Proto Labs, Inc. Q2 FY2025 earnings call

• Strong Q2 results with record revenue and EPS, exceeding expectations. - Received 2025 Future of Manufacturing Project Award. - Metal 3D printing service in Raleigh got ISO 13485 certification. - Customers using combined offer grew 44% YOY, revenue per customer up 11% QOQ. - Marketing investments driving engagement, sales enablement tools advanced, fulfillment channels optimized. - Tariffs impact margins temporarily but AI systems help adapt. - Focus on customer and employee experience, sharpening strategy and execution. - Priorities: drive growth in KPIs, expand production capabilities, reinforce core prototyping business.

Second quarter revenue was a company record at $135.1 million, up 6.5% YOY in constant currencies and 7% sequentially. CNC machining revenue was a record, growing 20% YOY (30% growth in US). Injection Molding declined 4% YOY. 3D Printing was down 1% YOY due to prototyping weakness. Sheet Metal grew 9%. US revenue grew 12% YOY, while Europe revenue declined 15% in constant currencies. Consolidated Non-GAAP gross margin was flat sequentially at 44.8%, down 90 basis points YOY due to network revenue growth and tariff impacts.

• Third quarter 2025 revenue expected between $130 million and $138 million, midpoint implies 6% growth YOY in constant currencies. - Foreign currency expected to have ~$400,000 favorable impact on revenue. - Non-GAAP EPS expected between $0.35 and $0.43 for Q3 2025.

• Tariffs and changing trade policies create short-term margin pressures. - Europe manufacturing contraction impacts revenue and margins.

Q: Strength in CNC work, leaning toward production, prototyping, or both?

A: All of the above, combination of production and prototyping.

Q: Strength continuing into Q3 and July?

A: Midpoint of guidance indicates strength continuing in same areas.

Q: Injection Molding pressure, what's causing it and turnaround?

A: Weakness in medical, majority of Injection Molding through factory, network is small portion; innovating to win more production business.

Q: Tariffs impact on margin, quantification?

A: Tariffs on aluminum and steel affected network margins, adjusted pricing and fulfillment to offset, network margins back to pre-tariff levels by June.

Q: Network margin and A&D mix?

A: Network margin was 29% in quarter; A&D is north of 20% of business.

Q: 30 days visibility comment on network business?

A: 15% of network business has longer visibility, 85% has limited visibility.

Q: Seasonality in Q4?

A: Expect typical seasonality with Q3 to Q4 down slightly due to holiday periods.