Half Year 2024 3D Systems Corp Earnings Call

Speaker Change: Hello, and welcome to the 3D Systems First Half 2024 conference calling webcasts at this time office, Pinsorney, listen only mode. If anyone wants to require operator assistance, please press star zero undertell of phone keypad. A question, an answer session will follow the formal presentation.

Operator: If anyone should require operator assistance, please press star zero under the telephone keypad.

Operator: A question and answer session will follow the formal presentation. You may press star one at any time to be placed into question Q.

Speaker Change: He may press star one at any time to be placed in the question queue, as a reminder this conference is being recorded. It's now my pleasure to introduce your host, Nick McCloskey, let's present in best relations. Please go ahead, Nick.

Operator: As a reminder, this conference is being recorded.

Michael McCloskey: It's now my pleasure to introduce your host, Mick McCloskey, Vice President, Investor Relations. Please go ahead, Mick.

Michael McCloskey: Hello, and welcome to 3D Systems' first half, 2024, conference call. With me on today's call are Dr. Jeffrey Graves, president and CEO, and Jeff Creech, CVT and CFO. 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.

Nick McCloskey: Hello, and welcome to 3D Systems First Half 2024 Conference Call.

Speaker Change: With me on today's call, our Dr. Jeffrey Graves, President and CEO and Jeff Creech, EVT and CFO.

Speaker Change: The Webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone, we wish to access the slide portion of this presentation may be so on the Investor Relations section of our website.

Michael McCloskey: The following discussion and responses to your questions reflect management views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially; additional information about factors that could potentially impact our financial results is included in our latest 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.

Speaker Change: The following discussion and responses to your questions with like management views as of today only and will include forward looking statements as described on this slide.

Speaker Change: Actual results may differ materially, additional information about factors that could potentially impact our financial results is included in our latest press release.

Speaker Change: [inaudible] During this call, we will discuss certain non-gap financial matters.

Michael McCloskey: During this call, we will discuss certain non-GAAP financial. In our press release and slides accompanying this webcast, you'll find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable periods of 2023.

Speaker Change: In our press release and slides a company, this webcast, you'll find additional disclosures regarding these non-gap measures, including reconciliation with comparable gap measures.

Speaker Change: Finally, unless otherwise stated, all comparisons in this call will be against the results for the comparable periods of 2023. With that, I'll turn the call over to our CEO Jeff Graves for opening remarks.

Jeffrey Graves: With that, I'll turn the call over to our CEO, Jeff Graves, for opening remarks. Thanks, Mick, and good evening, everyone. With our 2023 10-K filing and our 2024 earnings releases for Q1 and Q2 now complete, we're hosting today's call to discuss our results for the first half and our outlook for the rest of the year. Following my opening comments, I'll turn the call over to our CFO, Jeff Creach, to take a deeper dive into the first half financials. We'll then wrap up our prepared remarks and open the call for questions.

Jeff Graves: Thanks, Mick, and good evening everyone.

Jeff Graves: With our 2023 TNK filing our 2024 Orange releases with you wanting to now complete. We're hosting today's call to discuss our results for the first half and our outlook for the rest of the year.

Speaker Change: Following my opening comments, I'll turn the call over to our CFO Jeff Creech to take a deeper dive into the first half financials. We'll then wrap up our prepared remarks and open the call for questions.

Jeffrey Graves: As a backdrop for our discussion today, I'll comment briefly on our delayed 2023 Annual Report filing. On December 4th of last year, we announced that following a comprehensive month-long proposal and evaluation process, our audit committee had ultimately decided to dismiss the company's independent auditor following the 2023 year-end audits and moved to a Big Four audit firm beginning in 2024. This decision was made based upon many factors, including an assessment of each firm's capabilities in the context of our growing size and complexity as a company. Having informed all parties of our decision last December, the 2023 audit ultimately took much longer than anticipated and was significantly higher costs incurred.

Speaker Change: As a backdrop for our discussion today, I'll comment briefly on our delayed 2023 annual report filing.

Speaker Change: On December 4th of last year, we announced that following a comprehensive month-long proposal on evaluation process.

Speaker Change: that our audit committee had ultimately decided to dismiss the company's independent auditor, following the 2023 year-end with audits, and moved to a big four audit firm beginning in 2024.

Speaker Change: This decision was made upon many factors including assessment of each firm's capabilities in the context of our growing size and complexity as a company.

Speaker Change: Having informed all parties of our decision last December, the 2023 audit ultimately took much longer than anticipated and was significantly higher across and cured.

Jeffrey Graves: These costs, which we view as transitory, had a significant impact on our op-ex costs in the first half trailing into Q3. However, they're expected to return to historically normal levels in Q4. Moving forward, we do anticipate realizing greater efficiencies in the years ahead.

Speaker Change: These costs, which we view as transitory, have a significant impact on our op-ox costs in the first half, trailing in the Q3, are where they're expected to return to historically normal levels in Q4. Moving forward, we do anticipate realizing greater efficiencies in the years ahead.

Jeffrey Graves: With that, let's turn to slide five. When we last spoke in February, we mentioned the weakness we were seeing in our markets with respect to customer cap expending. We believed then, and now, that this was driven largely by a high level of uncertainty on the part of our customers in forecasting consumer demand in the face of high inflation and rising interest rates, combined with a tense geopolitical environment in Europe, Asia, and the Middle East. These uncertainties translate in the softer sales of printer hardware across virtually all of our major in markets.

Speaker Change: If that lets turn this slide fly off.

Speaker Change: When we last spoke in February, we mentioned the weakness we were seeing in our in-market with respect to customer cap expending.

Speaker Change: We believe then and now that this was driven largely by a high level of uncertainty on the part of our customers in forecasting consumer demand in the face of high inflation and rising interest rates, combined with a tense geopolitical environment in Europe, Asia and the Middle East.

Speaker Change: These uncertainties translating the softer sales of printed hardware across with all of our major in markets and the sales reaching their nater for our company in the first quarter.

Jeffrey Graves: The sales reaching their native for our company in the first quarter. While overseas, the track consumer sentiment remained relatively weak in August, with inflation rates now trending downward and interest rates poised to follow. Our opportunity pipeline has consistently strengthened since a bottom down in Q1. This translated to meaningful sales growth in the second quarter, with revenues up 10% on a sequential basis, provided this environment and cap expending trends continue. We expect continued sales growth in Q3 and Q4. While we won't fully make up for the weakness of Q1, the trends are clearly moving in our favor.

Speaker Change: While in the season, the track consumer cinema remain relatively weakened August with inflation rates now trending downward and that's where it's poised to follow. Our opportunity pipeline has consistently strengthened since a bottom-down in Q1.

Speaker Change: This translated to mean for sales growth in the second quarter, which revenues up 10% on the sequential basis.

Speaker Change: Provided this environment and Catholic spending trends continue, we expect continued sales growth in two, three and two, four.

Speaker Change: While we won't fully make up for the weakness of 21, the transfer of clearly moving in our favor.

Jeffrey Graves: From an industry perspective, given the scale of our company across multiple in markets and the breadth of our polymer and metal technology offerings, I believe we have a unique perspective on the trends in the adoption of production scale additive manufacturing. These trends can best be seen through the backlog of new application development requests we're receiving from our customers. This backlog has never been higher, driven by both existing customers and new customers who see increasing benefits from the adoption of 3D printing on an industrial scale. I believe this wise and customer interest could be explained very simply.

Speaker Change: From an industry perspective, given the scale of our company across multiple and markets, and the breadth of our polymer and metal technology offerings, I believe we have a unique perspective on the trends in the adoption of production scale out of manufacturing.

Speaker Change: These trends can best be seen through the backlog of new application development across where we're receiving from our customers.

Speaker Change: This backlog is never been higher.

Speaker Change: Driven by both existing customers and new customers who see increasing benefits from the adoption of 3D printing on industrial scale.

Speaker Change: I believe this wise and customary interest can be explained very simply, the versatility quality and cost of producing components with additive technology, including both metal and air polymers, has become economically compelling.

Jeffrey Graves: The versatility, quality, and cost of producing components with additive technology, including both metal and engineered polymers, has become economically compelling. This is true for our entire industry and across all markets. What does vary is the rate of which adoption occurs. Each market has a unique balance of needs. Markets that derive the greatest benefit from an ability to produce novel component designs, often only available without the techniques, are the first and fastest to adopt this new manufacturing technology. This is certainly the case for healthcare, as we see in both our dental and orthopedic markets, as well as semiconductor equivalent manufacturing, aerospace and defense in our industrial markets system and the field.

Speaker Change: This is True Foreign Power Industry in across all mochets.

Speaker Change: Well, that was very, is the way that which adoption occurs.

Speaker Change: Each market has a unique balance of needs, markets that derive the greatest benefit from an ability to produce novel component designs, often only available with added techniques, are the first and fastest to adopt this new manufacturing technology.

Speaker Change: This is certainly the case for health care, as we see in both our dental and orthopedic markets. As well as semiconductor equipment manufacturing, aerospace and defense in our industrial markets, just to name the field.

Jeffrey Graves: But even industries that manufacture billions apart today, such as electrical and automotive markets, often have a significant number of skews that are lower volume and higher complexity, increasing the value they derive from additive manufacturing. These higher complexity component volumes can, in some cases, rise into the tens or even hundreds of millions in total demand, the work in even the largest current production levels for the entire industry combined. In addition, a very little recognized significant trend is to use additive manufacturing to replace key process steps within an existing manufacturing process. For example, a terrific, a little recognized market for our company is the application of polymer printing methods to produce cores for metal tasks.

Speaker Change: But even industries of manufactured billions of parts today such as electrical and automotive markets often have a significant number of skis that are low of all human higher complexity.

Speaker Change: Increasing the value they derived from additive manufacturing. The entire complexity component volumes can in some case rise into the tens or even hundreds of millions in total demand. The orphan even the largest current production levels for the entire industry combined.

Speaker Change: In addition, a little recognized the significant trend is to use out of manufacturing to replace key process steps within an existing manufacturing process.

Speaker Change: For example, a terrific little recognized market for our company is the application of polymocrine methods to produce cores for metal castings.

Jeffrey Graves: For decades, cores have been a difficult, high-value element of the casting process. With our newest production printers and materials, we're able to produce complex cores for casting at a very attractive cost on demand to match the casting production rates. This method first demonstrated by the aircraft engine industry and more recently in large-scale commercial rocketry has now become a standard element in the factory workflow for these systems. With advancements in technology that reduced cost, it's now being adopted in even higher volume production applications such as automobiles and heavy construction equipment. With a continued march of data of adoption, what's been missing in recent cores is simply the confidence of our customers that they need to have in their in-market demand to warrant new capex investments in their plants.

Speaker Change: For decades, cores have been a difficult high-value element of the casting process, with our newest production printers and materials, we're able to produce complex cores for casting and a very attractive cost on demand to match the casting production rates.

Speaker Change: If we counted this in the metal technology category, the volumes would dwarf, even the largest direct metal printing applications today. Humanity deserves a multi-billion-mile market, highly distributed around the world.

Speaker Change: This method focused demonstrated by the aircraft engine industry and will recently enlarge seal commercial walk-a-tree has now become a standard element in the factory workflow for these systems.

Speaker Change: With advancements and technology that reduce cost, it's now being adopted in even higher avoiding production applications such as automobiles and heavy construction equipment.

Speaker Change: So, with the continued march of the additive adoption, what's been missing in recent quarters is simply the confidence of our customers that they need to have in their in-market demand to warrant new capex investments in their plants. It's really that simple.

Jeffrey Graves: It's really that simple.

Jeffrey Graves: As we now enter a period of lower inflation and lower interest rates, and as the world becomes increasingly risky for extended supply chains, we anticipate a rapid rise in printed demand and along with a strong poll on consumables and services. This is why we've been consistent in our R&D initiatives and customer applications support over this difficult period. With our global scale and an exceptional new product pipeline, we'll well position the benefit from this acceleration when it occurs. The overall printer demand was weakened first half, consumable, resilient and services strengthened, particularly in the healthcare space. Materials and services grew significantly over the prior year.

Speaker Change: As we now lead a period of lower inflation and lower interest rates and as a world becomes increasingly risky for extended supply chains, we need to anticipate a rapid rise in printed demand and along with it a strong pull on consumables and services.

Speaker Change: This is why we've been consistent in our R&D initiatives and customer application support over this difficult period. With our global scale and an exceptional new product pipeline, we'll welcome the physician to benefit from this acceleration under the curves.

Speaker Change: Well, overall printed a man was we can first have consumable whole resilience and services strengthened.

Speaker Change: Particularly in the health care space, materials and services grew significantly over the prior year. This helped offset weakness and printer households to some extent.

Jeffrey Graves: This helped offset weakness and printer hardwells where sales to some extent, specifically to the dental market, with the completion of our new long term supply agreement and the clear aligner market. We expect year over year comparisons will turn positive beginning in Q3. Another bright spot in the first half of the year was our growth in services, which was up 6% year over year for the first half. Services are critical to our customers in two capacities. One is taking care of our installed base of production printers, which is the largest in the world today. But a key second services element is the development of new component applications with our customers.

Speaker Change: specific to the dental market with the completion of our new long-term supply agreement in the clear aligner markets. We expect you over your comparisons with your positive beginning in Q3.

Speaker Change: Another bright spot in the first half of the year, it was our Great Conservatives, which was up 6% year old year for the first half.

Sherylis: Sherylis is your critical to our customers in two capacities.

Sherylis: One is taking care of our installed base of production printers, which is the largest in the world today.

Speaker Change: but a key second service is element is the development of new component applications with our customers.

Jeffrey Graves: This not only provides immediate revenue, but also supports a growing pipeline of printer and consumable sales for the future.

Speaker Change: This not only provides immediate revenue but also supports a grown pipeline of printer and consumable sales for the future.

Jeffrey Graves: Finally, it's worth mentioning our continued success in the medical device area, which is primarily focused on orthopedic applications. For many years, we've been a leader in supporting surgeons, and they're planning an execution of cranial, maxillofacial procedures. Over the years, we supported thousands of surgeries by participating not only in the planning, restorative and reconstructed procedures, but also providing surgical guides and critical implants that are used to help sustain and restore our patient's quality of life. Over the last few years, as our technology has evolved, we've extended this expertise to not only other parts of the human skeleton, but also into trauma environments.

Speaker Change: Finally, it's worth mentioning our continued success in the medical device area, which is primarily focused on orthopedic applications.

Speaker Change: For many years we've been a leader in supporting surgeons and they're planning an execution of cranial maciofacial procedures.

Speaker Change: Over the years, we've supported thousands of surgeries by participating not only in the planning of restorative and reconstructed procedures, but also providing surgical guides and critical implants that are used to help sustain and restore our patient's quality of life.

Speaker Change: But with the last few years, as our technology has evolved, we've extended this expertise to not only other parts of the human skeleton, but also into trauma environments, and new element of the market, we're both quality and response time or extremely important to patient outcomes.

Jeffrey Graves: A new element of the market where both quality and response time are extremely important to patient out. Combs. These are the areas we commonly refer to as personalized healthcare, as the solution we provide is custom tailored to a patient specific needs. First half revenues for personalized healthcare were up over 12% from prior year, and over 54% from the first half of 2021. We are really excited about the future. Given all of these factors from a timing standpoint, we would expect full company revenues to grow at mid-single digit rates on a consecutive quarter base of CQ3 and once again in Q4, bringing our revenue to roughly $450 to $460 million for the full year of 2024.

Speaker Change: These are the areas we commonly refer to as personalized healthcare, as the solution we provide is custom tailored to a patient specific needs.

Speaker Change: First Act revenues for personalized health care will up over 12% from prior year, and over 54% from the first of 2021.

Speaker Change: This marks the 10th consecutive order of annual growth for this business.

Speaker Change: With multi-billion dollar markets opening up before us in orthopedics, we're extremely excited about the future.

Speaker Change: You've been all these factors from a timing standpoint.

Speaker Change: and we would expect full company revenues to grow and mid-seal digit rates are consecutive quarter-base of Creech and once again in Creech for work, bringing our revenue to roughly 450 to 160 million for the full year 2024.

Jeffrey Graves: Growth margins for the first two quarters continue their trends of improvement, even in the face of volume weakness. This is primarily attributable to improving mix of consumables and services and benefits of our manufacturing and sourcing. Looking ahead, we continue to exceed continued room for gross margin expansion as printer volumes begin to recover and would expect margins to strengthen from the low 40% range. Moving to our op-ex expenses, in the first half, as I mentioned earlier, our GNA was significantly impacted by the extended close of our 2023 audit. Setting this aside, we executed well on our restructuring efforts that were announced in Q4 last year, as a part of the sector will be closed and consolidated over 15 sites around the world, and reduced our nonfinance-related workforce cost significantly, while maintaining our most critical investments in R&D and say, else.

Speaker Change: Grower's margins for the first two quarters continue their trends of employment, even in the face of volume weakness.

Speaker Change: and this primarily attributable to it, including mix of consumables and services that benefits of our manufacturing and sourcing.

Speaker Change: Welcome you ahead, we continue to seek continued room for Gross Margin expansion as printer volumes begin to recover and we'll be expecting margins to strengthen from the low 40% range.

Speaker Change: Moving to our opx expenses, and the first half was I mentioned earlier, our GNA was significantly impacted by the extended post of our 2023 audit.

Speaker Change: Setting this aside, we executed well on our restructuring efforts that will announce thank you for last year.

Speaker Change: was a part of the sector we closed and consolidated over 15 sites around the world and reduced our non-financial aid and workforce costs significantly while maintaining our most critical investments in R&D and sales.

Jeffrey Graves: These savings will become apparent when the costs associated with the 2023 close abate and Q4. We expect to deliver operating expense under $60 million for that quarter. With the transient costs in GNA receding in the second half, we would now expect to approach a justity of a downbreak even levels for Q4.

Speaker Change: These savings will become apparent when the cost associated with the 2023 closed abate in 2004.

Speaker Change: We expect to build our operating expense under $60 million for that cooler.

Speaker Change: with the transient cross in GNA receding in the second half. We would now expect to approach a destiny, a destiny of a dog, or even levels for Q4.

Jeffrey Graves: Finally, over the last several months, we've taken decisive action to de-risk our balance sheet. We've reduced our long-term debt by over 50%, opportunistically buying back our convertible notes at a substantial discount. We continue to have one of the strongest cash reserves in our industry, enabling us to face uncertain economic times with the confidence of continuity in our most critical investment areas. This strength, coupled with the widest range of additive solutions across the industry and our global sales and service infrastructure, inspires confidence in our customers that we will be there to support their long-term growth needs.

Speaker Change: Finally, over the last several months, we've taken the size of their action to de-risk a balance sheet.

Speaker Change: We've reduced our long term debt by over 50 percent, opportunistically, buying back our convertible notes at a substantial discount.

Speaker Change: We continue to have one of the strongest cash reserves in our industry, enabling us to face unsuitment economic times with the confidence of continuity in our most critical investment areas.

Speaker Change: This strength coupled with the widest range of added solutions across the industry and our global sales and service infrastructure inspires confidence in our customers that will be there to support their long-term growth dates.

Jeffrey Graves: From this position, we're now intensely focused on enhancing profitability without any compromised emission-critical growth R&D and services investments in order to maximize shareholder value.

Speaker Change: From this position, we're now intensely focused on enhancing profitability without any compromised emission critical growth on B and services investments in order to maximize shareholder value.

Jeffrey Graves: Let's now shift to some of our key announcements from the first half that are important drivers to continuing our possible momentum in the quarters ahead. I'm now on slide 6. Within our healthcare markets, 3D Systems leverages a culture of innovation that was born when our Chief Technology Officer Chuck Hall invented 3D printing and founded the company over four decades ago. This pioneering work, which was recognized last year by President Biden, and he presented Mr. Hall the National Medal of Innovation and Technology, would later spawn the entire additive manufacturing industry. From these routes, our healthcare business has emerged with two strong cornerstones today: dental and medical devices.

Speaker Change: Let's now shift to some of our key announcements from the first half that are important drivers to continue in our possible momentum and the quarters ahead.

Speaker Change: and now on Flight 6.

Chuck Hall: Within our health care markets, three systems leverages, a culture of innovation that was born when our chief technology officer Chuck Hall invented three-week printing and founded the company over four decades ago.

Chuck Hall: This pioneering work, which was recognized last year by President Biden, that he presented Mr. Hall the National Medal of Innovation and Technology with later spa me entire out of the manufacturing industry.

Chuck Hall: From these weeks, our healthcare business has emerged with two strong cornerstones today, dental and medical devices.

Jeffrey Graves: For the dental side of our healthcare business, 2024 has already been an exciting year. In June, we unveiled a significant expansion of our market-leading technology portfolio, which will now target all four major facets of dentistry, including alignment, protection, repair, and replacement of teeth. In conjunction with this strategy update, we were proud to announce the award of the largest contract in our company's history, with an estimated value approaching a quarter billion dollars. This five year agreement positions us as a key supplier for the indirect manufacturing of clear aligners for years to come. Building upon this 20-year heritage in the aligner market, for the last several years, we've been pursuing the next wave of innovation in orthodontics; that is the direct printing of clear aligners.

Chuck Hall: for the dental side of our healthcare business, 2024's already been an exciting year.

Chuck Hall: In June, we unveiled a significant expansion of our marketing technology portfolio, which will now target all four major facets of dentistry, including alignment, protection, repair and replacement of teeth.

Chuck Hall: and Conjunction with this strategy update, we will proud to announce the award of the largest contract in our company's history. With an estimated value approaching a quarter billion dollars.

Chuck Hall: This five-year agreement positions us as a key supplier for the indirect manufacturing and clear aligners for years to come.

Chuck Hall: Building upon this 20-year heritage in the aligner market for the last several years we've been pursuing the next wave of innovation in orthodontics that is the direct printing of the aligners.

Jeffrey Graves: We believe this technology will expand the market for clear polymerical liners, allowing full customization of the product to enhance effectiveness and positioning of teeth, while opening new options for delivery of the product to the patient. We've made significant progress in this area and are targeting commercial introduction in late 2025. From a teeth protection standpoint, we're in the final stages of developing an advanced direct printed night guard solution to be launched through our expanding partnership with Glidewell, a recognized global leader in the supply of advanced dental technologies. For teeth repair, we're building upon the outstanding materials portfolio of our NextDent products, which are increasingly being adopted by customers utilizing a broadening range of printing technology.

Chuck Hall: We believe this technology will expand the market for clear polymerical liners, allowing full customization of the product to enhance effectiveness and positioning of teeth. We'll open new options for the delivery of the product to the patients.

Chuck Hall: We've made significant progress in this area and are targeting commercial interaction in late 2025.

Chuck Hall: From a teeth protection standpoint, where in the final stages of developing an advanced directed night guard solution, to be launched through our outstanding partnership with why world, a recognized global leader in the supply of advanced dental technologies.

Chuck Hall: For teeth repair, we're building upon the outstanding materials portfolio of our next print products, which are increasingly being adopted by customers utilizing a broad range of printing techniques.

Jeffrey Graves: And lastly, we're extremely excited about our first market solution for singletieth multi-material jetted dentures, for which we anticipate regular toy clearance later this year. Our denture technology, which will be the first introduced to the market with our launch partner Glidewell, offers a unique combination of great aesthetics without standing performance, including the critical characteristic of durability, which we believe sets a new standard for the dental industry. This comprehensive approach to the dental market, which builds upon the technologies and repioneered over the last 20 years, positions the company for significant growth and value creation in a global dental treaty printing market estimated at over $15 billion by 2032.

Chuck Hall: and lastly, we're extremely excited about our first market solution for single-teeth multi-material jet-adventures.

Chuck Hall: for which we anticipate regulatory clearance later this year.

Chuck Hall: Our denture technology, which will be the first introduced to the market with our wants-party partner, Glidewall.

Chuck Hall: offers a unique combination of greatest aesthetics, without standing performance, including the critical characteristic of durability, which we believe sets a new standard fit event on this tree.

Chuck Hall: This comprehensive approach to the dental market, which builds upon the technologies and the pioneered over the last 20 years, positions to come me for significant growth and diet creation in a global dental treaty printing market estimated at over $15 billion by $12.32.

Jeffrey Graves: On the medical device side of our healthcare business, our primary focus is orthopedic applications, as I described previously. Our ability to offer the full orthopedic treatment workload of surgeons in the US and Europe, spanning from the digital image to the supply of custom finished hardware for the patient, combined with our quality focus and regulatory expertise, is unique in our industry. It enables us to thrive in the complex healthcare environment of today, offering products and services to support improved patient outcomes, while complying fully with the ever-changing regulatory requirements of individual countries around the world.

Speaker Change: On the medical device side of our healthcare business, our primary focus is orthopedic applications as I described previously.

Speaker Change: Our ability to offer the full orthopedic treatment workload of surgeons in the U.S. and Europe, spanning from the digital image to the supply of custom finished hardware for the patients.

Creech: Creech, combined with a quality-focused regulatory expertise is unique in our industry.

Creech: It enables us to thrive in the complex health care environment of today, offering products and services to support and improve patient outcomes, while complying fully with the ever-changing regulatory requirements of individual countries around the world.

Jeffrey Graves: In an exciting development. Last April, we announced FDA clearance for the world's first 3D printed PEEK cranial implants. Peak, more formally known as polyether ether ketone, is an engineered medical polymer that has performance characteristics very similar in many ways to human bone, while being transparent to X-rays and having excellent biocompatibility. These characteristics make it ideal for cranial, maxial, facial reconstruction applications, a market that's anticipated to exceed $2 billion by the end of 2030. While peak itself has been in the market for some time, the ability to 3D print custom peak implants using our self-contained clean room environment, EX-T220 printing technology is unique.

Creech: In an exciting development last April, we announced FDA Clans for the world's first 3D printed Peek Clangel in Plans.

Speaker Change: The more formally known as Polygithy or E3Tone is an engineered medical polymer that has performance characteristics very similar in many ways to human bone.

Speaker Change: while being transparent to actually is and having excellent vital compatibility.

Speaker Change: These care theorists make it ideal for cranial maxial facial reconstruction applications. A market that's anticipated to exceed $2 billion by the end of 2030.

Speaker Change: Well, Peacock's self has been in the market for some time. The ability to treat, to treat, to plant custom Peacock implants, using our self-contained clean, or environment, EXT-20 printing technology, is unique.

Jeffrey Graves: By directly printing custom 3D peak implants, lead times for the product to reduce, and there's a cost saving yourself up to 85% versus traditional manufacturing methods. Additionally, with a clean room-based prayer architecture and simplified post-processing operations, it's now even possible to execute this entire workflow within the hospital itself for reducing response time for the implant, and opening the application window to even include trauma situations where response time is so very important to a patient's recovery. Since our first demonstration this technology last year, it's been use successfully in 50 cranial plastics throughout Europe, and now with FDA clearance secured earlier this year in the US, we're excited to now bring this exceptional peak peak technology to the United States.

Speaker Change: by directly printing custom 3UP GIM plants lead times to the product that reduce and there's a cost savings of up to 85% versus traditional manufacturing methods.

Speaker Change: Additionally, with a cleaner-based prayer architecture and simplified post-processing operations, it's now even possible to execute this entire workflow within the hospital itself.

Speaker Change: for the reducing response time for the implant and opening the application window to even include trauma situations where response time is so very important to a patient to recovery.

Speaker Change: Since our first demonstration is technology last year, it's been successful in 15 cranial plastics throughout Europe, and now with FDA clearance secured earlier this year in the U.S., we're excited to now bring this exceptional with the predicted technology in the United States.

Jeffrey Graves: Turning the slide 7, our industrial solutions cater to a wide breadth of markets with tremendous potential to adopt the additive manufacturing into the production workflow. Our team of over 80 application-focused engineers are partnering with customers in key industries such as aerospace, transportation, semiconductor, energy, jewelry, academics, and service bureaus to deliver value-added innovations to the manufacturing floor. Just last month, we were very pleased to announce the strategic partnership of Precision Resource to advance metal additive manufacturing initiatives. Precision Resource is a leader in the production of critical components for the automotive, heavy duty, aerospace, and medical device industries.

Speaker Change: Turning the slide 7.

Speaker Change: are industrial solutions cater to a wide breadth of markets which tremendous potential to adopt the out of the manufacturing and the production workflow.

Speaker Change: Our team of over 80 application focused engineers, opponent with customers in key industries such as aerospace, transportation, semiconductor, energy, jewelry, academic, and service bureaus to deliver value added innovations to the manufacturing floor.

Speaker Change: Just last month we were very pleased to announce strategic partnership with precision resource to advance metal additive manufacturing initiatives. Precision resources are a leader in the production of critical components for the automotive, having duty aerospace and medical device industries.

Jeffrey Graves: A perfect match for our blog portfolio catering to both industrial and healthcare applications. With Precision's purchase of two of our metal DMP Flex 350 dual laser systems, they're receiving best-in-class environmental control and delivering exceptionally high-quality parts with unmatched accuracy. Also in July, the metal DMP Factory 500 and the DMP Flex 350 dual printing systems, along with our polymer SLS 380 solution, were purchased by the national additive manufacturing innovation company. Also referred to as NAMI in Saudi Arabia. NAMI's mission is to bring additive manufacturing technology to the Saudi Kingdom, localizing the manufacturer of critical components for a broad range of industrial markets.

Speaker Change: The perfect match for a blog portfolio catering to both industrial and healthcare applications.

Speaker Change: with Precision's protests of two of our metal, the MP Flex 350 view-always resistance. They were receiving best in class environmental control and delivering exceptionally high quality parts with unmasked accuracy.

Speaker Change: Also, we July, the metal VMP factory 500 and the VMP flexed 350 dual printing systems.

Speaker Change: along with our Polymer SLS-2U in the solution, we're purchased by the National Outer of Manufacturing Innovation Company, also we're put to his name and saw your radio.

Speaker Change: Mammons mission is to bring out of manufacturing technology to the Saudi Kingdom, localizing the manufacturer of critical components for a broad range of industrial markets.

Jeffrey Graves: As an example, NAMI will use 3D printing systems to produce critical components for the Saudi Electric Company. with the overall objective of building an increasingly resilient supply chain architecture for this critical infrastructure. Not only does this example speak to add to those increased role in the energy sector, which is expected to grow the 17 billion by 2032. It also demonstrates the possible effects of localization and accessibility to add to the continued catalyzing innovation. The announcement also wins credence to our joint venture with the Saudi Arabian Industrial Investment Development Company and its pivotal role in realizing Saudi Arabia's Vision 2030, which aims in part to bring added manufacturing production capability to tea industries throughout the kingdom.

Nammy: As an example, Nammy will use 3D printing systems to produce critical components for the Saudi Electro-Coupling.

Nammy: With the overall objective of building an increasingly resilient supply chain architecture through this critical infrastructure.

Speaker Change: Not only does this example speak additives increase role in the energy sector, which is expected to grow the 17 billion by 232. It also demonstrates the positive effects of localization and accessibility for additive to continue catalyzing innovation.

Speaker Change: The announcement also wins Creech's to our joint venture with the Saudi Arabian industrial investments company and its pivotal role in realizing Saudi Arabia's vision 2030, which aims in part to bring out the manufacture and production capability to key industries throughout the kingdom.

Jeffrey Creech: With that, I'll turn things over to our CFO, Jeff Creech, to set you the financial in more detail. Jeff?

Speaker Change: with that. I'll turn things over to our CFO Jeff Creech to step through the financial more detail. Jeff?

Jeffrey Creech: Jeff, thank you, and good evening, everyone. I'll begin our revenue summary on slide nine. For the first half, revenues of 216 million, we see a decline of 13% from prior year, almost entirely driven by software printer sales, with materials largely flat and a partial offset and services growth. However, when unpacking the individual quarters of 2024, revenues grew sequentially from Q1 to Q2 by over 10% and across printers, materials, and services, as well as across both healthcare and industrial businesses. Within healthcare, total first half revenues of 94 million declined 14% from prior year, but their materials and services performed very well in first half.

Speaker Change: Jeff, thank you and good evening everyone. I'll begin our webinar of song Leon Slide 9.

Unknown Executive: If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed into question Q. As a reminder, this conference is being recorded.

Jeff: In the first half revenues of 216 million, we've seen a decline of 13% from prior year, almost entirely driven by softer prayer cells.

Jeff: with Materials Largely Flat and a partial offset in services growth.

Michael McCloskey: It's now my pleasure to introduce your host, Mick McCloskey, vice president, investor relations. Please go ahead, Mick.

Jeff: However, when unpacking the individual quarters of 2024, Revenue's groups sequentially from Q1 to Q2 by over 10% and across printers, materials, and services as well as across both healthcare and industrial businesses.

Michael McCloskey: Hello, and welcome to 3D Systems first half 2024 conference call with me on today's call are Dr. Jeffrey Graves, president and CEO and Jeff Creech, CVT and CFO. 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. The following discussion and responses to your questions reflect management views as of today only and will include forward looking statements as described on this slide.

Jeff: within healthcare, total first half revenues of 94 million to climb 14% from prior year. While healthcare materials and services performed very well in first half, this was more than offset by decline in printer sales as Jeffrey Ferti previously.

Jeffrey Creech: This was more than offset by decline in printer sales, as Jeff referred to previously. For our industrial markets, first half revenues of 122 million decline 13% when the prior year, driven by declines in both printers and materials, again with a partial offset and services growth. Within industrial submarkets, we saw strong first half growth in key areas, such as semiconductors, aerospace and defense. However, this was more than offset by weakness broadly throughout most other major in markets.

Jeff: For our industrial markets, first half revenues of 120 million declines, 13% when the fire year driven by declines in both printers and materials, again with a partial offset from services growth.

Michael McCloskey: Actual results may differ materially additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on form 10K and quarterly reports on form 10Q. During this call, we will discuss certain non-gap financial. In our press release and slides accompanying this webcast, you'll find additional disclosures regarding these non-gap measures, including reconciliations with comparable gap measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable periods of 2023.

Jeff: We've been in industrial submarkets, we sell strong first half growth and key areas such as semiconductors, aerospace and defense.

Jeff: However, this was more than offset by weakness broadly throughout most other major end markets.

Jeffrey Creech: Now turning to slide 10, let's speak about gross profits. Non-GAAP gross margin for the first quarter was 40.1%, improving 110 basis points from the prior year. Second quarter, non-GAAP gross margin of 40.9% improved 200 basis points from the prior year. Collectively for the first half, this resulted in margins of 40.5%, a nearly 150 basis point improvement from the first half of last year. Margin performance was primarily driven by favorable makes and materials and services and benefits from our in-sourcing activities, but was partially offset by unfavorable absorption given our lower sales volumes. I would also add that gross margin includes the negative impact associated with an increase in inventory obsolescence reserves taken in the first quarter of this year, representing approximately 2.8 million dollars.

Jeff: Now, turning the slide to you, let's speak about growth's profits.

Jeff: [inaudible]

Jeff: Non-gap growth margin for the first quarter was 40.1% improving 110 basis points from the prior year. Second quarter, non-gap growth margin of 40.9% improved 200 basis points from the prior year.

Jeff: Collective late for the first half, this resulted in margins of 40.5% and nearly 160 basis unemployment from the first half of last year.

Jeffrey Graves: With that, I'll turn the call over to our CEO, Jeff Graves, for opening remarks. Thanks, Mick, and good evening everyone. With our 2023 10K filing and our 2024 earnings releases for Q1 and Q2 now complete, we're hosting today's call to discuss our results for the first half and our outlook for the rest of the year.

Jeff: Margin performance was primarily driven by favourable makes and materials and services and benefits from our insourcing activities, but was partially offset by unfavorable absorption given our lower sales volumes.

Jeff: I will also add that growth's margin includes the negative impact associated with an increase in inventory of solicits reserves taken in 1st quarter of this year representing approximately 2.8 million dollars.

Jeffrey Graves: Following my opening comments, I'll turn the call over to our CFO, Jeff Creach, to take a deeper dive into the first half financials. We'll then wrap up our prepared remarks and open the call for questions.

Jeffrey Creech: On slide 11, you'll find an overview of our operating expense. Non-GAAP operating expense for the first quarter was 66.3 million, increasing 3.6 million from prior year. For the second quarter, this was 64.2 million, a 2.1 million dollar increase from the prior year. Relative to our initial expectations, external audit fees and outside services related to the 2023 audit will approximately $5 million and $2 million higher, respectively, than originally planned in Q1 and Q2. Earlier, we expect 4 quarter op-backs to more meaningful represent the impacts of our previously announced restructuring initiatives and are targeting to deliver op-backs below $60 million for Q4.

Jeffrey Graves: As a backdrop for our discussion today, I'll comment briefly on our delayed 2023 annual report filing. On December 4th of last year, we announced that following a comprehensive month-long proposal and evaluation process that our audit committee had ultimately decided to dismiss the company's independent auditor, following the 2023 year-in with audits, and moved to a big four audit firm beginning in 2024. This decision was made based upon many factors, including assessment of each firm's capabilities in the context of our growing size and complexity as a company.

Speaker Change: I'm SWAT 11, you'll find an overview of our operating experience.

Speaker Change: Non-gap operating expense for the first quarter was 66.3 million, increasing 3.6 million from prior year. For the second quarter, this was 64.2 million, a 2.1 million dollar increase from the prior year.

Speaker Change: Relative to our initial expectations, external audit fees and outside services related to the 2023 audit will approximately $5 million and $2 million higher respectively, then originally planned in Q1 and Q2.

Jeffrey Graves: Having informed all parties of our decision last December, the 2023 audit ultimately took much longer than anticipated and was significantly higher costs incurred. These costs, which we view as transitory, had a significant impact on our OPEX costs in the first half, trailing into Q3. However, they're expected to return to historically normal levels in Q4. Moving forward, we do anticipate realizing greater efficiencies in the years ahead.

Previsory: As Previsory mentioned, it's while its impact is declining. We also expect the extended audit to create a headwind to operate in the expenses in the third quarter. I'll be at too much smaller extent.

Speaker Change: and the staff mentioned earlier, we expect four quarter-op-extable, meaningfully represent the impacts of our previously announced restructuring initiatives and are targeting to deliver up to $460 million for Q4.

Jeffrey Creech: Now, let's speak to the TNL on slide 12. We recorded adjusted EBITDA of maybe $20.1 million for the first quarter and negative $12.9 million for the second quarter, declines with $10 million and $6 million respectively from the same periods of 2023. Declines and adjusted EBITDA primarily reflect lower sales volume and the increases in operating expense just discussed. In line with my commentary on expected op-X savings and sequential revenue improvement throughout the year, we are expecting a significant improvement in adjusted EBITDA in the second half of the year as it compares to the first, with the expectation for continued sequential improvement moving forward, factoring in these cost improvements before should approach break even on an agenda basis.

Speaker Change: Now I'll speak to the TNL on slide 12.

Jeffrey Graves: With that, let's turn to slide five. When we last spoke in February, we mentioned the weakness we were seeing in our in-markets with respect to customer cap expending. We believed then and now that this was driven largely by a high level of uncertainty on the part of our customers in forecasting consumer demand in the face of high inflation and rising interest rates, combined with a tense geopolitical environment in Europe, Asia, and the Middle East.

Speaker Change: We recorded a Justin Bieber die of negative 2.1 million to the first quarter, and negative 12.9 million for the second quarter.

Jeffrey Graves: These uncertainties translate into the softer sales of printer hardware across virtually all of our major in markets. The sales reaching their native for our company in the first quarter. While overseas, the track consumer sentiment remained relatively weak in August, with inflation rates now trending downward and interest rates poised to follow, our opportunity pipeline has consistently strengthened since a bottom-down in Q1. This translated to meaningful sales growth in the second quarter, with revenues up 10% on a sequential basis. Provided this environment and cap expending trends continue, we expect continued sales growth in Q3 and Q4. While we won't fully make up for the weakness of Q1, the trends are clearly moving in our favor.

Speaker Change: Declines with $10 million and $6 million respectively from the same period of 2023. Declines in a Justin David Doc primarily reflect lower sales volume and the increases in operating expense just discussed.

Speaker Change: and line with my commentary on expected op-ex savings and sequential revenue improvement throughout the year. We are expecting a significant improvement in adjusted EBITDA in second half of the year as it compares to the first. We will be expectation for continued sequential improvement moving forward.

Speaker Change: Factoryman and these cost improvements, we'll share the approach, break you and on an address in our basis.

Jeffrey Creech: In the first quarter, we reported fully diluted loss per share of 12 cents compared to a loss per share of 23 cents in the prior year. Non-GAAP loss per share was 17 cents compared to a loss per share of 9 cents in the prior year. In the second quarter, we reported fully diluted loss per share of 21 cents compared to a loss per share of 22 cents in the prior year. Non-GAAP loss per share was 14 cents compared to a loss per share of 7 cents in the prior year.

Speaker Change: The first quarter we reported fully diluted loss per share of 12 cents compared to the loss per share of 23 cents in the prior year. Non-dact loss per share was 17 cents compared to the loss per share of 9 cents in the prior year.

Speaker Change: In the second quarter, we reported fully diluted loss per share of 21 cents compared to a loss per share of 22 cents in the prior year. Non-gap loss per share was 14 cents compared to a loss per share of 7 cents in the prior year.

Jeffrey Graves: From an industry perspective, given the scale of our company across multiple in markets and the breadth of our polymer and metal technology offerings, I believe we have a unique perspective on the trends in the adoption of production scale additive manufacturing. These trends can best be seen through the backlog of new application development requests we're receiving from our customers. This backlog has never been higher, driven by both existing customers and new customers who see increasing benefits from the adoption of 3D printing on industrial scale.

Jeffrey Creech: Now to slide 13 for a balance sheet. We closed the quarter with $193 million in cash and cash equivalence compared to $332 million at the end of last year. The decline included a roughly $87 million payment for the repurchase of $110 million of our 2026 convertible notes. In the aggregate, March 24 and December 2023 note repurchases reduced our debt by over 50%, delivering attractive yields while further derisking our balance sheet. Post-transactions were on position to support critical R&D investments for new product releases that we believe are essential as the market begins to strengthen in the months ahead.

Speaker Change: Notice why 13 for a balance sheet.

Speaker Change: We closed the quarter with $193 million in cash and cash equivalence and paid the $3.32 million that be in the last year. The decline included a roughly $87 million payment for the reproaches of $110 million of our $20.26 convertible notes.

Speaker Change: In the aggregate of March 24 and December 2023, note reproaches, we do start that by over 50% delivering a track of deals while further debisking our balance sheet.

Jeffrey Graves: I believe this rise in customer interest could be explained very simply. The versatility quality and cost of producing components with additive technology, including both metal and engineered polymers, has become economically compelling. This is true for our entire industry and across all markets. What does vary is the rate at which adoption occurs. Each market has a unique balance of needs. Markets that derive the greatest benefit from an ability to produce novel component designs, often only available if I look at techniques, are the first and fastest to adopt this new manufacturing technology.

Speaker Change: Police transactions, law physician to support critical R&D investments for new product releases that we believe are essential as the market begins to strengthen in the months ahead.

Jeffrey Creech: Looking forward, we continue to see inventory as a strategic social cash and expected to drive positive working capital performance over the second half.

Speaker Change: Working forward, we continue to see inventory as a strategic social catch and expected drive positive working capital performance over the second half. Now Jeff, back to you.

Jeffrey Graves: Now Jeff, back to you.

Jeffrey Graves: Thanks very much, Jeff. So I conclude with our remarks on Slide 14. While the broader economic climate remains challenging, our businesses started to sequentially recover and were encouraged by the view ahead. Sales pipelines are increasingly robust, and the growth in services from our applications near, as well as a healthy groundwork for expected new customer growth ahead. We continue to launch new product innovations, such as our EXT 800, Titan, Pellet, printer, and June, with more states for releasing the near future to realizing demand.

Speaker Change: Thanks very much Jeff, so I conclude with our remarks on slide 14.

Jeffrey Graves: This is certainly the case for healthcare, as we see in both our dental and orthopedic markets, as well as semiconductor equivalent manufacturing, aerospace and defense in our industrial markets system and the field. But even industries that manufacture billions of parts a day, such as electrical and automotive markets, often have a significant number of skews that are lower volume and higher complexity, increasing the value they derive from additive manufacturing. These higher complexity component volumes can in some case rise into the tens or even hundreds of millions in total demand.

Jeff: Well, the broader economic climate remains challenging, our businesses started to sequentially recover and we're encouraged by the view ahead.

Speaker Change: Sales Pipelines are increasingly robust and the growth and services from my application to New Year's laser healthy groundwork for expected new customer growth ahead.

Speaker Change: We continue to launch some product invasions such as OEX-T800, Titan Palipenter, and June.

Speaker Change: with more states for release in the near future to be the rising demand.

Jeffrey Graves: From a cost standpoint, we have a clear path for operating costs reduction going forward, and options for significant organizational optimization in the future. Within our software portfolio, we're now concentrating on our opt-in platform exclusively on the industrial markets that place a high value on quality and assurance of supply. Many of which have a regulatory element as well. We have key commercialization efforts in place, such as last year's announced development agreement with Baker Hughes, which is designed to accelerate innovation in the energy sector with the opt-in industrial and model system.

Speaker Change: from a cross standpoint where the clear path for operating cross reduction going forward and options for significant organizational optimization in the future.

Jeffrey Graves: The more than even the largest current production levels for the entire industry combined. In addition, a little recognized significant trend is to use additive manufacturing to replace key process steps within an existing manufacturing process. For example, a terrific, a little recognized market for our company is the application of polymer printing methods to produce cores from metal tasks. For decades, cores have been a difficult, high-value element of the casting process. With our newest production printers and materials, we're able to produce complex cores for casting at a very attractive cost, on demand to match the casting production rates.

Speaker Change: Within our soccer portfolio, we're now concentrating on rock and platform exclusively on the industrial markets that plays a high value on quality and assurance of supply, many of which have a regulatory element as well.

Speaker Change: We have key commercialization efforts in flight, such as last year's announced development agreement with Baker Hughes, which is designed to accelerate innovation in the energy sector with the optimum industrial MLA system.

Jeffrey Graves: In our regenerative medicine initiative, we remain tremendously excited about our partnership with the United States and specifically our one development program. This program not only is opening an entirely new market, but is also spotting incredible technology innovations that will impact our company and the world for years to follow.

Speaker Change: You know, we generated medicine initially, we were made tremendously excited about our partnership with the United States.

Speaker Change: and specifically our One Development Program.

Jeffrey Graves: If we counted this in the metals technology category, the volumes would dwarf even the largest direct metal printing applications today, given that it serves a multi-billion dollar market, highly distributed around the world. This method first demonstrated by the aircraft engine industry and more recently in large-scale commercial rocketry has now become a standard element in the factory workflow for these systems. With advancements in technology that reduced cost, it's now being adopted in even higher volume production applications such as automobiles and heavy construction equipment.

Speaker Change: This program not only is opening and entirely new markets, but is also spawning incredible technology innovations that will impact our company and the world for years to follow.

Jeffrey Graves: From a 2024 perspective, considering the weak start of the year, there was evidence of strengthening in the second half. We're updating our full year 2024 revenue projections of the range $450 to $460 million. With this revenue outlook, we anticipate non-GAAP rich margins of 40 to 42%. Given the effect of our restructuring efforts of declining G&A costs related to the 2023 audit, we now expect full year optics to be in the range of two. $248 million to $250 million, and adjusted EBITDA on improving such that youthful approaches break even performance.

Speaker Change: From a 2024 perspective considering the week started to the year, the incompetence of strengthening in the second half, we're up there in our four year 2024 revenue projections of the range 450 to 160 million dollars.

Speaker Change: with this revenue outlook, we anticipate non-gablish margins at 40 to 42%.

Speaker Change: Give me the effect of our restructuring efforts of declining GNA costs related to the 2022 audit. We now expect full U of X to be in the range of 208 million to 250 million dollars.

Jeffrey Graves: With the continued march of data of adoption, what's been missing in recent cores is simply the confidence of our customers that they need to have in their in-market demand to warrant new capex investments in their plants. It's really that simple. As we now enter a period of lower inflation and lower interest rates and as the world becomes increasingly risky for extended supply chains, we would anticipate a rapid rise in printed demand and along with it a strong pull on consumables and services.

Speaker Change: and adjusted the dollar, including such that youthful approaches go even performance.

Operator: We thank you for joining the call today, and we'll now open the line up for questions.

Speaker Change: We thank you for joining the call today and we'll now open the line up for questions. Kevin, if you'd open the line please.

Operator: Kevin, if you'd open the line, please. Certainly, we're now conducting a question-and-answer session. If you'd like to be placing the question Q, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question Q. If you'd like to remove yourself from the Q, please press star two. Let's star ones be placed in the question Q.

Kevin: Certainly, without the conduct of your question and answer session, if you'd like to be placed in the question queue, please press star one on your telephone keypad, a confirmation told will indicate your line is in the question queue. If you'd like to move yourself from the queue, please press star two.

Jeffrey Graves: This is why we've been consistent in our R&D initiatives and customer applications support over this difficult period. With our global scale and an exceptional new product pipeline, we'll well position the benefit from this acceleration when it occurs. While overall printed demand was weakened first half, consumables were resilient and services strengthened, particularly in the healthcare space materials and services grew significantly over the prior year. This helped offset weakness and printer hardwells where it sells to some extent.

Kevin: Let's star one's replace in the question queue.

Troy Jensen: Our first question today is coming from Troy Jensen from Cancer Pistaro, July. Is that live? Hey, gentlemen. Thanks for the time. I'm excited to talk to you. It's been a while. Sure. Hey, so off on the side. Yeah, I thought results were decent, given kind of what we kind of knew, so congrats on what you could do.

Speaker Change: Our first question today is coming from Troy Jensen from Cancer Pistoral July, is that a lot?

Troy Jensen: Hey, Jonathan, thanks for the time, excited to talk to you, it's been a while.

Troy Jensen: Thanks, Jordy. Hey, so, you know, I'll find a side...

Speaker Change: Yeah, I thought Results were decent, giving kind of what we kind of knew, so congrats on what you could do. But how about quickly to challenge you a little bit on dental, I guess I've heard more questions about the direct printing of a liners, and I have more to do with the cost of materials.

Troy Jensen: But how about quickly to challenge a little bit on dental? I guess I've heard more questions about the direct printing of a liners and has more to do with the cost of materials and so how the total cost reflects versus vacuum cashing, but thoughts on that and just kind of rank order in dental. Is it dentures or night guards or these direct printing of a liners that you're most excited about?

Jeffrey Graves: Specifically to the dental market, with the completion of our new long-term supply agreement and the clear aligner market, we expect year-over-year comparisons will turn positive beginning in Q3. Another bright spot in the first half of the year was our growth in services, which was up 6% year-over-year for the first half. Services are critical to our customers in two capacities. One is taking care of our installed base of production printers, which is the largest in the world today. But a key second services element is the development of new component applications with our customers. This not only provides immediate revenue, but also supports a growing pipeline of printer and consumable sales for the future.

Speaker Change: So how the total cost reflects versus vacuum cashing, but thoughts on that and just kind of rank order in dental areas, dentures, or night guards, or these direct printing of a liner is a pretty most excited book.

Jeffrey Graves: Yeah, great. Two great questions, Troy. So let me I'll talk to both of the net order. So the direct printing method is has been challenging. Why I've taken us a couple of years to develop it. The Mitch, I believe it'll carve in the market, Troy is an ability to move, move teeth more effectively. So basically, it should broaden the market for clear liners. I think the, you know, working with the leader in the field of the clear liners, we've gotten the cost down to be more attractive year over year for a long time. So it sets a big hurdle for direct direct printing method.

Speaker Change: Yeah, great, two great questions, Troy. So let me, I'll talk to both of them in that order. So the direct printing method is

Speaker Change: has been challenging, as well as taking us a couple of years to develop it. The Mitch, I believe, will carve in the market joy, is an ability to move teeth more effectively. So, basically, it should broaden the market for clear aligners.

Jeffrey Graves: Finally, as worth mentioning, our continued success in the medical device area, which is primarily focused on orthopedic applications. For many years, we've been a leader in supporting surgeons, and they're planning an execution of cranio-maximal facial procedures. Over the years, we supported thousands of surgeries by participating not only in the planning, a restorative and reconstructed procedures, but also providing surgical guides and critical implants that are used to help sustain and restore patients' quality of life.

Speaker Change: I think working with the leader in the field of clear aligners we've gotten the cost down to be more attractive year over year for a long time so it sets a big hurdle for the direct printing method.

Jeffrey Graves: The world we're finding is direct printed liners can deal with more difficult, if you will, more difficult cases. And it also also opens up all channels to market because you, with these smaller printers, could actually disperse them geographically. You could put them in major cities. You can even potentially put them in a dentist office. So it offers more channels to market, more ways of delivering the product more quickly to patients. And I believe it can, it can; it has the potential at least to move teeth more effectively. The, and it's a different; it's obviously a different cost structure.

Speaker Change: The what we're finding is direct print of the liners.

Speaker Change: Can deal with more difficult, if you will, more difficult cases.

Speaker Change: and it also opens up the channel's to market because with the smaller printers, you could actually disperse them geographically, you could put them in major cities, you could even potentially put them in a vinaus office, so it offers more channels to market more ways of delivering the product more quickly to patients.

Jeffrey Graves: Over the last few years, as our technology has evolved, we've extended this expertise to not only other parts of the human skeleton, but also into trauma environments. A new element of the market for both quality and response time are extremely important to patient out. Combs. These are the areas we commonly refer to as personalized health care as the solution we provide is custom tailored to a patient specific needs. First half revenues for personalized health care were up over 12% from prior year and over 54% from the first half of 2021. This marks the 10th consecutive quarter of annual growth for this business with multi billion dollar markets opening up before us in orthopedics. We're extremely excited about the future.

Speaker Change: and I believe it has the potential release to move teeth more effectively. And it's a different, it's obviously a different cost structure. So it's, you know, we're excited about the technology. I still, you know, we're looking for commercialization late 25.

Jeffrey Graves: So it's, you know, we're excited about the technology.

Jeffrey Graves: I still, you know, we're looking for commercialization only 25. It's a high-barned, displace the indirect method, but I do believe it will carve an inch in the market. So I wouldn't tell you it's our, you know, we're envisioning it to be our highest revenue product in dental, but it will have its home.

Speaker Change: and it's a high bar that just placed the indirect method, but I do believe it'll carve a niche in the market.

Speaker Change: So I wouldn't tell you it's our, you know, we're envisioning it to be our highest revenue product in dental, but it will have its home and I think we've got very compelling technology to offer.

Jeffrey Graves: And I think we've got very compelling technology to offer. In terms of what we're most excited about for the denture stuff, it is fantastic. It's a, it's made by a jetting method that's very fast. The aesthetics are beautiful, and the durability of the material we can produce is outstanding. So if you put yourself in a patient's shoes, you know, you could treat these dentures exactly like you treat traditional dentures. You can drop them. You can, you know, pulling them across the road. You can do that, and they hold together, and they're beautiful. They're actually quite attractive to look at.

Speaker Change: in terms of what we're most excited about for the denture stuff that's fantastic.

Speaker Change: It's made by a jetting method that's very fast, the aesthetics are beautiful, and the durability of the material we can produce is outstanding. So if you put yourself in a patient's shoes.

Jeffrey Graves: Given all these factors from a timing standpoint, we would expect full company revenues to grow at mid-similar digit rates on a consecutive quarter base of CQ3 and once again in Q4, bringing our revenue to roughly 450 to 460 million for the four year 2024. Growth margins for the first two quarters continue their trends of improvement, even in the face of volume weakness. This primarily attributable to an improving mix of consumables and services and benefits of our manufacturing and sourcing.

Speaker Change: You know, you could treat these ditchers exactly like you treat traditional ditchers, you could drop them, you can, you know, pulling them across the road, you could do that, and they hold together and they're beautiful. They're actually quite attractive to look at. So, and I believe they're going to be very cost effective. So, if you look in, there's roughly 4 million of ditchers sold a year in United States, I remember the number of the right, so.

Jeffrey Graves: So, and I believe they're going to be very cost-effective. So if you look in, there's roughly four million of dentures sold a year in the United States are a member of the number right. So there's a big market. 3D printing is a great way to go because it eliminates all a lot of difficult manual labor that today, honestly, is sent largely, largely sent overseas for execution. So you've got long lead times. You've got a big labor component. 3D printing is an excellent way to make teeth. And I, so I, I'm truly excited, and I'm working with wide roles.

Speaker Change: There's a big market.

Speaker Change: Greeney Printing is a great way to go, because it eliminates a lot of difficult manual labor that today, honestly, is sent largely overseas for execution.

Jeffrey Graves: Looking ahead, we continue, we exceed continued room for gross margin expansion as printer volumes begin to recover. It would expect margins to strengthen from the low 40% range. Moving to our op-ex expenses in the first half as I mentioned earlier, our GNA was significantly impacted by the extended close of our 2023 audit. Setting this aside, we executed well on our restructuring efforts that were announced in Q4 last year. As a part of this echo, we closed and consolidated over 15 sites around the world and reduced our nonfinance-related workforce costs significantly while maintaining our most critical investments in R&D and sales.

Speaker Change: So you've got a long lead time, you've got a big labor component.

Jeffrey Graves: These savings will become apparent when the costs associated with the 2023 close debate in Q4. We expect to deliver operating expense under $60 million for that quarter. With the transient costs in GNA receding in the second half, we would now expect to approach a justity of a downbreak even levels for Q4.

Speaker Change: 3, Prince and excellent way to make teeth and I am truly excited and working with Glide Lowes fantastic. Thereup.

Jeffrey Graves: Fantastic. They're a, they're a technology leader. They do a great job. We've got a big distribution network. So we're very excited to have them in partnership with us. And we'll open up the rest of the market over time.

Speaker Change: There's technology leader, they do a great job, they've got a big distribution network, they, so we're very excited to have them in partnership with us and we'll open up the rest of the market over time, but it's I'm really excited and we expect.

Jeffrey Graves: But it's, I'm. I'm really excited, and we expect FDA approval of that here in the second half. At some point, we're very optimistic about that. So we were good to go.

Speaker Change: FDA approval of that here in the second half at some point we're very optimistic about that. So we were a good to go.

Unknown Executive: Okay.

Troy Jensen: And if I could flip one more question and just on the pipeline comments. I've always said, you know, in a downturn, pipeline always looks great. Right. So you'll be able to steal on it, and you're adding some new ones. Right. So pipeline grows.

Speaker Change: Okay, and if I can't slip one more question in, um...

Speaker Change: Just on the pipeline comments, I've always said, you know, in a downturn, pipeline always looks great, right? So you'll be able to steal on it and you're right into new ones, right? So pipeline grows, but, you know, what's changing the pipeline and is a defense driven or you're more colouring, I'm just going to re-connectivity would be helpful.

Jeffrey Graves: But, you know, what's changed in the pipeline and is it defense driven or any more color and kind of just kind of recent activity would be helpful. Yeah. Sure.

Jeffrey Graves: So you obviously have been following our industry for a long time and asked good questions. The pipeline is a, and we're trying to get better at quantifying it. But I can tell you, just, just qualitatively, it's never been bigger in the, you know, the last few years. It's running up. And it's because the economics are the value of these parts that we're able to print now out of more and more specialized materials is going up and up. We just, we deliver a part for the, for the Navy for a naval. No application. Not long ago.

Speaker Change: Yeah, sure, Troy. You, you obviously have been following our industry for a long time and ask good questions. The pipeline is a, and we're trying to get better at quantifying it.

Jeffrey Graves: Finally, over the last several months, we've taken decisive action to de-risk our balance sheet. We've reduced our long-term debt by over 50%, opportunistically buying back our convertible notes at a substantial discount. We continue to have one of the strongest cash reserves in our industry, enabling us to face uncertain economic times with the confidence of continuity in our most critical investment areas. This strength coupled with the widest range of additive solutions across the industry and our global sales and service infrastructure inspires confidence in our customers that will be there to support their long-term growth needs. From this position, we're now intensely focused on enhancing profitability without any compromised emission critical growth R&D and services investments in order to maximize shareholder value.

Speaker Change: but I can tell you just quality, but it's never been bigger in over the last few years. It's running up and it's because...

Speaker Change: The economics are the value of these parts that we're able to print now out of more and more specialized materials is going up and up. We deliver the part for the Nadee for a naval application.

Jeffrey Graves: And it was, it was a part that does well in the install water. Okay. So it was a unique, a unique, but accepted material for the Navy. And the, what was the selling point on that components and why they're moving in the production is. Is it gets it gets a sub out of dry dock and back to the back to the ocean quickly. So the comparison to making that through traditional casting methods, which it could be, it was not. It's not an exotic design. But the traditional casting methods would have put that lead time at over 400 days.

Speaker Change: Now, long ago, and it was a part that does well in salt water, okay, so it was a unique, unique, but accepted material for the estate.

Speaker Change: and what was the selling point on that component and why they're moving in the production is...

Speaker Change: is against a sub-out of dry dock and back to the ocean quickly. So the comparison to making that through traditional casting methods, which it could be, it was not an exotic design, but the traditional casting methods would have put that lead time at over 400 days.

Jeffrey Graves: Let's now shift to some of our key announcements from the first half that are important drivers to continuing our possible momentum in the quarters ahead. I'm now on slide six. Within our healthcare markets, 3D systems leverages a culture of innovation that was born when our chief technology officer Chuck Hall invented 3D printing and founded the company over four decades ago. This pioneering work, which was recognized last year by President Biden, when he presented Mr. Hall, the National Medal of Innovation and Technology, would later spawn the entire additive manufacturing industry.

Jeffrey Graves: We got to turn around. So in four days, we got to back. So it's an example of what can be done. So I would tell you the pipeline for the fence applications is very strong. And we're really excited about that.

Speaker Change: We've got to turn the round 24 days.

Speaker Change: We've got it back, so this is an example of what can be done, so I would tell you the pipe line for the fence applications is very strong.

Jeffrey Graves: The semiconductor industry, we're doing a lot of export for work and metals for the semiconductor industry for semiconductor fabrication. So the folks that make that equipment, which is very expensive, complex equipment, they derive great benefits from 3D printing. First of all, the design of the product, but also in the economics. There's many of those components are assembled that you can put together now into a one assembly. If you are one large component, if you want to, that doesn't. So excited about the fence, excited about semiconductor, but there's a lot of polymer applications. There's our portfolio materials.

Speaker Change: and we're really excited about that. The semiconductor industry, we're doing a lot of exploratory work in metals for the semiconductor industry for semiconductor fabrication. So the folks that make that equipment, which is very expensive, complex equipment.

Speaker Change: They drive great benefits from 3D printing, personal and design of the product, but also in the economics, the many of those components are assembled, that you can put together now into into a single, you know, a single, if you are one, one large component, if you don't set up that does it.

Jeffrey Graves: From these routes, our healthcare business has emerged with two strong cornerstones today, dental and medical devices. For the dental side of our healthcare business, 2024 has already been an exciting year. In June, we unveiled a significant expansion of our market-leading technology portfolio, which will now target all four major facets of industry, including alignment, protection, repair, and replacement of teeth. In conjunction with this strategy update, we were proud to announce the award of the largest contract in our company's history, with an estimated value of approaching a quarter billion dollars.

Speaker Change: So, excited about the parents, excited about semiconductor.

Speaker Change: But there's a lot of polymer applications. There's our portfolio materials. You've got now flame retardant materials that are UL-UL certified that we can go to market with. That opens up a lot of exciting markets in electronics. For example, that have to have flame retardants.

Jeffrey Graves: You've got now flame retardant materials that are UL, UL certified that we can go to market with. That opens up a lot of exciting markets in electronics. For example, that have to have flame retardants. So industrial markets. Troy, I generalize defense and specialty industries like, like semiconductor is great. The more and more Troy we're tackling, the industries that have a long tail to their skews. So, you've got some real high runners. They're thought of as very high-volume industries. They make a lot of certain components. But most these companies have an annoyingly long to them, an annoyingly long tail of components that are measured in hundreds.

Speaker Change: So Industrial Markets.

Jeffrey Graves: This five-year agreement positions us as a key supplier for the indirect manufacturing of clear aligners for years to come. Building upon this 20-year heritage in the aligner market, for the last several years, we've been pursuing the next wave of innovation in orthodontics, that is the direct printing of clear aligners. We believe this technology will expand the market for clear polymerical aligners, allowing full customization of the product to enhance effectiveness and positioning of teeth, while opening new options for the delivery of the product to the patient.

Speaker Change: I'm sure I'd generalize the fence and specialty industries like Sunning Dr. Graves.

Speaker Change: The more and more joy, we're tackling the industries that have a long tail to their skews, so you've got some real high runners there, their thought of as very high volume industries.

Speaker Change: They make a lot of certain components.

Speaker Change: But most of these companies have a abnormally long to them, an abnormally long tail of components that are measured in hundreds.

Jeffrey Graves: And you can produce those so much more cost-effectively with 3D printing, once you get the process and material down. So we're having a lot of discussion with electronics, a lot of automotive discussion for specialty components, especially in hotter environments. And then you've got the natural ones in metal, which are aerospace and semiconductor are big ones. So I might have beat that question to that. But I am excited about it.

Speaker Change: and you can produce so much more cost effectively with 3D printing once you get the process in the year of answer. We're in a lot of discussion with electronics.

Jeffrey Graves: We've made significant progress in this area and are targeting commercial introduction in late 2025. From a teeth protection standpoint, where in the final stages of developing an advanced direct printed night guard solution, to be launched through our expanding partnership with Glydewell, a recognized global leader in the supply of advanced dental technologies. For teeth to repair, we're building upon the outstanding materials portfolio of our next student products, which are increasingly being adopted by customers utilizing a broadening range of printing technology techniques.

Speaker Change: A lot of our motive, the sketch of her specialty components.

Speaker Change: especially in hotter environments, and then you've got the natural ones in metal which are aerospace and semiconductor of big ones. So I might have beat that question to death, but I am excited about it. Well, honestly, Troy, we're having to come up with ways to prioritize the work. We've got any applications in there.

Jeffrey Graves: The guys, well, honestly, Troy, we're having to come up with ways to prioritize the work. We've got 80 applications in there. And they're busy every day of the day. It's a week, long days. And it's because people look at the economics of 3D printing. See, this is going to work. Now, they're not buying fairness. They're not buying a lot of machines yet. So when the capital environment gets better, I think you see a lot of those guys turning and saying, OK, sells printers, sells materials. And it's not there yet. It's a leading indicator. But I am tremendously excited about it.

Speaker Change: and they're busy every day of the week, the long days. And it's because people look at the economics of 3D police say, this is going to work. Now, they're not playing fairness, they're not playing a lot of machines yet.

Speaker Change: So, when the CapEx environment gets better, I think you see a lot of those guys turning and saying, okay, sell us printers, sell us materials and it's not there yet, it's a leading indicator, but I am tremendously excited about it.

Jeffrey Graves: Lastly, we're extremely excited about our first-to-market solution for singleties, multi-material-jetted dentures, for which we anticipate regular toy clearance later this year. Our denture technology, which will be the first introduced to the market with our launch partner Glydewell, offers a unique combination of great aesthetics without standing performance, including the critical characteristic of durability, which we believe sets a new standard for the dental industry. This comprehensive approach to the dental market, which builds upon the technologies we pioneered over the last 20 years, positions to company for significant growth and value creation, in a global dental treaty printing market estimated at over $15 billion by the 2032.

Troy Jensen: Okay, awesome guys. I wish you the best. Good luck. Thanks, Troy.

Speaker Change: Okay, awesome, guys. Wish you the best. Good luck.

Danny Eggerichs: Thank you. Next question is coming from Greg Palm from Craig. How am I doing?

Speaker Change: Thanks for watching.

Speaker Change: Thank you, next question is coming from Greg Palm from Craig Allen, who is now alive.

Danny Eggerichs: Greg, is that live? Thanks.

Danny Eggerichs: This is Danny Egrich on for Greg today. Appreciate comments on kind of the pipeline. And just being that pipeline has strengthened. And it sounds like momentum kind of built in Q2 and has expected it to for the second half as well. Just kind of curious. If you feel like visibility has improved as well. Or just, you know, for pipeline conversion or just being cognizant of overall macro, do you feel like maybe it's still just kind of too early, and you're glad that interest is coming back. But it's still kind of a way to see game.

Speaker Change: Thanks, this is Danny Agrochon for Greg today.

Danny Agrochon: Appreciate comments on kind of the pipeline and just being that pipeline has strengthened and it sounds like momentum kind of built in Q2 and is expected to for the second half as well Just kind of curious if you feel like visibility has improved

Speaker Change: Um, as well or just, you know, for pipeline conversion or just being caught in the cognizant of overall macro, do you feel like maybe it's still just kind of too early and you're glad that interest is coming back, but it's still kind of a way to see game.

Jeffrey Graves: On the medical device side of our healthcare business, our primary focus is orthopedic applications, as I described previously. Our ability to offer the full orthopedic treatment workflow to surgeons in the US and Europe, spanning from the digital image to the supply of custom finished hardware for the patient, combined with our quality focus and regulatory expertise, is unique in our industry. It enables us to thrive in the complex healthcare environment of today, offering products and services to support improved patient outcomes, while complying fully with the ever-changing regulatory requirements of individual countries around the world.

Jeffrey Graves: Yeah, Danny. First of all, it's good to hear your voice as well. Thanks for the question. It's probably more the latter, Danny. I mean, I'm really encouraged that customers are bringing it out and modeling the economics, looking at the quality of the parts, and all of that. The proof in the pudding will be then placing orders for equipment, which requires them to up their cat X budget. So I would, you know, I would get a zoomer in about it. I mean, we're projecting, as we said, you know, continued growth from Q2 to Q3 to Q4.

Speaker Change: Yeah, Danny, first of all, it's good to hear your voice as well, thanks for the question, it's probably more the latter, Danny, I'm really encouraged, the customers are bringing it out.

Speaker Change: Molling the economics looking at the quality of the parts or all of that.

Speaker Change: The proof in the pudding will be them placing orders for equipment, which requires enough to cap ex-budget. So I wouldn't, you know, I wouldn't get exuberant about it. I mean, what projecting, as we said, you know, continued growth from 22 to 23 to 24.

Jeffrey Graves: And we put that kind of the mid single digit levels, which we're, you know, we're happy to see the trend. Maybe we'll be better than that. But it largely depends on the, on the, the outlook our customers have for in demand. So hopefully the world will see continue to be in place and coming down. And then, you know, I've been encouraged by the Fed's comments about lower interest rates. I think that's, that'll be a strong push for more demand for our customers, more capital explaining their plants. When that happens, you should see a direct closer to our business.

Jeffrey Graves: In an exciting development, last April, we announced FDA clearance for the world's first 3D printed peak cranial implants. Peak, more formally known as polygether ether ketone, is an engineered medical polymer that has performance characteristics very similar in many ways to human bone, while being transparent to x-rays and having excellent biocompatibility. These characteristics make it ideal for cranial, maxial, facial reconstruction applications, a market that's anticipated to exceed $2 billion by the end of 2030.

Speaker Change: and we put that kind of the mid-single-digit levels, which we're happy to see the trend.

Speaker Change: Maybe we'll be better than that, but it'll largely depends on the outlook or customers have for in demand.

Speaker Change: So hopefully the world will see continue to be in place of coming down and then you have been encouraged by the Fed's comments about lower interest rates, I think that that'll be a strong push for more demand for our customers, more tap-expending and their plants.

Speaker Change: and that happens. You should see a direct voltage to our business. So, that's what we're waiting on. I've, you've seen the same public metrics that I do. So.

Jeffrey Graves: So that's what we're waiting on. I, I, you see the same public metrics that I do. So, you know, you kind of get the hold of breath of it. And we're coming into an election, and you know, we're in a volatile world. So all those caveats. But I am encouraged with the trend. It is, it is a big pickup in interest from Q1 to Q2. Very pleased with that. And we'll see where he's going to go. But right now it looks positive.

Jeffrey Graves: While peak itself has been in the market for some time, the ability to 3D print custom peak implants using our self-contained clean room environment, EX-T220 printing technology is unique. By directly printing custom 3D peak implants, lead times for the product to reduce, and there's a cost saving yourself up to 85% versus traditional manufacturing methods. Additionally, with a clean room-based prayer architecture and simplified post-processing operations, it's now even possible to execute this entire workflow within the hospital itself for the reducing response time for the implant, and opening the application window to even include trauma situations where response time is so very important to a patient's recovery.

Speaker Change: You know, you kind of got the hold your breath a little bit and we're coming into an election and, you know, we're in a ball to the world. So all those caveats, but I am encouraged with the trend, it is a big pick up and an interest from Keith wanted to.

Speaker Change: Good, very pleased with that and we'll see where Creech and Paul Gobe, but right now it looks positive.

Jeffrey Graves: Okay, understood. Then maybe on dental and maybe more specifically this large, you know, line or contract, you know, the simple math implies kind of like a $50 million average annual value. You know, is that the right way to think about it, or is there a way to think about maybe the cadence of that throughout its lifetime. And then, you know, just being that that average annual value is quite a bit lower. Then maybe that business has historically done is it, you know, is it safe to say all the things you're doing elsewhere in dental are kind of aimed at filling that hole.

Speaker Change: Okay, understood, then maybe on dental and maybe more specifically this large.

Speaker Change: you know, a liner contract, you know, the simple math implies kind of like a 50 million dollar average annual value, you know, is that the right way to think about it or is there a way to think about it?

Speaker Change: Maybe the cadence of that throughout its lifetime and then, you know, just being that.

Jeffrey Graves: Since our first demonstration this technology last year, it's been use successfully in 50 cranial plastics throughout Europe, and now with FDA clearance secured earlier this year in the US, we're excited to now bring this exceptional peak peak technology to the United States.

Speaker Change: Dad.

Speaker Change: Abergy any value is quite a bit lower than maybe that business has historically done is it's safe to say all of things you're doing elsewhere and dental are kind of aimed at filling that hole.

Jeffrey Graves: Yeah, I might phrase that a little bit differently, but yes, I mean, we're excited about the fundamental Danny that dental industry is converting to 3D printing broadly. And all, you know, and that's why we rolled out our strategy about participating all for all for elements, basic elements of the market. So, in terms of modeling that contract, it's very hard to predict year-to-year noise, but the overall value of the contract, with our best shot at saying what it's going to be. And you know, if you knew nothing, you draw a line through the points and say, that's where it's going.

Speaker Change: Yeah, I might phrase it a little bit differently, but yes, I mean, we're excited about the front of the middle of Danny's and dental industry is converting to 3D printing broadly. And that's why we rolled out our strategy about participating all four elements, basic elements of the markets.

Jeffrey Graves: Turning the slide 7, our industrial solutions cater to a wide breadth of markets with tremendous potential to adopt the additive manufacturing into the production workflow. Our team of over 80 application-focused engineers are partnering with customers in key industries such as aerospace, transportation, semiconductor, energy, jewelry, academics, and service bureaus to deliver value added innovations to the manufacturing floor. Just last month, we were very pleased to announce the strategic partnership of precision resource to advance metal additive manufacturing initiatives.

Speaker Change: So, the V.

Speaker Change: In turn, the modeling that contract.

Speaker Change: It's very hard to predict year to year noise.

Speaker Change: But the overall value of the contract with our best shot at Sandwood is going to be, and if you knew nothing, you draw a line through the points and say, that's what's going on. I guarantee you that won't be right, it'll be a little fluctuate.

Jeffrey Graves: I guarantee you that won't be right. It'll be, it'll fluctuate from that. So you can listen to the public players that talk about in demand, and you can get a sense for, you know, how that demand flows through to us. It's hard to be precise. The model we have an attempted that we've just set a keynote of value over the five over the five years. And we have no real further insight than that. I think it's a safe bet. It'll be in that total range, but the timing will depend on the end demand. And that's driven in part, Danny, by the inflation pressures consumers are feeling. They don't tend to buy as many aligners when food's expensive and gas is up.

Speaker Change: from that.

Jeffrey Graves: Precision resource is a leader in the production of critical components for the automotive, heavy duty, aerospace, and medical device industries. A perfect match for our blog portfolio catering to both industrial and healthcare applications. With precision's purchase of two of our metal DMP Flex 350 dual laser systems, they're receiving best in class environmental control and delivering exceptionally high quality parts with unmatched accuracy. Also in July, the metal DMP factory 500 and the DMP Flex 350 dual printing systems, along with our polymer SLS 380 solution, were purchased by the national additive manufacturing innovation company.

Speaker Change: So, you can listen to the public players that talk about in demand and you can get a sense for, you know, how that demand flows through to us. It's hard to be precise in the model, we have an attempt at that. We've just said a cumulative value over the five years.

Speaker Change: and if we have no real food or insight in that, I think it's a safe bet it'll be in that total range.

Speaker Change #120: but if the timing will depend on the end of the man.

Speaker Change: and that's driven in part, Danny by the inflation pressures, consumers are feeling they don't send a buy as many aligners when food's expensive and gas is up.

Jeffrey Graves: So, so hopefully that's all coming down, and you see that rise.

Danny Agrochon: So hopefully that's all coming down and you'll see that rise.

Jeffrey Graves: The other markets for dental, you can view it as kind of kind of going to get, but, but in their own right, they're very exciting. I mean, dentures have been made by hand to date, you know, so largely by hand. And, and you'll see a complete conversion to 3D printing in the, you know, the next several years. And it's a big market, not only in the US, but in Europe and even parts of Asia. So we're thrilled to be in it. We're committed to it. It looks great.

Speaker Change: The other markets for general, and you can be like, yeah, kind of kind of...

Jeffrey Graves: Also referred to as NAMI in Saudi Arabia. NAMI's mission is to bring additive manufacturing technology to the Saudi Kingdom, localizing the manufacturer of critical components for a broad range of industrial markets. As an example, NAMI will use 3D printing systems to produce critical components for the Saudi electric company, with the overall objective of building an increasingly resilient supply chain architecture for this critical infrastructure. Not only does this example speak to add to those increased role in the energy sector, which is expected to grow the 17 billion by 2032.

Speaker Change: Don't get up, but...

Speaker Change: but they're in their own right, they're very exciting and we did this for a bit of me by hand to date, you know, so largely by hand and you'll see a complete conversion to 3D printing in the next several years and it's a big market, not only in U.S., but in Europe and even parts of Asia, so we're thrilled to be in it, we're committed to it and it looks great.

Jeffrey Graves: It also demonstrates the possible effects of localization and accessibility to add to the continued catalyzing innovation. The announcement also wins credence to our joint venture with the Saudi Arabian Industrial Investment Development Company and its pivotal role in realizing Saudi Arabia's vision 2030, which aims in part to bring added manufacturing production capability to tea industries throughout the kingdom.

Jeffrey Graves: Night guards. We were still gauging the size of that market. The performance requirements are a little less than having to straighten teeth. But there's an interesting, interesting work going on to improve the intelligence, if you will, of the liners, the, there are my guards to, to help with sleep, Abney and help other, other, other issues. So I don't know where that'll take the market, but certainly it lends itself to 3D printing. And then finally have to repair the standard to repair that we've been in that business for a long time. So, so those, those are four big pieces of dental, and we're, we're having player in all of them today, probably the biggest.

Speaker Change: My grads, we were still gauging the size of that market, the performance requirements.

Speaker Change: are a little less than having a straightened teeth.

Speaker Change: But there's some interesting, interesting word going on that includes the intelligence if you will, of the lineers, there are my guards to help us sleep at me and help other other issues. So I don't know where that'll take the market, but certainly a lens of self-attreaty printing.

Speaker Change: and then finding out future repair of the standard future repair that we've been in that business for a long time. So those are the four big pieces of dental and we're a heavy player in all of them today, probably the biggest. And we look forward to getting even bigger all the time as a market converts to a three-year print.

Unknown Executive: And we look forward to getting even bigger over time as the market converts to 3D print. Okay, great. Excited to see all that, or see all that take hold.

Jeffrey Creech: With that, I'll turn things over to our CFO, Jeff Creech, to step through the financial in more detail. Jeff?

Jeffrey Creech: Jeff, thank you and good evening, everyone.

Speaker Change: Okay, great, excited to see all that, or see all that take hold, I will leave with their thanks

Unknown Executive: I will leave it there. Thanks.

Jeffrey Creech: I'll begin our revenue summary on slide nine. For the first half revenues of 216 million, we see a decline of 13% from prior year almost entirely driven by software printer sales with materials largely flat and a partial offset and services growth. However, when unpacking the individual quarters of 2024, revenues grew sequentially from Q1 to Q2 by over 10% and across printers, materials and services as well as across both healthcare and industrial businesses.

Unknown Executive: Thanks so much, Danny. Thank you.

Danny Agrochon: Thanks so much, Danny.

Jim Rashudy: Our next question is coming from Jim Rashudy from Needhamon Company. Your line is now live. All right, thanks. Good afternoon. So, hello Sequential growth. You're anticipating Q3; Q4 is dad. Talk to us a little bit about how you might see that playing out in both health care and industrial. Are you anticipating growth in both those sectors sequentially in the second half? Yes, we are Jim. We should see growth in both of them that the sustainability of growth and health care looks very high, and so very pleased about that. Again, there was a drop-off in printer sales in health care, where we're selling printers to contract manufacturers that are making implants, things like that.

Speaker Change: Thank you, our next question is coming from Jim Rashud if you need him in company your line is now live

Jim Rashud: Alright, thanks, good afternoon.

Jim Rashud: Hello, sequential growth you're anticipating Q3Q4 is dead.

Jim Rashud: Talk to us a little bit about how you might see that playing out in both healthcare and industrial. Are you anticipating growth in both those sectors? Sequentialing in the second hand?

Speaker Change: Yes, we are Jim. We should see growth in both of them.

Jeffrey Creech: Within healthcare, total first half revenues of 94 million declined 14% from prior year, but their materials and services performed very well in first half. This was more than offset by decline in printer sales as Jeff referred to previously. For our industrial markets, first half revenues of 122 million declined 13% when the prior year driven by the clients of both printers and materials. Again, with a partial offset and services growth within industrial submarkets, we saw strong first half growth in key areas such as semiconductors, aerospace and defense. However, this was more than offset by weakness broadly throughout most other major end markets.

Speaker Change: The sustainability of growth and health care looks very high, so a lot of work pleased about that. Again, there was a drop-off in parental sales and health care where we're selling printers to contract manufacturers that are making implants like that. That will solve again, driven by CapEx.

Jeffrey Graves: That was soft, again driven by CapEx. But the rest of health care was, if you will, very healthy. So, we saw a growth there; expect that to continue. We expect to see some rebound on the industrial side. Primarily from recovery of printers with CapEx spending becoming loosening up over the rest of the year. So, those are the basic drivers, Jim. Okay, and that ties into the next question. Jeff, you seem to have the habit of thinking about Q3, Q4. Is it going to be driven with sequential growth? How much of a recovery are you anticipating in systems, or is this materials and services that that's driving some of this improvement?

Speaker Change: but the rest of health care was, if you will, for your very healthy, so we saw a girl there, expect that to continue. We expect to see some rebound on the industrial side primarily from a couple of printers.

Speaker Change: with CapExpinning, become loosening up over the rest of the year. So those are the basic drivers.

Jeffrey Creech: Okay, and I've dead ties into the next question, Jeffrey Creech, and I've been thinking about Q3Q4, is it going to be driven into sequential growth? How much of a recovery are you anticipating in systems or is this materials and services that's driving some of this improvement?

Jeffrey Creech: Now, turning to slide 10, let's speak about gross profits. Non-gap gross margin for the first quarter was 40.1%, improving 110 basis points from the prior year. Second quarter, non-gap gross margin of 40.9% improved 200 basis points from the prior year. Collectively, for the first half, this resulted in margins of 40.5%, a nearly 150 basis point improvement from the first half of last year. Margin performance was primarily driven by favorable makes and materials and services and benefits from our in-sourcing activities, but was partially offset by unfavorable absorption given our lower sales volumes. I would also add that gross margin includes the negative impact associated with an increase in inventory obsolescence reserves taken in the first quarter of this year, representing approximately $2.8 million.

Jeffrey Creech: Yep, I would expect both, but the biggest recovery, Jim, will probably be in printers. Again, that's really what's held us back. That's what bottomed out in Q1. And, you know, Q1 was a really tough quarter, and Q2 was up 10%. Most of that was driven by improving printer sales. And I would expect the rest of the year will be that too. But, the installed capacity is being worked pretty hard. So, material pull through and services should be good. And remember, part of services are our application engineers that are doing new product development with customers as a part of our sales process.

Speaker Change: Yep, I would expect both, but the biggest recovery generally probably in front of us. Again, that's really what's held us back. That's what bought them down in Q1.

Speaker Change #100: and you know, two, one was a really tough quarter and N-T-2 was up 10 percent. Most of that was driven by improving printer sales and I would expect the rest of the year I'll be that too, but the installed capacity is being worked pretty hard.

Speaker Change #100: So, material pull through services should be good and remember, part of services are our application engineers that are doing new product development with customers as a part of our sales process. So, those 80 engineers are very busy. We give food that in the services number.

Jeffrey Creech: So, those baby engineers are very busy. We include that in the services number. And I would expect it to continue to grow. Thanks, Jim.

Speaker Change #100: and I would expect it to continue to grow.

Jeffrey Creech: On slide 11, you'll find an overview of our operating expense. Non-gap operating expense for the first quarter was $66.3 million, increasing $3.6 million from prior year. For the second quarter, this was $64.2 million, a $2.1 million increased from the prior year. Relative to our initial expectations, external audit fees and outside services related to the 2023 audit, will approximately $5 million and $2 million higher respectively, then originally planned in Q1 and Q2.

Speaker Change #100: Thank you all.

Tyler Hutin: Thank you. Next question is coming from Brian Draft from William Blair. Your line is now live. Thanks for taking my question. This is Tyler on for Brian.

Jim Rashud: Thanks, Jim.

Speaker Change #101: Thank you, next question is coming from Brian Graves from William Blair, your line is now live.

Speaker Change #101: Hey, thanks for taking my questions. This is Tyler on for Brian. I was just wondering if you could give some direction and how dental sales performed in the first and second quarter and then I'll have a follow up.

Tyler Hutin: I was just wondering if you could give some direction on how dental sales performed in the first and second quarter. And then I'll have a follow-up. So, overall dental sales, certainly materials for dental sales were strengthened throughout the quarter. Materials utilization. And, again, remember, the aligner market is a big one for us. So, we saw strengthening there. The rest of the market was so-so. I mean, it basically mirrored a lot of the performance of the rest in terms of printer demand. So, you saw Q1 was a weak quarter; Q2 improved, kind of along with the broad market.

Speaker Change #102: So, overall dental sales, certainly materials for dental sales were strengthened throughout the quarter, material utilization.

Speaker Change #102: and Anne again will remember the liner market is a big one for us, so we saw strengthening there.

Jeffrey Creech: As previously mentioned, while its impact is declining, we also expect the extended audit to create a headwind to operate in expenses in the third quarter, albeit to a much smaller extent. And as Jeff mentioned earlier, we expect fourth quarter op-backs to more meaningfully represent the impacts of our previously announced restructuring initiatives and are targeting to deliver op-backs below $60 million for Q4.

Anne: The rest of the market was so, so, I mean, it basically mirrored a lot of the performance of the rest in terms of printer demand.

Anne: So, you saw Q1 was a recorder, Q2 improved kind of along with the broad markets.

Jeffrey Graves: And we would expect that to continue. So, again, materials pull-through should remain pretty healthy for the rest of the year and grow. And then you've got increasing printer sales. So, those are things that should drive the rest of the year in dental.

Anne: and we would expect that turn to continue. So again, materials pull through should remain pretty healthy for the rest of the year and grow and then you've got increasing printer sales. So those are things that should drive the rest of the year in dental.

Jeffrey Creech: Now let's speak to the TNL on slide 12. We reported adjusted EBITDA of negative 20.1 million for the first quarter and negative 12.9 million for the second quarter, declines of $10 million and $6 million respectively from the same periods of 2023, declines in adjusted EBITDA primarily reflect lower sales volume and the increases in operating expense just discussed. In line with my commentary on expected op-X savings and sequential revenue improvement throughout the year, we are expecting a significant improvement in adjusted EBITDA in the second half of the year as it compares to the first, with the expectation for continued sequential improvement moving forward, factoring in these cost improvements before it should approach break even on an agenda basis. [inaudible] Non-gap loss per share was 14 cents compared to a loss per share of 7 cents in the prior year.

Jeffrey Graves: Thank you, Chef. Just wanted to touch on the night guard situation a little more. I think you mentioned that this will be a direct print. Was it made by hand before? Was it kind of made with a mold that you could 3D print as well? Just kind of like the opportunity there. I know you said you guys were kind of observing what's up maybe, and I've also heard about it a lot too. It's just, you know, it's just with sleep, acne, et cetera. So it's pretty interesting. Advising it into just any more details you have there.

Speaker Change #104: Okay, thanks Jeff, and just kind of wanted to touch on the night guard situation a little more.

Speaker Change #105: I think you mentioned that this will be a direct print, I wasn't made by hand before, it was a kind of made with a mold that you could really print as well, just kind of like the opportunity there. I know you said you guys are kind of observing what the up may be and I've also heard about it a lot too.

Speaker Change #106: You know, it's just a sleep apnea, et cetera. So it's pretty interesting, uh, uh, I think it into just any more details you have there.

Jeffrey Graves: Yeah, Tyler, there's two, there's two advantages to 3D printing them. Today, they are a thermal form. Okay, over over a die. And because you don't, you're not trying to move teeth at night. You're just trying to protect it. The price points can be pretty low for standard protectors in your mouth. Well, 3D printing allows you to do is is them want obviously create more complex aligner if you wanted to do other things like participate in training or or address sleep. I mean, other things like that. You have more design flexibility. The other thing, though, which I think will be really interesting to see play out is you can use dual materials.

Speaker Change #106: Yes, Tyler, there's two advantages to 3D Creech and them. Today they are a thermal form.

Tyler: Okay, over, over a die. And because you don't, you're not trying to move teeth at night, you're just trying to protect it.

Tyler: The price points can be pretty low for standard protectors in your mouth. Well, 3D printing allows you to do is, is them will obviously create more complex aligner if you want it to do other things.

Tyler: like participating in training, or address sleep at any other things like that. You have more design flexibility. The other thing, though, which I think will be really interesting to see play out is you can use dual materials.

Jeffrey Graves: So you can have a hard surface where the protectors mate with the teeth. You have a soft service around your gum for comfort. So I think the ability of 3D printing to make dual materials, which is unique, is a real attribute. And then for so full consumers that are concerned about a better night sleep and they don't want to wear the traditional night guards. I think it's a really interesting extension of that market.

Tyler: So you can have a hard surface where the protectors mate with the teeth and you have a soft surface around your gum for comfort.

Tyler: So I think the ability of cleaning to make dual materials, which is unique, is a real attributes. And that is for the so-called consumers that...

Jeffrey Creech: Now to slide 13 for a balance sheet. We closed the quarter with $193 million in cash and cash equivalence compared to $332 million at the end of last year. The decline included a roughly $87 million payment for the repurchase of $110 million of our 2026 convertible notes. In the aggregate, March 24 and December 2023 note repurchases reduced our debt by over 50% delivering a track of yields while further derisking our balance sheet.

Tyler: are concerned about a better night's sleep and they don't want to wear the traditional my guards. I think it's a really interesting extension of that market.

Jeffrey Graves: We are we that is our newest segment, if you will, in the dental market and we're still kind of feeling our way along with live well in terms of the market potential. But I can tell you we have an excited partner, and we'll see how fast we can move. Certainly, the technology is there. And you know, and we've got to make sure that the cost effect on this works as well. Okay.

Tyler: We are, we, that is our newest segment if you will in the dental market.

Tyler: and we're still kind of feeling our way along with live well in terms of the market potential. So I can tell you we have an excited partner and we'll see how fast we can move. Certainly the technology is there and we've got to make sure that the cost of technicalness works as well.

Jeffrey Creech: Close transactions, long position to support critical R&D investments for new product releases that we believe are essential as the market begins to strengthen in the months ahead. Looking forward, we continue to see inventory as a strategic social cash and expected drive positive working capital performance over the second half.

Jeffrey Graves: Yeah, just kind of following up really quick on that. Is that kind of a does that fall into the discretionary bucket just like aligners would, or is this more of a need for patients? You know, Tyler, I laughed because you know, if you go back 20 years, who would have thought aligners were critical for life, but they became critical to people. You know, people view it very high on their priority list to have really straight teeth. And so it's really moved up the list. Night guards are kind of similar. I mean a lot of people grind their teeth at night.

Speaker Change #108: Yeah, just kind of following up really quick on that. Is that kind of a, does that fall into the discretionary bucket, just like a liner's wood, or is this more of a need for patients?

Tyler: You know, Tyler, I laughed because, you know, if you go back 20 years, who would have thought the liners were critical to life, but they became critical to people, you know, and people view it very high on their priorities list to have really straight teeth.

Jeffrey Graves: Now Jeff back to you. Thanks very much, Jeff.

Jeffrey Graves: So I conclude with our remarks on slide 14. While the broader economic climate remains challenging, our businesses started to sequentially recover and were encouraged by the view ahead. Sales pipelines are increasingly robust and the growth in services from our applications near as well as a healthy groundwork for expected new customer growth ahead. We continue to launch new product innovations such as our EXT 800, Titan, Palette, Printer, and June, with more states for releasing the near future to realizing demand.

Speaker Change #109: and so it's really moved up the list. Night characters are kind of similar, I mean, a lot of people grind their teeth at night and I know many, many people, next time by the challenge, next time you're going to ask them, how many night guards are selling the people.

Jeffrey Graves: And I know, you know, many, many people. Next time I challenge some of your dentists, ask him how many night guards are selling to people. I'll very high percentage of people by night guards these days. The overall consumption is certainly larger than dentures, you know, the people have to replace their teeth. And it's because, you know, people are living longer; their teeth wear down at night because they grind, and they're wearing these aligners. So, as those as those advanced now with 3D printing. We can look at them doing it, basically a better aligner, if you will, a more one that conforms to your mouth better.

Speaker Change #109: I'll very high percentage of people by nightguard these days, the overall consumption.

Speaker Change #109: is certainly larger than dentures in other people after the place they're teeth.

Speaker Change #109: and it's because, you know, people are living longer, they're cheap, we're down at night, because they grind and they're wearing this, these align yourself.

Jeffrey Graves: From a cost standpoint, we have a clear path for operating costs reduction going forward and options for significant organizational optimization in the future. Within our software portfolio, we're now concentrating on our often platform exclusively on the industrial markets that place a high value on quality and assurance of supply. Many of which have a regulatory element as well. We have key commercialization efforts in plight such as last year's announced development agreement with Baker Hughes, which is designed to excel at innovation in the energy sector with the Octane Industrial and MoS system.

Speaker Change #109: As those advanced, now what 3D printing, we can look at doing it basically a better liner if you will, a more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more, more comfortable, and potentially even later on in life, put instrumentation in there to monitor sleep, to monitor stresses.

Tyler Hutin: That's more comfortable and potentially even later on in life put instrumentation in there to monitor sleep, to monitor stresses, things like that are all on the drawing board, but could you printing up the option for all of that. Great. I appreciate answering my questions. I'll pass it along. Yeah, thanks, Tyler.

Speaker Change #110: Things like that are all on the drawing board, but PewDiePening opens up the auction for all of that.

Speaker Change #111: Great, I appreciate you answering my questions, I'll pass it along.

Ananda Baruah: Take care. Thank you.

Tyler: Thanks, Tyler. Take care.

Ananda Baruah: Next question is coming from Ananda Baruah from Loop Capital Market for Linus. Now live. Yeah, guys, welcome back. Good to see you back online with you guys again. Yeah, good to hear your voice, Ananda. Thank you. Yeah, no doubt. I guess apologies if you went through this. I jumped on the queue and I started to do a couple calls going on tonight.

Rua: Thank you. Next question is coming from an end of Rua from Loop Capital Market Travelling, is now live.

Jeffrey Graves: In our regenerative medicine initiative, we remain tremendously excited about our partnership with United States and specifically our one development program. This program, not only is opening an entirely new market, there's also spotting incredible technology innovations that will impact our company and the world for years to follow.

Speaker Change #113: Yeah, guys, welcome back.

Speaker Change #114: Good to see you there, come on, we'll see you guys again.

Speaker Change #115: Good to hear your voice, but not to thank you.

Speaker Change #116: Yeah, no doubt. I guess...

Speaker Change #117: Apologies, if you went through this, I jumped on with the Q&A started to do a couple calls going on tonight. But did you talk about where across the portfolio, the pipeline, you're seeing pipeline improvement?

Jeffrey Graves: But did you just, did you talk about where across the portfolio, the pipeline, you've seen pipeline improvement? Yeah, it's, it's, it's, it's, it was posted foremost in the markets that the space says they absolutely need 3D printing. So no turning defense, aerospace; those are those are strong. Okay, the specialty markets like semiconductor equipment. We've been working as semiconductor equipment for years, and it's finally paying off for us. We've got an enormous amount of interest in metal parts for the semiconductor equipment industry. And if you think of the Chips Act and all the manufacturing coming down the pike on that, we're really excited about that because we can save them a lot of money by consolidating assemblies in the fewer numbers of parts.

Jeffrey Graves: From a 2024 perspective, considering the week start to the year, with evidence of strengthening in the second half, we're updating our four-year 2024 revenue projections of the range $450 to $460 million. With this revenue outlook, we anticipate non-gablished margins of 40 to 42 percent. Given the effect of our restructuring efforts of declining G&A costs related to the 2023 audit, we now expect four-year off-ex to be in the range of $248 million to $250 million. In adjusting the data and improving such that youthful approaches break even performance.

Speaker Change #118: Yeah, it's it's it's it's it was pushed in foremost in the market with the space that absolutely need 3D printing. So no turning the fence aerospace those with those are strong, okay.

Speaker Change #118: and specialty markets like semiconductor equipment, we've been working at semiconductor equipment for years and it's finally paying off for us, we've got...

Speaker Change #118: and an enormous amount of interest in metal parts, for the semiconductor equipment industry. And if you think of the chips act and all the manufacturing coming down the pike on that, we're really excited about that because we can save them a lot of money by consolidating assemblies in a fewer numbers of parts.

Unknown Executive: We thank you for joining the call today and we'll now open the line up for questions.

Unknown Executive: Kevin, if you'd open the line, please. Certainly. We're now conducting a question and answer session. If you'd like to be placing the question Q, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question Q. If you'd like to remove yourself from the Q, please press star two. Let's star ones be placing the question Q.

Jeffrey Graves: And you have a much higher performing part in some of the critical components in those systems. And some of them, I, if you've ever been close to a manufacturer of semiconductor equipment, some of them are incredibly difficult applications to survive in. And so you could do that with 3D printing a lot better than anything else. So though there's been a big demand in those kind of areas, especially the equipment thing. So we put all that in the industrial category.

Speaker Change #118: and you can have a much higher performing part in some of the critical components in those systems.

Speaker Change #119: Some of them, if you've ever been close to a manufacturer of swimming doctor equipment

Speaker Change #119: Some of them are incredibly difficult applications to survive in.

Troy Jensen: Our first question today is coming from Troy Jensen from Cancer Pistaro, July. Is that live? Hey, gentlemen. Thanks for the time. I'm excited to talk to you. It's been a while. Very short. Hey, so off on the side. Yeah, I thought results were decent, given kind of what we kind of knew. So congrats on what you could do. But how about quickly to challenge a little bit on dental? I guess I've heard more questions about the direct printing of aligners and has more to do with the cost of materials.

Speaker Change #119: So, you can do that with 3D turning off or anything else, so there's a big demand in those kind of areas.

Speaker Change #119: especially equipment and things so we probably have the industrial category.

Jeffrey Graves: On the medical side, orthopedics is really doing well. Our personalized health service is doing very well. We'll bring the cost down at good reliability for a very good reliability and quality in a regulated situation for patients. And so people basically going through bone repairs for either either cancer treatments or damage to bones. It's becoming very economically viable to make those kinds of implants now with 3D printing. So we've been in that market for a long time with modeling first years ago. The banking aids for surgery, and now the implants are all of those are now growing nicely for us.

Speaker Change #121: On the medical side orthopedics is really doing well, our personalized health service doing very well. We'll bring the cost down at good reliability for a very good reliability. I've seen quality in a regulated situation for patients and so people basically going through bone repairs.

Troy Jensen: And so how the total cost reflects versus vacuum cashing, but thoughts on that and just kind of rank order in dental. Is it dentures and night guards are these direct printing of aligners that you're most excited about? Yeah, great. Two great questions Troy.

Speaker Change #121: for either cancer treatments or damage to bones.

Speaker Change #121: It's becoming very economically viable to make those kind of implants now with 3D praying.

Speaker Change #121: So we've been in that market for a long time, with modeling first years ago.

Jeffrey Graves: So let me I'll talk to both of the net order so that the direct printing method is has been challenging is why I've taken us a couple of years to develop it. The Mitch, I believe it'll carve in the market Troy is an ability to move, move teeth more effectively. So basically it should broaden the market for clear aligners. I think the working with the leader in the field of the clear aligners, we've gotten the cost down to be more attractive year over year for a long time.

Speaker Change #121: We are thanking AIDS for surgery and now the implants are all of those are now growing nicely for us.

Jeffrey Graves: So very pleased with that, and then dental. It was off to the slow start at the beginning of the year but is increasingly interesting to people. We're doing a lot of trials with new materials, things like that. So pretty broad based, both industrial and health care. Okay, cool. That's super helpful.

Gary Creech: So, Gary Creech with that, and then dental, it was off to so start at the beginning of the year, but is increasingly interesting to people, we're doing a lot of trials with new material, things like that. So, pretty broad based, both the industrial and health care.

Unknown Executive: I appreciate the context and a quick follow-up. Do you by any chance have any sense for you know kind of like what the apples to apples install bases or maybe the apples to apples incremental you know kind of rev dollars looks like relative to 2020 when you know when the revenue bottomed out. And I'm just trying to get, I'm just trying to get a sense of where it is today. to that, if there's any useful context, you guys have. I know Ananda Paul's. I don't have any numbers at hand, but it's a great question. I'm sure the install base has grown.

Speaker Change #123: Okay, cool, that's super helpful. I appreciate the contact and a quick follow-up. Do you buy any chance? Have any sense for...

Jeffrey Graves: So it sets a big hurdle for direct the direct printing method. The world we're finding is direct print of aligners can deal with more difficult if you will more difficult cases. And it also also opens up all channels to market because you with these smaller printers, you could actually disperse them geographically. You could put them in major cities. You can even potentially put them in a dentist office. So it offers more channels to market more ways of delivering the product more quickly to patients.

Speaker Change #124: you know kind of like what the the apples, the apples, the apples, and sol bases, or maybe the apples to apples think from the kind of rev dollar looks like relative to 2020 when you know when the revenue bond is out.

Speaker Change #124: and I'm just trying to get a sense of.

Speaker Change #125: Where it is today, where I will say to that.

Jeffrey Graves: And I believe it can it can it has the potential at least to move teeth more effectively. And it's a different it's obviously a different cost structure. So it's, you know, we're excited about the technology. I still, you know, we're looking for commercialization only 25.

Speaker Change #126: Yes, there is any useful.

Speaker Change #127: and I don't have any numbers at the end, but it's a great question. I'm truly in solve bases grown. I know for us it's grown meaningfully and I would expect that through the whole industry. So that's a good point. We'll see if we can come back with some numbers for it. I don't have them sitting here today.

Unknown Executive: I know for us it's grown meaningfully. I would expect that through for the whole industry. So that's a good point. We'll see if we can come back with some numbers for it. I don't have them sitting here today, but I'm sure it is up. And I'm obviously optimistic for the future. We will continue to rise. All right, that's helpful. Thank you. Good to connect with you. Good to hear your voice, buddy. Take care. Thank you.

Jeffrey Graves: It's a high-barded, displace the indirect method, but I do believe it will carve an inch in the market so I wouldn't tell you it's our you know we're envisioning it to be our highest revenue product in dental but it will have its home and I think we've got very compelling technology to offer in terms of what we're most excited about for the denture stuff is fantastic it's a it's made by a jetting method that's very fast the aesthetics are beautiful and the durability of the material we can produce is outstanding so if you put yourself in a patient's shoes you know you could treat these dentures exactly like you treat traditional dentures you can drop them you can you know pulling them across the road you can do that and they hold together and they're beautiful they're actually quite attractive to look at so and I believe they're going to be very cost effective so if you look in there's roughly 4 million of dentures sold a year in the United States are a member of the number right so there's a big market greedy printing is a great way to go because it eliminates a lot of difficult manual labor that today honestly is centrally largely sent overseas for execution so you got long lead times you've got a big labor component three printings an excellent way to make teeth and I so I'm truly excited and I'm working with wide roles fantastic they're a their technology leader they do a great job we've got a big distribution that we're big so we're very excited to have them in partnership with us and we'll open up the rest of the market over time but it's I'm really excited and we expect FDA approval of that here in the second half at some point we're very optimistic about that so we were good to go okay and if I can slip one more question and just on the pipeline comments I've always said you know in a downturn pipeline always looks great right so you'll be able to steal on it and you're adding some new ones right so pipeline grows but you know what's changed in the pipeline and is it defense driven or any more color and kind of just kind of recent activity would be helpful yeah sure Troy you you obviously did fall in our industry for a long time and ask good questions the pipeline is a and we're trying to get better at quantifying it but I I can tell you just just quality like it's never been bigger in the you know the last few years it's running up and it's because the economics are the value of these parts that were able to print now out of out of more and more specialized materials is going up and up we uh we just we deliver a part for the for the Navy for a naval application not long ago and it was it was a part that does well in the install water okay so it was a unique a unique bit accepted material for the selling point on that components and why they're moving into production is is it gets it gets a sub out of dry dock and back to the back to the ocean quickly so the comparison to making that through traditional casting methods which it could be it was not an exotic design but the traditional casting methods would have put that lead time at over 400 days we got to turn around Troy in four days we got it back so it's an example of what can be done so I would tell you the pipeline for the fence applications is very strong and we're we're really excited about that the semiconductor industry we're doing a lot of export for work and metals for the semiconductor industry for semiconductor fabrication so the the folks that make that equipment which is very expensive complex equipment they they derive great benefits from 3D printing first of all the design of the into assemblies into one assembly if you are one one large component if you want to that doesn't so excited about the fence excited about semiconductor but there's a there's a lot of polymer applications are what are portfolio materials you've got now flame retardant materials that are you all you all certify that we can go to market with that opens up a lot of exciting markets in electronics for example that have to have flame retardants so industrial markets and Generalized Defense and Specialty Industries like Semiconductor is great. The more and more Troy, we're tackling the industries that have a long tail to their skews, so you've got some real high runners.

Speaker Change #127: but I'm sure it is a kind of obviously I'm optimistic for the future that we're looking to realize.

Speaker Change #127: All right, that's helpful. Thanks, Jeff. Good to see you, connect. All right, another. Yeah, good to hear your voice, buddy. Take care.

Operator: We reached the end of our question and answer session.

Michael McCloskey: I'd like to turn the floor back over for any further closing comments. Thanks, Kevin. And listen, thanks to everybody on the call or the webcast. I appreciate your time. In addition, we'll look forward to updating you on schedule after our third quarter earnings release. And we'll give you a feel for both the market and our performance. Thanks so much. Take care. Thank you.

Speaker Change #128: Thank you, we reach out to our question and answer session. I'd like to turn the floor about go over for any further closing comments.

Speaker Change #128: Thanks, Kevin, and we'll send thanks to everybody on the call, the webcast, appreciate your time. Initially we were forward updating you on schedule after our third quarter of earnings release, and we'll give you a feel for both the market and our performance. Thanks so much, take care.

Operator: Does conclude today's webcast. Is just connect your line at this time and have a wonderful day. We thank you for your patience today.

Speaker Change #129: Thank you, and it does conclude today's webcast is disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Jeffrey Graves: They're thought of as very high volume industries. They make a lot of certain components, but most these companies have a an annoyingly long to them, an annoyingly long tail of components that are measured in hundreds and you can produce those so much more cost effectively with 3D printing, once you get the process and material down, so we're having a lot of discussion with electronics, a lot of automotive discussion for specialty components, especially in hotter environments, and then you've got the natural ones in metal, which are aerospace and semiconductor are big ones.

Jeffrey Graves: So I might have beat that question to death, but I am excited about it. The guys, well, honestly, Troy, we're having to come up with ways to prioritize the work. We've got 80 applications and errors and they're busy every day of the day. It's been a week, long days, and it's because people look at the economics of 3D printing, say this is going to work. Now, they're not buying fairness, they're not buying a lot of machines yet.

Jeffrey Graves: So when the CapEx environment gets better, I think you see a lot of those guys turning and saying, okay, sells printers, sells materials, and it's not there yet. It's a leading indicator, but I am tremendously excited about it.

Troy Jensen: Okay, awesome guys, I wish you the best. Good luck. Thanks, Troy. Thank you.

Danny Egrich: Next question is coming from Greg Palm from Craig, how on your life is that live? Thanks. This is Danny Egrich on for Greg today. Appreciate comments on kind of the pipeline, and just being that the pipeline has strengthened, and it sounds like momentum kind of built in Q2, and it's expected to for the second half as well. Just kind of curious if you feel like visibility has improved as well, or just, you know, for pipeline conversion, or just being cognizant of overall macro, or do you feel like maybe it's still just kind of too early and you're glad that interest is coming back, but it's still kind of a way to see game.

Danny Egrich: Yeah, Danny. First of all, it's good to hear your voice as well. Thanks for the question. It's probably more the latter, Danny. I mean, I'm really encouraged that customers are bringing it out and modeling the economics looking at the quality of the parts on all of that. The proof in the pudding will be then placing orders for equipment, which requires them to have their cat X budget. So I would, you know, I would get a zoomer in about it.

Danny Egrich: I mean, we're projecting, as we said, you know, continued growth from Q2 to Q3 to Q4. And we put that kind of the mid single digit levels, which we're, you know, we're happy to see the trend. Maybe we'll do better than that. But it largely depends on the on the the outlook, our customers have for in demand. So hopefully the world will see continue to be in place and coming down. And then, you know, I've been encouraged by the Fed's comments about lower interest rates.

Danny Egrich: I think that's that'll be a strong push for more demand for customers and more capital explaining their plans. When that happens, you should see a direct closer to our business. So that's what we're waiting on. I, you see the same public metrics that I do. So, you know, you kind of get the hold your breath of it. And we're coming into an election and, you know, we're in a volatile world. So all those caveats. But I am encouraged with the trend. It is, it is a big pickup in interest from Q1 to 2. Very pleased with that. And we'll see where Q3 before go. But right now it looks positive.

Jeffrey Graves: Okay, understood. Then maybe on dental and maybe more specifically this large, you know, a line or contract, you know, the simple math implies kind of like a 50 million dollar average annual value. You know, is that the right way to think about it? Or is there a way to think about maybe the cadence of that throughout its lifetime? And then, you know, just being that that average annual value is quite a bit lower.

Jeffrey Graves: Or then maybe that business has historically done? Is it, you know, is it safe to say all all the things you're doing elsewhere and dental are kind of aimed at filling that hole? Yeah, I might phrase that a little bit differently, but yes, I mean we're excited about the fundamental Danny, the dental industry is converting to 3D printing broadly in all, you know, and that's why we rolled out our strategy about participating all for all four elements, basic elements of the markets.

Jeffrey Graves: So the in terms of modeling that contract, it's very hard to predict year to year noise, but the overall value of the contract with our best shot at saying what it's going to be. And you know, if you knew nothing, you draw a line through the points and say that's where it's going. I guarantee you that won't be right. It'll be it'll fluctuate from that. So you can listen to the public players that talk about in demand and you can get a sense for, you know, how that demand flows through to us.

Jeffrey Graves: It's hard to be precise the model we haven't attempted that. We've just set a keynote of value over the five over the five years. And we have no real further insight than that. I think it's a safe bet it'll be in that total range, but the timing will depend on the end demand. And that's driven in part Danny by the inflation pressures consumers are feeling they don't tend to buy as many aligners when foods expensive and gases up.

Jeffrey Graves: So hopefully that's all coming down and you see that rise. The other markets for dental, you can view it as kind of kind of going to get, but, but in their own right, they're very exciting. I mean, dentures have been made by hand to date, you know, so largely by hand. And and we'll see a complete conversion to 3D printing in the, you know, the next several years. And it's a big market, not only in US, but in Europe and even parts of Asia.

Jeffrey Graves: So we're thrilled to be in it. We're committed to it. It looks great. Night guards, we were still gauging the size of that market. The performance requirements are a little less than having to straighten teeth. But there's an interesting, interesting work going on to improve the intelligence, if you will, of the liners. There are my guards to, to help with sleep apnea and help other, other, other with other issues. So I don't know where that'll take the market, but certainly it lends itself to 3D printing and then finally have to repair the standard to repair that we've been in that business for a long time.

Jeffrey Graves: So, so those, those are four big pieces of dental and we're, we're heavy player in all of them today, probably the biggest. And we look forward to getting even bigger over time as the market converts to a 3D print.

Danny Egrich: Okay, great. Excited to see all that or see all that take hold. I will leave it there. Thanks. Thanks so much, Danny. Thank you.

Jim Rashudy: Our next question is coming from Jim Rashudy from Needhamon Company. Your line is now live. All right, thanks. Good afternoon. So, hello sequential growth. You're anticipating Q3, Q4. Is that focus a little bit about how you might see that playing out in both healthcare and industrial? Are you anticipating growth in both those sectors sequentially in the second half? Yes, we are Jim. We should see growth in both of them. The sustainability of growth in healthcare looks very high.

Jim Rashudy: And so very pleased about that. Again, there was a drop off in printer sales in healthcare, where we're selling printers to like contract manufacturers that are making implants, things like that. That was soft, again driven by CapEx, but the rest of healthcare was, if you will, very healthy. So we saw a growth there, expect that to continue. We expect to see some rebound on the industrial side primarily from recovery of printers with CapEx spending become boosting up over the rest of the year.

Jim Rashudy: So those are the basic drivers Jim. Okay, and that ties into the next question. Jeff, you center out with thinking about Q3, Q4. Is it going to be driven with sequential growth? How much of a recovery are you anticipating in systems or is this materials and services that that's driving some of this improvement? Yes, I would expect both, but the biggest recovery Jim will probably in printers. Again, that's really what's held us back.

Jim Rashudy: That's what bottomed out in Q1. And you know, Q1 was a really tough quarter. And in Q2 was up 10%. Most of that was driven by improving printer sales. And I would expect the rest of the year will be that too. But the installed capacity is being worked pretty hard. So material pull through and services should be good. And remember part of services are our application engineers that are doing new product development with customers as a part of our sales process. So those baby engineers are very busy. We include that in the services number. And I would expect it to continue to grow. Thank you. Thanks, Jim.

Jeffrey Graves: Thank you. Next question is coming from Brian. Drive from William Blair. Your line is now live. Hey, thanks for taking my question. This is Tyler on for Brian. I was just wondering if you could give some direction on how dental sales performed in the first and second quarter. And then I'll have a follow up. So overall dental sales, certainly, certainly materials for dental sales were strengthened throughout the quarter materials utilization. And again, we'll remember a lot of the aligner market is a big one for us.

Jeffrey Graves: So we saw strengthening there. The rest of the market was so, so I mean, it basically mirrored a lot of the performance of the rest in terms of printer demand. So you saw Q1 was a week quarter Q2 improved kind of along with the broad market. And we would expect that turn to continue. So again, materials pull through should remain pretty healthy for the rest of the year and grow. And then you've got increasing printer sales. So those are things that should drive the rest of the year in dental.

Tyler: Thank you, Jeff. Just kind of wanted to touch on the night guard situation a little more. I think you mentioned that this will be a direct print. Was it made by hand before? Was it kind of made with the mold that you could 3D print as well? Just kind of like the opportunity there. I know you said you guys were kind of observing what's up maybe. And I've also heard about it a lot too.

Tyler: It's just, you know, it's just with sleep apnea, et cetera. So it's pretty interesting. Advising it into so just any more details you have there. Yeah, Tyler, there's two. There's two advantages to 3D printing them. Today they are a thermal form. Okay, over over a die. And because you don't you're not trying to move teeth at night. You're just trying to protect it. The price points can be pretty low for standard protectors in your mouth.

Tyler: What 3D printing allows you to do is is them want obviously create more complex aligner if you want it to do other things. Like participate in training or or address sleep on the other things like that. You have more design flexibility. The other thing though, which I think will will be really interesting to see play out is you can use dual materials. So you can have a hard surface with where the where the protectors mate with the teeth.

Tyler: You have a soft service around your gum for comfort. So I think the ability of 3D printing to make dual materials, which is unique is is a real attribute. And then for so for consumers that are concerned about a better night's sleep and they don't want to wear the traditional night guards. I think it's a really interesting extension of that market. We are we that is our newest segment if you will in the dental market.

Tyler: And we're still kind of feeling our way along with live well in terms of the market potential. But I can tell you we have an excited partner and we'll see how fast we can move certainly the technology is there. And you know, and we've got to make sure that the cost effect on this works as well. Yeah, just kind of following up really quick on that is that kind of does that fall into the discretionary bucket just like aligners would or is this more of a need for patients?

Tyler: You know, Tyler, I laughed because you know, if you go back 20 years, who would have thought aligners would critical for life. But they became a critical to people. You know, people view it very high on their priority list, have really straight teeth. And so it's really moved up the list. Night guards are kind of similar. I mean, a lot of people grind their teeth at night. And I know, you know, many, many people next time I challenge some of you are going to ask him how many how many night guards are selling to people.

Tyler: Very high percentage of people buying night guards these days, the overall consumption is certainly larger than dentures, you know, the people have to replace their teeth. And it's because, you know, people are living longer their teeth were down at nights because they grind and they're they're wearing this these aligners. So as those as those advanced now 3D printing. We can look at them doing it basically a better aligner if you will a more one that conforms to your mouth better that's more comfortable.

Tyler: And potentially even later on in life put instrumentation in there to monitor sleep to monitor stresses things like that are all on the drawing board, but could you printing up the option for all of that. Great. I appreciate answering my questions. I'll pass it along. Yeah, thanks Tyler. Take care.

Tyler: Thank you.

Ananda Baruah: Next question is coming from Ananda Baruah from Loop Capital Market for Linus. Now live. Yeah guys, welcome back.

Jeffrey Graves: Good to see you back online with you guys again. Yeah, good to hear your voice Ananda. Thank you. Yeah, no doubt. I guess apologies if you went through this. I jumped on with the queue and I started to do a couple calls. I was going on tonight. But did you just did you talk about where across the portfolio, the pipeline, you're seeing pipeline improvement? Yeah, it's it's not it's it was close to foremost in the markets that the space says that absolutely need 3D printing.

Jeffrey Graves: So no turning the fence aerospace. Those are those are strong. Okay. The specialty markets like semiconductor equipment. We've been working in semi semiconductor equipment for years and it's finally paying off with us. We've got an enormous amount of interest in in metal parts for the semiconductor equipment industry. And if you think of the chips act and all the manufacturing coming down the pike on that. We're really excited about that because we can we can save them a lot of money by by consolidating assemblies in the fewer numbers of parts.

Jeffrey Graves: And you can have a much higher performing part in some of the critical components in those systems and some of them I if you've ever been close to to a manufacturer. Some of them are incredibly difficult applications to survive in and so you can do that with 3D printing lot better than anything else. So though there's been a big demand in those kind of areas, especially the equipment thing. So we put all that in the industrial category on the medical side orthopedics is is really doing well.

Jeffrey Graves: Our personalized health service doing very well. We'll bring the cost down at good reliability for a very good reliability. Quality in a regulated situation for patients and so people basically going through bone repairs for either either cancer treatments or or damage to bones. It's becoming very economically viable to to make those kind of implants now with 3D printing. So we've been in that market for a long time with modeling first years ago.

Jeffrey Graves: So the baking aids for surgery and now the implants are all of those are now growing nicely for us. So very pleased with that and then dental it was off to the start of the beginning of the year but is increasingly interesting to people. We're doing a lot of trials with new materials things like that.

Jeffrey Graves: So pretty broad base both industrial and health care. Okay, cool. That's super helpful. I appreciate the contact and a quick follow up. Do you by any chance have any sense for, you know, kind of like what the apples to apples install bases or maybe the apples to apples incremental, you know, kind of rev dollar looks like relative to 2020 when, you know, when when the revenue bottomed out as I'm just trying to get I'm just trying to get a sense of where it is today, to that, if there is any useful context, you guys have.

Jeffrey Graves: I know Ananda Paul's, I don't have any numbers at hand, but it's a great question. I'm sure he installed bases grown. I know for us it's grown meaningfully. I would expect that through for the whole industry. So that's a good point. We'll see if we can come back with some numbers for you. I don't have them sitting here today, but I'm sure it is up. And I'm obviously I'm optimistic for the future. We will continue to rise. All right, that's helpful. Thank you. Good to connect with you. Good to hear your voice, buddy. Take care. Thank you.

Jeffrey Graves: We reached end of our question and answer session. I'd like to turn the floor back over for any further closing comments. Thanks, Kevin. And listen, thanks to everybody on the call or the webcast. I appreciate your time. In addition, we'll look forward to updating you on schedule after our third quarter earnings release. And we'll give you a feel for both the market and our performance. Thanks so much. Take care. Thank you.

Unknown Executive: That does conclude today's webcast. Ms. Disconnector Line at this time and have a wonderful day.

Unknown Executive: We thank you for your patience today.