PROTO LABS 2026 Q2 Earnings Call

Thank you. Good morning, everyone. Welcome to Proto Labs' second 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 second quarter ended June 30th, 2026. The release is available on the company's website as well as an accompanying slide presentation. 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. I will turn the call over to Suresh Krishna.

Suresh? Thank you, Ryan. Good morning, everyone.

Thank you for joining our earnings call. We delivered another record quarter with record revenue and strong profitability. As we did in the first quarter, we achieved double-digit revenue growth, gross margin expansion, and operating cost leverage. Importantly, our results show that our strategy is beginning to translate into broader business momentum with expanding relationships among larger customers, sustained strength in CNC Machining, meaningful acceleration in Injection Molding, and early progress from the changes we are making in Europe. Second quarter revenue per customer grew 17% year-over-year, reflecting continued momentum as we deepen engagement with enterprise accounts. More and more customers are innovating at the speed of software, and Proto Labs is the perfect partner to help them rapidly iterate and move from design into production.

Strong performance across our factory business reinforces our belief that the investments we are making are gaining traction in the areas where we have our strongest long-term competitive advantages. Injection Molding was a standout performer in the second quarter, growing 13% year-over-year with strength in telecommunications driven by data center demand and aerospace and defense. This meaningful acceleration is important because it reflects the impact of the work we have been doing to improve quality, strengthen customer engagement, and drive larger orders. Injection Molding remains one of Proto Labs' key differentiated capabilities, and its accelerated growth is an encouraging proof point in our broader expansion strategy. CNC Machining continued its strong performance with 20% year-over-year growth in our factory operation driven by sustained strength in aerospace and defense, including drones, satellites, and robotics. Our results this quarter also reinforce an important trend we are seeing across the business.

Larger, more strategic customers are expanding both the breadth and the depth of their relationships with Proto Labs. Let me provide you with some examples. AeroVironment, a customer for over 10 years, relies on us for both prototyping and production. Lockheed Martin has expanded its use of our 3D Printing capabilities as they build out a network of strategic partners in additive production, a critical capability for spaceflight. With companies such as Anduril, Meta, Medtronic, Edwards Lifesciences, Boston Dynamics, and many others, we continue to build credibility as a partner that can support rapid innovation and increasingly complex production needs. The common thread is that our customers are asking Proto Labs to support more of their product lifecycle. This is exactly the strategy we laid out earlier this year, and it is why our teams remain focused on our four strategic pillars. Number one, elevating the customer experience.

Number two, reigniting innovation. Number three, expanding into production. Number four, driving operational efficiency. As it relates to elevating the customer experience, we made significant progress in the quarter with the rollout of our new European commercial structure on July 1st. An important milestone in the broader transformation we have discussed over the past few quarters. Previously, customers often worked with multiple regional entities to access our services while we operated across several ERP systems. By aligning our European operations into a single existing ERP platform and legal entity, our European customers with operations across multiple countries can now access our full manufacturing footprint through a single point of engagement. This simplifies how customers do business with Proto Labs, reduces friction, and makes it easier to leverage the full breadth of our capabilities.

At the same time, it reduces internal complexity and supports greater operational efficiency in Europe going forward. While we are making progress on our four strategic pillars, we also continue to drive organizational and operational changes to position Proto Labs for faster growth and improved profitability. To strengthen our commercial organization and better support our next phase of growth, we hired Bernardo Parlange as our Chief Commercial Officer in May. Bernardo brings a wealth of enterprise B2B commercial experience. He now leads sales, marketing, and customer success, bringing these functions together under a unified strategy to improve commercial execution and build a more scalable model. Manufacturing excellence also remains a key focus. To that end, in May, we hired Micah Roberts as Senior Director of Global Quality to help strengthen quality outcomes, production consistency, and customer satisfaction.

This work is especially important as we support larger production programs where repeatability, inspection, documentation, and quality systems become increasingly critical to earning more share with customers. Separately, we announced the planned retirement of Mike Kenison, former Chief Operations Officer, effective July 1st. Mike was with Proto Labs for nearly 20 years, and he played a significant role in building and scaling our world-class global operations and positioning the company for continued success. We are grateful for his exceptional leadership and dedication. We have initiated a search for a new Chief Operations Officer and expect to name a successor in the coming months. Returning to Europe and the transformation we outlined in February, we are pleased with the early progress we've made as revenue in the region grew 9% year-over-year, building on the momentum we saw in the first quarter.

This reflects early results from go-to-market changes we began implementing late last year, including alignment to core industries and increased, yet simplified customer engagement. I want to recognize Pjotr Horowitz, our VP of Sales and Customer Success in Europe, and the go-to-market team, for their strong leadership and execution as they drive these changes. At the same time, Europe remains a transformation story. While the commercial initiatives we implemented are beginning to gain traction and recent demand trends are encouraging, profitability is still a work in process. Overall, Europe remains a mid-to-long-term effort. Our objective is to turn what has been an earnings headwind into a contributor to future growth and profitability, and the second quarter was an encouraging step in that direction.

In closing, we are pleased with our execution across the business, which led to another record revenue quarter and another important proof point in our transformation. We delivered double-digit top-line growth, a 340 basis point operating margin improvement, and further expansion with larger strategic customers. The investments we are making are driving solid momentum. Injection Molding accelerated, CNC Machining remained strong, Europe grew nicely, and our teams are continuing to improve the way we serve the customers and operate the business. We continue to invest in AI to improve how we serve customers and operate internally. Proto Labs is at the forefront of what is called physical AI, the application of AI to the physical world. In our case, manufacturing. While much of today's AI discussion focuses on software, physical AI in manufacturing requires a deep understanding of processes, materials, machines, and quality, combined with sophisticated software and data sets.

It is a materially harder problem, requiring deep expertise in both software and manufacturing. We invented digital manufacturing in 1999, and with nearly three decades of experience building digital manufacturing systems, our richest manufacturing data sets, and the ability to translate designs into physical parts via true digital thread, we believe we are uniquely positioned to lead in this emerging category. The market recognizes the value that we deliver and the type of company we are becoming. In July, Proto Labs was recognized by "TIME" magazine as one of America's best companies of 2026. This recognition is a testament to the dedication of our teams as we work to build a stronger, more innovative, and more resilient company. At the start of this year, we began a significant transformation designed to position our business for faster growth and stronger long-term profitability.

We are in the early stages of that work. Through the first half of 2026, we have demonstrated that Proto Labs can produce strong financial outcomes and transform the business for the future. This is the foundation for profitable growth and long-term value creation for customers and shareholders. With that, I'll turn the call over to Dan to walk through our financial performance and outlook in more detail.