Operator: Greetings, and welcome to the Proto Labs First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Johnsrud, Investor Relations. Thank you. You may begin.

Ryan Johnsrud: Thank you. Good morning, everyone, and welcome to Proto Labs’ First Quarter 2026 Earnings Conference Call. I’m joined today by Suresh Krishna, President and Chief Executive Officer; and Dan Schumacher, Chief Financial Officer. This morning, Porto Labs issued a press release announcing its financial results for the first quarter ended March 31, 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 today 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?

Suresh Krishna: Thanks, Ryan. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. We are off to a strong start in 2026. First quarter revenue grew 10% year-over-year as we delivered another record revenue quarter. I am very pleased with the balanced execution reflected in our financial results. We achieved double-digit revenue growth significant gross margin expansion and improved operating leverage. Importantly, this reflects not only continued momentum but measurable improvements in customer engagement, growth and operating performance. These financial results are a credit to the hard work and dedication of our employees as they continue to execute with discipline across the business. I’d like to thank all Proto Labs team members for their outstanding quarter.

So far, in 2026, we continue to see strong traction with larger strategic customers contributing to our higher revenue per customer and reinforcing this as a key long-term growth driver. During the quarter, revenue per customer grew 20% year-over-year, providing evidence of the momentum we have with enterprise customers. In U.S. we grew 12%, marking the fourth quarter in a row of double-digit revenue growth in the region. I want to acknowledge the leadership of Sean Farrell, and the regional sales and customer success teams for driving that performance. Double-digit growth and significant margin expansion in the first quarter led to strong cash flows and earnings, reflecting in the strength of our business model. In the first quarter, we achieved Proto Lab’s highest non-GAAP earnings per share in over 5 years.

Our strong results were fueled by exceptional demand for our CNC machining service, which grew over 20% year-over-year in the U.S. driven by continued strength in aerospace and defense including space, exploration, satellites and drones as well as strong growth in robotics. As we saw in the last quarter, well-funded and innovation-driven markets where speed, precision and digital manufacturing are critical, continue to rely on Proto Labs as we deepen relationships and strengthen our position as a strategic partner. In April, we joined the Space Foundation, a global space community supporting collaboration and education. This move strengthens our presence in this fast-growing ecosystem as aerospace innovation accelerates rapidly in the new space age.

With organizations like NASA, Lockheed Martin and Northrop Grumman as long-standing customers, we continue to support leading-edge programs where speed, precision and reliability are critical. This is especially apparent following ARTEMIS 2 and its successful Lunar mission. Overall, our first quarter performance reflects continued progress on executing our strategy, which remains centered around serving customers across the product life cycle while building on the core strengths that differentiate us. As a reminder, our long-term strategy is anchored in four pillars: Elevating the customer experience, accelerating innovation, expanding production and driving operational efficiency. While these pillars will guide our business in the next few years, we are encouraged by the early traction we are seeing across each area.

As we focus our investments and prioritize work around these pillars we drove higher revenue per customer, strong growth in CNC machining and operating margin expansion. We continue to see expanding engagement with larger strategic customers in aerospace and defense and medical, reinforcing our conviction that production will become a meaningful long-term growth driver. We achieved AS9100 certification in our European operations during the first quarter, which expands our ability to support aerospace and defense customers globally. We are now better positioned to deliver high-quality aerospace grade parts while helping customers regionalize their supply chains and reduce disruption. This milestone strengthens our global capability and credibility in aerospace and defense and expands our ability to capture production programs globally.

Moving to our 2026 operational changes. As we’ve said in our last earnings call, 2026 will be a year of transformation and acceleration focused on improving the customer experience and building systems that will scale Proto Labs over the long term. On our fourth quarter call, we discussed several organizational and operational changes that position Proto Labs for faster growth and improved profitability. The first change we discussed is ensuring we have the right leadership, structure and operating mechanisms in place. Our product and technology teams are now combined under our CT AIO, Marc Kermisch, ensuring product and technology are aligned and is essential as we accelerate our organic innovation road map to improve our offer and the customer experience.

The second operational change in 2026 is enhanced focus on continuous improvement and quality. In April, Jonathan Blaisdell, joined Proto Labs as Head of our Proto Labs Business Excellence Systems. Jonathan has over 30 years of continuous leadership at Danaher and most recently at Polaris, where he helped embed a lean management system, driving operational and financial improvements. At Proto Labs, he will focus on strengthening our management system, operating rhythms and problem-solving capabilities, so our regions and service lines can execute more effectively at scale and drive productivity. We are already seeing tangible quality improvements in our injection molding operations during the quarter, we made investments to drastically improve quality with our largest, most strategic injection molding customers.

This will improve customer friction and help us expand our production offer. Importantly, the work we are doing is already driving operational benefits and will continue to unlock speed and leverage throughout 2026. Next, we have established our global capability center or GCC, in India, which will serve as a critical enabler of our long-term strategy. We are in the process of building out our team and presence in the region. We look forward to providing additional updates on our progress in the future. Lastly, the fourth change we called out is a strategic reset in Europe. We have taken deliberate actions to reset the business in Europe, including targeted reductions in the first quarter to align cost structure with current revenue levels and improvements in go-to-market operations.

We started some of Europe go-to-market work in late 2025, including alignment to core industries and simplify and increased customer engagement. I’m proud to say that these efforts are beginning to yield early results. with the region delivering 11% sequential growth in the first quarter, a sign that our teams are executing with discipline and focus. These early improvements are an important step towards stabilizing performance and positioning Europe to contribute to both growth and margin expansion going forward. I want to thank our European colleagues for their continued dedication as we reset this important part of our business. In closing, as we continue to progress through 2026, our priorities remain clear: elevate customer experience, accelerate innovation, expand our production capabilities and continue operating with discipline.

Execution across these areas is already translating into improved growth and engagement, and we believe it positions Proto Labs to deliver accelerating revenue growth and expanding profitability over time. I am encouraged by our strong start to 2026 and confident in our ability to execute our strategy and deliver durable long-term value to customers and shareholders. With that, I’ll turn the call over to Dan to walk through our financial performance and outlook in more detail.

Dan Schumacher: Thanks, Suresh, and good morning. I’ll start with a brief overview of our first quarter results. followed by our outlook for the second quarter of 2026. First quarter revenue was a company record $139.3 million, up 10.4% year-over-year. In constant currencies, revenue grew 8.7%. U.S. revenue grew 11.8% year-over-year, while Europe declined 3.4% in constant currencies. . First quarter CNC machining revenue grew 17.6% year-over-year in constant currencies. As Suresh stated, we continue to see very strong demand for our machining services across several key end markets, most notably, space exploration, satellites, drones and robotics. U.S. CNC machining revenue grew 23% year-over-year. During the quarter, we executed targeted pricing actions in line with machining market dynamics.

Injection molding grew 3.5% in constant currencies as we drove strong performance in large orders with strategic customers. 3D printing revenue was flat year-over-year in constant currencies as growth in the U.S. was offset by weak demand in Europe. We are still seeing strong demand for metal 3D parts in the U.S. And year-over-year, DMLS revenue growth was nearly 30%. Sheet metal grew 2.3% year-over-year in constant currencies, driven by solid growth in aerospace and defense and industrial tech. Shifting to margins. Non-GAAP gross margin was 46.2% in the first quarter, an expansion of 140 basis points, both sequentially and year-over-year. Higher factory gross margins drove the increase via both volume improvements and pricing increase. Also, mix was a tailwind in the quarter as higher margin factory revenue grew faster than network revenue.

First quarter non-GAAP operating expenses were $48.9 million, up $1.8 million compared to the prior year due to higher contractor, license and demand generation spend. On a percent of revenue basis, adjusted operating expenses were 35.1% of revenue, down 220 basis points year-over-year. This decrease was driven by a combination of 3 factors: First, we made targeted cost reductions in the first quarter, mostly in Europe as part of our strategic reset. There were also some reductions in the U.S. as we look to fund our strategic projects. Second, employee costs were lower than anticipated as we ramp hiring for our strategic pillar projects. We expect to increase SG&A spend throughout 2026 as we invest to execute our long-term strategy. And third, as part of our drive operational efficiency pillar, we are in the early innings of finding savings and efficiencies that will allow us to invest in growth areas.

Adjusted EBITDA was $22.8 million or 16.3% of revenue up from $17.4 million or 13.8% of revenue in the first quarter of 2025. First quarter non-GAAP earnings per share were $0.54, up $0.21 year-over-year driven by volume, factory gross margin expansion and leverage on our operating expenses. $0.54 is the high adjusted EPS figure we’ve reported since the third quarter of 2020. We generated $17.5 million in cash from operations during the first quarter. Proto Labs continues to lead the digital manufacturing industry and cash generation, reflecting the strength of our business model. On March 31, 2026, we had $158 million of cash and investments on our balance sheet and 0 debt. Our outlook for the full year and second quarter of 2026 is outlined on Slide 14.

We still expect full year 2026 revenue growth of 6% to 8%. For the second quarter, we expect revenue between $140 million and $148 million. At the midpoint, this implies 7% revenue growth year-over-year. We expect foreign currency to have a $500,000 favorable impact on revenue compared to the second quarter of 2025. Our earnings guidance incorporates the following assumptions for the second quarter of 2026. Non-GAAP add-backs will include stock-based compensation expense of approximately $4 million, amortization expense of $900,000 and restructuring and transformation costs of $600,000. We also expect a non-GAAP effective tax rate between 25% and 26%. In summary, we expect second quarter 2026 non-GAAP earnings per share between $0.50 and $0.58.

That concludes our prepared remarks. Sashi open — please open the floor for questions.

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Operator: [Operator Instructions] The first question is from Greg Palm from Craig-Hallum.

Greg Palm: Congrats on the solid results. Can you maybe give us a little bit more color on cadence of the quarter. I think you had mentioned that January had started off slow if I recall correctly. So what did you see February, March? What are you seeing so far in April? And just from like an upside standpoint, I think you called out A&D space, but any other end markets that maybe surprised you a little bit to the upside.

Dan Schumacher: Yes. One thing for the quarter, although Europe was down 3% year-over-year, they were up 11% sequentially. So we’re seeing some good traction within Europe. Suresh talked about the Europe reset, and we’re seeing some benefits and some stronger performance in Europe as we’re moving quarter-over-quarter. In terms of what we’re seeing, seasonality like in April, that’s reflected in the guide. So we have a really decent start to April, and that’s reflected in the number that you see, which implies sequential growth quarter-over-quarter, Q1 into Q2. It continues to be the same. We’re seeing strong growth from our large customers. We’re seeing strong growth from aerospace and defense end markets. I would also say computer and electronics and industrial commercial machinery performed well as well. And we’re seeing that strength continue into the second quarter.

Greg Palm: We shift gears to the network. So that was down sequentially barely up on a year-over-year basis on a constant currency basis. What — any reason for the decel? What are you specifically seeing in that business?

Suresh Krishna: Greg, we are — overall, we are very happy with our double-digit growth, and this is the second quarter we’ve delivered that. We will see fluctuations between our fulfilled methods between factory and network. We did see some weakness in network demand in 3D printing. And we are making some changes in our go-to-market areas so that we can work to accelerate network revenue growth in the future, much as we work to drive growth in our factory business.

Greg Palm: And I might have missed it, but did you give a network gross margin.

Dan Schumacher: We did not.

Suresh Krishna: We did not. We can get it for you.

Dan Schumacher: Greg. Network gross margin was 31%.

Operator: The next question is from Brian Drab from William Blair.

Brian Drab: One thing that stood out to me this quarter was the injection holding business and the growth sequentially. I know you called out that the primary growth came from CNC machining year-over-year, but this injection molding result is the best result you’ve had, I think, in 8 quarters, are you seeing some traction from the new initiatives that you talked about last quarter? What is the main thing driving that growth? And do you think that this kind of $51 million revenue level could be the base like baseline revenue level for the year and we’re going up from there or something unusual in the first quarter?

Dan Schumacher: Yes. Brian, we’re seeing traction really with some of our larger customers in terms of getting larger orders through injection molding. It’s all the things we’ve talked about in terms of what we’re working on from an injection molding perspective. Injection molding is a service that over time, there’s less prototype that we’re doing, and there’s more production that we’re doing. And we’re just getting better and better at that with our customers. And you can see that in the sequential growth that you talked about. It’s about meeting customer specifications as it relates to injection molding, especially on the larger orders. And they’re really using us because we do have — we can both schedule out over time, orders that they need or if they need them quickly, we can turn them faster than anybody else. So we’re getting good traction on some of these initiatives that we’ve talked about on injection molding, and you can see that in the results.

Brian Drab: And then you outperformed in terms of revenue growth in the first quarter. You maintained the full year guidance, can you just talk about your thinking and what you’re seeing maybe in the macro or in your business that prevented you right at the moment from raising the guidance for the full year for growth?

Dan Schumacher: We had a great Q1, Brian. And we’re always trying to be appropriately conservative when we provide the outlook to the market. The business is performing well. But I looked at that and balance that with macro uncertainty over the long term and the visibility that we have kind of moving into the future. If you take a look at that 6% to 8%. It would be normal seasonality as you go through the year. where we gave you the midpoint of the guide for the second quarter, which is up sequentially Q1 to Q2. Normal seasonality is you’re up — you’re either flat to slightly up Q3 and then you’re going to be down due to the holidays in Q4. That’s really what’s built into the full year guide. We’re 1 quarter in. We held it to where it is, but there is a certain amount of conservatism in there just based on the macro environment.

Operator: The next question is from Troy Jensen from Cantor Fitzgerald.

Troy Jensen: Congrats on really nice results here. Quick question for us, rasher. I guess I’d be curious to know your thoughts on how much of Proto Labs has production exposure. I’ve always thought of injection molding is primarily all production because you produce some out of parts, but I don’t know if you’ve tried to figure out what percentage you have exposed to prototyping versus production and how that’s changed over the past year or so.

Suresh Krishna: Again, I think we said it in our strategic plan. We are early in our journey to build the capabilities needed for production. I don’t know if you’ve given out in terms of percent what it is, but we are building it and more customers in our interactions with our bigger strategic accounts, they want us to get into production, and that’s what we’re building out as part of our strategic pillars is to be able to do more production for them. Absolutely, we see more interest in injection molding and in 3D printing as well. And we continue to gain some of these orders that gives us longer runs. We are still further away from getting to give you guys an ARR kind of number because they’re still early in this production journey.

Troy Jensen: How about just capacity levels right now in the factory? Any needs for investments given the accelerated growth here? .

Dan Schumacher: Yes, Troy. We don’t — capacity, yes, from the perspective of mills. And DMLS, we’re adding DMLS metal 3D printers. We have enough space. But as you know, in our digital manufacturing model we can scale very quickly. What we’re running into capacity issues is just on the number of machines and certain services. Specifically, CNC machining, obviously, you can see because of the growth, and I also mentioned in the U.S., we have around 30% growth in metal 3D print. So we’re adding DMLS printers as well. .

Troy Jensen: And then just 1 more for you, Dan. Can you just touch on gross margin thoughts going forward and can we keep them above 46% here?

Dan Schumacher: Yes. So the guide has gross margin flat to slightly down quarter-over-quarter. With that being said, I expect full year gross margins to be slightly up. on the year just based on what we saw in the first quarter and what we’re seeing — what I’m projecting for the second quarter. Gross margin is highly dependent on what our mix is and what we’re seeing from a pricing perspective, we’re going to continue to monitor market dynamics around pricing, and we’ll adjust pricing as necessary. But I’m really pleased with the execution we’ve had as it relates to that, and you can see that in our margins. .

Operator: The next question is from James Ricchiuti from Needham & Company.

James Ricchiuti: First congrats on the quarter. Dan, maybe first question for you. You gave some context in terms of how to think about gross margins as we go through the year. It appears that you’re also thinking more about adding some additional sales and marketing expense as you go through the year to pursue some of the growth initiatives that you’re targeting. How do we think about maybe OpEx as we look out beyond the June quarter? .

Dan Schumacher: Yes. I would expect OpEx to increase quarter-to-quarter. I described it on the call, we made some actions both in Europe — and in the U.S., the Europe actions were part of the Europe reset, and the U.S. actions were to fund that strategic investments. And I expect us to invest as we go through the year. A lot of that investment is going to go into R&D. You’re going to see some capital investment as well as it relates to software development as we go through the year. And these are to fund those strategic pillars, which should provide us both innovation for top line growth over the long term as well as efficiencies as we reduce the friction both with our customers and with our employees internally. So yes, there’s going to be further investment as we go through the year, but that’s to build traction and a strong return on the long term by funding the strategic buyers.

James Ricchiuti: I also wanted to ask a follow-up. Just on what you’re seeing in Europe. I know it was nice sequential growth that you’re you registered in Q1. Where are you seeing the most traction? Is this from the changes you’re implementing? Is it — are these perhaps coming from any one vertical or are they coming from new customers, different business lines. I wonder what — if you can just elaborate on the early progress you’re seeing there? .

Suresh Krishna: Yes. Thank you. We — as we said, we took deliberate actions to reset the business in Europe. We made targeted reductions in the first quarter. In terms of our go-to-market changes, we started to align our sales and marketing resources around core industries, aerospace and defense and medical. And we are increasing focus on targeted customer engagement. And that is working for us. It’s, again, very early what we are doing in Europe. And we are seeing the benefits of that come through in the first quarter. But again, as I said, we are very early in this effort so far.

James Ricchiuti: And lastly, if I could just slip 1 in, some very nice growth in revenue per customer for contact. Again, similar type question, are you getting more traction? You called out a couple of verticals, but I’m just wondering where are you seeing the most progress in terms of driving revenue per customer? .

Suresh Krishna: Yes. We are definitely — we are very pleased with the engagement we are getting from our largest customers, most strategic customers. We spend a lot of time talking to them. And we are seeing most response in aerospace and defense and drone companies our specialty, which is speed, reliability and quality resonates a lot with these industries right now. They are high innovation. They like our speed with innovation and our ability to take them all the way through the life cycle of the part all the way into production. And that’s what is resonating and giving us more share of wallet.

Dan Schumacher: What I would tell you as well is as we do customer surveys, one of the things they do like about us is as we have more human interaction with them, with our experience in manufacturing and our experience in actually making the part, helping them through the process so that they’re — we’re delivering what they need, and that makes that customer stickier and order from us more often. As we do more of that, that leads to really that expansion and how many orders, how many parts those customers end up buying for us in a given period. .

Suresh Krishna: Yes. And these industries, as you know, are early in the innovation cycle. These are long investments, early in the innovation cycle, and we will benefit a lot as these industries continue to scale, and we get in early in the innovation cycle.

Operator: This concludes the question-and-answer session as well as today’s teleconference. You may all disconnect your lines at this time. Thank you for your participation.

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