Proto Labs Q2 Earnings Call Highlights

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. 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. 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 ful.