Proto Labs, Inc. (NYSE:PRLB) reported modest revenue growth and a significant increase in non-GAAP earnings per share for the second quarter of 2024, despite a tough macroeconomic climate. The company, which specializes in digital manufacturing, credited improvements in AI pricing algorithms, increased automation, and cost management for its financial performance. However, Proto Labs anticipates a more challenging third quarter with an expected revenue between $117 million and $125 million due to a broader manufacturing contraction.
Key Takeaways
- Proto Labs' revenue grew by 2.8% year-over-year to $125.6 million in Q2 2024.
- Non-GAAP earnings per share increased by 25% compared to the same period last year.
- The company has seen a 50% rise in customers using their comprehensive offer over the past 12 months.
- Proto Labs will reorganize to separate revenue generation from operational and fulfillment tasks.
- The company forecasts a challenging Q3 with softer customer ordering patterns and manufacturing contraction.
Company Outlook
- Proto Labs expects to face a challenging operating environment in the third quarter of 2024.
- The company is focused on driving efficiencies and maintaining strong profitability.
- Organizational changes are underway to improve customer engagement and accelerate growth.
Bearish Highlights
- Proto Labs has experienced slower growth compared to competitors due to market headwinds.
- The company anticipates a softer performance in August and September, following normal seasonal patterns.
Bullish Highlights
- Despite the difficult environment, Proto Labs has improved its profitability and taken market share.
- Executives expressed confidence in the company's ability to grow strongly when economic conditions improve.
Misses
- The company is working to reverse a recent decline in customer count.
- They have noted a consistent slowing in customer activity during June and July across major geographic regions.
Q&A Highlights
- Executives discussed the company's focus on serving customers holistically and driving production, especially in injection molding and CNC.
- The recent reorganization is expected to increase productivity and growth without additional investments.
- Proto Labs remains confident in their business model, which historically performs well in strong economies.
InvestingPro Insights
Proto Labs, Inc. (PRLB), known for its digital manufacturing prowess, has recently demonstrated a robust financial performance, which is further illuminated by insights from InvestingPro. With a market capitalization of $733.91 million and a P/E ratio standing at 38.17, the company's valuation metrics offer a mixed picture. The P/E ratio suggests a premium valuation, yet the PEG ratio, which is at a low 0.36 for the last twelve months as of Q1 2024, indicates potential for future earnings growth relative to the P/E.
InvestingPro Tips highlight that Proto Labs holds a perfect Piotroski Score of 9, reflecting strong financial health and operational efficiency. Additionally, the company's management has been actively buying back shares, signaling confidence in the firm's future prospects. These actions, coupled with the fact that Proto Labs holds more cash than debt on its balance sheet, provide a reassuring financial stability outlook for investors.
For those seeking a deeper dive into the company's performance and potential, InvestingPro offers additional tips. There are currently 11 more tips available on InvestingPro's platform, which can provide investors with a more comprehensive analysis of Proto Labs' financial health and market position.
Key metrics from InvestingPro Data that stand out include:
- Revenue Growth: Proto Labs reported a year-over-year revenue increase of 3.23% for the last twelve months as of Q1 2024, which aligns with the modest growth mentioned in the article.
- Gross Profit Margin: The company has maintained a strong gross profit margin of 44.61% over the same period, suggesting effective cost control and pricing strategies.
- Analysts' Predictions: Despite the cautious outlook for Q3, analysts predict Proto Labs will be profitable this year, as indicated by the company's recent performance and strategic initiatives.
Investors and stakeholders in Proto Labs can leverage these insights and the detailed analysis available through InvestingPro to make informed decisions about their investment strategies.
Full transcript - Proto Labs Inc (PRLB) Q2 2024:
Operator: Greetings. Welcome to Proto Labs' Second Quarter 2024 Earnings Call. [Operator Instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Jason Frankman, Vice President and Corporate Controller. Jason, you may now begin your presentation.
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. 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 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-GAAP financial measures consistent with our past practice. 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 GAAP to non-GAAP results. Now. I'll turn the call over to Rob Bodor. Rob?
Rob Bodor: Thanks, 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 Lab's 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 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. 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 the factory and the 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. 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. Let me now share an example of the value we bring to customers with our unique capabilities. A medical device company called Solmetex 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. Solmetex 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 Solmetex's innovation through our world-class lead times. We then fulfilled injection molding production quantities via the network. So prototyping the factory's production through the network. Solmetex is fully utilizing Proto Labs combined offer to add value to their customers and their own business, which aligns with our first strategic initiative. As for our second strategic initiative, our relationship with Solmetex 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 Proto Labs as a single source manufacturer throughout the product life cycle. While we are seeing a growing number of customers use Proto Labs for both prototyping and production, there are still many cases in which customers order prototypes from Proto Labs and eventually go elsewhere to procure their production volumes. Capturing additional production work from existing prototype customers is a massive growth opportunity for Proto Labs. 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. As I mentioned earlier, we grew in the first half of 2024, while U.S. 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 hit an eight-month low as manufacturing activity enters deeper into contractions. 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, 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 the operational and fulfillment work. 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 life cycle and accelerating revenue growth. The new order structure also ensures complete integration between the factory and the network. The Global Operations Organization will also allow us to more efficiently serve customers production needs. 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 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 the GM of the Americas in 2021. So Mike brings a wealth of experience in operational leadership, and I am confident that he is the right person to lead the new operations organization. As noted in our SEC filing on July 24, Bjoern Klaas is no longer GM of our EMEA region. Bjorn led our European business for almost seven years and we are very thankful for his contributions. I am personally thankful for Bjoern'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 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 Org will be led by Peter Horowitz, currently Managing Director of Proto Labs Network, which he joined in 2022. Proto Labs Network has performed very well under Peter's leadership and in his new role he will draw on prior successes in several B2B sales leadership roles. The leadership of Sean and Peter, 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. We believe our strategy will continue to drive strong top and bottomline 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. I am confident these changes will enable us to serve customers from prototyping to production and accelerate customer adoption of our comprehensive offerings. 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. I'll now hand it over to Dan to cover our financials in detail as well as our outlook for the third quarter. Dan?
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, up 22.7% in constant currencies. 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. 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-GAAP gross margin was 32.8%, up from 31.7% in the first quarter, while factory non-GAAP 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. 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. 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. 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. On June 30, 2024, we had $112.9 million of cash and investments and zero debt. Our outlook for the third quarter of 2024 is outlined on Slide 13. This outlook reflects a more a 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. 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 to earnings guidance. We expect to incur $500,000 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 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%. 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 a 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. 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.
Operator: [Operator Instructions] And our first question will be coming from the line of Brian Drab with William Blair. Please proceed with your questions.
Brian Drab: Good morning. Thanks for taking my questions. 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 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 what -- it sounds like the team is slightly smaller now, and what is the potential impact in the medium term on margins or cost take-outs?
Rob Bodor: 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. So, one, we're moving from regionally organized, where we had all our P&Ls were regional in the U.S. and in Europe, and we had general managers, right, who were 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 find opportunities to drive productivity in that. 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 they'll be having single unified incentive 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...
Brian Drab: Yes, I asked about the cost, but before we get, just maybe an example of a customer, you know, benefiting from this reorg would be helpful, just how this would benefit Proto Labs and the customer, I guess. But I'm just picturing, like, 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 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 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 -- am I on the right track in all there?
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 just serve the customer more efficiently with that comprehensive offer.
Dan Schumacher: Brian, what I would also just highlight, you've got a team that has just focused on the customer. They're just focusing on getting the customer what it needs, what it wants, right. And that could be -- in terms of our customers, that could be the fastest speed prototype out of our CNC facility, or that might be somebody who is 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. 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.
Brian Drab: Yes, it makes sense. Okay, thank you. I've got a couple more questions, but maybe I'll 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 per customer is 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?
Rob Bodor: Yes, we absolutely do. And our focus is on driving that and driving overall growth, right, by improving our revenue per customer. Now, 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 high 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 I attribute what we're seeing with total customer count 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 -- 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. 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 get them to be adopting that. We saw a 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 better serving the customers we reorganize 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.
Brian Drab: All right. Okay. Thank you very much.
Dan Schumacher: Thanks, Brian.
Operator: Our next questions are from the line of Troy Jensen with Cantor Fitzgerald. Please proceed with your questions.
Troy Jensen: Hi, gentlemen, congrats on a good Q2 in a tough environment.
Rob Bodor: Thanks, Troy.
Troy Jensen: Maybe just a couple questions -- You're very welcome. For Daniel, though, can you talk about what you think gross margins is going to look like kind of the midpoint of the guidance range Q3, then also following 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?
Dan Schumacher: Yes. So with the middle of the guidance range, I would expect gross margins to be down slightly quarter-over-quarter. We are still pushing efficiencies, automation through our factory, and continue to working the algorithm on the network side. But, there is going to be some pressure from the volume. So I would see the gross margin down slightly quarter-over-quarter. From an operating expense perspective, 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 middle of our guidance range from an EPS perspective. Was there a second part to that question or did I answer it?
Troy Jensen: Well, there is a follow-up for that, Daniel, and - one of you guys, actually. But just the hubs business, I know on a year-over-year basis it's been growing nicely, but the last four quarters we've been stuck in $23 million to $25 million. I know your biggest competitor out there is growing significantly faster. So can you just talk about share shifts or kind of why hubs isn't growing as fast as maybe some of the others out there?
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 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. And so I think that, that's affecting us right. We're not independent of the overall market.
Troy Jensen: Got you. That's fair. Okay. So good luck here in Q3.
Rob Bodor: Thanks, Troy.
Operator: Our next question is from the line of Jim Ricchiuti with Needham & Company. Please proceed with your questions.
Jim Ricchiuti: Hi. Thanks. Good morning. So if we think about this reorganization, it appears to be more of a redeployment of resources as opposed to -- 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.
Rob Bodor: Yes. 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, 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. 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 customer better and so that's really the key rationale for it. Dan, would you…
Dan Schumacher: Jim, when I look at -- we grew EPS 25% through the first half of the year, but we only grew revenue to 2%, right. And growing in a tough environment is good, but as Rob has 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, growth 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. 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 streamline over the longer term.
Jim Ricchiuti: Got it. Thank you. The slowing that you called out in June and in 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. 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: Yes, so, 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. Then after the 4th of July, while we saw increasing order rates 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 starting in June, as you talk with a customer about closing a project and so forth, it would go through more approval cycles. There was more delay and trying to get an answer to close an order. And that -- that type of hesitancy continued into July. And so that's the environment in which we're playing in, but we're still focused on solving our customers problems with what we have and driving the growth and capturing as many of the opportunities that are there.
Rob Bodor: 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. 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 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 best as possible in any macroeconomy, and we're driving what we can control, which is to make sure we serve our customer 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: Got it. That's helpful. Best of luck going forward. Thank you.
Rob Bodor: Thank you.
Dan Schumacher: Thank you.
Operator: Our next question is from the line of Greg Palm with Craig-Hallum Capital. Please proceed with your questions.
Greg Palm: Yes, good morning. I wanted to just dig into 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 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 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: Yes. 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: 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?
Dan Schumacher: No, We just give guide on the overall quarter right and not specifically on what is 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: Okay. And I'm curious, 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 that business was acquired, and even if I look back at 3D Printing, which was historically a pretty good grower, and it's 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 is there any focus on either de-emphasizing that further walking away from certain processes, just would like to get a little bit more color there?
Rob Bodor: Yes. Thank you for the question. So in terms of the reorganization, again, this is about how can we 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 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 macroenvironment, and we are working to drive and improve our overall revenue, and that's really where my focus is.
Greg Palm: So I guess, do you think some of the organizational changes could help reaccelerate activity in some of those lower-performing segments, then, is that the hope?
Rob Bodor: Absolutely, absolutely.
Greg Palm: Yes. Okay. All right. I will leave it there. Thanks.
Rob Bodor: Thanks, Greg.
Dan Schumacher: Thanks, Greg.
Operator: Thank you. This will conclude our question and answer session and also conclude today's conference. You may now disconnect your lines at this time. Thank you for your participation.
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