DDD - Earnings call transcript Q4 2017

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Operator

Good afternoon and welcome to 3D Systems' Conference Call and Audio Webcast to discuss the Results of the Fourth Quarter and Full Year 2017. My name is Matt and I will facilitate the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the call over to Stacey Witten, Vice President of Investor Relations for 3D Systems. Thank you, you may begin.

Stacey Witten

Good afternoon and welcome to 3D Systems conference call. Financial and President on John Chief and Vice and Witten Vyomesh call McMullen, Legal Stacey Johnson, President our Andrew Joshi, Chief Chief Officer. am with President the me are Executive Executive I Vice and and Officer; Executive Officer; refer The portion we'll call the call. slide presentation contains webcast during a this that of to section do Those portion of slide following access so the to on the along website. on wish the of investor relation presentation, phone may our who this to at questions like of end discussed related in this session issued release would provided in should the the who Participants numbers we and today. ask in the matters the phone using to slide the press on conference call call

be and there seconds may described via management's For and a slide. of to differ few will aware you the be as discussion responses those to this questions forward-looking include accessed webcast, your that web. streaming who've results may pose delay the Actual statements on be portion not today will reflect able of following only materially. questions and as The please views the

filings Report Additional the our potentially factors that our financial including our is SEC, in on Annual Form about today's XX-K. release most and impact recent included in press information results could with

available GAAP these During regarding measures measures. these our on disclosures both non-GAAP including this our this comparable you press Relations find certain which measures, call, additional In webcast, Investor we financial reconciliations release are to measures. will discuss accompanying and slides non-GAAP will of website,

the stated, results call comparable of Finally, will XXXX. all unless be for this in the otherwise period comparisons against

call CEO. the turn over to to our pleased Vyomesh VJ? I'm Joshi, Now

Vyomesh Joshi

everyone. Stacey. Thanks, afternoon, Good

substantial very we the future. a We worked foundation progress the a we position we stronger closed for XXXX, hard, built a strength in year for and of During believe company. made

the operationally last took and more believe organizationally growth than forward. sustainable and actions with we well company processes we the As positioned quarter, both reliability, the anticipated. year, infrastructure challenges for initially we throughout faced going XXXX quality, in we We discussed

company dentals. improved give technology Figure a low and fourth net from Before and the quarter, the made Sanmina, strategic for investments made. experiences, X our and in material to on both job service hierarchy, a a including our hardware installed time, cadence, we driven, year, culture our a to product force we go-forward drive with the drive improved customer improvement in base. to on and on which across the the We systems began a the annuity visibility software infrastructure, generation new business flagship long optimization our are materials, of more development drivers new progress platform improved both rebuilt improved model completed cost minutes the company few model visibility rationalized which return company's perspective focus at progress the repositioned metric to customer us service and to of and organizations. for including and be year the DLP while our get expansions take centric the where overtime supply utilization to we XXXX, product programs and to of and from good and like during on services operational ship about next of from structure our cost Throughout rebuild will I'd term cost into process and analytics an reduction via sales our significant work portfolio product metals production a investment supply improved with applications We internally more of And promoter deep analytics the in market-based score with and fully in reflect our same execution, resulted and competitively chain our model, through we've offerings. details and to a employee hardware partnership series believe offerings significant products last our focus achieving satisfaction, integrating in making chain based

We the drive Oracle a upgrade. to IT long confirmation major in and term also invested including infrastructure system efficiency ERP

made We region growth with our the time progress the believe we To reflected a year. company's throughout have in improve during a adjustment worldwide made date, with go-to-market the EMEA, consolidation enhanced which and reorganization go-to-market the in consistent strategy and that real execution. to year most is we've the

also Americas experienced However, sales engineering in our performance designed expanded to balanced we as generation continued implemented lead recent focus APAC direct and channel. teams, show of and across is conversation beginning returns. sales the fourth We to rate application the tools regions to our improve and in more quarter our and more work refine improve all the and

improve While execution believe our and worldwide. are track progress actions go-to-market not we've are and we growth and to drive the investments done, significant made continue to in on right

turn XD centered the to a year critical and enable We building used analytics case. We're forward. work and for company. enable opportunity the strategy production company in on take processes, this to behind We around used believe the XXXX us. the to needs structure company infrastructure, stabilize we drive to the on last and market corner actions focused foundation organizational expansion a actions the prioritized and transformation year to building With case multiyear is our the of based company are us, in significant capitalize the ahead necessary by

introducing focus Our customer improving and are to new shift products execution, energy and XD production. drive efficiency to on disruptive

and we to transformation. build launches planned as drive will of product Our throughout year the phase coming efficiencies the next continue momentum

to like between and included like significant in to confident before ability excited DLP, Figure plan I term customers showcased demand SLS the on and X, These customers our be We sustainable our Throughout return a bridge materials, growth. long provide our and in that more into digit in drivers from technology drivers metal and several performance John traditional in overview continued workflow. systems would double software, to in introduce to enable well growth about and help I'm these. about and we where provides gap We printing and return With integrate healthcare, growth with results to seamlessly to to I'd we an with we're to continued of growth. market production launch growth quarter recap of manufacturing leader XXXX, to scale printer revenue software revenue details. prototyping the continued services the products growth materials, drive in fourth talked manufacturing production range as to profitable our November, opportunity XD several their generation remain in to to we As plan manufacturing. next

in quarter, million. increased was approximately increase to healthcare fourth and revenue Demand the industrial flat with all X% in categories. During fourth revenue the total quarter. continued across strong to resulting customers improved be in healthcare XX% growth Printer $XXX.X revenue and from has

total quarter. due increased quarter, On X% from and the XX% X% For with XX% fourth increased utilization to installed sold in both revenue and in the the fourth revenue base unit production equipments. Materials quarter customers. increased demand the growth software healthcare including printer demand in increased manufacturing of revenue professional print high

operating $X.XX and fourth region quarter increase GAAP remained the solid we to as increase X% the quarter. EMEA of during go-to-market execution products increased profit and Americas XX% XXXX, the reported inclusive $X.XX Asia fourth margin in continued market earnings our in strong. And Pacific expenses XX% the per compared demand non-GAAP quarter We in to share. of investment our performance of of Gross in our XX.X%. and and improved and Additionally, loss expenses materials per and the to a including plastics, continued R&D, non-GAAP software fourth in Non-GAAP bring in was investments. new metals, XXXX SG&A and in IT share

me let fourth our in year to discuss detail. over full turn it Now, more and John? quarter XXXX to performance John

John McMullen

afternoon everyone. VJ. Thanks, Good

$XXX.X to fourth $X.XX increase XXXX. were GAAP fourth XX% share of expenses For loss million, reported share was of quarter increase expenses of per XX% reported Gross in to earnings $XX.X XX.X% $X.XX X% quarter million, of expense. a XX% including compared quarter, fourth and to an the the R&D we GAAP quarter to in in quarter increase X% of in of XXXX SG&A fourth fourth per the increased We margin XXXX. compared the operating of profit XXXX. compared revenue the

to market primarily fourth revenue XXXX. the support in operating For increase million the share in per of to the and X% of bring year, compared new $X.XX driven $XX share to X% or investments expenses and platform, particular for plastics, of software. million, increased $X.XX to $XXX.X fourth growth SG&A expenses the $XX.X compared to R&D in in earnings reported we as reported by Non-GAAP XXXX, of of Compared materials initiatives. many a invest throughout by increased reported XX% Figure We we the We fourth million, go-to-market X% of the to in our in primarily and of of GAAP per in quarter $X.XX non-GAAP share XX.X% non-GAAP IT prior per million non-GAAP been R&D. $X.X full X per have quarter or transformation to share investments $XXX.X to loss investments margin gross $X.XX earnings profit to critical XXXX million and continued we $XX.X increased plan year. XXXX. metals, driven These products in a loss to million, expenses of year quarter

million $X.X loss full reported in or million, we compared earnings a revenue across the driven For share XXXX, per a of categories. or XXXX prior of quarter to per $X.XX non-GAAP of the year. loss Healthcare non-GAAP for $XX.X by share of all growth fourth to XX% increased year $XX.X million earnings $X.XX the

$XXX.X of increased We for healthcare pleased overall and trends XX% categories year full demand for with the continue healthcare be the to to revenue all million.

digit the XX% on continued million. fourth expect revenue quarter, healthcare In manufacturing We going forward. double demand to increased growth $XX.X in

on in manufacturing. helped generation customer enhanced return investments growth and approach sales technology, a to demand in drive experience, Our demand facilities, has

unit million. the the both quarter manufacturing for was in Printer $XXX.X approximately XX% was the on flat grew unit demand flat at with fourth quarter. in Printer professional and For growth year, revenue fourth production sales approximately sales.

million revenue XXXX, printer total sales printer. X%. the total year. by increasing lower increased unit the X% the printer X% and X% to decreased ASPs of unit by priced the for particularly and Throughout decreased year $XX.X negatively professional year, and were XX% revenue full impacted mix in quarter. sales Plus revenue Production sales printer the MJP fourth printer XXXX Materials increased units For decreased our

to continued base. grew and For the $XXX.X year, the million, of addition by installed X% driven utilization our of Vertex materials

installed We expect production model. sales of we understanding to the ongoing growth in based improve base, annuity execution, and continue materials increase drive improve business more a applications as increased our

to X% year revenue million. the Software prior $XX quarter increased of from the fourth

X% the revenue to software For year, million. increased $XX.X

the fourth to in software of year. We expect in the prior going XX.X% XXXX in reported to compared gross quarter margin growth We continue forward. profit XX%

efficiency year, charges legacy XXXX. the offset XX.X% XX.X% reported margin negative impact to we made XXXX. inventory For includes discontinuations which full supply of cleanup chain We've compared improvements design, leader a providing in Gross a technology processes and with product solutions begun supply during procurement and high and throughout manufacturing chain optimization and and Sanmina, strategic support. have relationship quality entered recognized into a delivering our end-to-end manufacturing profit logistics

over improved including sequentially. prior of We maintain SG&A from months. profit operating the products XX% increase XX% expenses. year, investment and fourth were which the to R&D primarily recently increased announced to these million, ongoing an and non-GAAP new expenses to expect million, quarter prior XX% in increase increased the but of for the operating expenses the overtime. Compared R&D are expenses changes in only XX% year in XXXX expenses quarter X% increase the Non-GAAP were the $XX.X margins efficiency GAAP planned and in to X% help $XX.X commercialization increase improvements additional gross from expenses support quarter, coming increase for SG&A XX% compared

million go-to-market operating including X% growth. during increased increased year, we to we generated fourth long million, expenses from term lower. for Throughout drive critical and to X% increase resulting increase and the cash and significant the quarter expenses SG&A in in in $XXX.X X% in investments million XXXX. X% XXXX, R&D million. cash can $XXX.X cost the operating appropriate increased in SG&A expenses are of ended for materially R&D innovation, For expenses from driving expenses non-GAAP believe Full $XX.X couple $X.X operating GAAP made we IT, Non-GAAP $XXX.X increased expenses years, believe over which XX% XX%. of expenses. Non-GAAP company operations the generated cash. operations million structure quarter We're committed an We the We next and of with we of to

cash timings from time . and continue infrastructure. will to expect expenditures at cash meaningful over and generate in same while operations fluctuate, the generation to While quarter-to-quarter we investing growth periods

I'd VJ, moments term back company going Before building call where on success. turning the We're today we're for forward. to like a the discuss profitability a high outlook and take few focused level to long and growth, to

the transformation still are of a company. midst the We in of multi-year

As in in work VJ and completed do. many more work described, still but have XXXX, areas we've we a significant of progress foundational made lot to

year As focused we additive production on manufacturing, we product improve with build also disrupted applications momentum the throughout for remain coming to operational continuing our organization and efficiency. drive will to launches

plans have cost years. next the down from the leverage over and place operating in We couple to improve meaningfully of drive P&L

remarks. call maintain concluding to balance ultimately these cost profitability improve Over to with VJ? a that, earnings turn back cash With the the and same our period, for power. reductions, VJ solid drive we some position, investments plan I'll

Vyomesh Joshi

XXXX, to we're and multiyear place legacy scalable growth. on the in the We're for transformation and and bringing our In foundation project. efficiencies products we progress a market. the stabilize corner company. disruptive driving Addressed We innovative to believe operational significant and put many new focused turnaround John. Thanks, in made issues turning execution,

the further scalable additive series largest Day of a NextDent in with in printer. breakthrough XX% is our faster printer solution X for Lab manufacturing to manufacturing the to the total times laboratory with new other product same four of XXXX, digital for address more America, we introductions up the dentistry. portfolio. the labs. this. is innovative believe dental hardware best which solidify NextDent redefine will market and this a and specifically product, At the we it This market time, At XXXX the for several solution portfolio X launched of any and received number it as in show. We throughout entire strong for introduced dental digital bringing the was believe specific materials well have XX entry new today than we dental platform and NextDent planned based leading The effective to we XD is cost materials the market Chicago, to a at extremely a our we're dental event dollar by our and first XXXX solutions workflow, has defined designed XXXX XXXX, Figure SmartTech position billion materials Figure

and our XXXX, designed printers, also DLP prototyping. cost high launched We jewelry functionality low XD and production high FabPro industrial productivity the new based for dental

help suite part solution long durable automated, launch will launch deliver is fully largest to focused quarter to metal fully With for expanded These of first it, With to and open products ongoing various plan market of in we for to expand what as scalable, meet coming and the success parts shipping integrated compared the fully And automated turn end-to-end print we powder to generation platform to and the Later products from and deliver module and I we plan a and would be removable production part to competitors. environment greater an will generation lower integrated offer our prototyping call solutions XDXpert leading streamline production plan manufacturing. months, true operation to ProX efficiency accelerate modules, of to X During the designed production solutions. fixed units production next as our they needs grade plan back over and modular on help next from ship materials available continue industries, questions. the the to additional to printer, our opportunities materials growth software well standalone year, excited begin floor management believe the with a total portfolio, SLS today. superior diameter of of versus Stacey. to end-to-end company. SLS about to significant remain Stacey that, DMP like complete also metals our XXXX, which We XXXX, products. we portfolio, quality who the term the to innovations additive the we to cost Figure the

Stacey Witten

to questions. We discussion. limit question to the VJ. you We'll and allowing now others participate yourself for that ask follow-up, one in thus call the open Thanks, one

teleconference call. please on this As slide. all direct of this are the The reminder, portion provided telephone a again questions numbers to

the is If inside number the you And calling U.S., X-XXX-XXX-XXXX. calling you're the are outside the number X-XXX-XXX-XXXX. U.S., if is

Operator

Great, thank you.

We will Loop conducting Our be Ananda [Operator is now a first Instructions] go ahead. question-and-answer session. from from question Please Capital. Baruah

Ananda Baruah

just areas the and some growth. you're taking - to back the think quarter Thanks with start for time mentioned Hey, I some of good out going of ongoing of I grew magic kind made that out teasing I to guess - and spent into this which guys. you afternoon questions. VJ, go guys you positioned like the for some the you

also in mean, cracking believe So rates. to it that I including I'm lead calendar to made and 'XX, take going you improvement mentioned of on conversion generation

not So expect you the you mentioned accurate, is, conversion might improvement which But well, degrees as correct think the - that. you which please of couple expect to grow what rates if things. of to printers this you Do business had and aspects year? do year guess in grow that's of I talk can made this then a in grow to you

Vyomesh Joshi

software I'm by let and demand that out way will the me on the growth so saying to engine, building continue start healthcare, manufacturing Yeah, that materials grow.

printer for part important will revenue be the growth. think our XXXX I

hardware I XXXX in now at in XXXX. looking QX, the place, revenue that's printer XX% that we're a you growth, XX% what where can So and we're it QX quarter if X% minus in our good we Slowly printer QX, now think at. minus into and flat about of fourth getting revenue minus sign look in was growing growth feel nearly

the as will the help machine investments X, also we in is SLS thing especially go-to talked products. launches having made the will are that metal and next-generation market second you because competitiveness all FabPro with I we our we the with with conversion rate, Figure The can the do say XXXX that about now new

and revenue to that help us now believe hardware will very I growth I should be the So XXXX. for printer that drive important think

Ananda Baruah

like excavation in have sounds of driving XXXX. revenue you printer That an growth

Vyomesh Joshi

do Yes. to We that. need

is our just want are quarter. the that also I is a to think I quarter sure progress softer need always seasonality there to a and in we as throughout we do making year first XXXX. reminder in that make continue a to revenue and the

we a you need XXXX. guys that for to - think I model need to So kind of built

Ananda Baruah

And a you've just How works much the you talk more remains guess go-to follow-up, process? this how that as quick you've I about done the little and as much work of in - in the to spoken a you go market that on can year? channel.

Vyomesh Joshi

Yeah, I understand.

complex sales aspects production for to the and of this it. application make - important customer we call because need what to think are and there a is I market is So important think main whole from part We innovation build direct our it's two direct to shift engineering. go-to for very prototyping force I center, production sure our force sales need we sale our build we and

The second the where channel these complex a of kind part right is can solutions. sell getting they

right force, globally both channel. we application are what and direct So doing building sales the engineering,

Ananda Baruah

Got much. it. Thanks so

Vyomesh Joshi

Thanks, Anand.

Operator

question from Ricchiuti is from Jim Needham Company. & Please go Our ahead. next

Jim Ricchiuti

up area a in little QX we if you the of from business. drop-off there seasonality at a The expect of anything QX. revenues the unusual talk maybe Good were in first a bit could about that that business? afternoon. VJ, to area? about Are Would that there Was significantly and a the in about Hi. services wanted level question business? that new I ask you significant

Vyomesh Joshi

XX%. important include health at look QX, if Well, at XX% - health you in because XX% profile, improved in if in think fourth business, our I look the we services which very note quarter care quarter is care and QX this XX% and to in then the QX, now XX% then you

business. you with expect that to So of care a of kind I have our seasonality health a think lot

months summer an the uptick. we the have During during month, Christmas and

when lower care So, seasonality business. different seasonality yeah, talk will be our health the QX about will be you the because little of

our think that's business. force the services I driving for

Jim Ricchiuti

And look meaningful new products. at new can't this revenues But obviously a year? scheduled new wondering what for you in is, second comment if of how be I'm could That's on printer new then specifically Okay. products individual introduction helpful. active fairly aggregate, you the year. these yeah, have these product, printer of this the in on half we products impact the And

Vyomesh Joshi

Yeah.

that of I it's need can revenue. can all So products, at how I and think that think you. a two our things looking good you half good to these there second all help first new you thing, tell be right on I built The really where is printer are are

that very beta of we phenomenal. are the customer on, we the we feedback is contribution for all, products First proposition. from the with making excited the working our are And are about customer getting that respect value I'm

approach The the and the be gradual that of is can talk categories. growth new the to that disruptive are The in then overall is second that be will be it revenue products that I half. to that's SLS, terms also we piece we and they and in categories additive second go-to but most portfolio last means market. going we the building are in That products careful be proposition of uptick value the taking and especially right market, the are why so how thing that's except new of product additive will go-to the for to why the build our about have combination

Jim Ricchiuti

very Thanks much. Okay.

Operator

Our next Genuity. Please Burleson go question is from from Canaccord Bobby ahead.

Vyomesh Joshi

Hey, Bobby.

Bobby Burleson

afternoon. Good Hi.

of and you was flat QX? mix think printer in curious revenue performance headwinds of some shift revenue Or do new the just products stabilized can by looking at Do printer XXXX. the as is of terms had in you for in coming, growth that where year-on-year you think a kind printer makes So it mix this would higher I ASP? the

Vyomesh Joshi

And are similar. the is reason be SLS, what Figure production profile. sharing And mix where these I some built, our all I successful the printer with and to think first but FabPro my the very production right. printer. professional been professional going is for that our between be reason we X, was the of very of all was a will and products have is multijet the was the printing view It the printers, that's wax

now So will in professional overlap, And there for why right earlier, that completely product. is production XXXX mix example, and model seeing continue between I XXXX. is that's the much category. FabPro as we new just as are said a because not It's

to We on are not current have much our as impact going portfolio.

Bobby Burleson

associated Okay. And I going guess last terms gross of startup of loaded year, versus wise? as be frontend be a you in market. how operating follow-up to much expense stuff to can sounds margin thinking that, you we a more this if there have anything to year it the that or about costs products like or you to be are margin bring Should concentration going with new little are innovative

John McMullen

Yeah, this is John.

we XXXX lot products there final start I cost of But just some and be the taking QX will then we'll do latter to on place work to that ramp of in part think the at a those that is the as products. then that of to point the frontend market. loading in launching

from a in set has there marketing view investment from point So view both meaningful half in lot of there launches advance of And these a of is a of been R&D year. the an next of point and launches.

Vyomesh Joshi

market, like go-to disruptive the we'll this these wanted the require right indicating. to go-to innovation the and with And I innovation, reason to front-loaded, market new think in because R&D. felt invest that leave the invest we we a is I what combination to and category build are that you We categories this of that's into wanted

Bobby Burleson

thank Great, you.

John McMullen

welcome. are You

Vyomesh Joshi

Thank you.

Operator

Please & ahead. is go Gabelli from Susanto from question next Our Hendi Company.

Hendi Susanto

my is questions. and question VJ, to VJ. do Good in evening the they are compared you for for first How market printing opportunities different XD and characterize how XXXX? thank taking you My market XXXX?

Vyomesh Joshi

market view continued has my to there. be think is I Well, overall opportunity

force to big coming the go and belief manufacturing, be in growth the that think in parts and prototyping to to going are I from believe XXXX shift three point I also I production on-demand from opportunity. to fundamental back business five very also to is we need view. of driving opportunities our really years production

because see saying, can grew lot As XX%, value of understanding are with this the you in may let manufacturing and additive by opportunity a start QX, thing. by me companies' play that outsourcing of slowly hey, they we

We where see a our insourcing. then are it eventually and bring you using outsourcing combination and and capability in-house on-demand of parts that's

'XX it is should will view opportunity driven year. the in said, more good And be to and opportunities I on-demand a business. my So manufacturing, as be production the our parts

Hendi Susanto

John, And best North Europe's VJ terms been is or How post of Yeah. ramp-up? organizational structure and market your practices sales and QX, XD productivity Systems making to your go-to that reorganizing America in what then and has Asia-Pacific. and far long changes

Vyomesh Joshi

in Europe, all in both are the Yeah. that had announced the showing remember he in we Herbert, runs bringing Yeah, so market these improvements results. the and Americas he built if that you is processes' now Asia worldwide are go-to organization and processes he and

APJ sure and it's and all my view If both and build much to Americas because to about is talent we in I look in in the still or need QX. and 'XX processes Americas. think our either you is processes need because work these we to need at Asia-Pacific we and the achieved QX people that more QX build continue think we we continue balanced what to have than I to we do make

Hendi Susanto

you and XXXX. Thank for good luck

John McMullen

Thank you much. very

Operator

Joe is go Our from Longbow from next Research. ahead. question Please Wittine

Joe Wittine

anticipate do ASPs printer answer on this questions. account Bobby's for the increase launches taking question, Hi. Yeah. put your will Thanks when you year point ahead? a final To the to consolidated into taking impact of

Vyomesh Joshi

that offer. remember to multimillion we $XXXX are be going The it way. dollar may reason, way think all I from Joe, not the

and things So thing The the to depending going based depending generate software for model that you the growth, ASP. you right. that on what unit watch really base kind of multimillion and to the services that is from because with on, we need an is right all I where I'm the solution, see participation I dollar of and business appropriate to to the we kind really on to materials, look installed build are way want at want mix believe the that's annuity $XXXX model we build. the the the

we So I base is want am have The think installed what to want mix. we to do depending productive the more ASP on is and what interested. that's I

to different going a are You answer. have

Joe Wittine

It we Okay. remarks visible address John, become give - there. the on think these wrong are beyond initiatives ready your if driving to materially year can I today. I'm looking to interesting. But like That's you total you a it's also sound can lower you then, And size the you OpEx of that? are prepared helpful. street timing details [indiscernible] or dollars, or on Correct the as this me address doesn't

John McMullen

Yeah.

my comments, that prepared comments were think for us. a approach I around multi-year

are I felt things, were think the more we over baseline we have and needed time. really now at the business think XXXX in we making some organizations, of loaded of a we think a take for understanding are structures all we approach the investments the tuning going organizational frontend company. the forward spent point lot of it have at can a where cost way up that changes really lot some we what is and improving appropriate visibility time of look we we long-term But what growth and also about a to across our that model

it's So a project. multi-year

But we pretty a should be this good as early a have I terms where in think work it's some done We've of we a company. multi-year heading settings we project. think broad portfolio.

of the of proxy or we you numbers from is think 'XX, that operating not QX think are an run for providing direction any QX about but kind guidance expense, the specific on decent a rate a OpEx. P&L, the As I

company. more We to a headcount as grow looking our not are

We turning expense this on posted and basis. a not is We'll corner posted. keep keep us. a to for we going are - you on multi-year gradually operating you will project regular this But start the is

Vyomesh Joshi

need for But and we what thing building and and that's for focused important I on. the market in we we think to go us think invest are the most to is innovation are long-term appropriately I company

Joe Wittine

from XXXX tailwind quick and where Thank out, really today can the one we I I follow-up, big John, just to is euro sneak if in you. your how sit If thanks. can quantify a will step you

John McMullen

move really on foreign projections will don't right. that. so We no projections currency, quick, around Things make pretty Yeah.

Operator

from next Mohan America is go Wamsi Merrill from Lynch. Please Our question ahead. of Bank

Ruplu Bhattacharya

the filling product Wamsi Ruplu questions. VJ, It's issues. Hey, talked actually in quality past today. have Hi. about for for the Thanks in you taking

the So us have update, what just give in with printers you an of issues percent maybe can them? field still

Vyomesh Joshi

multijet So where I the we talked legacy of and especially our think printing remember products, issues a about XXX platform. had lot I

about I shows in issues net all have into score. that believe our promoter I we And talked improvement tackled score - throughout We the where XXXX. XX-point promoter up do that

So attending customers happy are are them. to very really that very, now we

taking solving are are We reliability accountability forward designing are because that assembly. great we the for that products sure their introducing and designing designing we moving all making problems quality to have I'm and in for quality and personal XXXX. reliability, be will new going manufacturing, for we

believe we corner. the I have turned So

legacy because issues. to had As we I talked all we a the about, I that but believe - lot invest had

and we and I think we that quality I'm a that going to seeing we make is aspect solution that the very now corner and are reliability on very work continue important to confident of that sure every are turning build.

Ruplu Bhattacharya

That's impact there us John, any just was fiscal revenue changes Okay. quantify earnings you can on help from in XQ? and maybe, And accounting the helpful.

John McMullen

Yeah.

on our or additional changes liability cost noted or of are clear event. original to also it relative related there warrantees cost that a we but get a no to XXXX all now The year That's the we company have revenue balance 'XX. impact XXXX, material full topics, the preliminary full zero did So And in we don't revenues to on make XXX year. will in We right results, the in to of related any impact projected first want was financial either on results. chose balance to that and of cost financial disclosure analysis separately. since we absolutely do kind product into around of relative that the sheet, our QX no relative the add around impact sheet on was as as believe And outcome warranties. no for impact in to XXX was we QX results there we -

the know warranties review initial costs enhancements reviews let part and that ongoing how as product company's disclosure to do I our As of products. we in and consistent to XXXX internally from want be services with reclassify to related will revenue folks to results, we

We services. showing are traditionally that in

those related any impact over these give that no works will going disclosures impacts no going think we we've the the we all. are to to and apples-to-apples to financial a last from and for We be also reclassify XXXX to that done and products to company minimal, the at are again the give in week each in quarter We you XXXX impact year-over-year results and on XXX. are of those services, give non-material will comparisons disclosure impact changes - basis on and we'll enable will for all do

Ruplu Bhattacharya

Okay. one on questions if lot Thanks market. I And a clarification. the quick been just can ask there have for go-to clarification, of

go-to Sorry, what like spend you when OpEx challenged, ahead. else So go I because that is take towards say or your will market remain of here? it OpEx it contributing is

Vyomesh Joshi

of aspects three are there it. Yeah,

Firstly, we the processes. processes to the IT, model the business bring to place to right because sure We we wanted the need of them. make

so and the go-to that are two is to you one because had our budget, and systems and we market. are want also IT innovation OpEx third we another Oracle upgrade major in what And places for sure seeing platform build R&D our the meaning that we a make the is the

clear of any? are want be add that you just aspects to there want I it. So John, to three

John McMullen

next a QX be and fair driving market, better the services in so frontend the something believe nine longer so Yeah. amount that's on and cadence last and and term corner - to turn the around rate OpEx, outlook support - the as noted it. all continue And structure to start coming over things the where on for think and loaded that go-to we noted, lot the a more need work the organization to visibility going cost having is months the able that. I operational out earlier we'll of cost we over P&L, now our I run around VJ quality coming like of we the the advance and to want question really IT, launches we like six where invest based of and out our months But work the we for six

going we very that's but an time. where that kind So set That's we us to overnight are an have views get, expectation to good event. we don't going some of take want to

Ruplu Bhattacharya

all you the Thank Okay. for details.

John McMullen

bet. You

Operator

Blair. ahead. go from question William Drab next is Please Our Brian from

Vyomesh Joshi

Hey, Brian.

Brian Drab

One, that questions. quick the reclassify some care XXXX million the XXXX revenue just Did you XXXX in revenue, XX-K did shows $XXX in a health thanks clarification. for my Hey, shows Hi. health taking first you Because XXX. segment? the in XX-K but care

John McMullen

Yeah.

but revenue classify quarter we was So revenue, we changed the and fourth year XXXX. error haven't in for the unfortunately correct XXXX, health all first care for last the of so we health in XX-K an we there the way information comparison in the understated provided care

corrected talked So if based on the for you quarter, health the the those XX% fourth for are looked growth at when numbers. of year, about we care XX% full

of but care how error, we an in had didn't revenue. we we anything So and change health aggregate classify terms

Brian Drab

quarter - to the I think the That sense. said makes for that OpEx guidance right. be Thanks. All should clearly you pretty so fourth John, And speak level Okay. then,

John McMullen

guidance. no guidance, No

Brian Drab

used and Yeah, to add guidance, but it, word the guidance. I the you let the that's want whatever guidepost. call word me

John McMullen

to a tag but continue from think an to That Yeah, not it's it's would I say point for kind number. run could of - of intent OpEx view. good ramp a yeah, our rate-ish quarter, vary I to quarter

that it way. put Let's

Brian Drab

about quarter, Okay. the 'XX? margin. And what around quarter, should gross expect been and we is - last gross just XX It's the question in XX third this adjusted how in on

John McMullen

will year. throughout margins plus I quarter the a proxy think reasonable or is the fourth minus trend for where

Brian Drab

Got you. Thank it.

Vyomesh Joshi

you. Thank

Operator

from Patrick Please question is Stifel. next ahead. go Our Newton from

Vyomesh Joshi

Patrick. Hey,

James Gruetzmacher

James if Actually digits? revenue to for up a commentary more meaningful on high just given about clarification on into that absolute basis single the John, an and on the percentage have you double of to it return driving a the next we that over OpEx growth guys. couple down or basis Patrick, a how here expect you even fluctuate should is digits that see or Hey, years, of

John McMullen

be a expect on certainly should improvement right. on that only absolute basis you general, driven when grows P&L Yeah, I an think and basis model the will in

think we I that's now. right say all really can So

James Gruetzmacher

should terms models? IT being made. then on and to investments one-time just think a those How of Okay in and we the about follow-up that cost ERP you the costs relative subscription

John McMullen

the other it and of on that XXXX Yeah, we'll continue also IT in the to invest part is general. organization we've in rebuilt IT in

work efficiency having processes in So and of be the I time. forward for see be change the a think transformation coming the and will going much from biggest we systems the contributor reducing whole company across IT the us organization out opportunities will cost over that better

Vyomesh Joshi

now software kind that services after of the can us. we will annuity-based really the they think about important. we go on-demand I model not investment need that where materials, Yeah, services, I'm our our system, IT IT is so It's the and one-time right but I in wanted business a the Right upgrade on believe to manufacturing initially. talking be and systems do important for

Operator

Sherri Scribner ahead. Deutsche go question Bank. is from from next Our Please

Sherri Scribner

was of of I your about as to a should a know pipeline you. in Hi. Thanks. XXXX. percentage of how percentage clearly in have guys some of 'XX new products strong trying year I think last XXXX for wanted do products we goal and products get is and Thank you in a new products in you sense new XXXX? as revenue what revenue to

Vyomesh Joshi

grow think production to excited the way we going something just shifting do product new the believe are I that products is we don't is going to are any I launches give numbers very about business. because continue we there. this to the believe and the I'm

Sherri Scribner

is And of machines much and for what which how of - is are of products sense then production now at going targeted us give production, your towards for about a Okay. you some goal are and mix thinking can long-term that parts then parts your your final final

Vyomesh Joshi

Again we example. that. an just don't out give We'll give

and that's opportunity a used aligners would think I view a more and we have growth for materials. site. aligners, we So to using The for and growth our my day you our will find overall for use vital give XXX,XXX is hardware a and need this in they a more very which like and in production think that's comes is that both cases significant company produce I fair if a that technology particular doing be aligned case

Sherri Scribner

Okay. Thank you.

Operator

question from Please ahead. next Our Cross is Shannon go from Cross Research.

Shannon Cross

very much. you Thank

Vyomesh Joshi

Shannon. Hey,

Shannon Cross

you are how Hey, doing?

Vyomesh Joshi

Good.

Shannon Cross

Good.

a One, have about I where can a standpoint and question, the maybe on talk couple. my - geographic a also perspective, little most from vertical standpoint? a in a bit from are from seeing you consumables a growth vertical So consumables you

Vyomesh Joshi

the depends use growth materials I cases. Well, think on

a because for think of I is I example the that clear vertical very growth. a gave dental that's aligners opportunity believe you the tremendous one I and

want that only second that important care that and going long-term not The and It's also parts aerospace think to verticals us. for your in I dental be but health are we custom vertical very complex will believe those two are directly manufacturing. you the the arena, to And because from into be to kind come that's material up where the to when annuity is business additive related way using set going model. production of is I done the the usage are because growth

Shannon Cross

prototyping at guess characterize mass maybe curious level customers or in goal process? when terms are you conversations the you year maybe to two last manufacturing in of to or thought some how now have - changed Can came manufacturing. I move end to you the last your understand year of when to is I'm to the in I their where from customers, are And talking

Vyomesh Joshi

Yeah.

needs very production, will user So quality, it's part end the when it's they end first to or precision, be not. the the customer And the clear. customer the are needs are the which and you repeatability in about going the There think whether very at about four important day, I determine of part, that durability. and talk talk

- could the a or production per I thing volume? year, because million once that which materials, comparatively want the to is anything is are be - between will things model total the thing ask arena, XXX,XXX cost NextDent end part be Chicago run, than so look faster cost so times footprint if introduced to you the XXXX, the it's let's very, even of become the ask have, and very part that just more operations, we dental they becomes that's that want with The produce of cost second operation Can we technology. productivity. maintenance think cost in that they those And always - that to able including of important. at in uptime, that total you user The they I four third say, the cost I the

the got you a last So precision because that you've - productivity lot very very, It's actually something custom view. right of the so and case product. now confirm in things then that's the and times has clearly precision launched that XX% have effectiveness accuracy shift used point going of It to in and has had dental parts, multiple to it of other customer you be it years. needs have Figure That's I'm and having your than quoting, actually to able will from customers with an more example it production giving, any for the solutions Having inside by that and they about the is can what we four for we are that so we customers when that did right materials acquisition way mouth technology, requirement. the and are - NextDent that just X we achieve faster three used the the all case. meet we cost production that to

Shannon Cross

you. Thank

Operator

floor back to like would comments. to concludes This Witten any Ms. over session. you. I Thank the question-and-answer turn closing for the

Stacey Witten

today the Relations your after replay us Thank A of support www.Xdsystems.com/investor. website, joining our the section call be of and you. Investor XD Systems. for webcast Thanks on for this of continued you. made will Thank available

Operator

teleconference. participation. today's concludes Thank your This for you

your time. You may lines at this disconnect

3D Systems (DDD) 14 Mar 182017 Q4 Earnings call transcript