3D Systems Corporation (DDD) on Q2 2021 Results - Earnings Call Transcript

Operator: Good morning and welcome to the 3D Systems Conference Call and Audio Webcast to discuss the results of the Second Quarter 2021. My name is Donna, and I will facilitate the audio portion of today's interactive broadcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. At this time I would like to turn the conference over to A - John Nypaver Junior Vice President, Treasurer, and Investor Relations. Thank you, Sir. Please go ahead. A - John Nypaver: Thank you, Donna. Good morning and welcome to the 3D Systems conference call. With me on the call are Dr. Jeffrey Graves, our President, and Chief Executive Officer; Jagtar Narula, Executive Vice President and Chief Financial Officer; and Andrew Johnson, Executive Vice President, and Chief Legal Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. For those who have access to the streaming portion of the webcast, please be aware that there may be a few seconds delay and that you will not be able to pose questions via the web. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on the slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in last night's press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, which are both available on our Investor Relations website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2020. Now, I am pleased to turn the call over to Jeff Graves, our CEO. Jeff? Jeffrey Graves: Thanks, John. And good morning, everyone, and thank you for joining our call today. When we reported Second Quarter results last year, our Company and the world at large were increasingly gripped in the COVID crisis. No one could foresee how long and painful this situation would become. We were concerned foremost about the safety of our employees and then meeting the ongoing needs of our customers, particularly in the Healthcare industry, where the focus had rapidly turn to the treatment of the victims of the pandemic. While there were to be many dark days ahead, the resiliency of our employees and of our customers sustained and inspired us to weather the storm. We will forever be grateful to our 3D Systems colleagues and to the multitude of frontline workers who struggled each day to take care of the sick, protect the well, and keep our essential services running. It was in this call that our new 3D Systems leadership team was formed. Coming together quickly to develop plans, not simply to stem the losses, but to position our Company to emerge from the pandemic stronger and more focused than ever. Ready to capture the exciting future we saw ahead for additive manufacturing. Our first essential step was to develop a clear purpose statement, which is to be leaders in enabling additive manufacturing solutions for applications in growing markets that demand high-reliability products. We then executed a four-phase plan to enable this vision; reorganizing the two business units, restructured again efficiencies, divest non-core assets, and invest for future growth. Our results since that time have shown consistent steady progress. First, where the return to growth and profitability by Q4 of last year and then continued momentum this year, which carried us in Q2 well beyond 2019, Second Quarter levels, and important pre-COVID benchmark for all companies to measure themselves against. Looking specifically at this year's Second Quarter results, given the difficult environment of Q2 last year, it's no surprise to see an exceptional rebound in revenue, profitability, and cash performance. When adjustments were made for divestitures, which we then refer to as our organic performance, our top line grew almost 60% year-over-year, and EBITDA by a whopping 650% to a level of 12.4% of revenue for the quarter. Jagtar will review the details for you in a few moments. In addition to the usual year-over-year comparisons, 2 additional reference points are helpful in understanding our business momentum. One is our consecutive quarter performance, which reflected revenue growth of over 11% in Q2 versus Q1 of this year. The second reference point, and perhaps the one that's most compelling, is our pre-pandemic performance. If we compare Q2 of this year to the second quarter of 2019, our organic revenue grew 11.4%, which reflects a true acceleration in the adoption of additive manufacturing and the effectiveness of our intense focus on select market verticals and applications. From a cash perspective, I'm very proud of the team's ability to manage the business efficiently in this rapidly changing environment, which resulted in a quarter in the generation of over $13 million of operating cash flow. This allows us to make critical investments needed to support the exciting growth opportunities that we see ahead. So reflecting on the overall state of our business from a strategic positioning standpoint, our combination of global scale, industry-leading breadth of technology across metals and polymer platforms, and our consistent financial performance have now combined to differentiate our Company and positioned us well to be a partner of choice to leading OEMs in healthcare and industrial markets. Turning into our divestitures, in order to improve our focus and greatly enhance our ability to invest in exciting growth opportunities, we moved aggressively over the last year to divest non-core assets. In June, we announced an agreement to sell our On-Demand Parts business. This business focuses on the rapid production of components using additive and subtractive manufacturing methods, which in addition to having divergent business metrics from our core focus, often put us in conflict with other service bureaus, which is an increasingly important market for additive technology. This sale, not only increased cash for investment but increases our available market for future sales. More recently just after quarter-end, we announced the planned divestiture of Simbionix, our medical simulation business. This is a very good business and one that does not align with our core focus on additive manufacturing. By selling it to a strategic buyer, we created a sustainable leader in medical simulation while delivering to us a significant cash for future investment in our core. A true win for all stakeholders. In executing these divestitures, it's important to note that we have now completed our plan to exit non-core businesses. The proceeds from these sales will leave us in a strong position with a cash balance of roughly $500 million and no debt. We now move forward with strong organic growth and profitability at both the gross margin and EBITDA margin level. Positive operating cash flow capable of sustaining the investments needed to meet increasing customer demand. And plenty of dry powder on our balance sheet for additional growth investments. I, again, want to thank all of my colleagues at 3D Systems who have worked so hard in executing our business plan, which has successfully reinforced our leadership position over what's been an extremely challenging 12 months. As we near completion of our divestiture efforts and our momentum accelerates in both of our business units, we turn to the future and have begun making investments for continued growth and profitability. Over the last several months, we announced plans for the expansion of our facilities in Rock Hill, South Carolina, and Littleton, Colorado. In addition, we recently announced the creation of a new executive leadership role, Chief Technology Officer for Additive Manufacturing. The purpose of this role is to drive organic growth by expanding and accelerating application development and product innovation, including all hardware, software, and materials development for production scale Additive Manufacturing solutions. I'm pleased that Dr. David Leigh joined the Company in this capacity. David has been a pioneer in Additive Manufacturing with more than 30 years of experience in the industry. With this new role, we're accelerating our investments in people, processes, infrastructure, and technologies that position us for future growth and profitability. 3D Systems has tremendous potential to revolutionize markets. Through the enablement of production scale, additive manufacturing, and delivering breakthrough innovation is essential to achieving this vision. We're very fortunate to have David joined us on this exciting journey. Before I continue, I'd like to offer an example of how our application focus is driving our development efforts and translating into accelerated growth opportunities for our business. As many of you have might remember, over the last few years, we developed a new printing platform called Figure 4 to DLP-based technology that opened up new and exciting applications for polymeric components. Central to Figure 4 success is the availability of new polymer materials that offer a customer attractive performance characteristics. To this end, over the last year, we've expanded our investments in photopolymer development targeted towards specific applications and market verticals. As an example for the automotive applications, a key relationship was established with Toyota Gazoo Racing, where our joint teams focused on a new Figure 4 material called Pro-Black 10. This was successfully introduced for racing applications but our work did not stop there. Looking to expand to larger component sizes, we worked with the Toyota team to modify the material and process for broader SLA application. This work is now led to the introduction of a new material called Accura AMX Rigid Black, a material that has excellent mechanical and environmental performance, along with the automotive quality surface finish, and can be printed economically in large SLA formats that deliver tremendous productivity improvements over competing production processes. Moving forward, this material will provide application solutions well beyond automotive, such as consumer goods, service bureaus, and specialty contract manufacturing markets. It is this combination of materials, printing technology, and software focused on specific breakthrough customer applications that are at the heart of our organic growth engine. And finally, before I close, I'd like to comment on an area that I am particularly excited about for our longer-term future, and that is regenerative medicine. One of the key reasons behind Dr. Leigh's appointment as our new CTO for additive manufacturing is that it allows our Co-Founder, Chuck Hull, to focus increasingly on our groundbreaking biotechnology efforts as our Chief Technology Officer for Regenerative Medicine. As we've stated before, our partnership with United Therapeutics is essential to our combined efforts to print human organs, beginning with a human lung. These efforts are, by any measure, extraordinary. And we look forward to updating you on progress at some point in the future. Building upon this core development program, we are accelerating our efforts to bring -- to develop and bring to market other non-organ human applications for the body. Just as with our existing healthcare business, this extension of 3D printing into other human applications involves the combination of new tailored materials, very high precision printing technologies, and customized software solutions. In addition to being printable, the materials used in these applications must be very specific requirements, including physical and mechanical properties, as well as having bio-compatibility characteristics to limit or even eliminate the risk of rejection in patients. In this pursuit, we're partnering with other firms that can bring specific technology or application know-how that can move us ahead more quickly. One such partnership that we announced this quarter is with CollPlant, a biomaterials Company that brings unique expertise in plant-derived rhCollagen material. One application of this material that we're focused on is its use as printed soft tissue matrices for breast reconstruction procedures. Today, these soft tissue matrices are most often derived from human cadavers or -- and application expertise for regenerative medicine. There will be many more to follow. A natural extension of our efforts in this area, enabled in part by our recent acquisition of Allevi, is our move to support academic and other research laboratories that are studying the fundamental science of regenerative medicine. From this foundation for which Allevi has a presence in over 350 research labs around the world, we're increasingly excited about the potential of pursuing applications in the pharmaceutical markets, were printed, customized 3-dimensional tissue samples can be used for advanced drug therapy development. The ability to print specific 3-dimensional tissue specimens representing either healthy vascularize cellular structures or even tumors tissues offer the potential of enabling tailored experiments for drug development, which could shorten time to market and improve patient outcomes. While these investments will take time to bear fruit, with our strong foundation in healthcare, which now comprises over half the Company's revenue and key technology partnerships that we're now establishing, we believe we are well-positioned to play a leadership role in this emerging field of regenerative medicine. So to summarize, having executed our 4-phase plan launched last summer, we're now a Company exclusively focused on additive manufacturing. With industry-leading scale, the broadest range of metal and polymer technologies all linked together through -- being in the midst of a turnaround from the economic slowdown due to the pandemic. We saw this turnaround accelerate in the second quarter. After seeing a return to growth in Q1, industrial continued to rebound in Q2, growing sequentially 8.3% as compared to the first quarter of 2021. The performance of our industrial segment reflects the continued market rebound combined with organizational enhancements that we have implemented as part of our reorganization and restructuring efforts. These enhancements have resulted in reduced internal friction, a more holistic view of our customers and pursuits, and improved sales efficiency through a segment-oriented approach. Our improved model is evidenced by the sale of a record 3 of our flagship Factory 500 Metal machines this quarter, which was sold into the Aerospace and Transportation segments. While the last two quarters of seeing good growth from solid execution combined with improving macroeconomic conditions, we continue to see challenges that could impact economic performance, including new variance of the COVID virus, inflation concerns, and continuing supply chain shortages. In regards to this last item, we have begun to see the tightening of costs and availability for certain components that go into our products. Our team continues to manage through the issues and we remain positive about the second half, but we see this as a potential headwind as we move through the year. Now, we turn to gross margin. We reported a gross profit margin of 42.4% in the second quarter of 2021, compared to 31.2% in the second quarter of 2020. The non-GAAP gross profit margin was 42.4% compared to 41% in the same period last year. When compared to the first quarter of this year, gross profit decreased from 44%. This sequential decrease was primarily the result of non-recurring write-downs related to equipment and inventory, impacting margin by approximately 140 Basis points. Even with this nonrecurring charge and announced divestitures, we continue to expect non-GAAP gross margins in the range of 40% to 44% for 2021. Operating expenses for the quarter were $79.1 million on a GAAP basis, an increase of 14.5% compared to the second quarter of 2020. This year-over-year increase is primarily related to higher stock compensation expenses, including the higher expense for employee bonuses that are tied to the strong performance of our business. Our non-GAAP operating expenses in the second quarter were $55.2 million, a 3.3% decrease from the second quarter of the prior year. Compared to the first quarter of 2021, non-GAAP operating expenses increased 7.7% as our focus turns to growth and we invested in our operational infrastructure, which will allow our people and systems to better absorb the growth of strategic investments are made. Adjusted EBITDA defined as non-GAAP operating profit plus depreciation was $20.1 million or 12.4% of revenue compared to a negative $3.6 million or negative 3.2% of revenue in the second quarter of 2020. Compared to the first quarter adjusted EBITDA margin is slightly lower driven by the investments mentioned earlier to improve our corporate infrastructure and support future growth. Now, let's turn to the Cash Flow Statement and Balance sheet. Cash on hand decreased by $600,000 during the quarter. This decrease was driven primarily by acquisition costs of $10.9 million and capital expenditures of $4.3 million, offset by cash generated from operations of $13.5 million. We ended the quarter with no debt and full capacity on our $100 million undrawn Revolving Credit facility. We were quite pleased with our continued strong cash -- continued strong generation of cash from operations, which as mentioned was $13.5 million. This compares favorably to cash used in operations of $18.7 million in Q2 2020. Our strategic reorganization and cost management have enabled this extremely positive turnaround in operating cash flow. Before I conclude my commentary, I would like to provide additional detail on the expected impact of our 2 recently announced divestitures: the On-Demand Parts business and Simbionix. We expect both deals, which will be the last of our planned divestitures, to close in the mid-third quarter, after which they will no longer be included in our results. On a quarterly basis, these combined businesses generated approximately $25 million of revenue per quarter and a non-GAAP contribution margin of approximately $5 million to $6 million per quarter. So what will we look like when these divestitures are complete? From a strategic standpoint, we will be accompanied by a singular focus on additive manufacturing, an exciting and fast-growing industry driven by both healthcare and industrial markets worldwide. We will go forward as one of the largest and best-known comprehensive providers of Additive Manufacturing technology, comprising the broadest range of polymer and metal printing platforms in the industry. A market-leading metals materials -- market-leading materials Portfolio, and an extensive suite of software to enable large-scale, efficient conversion of electronic component designs to finish products for our customers worldwide. From a financial standpoint, following our customers worldwide. From a financial standpoint, following the completion of our divestitures in the third quarter, we will have the strongest financial profile in our industry. We will be a roughly $500 million revenue profitable Company with strong cash generation from operations and an outstanding balance sheet with approximately $500 million of cash and no debt. This profile is unique in our industry and positions us well to invest in exciting organic growth, including expansion of our development, infrastructure, and technology teams, having unique talents that are demonstrating daily new applications of this exciting manufacturing technology for our customers around the world over. We're also in an excellent position to execute on strategic growth opportunities that will support our long-term objective to reach sustainable double-digit revenue growth, gross profit margins of 50%, and adjusted EBITDA margins of 20%. We believe that with our focus, scale, profitability, and Balance sheet, we are very well-positioned to continue to succeed in this exciting growth industry of Additive Manufacturing. Finally, I wanted to provide an update on our Investor Day Event that we have scheduled for September 9 in the Denver, Colorado area. As many of you know, we are seeing a rise in cases of COVID infections, Jagtar Narula: primarily related to the Delta variant. This has created uncertainty in the ability of some interested parties to travel and attend in-person gatherings. Out of an abundance of caution for the safety of our investors, analysts, and employees, we have decided to postpone our Investor Day event. We plan to reschedule to a later date this fall. and our preference is to continue as an in-person event, depending on the trends of the virus variant, the vaccine rollout, and new guidance from public health officials. We will provide an update as soon as possible and look forward to sharing our long-term growth strategy in more detail with the investment community. With that, I will turn the back -- the call back to Jeff. Jeff? Jeffrey Graves: Thanks, Jagtar. The last 12 months are now behind us and I truly believe the next 12 months can be the best this Company's seen in its history. Financially, we are arguably the strongest Company in the space, which means we're the best positioned to take advantage of the accelerating adoption of Additive Manufacturing. We'll use our Balance sheet to drive growth in our core business, and a key focus on driving recurring revenue streams. We'll be deliberate in searching for strategic investments that will support the core business we built. We will now take your questions. Operator? Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. Our first question is coming from Ananda Baruah of Loop Capital Markets. Please go ahead. Ananda Baruah: Hi. Good morning, guys. Thanks for taking the question and congrats on the ongoing solid execution. It's -- yes, you're welcome. It's good to see it -- good to see it sort of clicking, continuing to click altogether. I guess just one for me. I guess maybe a couple of parts, but all related. How do you guys see the organic growth profile going forward? And Jagtar, you sort of referenced double-digit and getting to that. But just any context around how you see the organic growth profile going forward, and what the key action items and milestones are to achieving that. And then just as an additional part of that, what could also happen to allow you to exceed that? So that's it for me. Thanks. Jeffrey Graves: So, I'd say Ananda, thanks for that question. That's very thoughtful. I'll comment and I'll leave it for Jagtar if he wants to supplement as well. We adopted a very specific business model a year ago, and that model is really working well for us. We're extremely application-focused in very specific markets, and clearly, Healthcare is tremendous. We've got a lot of expansion capability there and industrial verticals are becoming increasingly attractive across a number of them. There's plenty of room to hunt, and that horizon's expanding every day as businesses reopen and they're reopening, Ananda, with new concerns in paradigms about their supply chain. I think you've been with new concerns in paradigms about their supply chain, I think you'd see this broadly as folks are nervous and you see the rise of the Delta virus now, right? And we have the same conversations as last year. Gosh, where will we make parts? How do we get them in? How do we get them in? This is our customer conversations. Well, Additive Manufacturing can address a great many of those concerns and offer higher performance parts, whether it's for human application or industrial markets. Their willingness to experiment, to try new applications, to come in and work with our applications in the years, their appetite for that is up tremendously. And as the economy reopens on the Industrial side and Healthcare continues to grow, I think -- we see no end in sight for that. I think the adoption of production-scale industrialized Additive Manufacturing is here and it's going to really take root and grow from here. That's a comment I'd say for the entire industry. For us specifically, I think our business model is somewhat unique. We really focus on finding the right customer and exciting market verticals and really demonstrating exciting applications. I'll give you an example, Ananda, of what's been really terrifically exciting is in the semiconductor manufacturing industry, We pioneered some applications with one of the leading providers of semiconductor manufacturing equipment over the last couple of years. We've really accelerated than last year as there's been a chip shortage. And there's more demand for new machines. They're investing -- our customers are investing more R&D dollars, development dollars for new manufacturing platforms. And they're pulling on the best attributes of Additive Manufacturing to help get them there. A lot of that is around the heat transfer control, extending the thermal stability of the equipment so you can print very fine detailed semiconductor chips. That's just one example, but it's this -- there's a window of embracing now additive that's really exciting. So the punch line from a growth rate perspective, if you look at our Q1 to Q2 -- probably the best reference points you have is Q1 to Q2, again, if I remember the numbers correctly, Jagtar, from your portion of the dialogue here, we were about mid-teens and Healthcare growth and we were nearing double-digits on industrial actually -- high single-digits. And I think Ananda, you're going to see that momentum continue. I think in Healthcare, the ability to customize the product for implants is really attractive. It improves patient outcomes. It reduces the cycle for healing for, for getting patients out of the hospital. It improves the performance of parts for their rehabilitation often in at least skeletal applications and other med devices. Dental has been talked about a lot. Clearly, we have a lot of momentum in the Dental area as well, and that's continued to expand. Industrial, I think you'll see it take root broadly in many verticals. I would expect the growth momentum to certainly continue. And there's a lot of opinion about what the whole industry will grow at. People talk about mid to high teams, even 20% plus. Whatever that overall industry growth rate is, I think we'll certainly be able to mirror that ourselves. And hopefully in the most preferred markets, so that we also get not only volume leverage but some gross margin improvement from being in the really difficult parts of the market. So again, I would -- being the really difficult parts of the market. So again, I would -- Forms are very specific materials. There's a lot of room for consolidation of that kind of expertise, and we want to make sure we have the right platform for that. So we are investing some money in our basic platform, in our basic infrastructure IT, finance, all of that, to make sure that if we did participate in that that we could integrate our Company very well and move forward. We've been doing some of that, we'll do more of it. And then more broadly, obviously, there is continuous innovation in this industry. We are the largest player in the industry, so yeah, scale is always helpful, additional scale. But for us, it's probably more around technologies. And there's three of them. There's printing, there are materials in their software. So those 3 will encompass our focus. And I would again come back, Greg, to Biotech. I just think -- I think the next horizon for Additive Manufacturing. There's an enormous runway for current applications in both industrial and healthcare. But when you look out past those, there is a whole new horizon on Biotech for printing. And I am really excited to be making -- to position ourselves well for that market as well. So hopefully from our shareholder's standpoint investors, you get very short-term -- good short-term benefits by growth in the existing markets and the adoption of additive for healthcare and industrial. And then you provided a long-term value play in the biomedical space, Biotech space with regenerative medicine. Does that make sense? Ananda Baruah: Yeah. All good. I appreciate all the insight. Thanks. I'll hop back in the queue. John Nypaver: Thanks Operator: Thank you. Our next question is coming from Sarkis Sherbetchyan of B. Riley FBR, please go ahead. Sarkis Sherbetchyan: Hey, good morning, and thank you for taking my question here. John Nypaver: Morning. Sarkis Sherbetchyan: The first question just really revolves around the revenue from divestitures that are called out for both Fiscal '19 and '20 on the bottom of the release. I think some total -- let's call it a range of $40 to $50 million on the year, but in the prepared comments, I think you mentioned the quarterly run rate of the revenues from divestitures is $25 million, so that adds up to a 100 million. Just wanted to get a sense of the revenues called out in the press release for wherefrom GibbsCAM, Cimatron, and the other revenues that you called out in the Earnings deck. Is that for the businesses pending divestiture in 3Q? Jagtar Narula: Yes, Sarkis, you've got that exactly right. What's called out in the release is to reconcile to organic growth. Those are only the acquisitions that have already closed -- or sorry, the divestiture has already closed, which GibbsCAM, Cimatron, and a couple of small divestitures that we did last year. Or the end business in China and Australia. And that's the $40 to $50 million that you're referencing of revenue. The 25 million I referenced in my prepared remarks are for the divestitures that we have not yet closed. That's the On-Demand Parts business in the Simbionix business. And we expect that to close midway through the second quarter some point or third quarter, some point. Sarkis Sherbetchyan: Okay. So just to use some crude math here, if I simply take the sum total of the 19 as a baseline rate. X divestitures and then remove about a 100 million bucks in top-line, I guess at about $500 million or so. And let's call it performed the top-line. We should grow the business from that point forward and then kind of take your margin range of I think you said 40% to 44% still. And work with that, correct? Jagtar Narula: Yes. That's absolutely correct. I think I mentioned in my prepared remarks that we would expect to be on the order of $500 million revenue Company post investors profitable. And so I think you've got exactly right. Sarkis Sherbetchyan: Okay, great. And just one final one for me. From a Capex perspective, I know you're kind of reinvesting back into some of these interesting drivers for future growth. Any revisions or any kind of outlook you can provide us for capital expenditures this year and next? Thank you. Jagtar Narula: Yeah. I said, in the past that we expect Capex about 4% to 5% of revenue, I'm still holding to that number. Our Capex some Additive Manufacturing for the reasons I mentioned. Its supply chain has become very risky, and you see that as an ongoing issue for most companies. They are looking for new ways to make parts closer to home with more assurance. And that's so -- beyond COVID, and this was an important quarter for that because we surpassed our 2019 sales number quite substantially. You say, what's driving that? Well, there's a couple of things. Number 1 is I like to think we're executing very well, our model's working with customers coming in with a strong application focus. I think the model is right, and I think their receptivity to adopting additive is really strong. So, so I think we're selling, we're selling into the customer base that's excited about Additive. And I think we've got just the right business model right now to take maximum advantage of that. And you see the net result of that reflected the numbers. I was particularly pleased with the consecutive quarter growth and the comparison to 2019. That 11% growth over '19, I think -- honestly, I think that shows that the model's working, and customers are very receptive to have it right now as it moves into a true production environment. Sarkis Sherbetchyan: Okay, great. Thanks. Very helpful. And then on the printer side, just given your broad portfolio, I'm just curious if you could point out any particular areas or lines of strength and even if there are some notable trends in terms of what you're seeing across metals versus plastics. Jagtar Narula: Yes. It's very -- that's another good question. I've been particularly pleased, I would tell you, on the side of the metal. Metals are really doing quite well in terms of customer interest, volume growth. Both our 350 units now are 500 units. Jeffrey Graves: As Jagtar mentioned we had 3 sales on our Factory 500, which is our largest flagship metal product now, and the 350 is doing very well. We're really pleased on the metal side and it is --customers that have shown interest and are now going as the applications are demonstrated now -- they're going firmly in this direction where they say; Okay, I've made a variety of parts now that really bring me performance benefits. I understand the workflow and the cost impact. I'm in. And they are placing orders for those machines. But also excitingly on the polymer side, the better we do on developing materials, especially in the photopolymer area from a performance, a toughness perspective, and surface finish, The -- and the better we can use our software to densely pack printing chambers, the more these polymer systems are in demand. And I am extremely excited also about our polymeric work, it's, it's really good. The work on SLA and DLP, with these new photopolymers. But a lot of the magic there is in having the material and then integrating it with the process. So the printer itself is important. But I cannot understate the importance of the print process in conjunction with the material. Getting that combination right is extremely valuable to our customers. And then obviously the photopolymer area has been instrumental in helping us in our regenerative medicine efforts as well. So having that core expertise is very beneficial there. And again, we will hear more about that in the years to follow. Sarkis Sherbetchyan: All right, thanks so much. Jagtar Narula: Thanks, Rob. Operator: Thank you, your next question is coming from Paul Chung of JP Morgan. Please go ahead. Jagtar Narula: Morning, Paul. Paul Chung: Morning. Thanks for taking my questions. So on the topline, can you give us a sense of materials versus systems mix? You mentioned higher growth in materials in the quarter in healthcare. So should we start to see materials kind of accelerate over the next couple of quarters and some upward contribution on overall margins as you've seen, some nice momentum on-system sales over the past three quarters? Jagtar Narula: Yeah, Paul, so I think you articulate our strategy a little bit. Material sales, I think we've got a disclosure in the Q we're mentioned recurring revenue which we put materials into that bucket. So material sales, as I think roughly about 1/3 of our revenue in the quarter. It is high margin revenue for us, so one of our stated strategies is to continue of printers, drives future materials revenue and that future material revenue turns into high margin recurring revenue. I think you've captured nicely how we think about the business. Okay. And then on the OpEx side, really translate into driving development. And the reason I put that in there is that the development of that Pro-Black came out of a discussion we were having with Toyota and to meet their needs and the way the least their Company pioneers a lot of technology is through the racing teams. So we launched that material where the racing team developed and launched it with them with an eye toward expanding it into their automotive business. And so we were able to do that and they needed larger format parts. So we've changed our development program to move it over to the SLA platform. So I thought it was a nice example to use. I would tell you I wouldn't read too much into that one single material. It's a great material, but we're launching we have, we have a host of materials, polymer materials, photopolymers, that are under development, Troy. It is a really important part of the business than that's why we're we're putting a new building here in Rock Hill. We're expanding our development laboratories. And we've got new production capacity coming off for materials because, particularly in the photopolymer area, having material for a customer is absolutely instrumental. The best printer in the world without the right material, as you know, this fails. And you've -- so you've got to have those in. Our best success is when we can tie it directly to a customer application and drive our development off of that application. As long as the market is big enough out there to sustain growth. So that's said, as long as the market is big enough out there to sustain growth. So that's the model we've adopted and it's really resonated well with the workforce and with our customers. And so don't read too much into the Pro-Black example in terms of dollars, but it should serve as an example of how we're really driving our development efforts. Paul Chung: Okay, that's fair. And these rig Ag-Tech, could you just size up the software to just curious to know how big that is within the systems or product revenues? Jagtar Narula: Software is right now subbed $10 million per quarter for us, between $5-10 million per quarter. Paul Chung: Do you have mainly just 3D Expert? Jagtar Narula: Yes. 3D Expert, Geomagic, 6 3D Print. Paul Chung: Okay. Perfect. Anything interesting guys? Go ahead. Jeffrey Graves: just to supplement what Jagtar said on software. Some of the most positive feedback in the last 12 months has been around the software platforms, so we're looking to expand our use by customers. They are wonderful tools. I don't know that we've been aggressive enough about getting out and explaining to new customers how really effective they are. You will see an increased focus from us on software. It's a vital part of the ecosystem. And it's one that I think we've got a really good foundation in that we just need to grow from. Paul Chung: Great. Well congrats again, gentlemen, and look forward to seeing it in a few weeks. Jeffrey Graves: Yes, we will. Troy. Thanks so much. Operator: Ladies and gentlemen, we would like to apologize for the technical difficulties experienced by participants on today's webcast. A complete archive will be available later this morning using the same link. At this time, I would like to turn the floor back over to Mr. Graves for closing comments. Jeffrey Graves: So thank you for joining the call today and for your continued support of 3D Systems. A replay of this webcast will be available on our Investor Relations page, where you can see the supplemental charts they go through it, they appreciate the time and the interest in the Company and we'll look forward to talking to you again next quarter. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and have a wonderful day.
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3D Systems Corporation Earnings Preview and Breakthrough in 3D Printing Technology

  • 3D Systems Corporation is set to release quarterly earnings with an estimated EPS of -$0.07 and revenue of $108.48 million.
  • The company unveils the EXT 800 Titan Pellet, a significant advancement in 3D printing technology aimed at enhancing speed and cost-efficiency in manufacturing.
  • The financial impact of the EXT 800 Titan Pellet could be substantial, potentially increasing revenue streams and improving profitability for 3D Systems.

On Monday, June 24, 2024, before the market opens, 3D Systems Corporation (NYSE:DDD) is scheduled to release their quarterly earnings. Wall Street estimates suggest an earnings per share (EPS) of -$0.07. The revenue for the quarter is estimated to be approximately $108.48 million. This earnings report comes at a crucial time for DDD, as the company has recently made significant advancements in 3D printing technology, which could potentially impact its financial performance and market position.

3D Systems has unveiled the EXT 800 Titan Pellet, a major breakthrough in 3D printing technology designed to revolutionize the industry with its enhanced speed and cost-efficiency. This new addition to the company's EXT Titan Pellet systems portfolio is aimed at a wide range of industrial applications, promising to transform manufacturing processes across various sectors. The EXT 800 Titan Pellet is notable for its compact pellet extrusion system, which boasts a build volume of 800 x 600 x 800 mm, combining the speed, reliability, and efficiency of its predecessors into a more compact and cost-effective package.

The introduction of the EXT 800 Titan Pellet is a significant step forward for 3D Systems in expanding its footprint in the 3D Printing industry. It targets diverse manufacturing needs and is capable of producing functional prototypes, tooling, fixtures, and end-use parts for industries such as aerospace, defense, prosthetics, and research. One of the key benefits of this system is its ability to print up to 10 times faster than traditional filament-based systems while also significantly reducing material costs. This makes it an ideal solution for both large shop floors and smaller labs and universities, aiming to streamline their manufacturing processes.

The financial implications of the EXT 800 Titan Pellet for DDD could be substantial. By offering a solution that is up to 10 times faster and reduces material costs by up to 10 times compared to traditional filament-based systems, 3D Systems is positioned to capture a larger market share in the rapidly growing 3D printing industry. This could potentially lead to increased revenue streams and improved profitability in the long term, which would be reflected in future earnings reports.

Currently, the stock of 3D Systems Corporation is trading at $3.52, experiencing a slight decrease of $0.03, which translates to a decline of approximately 0.85%. Today, the shares fluctuated between a low of $3.435 and a high of $3.615. Over the past year, the stock has seen a high of $11.09 and a low of $3.32. With a market capitalization of around $469.69 million, the company's shares are actively traded on the NYSE. The upcoming earnings report and the market's reaction to the new EXT 800 Titan Pellet could provide further insights into the company's financial health and growth prospects.