Proto Labs Inc Q1 FY2025 earnings call

• Started the year strong with revenue and profitability near guidance ranges, sequential gross margin expansion, and strong free cash flow.
• Hybrid model yielded positive outcomes: customers using combined offer grew >45% TTM, revenue per customer up 3% YOY.
• Marketing investments gaining traction: new messaging resonating, share of voice increased, over two million views of prototype to production campaign.
• Go-to-market reorganization yielding positive results, sales enablement tools improving customer understanding.
• Optimization of fulfillment channels: closure of German molding facility streamlined operations.
• 2025 priorities: driving growth in key indicators, leveraging streamlined structure, expanding production use cases, reinforcing core prototyping business.

First quarter revenue was $126 million, near the upper end of guidance. Revenue fulfilled through Protolabs Network was $26.3 million, up 11.5% in constant currencies. U.S. revenue was down 1.2% YOY; Europe revenue was flat in constant currencies. By service: CNC Machining grew 6% YOY; Injection Molding declined 7% YOY but up 7% QoQ; 3D Printing down 6% YOY; Sheet Metal up 19% YOY. First quarter consolidated non-GAAP gross margin was 44.8%, up 140bps QoQ but down 80bps YOY, driven by volume and mix changes.

• Q2 2025 revenue expected between $124 million and $132 million, midpoint 2% YOY growth, with foreign currency expected to have $300,000 favorable impact.
• Anticipates non-GAAP add-backs in Q2 to include stock-based compensation expense of approx. $4.5 million and amortization expense of $900,000.
• Estimates non-GAAP effective tax rate between 25% and 27% in Q2, with non-GAAP EPS expected between $0.30 and $0.38.

• Tariff uncertainties and their potential impact on customers and the manufacturing landscape.
• Dependence on global network, including potential challenges from trade issues affecting manufacturing partners in regions like China.

Q: Brian Drab on gross margin sustainability and Hubs network challenges A: Dan Schumacher says gross margin QoQ increase due to factory volume, network margins down QoQ; Rob Bodor notes sequential performance and production business growth.

Q: Brian Drab on Hubs network and tariffs A: Rob Bodor states network is adaptable, can redirect orders based on needs, tariffs not causing major challenges.

Q: Greg Palm on network in U.S. and April order growth A: Dan Schumacher says orders improving month-to-month, network fulfilled orders trending up; Rob Bodor highlights production business growth and focus on customer education.

Q: Troy Jensen on production in factory vs network A: Rob Bodor and Dan Schumacher state production occurs in both factory and network, with same quality standards applied.

Q: Troy Jensen on seasonality and tariffs A: Dan Schumacher discusses normal seasonality trends, Rob Bodor says actions gaining traction and well positioned despite changing landscape.

Q: James Ricchiuti on network margins, tariffs and materials, 3D Printing alignment, production strategy in mature markets A: Dan Schumacher says network margins over 31%; Rob Bodor talks about material mitigation, 3D Printing headwinds due to prototyping slowdown, and production strategy targeting higher-margin production categories.