? August and September will be lower than what we had last year, which is why the guide is down year over year.
Speaker Change: What I am talking about is normal seasonality patterns that we see on a lower base right. So if you if you draw that trend.
Greg Palm: August and September right August and September will be lower than what we had last year, which is why the guide is down year over year, if that makes sense Greg.
Dan Schumacher: That makes sense, Greg. Okay. I mean, can you give us any sense in terms of like quantifying the declines in July and what's baked into the guidance, or at least sort of ballpark? No, we just give guide on the overall quarter, right? And not specifically on what is, you know, month to month. But I would say, in general, the decline in July is consistent with what the middle of the guide is year over year. Okay.
Gregg Palm: Okay, I mean, can you give us any sense in terms of like quantifying the declines in July and what's baked into the guidance or at least a sort of ballpark? No, we...
Greg Palm: Oh, Okay, I mean could you give us any sense in terms of like quantifying the declines in July and what's baked into the guidance or at least sort of ballpark now.
Dan Schumacher: We just give guidance on the overall quarter, right, and not specifically on what is, you know, month to month, but I would say, in general, the decline in July is consistent with what the middle of the guide is year over year.
Greg Palm: Give guide on the on the overall quarter right and not specifically on what is.
Speaker Change: Month to month, but I would say in general the.
Speaker Change: The decline in July is consistent with what the middle of the guide is year over year.
Greg Palm: Okay.
Greg Palm: And I'm curious, you know, under this new organizational change strategy that you talked about. Does it change how you view, you know, revenue by service, for instance, you know, sheet metal, which has been declining basically every year since, you know, that business was acquired and even, you know, if I look back at, you know, 3D printing, you know, which was historically a pretty good grower and it's kind of stagnated, stagnated here the last couple of quarters. I guess what I'm trying to figure out is how much of this is due to cyclical versus structural reasons and, you know, is there any focus on either deemphasizing that further, walking away from certain processes, just would like to get a little bit more color there.
Gregg Palm: And I'm curious, you know, under this new organizational change strategy that you talked about, does it change how you view revenue by service, for instance, sheet metal, which has been declining basically every year since, you know, that business was acquired? And even, you know, if I look back at, you know, 3D printing, which was historically a pretty good grower, and it's kind of stagnant here, the last couple of quarters, I guess what I'm trying to figure out is, how much of this is due to cyclical versus structural reasons. And, you know, is there any focus on de-emphasizing that further walking away from certain processes? I just would like to get a little bit more color there.
Speaker Change: And I'm curious you know under this new organizational change strategy that you talked about does it change how you view you know revenue by by service for for instance, do you know sheet metal, which has been declining basically every year.
Speaker Change: Since you know that business when it was acquired and even if I look back yet.
Speaker Change: Three D printing, which was historically a pretty good grower and it's kind of stagnated stagnated here. The last couple of quarters I guess, what I'm trying to figure out is how much of this is due to cyclical versus structural reasons and you know is there any focus on either deemphasizing that further.
Speaker Change: Walking away from certain processes, just would like to get a little bit more color there.
Rob Bodor: Yeah, thank you for the question. So, in terms of the reorganization, again, this is about how we can serve our customers holistically and how we can be efficiently organized to do that as seamlessly as possible. It does not change the services that we are bringing to market, and we want to continue to be able to bring to market all services to meet the needs of our customers as effectively as possible. Certainly, we have some services that are performing better than others in this macro environment, and we are working to drive and improve our overall revenue.
Rob Bodor: Yeah, thank you for the question. So in terms of the reorganization, again, this is about how we can serve our customers holistically and how can we be efficiently organized to do that as seamlessly as possible. It does not change the services that we are bringing to market, and we want to continue to be able to bring all services to market to meet the needs of our customers as effectively as possible. Certainly, we have some services that are performing better than others in this macro environment, and we are working to drive and improve our overall revenue, and that's really where my focus is.
Speaker Change: Yes. Thank you for the question so.
Speaker Change: In terms of the reorganization again this is about how can we serve our customers holistically and how can we be efficiently organised.
Speaker Change: To do that.
Speaker Change: As seamlessly as possible.
Speaker Change: It does not change.
Speaker Change: The services that we're bringing to market.
Speaker Change: And we want us continuing to be able to bring to market are all services to meet the needs of our customers as effectively as possible.
Speaker Change: Certainly we have.
Speaker Change: Some services that are performing better than others in this macro environment and we are working to drive and improve our overall revenue and Thats really where my focus is.
Rob Bodor: And that's really where my focus is. So I guess even do you think some of the organizational changes could help re-accelerate activity and some of those lower performance segments then? Is that the whole? Absolutely, absolutely. Yep, okay.
Gregg Palm: So I guess, I mean, do you think some of the organizational changes could help re-accelerate activity in some of those lower-performing segments then? Is that the hope?
Speaker Change: So I guess you mean do you think some of the organizational changes could help reaccelerate activity in some of those lower performing segments, then was that the whole salute absolutely.
Rob Bodor: Absolutely. Yep, okay. All right, I will leave it there. Thanks.
Speaker Change: Yeah, Okay, Alright, I will I'll leave it there thanks.
Greg Palm: All right, I will leave it there. Thanks. Thanks, Greg. Thank you.
Greg Palm: Thanks, Greg.
Operator: Thank you. This will conclude our question and answer session and also include today's conference. You may now disconnect your lines at this time. Thank you for your participation.
Speaker Change: Thank you. This will conclude our question and answer session. Also include today's conference you May now disconnect. Your lines at this time. Thank you for your participation.
Operator: This will conclude our question and answer session and also include today's conference. You may now disconnect your lines at this time. Thank you for your participation.