Greetings. Welcome to Proto Labs First Quarter 2020 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr.

Dan Schumacher, Director of Investor Relations and FP&A. Thank you sir, you may begin..

Thank you, Michelle, and good morning, everyone. With me today is Vicki Holt, our President and Chief Executive Officer; and John Way, our Chief Financial Officer. This morning, before the market opened, Proto Labs issued a press release announcing its financial results for the first quarter ended March 31, 2020.

The release is available on the company's website at Proto Labs.com. In addition, a prepared slide presentation is available online at the web address provided in our press release.

Before we begin, I would like to remind everyone that our discussion 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 results 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 within the Investor Relations of our company website for a complete reconciliation of non-GAAP to GAAP results.

Now, I'd like to turn the call over to Vicki Holt, President and Chief Executive Officer of Proto Labs.

Vicki?.

One to enhance our e-commerce platform and customer experience; and two, to improve the functionality and interconnectivity of the backend systems, which support our operations.

The benefits for ProtoLabs 2.0 as outlined in our Q4 call include improvements in the customer experience, our internal productivity, the speed and scalability of the business and expanded internal business insights.

ProtoLabs 2.0 is still extremely important to our business and we are continuing to work diligently, but our timeline would likely be slightly delayed. Many employees and other resources dedicated to this project are now working remotely.

We are focused on maintaining the same productivity the project had prior to the pandemic, but obviously we now need to work differently.

Working sessions, planning sessions and group meetings that used to be held in front of a conference room whiteboard are now online using video conferencing and other tools to facilitate information gathering, collaboration and decision making. We continue to make progress on this project and we will keep you informed as we progress through the year.

We remain confident in the long-term profits of our business and ProtoLabs 2.0 will increase our position as the leading digital manufacturing source for rapid prototyping and on-demand production.

In the near term, we will push forward on ProtoLabs 2.0 while continuing to manage through the COVID-19 pandemic, ensuring employee safety while continuing to delight our customers. The future holds uncertainty and we are preparing contingency plan for a range of different scenarios.

Our business model has generated strong cash flows over the years and we have a very strong balance sheet with sizeable cash and investments and no debt. We are focused on managing our business for the long-term as we serve all our stakeholders, including our employees, our communities, our customers, and our shareholders.

The decisions we make and the levers we pull will ensure that Proto Labs will continue to be a strong viable company long into the future. With that, I'd like to turn the call over to John..

Thank you, Vicki. The Q1 financial results begin on Page 12 of our presentation. Revenue in the first quarter was $115.1 million, an increase of $1.7 million, or 1.5% over the same quarter in 2019.

Foreign currency had a slightly larger negative impact than we expected representing a $600,000 headwind in the quarter, resulting in constant currency growth of 2%.

Turning to product developer growth, our first quarter unique product developers served increased to 20,876, or 1.5% growth compared to the prior year and in line with our overall revenue growth.

Gross profit for the quarter was $58.1 million, a decrease of $760,000 over the comparable quarter of the prior year and the sequential increase of $1.5 million. Gross margin was 50.5% relatively flat with the 50.6% we reported in the fourth quarter of 2019. This compares with 51.9% in the first quarter of last year.

Year-over-year gross margin compression of 140 basis points in the first quarter was due to the following factors. Our annual merit increase and general wage inflation resulted in a 90 basis point headwind in Q1 versus – versus Q1 of 2019.

We invested in our operations and equipment to support the business, particularly in 3D printing in Japan resulting in a 70 basis point headwind in the quarter. These headwinds were offset by improvements in our gross margins in our New Hampshire operations resulting in a 30 basis point benefit to the overall gross margin.

Moving to Page 13, our non-GAAP operating expenses totaled $38.4 million or 33.3% of total revenue in the first quarter of 2020, up $2 million from Q1 of 2019. Sales and marketing was 15.3% of revenue in the quarter compared to 15.9% in the prior year.

The reduction in sales and marketing was primarily driven by lower trade show and other marketing activity as well as lower travel and entertainment during the quarter.

The travel restrictions have provided our marketing team the opportunity to express their creativity by developing a virtual trade show as a tool to continue to educate potential and existing customers on our capabilities. You can visit our virtual trade show booth in the webinars and trade shows section of our website at protolabs.com.

Research and development expense increased to 7.4% of revenue compared to 6.7% of revenue in the prior year. These investments primarily related to an increase in our external contractor expense associated with ProtoLabs 2.0 as we continue to advance this important project.

General and administrative expenses were 10.7% of revenue compared to 9.4% in Q1 of 2019 and 10.2% in the fourth quarter. The increase was predominantly related to the recording of an estimated potential bad debt. With the uncertainty created by the COVID-19 pandemic, many businesses are or will be facing cash flow challenges.

As a prudent measure to cover potential exposures, we're recording an additional allowance for doubtful accounts of approximately $1 million in the first quarter. GAAP operating income was $16.8 million or 14.6% of revenue in the first quarter. Adjusted non-GAAP operating income was $20.6 million, or 17.9% of revenue.

On a GAAP basis, our tax rate was 21.8%, up from 21.1% in the first quarter of 2019. The GAAP tax rate is influenced by a number of factors each quarter with the mix of business between countries and states driving the largest portion of the increase this quarter.

On a non-GAAP basis, the tax rate was 21.9% in the first quarter compared to 21.3% in the prior year. On a GAAP reporting basis, net income totaled $14 million resulting in diluted earnings per share of $0.52.

Adjusting for the after-tax cost of stock compensation, amortization of intangibles and unrealized foreign currency gains, our non-GAAP diluted earnings per share in the quarter was $0.61, representing a $0.08 per share decrease from the prior year and the sequential decrease of $0.02 per share.

In summary, our financial performance this quarter was relatively strong compared to many other companies operating in this environment. Our revenue held up through the quarter with the assistance of some COVID-19 orders allowing us to deliver revenue in line with our guidance.

We managed our costs in line with the volumes in each facility and realized the financial benefit from lower trade show and other travel spending resulting in earnings above our guidance range. Now turning to cash flow, our business continues to produce strong cash flows and we have a very strong balance sheet with no debt.

We generated $22.4 million in cash from operations during the quarter. Our cash from operations is seasonally lower in the first quarter each year, primarily driven by the timing of payments of certain liabilities, including annual incentive payments.

Capital spend in the first quarter was $13.4 million, including investments in ProtoLabs 2.0 additional equipment and facilities projects in Europe. We also returned capital to shareholders by repurchasing $12 million or 161,000 shares of common stock at an average price of $74.18.

Given our strong cash generation and solid cash position, we continued our opportunistic stock buyback strategy under a 10b5-1 plan through the end of the first quarter and into April. We have $35 million remaining under our buyback program and anticipate taking a conservative approach as we continue to deploy our opportunistic strategy.

We ended the first quarter with the cash and marketable securities balance of $167 million. Turning into our outlook for the second quarter. We have historically provided quarterly guidance.

Given the uncertainty in the market, we feel it’s best to provide information on what we have seen to date and provide additional details as to how we are managing the business rather than to provide formal revenue and earnings per share guidance.

Starting with April ordering and revenue trends to date, as Vicki described, ordering trends began to decline in the third week of March. Shortly thereafter, COVID-19 related orders started to ramp up. In total, we have received approximately $9 million in COVID-19 orders and will recognize approximately $5 million of revenue on these orders in April.

These orders combined with the increase in production orders have resulted in projected April injection molding parts revenue growth of approximately 25% and overall injection molding growth of approximately 15%. Collectively, our other services are down approximately 20% in April compared to the prior year.

The net result for April is a year-over-year revenue decline of approximately 5%. Excluding the COVID-19 orders, the April revenue decline would have been approximately 15%. We are receiving COVID-19 related orders in each of our regions. However, the majority of these orders are in the Americas.

April revenue in the Americas is approximately flat or down 15% without the benefit of the COVID-19 orders. On a per day basis, Europe is down approximately 15% and Japan is down approximately 20% compared to April 2019. As we turn the calendar to May, we have a backlog of COVID-19 orders of approximately $3 million that are expected to ship in May.

We are still receiving some COVID-19 orders, but at lower rate than earlier in April. The current market dynamics create significant uncertainty, particularly for the on-demand quick turn nature of our business.

As we look to the expense components of the income statement, we have prudently managed costs since the COVID-19 outbreak began and we will continue this practice. We are managing our cost structure in response to the revenue levels in each of our services.

Our manufacturing – in our manufacturing facilities, we continue to adjust our variable costs to the corresponding volumes by ensuring appropriate and agile staffing levels given the current and expected future ordering trends, including managing our contractor and overtime hours, shifting employees to areas of need and deploying shorter work weeks among other labor management activities.

With the enhanced CARES Act and governmental support programs in other geographic regions, we're focused on keeping our employees employee compensation as close to whole as possible.

Our business is built to handle a certain amount of volatility, however, the magnitude of the decline in certain areas of the business may be greater than we can affectively flex in the short-term. Our employees are our greatest asset and our goal is to keep our dedicated employees working and treated fairly during these uncertain times.

With respect to our administrative costs, we have scrutinized many areas essentially eliminating all discretionary spend including travel, overtime and hiring among others. And we will continue to prudently manage costs as our top-line uncertainty persists. Our incentive compensation will adjust based on market conditions and their performance.

In addition, in support of our employees in select locations who have been impacted with shorter work weeks or furloughs, the executive leadership team and the board of directors has led by proactively taking reductions in our base salaries in Q2.

We remain committed to ProtoLabs 2.0 and we will continue to invest to drive that projection – that project to completion. For your modeling purposes, the largest lever for Q2 is incentive compensation. The remaining costs are expected to be slightly below Q1 levels. We are managing the business for the long-term.

Proto Labs is well positioned with our strong cash flow and balance sheet to weather this crisis as we managed through the uncertainty. We are currently evaluating, monitoring and adapting to the ever changing landscape with the objective of being in a strong position to capitalize on the opportunities as the economy recovers.

I'll now turn the call over to Vicki for some final comments..

respond, recover and thrive. We are currently responding to the COVID-19 pandemic with our employees, communities and customers in mind.

We are also keenly focused on the long-term and based on conversations I've been having with business leaders, it is clear this pandemic is causing manufacturers to consider changes going forward, which present favorable conditions for Proto Labs.

This pandemic is going to accelerate the digitization of manufacturing and the openness and preference manufacturers have to conduct business through e-commerce.

In addition, manufacturers are going to be taking steps to strengthen their businesses by adapting supply chains to allow more flexibility and reduce logistical challenges of long supply chain. As an e-commerce digital manufacturer, we are very well positioned to help our customers navigate these changes in their business in the future.

Not all companies get the third stage following a Black Swan event and have the opportunity to thrive in the future environment. I believe Proto Labs e-commerce, digital manufacturing business model, our agility, our culture and our people position us to thrive in the new world.

We will continue to respond and make adjustments to our costs where we can to manage our business in the short-term, but we will not sacrifice our opportunity to recover and thrive as we emerge from this crisis. This concludes our formal remarks. Now, John and I will be happy to take your questions.

Michelle, can you please open the lines for Q&A?.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brian Drab with William Blair. Please proceed with your question..

Hey, good morning John and Vicki and I'm just opening by saying it's incredible what you guys are doing to support the fight against the pandemic and thank you for doing that..

Thanks, Brian..

Thanks, Brian..

Yes, and now I have to shift asking you questions about financial modeling.

So, is there any way that you could help give us some insight into – some more insight into what gross margin is going to do in the second quarter or in April? What are you seeing because it seems like you have about 10% to 15% of total revenue at no expedite fee? And I know in general, typically about half or more than half – a little more than half of your orders go out with an expedite fee, which really can support gross margin.

And then of course, with the balance of the business, maybe down 20% outside of COVID related activity, there's some de-leveraging there.

So just any help on gross margin in the near-term?.

Yes. Brian, I think, as we're looking at it, all your points are very valid and things that we continue to manage through. I think that the biggest variable that that we're dealing with is volumes and trying to predict what volumes are in each of the individual facilities and adjust our labor to match those volumes.

I think, as I said in my prepared comments, our business is built to handle a certain amount of volatility and we can flex. I think in periods of declining volumes, it's a little harder for us to adjust those costs just on a relative percentage basis.

So, I think, as we're looking at gross margins and with the potential of revenue being – a little bit lower gross margins likely will have a little bit of pressure on them in Q2..

Okay. .

But….

And you'd pay a little bit sequentially versus a lot. I mean, I guess, a little bit makes me feel like you're talking about 100, 200 basis points I would have thought, maybe it's beyond that..

It really will kind of depend on where that volume ultimately comes in..

Yes..

Volumes are in the range where we were in April. Your 100, 200 basis points is probably about right, steeper than that. It will likely have a little more pressure than that. But the top line is going to be one of the biggest drivers to what our gross margin percentages will be..

Okay. And then I think – I think you said that you saw customer activity driven by customers building some inventory as we've seen across the industrial world.

Have you seen that tailwind dissipate toward the end of April? Or are you still seeing the customers building -- building inventory?.

Yes, we've seen a little of anticipate as we have gone through April, at the same time of course, the COVID-19 orders were strong in April. So it offset some of that and we have that strong injection molding parts, revenue growth year-over-year in April as a result of that.

But, yes, we did see some of that, just build up inventory from the other segments kind of slow down..

Okay. And then I'll just ask one more for now, but – that on the website right now you're offering – you've been offering COVID related orders to go out without an expedite fee up to April 30th.

Are you going to continue that beyond April 30th? Or how do you perceive that playing out?.

Yes. We're not planning to continue it into May..

Okay. Okay, thanks. I'll get back in line and good luck..

Thank you..

Thanks, Brian..

Thank you. Our next question comes from the line of Greg Palm with Craig-Hallum Capital Group. Please proceed with your questions..

Yes, thanks. Good morning everyone. Hopefully everyone is doing well and yes, I'll repeat it’s great to see everything you’re doing to help with COVID-19 here..

Thanks, Greg..

So I guess I'm still – I just want to reconcile some of the comments here again. So injection molding revenue was down slightly in Q1, but up significantly in April. I mean, it's sort of implies that COVID-19 contribution will be weighted much more heavily to Q2 versus Q1. And I think that's what you implied.

But can you confirm that? And I guess, if my math is right only about $1 million of COVID revenue was recognized in Q1.

So was the remainder of the offset from the declining services in end markets from stockpiling? Or what else am I not taking into account?.

Yes, so I will say the most of the COVID impact is falling into Q2. There was a little bit in March, but – and since – and it is mostly in injection molding. So, as you know, we started seeing the big impact in the United States kind of in the – in early March time – kind of timeframe and injection molding generally has some longer lead times to it.

So as you get a tool made and start shipping parts, most of that is going to be falling into April. We have seen a slowdown in the number of new COVID programs coming into our system.

So that's why it's so difficult to project what kind of tale this is going to have as a lot of the medical community has spent a good part of this stay at home period of time to build up their response and get protective – personal protective gear and ventilators and all the medical supplies they need in place.

So I'm not sure what kind of tale this is going to have, which is what makes it really difficult for us to project going forward in revenue this quarter..

Yup. That makes sense. I mean, on that, can you talk at all about new customer growth? I mean, my assumption is, you know, or at least you've said you've gained customers because of everything going on for these COVID-19 projects.

But you know, I also feel like these recent events could significantly increase the awareness for your digital on-demand capability.

So, I mean, in terms of leads, inbound interest from new customers in non-healthcare industries, I mean, are you seeing any significant changes or is it too early to think about that?.

So let me answer this in two ways. First, we have a very strong position in the med device market as you know. So it represents almost 29% of our sales revenue. So we've got very strong awareness in the medical device community. And many of these COVID-19 orders were coming from companies that we already done business with.

Now, so that being said though, I think your point is well taken. This pandemic and our response has been very, very visible in social media. And I think as companies in other end use verticals begin grappling with what they need to do to shore up their supply chains.

Proto Labs has made a significant step in working to change that perception that we're a lot more than just prototyping and we've been working on that for a long time. But this – the visibility of this pandemic is really helping people realize we are a lot more than just prototyping.

We make a lot of very high quality quick turn approaches to production parts as well. So will that help us? We'll just have to see how that progresses as we go forward..

And you might have been alluding to this but as it relates to kind of that on-demand, high volume manufacturing service that, you know, I think you've been trying to push for the last few years. I mean, I think, you've completed several very, very large scale projects for COVID.

So, I mean, I guess, is that one service that you think might see increased adoption from some of your customers going forward now that they know of your capabilities and how successful at least some of these recent projects were?.

Yes, I don't know for sure, but we are sure going to work to try to leverage that because as I mentioned, I believe as a result of this crisis, manufacturers are really taking a look at their supply chains. And they're trying to put in place things that improve their flexibility and really deal with those long supply chains that are at high risk.

We can help them. And I think that the visibility we've gotten in this pandemic really helps the manufacturers understand the role that we can play as they work to solve those problems in their business..

Yes, that's great color. I'll leave it there. Really impressive stuff. So congrats again and good luck going forward..

Thank you..

Thanks, Greg..

Thank you. And our next question comes from the line of Troy Jensen with Piper Jaffray. Please proceed with your question..

All right, thanks. First of all, congrats on the great results and thanks also for all the efforts you guys are doing with the COVID here..

Thanks, Troy..

Thanks, Troy..

Yes. So I appreciate all the incremental information you guys gave us here April over April. And I apologize if this question was asked. But can you talk about a lot of this COVID business, Vicki, is what I would call bridge manufacturing, right, just kind of helping for serge capacity and whatnot.

So your thoughts on just the strength of what you're seeing right now in your COVID pipeline?.

Yes. So that is the – that's the challenge we've got. So some of it's bridge, but some of it is actually producing the parts, so some of the applications were producing tens of thousands of parts that go into equipment into medical device space. So it's not all bridge tooling.

In some cases it is, but it's not all bridge tooling, some of it is actually the final parts that and they're not planning to make an additional tool. But, as I said, we have started seeing a slowdown in the number of new COVID opportunities that are coming into our COVID-19 customer response team. And we keep a database of all of these.

And as they come in as an opportunity and it has they moved through the process of design and whether in fact they're ordered and closed. So we have a lot of opportunities still in that pipeline, but the number of new ones coming in have slowed significantly. So that's why it's difficult for us to forecast the tail, that's on this serge..

All right. Understood. I know it's tough to figure out. I'd be curious to know your – just your thoughts too on the lead generation. I know you just get on it in the last question, but it's not that you guys got a lot of leads through sitting in all the conferences that I'd always seen you guys attending.

And given there seems to be none of those, just curious how much of lead generation kind of came through those means..

Yes. We -- so the other thing that's been awesome about this particular situation is the amount of social media attention that we've been able to get from that and leverage from that.

And we've seen a lot of comment and activity in social media that's outside the medical device market in other target markets where our value proposition can really resonate.

So yes, like I said, we are – we're focused on managing this thing through the short term, but also making sure we position ourselves on the back end to be a solution for companies as they begin to look at how they might want to adapt their business going forward.

And the other thing that – it's a subtle point, but we're all working remotely now, right? And historically manufacturers have been a little bit more hesitant in the B2B world to do business over e-com. They're learning pretty quick. E-commerce can be very efficient and very effective.

And that's also very positive for us as we always have been working to change the behavior of manufacturers, so they can take advantage of the unique disruptive business model that we have here at Proto Labs. So those – both of those things are kind of helpful for us going forward..

Yes, yes, very fair. How about a question for John? I would be curious if you could remind us I'm not expecting granular information here, but just your vertical exposure. I mean, obviously, healthcare I believe is your biggest, but print order or auto and aerospace and consumer products and just a little help there would be great..

Yes. Medical is about a quarter of our overall business kind of in that mid-20s range. Computer electronics is that mid to upper teens. And then we've got a bunch that are hovering around that 10%, general manufacturing, industrial machinery and equipment aerospace and then automotive is kind of in the mid single-digits. So those are the new ones..

Perfect. And that’s it for you guys. Thanks again for all the work. And good luck as you're going forward..

Thanks, Troy..

Thanks..

Thank you. Our next question comes from the line of Jim Ricchiuti with Needham and Company. Please proceed with your question..

Thank you. Good morning.

I'm wondering if with respect to the COVID related business from your traditional medical customers, did you see any of them diverting resources for COVID? And I guess where I'm going with this is I'm wondering as that business, the COVID related business begins to slow down, if you might be getting to see if this is true, I'll pick up from that traditional medical related business that you normally would be seeing..

Yes, I can't really speculate on that. We've always been had very strong partnerships with the med device space. I think there've been very, very pleased and complementary of our ability to respond to their needs at this time. So, our relationships with our customers remaining very, very strong.

So, I would view that as a positive, but we'll just have to see as this thing progresses. As you know, outside of many of these COVID related applications with the medical device community, they're seeing declines in their business in other areas because there's – the non – the elective surgeries and elective processes are just not taking place.

So whether that impacts some of their spending going forward, I don't know..

Fair enough. A couple of other questions and I'm curious on the sheet metal side of the business and I think in the presentation it would – where you may have called out a 12% increase.

And I'm just wondering what was driving that and maybe are we seeing, beginning to see a change there in that portion of the business, which is obviously had some challenges..

Yes, we have a pretty easy comp there because our first quarter was pretty weak. But we are seeing some improvement in – in how that business is going and how our sales team is moving. But that business is not getting – as we mentioned that business is not getting the benefit of COVID the same – COVID orders the same way injection molding is. So….

Yes, Jim, I think the way I would look at it is our sales resources and everything that we've been talking about and developing was gaining traction and then COVID came along and disrupted it. So, we were making nice progress and that's all thrown into uncertainty with everything else as we're managing through..

Okay. And then two final questions, I'll jump back in the queue.

The production parts business, I'm wondering if you're seeing any change in behavior from some of your traditional competitors and these may be machine shops, injection molding shops that are more aggressively pursuing business now just in light of this unprecedented downturn that we're seeing in the economy so rapidly..

No, we have not seen that today. And as you know, we're a little bit different than some of those companies. And so, they don't really have the capability in injection molding to respond as quickly as we can, so where speed is important. There really is nobody as fast as we are there.

So haven't really seen anything there and haven't really seen much in that we're aware of on the machining side either. But that business has seen quite the decline. We mentioned that outside of injection molding as we looked at April year-over-year, the rest of our services are down about 20%..

Okay. And lastly, just 2.0, a little bit of a shift out for understandable reasons.

I'm just wondering, is there – can you put anything more of a timeline to that? What kind of a delay might we be looking at?.

So we put the word in there slightly because we're not talking years. We're talking months kind of timeline and it will really depend. We have to be able to – is it a growing – first in Europe we have to be able to get a team in Europe to manage hypercare and that approach there. So we've got to be able to travel and get some folks over there.

So we'll see how the travel restrictions progress as we go through..

Okay. That's it. And thanks for all the good work on COVID. Thank you..

Thank you..

Thanks, Jim..

Thank you. Our next question comes from the line of Ben Rose with Battle Road Research. Please proceed with your question..

Yes. Good morning John and Vicki and also I want to offer my congratulations to you for really stepping up during this crisis and doing a lot of great things. You would put out a press release just before at the end of the quarter or just before reporting the quarter dealing with the new metal printing initiative you have with GE.

And I thought it would be maybe appropriate just to check in with you to see how that relationship is going.

And within your 3D printing business, is there any update that you can give us regarding how metal printed parts are contributing to the growth of that business?.

So our partnership with GE on metal 3D printing is very strong. We've been a partner with them for quite some time. The press release was around acquiring what's called an X line. It is a machine that allows us to make it larger parts.

So it's just got a much larger build platform to it that allows us to make bigger parts and customers, particularly in the aerospace and satellite, space segment are looking at large – and also frankly also industrial segments are looking for larger parts. And so that's what that one is about.

We haven't got the machine yet, so we'll wait till it arrives, but we're looking forward to be able to serve our customers there. Metal 3D printing has been performing quite well, but has not really had much of an uptick with respect to the COVID-19.

So that general decline that we mentioned would apply to the metal 3D printing business as a result of the economic downturns both here and in Europe..

But I think overall as you look at it we see a lot of opportunity in metal 3D printing. And I think the ability to produce larger, larger parts is an area where that service is going. And we did produce 10% growth in our 3D printing in the first quarter despite the COVID impact and metal was a strong contributor there..

Okay. And if I may, just one quick follow up. I know you mentioned auto is still small. In the scheme of things in terms of 5% to 7%, there has been a lot of buzz around next generation product development for electric vehicles and batteries and so on.

I’m just wondering if on the margin, you may be seeing any interesting orders from some of your product design customers in that regard..

Yes, I – we do tend to – when we work with automotive tend to work on more of the innovative electric vehicle kind of side of the equation, but automotive in total in both first quarter and going into second remains down..

Okay. Okay, thank you very much and I wish you a lot of luck..

Thank you..

Thanks Ben..

Thank you. There are no further questions at this time. I'd like to turn the call back over to Ms. Vicki Holt for any closing remarks..

Thank you, Michelle. I want to thank the Proto Labs employees for their efforts in the beginning of 2020 and through these extremely difficult times. I also want to thank our customers for their continued support. We are committed to responding to the COVID-19 outbreak recovering and eventually thriving.

As I said earlier in the call, our number one priority is managing through the current crisis while ensuring our employee safety and continuing to serve our customers.

Our business is more resilient than many of our competitors in tough macroeconomic times due to our e-commerce platform and industry-leading digital manufacturing processes and infinite capacity model. Over the long-term, I am extremely confident our business model will drive great shareholder value.

We look forward to reporting to you on our progress during our next call. Thank you very much..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..