PROTO LABS, INC. 2026 Q3 Earnings Call

Thank you. Good morning, everyone, and welcome to Proto Labs' third quarter 2026 earnings conference call. I am joined today by Suresh Krishna, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning, Proto Labs issued a press release announcing its financial results for the third quarter ended September 30, 2026. The release is available on the company's website. In addition, a prepared slide presentation is available online at the web address provided in our press release. Our discussion today 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 outcomes 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 at the investor relations section of our company website for a complete reconciliation of GAAP to non-GAAP results. Now, I will turn the call over to Suresh Krishna.

Suresh? Thank you, Ryan. Good morning, everyone, and thank you for joining our earnings call.

I am very pleased with our third quarter performance, which provides further evidence that the execution of our strategy is translating into strong and consistent financial results. Third quarter revenue grew 14%, resulting in another record revenue quarter. This is the fourth consecutive quarter of double-digit growth. We also delivered double-digit non-GAAP EPS growth for the fourth consecutive quarter, with EPS growth outpacing revenue growth in each of these quarters. In the first 9 months of 2026, year-over-year revenue grew 12%, adjusted operating margin expanded 300 basis points, and adjusted EPS grew 46%, underscoring the consistency of our execution and the strength of our momentum. These results are driven by the tremendous work of our Proto Labs team and their continued commitment to serving our customers.

I want to thank them all for everything they do every day. The trends that drove strong performance in the first half of the year continued in the third quarter. Larger strategic customers continue to broaden their relationships with Proto Labs and turn to us for more of their manufacturing needs across the entire product life cycle. This is reflected in a 17% year-over-year increase in revenue per customer. In addition, we served almost 21,000 customers in the quarter, up sequentially for the third straight quarter. We continue to see strong demand in high-growth industries, including aerospace, defense, drones, robotics, and data centers. We work with the most innovative companies in these markets, including Blue Origin, Relativity Space, Raytheon, AeroVironment, Shield AI, Agility Robotics, and many others. These customers need to rapidly move from ideas to prototypes and into production, making Proto Labs' speed, quality, and reliability increasingly critical.

We saw broad-based strength across our business in the third quarter, with each of our three largest service lines growing double digits year-over-year. Factory CNC machining was particularly strong, growing 22% as our world-class speed continues to resonate with customers. Global 3D printing revenues grew 12%, led by strong demand for metals and HP's Multi Jet Fusion technology, or MJF. Year to date, MJF revenue in our U.S. factory operation is up more than 40%, and we are investing in additional capacity to support that growth. Proto Labs is at the center of a major shift taking place in manufacturing, driven by four powerful macro trends. First, re-industrialization. Companies are bringing manufacturing closer to their customers and building more resilient regional and sovereign supply chains. Second, a wave of hardware innovation moving at the speed of software.

Investment is accelerating across critical and emerging industries like space, drones, robotics, data centers, and other highly engineered hardware that ultimately needs to be designed, tested, and manufactured from prototype to production at faster speeds than ever before. Third, physical AI. AI is moving beyond software and into the physical world, driving a new generation of robotics, autonomous systems, intelligent machines, and other advanced products that require manufacturing to leverage physical AI. Fourth, supply chain agility and scalability. As innovation accelerates, companies need manufacturing partners that can invest and scale with them without the manpower and capital constraints of traditional supply chains. This is exactly the environment Proto Labs is built for. We help customers move quickly from idea to prototype to production while delivering the quality, reliability, and scalable capacity they need. We have an important structural advantage, our true digital thread.

Proto Labs' software native digital manufacturing model enables speed and automation today while creating a foundation to leverage AI and scale efficiently over time. With millions of CAD files and decades of manufacturing data in our library, we have a powerful foundation to apply AI, advance our manufacturing capabilities, and create more valuable solutions for our customers. We are already seeing the benefits of these trends in our business, and we believe they create a significant opportunity for Proto Labs over the next several years. We continue to invest in capabilities to capture the opportunity ahead. We are advancing our four strategic pillars, elevating the customer experience, accelerating innovation, expanding into production, and driving operational efficiency. I'd like to share several important business and product updates with you now.

On ProDesk, we launched new metal 3D printing heat treatments, FDM printing capabilities, and additional CNC machining surface finishes, giving customers more control over part performance, surface quality, and finishing requirements. Next, we continue to enhance the Protolabs Network with improvements designed to accelerate order acceptance, improve partner communication, and strengthen quality. We are also developing AI-assisted order checks to identify specification discrepancies earlier and further automate the customer and partner experience. With respect to improving efficiency across the organization, last week we announced an enterprise implementation of Amazon Quick as part of our broader AI roadmap. Our initial focus is on go-to-market workflows where we believe AI can improve productivity, reduce response times, and streamline order-to-quote processing. To accelerate implementation, we created forward-deployed AI engineer roles to identify high-impact use cases and design AI-enabled workflows across the organization.

Enterprise-wide implementation will continue into 2027, led by Marc Kermisch, our Chief Technology and AI Officer. Technology is an important enabler of our strategy, and operational execution is the other. In August, Sam Ramahi was named Chief Operations Officer. Sam brings over 25 years of executive operational leadership across global companies like nVent, Eaton, Honeywell, and more. Sam will help advance our strategic pillars while focusing on driving operational excellence across safety, quality, delivery, and cost. We are also expanding the talent and capabilities needed to execute our strategy. We have officially inaugurated our new global capability center in India. Engineers are on-site and are working directly on our manufacturing and AI roadmap. The talent and capabilities we are building in India will help accelerate progress across all four strategic pillars.

The center strengthens our investments in technologies that will meaningfully improve productivity, including AI, automation, and advanced manufacturing capabilities that support our broader digital manufacturing strategy. Turning to Europe, revenue grew double digits in the third quarter, in part due to the go-to-market changes we initiated late last year. We are very pleased with this performance, and I want to thank our team in Europe, led by Pjotr Horowitz, for their continued execution and commitment. We continue to advance the initiatives needed to return Europe to profitability, addressing the drivers of underperformance while putting the right organizational structure, operating model, talent, and capabilities in place to execute more effectively. These efforts are designed to complement the go-to-market changes already underway and support further operational improvements. As I shared last quarter, the transformation in Europe remains a work in progress, and it's a longer-term effort.

While we are encouraged by double-digit revenue growth, our objective remains unchanged, transform Europe into a contributor to both future growth and profitability. Before I turn the call over to Dan, I want to highlight two recent recognitions of our commitment to manufacturing innovation. In August, we announced a partnership with MIT and a grant supporting U.S. manufacturing innovation research at MIT Industrial Performance Center. In September, Proto Labs was one of the only 500 U.S. companies named to Business Insider's America's Most Innovative Businesses 2027 list. We are proud of both recognitions and believe they reinforce Proto Labs' position at the center of manufacturing innovation. In closing, I am very pleased with our results through the first nine months of the year and the progress we are making on our transformation.

At the same time, I believe we are still in the early innings of what this business can achieve. We are executing our strategy at a time when some of the world's most innovative industries are moving faster, manufacturing supply chains are being reconfigured, and speed and digital manufacturing capabilities have never been more important. We believe Proto Labs is uniquely positioned for this environment and the opportunity ahead. We remain focused on building on recent momentum and delivering sustained profitable growth and long-term value for our customers and shareholders. With that, I'll turn the call over to Dan to walk through the financials and outlook.