B2B eCommerce

A slowing economy catches up with an all-digital manufacturer

An all-digital ordering, processing and purely ecommerce manufacturer based in Minneapolis is reported slowing sales in the third quarter.

The primary reason: slowing customer demand for injection molding, one of the company’s biggest sales business channels.

“Revenue came in near the bottom end of our guidance as strong growth in several areas of our business is being largely overshadowed by a decline in our injection molding revenue, predominantly due to the challenging macroeconomic climate,” Proto Labs Inc. CEO Rob Bodor told analysts on a Q3 earnings call based on a transcript from Fool.com.

In the third quarter, revenue for injection molding declined 15.3% to $48.9 million from $57.7 million. In comparison, sales for CNC machining grew slightly to $47.5 million. That’s up 8.7% from $43.7 million in Q3 2011. Sales for Protolabs’ sheet metal business increased $5.2 million for the current third quarter. That’s up 6.1% compared with $4.9 million in the prior year.

“We saw fewer production parts orders in the most recent quarter due to excess inventory buildup in the market at a time when many of our customers are experiencing softening demand and elevated inflation,” Bodor said. “These macroeconomic and inflationary headwinds impact injection molding parts orders more than our other manufacturing services because injection molding has the highest relative proportion of low-volume production compared to prototyping and the highest average number of parts per order.”

Despite the slowdown in sales, Protolabs continues to ramp up is digital commerce features and functions.

In January 2021, Protolabs agreed to pay $280 million (plus up to $50 million contingent on performance) for Amsterdam-based Hubs. Hubs offers digital manufacturing services through an international network of hundreds of manufacturers and also processes orders online. In the first quarter of 2022, Protolabs “made progress on the integration of the Protolabs and Hubs offers into one ecommerce platform with a focus to provide a best-in-class customer experience,” Bodor said.

Now, Protolabs is beginning to roll out more integrated digital order and payments features across various global regions.

“We now offer CNC manufacturing for eligible parts through the combination of our internal digital manufacturing and our digital network of manufacturing partners,” he told analysts. “We began the rollout in Europe, and we’ll continue to test and iterate. In the coming months, we will offer customers more expanded capabilities through the digital network, and we plan to expand the integrated offer to the Americas in early 2023. And finally, Proto Labs U.S.”

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