DDD - Earnings call transcript Q4 2019

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Operator

Greetings, and welcome to the 3D Systems Conference Call to discuss the Results of Fourth Quarter and Full Year 2019. My name is Kevin, and I'll 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. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure your my Investor Melanie now Relations. is to host introduce Solomon, It go Please ahead.

Melanie Solomon

welcome Systems Vice President to me and and Vice afternoon, Good XD Financial Chief Chief call Officer; Booth, Officer; Vyomesh Legal President Executive and on Johnson, conference are Joshi, and Chief our Executive and Andrew Todd Executive President the With call. Officer.

who using website. to Participants along portion slide this slide number slide this presentation will in Investor phone refer our a on matters the at this following related provided that the ask Relations questions Those contains and to we that during to press call the in end discussed of in call. portion The of presentation webcast call issued so the like the the access may section wish the conference on we of today. session who'd on of do this release to call should the

access views of will not described For be questions delay only on questions and you that who responses that following the and as The will a able statements today management's few to streaming to may forward-looking web. aware be have reflect via be post there those as discussion please of second webcast to the and your portion include slide. this

differ may results Actual materially.

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

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

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

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

Vyomesh Joshi

and experience innovation vision driving at of would XD would shared range our our everyone. and XXXX, as digital of come Systems real. afternoon, benefits expertise dental, Thanks, Melanie. solutions, Germany strategy fall manufacturing across our In the alive make with for XD last durable and I solution We industries, has my production customers collaboration aerospace, Good It customer force. with Formnext people production how including health realizing goods. a demonstrated strategy and of automotive care, require how in

needs platforms, Our into environment. to forward materials, integrating a professional customers' path ability production through to a breakthrough specific creating has company traditional additive combination software architect hardware unique of solutions, to and a services,

able a increase cost improve operations. result, to total agility, and scale As are manufacturers of freedom, achieve overall design production,

Systems accelerating journey using adoption to additive help. XD to competitive additive manufacturing. from advantage no can sustainable is customers of Our where manufacturing moving experience And a as are that

sharp been Over production. E&Y report, additive three the companies a serial using years, XX% in last for According to has manufacturing increase in are global there additive functional manufacturing using of parts.

within to needs customers' to with their So environment. We their mind successfully process our through we additive adoption are journey possible and designing achieve help best application address their additive and customers them the existing with begins the crossing partner chasm. solution challenges. manufacturing in the the of accelerate progress production This

additive be of applications manufacturing engaging a customized designed providing workflow development to the technology. advanced to of centers. customer encouraged are to our domain access will expertise, There one innovation and their customers Customers by with begin journey production by state-of-the-art accelerate solutions, with solution

customers solutions. find production with customers our parts closely System using produced workflows. were year, have production And to been working the XXX than last our more We right million by XD

driven across arrangement lowered manufacturing a plastic with existing ensuring by production, the our structure cost-cutting of Figure In keenly printer our excellence, organization. on which and the by X manufacturing improving cash expanded proficiency. have Sanmina, the on top cost focused the of of while cost to with for world-class we model most flow. relationship X% we highlights include operational XXXX and to XXXX, Turning provides to We us commitment operating variable efficiencies been expenses

We generated improvements cash in working quarter the planned of $XX.X including capital, million a of as result from XXXX fourth reductions. of operations in inventory

which materials and the stabilized and have grow. strengthened we in XXX XXXX production now company We printing introduced and We have the materials available. on foundation to new XX over scale XD

in in I'm we half of returned to second materials. the that XXXX, very growth pleased

XX% is care grew excluding business health XXXX. customer care health in Our strong. And enterprise our major

results. of earnings X%. quarter non-GAAP quarter of the quarter reported XX.X%. and over per of and reflecting profit turning grew the X% fourth $X.XX was the fourth per gross share last $XXX.X gross Now, GAAP million, to XX.X% year. was Materials We margin non-GAAP Total revenue profit margin in loss $X.XX decrease GAAP briefly was a share. same

in XXXX shipping for we and begin and April. services to XXXX, expect grow simulators, be platforms on to in a are medical company be medical important to in poised In focus will we continues factory professional of and are we opportunity area profitably. continue healthcare to the in Health grow growth care business track our manufacturing, XXXX. to Metals metal the device

enhancements, generation. with and growing And focused remain cash introductions We start in have product incredible We will new software go-to-market software we our XXXX. profitability on assets. and

grow have we to scale We structuring lean and on profitable. to foundation and a which the be built and are company

on our XXXX. will quarter the now for Todd? of details results fourth more provide Todd

Todd Booth

Thanks VJ. Good afternoon everyone.

the decrease reported a $XXX.X decrease GAAP when the XXXX fourth of a excluding we quarter, X.X% million, fourth the revenue compared business. to and For of entertainment of X.X% quarter

We quarter $X.XX GAAP same share XX.X% per fourth to quarter XXXX loss expenses the the non-GAAP of $XX.X We quarter reported XXXX. the in in GAAP XXXX, fourth quarter XXXX. of the million. of XX.X% compared was the in of a profit per compared of reported decreased to operating earnings earnings as XXXX. in fourth of share quarter per $X.XX GAAP of share to in XX.X% fourth margin $X.XX gross fourth

million the environment. industrial to decreased delay the printing $XX.X enterprise of factory XX.X% due the macro to shipments, patterns metals ordering softer in customer, revenue a large Printer and

in increased revenue and $XX million decreased quarter. in $XX.X revenue manufacturing million. $XX to the the the to X.X% now-resolved activity to million On-demand the the Healthcare manufacturing quarter, Materials from decline X.X% revenue suspension. in government attributable decreased to XX.X% impact fourth to pipeline the

due industrial in decreased we typical of to impacted the expecting market overall seasonal quarter $XX.X XX.X% In revenue are Software automotive first further million primarily fourth quarter, XXXX, in a China. coronavirus the and weakness the European outbreak decline in manufacturing. the by to

gross in the margin was the margin The fourth in profit and factory gross XX.X% XXXX. of results XXXX fourth mix, quarter GAAP reported adjustments. We of Non-GAAP impacted XX.X%. inventory by quarter were of profit utilization,

XXXX. expect in We gross mid-XXs range the remain margins in profit to

the a R&D were decrease to XX.X% XX.X% expenses the quarter in of operating in compared $XX.X SG&A fourth quarter decrease of decrease expenses GAAP a XX.X% million, expenses. XXXX and a for including

structure on expenses to customer-funded Non-GAAP due Non-GAAP operating and decreased prior million, quarter to focus of a X.X% year expenses non-GAAP in quarter and million. from the XX.X% of to sequentially. were XXXX continued operating to expenses the $XX.X X.X% decreased cost development. decrease research favorable timing and a million. Non-GAAP quarter, $XX.X Compared the $XX.X XX.X% decrease SG&A fourth the reducing R&D fourth decreased expenses

performance quarter as and the $XX.X paid fourth million. reduced unrestricted sequentially capital million million the $XX.X down million $XX.X operations inventory $XXX.X ended during with from of generated debt Working quarter. improved million by to cash. cash by We $XXX.X we We in

continue While the used to are fourth cash we generation for will cash results pleased quarter. period-to-period, very in fluctuate with the

to VJ. call the back that VJ? turn With I'll

Vyomesh Joshi

Thanks Todd.

Systems Before we lot begin and make made business progress improve my Q&A, have reliability years team a joined and with our I a quality XD to comment of and about on worked want our four product portfolio, I XX. culture. to and Score retirement. Net the improved ago Promoter cost structure, We planned processes, to

the solution whole Systems. our executed model customers have customer is and XD through of innovation portfolio with journey engagement a customer additive digital including manufacturing We our our manufacturing guiding encompassing center the strategy

team with now to committed appropriate the the right execute I will the and transition. an our Board the we place growth find products have involved feel with in I'm in that working to remain confident strategy. right successor to

customers thank and software, professional I as to recent employees revenue focus dedication Systems. take continue on to opportunity drive materials, and and loyalty this XD their want innovative work services at our turnaround that the I profitable platforms, to believe through for we hardware all XXXX. production will our in including solutions growth

now we And with will Operator? questions. open the that floor for

Operator

is We'll a now you. coming from Instructions] first session. conducting Capital from today question Palm Group. Greg Craig-Hallum [Operator Thank Our question-and-answer be

line now Your live. is

Greg Palm

nice here. the good to Congrats end Todd, VJ, on afternoon. the year

Vyomesh Joshi

ask but operating did share cash Great earnings feel performance about $XX.X Greg. good No, Yes. the -- we and question. our have especially we that the Go per million. Thanks. the ahead cash that we

Greg Palm

way I confident these in Yes. on Any You No, was lower growth of whether you some this detail metal to the the I'll shipments XXXX compliance that headwinds of year in system out ability seem export enterprise return good. start with pretty in was customer? lack it company-wide. guess you the topline the mean to shipments to I saw your VJ.

year? to the just I'm faced sense trying So, get were company-specific a headwinds you what last for

Vyomesh Joshi

I three. all about think talked you So,

is, we shipping I now second the we'll first of start delay are course, as about, quarter confident the had of we very So, April. And We to talked shipments metals. the XXXX. think that to in

had really second they customer is level was asked were in XXXX, a hardware lot building that one so They the shipments factory in second for not one. The which China. enterprise XXXX in the the same was of the

plastics that will looking us So at now should behind now able that having growth in also our be be printers to real the happening in we XXXX.

on growing start that is a It our on having business. and with OEM issue kind the important our right ODM thing focus but going a that's lot should be not the the able a be very we is of the X/X whole us go-to-market the suspension third with business behind impacted part. businesses compliance of The ODM we especially only are to export to business,

XXXX the because software segment of of was segment one last manufacturing is in software. business overall the -- And in in the a automotive The industrial had the lot down. We headwinds Europe.

also software growth in path now So on XXXX. we new software difference have and big under will getting go-to-market with product focused the a make our Davey that healthcare now Wayne and for introductions

want thing other as important healthcare The to business about. state I that talked is I our

in Planning grow simulator out, to XX% our enterprise our Virtual XXXX medical you the customer and business If our business, and continue we'll device grew manufacturing business. take Surgical

be good feel to are headwinds very about I of not that some the going there in XXXX. So

XXXX. attention other on need well pay be need that that workflows. it. course, focus Of sure And headwind that really But are we to continue should to set production X our to The like introduced to and in we making very we with also profitable our Figure us. up for new help we think really believe material coronavirus, we growth I we prudent

Greg Palm

Good I you ago. QX? to backlog I delay in Or you should had hear. a in talked was And a portfolio? quarters Do gave we on? of number shipments you what's goes will million know the that at have a ramp think big $X the point metals for the number about you level several as away year the get But of assume right backlog? that sort one

Vyomesh Joshi

clearly QX, ramp. Factory both this open So And we our very know customers solve that issue and before Factory we this start were have But in we XXX. to it about shipping. you them XXX that thing and are with the shipping patient start is need we'll we great will

we customers' responses three will But growth. our So I be for and by believe very start the ramping important will I'm QX. those starting absolutely encouraged quarters in very

We XXXX. significant but in number, exact it growth a be are giving not any will

Greg Palm

last hop and Okay. guess I'll Makes one here. back I sense.

you March I decline look was the You from last if I that it mentioned don't X anywhere December kind know quarters typical back -- that's range. mentioned years from I and typical XX%. of go or to the X% to a the if seasonal Todd mean over expected

December So what guess... from in March seasonal to normal your a quarter? is decline mind I the And

Vyomesh Joshi

also we said understand normal probably don't I you X% happen give and X%. to So number the to in yes, XX% don't but be impact think But as that would we we need exact to coronavirus really impact three of ways. will want because expect

First our factory that. China we ODM in are able one, not to operate

need in have and may to we we to attention is, we chain supply where some do the that places thing pay of because of the supply impact shipments other the really and product chain. China an have The other to

a need buy because will lot third the customers of impact who And impact, coronavirus. they our also an that. materials to I understand the And think of really have we

pay we sure not For want now, that. it's just but that material attention to we to make

Greg Palm

little a building X% conservatism on So X%, to maybe there? going extra out given but everything that's

Vyomesh Joshi

right. That's

Greg Palm

it. Got

luck. Thanks Okay. for help. the Good

Vyomesh Joshi

Thank you. Perfect.

Operator

Thanks.

Company. Jim coming Our Needham next & from Ricchiuti is from today question

is line now Your live.

Jim Ricchiuti

afternoon. couple of progress -- gave of enterprise made breakout it you, the a excluding business at for healthcare was the shape, for years. healthcare you've company, in that VJ good congratulations excluding you Questions the just the XXXX. kind the how Good What business, customer? on What the in did area wondering customer the up I'm last QX? for

Vyomesh Joshi

Sure. Sure.

if of at a sort we X% decline in close printer QX, take XX% - business take We if you QX. it's of in you other So decline. were enterprise the to kind the hardware, X.X%. of But the actually grew customer

kind believe our business that engine we the better. thing growth device in a the medical I that in I -- and continue Planning and absolutely talked will at the medical simulator manufacturing, of having healthcare XXXX So Surgical about the growth the that and Virtual believe

Jim Ricchiuti

in That's really done R&D, see guys the about side, nice we it's controlling R&D how it. a you basis of surprised And should for is I the line out sort helpful. Or on job Todd. in How anything maybe Is that unusual about that was have just you decline think a OpEx a OpEx. of... we to kind looking Got OpEx think should to in QX? -- there QX? question

Todd Booth

some look a timing to did XX% favorable is in our we have in look way cost feel and Without structure we the favorable at the So you decrease QX place. it would at timing.

forward. look at So you should going that

Vyomesh Joshi

R&D the is, think just I we taking the important are down. So thing most that

SG&A not the that taking down, are We but significantly.

think we must that's payment think very we But that in got timing us. I this the I invest innovation to that of and we specific QX. important got in

a good But done So our I we really think right approach balanced innovation. in a cost need that we have in structure. invest sure do we making very have job believe to I

Jim Ricchiuti

the gave color cadence And year. quarters of product you should wondering how see last and how over I'm question about on Thanks. overall it. is, XXXX? you Got the for we couple think of about the this some opportunity me metals unfolding that new first

Vyomesh Joshi

-- well. So doing extremely I our think business new dental products the is so

in new We about do the week months. incredible positive with, big we show that had response last have for Chicago XX a will got some able we technology to stacked We talking which from show. been software and and be last you introduced printing

XXXX, Figure new our opportunity dental materials growth and do I in introduced modular So of a are getting the now coming momentum we a in traction. believe we is definitely that quarters. stand-alone we for XXXX. lot of will also industrial And fall X have The the great finding are the

we the about talked Figure dental. materials metals We with X the talked plastics and about. new So with

a very is had other software. our We important part very inspection The upgrade good software our portfolio. Control X in

with our We good product have a Design very product. X

are metals very which side. also a Gibbs expert, real, to with very lot our is other thing on growth, of the growth And is start and able in The you important our in is a should thing our XD last to a innovative going XXXX. product the metal Cimatron CAM, be growing see we

So product I the last in help in growing nine new us our six to have we revenue believe in should months these XXXX. introductions all done also

Jim Ricchiuti

Got again. it. Thanks

Vyomesh Joshi

Thanks, Jim.

Operator

Thank you.

Our Drab question coming Blair. from next is Brian William from

is Your live. now line

Vyomesh Joshi

Hey, Brian.

Brian Drab

you. Thank VJ. Hi, Hi, Todd.

fourth a from sorry you a repeat a to and was said, that I'm be research quarter in what development, you R&D forward? what and payment there large expect customer can payment was So was it just and on going you the how or do the

Vyomesh Joshi

that be R&D are in showing right about, Todd think it decline the such XX% talked was you in decline year-over-year will that R&D. and now exclude XX% payment I So if we

Brian Drab

has guess I to previous quarters, way, for R&D million forward? the mean million million. I million guess still said I run to been $XX the rate $XX $XX of $XX Is three kind going another that

Vyomesh Joshi

We that yes. care innovate to we think that make We a really we platforms. are short-term to to sure a got our Yes, opportunity to to need innovate. also approach in software, we I innovate, must golden and this. upgrade have materials, trying continue have to got health we don't

the balance and just we that So I right now believe make we we need to absolutely innovate. sure have

Brian Drab

balance through dollars outside know guess and you've Thanks. if to than planning point flat. Okay, of for is SG&A you're at flat? you I or mean, I R&D. should the the be okay. this higher then SG&A I of lower been budgeting whole the if or -- And process higher lower or mean, XXXX or it

Vyomesh Joshi

Yeah.

in huge platforms start to opportunity, quarter. it's metal got we think shipping We I to our got we a invest really now after opportunity. go second that

organization I we we happen. sure a that's for to need in our that look go-to-market us under make a software, opportunity health put care the leadership. sure to also business making Wayne make We at focused that that Davey's high-margin want and that

should the able What sure a we -- need do we of a So cost business get using about now think think the right we of our I structure. revenue as of revenue, revenue I we think get you to look right to feel in percentage uplift, And we we could think model mind. to kind got the structure. And be kind I cost a that appropriately uplift. at is to make that the need

you any do want to Todd comment? make

Todd Booth

as well. and -- cost of we've as XXXX. lot taken to We XXXX agree a you out need I see No, from

So the grow. also place we have in now structure and but invest

Brian Drab

to that a mean just on up? final does Up I'm flat? it. So point sorry, put or

Vyomesh Joshi

will of no, up. percentage it revenue, not As a be

Brian Drab

dollars? sorry In dollars, I'm

Vyomesh Joshi

be on Dollars up. growth. will the will It depend Yeah.

Brian Drab

be Okay. sorry? Did up you VJ say will it

Vyomesh Joshi

of we up. will a flat. is be grow, revenue to the percentage as was going said be So If what revenue slight there'll

Brian Drab

Thank line. in you back much. Okay. very Thanks. I’ll get

Vyomesh Joshi

Thank you.

Operator

Thank you.

from Ananda Loop question from Your Capital is Markets. Baruah next coming

live. now is line Your

Ananda Baruah

just, I talk taking that's of a couple demand with that is questions. couple about more A the And then still from if the environment. to follow-ups. I a coronavirus dimension. It you accurate? little VJ, I stable beginning could Hi, guess afternoon bit like sounds Appreciate could. good some impact you guys. But challenging have

Vyomesh Joshi

No, no.

I and to wouldn't say that as think is the the the it's XXXX. but I all slowdown we with XXXX in it demand industrial manufacturing still continuing, saw what in similar stable environment is

question, coronavirus. there want of right? our revenue reflected was think What QX we that. QX, what now on clear that be in to are based headwinds in clear. we work So if and no because you that that I just innovation But because the have metal will our in about, think about other was talking what I grow be I our want is about revenue growth our confusion answering and talked So that's that to the getting drivers I just confident on I that and I'm very we XXXX. done that the printers

Ananda Baruah

And stuff. you mentioned corona some concerned, of anecdotally…? things, in that couple to far factory chain least China But the all out, more plays to then as as a context at of provide is wanting can supply there you is how see wait and ODM any

Vyomesh Joshi

No.

the else. are place think in we everybody I same with

trying we you I if predict I We today you ask but just material make anything. assessment me, the to things give and -- not it's don't are to just I all current sure to how out what figure have. of change want want could

Ananda Baruah

me. last Okay, one for And okay. then

regards with software Just growth. to

metals So will will forward be and you're pull introduced good that the provide that including sounds then been saying it software themselves that growth. new like with have introduced and that products

Vyomesh Joshi

go-to-market put have we done, have we organization. enhancements go-to-market the focused, And

I a the with part important think because channel. we are very that's engaging software

get that lead We the We their that We can we introductions. all sure up. are new awareness generation can get up. making have

sure not focus in it's think contract a drive our software in to have renewing opportunities investments the hunt I that's the of new maintenance lot just We for we about is. and want because made making pipeline the to

Ananda Baruah

can newer it. rest have -- modules on of the channel That's those of takes then helpful. that or the just guess those of are I been Got in mentioned, software that which you refresh memory the really just the market... And our memory place regard in refresh such when my you that how -- refreshed which

Vyomesh Joshi

inspection refreshed. our expert is And we our XD with portfolio very Gibbs software I'm But with our about software. and the the Cimatron about a goes excited I'm software X subtractive excited the traction. are good of very business. also core which CAM, seeing software All metals Control then,

product we opportunity that so So Control I really of XD X think portfolio. in X Design have all our expert

having the then was I here and focused the to licenses. important go-to-market think new innovation more drive thing that

Ananda Baruah

That’s really appreciate much Thanks I helpful. V.J. it. so

Vyomesh Joshi

Thank you.

Operator

next today Troy Our is from question coming Jensen Jaffray. Piper from

live. now is line Your

Troy Jensen

afternoon an of sale growth gentlemen. to were your Quick kind the in VJ, seen just future bullish for haven't you really question acceleration growth and revenues, for guys Good in at good if you I'm pretty with you adoption on mean you prepared But I specifically product luck here. kind we about. seeing speaking respect remarks here. VJ systems of look

to about you So can see growth an When competition? ASP business? think just talk your for it you to erosion? really it Is do start system going is we're in acceleration

Vyomesh Joshi

Yes.

the because, my especially platforms view So workflows. one is first very I metals for we production think have good

a health care we especially platform lot of think device look drive So in care to business. lot you addition center powder our unit the automation the And with at and in be very, plan. manufacturers' management should is much growth the of we of very medical growth able business that our handling a material of if of XXX health

a on a segment XXX defense really XXX pipeline for us. we point Factory very is a seeing of as and of lot view. our important And here are With aerospace from traction

that my I able get believe multimillion-dollar quarter as able we be said traction to these do we should I that find in system remarks. the big systems after So this be to are should second

very for growth be said software So the opportunity. metals as important the that's for associated metals. And the then I for the will

I then our one for now pipeline materials still healthier is our business And new do modular. getting to believe production a Figure with dental are we four continuing and stand-alone our both second the our grow. much The

be machines continues is be that's high machine to a will The our star for very ASP able part is XXX to us. that's I which important a our what So SLA we drive. and think it last

high XXX be then Figure think machines the is So what see growth to and think you'll I here of metal like in the systems. way platforms our platform mid-range the ASP about the four will

clearly, market slowed hyper-competition has there. the is Now and down

tell but it's are be to believe ago, that I'm four do years set to up XXXX we I that growth three, I talked So well you going product with not used see you that trying about. to the for the maybe

Troy Jensen

Okay to you a up you or think that the QX given there last metal said QX material year $X on that? that VJ. delivery to you And follow was that's that metals, was the can quarter an QX shipped of there where weren't because do that I pipeline? platform. able million still Is recognize confidence something metal in in order that's Is

Vyomesh Joshi

Yes.

think growth in then shipping see it, metals. that good we you -- and I to the it start QX very of not but all are going will feel about it the in Yes.

Troy Jensen

Okay. right. Luck. Well, good All

Vyomesh Joshi

Thank you.

Operator

Thanks.

today question JPMorgan. Coster from coming Paul next from Our is

now live. is line Your

Todd Booth

Paul Hey

Paul Chung

Coster. question. for taking on for our Chung Paul It's Thanks guys. Hey

And of then, kind about of strength you materials see on on so for impact could some second next the in this as the the of nice what kind you And momentum we there? if line quarters see materials So do do printer quarter? you think expand XQ more metals the then, in shipments XXXX? in couple of half

Vyomesh Joshi

all the clear. want about and to will the be software. on and very be side. support of services just side, all, because different it's to model business printers not connected In materials growth our I So metal the metal is the first metal

materials XXXX. uplift an don't because our see So, in growth in metal of I shipments

in second materials then to X% The I about is of growth back XXXX it about had X.X% and quarter that grew want we in talked talk in will third thing the I and second come grew QX. half

three there for reasons main that. And -- the main are

base one, legacy you were we had. were if because the not that declining in and installed from uplift we of we the new growth. XXXX materials base And that products declining the were first materials half First about the getting installed the all new and and our materials then revenue growth talked remember, we

has that over of second So in XXXX. starting crossed half

the because jewelry enterprise our is want and material my is that then in our the just lumpy. will the certain we And is their So, from to be value to be coming enterprise really XXXX the Because growth But to at to which like from should dental. able the they Material continuing from growth segment coming may so customer looking for growth but growth It's grow some view need really side be make workflows think important production materials, are us. business. I whole very in a sure. coming seeing that in coming order customer materials was materials we XXXX. some in positive of -- I quarters of decline start core

Paul Chung

kind XQ? levels should off then And XXXX, you. kind on CapEx the your Or... Can in strength for what kind from Got build and free cash you expect flow of in we of your of expectations cash operations? from

Todd Booth

Yeah.

we XXXX. $XX during million CapEx had on So

most year. bit, be little positive full cash And devices. the investment generated XXXX, from medical For from in of for we'll operations we up a the see but our then

Paul Chung

Okay.

really the temporary, So, it's working change? cap a not structural is kind benefit of

Todd Booth

right currently level. levels the at feel working at The we -- we're capital we're

-- not operations from generating you're going forward. So, cash be it'll

Paul Chung

Okay.

Vyomesh Joshi

Yeah.

thing. structure. I a it's a one-time think It's not

The other that we thing outsourcing did. that's about manufacturing we very talked important,

We chose very strategic. happy good want something is are we to very manufacturing Sanmina, The to have the are we at transition now as with because if Most moved believe we is who plastics there well, we are on focus going is which our or partner. what Sanmina. -- of

world-class, that also the very where really of going to strategic ourselves. The continue the in example, to we make want we overall for are going us company managing are chain. want help kind and our at we right sure will As is places we manufacture to to to supply how manufacturing look materials who for do we be have balance. partners And

Paul Chung

like It shipments printer you XQ. to that? in full you sounds Thank of going some to kind can When And very have last When start metals we are your for much. reinstitute Thanks. some question. then guidance? visibility you expect year

Vyomesh Joshi

going guidance. not give are any We to

look to sure we the execution we our just focus We -- are on at we this business, just environment, growth. uncertain going in tell revenue need how to feel we we that focus on make you and we directionally and

Paul Chung

you. Thank it. Appreciate

Operator

Thank you.

question Drab Blair. follow-up Brian from is a William next from Our

line Your is now live.

Vyomesh Joshi

Hi.

Brian Drab

Hi. Thanks.

Just quickly, first XXXX, about and for model margin despite I'm XX% material sales. of quarters then gross to trying good margin quarter XX% and three the had you XXXX in the for fourth gross

kind we to XX%? above So, be XX%, thoughts below on I Any mean that. are of going

Todd Booth

What we get is mid-XXs.

Brian Drab

XX%. to XX% So

Okay.

Vyomesh Joshi

Yeah.

because I we -- so inventory kind thing So XXXX Brian, think to I the mid-XXs margin. think gross of at for adjustments that is was the that had reason. the I look the main that right the was to QX believe had do, for do we

Todd Booth

And one brought inventory a down thing we the adjustments, inventory lot the XXXX. on in have

you when some through you expense. So that of some it take do

Brian Drab

got it. I

Okay. very Thanks much.

Operator

you. Thank

Next a Greg from Capital Palm question follow-up Group. from Craig-Hallum is

is now line live. Your

Vyomesh Joshi

Go ahead, Greg.

Greg Palm

Thanks. Yeah.

Just two of sort eventual the on VJ, follow-ups. of company to thoughts in really looking qualities be for quick what do that you here, bring stage? Board think your mean will terms replacement the I to

Vyomesh Joshi

will profitable we make Spencer continue we external the we to looking world-class I at and a technology internal must sure that think have hired So, we we candidates. the And are are Stuart, and growth. and drive both the a and think firm innovate I company,

Greg Palm

Todd one for And guess Okay. Fair you. I enough.

more kind long-term You've here? almost maybe commentary makes any six what opportunities the guess the now. near company I and excited company what you both are for and with been you months on for believe of

Todd Booth

been with company. He VJ. about around six in excited mentor great this of back And products, showed here. a solutions. has to me I'm months our being extremely Well, FormNext the future I'll my our there first digital point VJ

Greg Palm

Sounds good. All Thanks. right.

Operator

of back comments. like for to or closing end turn reached Melanie session. floor further our I'd We to the any you. Thank over question-and-answer

Melanie Solomon

you soon be of Systems. joining our website. support today all will replay and Relations A Thank you on for and good continued Investor this of for your us webcast XD section available the Thank night. of

Operator

That does conclude teleconference. today's

today. you You this day. your time, may at We participation a and disconnect wonderful your lines have for thank

3D Systems (DDD) 26 Feb 202019 Q4 Earnings call transcript