Proto Labs, Inc. (NYSE:PRLB) reported a significant milestone in its financial performance for the fiscal year 2023, surpassing $500 million in annual revenue for the first time. The company, a provider of digital manufacturing services, also recorded a 7.2% year-over-year growth in fourth-quarter revenue, reaching $125 million. Despite a decrease in non-GAAP gross margin and a soft start anticipated for the first quarter of 2024, Proto Labs expressed optimism for year-over-year growth driven by automation and AI-enabled pricing algorithms.
Key Takeaways
- Proto Labs achieved over $500 million in revenue for the first time in its history.
- Q4 revenue grew by 7.2% YoY to $125 million, with the Proto Labs network contributing $22.5 million.
- Full-year non-GAAP earnings per share increased by 6% to $1.59.
- The company expects Q1 2024 revenue to be between $120 million and $128 million.
- Strong growth was seen in aerospace, automotive, and medical verticals.
- The company plans to focus on growing revenue per customer and driving larger orders.
Company Outlook
- Proto Labs anticipates year-over-year revenue and profitability growth in 2024.
- Strategic priorities include increasing revenue per customer, driving larger orders, and investing in employees.
- The company served 53,464 customer contacts in 2023 and aims to expand within its existing customer base.
- Proto Labs is focusing on automation and AI-enabled pricing algorithms to drive future growth.
Bearish Highlights
- Non-GAAP gross margin decreased to 45.3% due to lower factory volume.
- Anticipated decrease in revenue and profitability in Q1 2024 due to a higher mix of network business and increased SG&A expenses.
Bullish Highlights
- The company experienced strong growth in injection molding, CNC machining, and 3D printing services.
- Proto Labs network revenue saw a 49% growth in constant currencies.
- The company is optimistic about securing more large orders, providing consistency in production work.
Misses
- Sheet metal revenue declined by 8% YoY.
- A soft start to Q1 2024 is expected due to lower order levels in December and early January.
Q&A Highlights
- Rob Bodor expressed satisfaction with the company's performance and growth despite the manufacturing sector's contraction.
- The company's business model focuses on offering solutions that drive growth, which may affect margins.
- Success is measured through metrics such as the number of customers using combined offerings and average revenue per customer, which will be disclosed in the future.
Proto Labs has demonstrated resilience and adaptability in a challenging manufacturing environment, achieving record revenue and setting strategic priorities for continued growth in the year ahead. With a focus on expanding its customer base and driving larger orders, the company is poised to leverage its investments in automation and AI to enhance its market position.
InvestingPro Insights
Proto Labs, Inc. (PRLB) has recently made headlines with its financial achievements, and insights from InvestingPro provide a deeper look into the company's performance and potential. With a market cap of $915.66 million, Proto Labs stands out in the digital manufacturing sector. Despite a slight revenue decline of 0.39% in the last twelve months as of Q3 2023, the company has shown a quarterly revenue growth of 7.38% in Q3 2023, reflecting a positive trend that aligns with the reported year-over-year growth in the article.
InvestingPro Tips indicate that Proto Labs has been actively buying back shares, which can be a sign of management's confidence in the company's future. Additionally, the company holds more cash than debt on its balance sheet, providing a strong liquidity position that may reassure investors of its financial stability.
Investors looking for more comprehensive analysis and additional insights can find them on InvestingPro, with 9 more tips available that could further inform their investment decisions. These include expectations of net income growth this year and revisions of earnings upwards by analysts for the upcoming period.
For those interested in exploring these insights further, InvestingPro offers an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24. This promotion provides access to a wealth of financial data and professional analyses to help make informed investment choices.
Full transcript - Proto Labs Inc (PRLB) Q4 2023:
Operator: Greetings. Welcome to Proto Labs Fourth Quarter Fiscal Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] 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. Mr. Frankman, you may begin.
Jason Frankman: Thank you, Rob and welcome everyone, to Proto Labs’ fourth quarter and full year 2023 earnings conference call. I’m joined today by Rob Bodor, Proto Lab’s 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 fourth quarter and full year ended December 31, 2023. 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 will turn the call over to Rob Bodor. Rob?
Rob Bodor: Thanks, Jason. Good morning, everyone, and thank you for joining our fourth quarter and full year 2023 earnings call. We continue to execute well on our priorities through the fourth quarter, resulting in a record year and strong financial and operational results. For the full year 2023, we generated revenue above $500 million for the first time in ProtoLabs' 25-year history, while delivering improved earnings, robust cash flow, and returning substantial capital to shareholders. Every day at ProtoLabs, we're guided by our mission, which is to empower the world's most innovative companies to bring their new ideas to market by offering the fastest and most comprehensive digital manufacturing service. We manufacture high-quality, custom, complex parts for the next generation of innovative solutions to the world's challenges. I'll now share a few examples of how we enable customers to accelerate innovation across pioneering industries. First, I want to share two examples from the electric vehicle industry, which is a growing sector of our business. ProtoLabs has been heavily involved in creating a more sustainable future through the electrification of vehicles with various customers. One prominent EV manufacturer has been a ProtoLabs factory customer for years as our reliable and rapid lead times help them move fast and bridge supply chain challenges as they introduce new vehicles and options. This customer recently received their first order fulfilled through our manufacturing partner network, which we rebranded from Hubs to ProtoLabs Network in January. ProtoLabs Network manufactured quality injection molded prototype parts, which were beyond our factory's capabilities due to their size and complexity. As EV manufacturers have very different development and supply chain requirements than traditional auto manufacturers, the flexibility of our combined offerings provides the agility and adaptability that EV manufacturers need. We are incredibly excited to continue our work with this customer and help create a more sustainable future through emissions-free vehicles. In addition to electric cars, our advanced digital manufacturing capabilities also support innovation in the electric aerospace industry. Kinetics [ph], a company that has developed an electric motor for commercial regional jets and narrow body aircraft, leveraged our manufacturing precision and speed to have a new complex metal component manufactured. This part was 3D printed in our digital factory due to its complex design that maximizes surface area and improves the power to weight ratio. Our services allow Kinetics [ph] to accelerate innovation in aircraft motors. ProtoLabs is also involved in rapid innovation in the commercial space exploration sector where speed to market is critical. Our ability to quickly provide high quality precision parts through comprehensive manufacturing services allows companies like Space Inventor to develop satellite systems and advance aerospace technology. Space Inventor turned to ProtoLabs in order to meet stringent project timelines. We manufactured several CNC machined components for structural elements and complex brackets and a variety of specialized materials for their satellites. Crucially, with our industry-leading turnaround times, we rapidly manufactured and delivered quality components while significantly expediting Space Inventor's design process. One final example to highlight today comes from the agricultural machinery industry. ProtoLabs recently worked with a leading equipment manufacturer that drives sustainable progress in agriculture. This customer had an unexpected delay arise at an existing supplier. When supply chain disruptions arise, ProtoLabs always has capacity available to ensure customers can continue to innovate. We provided quality, cost-efficient CNC machined components through both the factory and the network. ProtoLabs' speed and comprehensive offering allow this customer to meet scheduled phase gates and keep a critical program on track. These are just four short examples of the innovations we get to accelerate every day in exciting industries which positively impact the world. We served over 53,000 customers in 2023 and empowered customer innovations in many different applications. I'm proud to say that in 2023, we contributed to the greater good while successfully executing against our business priorities. 2023 was a success for ProtoLabs. We confirmed that our strategy to combine the factory and network offers is the right one, demonstrated by 70% growth in ProtoLabs' network and continued customer adoption of the combined offer. In the presence of a challenging global manufacturing demand environment that experienced contraction throughout the year, our comprehensive offering enabled ProtoLabs to take share in our market. Our leadership team executed on our strategic objectives and I'm proud of what we accomplished. As you'll recall, we entered 2023 with two priority areas. First, to narrow our focus to drive revenue growth in our two largest services, injection molding and CNC machining. And second, to improve shareholder value through increased profitability. I am pleased to report that we successfully delivered on both of those priorities. On our fourth quarter earnings call one year ago, we stated that we expected year-over-year growth in injection molding for the full year. We met our goal of achieving injection molding growth in 2023, driven by the value we provide as a single source injection molded parts supplier, winning larger orders with strategic customers. Investments in digital quality, competitive pricing, and consultative design services have contributed to success with larger production-oriented orders. Collectively, these investments have been key to transforming our injection molding business, allowing ProtoLabs to serve as a true strategic partner for our customers. In addition, we continue to win more injection molding orders where our customers benefit from combined factory and network performance. In our other priority growth area, CNC machining, we successfully unlocked greater growth potential through the most complete and comprehensive offer in the industry. CNC machining revenue fulfilled by the ProtoLabs network grew 80% in 2023. Customers took advantage of the combined offer, leveraging lower part prices at longer lead times, improved tolerances, broader finishing options, and larger and more complex part designs through the ProtoLabs network. We also invested to expand our CNC offer in the digital factory, launching scaled plating and anodizing at our best-in-class lead times. Finally, in 2023, we drove shareholder value through improved profitability and returning capital to shareholders. ProtoLabs' differentiated business model generated significant profitability and cash flow throughout the year. Both factory and network gross margins improved year-over-year, and 2023 non-GAAP earnings per share grew 6% over 2022. We generated $73 million in cash from operations, the highest in our industry, and we paid back 97% of our free cash flow to shareholders through $44 million in share repurchases. Our strong execution on the strategic priorities set out at the beginning of 2023 provides a robust foundation for continued success in 2024. This year, we expect to grow revenue. To do so, our 2024 priority areas are as follows. First, we will strive to increase revenue per customer by growing the number of customers using the combined factory and network offer, and second, we will drive larger orders in all services. Success in these priority areas will lead to improved financial performance and continued shareholder value creation. Specifically, we're focused on driving growth in users of the combined offer, which will drive revenue through both the factory and the network. This number increased substantially in 2023, and I expect significant growth in 2024. Our go-to-market teams are aligned and well-equipped to promote and sell the combined offer to existing and new customers. Next, our emphasis on driving larger orders through both the factory and the network includes a shift from prototyping to production, which is a larger overall market. Specifically for injection molding, which has the highest revenue per customer of our four services, we will focus on satisfying the needs of the production customer. With its lower price, longer lead time offer, the ProtoLabs network generates higher average order value than the factory, and we will expand on these larger orders through the network in 2024. These areas of emphasis highlight the importance of increasing customer share of wallet. Since our initial public offering in 2012, our primary focus was to add new customers while continuing to serve our existing customers in their times of need. While this is still important, our focus with the combined offer is to go deeper with larger strategic customers and serve more of their custom parts needs as a true prototype to production single source supplier. In 2024, we will also continue to invest in our most important internal resource, our people. ProtoLabs employees enable us to continue revolutionizing manufacturing and accelerating innovation. ProtoLabs is a great place to work and we will improve the employee experience through continued investments in areas like talent acquisition, training and development, and total rewards. Just a few weeks ago at our annual kickoff meetings, we introduced a fully refreshed set of company values for the first time in over 10 years to help guide us into the future. We look forward to doing more for and investing in our amazing talent at ProtoLabs this year and beyond. We are encouraged by our strong finish to 2023 and believe we have the right strategy and priorities in place for continued success. Resilient execution in 2023 enabled us to meet our commitments and take share in the market despite headwinds from manufacturing contraction. We remain focused on becoming the strategic partner to the world's innovators, maintaining our industry-leading financial model, and increasing value for our shareholders. I want to thank our more than 2,400 employees for delivering excellent 2023 results and positioning the company for success and value creation in 2024 and beyond. Thank you for your continued commitment to ProtoLabs. Dan will now provide fourth quarter and full year financial information as well as our outlook for the first quarter of 2024. Dan?
Dan Schumacher: Thanks Rob and good morning everyone. Our financial results begin on slide 13 of the slide presentation. Looking first at fourth quarter performance, revenue of $125 million grew 7.2% year-over-year in constant currencies. ProtoLabs network revenue was $22.5 million in the quarter, up 49% in constant currencies. Looking at revenue by service on slide 15, fourth quarter injection molding revenue grew approximately 14% year-over-year in constant currencies as we saw an increase in larger parts orders. CNC machining grew 4% year-over-year in constant currencies driven by continued growth through ProtoLabs network. Fourth quarter 3D printing revenue grew 3% year-over-year in constant currencies. Sheet metal revenue declined 8% year-over-year in constant currencies. Fourth quarter non-GAAP gross margin decreased 70 basis points sequentially to 45.3% primarily due to lower factory volume. Fourth quarter ProtoLabs network non-GAAP gross margin was 33.6% compared to 33.7% in the third quarter. Fourth quarter non-GAAP diluted net income per share was $0.46, adjusted EPS came in higher than our guidance midpoint of $0.30 for several reasons. First, higher than expected volume. Revenue came in at the top end of our guidance range. Next, gross margin exceeded our expectations in the fourth quarter due to do largely to stronger than anticipated revenues and injection molding, one of our higher margin services. Lastly, our fourth quarter selling, general and administrative expenses were below forecast driven partially by lower incentive compensation. Turning to cash flow and balance sheet highlights on slide 16. Cash flow from operations was $17.2 million and we repurchased 4.9 million of common shares in the fourth quarter. On December 31st, 2023 we had $110.8 million of cash and investments on our balance sheet and zero debt. Now let's look at some of these results for the full year which begin on slide 18. Total revenue increased 5% over 2022 in constant currencies and excluding Japan. At $504 million, total revenue surpassed $500 million for the first time in our history. Both factory and network gross margins increased year-over-year. However, total company GAAP gross margins were flat at 44.1% due to a higher mix of network revenue. 2023 Protolab’s network revenue of $82.6 million grew 69% year-over-year in constant currencies and network gross margin for the full year was 30.6% compared to 25.8% in 2022. We served 53,464 customer contacts in 2023 and revenue per contact increased 9% over 2022. 2023 non-GAAP earnings per share increased 6% to $1.59 and we generated $83.2 million in adjusted EBITDA. Cash generated from operations in 2023 was $73.3 million up from $62.1 million in 2022. Our business model generates industry-leading cash flows allowing us to invest in organic growth and return capital to shareholders. During 2023 we paid 97% of our free cash flows to shareholders through share repurchases. Turning now to forward-looking guidance. We will continue to guide on a quarterly basis due to the quick-turn nature of our business and continued macroeconomic uncertainty. Our guidance for the first quarter of 2024 is outlined on slide 23. We expect to generate first quarter 2024 revenue between $120 million and $128 million. This guidance reflects a softer start to 2024 due to December and early January order levels being lower than historical periods. However, recent performance has been more in line with historical trends, and our guidance assumes that will continue through the end of March. We expect foreign currency to have between a $500,000 and $1 million favorable impact on revenue compared to the first quarter of 2023. Moving to earnings guidance, we anticipate non-GAAP add-backs in the first quarter to include stock-based compensation expense of approximately $4.5 million and amortization expense of $1 million. We currently estimate a non-GAAP effective tax rate of 21% plus or minus 50 basis points in the first quarter. In summary, we expect first quarter non-GAAP earnings per share between $0.26 and $0.34. That concludes our prepared remarks. Operator?
Operator: Thank you. [Operator Instructions] And our first question comes from the line of Brian Drab with William Blair. Please proceed with your questions.
Brian Drab: Good morning. Congratulations on a really solid year in a tough environment.
Rob Bodor: Thanks, Brian.
Brian Drab: First, there is no significance in the terminology changes. Now you are using customer contacts. Previously, it was a longer term. You need product developers, engineers served. I guess it is just being more efficient with words. Is there any difference in those terms?
Rob Bodor: Thank you for the question. I think what we are looking to signal is that what we are seeing is while in the past our customers were primarily engineers and product designers given that our business was primarily a prototyping business, you can see that a lot of our growth in 2023 came from increase in production. Customers are using us more deeply for higher volumes and taking the prototyping business that they have been used to using us for and converting that into production, staying with us through the product lifecycle. We just found that naming all our customers product designers is probably not correct anymore. That is why we made that change.
Brian Drab: That makes sense. That is a good segue into my next question. When you look at the revenue per contact, this year is up 10%. I guess that is mainly attributable to your success going deeper with these enterprises, going deeper with the big customers and doing more production work. Is that a trend that we should continue? As you are looking into 2024 now, do you expect that you could grow that revenue per contact substantially again in 2024?
Rob Bodor: Yes, absolutely. I am very pleased with our increase in revenue per customer in 2023. I think it is a strong indication of the success of our strategy. I want to recognize the work of our sales and marketing teams in terms of how they have engaged with our customers to make sure that they are aware of our broader capabilities in terms of production. The investments that we have made into expanding our offering both in the factory and in the network now allow us to work with our customers outside of prototyping. We served 53,000 customers last year. Our customers are used to partnering with us and relying on us for their prototypes. Now we can transition the prototyping work into production work. We are starting to see good traction in that. We will continue to report average revenue per customer and are driving to increase that number.
Brian Drab: Okay, great. I just want to be really clear on this or make sure that I am clear on it. You said in the guidance that you are assuming -- I think what you are saying is that you saw the typical seasonal softness in December and January and your guidance assumes that you don't see the typical seasonal uptick in March. You're kind of assuming that that seasonal softness persists through the first quarter. Am I understanding that right?
Dan Schumacher: Brian, this is Dan. Thanks for the question. Let me reframe. So we saw lower than historical levels starting to like mid-December and then that persisted into January and so things did not pick up at the same historical time. It was later than usual but we're happy with where the levels are now both from an order and a quoting perspective and the guidance assumes that we'll be at those levels through the quarter.
Brian Drab: So you saw a December that was lower than typical?
Dan Schumacher: Second half of December and I don't know, Brian, we were talking to customers, a lot of them were away for a longer period of time than historical both within Europe and the U.S. I don't know if that had something to do with the timing of the holidays, of where they were from their budgets as they closed the year and started the new year but it was lower than, we normally see a seasonal dip but that dip was lower than what it had been in prior years. Okay, now we're back on this.
Brian Drab: Yes. Okay, okay. And then just in closing for me, I just want to say, at the beginning of the year when, we were talking about growing the injection molding business for the full year and you've just done $45 million in injection molding in the fourth quarter, I think a lot of people were skeptical. So, congrats on achieving that goal. It seems like a stretch goal at the time but I'll talk to you more later, thank you.
Dan Schumacher: Thanks, Brian.
Operator: Our next question is from the line of James Ricchiuti with Needham and Company. Please proceed with your question.
James Ricchiuti: Hi, thanks. Good morning. I just want to go back to the way Q4 started off. We talked about some slowing in activity in the early part of October and then, clearly things picked up. And I'm just wondering, as you're shifting more toward production-oriented business, it sounds like, you're seeing some almost similar trends in the current quarter. Is there any change in the linearity of the quarter with respect to, what you're doing on the production side of the business?
Dan Schumacher: Yes. So, thanks for the question, Jim. This is Dan. Let me kind of walk you through what we were seeing. When I talked on the last quarter call, what we were seeing was softness specifically in CNC is what I pointed out. But in the fourth quarter, as you could see from the results, we had really strong injection molding orders and larger orders in the quarter, right? As we closed out the quarter, as I was just talking to Brian about that holiday dip was lower than it normally had been, and then it was slow to kind of rebound into January. In terms of, like, seasonality and what we're seeing, for sure, as we get some of these larger orders coming in, that can disrupt maybe what some of the seasonal trends are as we see strength in that area. Let me flip it over to Rob to talk a little bit about, what we're seeing in those production orders.
Rob Bodor: Yes. Yes, thanks, Dan and Jim. I mean, I'm pleased with our performance in Q4 overall with the growth we saw there and in 2023 as a whole, right? And I'm particularly glad that we could, have that kind of performance in the presence of contraction in the manufacturing sector, right? And I think we attribute it to our ability to have done more production work with our customers across all of our services and seeing that growth. But in particular, in injection molding, I think that's really been successful for us with more and more of our customers to be able to do those larger orders. And as I look forward, I expect that we will have more and more of those larger orders, and that'll help to create more of that consistency, right, as we look at the business going forward.
James Ricchiuti: The other thing I'm struck by, Rob, is I feel like this is the strongest growth you've shown in the U.S. for some time. And I assume that's, what you're describing as really is driving to accelerating growth in the U.S., which, frankly over the last year or so, has been the growth rate's been somewhat tepid. And it picked up quite a bit, it seems like, in the U.S.
Rob Bodor: Yes, I'm very pleased with the fact that we're getting traction with our customers as a result of this strategy. So, thank you.
James Ricchiuti: Yes, if we think about your, last question for me, but think about what you're trying to do in terms of driving more production business through the company, through the network. Where are you seeing the most traction in terms of verticals? You highlighted some use cases. So, I'm just thinking in general, if any one vertical, market vertical, is more receptive to this.
Rob Bodor: Yes, in the fourth quarter, we saw strength with aerospace and with automotive, kind of per some of the examples that I shared in the use cases and the prepared remarks. And medical continued for us.
James Ricchiuti: Thanks a lot.
Rob Bodor: Thank you.
Operator: [Operator Instructions] The next question's from the line of Greg Palm with Craig Hallum Capital. Please proceed with your questions.
Greg Palm: Hey, good morning. I'll offer my congratulations as well to a good end to the year. I'm curious, as we think about the guide for Q1 and specifically sort of the bridge from Q4 to Q1, revenue at the midpoint, flat to down a little bit, but profitability, whether it's EPS or implied EBITDA, down pretty substantially from Q4. So, can you just maybe help us understand, is that higher OpEx, is that lower margins, maybe some of the puts and takes associated with that?
Rob Bodor: Yes, great. Thanks for the question. And so, a couple of things are going on quarter-over-quarter. One, we do expect gross margin to come down quarter-over-quarter. There's a couple reasons for that. First, we expect to have a higher mix of the network business in the first quarter compared to the fourth quarter. When I talked about that blip that impacted the factory business more, that softening at the end of December, start of January, impacted the factory business more than it impacted the network business. So, we're going to have a headwind from a mixed perspective. Second, you mentioned the volume. We expect the volume at the midpoint to be down quarter-over-quarter because of that softness we saw. In addition, because the factory business is going to be a little bit softer, their margins are going be a little bit lower from fourth to first quarter because of not having as much volume to absorb those costs. And then last, SG&A will be up quarter-over-quarter. We have some timing things as we started out the year. Some of those are accounting-ish, dealing with incentive comp in terms of payroll tax accruals, vacation accruals, those type of things, as well as increased investment in the network as it grows. Those things create a headwind quarter-over-quarter in SG&A.
Greg Palm: Okay, that is helpful, color. And Rob, I think I heard you mention in the prepare that you do expect revenue growth on a year-over-year basis. I'm not sure if I missed it, but I didn't hear any commentary on whether you think that profitability, whether it's EPS or EBITDA, will also grow on a year-over-year basis. So do you care to comment on that?
Rob Bodor: Sure, yes, thank you. So yes, we're coming off of a strong year, right, in which we grew despite challenging economic conditions with contraction in the manufacturing sector. We were able to take share last year. I'm very pleased with that. And we expect to do that again in 2024. I'll let Dan talk, so on the revenue side, I'll let Dan respond regarding EPS.
Dan Schumacher: When I talked about on the call in terms of how 2023 played out, we had improved the growth margin, both in the factory and in the network. From a factory perspective, we're deploying more and more automation into our factory. We have more robotics that are going on within our factory that allow us to vary our labor as volume comes through. On the network side, we also improved our margin in 2023, and that's through improvements in our AI-enabled pricing algorithms that we have within the network. We expect to do that in a similar basis, Greg, next year. Right, so if there's more automation we can bring into the factory, we have more productivity projects in the factory to make them more efficient. And we also expect on the network side that we're going to continue to work on those AI algorithms to continue to maximize the margin we have in this environment. Now, that being said, if you noticed last year, our overall margin was flat. So we do expect the network to grow more than what the factory is in 2024. And depending on how that plays out, will kind of tell us if our margins are going to stay flat or not. So we're driving to offer the solution to the customer that they want in this period of time. And we feel that is the business model that is the best way for us to grow. But that may have some impact on margin as we go through 2024.
Greg Palm: Okay, understood. And then lastly, as it relates to kind of this broader strategic initiative, what kind of data or metrics are you tracking that gives you some sort of success, a sense for the success of this combined offering and the strategy associated with that? I mean, like, what's more important? Is it growing new customers? Is it growing wallet share with existing accounts? How do you view that?
Rob Bodor: Yes, great question. So of course, we want to grow both our new customers and our existing customers. And we've got initiatives in place and our salespeople are focused and our marketing teams on really on driving both of those. But what I would say from an existing customer standpoint is, we've got the largest customer base in our industry. Last year, we served 53,000 customers from individual entrepreneurs to the Fortune 500, right? Within the Fortune 500, we serve 85% of the companies in our target industries. And so we've got a great customer base of innovative customers. I think there's a tremendous opportunity for us to grow and expand within our existing customer base. Right? Our customers are used to relying on us for their prototyping. They've been telling us for years that they'd love to use us more and we just haven't had offers in the past. We've now put together between investments in the factory and the network offerings that serve them for production that allow them to go from prototype through production through end of life that allows them to use us for quantity one or quantity a million, right? We haven't had that capability in the past. And I think there's just tremendous opportunity for us to grow with our existing customers. And so what we're measuring to make sure that we're on top of that, I mean, we talked about the number of our customers, we talked about average revenue per customer. We also talked about tracking, the number of customers that are using the combined offerings, right? Buying from both the factory and the network. And there's a number of other things kind of internally that we look at to make sure that we're making this progress. But I'm quite pleased with the progress that we showed last year along these lines.
Greg Palm: At some point, some of those KPIs associated with, number of customers, using, either or both of the services, is that something that you might start disclosing?
Rob Bodor: Yes, great. The answer is yes. I think, in this industry, in this space, right, being able to, serve a customer more, get more of their wallet share of our existing customers is going to generate a more profitable business long-term, rather than having to continue to chase the new customer every year. Of course, we're still going to grow new customers, we're doing that. But for sure, as in the future, we will share some of these metrics.
Greg Palm: Okay. Best of luck. Thanks.
Rob Bodor: Thanks. Thank you.
Operator: Thank you. We've reached the end of our question-and-answer session. This will also conclude today's conference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.
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