[Executive Summary](index=1&type=section&id=Executive%20Summary) [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Overview) Protolabs achieved record quarterly revenue in Q2 2025, driven by growth in both Factory and Network fulfillment, with non-GAAP EPS also increasing year-over-year Second Quarter 2025 Financial Highlights (YoY Change) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Total Revenue | $135.1M | $125.6M | 7.5% | | Factory Revenue | $105.8M | N/A | 4.8% | | Network Revenue | $29.3M | N/A | 18.6% | | GAAP Net Income | $4.4M | $4.5M | (2.2%) | | GAAP Diluted EPS | $0.18 | $0.18 | 0.0% | | Non-GAAP Net Income | $10.0M | $9.5M | 5.3% | | Non-GAAP Diluted EPS | $0.41 | $0.38 | 7.9% | | Adjusted EBITDA | $19.7M | $19.3M | 2.1% | | Adjusted EBITDA Margin | 14.6% | 15.4% | (0.8) pp | - Protolabs served **21,775 customer contacts** during the quarter, with revenue per customer contact increasing **10.9% year-over-year to $6,203**[8](index=8&type=chunk) - Cash and investments balance stood at **$123.2 million** as of June 30, 2025[8](index=8&type=chunk) [Third Quarter 2025 Outlook](index=1&type=section&id=Third%20Quarter%202025%20Outlook) For the third quarter of 2025, Protolabs anticipates revenue between $130.0 million and $138.0 million, with diluted net income per share projected between $0.17 and $0.25 Third Quarter 2025 Outlook | Metric | Low End | High End | | :-------------------------- | :-------- | :------- | | Revenue | $130.0M | $138.0M | | GAAP Diluted EPS | $0.17 | $0.25 | | Non-GAAP Diluted EPS | $0.35 | $0.43 | [Non-GAAP Financial Measures Explanation](index=2&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) [Non-GAAP Definitions and Rationale](index=2&type=section&id=Non-GAAP%20Definitions%20and%20Rationale) Protolabs uses various non-GAAP financial measures, adjusted for items like stock-based compensation and amortization, to provide insights into underlying business trends and operating performance - Non-GAAP revenue growth excludes the impact of changes in foreign currency exchange rates to evaluate underlying business trends[9](index=9&type=chunk) - EBITDA and Adjusted EBITDA are used to provide additional information on financial results, adjusted for stock-based compensation, foreign currency, CEO transition, and exit/disposal costs[10](index=10&type=chunk) - Non-GAAP measures are considered useful by management and the board for evaluating operating performance and executive compensation, but should not replace GAAP measures[14](index=14&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased from December 2024 to June 2025, driven by reduced property and equipment, while current assets and total liabilities increased Condensed Consolidated Balance Sheets (Key Figures, in thousands) | Account | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $205,506 | $194,854 | | Property and equipment, net | $215,777 | $227,263 | | Total assets | $743,252 | $743,512 | | Total current liabilities | $62,164 | $53,271 | | Shareholders' equity | $664,707 | $670,151 | | Total liabilities and shareholders' equity | $743,252 | $743,512 | - Cash and cash equivalents increased from **$89,071 thousand** at December 31, 2024, to **$90,382 thousand** at June 30, 2025[21](index=21&type=chunk) - Accounts receivable, net, increased from **$66,504 thousand to $78,011 thousand**[21](index=21&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 total revenue grew 7.5% year-over-year, driven by CNC Machining, but GAAP net income slightly decreased due to higher operating expenses Condensed Consolidated Statements of Operations (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :----- | :----- | :--------- | | Total Revenue | $135,063 | $125,631 | 7.5% | | Cost of revenue | $75,289 | $69,085 | 9.0% | | Gross profit | $59,774 | $56,546 | 5.7% | | Income from operations | $4,969 | $5,999 | (17.2%) | | Net income | $4,427 | $4,540 | (2.5%) | | Diluted EPS | $0.18 | $0.18 | 0.0% | Revenue by Service Line (Three Months Ended June 30, in thousands) | Service Line | 2025 | 2024 | Change (%) | | :---------------- | :----- | :----- | :--------- | | Injection Molding | $47,415 | $49,080 | (3.4%) | | CNC Machining | $61,945 | $51,239 | 20.9% | | 3D Printing | $21,215 | $21,281 | (0.3%) | | Sheet Metal | $4,303 | $3,922 | 9.7% | - Total operating expenses increased from **$50,547 thousand in Q2 2024 to $54,805 thousand in Q2 2025**, contributing to the decrease in income from operations[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased for the six months ended June 30, 2025, while financing activities used significant cash due to stock repurchases Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $28,963 | $35,781 | | Net cash (used in) provided by investing activities | $(3,552) | $3,665 | | Net cash used in financing activities | $(25,169) | $(26,912) | | Net increase in cash and cash equivalents | $1,311 | $12,359 | | Cash and cash equivalents, end of period | $90,382 | $96,149 | - Purchases of marketable securities amounted to **$11,052 thousand** in the first six months of 2025, compared to none in the same period of 2024[25](index=25&type=chunk) - Repurchases of common stock totaled **$23,980 thousand** for the six months ended June 30, 2025[25](index=25&type=chunk) [Reconciliations of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliations%20of%20GAAP%20to%20Non-GAAP%20Measures) [Net Income and EPS Reconciliation](index=7&type=section&id=Net%20Income%20and%20EPS%20Reconciliation) Non-GAAP net income and diluted EPS for Q2 2025 exceeded GAAP figures, mainly due to adjustments for stock-based compensation, amortization, and CEO transition costs GAAP to Non-GAAP Net Income and Diluted EPS (Three Months Ended June 30, in thousands, except per share) | Metric | GAAP 2025 | Non-GAAP 2025 | GAAP 2024 | Non-GAAP 2024 | | :-------------------------- | :-------- | :------------ | :-------- | :------------ | | Net income | $4,427 | $9,987 | $4,540 | $9,532 | | Diluted EPS | $0.18 | $0.41 | $0.18 | $0.38 | - Total adjustments to GAAP net income for Q2 2025 amounted to **$6,518 thousand**, including **$4,259 thousand for stock-based compensation** and **$1,362 thousand for CEO transition costs**[26](index=26&type=chunk) [Gross Margin Reconciliation](index=9&type=section&id=Gross%20Margin%20Reconciliation) Non-GAAP gross margin for Q2 2025 was 44.8%, slightly higher than GAAP, primarily due to adjustments for stock-based compensation and amortization GAAP to Non-GAAP Gross Margin (Three Months Ended June 30) | Metric | GAAP 2025 | Non-GAAP 2025 | GAAP 2024 | Non-GAAP 2024 | | :---------------------- | :-------- | :------------ | :-------- | :------------ | | Gross margin | 44.3% | 44.8% | 45.0% | 45.7% | - Adjustments to gross profit for Q2 2025 totaled **$767 thousand**, comprising **$424 thousand for stock-based compensation** and **$343 thousand for amortization expense**[29](index=29&type=chunk) [Operating Margin Reconciliation](index=10&type=section&id=Operating%20Margin%20Reconciliation) Non-GAAP operating margin for Q2 2025 was 8.6%, significantly higher than GAAP, primarily due to adjustments for stock-based compensation and CEO transition costs GAAP to Non-GAAP Operating Margin (Three Months Ended June 30) | Metric | GAAP 2025 | Non-GAAP 2025 | GAAP 2024 | Non-GAAP 2024 | | :---------------------- | :-------- | :------------ | :-------- | :------------ | | Operating margin | 3.7% | 8.6% | 4.8% | 8.9% | - Total adjustments to income from operations for Q2 2025 were **$6,697 thousand**, including **$4,259 thousand for stock-based compensation** and **$1,362 thousand for CEO transition costs**[31](index=31&type=chunk) [EBITDA and Adjusted EBITDA Reconciliation](index=11&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 increased to $19.7 million, providing a clearer view of operational profitability by excluding non-cash and non-recurring expenses GAAP Net Income to EBITDA and Adjusted EBITDA (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :------------------ | :----- | :----- | | GAAP net income | $4,427 | $4,540 | | EBITDA | $14,101 | $15,183 | | EBITDA Margin | 10.4% | 12.1% | | Adjusted EBITDA | $19,692 | $19,339 | | Adjusted EBITDA Margin | 14.6% | 15.4% | - Key adjustments from EBITDA to Adjusted EBITDA for Q2 2025 included **$4,259 thousand for stock-based compensation** and **$1,362 thousand for CEO transition costs**[33](index=33&type=chunk) [Revenue Growth by Region Reconciliation](index=12&type=section&id=Revenue%20Growth%20by%20Region%20Reconciliation) Q2 2025 GAAP revenue grew 7.5% year-over-year, driven by strong US growth, while Europe saw a decline, with foreign currency impacting overall non-GAAP organic growth GAAP to Non-GAAP Revenue Growth by Region (Three Months Ended June 30, in thousands) | Region | GAAP 2025 | GAAP 2024 | GAAP Change (%) | Non-GAAP Organic Change (%) | | :------------ | :-------- | :-------- | :-------------- | :-------------------------- | | United States | $110,712 | $98,541 | 12.4% | 12.4% | | Europe | $24,351 | $27,090 | (10.1%) | (14.9%) | | Total revenue | $135,063 | $125,631 | 7.5% | 6.5% | - Foreign currency impact for Q2 2025 was a negative **$1,292 thousand** on total revenue, primarily affecting Europe[35](index=35&type=chunk) [Revenue Growth by Service Line Reconciliation](index=13&type=section&id=Revenue%20Growth%20by%20Service%20Line%20Reconciliation) Q2 2025 saw significant growth in CNC Machining revenue (20.9% GAAP), while Injection Molding and 3D Printing declined, contributing to overall revenue increase GAAP to Non-GAAP Revenue Growth by Service Line (Three Months Ended June 30, in thousands) | Service Line | GAAP 2025 | GAAP 2024 | GAAP Change (%) | Non-GAAP Organic Change (%) | | :---------------- | :-------- | :-------- | :-------------- | :-------------------------- | | Injection Molding | $47,415 | $49,080 | (3.4%) | (4.3%) | | CNC Machining | $61,945 | $51,239 | 20.9% | 19.7% | | 3D Printing | $21,215 | $21,281 | (0.3%) | (1.4%) | | Sheet Metal | $4,303 | $3,922 | 9.7% | 9.3% | | Other Revenue | $185 | $109 | 69.7% | 68.8% | | Total revenue | $135,063 | $125,631 | 7.5% | 6.5% | - Foreign currency impact for Q2 2025 was a negative **$1,292 thousand** on total revenue, with CNC Machining and Injection Molding most affected[37](index=37&type=chunk) [Q3 2025 Guidance Reconciliation](index=14&type=section&id=Q3%202025%20Guidance%20Reconciliation) The company reconciles GAAP to non-GAAP diluted net income per share guidance for Q3 2025, with non-GAAP being higher due to stock-based compensation and amortization adjustments Q3 2025 GAAP to Non-GAAP Diluted EPS Outlook | Metric | Low End | High End | | :-------------------------- | :-------- | :------- | | GAAP diluted net income per share | $0.17 | $0.25 | | Total adjustments | $0.18 | $0.18 | | Non-GAAP diluted net income per share | $0.35 | $0.43 | - Adjustments for Q3 2025 guidance include **$0.15 for stock-based compensation expense** and **$0.03 for amortization expense**[43](index=43&type=chunk) [Operational Metrics](index=14&type=section&id=Operational%20Metrics) [Customer Contact Information](index=14&type=section&id=Customer%20Contact%20Information) Protolabs served 21,775 customer contacts in Q2 2025, with revenue per contact increasing 10.9% year-over-year, indicating higher value per customer engagement Customer Contact Information (Three Months Ended June 30) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :------- | :------- | :--------- | | Revenue | $135,063 | $125,631 | 7.5% | | Customer contacts | 21,775 | 22,456 | (3.0%) | | Revenue per customer contact | $6,203 | $5,595 | 10.9% | - Customer contacts are defined as product developers, engineers, procurement and supply chain professionals, and other individuals who place an order that is shipped and invoiced during the period[41](index=41&type=chunk) [Company Information & Disclosures](index=2&type=section&id=Company%20Information%20%26%20Disclosures) [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Protolabs scheduled a conference call for July 31, 2025, to discuss Q2 2025 financial results and Q3 2025 outlook, accessible via dial-in and webcast - The conference call was scheduled for **July 31, 2025, at 8:30 a.m. EDT**[15](index=15&type=chunk) - A simultaneous webcast and accompanying presentation were available via the investor relations section of the Protolabs website[15](index=15&type=chunk) [About Protolabs](index=2&type=section&id=About%20Protolabs) Protolabs is a leading digital manufacturing services provider, offering rapid prototyping to production through its digital factories and partner network - Protolabs is described as the **world's leading provider of digital manufacturing services**[2](index=2&type=chunk) - The company's digital factories produce low-volume parts quickly, while the Protolabs Network provides advanced capabilities and volume pricing through partners[16](index=16&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The press release includes forward-looking statements subject to risks and uncertainties that may cause actual results to differ, with no obligation for Protolabs to update them - Statements in the press release that are not historical facts are considered "forward-looking statements" under The Private Securities Litigation Reform Act of 1995[17](index=17&type=chunk) - These statements involve known and unknown risks, uncertainties, and other factors that could cause material differences in Protolabs' results[17](index=17&type=chunk) - Protolabs expressly disclaims any intent or obligation to update any forward-looking statements[17](index=17&type=chunk) [Investor and Media Contacts](index=3&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor relations and media inquiries, including specific personnel and their contact details, is provided - Investor Relations contact: **Ryan Johnsrud, Manager – Investor Relations and Corporate Development, ryan.johnsrud@protolabs.com**[19](index=19&type=chunk) - Media Contact: **Brent Renneke, Marketing Communications Manager, brent.renneke@protolabs.com**[19](index=19&type=chunk)

Industry Overview - 3D Printing, or additive manufacturing, is a transformative technology that creates physical objects from digital designs by layering materials with high precision, significantly impacting manufacturing processes since the 1980s [2] - The technology offers advantages over traditional manufacturing, including cost efficiency, customization, precision, and sustainability [2][4] Market Growth - The global 3D Printing market is projected to grow from $24.61 billion in 2024 to $29.29 billion in 2025, and is expected to reach $134.6 billion by 2034, with a CAGR of 18.52% [7] - The healthcare 3D Printing market is anticipated to grow from $1.66 billion in 2024 to $1.96 billion in 2025, potentially exceeding $8.71 billion by 2034, reflecting a CAGR of 18% [6] Regional Insights - North America currently leads the 3D Printing market with over 35% share, followed closely by Asia Pacific at 30% [8] - The U.S. 3D printing market is expected to grow at a CAGR of 19.18% from 2025 to 2034 [8] Key Players - Leading companies in the 3D Printing space include Xometry, Proto Labs Inc., and Stratasys, which are embracing the technology for rapid prototyping and on-demand production [3] - Carpenter Technology, ATI Inc., GE Aerospace, and L3Harris Technologies are highlighted as promising stocks in the 3D Printing sector, each with unique capabilities and market positions [9][11][14][17][20] Sector Applications - 3D Printing is gaining traction in various sectors, including healthcare, aerospace, automotive, and consumer goods, enabling the production of lightweight components, personalized medical tools, and complex designs [5][4] - In aerospace, 3D Printing is used for manufacturing durable aircraft components, while in automotive, it aids in producing prototypes and customized parts [5] Technological Advancements - The technology allows for the use of lighter and stronger materials, minimizes waste, and enables faster production cycles, which traditional methods cannot achieve [4] - Companies like GE Aerospace have integrated 3D Printing into their production processes, resulting in significant improvements in fuel efficiency for jet engines [18][19]

Financial Performance & Growth - Protolabs achieved $504 million in revenue in 2023[6] - The company's Non-GAAP gross margin was 45% in 2023[6] - Adjusted EBITDA reached $83 million in 2023[6] - Protolabs Network revenue experienced a 69% year-over-year growth in constant currencies in 2023[60] - The company's revenue increased by 5% year-over-year, excluding Japan, in 2023[56] Customer Base & Manufacturing - Protolabs has served over 53,000 customer contacts[6,36] - The company has manufactured over 450 million parts to date[6] - Over 85% of Fortune 500 companies in target industries are served by Protolabs[36] - More than 90% of revenue comes from returning customers[44] Market & Outlook - Protolabs operates in a $100 billion+ market[8,14,18] - The company anticipates Q1 2024 revenue between $120 million and $128 million, representing a growth range of -5% to 2% year-over-year[73] - Non-GAAP EPS for Q1 2024 is projected to be between $0.26 and $0.34, indicating a year-over-year growth range of -12% to 15%[73]

Financial Performance - Revenue for Q1 2025 was $126.2 million, a decrease of 10% year-over-year[18, 19] - Non-GAAP EPS for Q1 2025 was $033, a decrease of $007 year-over-year, driven by lower volume and increased OpEx[21, 22] - Revenue fulfilled through the Protolabs Network was $263 million, up 115% year-over-year in constant currencies[23] - Q1 2025 revenue increased 4% sequentially[23] - Non-GAAP Gross Margin decreased by 80 bps year-over-year to 448%[31, 49] - Non-GAAP Operating Margin decreased by 210 bps year-over-year to 74%[31, 50] Revenue by Service - Injection Molding revenue decreased by 7% year-over-year to $487 million in constant currencies[25] - 3D Printing revenue decreased by 6% year-over-year to $202 million in constant currencies[26] - Sheet Metal revenue increased by 19% year-over-year to $42 million in constant currencies[27] - CNC Machining revenue increased to $528 million from $499 million year-over-year[29] Cash Flow and Balance Sheet - Operating Cash Flow for Q1 2025 was $184 million[32] - Capital Expenditures for Q1 2025 were $13 million[32] - Share Repurchases for Q1 2025 were $209 million[32] - Cash and Investments totaled $1163 million[32] - Debt remained at $0[32] Q2 2025 Outlook - Revenue is projected to be between $124 million and $132 million[35] - Non-GAAP EPS is projected to be between $030 and $038[35] - Foreign currency is expected to have an approximately $03 million favorable impact on Q2 2025 revenue[37]

Industry Overview - 3D Printing, or additive manufacturing, transforms digital designs into physical objects with high precision, revolutionizing manufacturing across various sectors [2] - The technology offers advantages in cost, customization, precision, and sustainability compared to traditional manufacturing methods [2][4] - 3D Printing is gaining traction in healthcare, aerospace, automotive, and consumer goods, enabling the production of complex shapes and reducing supply chain costs [5][6] Market Growth - The global 3D Printing market is projected to grow from $24.61 billion in 2024 to $29.29 billion in 2025, and reach $134.6 billion by 2034, with a CAGR of 18.52% [7] - The healthcare 3D Printing market is expected to grow from $1.66 billion in 2024 to $1.96 billion in 2025, with a projected CAGR of 18% from 2024 to 2034 [6] Key Players - Xometry, Proto Labs Inc., and Stratasys, Ltd. are leading companies in the 3D Printing space [3] - Carpenter Technology (CRS) has developed its additive capabilities through acquisitions and operates an Emerging Technology Center for metal powder production [10][12] - ATI Additive Manufacturing focuses on aerospace and defense, enhancing production capacity for advanced metallic powders [13][15] - GE Aerospace has a long history in additive manufacturing, producing components that improve fuel efficiency in jet engines [16][18] - Stratasys offers advanced 3D printing solutions across multiple industries and recently showcased new technologies at a major industry event [19][20] - Materialise provides software solutions and services for various industries, enhancing build preparation time and pushing boundaries in medical applications [22][23][24] Investment Opportunities - The 3D Printing sector presents compelling growth opportunities for investors, with stocks like Carpenter Technology, ATI Inc., GE Aerospace, Stratasys, and Materialise NV identified as high-potential investments [8]

Revenue and Income - Revenue for the three months ended March 31, 2025, was $126,205, a decrease of 1.3% compared to $127,890 for the same period in 2024[11] - Net income for the three months ended March 31, 2025, was $3,599, a decline of 31.7% from $5,268 in the same period last year[11] - Total revenue for the three months ended March 31, 2025, was $126.205 million, a decrease of 1.3% from $127.890 million in the same period of 2024[60] - Net income for the three months ended March 31, 2025, was $3.6 million, a decrease from $5.3 million in the same period of 2024[26] Gross Profit and Margins - Gross profit for the first quarter of 2025 was $55,698, down from $57,467 in the first quarter of 2024, reflecting a gross margin of 44.1%[11] - Gross profit for the first quarter of 2025 was $55,698 thousand, down 3.1% from $57,467 thousand in Q1 2024[11] Assets and Liabilities - Total current assets as of March 31, 2025, were $194,410, slightly down from $194,854 as of December 31, 2024[9] - Total liabilities increased to $80,649 as of March 31, 2025, compared to $73,361 as of December 31, 2024[9] - Total long-lived assets decreased to $221.207 million as of March 31, 2025, down from $227.263 million at December 31, 2024[61] Cash and Cash Equivalents - Cash and cash equivalents decreased to $82,692 as of March 31, 2025, from $89,071 at the end of 2024[9] - Cash and cash equivalents totaled $81.2 million as of March 31, 2025, down from $86.4 million at the end of 2024[33] Operating Expenses - Operating expenses for the first quarter of 2025 were $51,167, an increase from $50,640 in the same quarter of 2024[11] - Operating expenses for the first quarter of 2025 totaled $51,167 thousand, an increase of 1.0% from $50,640 thousand in Q1 2024[11] Shareholders' Equity - The company’s total shareholders' equity decreased to $656,801 as of March 31, 2025, from $670,151 as of December 31, 2024[9] Stock Options and Compensation - As of March 31, 2025, the company had 499,700 stock options outstanding with a weighted average exercise price of $48.80, an increase from 445,136 options at December 31, 2024[43] - The company granted 77,606 stock options during the three months ended March 31, 2025, with a weighted average grant date fair value of $22.07[44] - Stock-based compensation expense was $4.0 million for the three months ended March 31, 2025, compared to $4.3 million for the same period in 2024[42] Tax and Income Tax Rate - The effective income tax rate for the three months ended March 31, 2025, was 39.9%, an increase of 8.1% compared to 31.8% in the same period of 2024[52] - The company recorded an income tax provision of $2.4 million for the three months ended March 31, 2025, compared to $2.5 million for the same period in 2024[52] Inventory and Allowance for Obsolescence - Total inventory as of March 31, 2025, was $13.9 million, an increase from $12.9 million as of December 31, 2024[38] - The Company reported an allowance for obsolescence of $687,000 as of March 31, 2025, slightly up from $684,000 at the end of 2024[38] Marketable Securities and Intangible Assets - Total marketable securities as of March 31, 2025, were valued at $33.6 million, compared to $31.8 million as of December 31, 2024[34] - The Company has intangible assets with a net value of $20.8 million as of March 31, 2025, compared to $21.4 million as of December 31, 2024[28] Other Comprehensive Income - The company recognized $1.003 million in other comprehensive income for the three months ended March 31, 2025, compared to a loss of $925,000 in the same period of 2024[51] Unrecognized Compensation Expense - The company had $4.8 million of unrecognized compensation expense related to unvested stock options, expected to be recognized over a weighted-average period of 2.9 years[44] - The company had $18.1 million of unrecognized compensation expense related to non-vested restricted stock, expected to be recognized over a weighted-average period of 2.7 years[46] - As of March 31, 2025, there were $7.5 million of unrecognized compensation expense related to non-vested performance stock, expected to be recognized over a weighted-average period of 2.3 years[49] Revenue Breakdown - Revenue from CNC Machining increased to $52.843 million in Q1 2025, up 5.8% from $49.932 million in Q1 2024[61] - Revenue from Injection Molding was $48.723 million, down from $52.663 million, while CNC Machining revenue increased to $52.843 million from $49.932 million[61]

Financial Data and Key Metrics Changes - The company reported revenue of $126 million for Q1 2025, which is down slightly year-over-year but near the upper end of guidance [5][20] - Non-GAAP earnings per share were $0.33, also near the top end of expectations, reflecting solid profitability [5][24] - Free cash flow represented 14% of revenue, indicating continued industry-leading profitability [6] - Non-GAAP gross margin increased by 140 basis points sequentially to 44.8%, although it was down 80 basis points year-over-year [23] Business Line Data and Key Metrics Changes - Revenue from CNC machining grew by 6% year-over-year, driven by strong performance in production [21] - Injection molding revenue declined by 7% year-over-year but increased by 7% compared to the previous quarter [22] - 3D printing revenue was down 6% year-over-year due to lagging order trends [22] - Sheet metal revenue increased by 19% year-over-year, driven by improved offerings [22] Market Data and Key Metrics Changes - U.S. revenue was down 1.2% compared to the prior year, while European revenue was flat in constant currencies [20] - Revenue fulfilled through the Proto Labs Network was $26.3 million, up 11.5% in constant currencies [20] Company Strategy and Development Direction - The company is focused on driving growth through a hybrid model, which has seen customer utilization of combined offerings grow by over 45% [6][7] - Strategic priorities for 2025 include enhancing efficiency, expanding production use cases, and reinforcing the core prototyping business [18] - The company is closely monitoring tariff policies and believes the current situation presents growth opportunities due to its diverse manufacturing footprint [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic headwinds and maintain profitability [6][19] - The current economic uncertainty is causing customers to be cautious about demand forecasting, but the company believes it can adapt quickly [17] - Management anticipates continued growth in Q2 2025, with revenue guidance between $124 million and $132 million [25] Other Important Information - The company has zero debt and $116.3 million in cash and investments on its balance sheet [25] - The company is actively reviewing pricing strategies to offset potential impacts from tariffs [17] Q&A Session Summary Question: Can you elaborate on the sustainability of the recent gross margin improvement? - Management indicated that the improvement was primarily due to increased factory volume, but network margins faced challenges [29][30] Question: Are there concerns regarding the hubs network due to tariffs? - Management reassured that the network is adaptable and has been able to mitigate impacts from tariffs effectively [36][38] Question: What are the trends in order growth and customer behavior in April? - Orders have consistently improved month-to-month, with a higher proportion of revenue going through the network [41][42] Question: Are there any headwinds from materials used due to tariffs? - Management stated that the robust supply chain has mitigated substantial increases in raw material costs due to tariffs [65][66] Question: How does the 3D printing business align with the production parts strategy? - The 3D printing segment is primarily a prototyping service, which has faced headwinds due to a slowdown in new product launches [68][69] Question: Is the company satisfied with its strategy in mature manufacturing markets? - Management expressed confidence in their differentiated offering and the ability to penetrate various industries over time [71]

Financial Data and Key Metrics Changes - The company reported first quarter revenue of $126 million, which is down 1% year-over-year but near the upper end of guidance [4][19] - Non-GAAP earnings per share were $0.33, also within guidance but down $0.05 sequentially due to increased operating expenses and a higher tax rate [23] - Free cash flow represented 14% of revenue, highlighting strong profitability [5] Business Line Data and Key Metrics Changes - Revenue from CNC machining grew 6% year-over-year, driven by strong performance in production and high requirement CNC parts [20] - Injection molding revenue declined 7% year-over-year but increased 7% compared to the fourth quarter [21] - 3D printing revenue was down 6% year-over-year, while sheet metal revenue increased by 19% due to improved offerings [21] Market Data and Key Metrics Changes - Revenue fulfilled through the Proto Labs Network was $26.3 million, up 11.5% in constant currencies [19] - U.S. revenue was down 1.2% compared to the prior year, while European revenue was flat in constant currencies [19] Company Strategy and Development Direction - The company is focused on driving growth through a hybrid model, which has seen customer utilization of combined offerings grow over 45% year-over-year [6] - Strategic priorities for 2025 include enhancing efficiency, expanding production use cases, and reinforcing the core prototyping business [17] - The company is closely monitoring tariff policies and believes its diverse manufacturing footprint provides resilience and flexibility [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic headwinds and maintain profitability [5][18] - The current economic uncertainty is causing customers to be cautious about demand forecasting, but the company believes this environment favors agile players [15] - Management highlighted the importance of adapting to supply chain dynamics and the potential for growth driven by reshoring trends [12][44] Other Important Information - The company generated $18.4 million in cash from operations during the first quarter and returned $20.9 million to shareholders through stock repurchases [23] - As of March 31, 2025, the company had $116.3 million in cash and investments on its balance sheet with zero debt [24] Q&A Session Summary Question: Can you provide more details on the sustainability of the gross margin improvement? - Management indicated that the sequential increase in gross margin was primarily due to higher factory volume, with expectations for flat to slightly down margins moving forward [28][30] Question: What are the current trends in order growth and customer behavior? - Management noted consistent month-over-month improvement in orders and customer engagement, particularly in production offerings [41][43] Question: Are there any concerns regarding the hubs network and tariff impacts? - Management reassured that the network is adaptable and has been able to mitigate impacts from tariffs effectively [36] Question: How does the company view the production parts opportunity in mature markets? - Management expressed confidence in their differentiated offering and the potential for growth in both traditional and emerging markets [72]

Company Performance - Proto Labs (PRLB) reported quarterly earnings of $0.33 per share, exceeding the Zacks Consensus Estimate of $0.28 per share, but down from $0.40 per share a year ago, representing an earnings surprise of 17.86% [1] - The company posted revenues of $126.21 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.61%, although this is a decrease from year-ago revenues of $127.89 million [2] - Over the last four quarters, Proto Labs has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Market Performance - Proto Labs shares have declined approximately 8.4% since the beginning of the year, compared to a decline of 4.7% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.37 on revenues of $126.08 million, and for the current fiscal year, it is $1.40 on revenues of $504.62 million [7] Industry Outlook - The Rubber - Plastics industry, to which Proto Labs belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Proto Labs' stock performance [5][6]

Financial Performance - Total revenue for Q1 2025 was $126.2 million, a 1.3% decrease from $127.9 million in Q1 2024[6] - Net income for Q1 2025 was $3.6 million, or $0.15 per diluted share, compared to $5.3 million, or $0.20 per diluted share, in Q1 2024[6] - Non-GAAP net income was $8.1 million, or $0.33 per diluted share, down from $10.4 million, or $0.40 per diluted share, in Q1 2024[6] - Revenue for Q1 2025 was $126,205,000, down 1.3% from $127,890,000 in Q1 2024[28] - Net income for Q1 2025 decreased to $3,599,000 from $5,268,000 in Q1 2024, representing a decline of 31.7%[25] - Non-GAAP net income for Q1 2025 was $8,083,000, compared to $10,414,000 in Q1 2024, a decrease of 22.4%[26] Customer Metrics - Protolabs served 21,627 customer contacts during the quarter, with revenue per customer contact increasing 2.5% year-over-year to $5,836[7] - Customer contacts decreased to 21,627 in Q1 2025 from 22,466 in Q1 2024, a decline of 3.7%[39] - Revenue per customer contact increased to $5,836 in Q1 2025 from $5,693 in Q1 2024, an increase of 2.5%[39] Revenue Outlook - The company expects Q2 2025 revenue to be between $124.0 million and $132.0 million[5] - Non-GAAP diluted net income per share is projected to be between $0.30 and $0.38 for Q2 2025[41] Profitability Metrics - Adjusted EBITDA for Q1 2025 was $17.4 million, or 13.8% of revenue, compared to $20.2 million, or 15.8% of revenue, in Q1 2024[7] - GAAP operating margin for Q1 2025 was 3.6%, down from 5.3% in Q1 2024[30] - Non-GAAP operating margin for Q1 2025 was 7.4%, compared to 9.5% in Q1 2024[30] Cash and Investments - Cash and investments balance was $116.3 million as of March 31, 2025[7] - Total cash and cash equivalents at the end of Q1 2025 were $82,692,000, down from $92,804,000 at the end of Q1 2024[25] - The company reported a net cash used in financing activities of $21,927,000 in Q1 2025, compared to $16,619,000 in Q1 2024[25] Stock and Debt - The company repurchased $20.9 million of common stock during the quarter[3] - The company has zero debt on its balance sheet, positioning it strongly for growth and investment[3] - Revenue fulfilled through the Protolabs Network was $26.3 million, a 10.0% increase compared to Q1 2024[6]