Proto Labs, Inc. New CEO Points to Large Opportunity to Improve Awareness

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Proto Labs’ new CEO Victoria Holt and CFO John Judd attended a conference in New York City this week. This was the first investor event for Ms. Holt since joining Proto Labs and only the second time she spoke to investors in a public forum. We believe it is important to highlight for investors that Ms. Holt is focused on addressing the issues that we believe are most important for acceleration in the company’s growth rate.

The company should be able to build more big-account business—and get some of the bigger customers to use Proto Labs as the preferred supplier. We believe less than 15% of Proto Labs revenue comes from Fortune 1000 companies.

She will be focused on stepping up marketing to increase account penetration. She sees the opportunity to speed up the rate of adoption of Proto Labs service at new and existing accounts. The company is implementing many new marketing tools and rolling out several new marketing programs.

In our view, Proto Labs’ most significant barrier to growth is lack of awareness. The company has only barely penetrated its addressable market (we estimate low-single-digit percentage penetration at large accounts; total company annual revenue run-rate less than $200 million with a total addressable market of greater than $6 billion). A fresh look at marketing opportunities is what the company needs most at this point in time, in our view. In addition, an effort to further capitalize on the one-of-a-kind nature of the company’s service offering through modest price increases could add a few points to the revenue growth rate.

In February, Proto Labs named Victoria Holt president and CEO, effective immediately. Ms. Holt replaced Brad Cleveland, who announced his intention to step down on October 31, 2013. Most recently, Ms. Holt was president and CEO of Spartech Corporation, a supplier of sustainable plastic sheet, compounds, and packaging solutions. Prior to Spartech, she was senior vice president–glass and fiber glass at PPG Industries (PPG $197.32) and served in leadership positions with Solutia and Monsanto Company (MON $111.76).

Mr. Cleveland led Proto Labs as it grew from $1 million in annual revenue to over $150 million today. On last quarter’s conference call, he said Proto Labs now needs somebody that has more experience running a large company. Ms. Holt has extensive experience within larger organizations, not only on the operational side, but also in finding and developing new markets. She helped grow the performance films business at Solutia from $600 million to slightly less than $1 billion over six years. She also led the turnaround of Spartech (greater than $1 billion in annual revenue) over a two-year period, driving a 73% increase in operating earnings.

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