Proto Labs Q2 Earnings Call Highlights

Key Points

• Record revenue and stronger profitability: Proto Labs reported Q2 revenue of $149.3 million, up 10.2% year over year in constant currency. Adjusted EBITDA increased to $25.1 million, while non-GAAP EPS rose 45% to $0.60.
• CNC machining and injection molding led growth: CNC revenue rose 13.1% and injection molding increased 12.9%, driven by aerospace, defense, telecommunications and larger customer orders. 3D-printing revenue declined 2.7%, primarily because of weakness in Europe.
• Full-year outlook raised: Management now expects 2026 revenue growth of 8% to 10% and projects Q3 revenue of $145 million to $153 million. The company also highlighted its European commercial transformation and continued evaluation of acquisitions.

Proto Labs NYSE: PRLB reported record second-quarter revenue as demand strengthened in CNC machining and injection molding, while management raised its full-year growth outlook and highlighted progress in its European commercial transformation.

Revenue for the quarter ended June 30 was $149.3 million, up 10.2% year over year in constant currency, Chief Financial Officer Dan Schumacher said. U.S. revenue rose 10.9% in constant currency, while European revenue increased 7.3%. The company said revenue per customer climbed 17% from a year earlier, reflecting deeper engagement with larger accounts.

“We delivered another record quarter with record revenue and strong profitability,” President and Chief Executive Officer Suresh Krishna said. He said the company generated double-digit revenue growth for the second consecutive quarter, alongside gross-margin expansion and operating-cost leverage.

Manufacturing Services Drive Growth

CNC machining, Proto Labs’ largest service line, generated 13.1% year-over-year growth in constant currency. Schumacher said the performance was driven by both volume and pricing, with particularly strong demand from aerospace and defense customers involved in space exploration, satellites and drones.

Injection molding revenue increased 12.9% in constant currency, an acceleration that management attributed to broader end-market strength and larger orders. Krishna cited telecommunications demand related to data centers as well as aerospace and defense activity. He said the company’s efforts to improve quality, customer engagement and production-oriented capabilities were supporting growth in the service.

Management said customers are increasingly using Proto Labs for a broader portion of their product lifecycle, from prototyping through production. Krishna named AeroVironment, Lockheed Martin, Anduril, Meta, Medtronic, Edwards Lifesciences and Boston Dynamics among companies with which Proto Labs has expanded or continued relationships.

3D printing revenue declined 2.7% year over year in constant currency, largely due to a 6.7% decline in Europe. However, Schumacher said U.S. demand remained strong for direct metal laser sintering, or DMLS, and multi-jet fusion, or MJF, technologies in aerospace, defense and electronics. The company is investing to add capacity in those areas. Sheet metal revenue increased 3.5% in constant currency.

During the question-and-answer session, management said network revenue was flat during the quarter. The network’s gross margin was 33.6%, improving both sequentially and year over year, Schumacher said. He added that the company aims to grow both factory and network revenue over time, based on customers’ fulfillment preferences.

Margins and Cash Position

Second-quarter non-GAAP gross margin was 46.8%, up 60 basis points sequentially and 200 basis points from the prior-year quarter. Schumacher attributed the improvement to higher margins in factory and network fulfillment as well as a favorable mix shift.

Non-GAAP operating expenses totaled $52 million, an increase of $3.1 million from a year earlier, primarily reflecting demand-generation investments and higher contractor and professional-services costs. As a percentage of revenue, adjusted operating expenses were 34.8%, approximately flat sequentially and down 140 basis points year over year.

Adjusted EBITDA rose to $25.1 million, or 16.8% of revenue, from $19.7 million, or 14.6% of revenue, in the year-earlier period. Non-GAAP earnings per share increased 45% year over year to $0.60, which Schumacher said was the company’s highest adjusted EPS since the third quarter of 2020.

Proto Labs generated $15.4 million in operating cash flow and repurchased $5 million of common stock during the quarter. It ended June with $162.9 million in cash and investments and no debt.

Europe Transformation and Leadership Changes

Krishna said Proto Labs rolled out a new European commercial structure on July 1. The company consolidated European operations into a single existing enterprise resource planning platform and legal entity, allowing customers operating in multiple countries to access its manufacturing footprint through one point of engagement.

European revenue grew 9% year over year, according to Krishna’s remarks, building on first-quarter momentum. Management said commercial changes begun late last year, including a greater focus on core industries and simplified customer engagement, were beginning to gain traction.

Still, Krishna said Europe remains a “mid-to-long-term effort” and that profitability in the region is still a work in progress. The company is seeking to improve both operating and factory costs while continuing to grow revenue.

Proto Labs hired Bernardo Parlange as chief commercial officer in May to lead sales, marketing and customer success. It also appointed Micah Roberts as senior director of global quality. The company is searching for a new chief operating officer following the July 1 retirement of former COO Mike Kenison.

Outlook Raised

For the third quarter, Proto Labs expects revenue of $145 million to $153 million, with the midpoint representing approximately 10% year-over-year growth. The forecast assumes a $400,000 unfavorable foreign-exchange impact compared with the third quarter of 2025.

The company raised its full-year 2026 revenue growth outlook to 8% to 10% year over year, supported by first-half results and third-quarter guidance. It expects third-quarter non-GAAP EPS of $0.56 to $0.64, based on anticipated stock-based compensation of approximately $4.2 million, amortization expense of $900,000 and a non-GAAP tax rate of 23% to 24%.

Management also said it continues to evaluate acquisition opportunities that could expand its production-oriented capabilities within its existing service areas. Schumacher said the company has a “healthy pipeline” of potential transactions, with the focus on returns and serving larger customers’ needs.

About Proto Labs (NYSE:PRLB)

Proto Labs, Inc is a digital manufacturing company that offers on-demand production services for custom parts and prototypes. Utilizing technologies such as 3D printing (additive manufacturing), CNC machining and injection molding, the company transforms digital CAD designs into functional parts on accelerated timelines. Its platform-driven process combines automated quoting, rapid tool generation and manufacturing execution to serve product developers, engineers and small- to medium-sized production runs.

Founded in 1999 by Larry Lukis, Proto Labs has championed the application of digital workflows to traditional manufacturing methods.

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