DDD - Earnings call transcript Q1 2018

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Operator

Good afternoon and welcome to 3D Systems' Conference Call and Audio Webcast to discuss the Results of the First Quarter 2018. My name is Sherry and I will facilitate the audio portion of today's interactive broadcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. would Vice turn Systems. President, I to call time, Witten, Stacey Investor this like the to over At Relations, XD

Stacey Witten

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

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

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

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

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

VJ to Stacey. and Vyomesh call afternoon, in and We I'm [XXXHXT-E everyone. for position over Thanks, Joshi] company turn VJ? stabilize progress company CEO. the Now, Good growth to long-term the to substantial profitability. pleased the XXXX Joshi, our made

in success IT, are we We services believe and several including areas to long-term invest go-to-market. critical to continue

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

Our provide I improving quarter to drive energy products and on an this financial introducing to provides results. to shift efficiency disruptive more on of would execution, like overview the customer that, our detail With focus production. year new John first remain and XD before

the manufacturing. revenue on-demand pleased are in healthcare, in printers, first with We software with growth our and quarter

the first quarter, increased X% During to million. total $XXX.X revenue

like to I drivers, of Healthcare have would key discussed and recap We for several revenue growth performance take consistently XX%. moment of the first these XXXX. grew quarter categories a to the

new a products. unit our increased Software flat. printer to manufacturing approximately printer X%. was revenue increase revenue Materials revenue On-demand in any shipping prior grew on XX% sales grew XX%. XX% And of

expect our pleased in growth fuel model are we annuity-based very We units, with future. which the our printer in business will

GAAP first As was XX.X% more expect XXXX more non-GAAP of we margin place we this reshape sequentially. $XX.X X% quarter and gross increased our same first but will were increase revenue units, base quarter operating the expenses X% quarter. operating in million, continue expenses compared $XX.X productive a GAAP materials XX.X%. was to the last drive only in Non-GAAP XX% long-term. and installed to increase a gross to profit million year, margin profit

and loss of share. reported a XXXX, per of $X.XX we of loss For $X.XX the first GAAP non-GAAP share quarter a per

performance in to me financial first quarter over it detail. XXXX John discuss Now, our turn to John? let more

John N. McMullen

Good VJ. afternoon, everyone. Thanks,

$X.XX loss an million, on of the We reported new $X.XX XX.X% a share in operations $XXX.X to of revenue the Healthcare for a XXXX. XX% $XXX.X of first and revenue of R&D or reported non-GAAP to investments first reported the was GAAP in we compared loss quarter we of ended of product a go-to-market the in customer capital increased of in X% IT, the non-GAAP XXXX. first to margin R&D to in the XX% per GAAP $X.X first to initiatives. compared cash million XXXX, increase $XXX.X quarter $X.XX million XXXX, of quarter million $XX.X GAAP quarter, of as of innovation to XXXX continued million, compared per expenses. X% loss first per a to $XX.X increase of million, or non-GAAP in and increased $XX.X with quarter loss products. We increased in compared used the $X.X a transformation to first quarter quarter expenses centers. XX% We share profit $X.X support XX.X%, quarter. expenses million, on-demand to first at a hand, XX, quarter XXXX, of SG&A previously continued of and XXXX Compared continue earnings compared announced during of invest of operating expenses to million increase in we gross share the first launches, to Non-GAAP new We the cash the million. of million as X% in first of $X.XX SG&A $XX.X December invest manufacturing, XXXX. share first to including per quarter XXXX. including quarter the For in in of increased IT expenses X%

healthcare pleased the $XX.X a expect all to increased both quarter with production growth in professional going and overall in to double-digit the growth unit in sales. healthcare XX% printer XX% of and unit strong continue forward. first Printer in trends demand revenue categories with continued million sales, increase for We on be

We we the are launch fluctuate, due printer throughout products sales of annuity-based year we longer-term. range will very as at have unit at and may revenue specifically, fuel of As orders. discussed, our timing over continue printer the we and of a this Materials mix revenue sales mix the believe prices. to making $XX.X placements was to model year flat approximately business unit million wide

can printer between printers lag continue materials as materials unit and this time year we in placements driving later contributions there utilization. growth we scaling benefit and strong be new placements utilization, expect higher While incremental of while from

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

and experience, margin in technology, generation approach to offset gross demand manufacturing enhanced continue improvements helped investments our year. GAAP metal margin impact will quarter. business revenue ongoing for for software million initiatives. both continued drive the of over we to We printers, the have to gross category. X% and our our As on-demand of growth The believe in on-demand cost mix chain manufacturing the from services first in compared reductions XD the sales continued profit On-demand additional supply of We non-GAAP achieved this $XX.X and and plastic longer-term. growth expect from of investment prior XXXX, we XX.X% add solutions customer sales drive continued in facilities, XX.X% increased and quarter XX.X% reported manufacturing profit of in and

legal a quarter first of X% and $XX.X year. of but new to therefore fluctuations quarter-to-quarter. a of planned as drive expenses chain additional compared result only optimization, new process and of of expect were to well X% GAAP the in increased for an to XX% the operating be of XX% quarter support But million, products mix of million, the from including expenses. our and XXXX, from our increase Compared this first manufacturing increase IT market-based expenses the expenses R&D supply infrastructure, in investment a products the increase $XX.X R&D profit were and as increased margins operating in increase XXXX, in non-GAAP XXXX the expenses increase expenses. available to quarter continue quarter, XX%. X% in in Non-GAAP quarter SG&A hierarchy, fairly X% improvements, ramp first sequentially. prior and sales expenses Operating stable job SG&A implementation gross We year, efficiencies, may expenses investments primarily the from throughout increased and

continue over of years. make next are for to investments We to remain company critical committed we to the significant success. improving couple structure long-term cost We believe the our

strategic on call costs We resources back some cost I this and to also each to with optimization to non-GAAP the costs want for and non-GAAP reduce have we and that, exclude our overhead with these are infrastructure therefore, optimization company-wide associated plan align results, key costs, VJ and in a note, will efficiency VJ? to from turn I'll plan priorities, developed With plan remarks. concluding quarter. our reconciliations leverage investments. executing our IT be

Vyomesh I. Joshi

disruptive our Thanks, XXXX, efficiencies, new we products to focused operational bringing In driving on market. John. execution, and innovative are and

reduce better for XXXX and our trade visits. shows, production-grade customers provides cycle the for the Systems X, recently we next competitive materials, chain. digital Grumman. XD which products. the and multiple speed and it SLS began we over $XX,XXX point four together solutions patient for This including cost provide XD XX% and of systems, Figure competitive solution accuracy. provide XXXX we digital as benefits materials, XXXX, aerospace and additive leaders maintenance Orbital than enhanced a dentistry these productivity redefine compared the SLS compared our supply speed Last great and feedback with savings, XXXX, per the Northrop ATK printer. introductions XD demonstrated throughout Force methods, previewed series Figure Air research aircraft half system materials further to and with visits total cases XX%, to announced The savings XXXX temperature new can manufacturing systems. to The XXXX cut recent selected LAB by offered of a high-speed We workflow, increase part methods. manufacturing offering of to real-world integrating the than at fitting generation of dental This number six the which XX% cost such has X.X XX% molding less XX operation use require launch, production X cost brings dentures also up offers Lockheed printing of have shipping NextDent competitors times injection strong At FabPro At U.S. project on on the at typically product with for in superior customers. week, the production have by can and traditional FabPro traditional printing of market we X leading of leader quality, DAY, entire products can times can enabling of more control, price manufacturing into and solidify rates platform We XX unmatched believe Figure Martin, offers received and times portfolio. the planned a

can X X costs parts Figure the One aircraft time was demonstrate used technology repairs. and minimum plan order We goals planes One unparalleled most be research selected XXXX, is is modular to and Six reason main available, to how rapid summer. with this of time-to-part, X shipment just-in-time this NextDent is because production and and older printing for with reducing reputability. delivery quantities, difficult-to-replace for Figure fastest to delivering standalone the begin X XD of Figure of the to it Sigma an reproduce explore accurate Figure no components part quickest,

products XXXX the and Additionally, The the from market DMP our we larger trade positive, products going new on provide later model customers, feedback collective and printer, year, incremental will DMP testers, the full beta of and new Solution. market expanded XXX bring plan forward. opportunities very a set and ProX has we XXXX shows to to this factory-ready believe our metals of Factory been

portfolio, like our the would end-to-end with complete Stacey? questions. for excited are We innovation call very And Stacey that, to ongoing and significant back will about open opportunities. to I growth turn and who the floor enhanced

Stacey Witten

Thanks, VJ.

yourselves and now call to the question to We up, others allowing one-follow discussion. limit questions. that will thus We you the participate ask in open one to

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

the number is calling U.S., you the If are X-XXX-XXX-XXXX. in

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

Operator

you. Thank

Company. & Please is Our Ricchiuti from first proceed. Jim Needham question with

James Ricchiuti

early the Question part you. the will bit respect, have whether of summer? up? as up? you June these And any How How give production. just the printer as color the the indicated that growth in with momentum sustainable I And was VJ, follow-up latter it question professional this to Thank is you you of in of products. the little professional looks if coming then, shipping be that. Thank at It and to on Good you. is new wonder was do us you Can think production part this point I Hi. a you can summer much to from XX%. better give more some much just quarter? the indication us was like or it showed, relates afternoon. both just

Vyomesh I. Joshi

Okay. right. All

of You questions. lot have

So let me go one-by-one.

there's The XXXX. first and growth had both thing a professional We production printer's in is balance. QX

production not that in only printers, will but products I've SLS, second the MJP, is had believe XXXX. And the introducing printers, our XXXX. I happen the growth So, about, talking without we of which and half DMP a our tremendous been new in this really SLA even

second thing installed in in quarters say that the I generate annuity XXXX. is, base, The focused would stream are the productive these we can things and because coming on especially

make that that want I printer Another to sequentially. point XX% the grew revenue

weak we tremendous a saw growth generally, quarter So, side. the share market even on hardware printer in

going be this product, next-generation different. the as far is As to

we SLS FabPro talked starting this our started as shipping XXXX example, So, month. about and we XXXX for

to early summer, timeframe. the which then XXXX are the shipping XXXX dental We our DMP in XXXX going is and and start lab fall

see summer excited feedback you're about going many the trade the half, that Like really be DMP going printers, of accuracy and best the got to Figure way revenue. X we got I I as the in have are we to early the the overall printer The fall. unit, in us terms in that more growing coming success what tremendous shipping, the feedback are also believe help said, So shows. will this and to see all to XXXX of there metal second the in very speed, the throughout is, our market. X will And the feedback the the Figure we we the is products titanium you're XXXX,

James Ricchiuti

least the assume, product some at XX.X%. And those your ship see second could that these half, the products begin Should margins, we indicate in gross gross in in Q, improvement product margins? we to as

Vyomesh I. Joshi

by certain the Figure for But, It's as different you the X, the low But be X, because expect products higher the margin. FabPro. into margins able you we the overall maintain product be to price believe, margin production like are It I the category. depends go There point Figure the XXXX, the DMP can to company. will going what be lower. will modular

James Ricchiuti

Okay. Thank you.

Operator

Our next is Ananda proceed. Loop from question with Capital. Please Baruah

Vyomesh I. Joshi

Hey, Ananda.

John N. McMullen

Ananda. Hey,

Ananda Baruah

the Hey, really you straight guys. start I'd consider when two of to of guide all initiatives question. just see. taking quarter I on you if then, could. the And straight solid had Couple you Thanks for about VJ, regards pretty in things. October consider XXXX? what of execution. I It's yourself talked guess You've of for yourself to of had for be the you execution. there. the schedule Hey, do handful a remove Do in schedule And to ahead ahead good congrats to I doing collectively solid mean, like you XXXX, place with quarters had there? sort of

So I'd get couple a I And thoughts Thanks. to others. there. love have your

Vyomesh I. Joshi

think a just ahead. it build. it's call I wouldn't I

growth. I We growth, growth on continue continue healthcare, want and to first And always ODM to and go just business printer revenue the in quarter. want that now, the our I positive I doing the that I stabilize about, I the to focused are our the grow going always want to drive to right software say, always talked hardware revenue take that's to the direction, that. – I company, continue drivers to said as

Americas part and The Asia. between the other important the is balance EMEA,

only materials, to the also in annuity this achieve these APJ performance categories software I our have will come growth So, grew and services, and a but thing to X%, X% go-to quarter, then EMEA I That balanced the and want said I streams for want X%. always that into grew market. Americas grew second that was not

first So, now, quarter. this is the

sure of day, I products to that We seeing and to achieve, done, make half our and second now the I these our will augment move I revenue to now we us now in And continue of really growth. want launch doing on make continue we continue EMEA Americas we the are XXXX, that and that to and at products, as that want performance balanced we way. really on that pruning with would we what sure I to build want portfolio APJ new have into because end like to help a innovative that focus overall the that.

part impact introductions, but other our The on else sure the need not cost everywhere is, important is we really to do make work really cost to way our structure. structure, on take And the cost the want out. how work can we product I

Ananda Baruah

in quarters? actions been taking the over been really several the it the channel you've catalysts have is incremental And that the America North that last

Vyomesh I. Joshi

It's both inside people, we adding we adding See, indirect. assignments. and more for clarifying scrubbing direct direct and It's not territory the me, are just we the channel. are are sales sales,

really I focused about to and generation. part kind pipeline, important the of other get is The right create talked to on a we lead want

Our can So these we experience have drive to want approach the People the demand that at work all and Know talent – count have that I really finding, that believe generation. I XX really with I'm RAPID we we on we the Systems, application engineering, thing that incredible launched our the really the do, employees our XD we in of because campaign years and workflow

we APJ, all generation are So, also want our to that we Americas plus campaign, taking, the processes EMEA, approach things, into marketing the drive go-to-market had optimize applying have lead these will the right the drive really that do, revenue profit we of and we for the approach execution. with and kind growth. we will to fairs them Plus, taken that investment the we events in pipeline continue and launch and new that

Ananda Baruah

helpful. That's Okay.

to I'm in. more sneak just going one Now,

I into the sort the these guidance, of you've in not the I launches. should us Just normal seasonality? of mean, but giving new year, of launches. high-end out, last know about dynamics you're two and product we how quarters the ahead seasonality help think through had

the stall? of the could to How think launches or us would So, launches help do sort about that you like dynamic?

Vyomesh I. Joshi

same able QX way QX think, the And us the not we overall happening. growth. the should see then, I be QX, you in to look QX, are launches at in the launches what saw revenue is on helping should because seasonality, like No, the you and seasonality all execution QX to major

Ananda Baruah

Got it. Thanks so much. it. Appreciate

Vyomesh I. Joshi

you. Thank

John N. McMullen

Yes. Take care.

Operator

Please Company. Our Blair next Drab question Brian from is & William with proceed.

Vyomesh I. Joshi

Brian. Hey,

Brian P. Drab

to looking Gosh, margin my sort X XXX is basis was XXX I if I'm Hey. Thanks I the surprised you're Ananda points, opposite was as were questions. you be and down wondering of for at taking I'm this too points a industry levels behind. organic of mean, growth quarter is feel, year-over-year, X% little gross of about the basis might than way, of would guess, I you forming question year, FX. last returning which XX%-plus. are asked, point, out and kind OpEx I points we take if like that growth, And at this have talking up was, you and the this not

is just I'm XX%-plus a is the ask here, question XXXX this a point? story just I'll – in So the that at is wondering, XX%-plus it cards and

Vyomesh I. Joshi

let's all because down there questions. think are multiple I questions break Well, one-by-one the

base. to unit you which that is, is the way I was that's The really growth, first printer very put do because first thing clearly, the to installed important thing get our wanted the

unit gaining So, share. we said are XX% we growth,

XX%. The growing market not real. be just Let's is

and production So the to be that's in unit. I just want both MJP And clear.

not story very that. is and clear an MJP just I to want this So about be

exchange. that execution have the is, when there. X%, there we achieving really what no foreign sales is on you are When are grew foreign we that and yeah, helped. America, The we the second exchange But thing definitely focused

because, our the we make to The that was going to when remember, installed you printers third at which I were from are system. they utilize coming looking point mix materials legacy is are revenue base the have working, not which a materials. not And still the want

of taking on, are going progress a services replacing units. customers but on Now, XXXX XXXX MJP is migration the old where we have and there like, lot MJP on MJP especially made

terms gross materials more relative materials are flattish different thing will hardware So margin. a to see that growth, you're seeing very that's margin, the have because on have mix you the gross in growth when you the of the to what going mix really

I company the the then want kilograms that share that's I that for want of be of So company much build at – short-term with the some much, look introductions we part, consume seeing I growth drive product I as once the on are and go-to-market materials, about I to we am terms we to said start investments how growth of margin to going for It's expenses, are I want market happy I IT stream better. that unit execution units we the because kind new that's put can and gross and in margin. mix just build our to going run is in to annuity last a don't because absolutely of a actually XX% it – the this materials, in – to great where materials. grams unit these we make. focus our of driving want The how that I sure to and really make not long-term. just want always cut portfolio, the the and where the

and We terms are drive. we base very what in want measured of methodical to of very, kind installed

happy in So, performance. I'm mind, our really with And add John that too. let with

John N. McMullen

Yeah.

couple gross you margin. on. gave Just we on QX, that direction When up in on specifics brought some a of talked we

pleased and QX overall throughout revenue somewhere printer could or particularly growth, certain operating expense, and growth. of suggested expect performance of range sequentially our with in of that course continue the in revenue the year, was we within QX. to of we were areas probably the So, certainly the range you expectations high-XXs Margins,

margin margin, installed process, understand but and talked and come. reshape through on growth that yet a forward to going basis. the we've I base migration And we So, wanted driven you by we've the of that give to addressing materials kind the been how, just quarter-by-quarter is detail go about leverage that part. year-over-year as

Brian P. Drab

Got it.

the I gross you get for company X% column Q just at down detail. got materials year-over-year and and stock if thinking looking just... overall I'm you've gross profit this appreciate the flat It's dollars and where gross for Okay. X%. would products going profit had that for really (XX:XX) change profit in

Vyomesh I. Joshi

it's ...understand, right? a mix thing,

Brian P. Drab

some margin giving wondering starts up to when that or and price ...by I'm turn. up giving

Vyomesh I. Joshi

I Well, think the and you printing as have getting as will of now a right what soon that, base, and installed more the growth see kind mix. our start then more materials you we

I the any to kind to drive think get invest see in don't of because you you you getting not annuity of the annuity-based business model, if that, you've that in are base, will really installed got productive going the fruits And our we installed that growth, why this with base. needed saying installed company driving an on we that focused and usage where that. and unit then can on that's XX% the I'm we portfolio, very get happy base. pruned

John N. McMullen

Yeah.

of Brian, base. thing, amount understanding the our of installed analytics in other time a and is fair invested The that also we've

that us visibility in and pretty we good over helps that's of So our terms expectations how well. with have moving time, as

Brian P. Drab

it. Great. you. Okay. Thank Appreciate

John N. McMullen

Yeah. Thanks.

Operator

next is Wamsi Please Mohan America of Bank proceed. Lynch. Merrill from with Our question

Vyomesh I. Joshi

Hey, Wamsi.

Wamsi Mohan

on you is think just guys. to the is what how in of for here, down the a us Hey. wondering, age appropriate (XX:XX) base? Can color average is that year-on-year the comments the us base on maybe give How and installed afternoon, on I installed that... much Good us sense base. or basis, John, you some any printers of understand some installed shipping that VJ on follow that metrics was to that up give your

Vyomesh I. Joshi

I of of you can but I it. a give will Yeah. lot you details, give flavor just

So, of because you call what at kind to three annuity-based generally that. years model think business on I if installed you what because look that's – to really you it, approach about based create five have base

it, units you usage, didn't we materials that if about is lot where of growth. installing think good have So, the not the was the company for very and consumer

we they that I that MJP have been products the because installed, We the our very and these also were hurts also XXX not upfront that being printers, had in legacy in about issue used.

working kind stabilized we and that. are hard Now, we of

started base line how of base, And specifically our more that to are we in X, because where which segment what DMP doing augmenting from XXXX. last we second XXXX create. what base. see will saying our because consuming more lot need and And SLS, adding that quarter that's be XXXX, is right installed services that in generate are we annuity any product segment units XXXX out year, now of materials will half SLA, installed come to do on units. So more and and the And we the is out we feeling these we now units active happens consuming for production we first is really are and believe, not work, and I'm stuff MJP need units come DMP. then on will not with they jewelry going really with focus path installed to the portfolio printer, with materials. which new overall lot Starting this have which then, we put then really XXXX active of SLS for The XXXX, can in our shape casting and base. which starting production continue we Figure materials so that investment is and the And with the putting

Wamsi Mohan

the of Thank cash as go for the think you. if materially in we well. we of what cash tick through and we the remainder quite John, flows There's And I look color, should year? year-on-year a they're big free full-year about operating flow. for How as up think if CapEx CapEx? should progression the of your down both Thanks flows, the a cash on could, VJ. at you Okay. And basis

John N. McMullen

Sure.

of step you burn cash January. year, CapEx in the right, course a through to some the if was QX was did acquisition the So of QX point shift continued in view QX product cash think but did we I the We fraction the back in that driver launches. show to the of the business a of the last beginning back decline from back primary of the in support all investment biggest of it was cash the from way to year, the that. From QX,

of So, million million $XX roughly $XX was there in or that play cash quarter-to-quarter. CapEx

should about full the You for year. think CapEx

think the should $XX we the our year. improve to ability year build about continue there ramp is position our $XX business, last what hopefully, did and, to cash not later we the million down the to in in as CapEx for and You too And us. million inconsistent road range, with

Wamsi Mohan

Okay. you. Thank

Operator

& next Hendi is Please Our Gabelli Company. from proceed. question with Susanto

Hendi Susanto

delivering on Evening, VJ John. growth Congratulation QX. and in

First question is for VJ.

of look Furthermore, you in some QX, printer's able purchases I'm anticipate we colors ASP Given how when toward you growth mix be some growth? and and whether customers wait should versus see may the also, products? should strong to we printer that printer revenue printers there new some their is for Would into introductions, lower shift then high-end on strength in mid-end or units wondering QX? whether new delay have share

Vyomesh I. Joshi

QX. are think what units it, by but doing. and good price on Well, the that's XXXX very that of not expect fewer way higher to I on product And $X,XXX we we production in $X low going as balanced. to in way would think professional are I have similar introducing will be worth was QX product printers, and it, in be mentioned, very at million-plus average lot from But all and new the the that's to ASP the point. point both line, the because category I average, as I We a look units introductions what had you're may growth in product price

of those my have we and a the measuring you should is at And you units having lot materials, I think look really XXXX. throughout So us. revenue what hardware view that's are units, also overall growth adding to are more just be consuming

Hendi Susanto

John, then, OpEx? And on base up in throughout OpEx, on OpEx further share you questions a investments? for Wamsi's on it. more or may following your clarity for increase the your OpEx QX Got would investment year represent case Does

John N. McMullen

Yeah. Sure.

a door. throughout loading QX think good about get in products full-year proxy I a we course little came a and bit rate So about But results, with talked OpEx front-end number we for QX year-end out first we the out at also we the when being run of these of XXXX. as the of kind half talked

So QX and that's in we new to driven R&D related sequential a expenses OpEx, from X% product predominantly saw to in introductions. QX total really increase

number year And a as in or blanks to would I'll minus, good run the terms is fill the that a quarter-to-quarter. rate thought so in how of and the I kind you of QX, roughly stick way let look, with plus might

Hendi Susanto

you. Thank

John N. McMullen

Yeah.

Operator

Our Group. David is Financial with Susquehanna Please next question Ryzhik Proceed. from

Vyomesh I. Joshi

Dave. Hi. Hey,

David Ryzhik

think question. but give in Thanks the for the update about the on metals demand U.S. can an good XXX? the ProX I much talked your guys. update DMP portfolio, some so Hi, the taking Europe, there, efforts you've past an VJ, you on in

Vyomesh I. Joshi

Yeah.

David Ryzhik

And I have follow a up.

Vyomesh I. Joshi

medical the this have the getting are key The what because we segment, at with the and in to think, proposition I to capability two success get tremendous having I solution look think I you know-how believe segments. us healthcare metals, manufacturers. value to So that here is really device think I healthcare the fundamental helping workflow

do a want we be in healthcare we is system taking that our software aerospace as and to So, also we is that approach that XXX titanium to are the my to business similar of that have still work XDXpert hardware, workflow able having overall this where ProX workflow really come will because in with to have. we very believe after mentioned, we competitive advantage. where XDXpert, the And metal materials aspect know-how, healthcare it. DMP in cases overall because some product, on The important I is phenomenal a aerospace, the we view, the I a will approach use but very have that focus that our is

believe have see talent success we already, and in that and U.S. Americas as some very also going going I you also in and the now, And the Europe, in see continuing. hired good you're traction it's the I traction As we're see coming mentioned, in far can – as to to months.

David Ryzhik

Thanks. balance John. question, sheet And just quick a

million, $XXX you the what's and So, that to much run little is onshore? minimum how need business if have the cash cash over do you a at

John N. McMullen

just and was on don't balance think I'm minimum basis. the of shy depends lot a cash keep ending $XXX right? work a mix something we certainly of quarter-to-quarter in is the And the where cash of million you comfortable our non-U.S. it number times, it's with cash U.S. really because on, for on now, QX. I'd Right and company, of on and eye a a pure I lot give that So an

the forward our not give of us is the for that like number what grow is cash that certainly But, cash understand with not It's investments what cash we're a but uncomfortable understand I'm something is. also to on where to not really, peg our I'm So cash very really shared, really position with you all. comfortable we mix a where at is. We and going today. And also making, meaningful. it's opportunity that we

David Ryzhik

much. so Thanks Okay.

John N. McMullen

Yeah.

Operator

with Our is proceed. Burleson next question Bobby Canaccord. Please from

Vyomesh I. Joshi

Bobby. Hey,

Robert Joseph Burleson

guys. Hi, Hi, John. Hey, VJ. Hi.

So, I'm landscape. your where advantages lot on curious see we've the mean, curious broadest I the competitive think guess, kind range your guys I of cetera. yet. of out you software, hardware, touched on have there. don't technology, I portfolio. A in obviously, that you et of innovation

Vyomesh I. Joshi

Yeah.

Robert Joseph Burleson

make have sure leg are competition? you to guys that doing the on What you up a

Vyomesh I. Joshi

Yeah.

So let's by goes because customer as feel, – technology by, rather start out-view. than always I it in-view with

any product So, when customers, casting best a don't you competition. about XXXX doing We solution. I our and is investment well. have the we for where And have is jewelry extremely wax think really this think

space a after is are. you that we believe We solutions comfortable to solution making continuing go unique we continue to share. leader. which are appearance And Then, modeling, all comfortable provide part is quality and the that of of to XXX and we we own the to are I'm the and the modeling achieve, casting the leaders. way fantastic. solution, the that ProX And will be reliability overall that we the dental, are the healthcare, from We have am stating solution the this reason And a I be is with our where and the progress. productivity, absolutely tremendous gain system very very very that the solution continue we leader leaders are we that we for SLA the the

productivity part is we the And continue the and Because it. of our that the of competitive. functional to getting the – we it already going with part low-volume with new the go I absolutely believe prototyping we You and then functional to technology have always XXXX, the we in proving we you production. XXXX go that SLS this density the are is that and DMP, SLS and low-volume to a talked are quality. temperature out. do And production, is can better machines And have control better where the now, to build about well a I in prototyping our

are to are Factory We for and the with I do have a very DMP about I the they we XXXX and feedback have products. do titanium, unique XXXX in architecture believe going the believe the segment, advantage really in to grow market. our systems, XXXX, customers, healthcare we that our DMP the used. that And getting thrilled new are we And brings new

a adoption I the times XXXX, drive speed, reducing to you So, materials productivity Figure productivity ease we a the very, core cost accuracy about. it with if per LAB help the the up into best you really it's that's design to which engineers you parts on Cpk nobody savings talk when accuracy, hour, X.X, has Six that and the the X four do the and at FDA feedback kind and category the the we and When really kind Figure And when is variation printer. highest think a we the visits, the faster have materials, lab the the is important we with is you to to the we because industrial the customer for no of modules approval. times, part can very XXXX, of Sigma, multiple meaning are of about part-to-part the have them about materials it's of you are of that then us with dental X.X and then With the XX%, entry-level look going talking for drive excited engine-to-engine variation. have print has of really printer, portfolio, our we FabPro And about really number or put the because XX which best materials fastest, printing of all the dental we the that XX then many that DAY, time X, X, have, XXXX. overall believe product. got the use get I'm on engineer the about NextDent has inches that really very a can of of

tight about manager and We the are wants. that's what range, very very, talking production

go innovation. in to the will sweet additive our use we I spots that And think delighted have I think comparative actually in of application, point now that the for MJP. now view SLA, our the and of kind that to investment portfolio point That's give the into right DMP These reason this certain us by I because So I portfolio overall in view, the of manufacturing. needed the are and back and augmentation response R&D products marketplace. new wanted getting leadership we had great up the existing portfolio SLS, case, by we so, a am

Robert Joseph Burleson

you et unit like up very sounds And guys in growth. mix And materials you on it but the volatile Thank still stabilizing is a side, following then, growth, nice terms cetera. that. have Okay. might production and Great. strong be for unit just bit delivered of little professional, the

Vyomesh I. Joshi

Yeah.

materials... the on So,

Robert Joseph Burleson

– I'm Thanks. What's wondering growth, time materials stable? the when your read-through read-through sorry. lag real and and installed in that itself is we is what's should terms the see between So, the growing base of resurgence the that a I'm in materials margin

Vyomesh I. Joshi

Yeah.

we by the at that as reshape. Again, I need category. So to said, look have it is, and you I thing first to think

with MJP really we having printers, we things. legacy is an platform. MJP our So, for And reliability now, XXXX, had reliable issues very other are and remember, a which

help in growth. is seeing MJP us the going portfolio now, of kind growth that overall this Right the the show reason to flat. is are believe materials of XXXX you materials absolutely and that materials that I So up really harmonizing

there products, new are of this am confident we to not is SLS all the concerned, at see continue to for look they far of as As our SLA. incremental. growth are going XXXX is to our we as the continuing to very see then, different going I between categories beauty be with SLS, SLA is now that are portfolio. in we printer, The And they're products materials overlap think tremendous growth. really new and materials I

that So I our see revenue significant change a growth. and think then starting going XXXX, to materials in second half you're

Robert Joseph Burleson

Great. Thank you.

John N. McMullen

Welcome.

Operator

Our from is proceed. Piper Please Jaffray. with Jensen final question Troy

Vyomesh I. Joshi

Troy. Hey,

Troy D. Jensen

gentlemen. Hey, here. Hey. Thanks for me top-line in on great congrats and the sneaking

John N. McMullen

Yeah.

Troy D. Jensen

Hey.

on we get we Just quick you curious managing business. of kind far mean, can gross margins? what question, think to are be how margins I just or a in see gross should or you're bit going we XX% high-XXs? guys the fundamentally, to just if can back about thinking a should little dive we as Just targets about as

John N. McMullen

Yeah.

relative turn can material VJ leverage just then, relatively had the I really that for year coming think really we migration additive the on in are around but the new incremental. to the the And to relative about installed that that ballpark, down margins the in direction were corner above high-XXs, when that growth discussion the start general, is in products our that stable QX. and Troy, we a the little base gross seasonal to we gave QX levels, and think in low in quarter was

we of So, leverage hardware. see the between mix with some the business that's could materials where and

Vyomesh I. Joshi

developing. that I materials, continue because think when that proprietary I learned really materials margins margin, go connected a why the we the you how really important, it are what that's maintain want okay? of And do, a you for with the you hand-in-hand. this of XX% could that R&D they gross how intellectual to very I is materials gross property gross margin and think, in to thing my have mind, that's is are why that mix margin. way that's drive, and then about And IP, a kind to the you kind margin, Because that's have want one because

Troy D. Jensen

growing If Would XX%? gross revenue. margins of margin that is percentage I that X a as (XX:XX) So, really could mean, is software materials help guess, here. have... a drive above VJ, good to (XX:XX) ramp, so Figure That's I starts

Vyomesh I. Joshi

a and the depends have on Troy. kind all units, I the to on profile. depends very going a more It If get it's modular the mix, more It mix. production the different of and

And the materials There material, develop. it the the as nothing Figure materials elastomeric at that materials, these that the why very gross to we then, next-gen world look And materials are I category confident because the the on are X unique of margin going I'm had a the way is for the like are doing I will innovation. are it we margin. think tie be the materials, will we all in these gross that. material, that's said, tough, determining And prototyping on after. kind these is I the the things all

Troy D. Jensen

All Okay. right. Good luck. Understood.

Vyomesh I. Joshi

Thank you.

John N. McMullen

Thank you.

Operator

gentlemen, for session. question-and-answer to have reached remarks. our we over to and end I Ladies closing the the back Stacey of would like turn conference

Stacey Witten

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

Operator

concludes Thank you. conference. today's This

your You at thank this for and lines your time you disconnect participation. may

3D Systems (DDD) 2 May 182018 Q1 Earnings call transcript