DDD - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the 3D Systems’ Third Quarter 2020 Conference Call and Webcast. 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. It is now my pleasure to introduce your host Melanie Solomon, Investor Relations for 3D System. you. Thank

begin. may You

Melanie Solomon

Financial afternoon, on to Jeffrey the Chief Legal Narula, President Good Vice Johnson, call. and President Graves, Systems With and Chief Chief Jagtar Officer; me call The Executive and and Jesse. Andrew portion XD Executive webcast welcome the may Officer. conference our wish Officer; Thanks, contains are along on following so call this that to of Investor of Those the slide presentation Relations presentation we our phone call. who of will on the portion website. a refer do access slide Dr. to this during section the

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

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

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

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

Now, Graves, to our Jeff I'm CEO. call to over pleased Jeff? the turn

Dr. Jeffrey Graves

Thanks, Melanie.

this everyone's up times. morning. thank in saying you hope well by these for bearing healthy all our start me call stressful joining Let and staying I

well made of balancing continue, those our our employees we've customers. challenges families commitments of with so proud I'm to the very needs virus their of and for the COVID their While

move fourth demand and across pleased COVID-XX As economies of rising businesses we serve. We're open, our of was to quarter, as the and begin these it to late first we're with actions Company sustained our trends our talked efficient pandemic, in the momentum world more would importance the the as the strategic in see which hopeful the since call, in become purpose, that moving Year. joining On through the we this how about the dealing my clarifying is May, drive and effects New markets forward. our we around continue last

and provide to our leaders our products. to purpose As prioritizing manufacturing reminder, the growing focus Systems purpose is order in our We expansion improved moved profitability deliver in in we journey, enhancing while forward efforts, like simply of progress the to phases update growth our with very the restructure, activity: and parallel on this a solutions investments applications will actions moving in four short statement strategic markets forward rapidly XD while future. our We on in value lead margin with each invest. simplify developed which as Having defined to additive term, needed These statement our I'd reliability high the to be operations operating We're described in to our improve statement, greater customers. our you to efficiencies, demand and can transformation follows: for divest now in enabling each. phase reorganize, are that purpose

with reorganization. begin Let's

regulated. Company planning. for to virtual of seek include is defense, and components, medical their verticals, processes focus and primary As surgical deliver Within healthcare, key durable first healthcare to tend simulation way controlled to market value last on technology industrial. automotive our actions one dental growth applications, performance and quarter, a These we on key was and that as touched engineering to goods Industrials or cultures the and premium aerospace, that two markets briefly and medical focus applications. to a on customers, place on innovation reliability reorganize have devices, be all highly our

foundation unique engineers ongoing application an adoption combination in manufacturing, our offerings. supports and our has application our to tools exciting we their needs believe will that with It's additive efforts uniquely manufacturing within years established in and enable hardware, are our in customers' team growth needed our goal company and full that positioned With and the our acceleration their materials, service ahead. in these adoption As for technology to our this their markets, customers while additive support of global field. expertise on specific of of a strong profitability portfolio the encompasses winning focus new software solutions and reorganization our product exceptional is

we our As than customers need components basis, year. build our focus intense to technologies an current greater production delivering exciting no customers' to each will deliver other translating components on validation our further a value, on in forward much over an moving our that Today, in you X.X look of number dwarfs this technology this success adopting competitors this to for upon each success. that million scale It's capability over manufacturing are industry. million this XXX foundation day, annual a with our on all

game efforts, on complete the update management With fully now Jagtar reorganization, along business plan. is call I'm our introduced executing earnings pleased call. our we team to who unit our me to appointment last and today, which this our our our described in let with Officer, new our leaders Having Narula, our Chief welcome two focused on you of quarter, we're very restructuring Financial

XXXX. the rate expectation Our that a of deliver end cost basis we $XXX million by is will run of on savings

would that pleased plan. workforce, We and I'm In executing on operating deliver to savings you tell include a to which leadership achieved consolidating principles efforts, guide a track created our these one and safety being set team working customer of help moving the of combination mind, included each through in restructuring also nonemployee optimizing ensuring XXXX. on spend. with acting plans, customers, prioritizing business. facilities to ensure team, focusing a in restructuring estate employee of Actions operating of high their our decision-making, all our real our success to end that rapidly aspects employees. the in while by level we're of long-term and partners stated and taken efforts, decisive always the and quality our as our bold we're principles forward the success $XX day, be These ethics and being our that million of

statement we that parallel longer of embodied the the able core begin efforts, the in reorganization divestiture. restructuring to assets With and purpose were focus process in Company identify were to certain and the our to no

the and was to a highly leaving GibbsCAM not software and balance result for position, was our net than growth announce pleased future for these cash in were As Cimatron additive additive us earlier $XX sale their efforts, of of subtractive of in week, core be this a this to will These customers, manufacturing, on and businesses while the manufacturing The business. valuable investment businesses rather sheet, million. the proceeds and technologies our I to efforts our completion initiatives. in from used strengthen our further will future sale focused restructuring

plans on moments. balance Jagtar the sheet efforts next and around for equity to few our continue the further a comment will quarters. divestiture in plans the ATM program our We over for several specifically expect

of add businesses. quarters, to parallel, we'll enhance of core profitability investment with noncore be the few me However, opportunities let next prospect of evaluating, and growth our assets further the in divestitures that in

how our As in our will progress keep of I'd bringing With process, with to rigorous and any future with industry. opening opportunities earnings value and a examples updated focus this our expertise follow is new and an my plans investments you growth goal actions, calls. value shareholder divestiture We'll customers we to in delivering make on end unwavering disciplined exciting creating our with Company. increasingly that, the of and like for comments exciting

through a around especially recent many changed As a and the is extremely versatile a healthcare contract this help additive the you manufacturing medical over capability the devices. In keen facilities each true Earlier as supply environment an flexible world, of our to create organizations application for for for system, know, Health hospitals, manufacturing providing we illustrated awarded largest healthcare with the proud pandemic veterans Administration. the is multimillion-dollar additive million The year. interest Veterans to month, production chain. this to operating for in establish experience VA in of VA were more and healthcare, the integrated the be there's X,XXX country's has X

of and This powder, nylon staff as produce program, other positions of well applications. nasal then medical-grade COVID As by gained printers a and workflows, their can end other the systems with systems will part The be turnkey VA by and own the deploy this future. in and with enabling train swabs, manufacturing which our followed medical-grade early platform operational experience well which in-network XD is support will operations. medical approvals, our we're medical will physicians adopters after required Systems for establish hospital XXXX, to which use. SLS independently fully the devices regulatory the other several pilot The the and device VA us capability additive quality be application

see best while VA to the get of at XD the the to does we fact all team wonderful While what enjoy we support that mission provides of ahead, Systems business our and opportunities it critical the support the the we our part allowing is this veterans, best.

software units, and applications our systems. material technological our to and our turn in progress enabling continuing of technology, breakthroughs let's hardware, Next, both business in

sharing the first spite prints progress this challenges year, exciting program, that, October. manufacture late by an program be Army announced fastest, of In will create third our new in groundbreaking advanced our completing past ground for near alloys range turn this market example, system, using to a by a ago, printers, largest, enabled of and aerospace future. to in on by printer. metal our made we for Jagtar? call aerospace we've upon now let Jagtar lightweight a builds family the quarter me U.S. over by the With the This successfully and the be COVID outlook. As our D&P XXX-millimeter million the in are of $XX range more sponsored applications. a in to updates precise broad which current quality year meter the newly world's will and the program We'll test meter flight able that expanded who of vehicle describe components, results of X most nine-laser high-temperature X applications it substantial

Jagtar Narula

Thanks, Jeff. everyone. Good morning,

to events impairment any term third in $XX.X of the For the or increase noncash environment that quarter of was rebound goodwill not of price quarter charge. revolving decrease with covenant activity and interim customer from as charge test This in secured affect third and Company's economic million availability the quarter by third the liquidity, the ultimately in in a with Company's quarter XX% million, COVID-XX to compared the the expenditures quarter shutdown. second the triggering the our facility. charge of impairment of credit result senior secured decline and XXXX, from worst share necessitated of compared the was a We and identified an not position, test will of pandemic. Included revenue XX% cash we share the to of of of third The impact reported of pretax certain to goodwill year associated loan the loss we reported in a $X.XX due facility $XXX.X cash senior net $X.XX impairment XXXX. quarter, will connection loss the a business in pandemic-related the our impairment under third saw compared the this loss per XXXX a was

XXXX. dental focus customer results. announced by year-over-year quarter, increased share discussing Turning in per by share new of non-GAAP the Revenue non-GAAP from our sales in market, $X.XX and in healthcare $XX.X the are quarter with of last related stronger loss products, with per $X.XX the in all materials million, of strategic all closures the we first We services healthcare XX.X% Consistent year-over-year revenue decreases million, third a of third compared half geographies to XXXX and $XX.X due, the to quarter industrial. reported to now X.X% driven of market the in pandemic. XX% basis, decreased year activity. both strong to to following of pandemic across in approximately a to Industrial we sales businesses. sequential associated quarter-over-quarter our revenue improvement and vertical On primarily, level the of reduced saw

XX.X% reported third to margin in in XX.X% Now gross profit of XXXX. We margin. the quarter we of third XXXX the of turn to compared quarter gross

taking basis, gross to caused initial to expenses versus were by QX volume Many that Our gross million margins the expenses. quarter X.X% due GAAP the a increase in charge overhead for third including will impairment activities. of the impacted coming of of our Also in third are profit expenses lower $XXX.X XX.X% increase the expenses X.X% is strengthen of absorption help cost Operating offset restructuring XXXX, we quarter SG&A quarters. included reduction further of XXXX, lower margins the R&D by decrease the previously. actions and XXXX our a in a quarter the compared I an mentioned in were goodwill on operating over

Excluding decreased quarter or compared operating X.X% $XX.X this $X.X to for the of goodwill million charge, $XX.X million the XXXX. third to impairment quarter expenses for million

intangibles stock-based Importantly, the our historical third restructuring charges in exclusion year. from quarter and decrease our goodwill operating between non-GAAP million, well with adjustments. GAAP expenses non-GAAP consistent to as $XX.X of in third were GAAP The is differences the $XX.X XX.X% as non-GAAP primary of quarter operating the compensation, million prior and of impairment, expenses the the aforementioned amortization a

turn includes interest offset and let's stock. issuance hand the and and million used flow quarter made We million $XX.X payments onetime cash operations, the of the beginning on the to statement repayments, $XX.X with million for of for of cash the since partially which $XX.X non-controlling decreased million in sheet. $XX $XX.X million nearly for $XX quarter cash to balance million $XX $XX for Cash XXXX debt of capital the purchase year. from common ended for Now equivalents. million of We inventories, first has expenditures, by proceeds million used

is loan $XX term million. Our now

$XX at quarter So was million. our net cash position end

and $XX million availability XXXX, of undrawn the We September terms of agreement. as XX, million of revolver based upon that has have was $XXX

inventories. Let a me comment on quick make

We up nearly million $XX inventories have the cash seen used in year. this far go so

to due suppliers. our committed and year As with to times turned due were the slow manufacturers the the in unable down enough we to market fast first rapidly of the our inventory pandemic, down half contract lead additions

and now these strong the adjustments With we strengthening, sales on our forecasting, as sales exit a expect year. improvements now we made, focus inventory

time, $XXX uncertain and with remarks on our my equity last ATM the our initiatives to ensure to $XX us flexibility Under at-the-market times. the the we still million program, end quarter, me for COVID of risk and was necessary needed which program, to ranging needed. leaving on in abatement impact this financial with stock, ATM uncertain, support believe restructuring announced let Finally, available our called program third a program we economic highly highly At issued comment a program, the we provide the million during common if quarter.

expectations divest and of that our to We million $X transferring $XX liabilities will and million our sales, Cimatron progressing are improved to generated we QX. However, QX price agreement the signed with this cash the business and for a we and that buyer. adjustments in software environment, announced anticipate purchase stock the in our restructuring the we Furthermore, this announced as an additional Gibbs have under earlier efforts, do QX. businesses, program close not are expect price week, we sales from in ATM deal approximately

the taxes, from, final there number to million sale the for between up to distributions and on is GibbsCAM very back program I'll cash In our the call million. well of we about This altogether. will ATM Jeff. that, turn will the $XX $XX need to receipt the it the built continued of cash position Jeff? balance $XX million may we following Therefore, expect Cimatron million that sheet. cash primarily evaluate to and proceeds the With net elect of net and entities transaction now to of our terminate closure and plan for $XX a of leave foreign in be us time. over parent The around addition,

Dr. Jeffrey Graves

Jagtar. Thanks,

pleased transformation on I'm our progress summarize, our the and strategic making with company. the we're to of very realignment So

team our to Our is place, XXXX. of track end continue, restructuring complete, reorganization efforts run and professionals our by in million cost rate leadership $XX seasoned is of savings on in the deliver we're

of up the the We from continue economy opens the returning to see effects pandemic. as demand

stakeholders risk I our we some the loyalty for thank their and strengthening COVID As business for challenging these bright time, about while continued we'll look a want forward. strong to than customers a from ever anticipate the continued of and dedication now related result, to employees, and continue will moving times. during period emerging floor very open questions. for future And ahead. the this With execution, excited we Operator? that, with forward stronger focus to and

Operator

you. Thank

will We question. proceed with now Instructions] [Operator line comes question-and-answer Palm Craig-Hallum. with of from be session. first conducting Greg Please a Our question your the

Greg Palm

quarter, back the starting I it surprises kind ramping still I mean, kind of given, which levels, operations. just of of our are bounced gradually almost but back exceeded specifically guess a I hard, us, segment think, expectations, to lot materials customers many really with obviously, pre-COVID your of

So to QX? what drove the sizable increase relative

Dr. Jeffrey Graves

pretty think I Greg, it's straightforward.

customers need that reacted think And ago, ramps materials. quarters promptly I now inventories. to as occurred depleted in the their COVID a few shutdown production pretty when they up, bring

mean, There So was I heavily the was clearly, a supply nice bounce back. depleted. chain

You've shut had opening dentistry. of down like entire that industries had the some

rebound. It to to we they was use So expect assets with our pleased the strong, purchased parts. we the increasingly make nice and would were and customers previously see

So we were pleased with that.

Greg Palm

Yes.

And do out line? What talking of in a the revenue, know year in I the October? far in really thus taking the seeing normal I Good. see is anything normal, the see mean, usually, seasonal Okay. and impact you in in I divestiture. mean you ongoing I are QX improvement you'd but expected this guess, still from and but year, Company I'm QX. across a bump top

Dr. Jeffrey Graves

place. continue -- logistics But year broadly, the most strengthening to I in incredibly darn ever supply seasonality just so of -- this ratcheting it experienced. be can and different -- the will still Yes, the markets, the in normal to opening in adapted I hope it and I chain. the Greg, companies say tell parts back It's terms that Greg, of see I'd will assume, in the environment unpredictable. is would on I this being the makes still abnormal have creative logistics COVID we really world, you occur,

as go world, dealing product some while sand through economy a shutdowns fits was at down getting they impact shut much, huge logistical with issues better starts the So the initially, as much they're that in. and with around

historically It's ramp as seasonality COVID. remains see continue observed this desire continue So bizarre would to with to year to production, expect I that continue. strengthening. we long the some their as a and they you've demand up year And just such patterns

know but amplify or pleased incrementally it get that based the am it will to better. don't tell I it if you. see That's dampen So, I can to on world history, I the continues best

Greg Palm

No.

net revenue, a That's of assume was And net level quarter in last higher at helpful. I talked know you probably were profitable what that I'm strength expecting sequential puts versus or exiting that September, than adjusted level you if year. Okay. when income about given we assuming the December income being you that

So you revenue what profitability about to on level of report of expect in QX know and do then? progress top restructuring, that of I the given we mean new the

Dr. Jeffrey Graves

to just that's how math the the happens dog continues rise -- not we're a -- just go. comment goes volatility range. -- cautious But so ship, I demand a again, what as you position to I wildcard. the in to continues rise. the in be that, on able expect believe the math that's would don't with way we're of with to the But If quarter-by-quarter would and works. COVID. just pandemic you because can -- tell direction to Greg, It's volumes I predicting this on That's Well, I the really such we're to I provide the would about market. going guidance, really directionally, way that

Operator

you. Thank

Capital Please Ananda question comes next Markets. from the your of Loop line proceed Baruah with with question. Our

Ananda Baruah

on doubt. congrats yes, the And progress, no

and for from from couple quickly other sort which are both Just to to end aside may markets, Jeff, you a dentistry, able me. supplies end visibility perspective? able -- a more markets get improving be hardware of than

Dr. Jeffrey Graves

to but obviously dentist. they a halt. dentistry it the really lot variability, I'm a everybody of pandemic go to ground dentistry, I about the Andy, pleased had the what And peak the was when of sure there's knows at really in shutdown,

see couldn't just You go anybody.

So now is I'm back that's But market. the pleased great. That's about the healthcare up. what rest opening particularly of

broad There and virtually down in our we're shut that Now postpone we -- those. that portions of customer pleased. we operations, areas healthcare viewed well. people as across But and strengthening of were non-essential market mean, orthopedic saw were as the base, were I all so really were things a

pent-up a might year-over-year anticipated only There we growth, was fact You would got which I demand, I that in sequential the the healthcare. actual year-over-year not a thing. have say dentistry was well but I mean, future. we're real X% healthcare were it toward be broad of talking great lot resurgence the a nice it and was And quarterly the a growth, we but to to our that. fabulous. this In of environment, pleased It's in. growth X% for And with market focus about, on harkens very think

Ananda Baruah

come. -- the maybe It contributing you of are as to still like that the Is right And industrial something much sounds now? what's that's relative? as markets that's state not

Dr. Jeffrey Graves

year-over-year, On to way, way percentage think and about went it's mentioned cup release, full way starting as obviously, It's headroom go, strong. still got or empty. see a over well. or and a it healthcare but forward got we mentioned to of I basis, the is more in them. rose And Industrial got lower healthcare XX%, long can down base. both little a long down is great from But go. it's we to just view in industrial is a XX% it's as the I you industrial as long a much both sequentially is lot half mean, a depressing moving which And a resurgence.

markets well with love key we're on I'm and both, we I customers them right play bullish in. positioned I of now. in mean the So both

Ananda Baruah

sort of it, help divestitures, of with years not then set And anecdotally Any did you might is a they just but that think what are you'll various of -- what sort ago feels The be think exploring? integration. about opportunity the any of Company the there to be give can it and us of, acquisitions, of I way Great. stages handful, call context can in be? about regards the the how to tens what Okay. us you but kind a may you of will there help guys number like do, opportunity

Dr. Jeffrey Graves

provide it put accumulative us on more can there in divest. run really color on a lot was thoughtful tell they -- position manufacturing, were we get we of to you additive to were one, these sit inbound publicly back make much that. for to want there hard Well, interest anything our of I want we shareholders a we sure a a a and value processes, reason. said really assets. of But say, on good once to out focused it number be very number about It's do good were that you nicely,

about You what divest. want you very to thoughtful be

and So valuations the I'm position on future bring. business what of on they comment to in really synergies not see a the about will specific any buyers expectations plus depend

and a make on then divest it. we'll making because one sure heavily where and probably just decision I position now we're to technology, with frustrating just it's was Nicely it's and probably to very try about the thoughtful want be first apologize to most So doing subtractive bound, was we this on hard, increasingly I very about be how it. that. we can we for know obvious go what focused it -- thoughtful in which one, we're I but a

Ananda Baruah

context Listen, helpful. Yes. is any

Is we mostly, that always just because Or any it there, some this And of and we kind fit these divest for set helpful. of for question. take is kind are want saying mean -- for the a we'd doesn't gray is your it listen, quick a Jeff, of do right right assets But sell I'm is the opportunity say, for I the which for yes. to right? the distraction, gray that's all it? we of you are same I the area. price, area the sort so that I is So case answer gray stuff. mean -- have price, there I what really hey, worst get evaluations, follow-up

Dr. Jeffrey Graves

are value in that more noncore. They there's groups they I No, up multiple should stuff in strategically, really in long little would not going. business, to we're fits gray. qualitatively, look, businesses. with bit And for that these mind, continue them, that just -- can really them better The that's I'm very want the in fine growth at outside are gray our that look to still of There's right Ananda, just folks that much there's there term, and the reason, grayness of we these business. But out bear because over we just not businesses. that say, that get all the core very sure for they of course. be that's are to may there, focused we say has really drive crept focus some company by be but area. are owners are core. think a where will businesses. not for a fine invest to of on They're And elements and much But there owned fine a They're good. do activities. And time, But grown they've

we might And you them. you not so tricky. just go there. that's because, separating noncore to -- as how buyer gray be a right value the separate happened there's well, of about imagine, when is So wants But and and obviously, we thoughtful as those stuff lot the want to a get after

applications, what we're to being. it's around statement we specific. focus and can Our It's continue our heritage, going we manufacturing, what specific Additive very purpose believe, is be, that's best-in-class app.

going divesting. look So to we are, are at that things perimeter, that overtime, outside

Operator

you. Thank

proceed Riley with question Please B. of comes next from the FBR. Sherbetchyan Our question. line with Sarkis your

Sarkis Sherbetchyan

you're Like all in, going P&L, from high because what's that P&L line could right, kind Systems questioning. of level. So the said of assuming associated I we and strategic of a just XD look out follow no kind If divested, business could other the of that wanted be at up the they of the fit done? very of magnitude parts longer direction guess come the and expenses last potentially sales to on

Dr. Jeffrey Graves

and businesses answer dependent Well, businesses up on you, I'm of which -- parts the sure divesting. frustrate end or it's highly but which we which will that

just kind apologies just -- we just you or about in very before either to it's coming difficult today of It's and Ananda's from separate to either So you divest. or a similar Company and timing on it's size I for you. to But want those for -- be what the target guide we're from what position impacts we question And are them. the a of thoughtful really to very give that. my us not

it's we the do can we're the best going. just find So to direction

Sarkis Sherbetchyan

Okay. can the we second, disclose on maybe and financial guess if talk multiples Cimatron the the I And received worries. GibbsCAM businesses? for those you were maybe can those also a for right? about software businesses businesses maybe of profile No focus then if what

Jagtar Narula

Sure.

material. is declining the and to with It's also been be we'll million. GibbsCAM Cimatron There's but the So, not associated revenue that it's to of high-single-digit rates to some $XX type to $XX million. evaluate, $XX business around largely costs direct corporate around costs small million low-double-digit we'll buyer $XX level the annually. million The to transferring overhead that look

revenue million declining million $XX of to think can costs. it you $XX of as the $XX million So to million $XX

Sarkis Sherbetchyan

in the the is to contemplated $XX have next $XX out months? in cost communicated in rate savings the guys XX that achieve And million million to you run

Jagtar Narula

in contemplated Yes, Yes. that's that. not

Sarkis Sherbetchyan

environment, expected sales strength. hat continued and specific just you that take going of anything and just Maybe support to it's kind what's forward? I the but guess, more tangible comment? this kind Jeff, drivers our of some on, difficult hang a know improving we kind I can of moving And on mentioned

Dr. Jeffrey Graves

interesting. No, it's

pre-COVID, and those the kind are in we've you If participated markets of strengthening look that broadly. at

So certainly us. for to of business is taking devices broadly, you'd That's it's to business returned as the growth. mean, and get in than patients. surgical more nice say, a planning dentistry popular frankly, medical healthcare, has surgeons And I virtual are back care ever,

folks production and with system moved how an that businesses. one of has release the their systems business capacity knows, I and a the a And the of VA I systems you we're They're more in So we in and -- rethinking we we released morning, And growing. devices flexibility now and that well new positioned when example basis. we where range hardware, love believe, are really to think hired out think supply look give that needs. hospitals the very the to forward And can it, well looking quality on create of VA. much our put now and one, react turnkey The device COVID for us those a printer critical short-term patient in a chains are they've of they the environment of we're press around here areas. hospital to supply medical needs us, on at that their chain That's very care. new is -- especially direction, healthcare critical and will particularly a number That's do medical on facet in as that, them and and to software that fill provide basically required. and do to PPE everyone knowledge were they're And address more move and market. caught that brand-new at are that FDA-approved to a to our hit adapted materials a number capable with short thrilled short-term responsive there it how systems a respirators short-term as yesterday as aggressively

in I incremental growth. there, healthcare. traditional growing again. So systems, our think, to to opportunity further growth, The hospital extension I love now markets supply great drive chains They're and

ground you'll industrial see new that There's it the electric side, think and certainly On the put demands I things cars for and vehicles responses. basic traditional like way, that. -- the transportation, for same

be to impacted by will clearly, world increase the severely So sales. chains around were COVID they largely moved have to that extremely companies looking all that the hampered supply And during period. countries those low-cost were

of of overall the resurgence you see so move you And more chains. So see on it a then for supply demand. flexible but top sales,

Aerospace, will, us. will look now I say could always next techniques. the early markets couple adopter, if in those is become rebound So commercial those manufacturing the because very Hopefully, impact. clearly, years, of COVID aerospace at new you some the an these that over and and of for of right of doldrums that's exciting

you about I'm the each of kind of one for there, covered I've So sincere them. but waterfront

of for on make need I this trends. top think up supply world. around more you've the historical localized And demand chain it, and disruptions flexible to got got you've a for

means for and industry. entire our that So -- it's true

into it's think where I here -- to nice come period going demand. a you're there's rising

Sarkis Sherbetchyan

That's certainly in more Yes. Yes. One helpful. queue. the for I'll me and back hop

divestiture You mentioned as the through process. you're going

any at buy? also getting there position, what in to there. composite from materials your market just that either in looking or for, fiber kind the like that sense you or of to to is, sounds maybe additive opportunity considering your have your perspective. also understand Are processes kind set You're And can want the I the gap? in I anything to kind are portfolio to you I'm pretty direction? portfolio any looking bridge it of investments get growth. build want an help investments opportunities new in enhance or is Do just of interesting

Dr. Jeffrey Graves

Yes.

the we broadest So yes, industry and on When that. part the application software proud that's have to last going very to I we're the probably anybody material would to going our really in range and hardware, and faster in solutions say focus to systems, answer of we first, the of what than I think, forward. we're and can customers, better world, bring the

stream investments to. organic keep that we need to inorganic, Now have or make we to key going, whether technology, it's in really

about systems. So our material evaluating lot a we're talk and constantly

turn and or We and have components. new great customers continue actually hardware materials systems, hardware into what launch use platforms, to we

of edge So we our sure platforms. the want fresh at and of make put we can we materials leading through really the range to on stay

in side, team great particularly grow. the leverage a have and place, the polymer to on technology We

our we'll launch suite capability, hardware the and enhanced we those are software like on then around money those. Periodically, to And investment the and speed for capability, platform, efficiency, areas that. platforms really will side, on really those And ripe, not new of So case very, very new we home precision, through around things put who multi-material software workflows capability, and our and stay in high-temperature some excellence aerospace, areas. really faster continue in to customers each and and the engineers define that's together metals that application to, can of focused are use. guys with And centers and our day. were on allows only but both customers it print of which faster customers that for comes that great because bring current have a high those plastics

together the So in better you applications, you're to hardware, successful think capabilities, bring all in And going industry. more the the to to in for I be this three software -- need you have industry, materials. that be competitive

Operator

Thank [Operator Our with the question. Please your Instructions] of you. with from Drab next Brian Blair. comes proceed line question William

Brian Drab

of business that this that? that acquired kind as was gross XX% over about a software you before running Is was that Can of business by that, margin gross Cimatron, margin the it talk XD. was running level at?

Jagtar Narula

Yes, of that million say I associated mentioned the hit XX% goods the $X about that of that XX% of with business. of line. cost XX% to I'd cost sold

Brian Drab

able Okay. XXXX, list, this as Or think And that in period. think, the pile? there probably I XXXX fish is of that -- you -- through largest when that are, one there Cimatron in big made then to is the you of the you you that Is the that biggest that feel the do? other you're one can were that do divest, are XX ones look you acquisitions

Dr. Jeffrey Graves

of it on -- There want It's of your was to obviously, are lot you the inbound assets. work -- excellent ownership just were demand, they they going larger. largely to invest were on Cimatron of They there that No, would be we assets other could way a were our core. were out weren't we but in focused direction. that kind through Again, potentially invest, some focused our They attractive under assets. so technologies,

it more for complex flexibility done the retain the that get and balance because sheet to owner very which inbound it proud us And additive allowed were much people we'll was really we did have hard really did but made We software -- was divestiture. our a for of portions assets excellent that But can work for nice to strengthened interest, and worked to moving to involved and forward. by we will business follow additive what process someone and asset not its I think on consider one the want additive, the there. great It's means we us, that of future that could be right largest it, is. else. own divest, timing the any for each in and we talented retain but a we in a declining team it So manufacturing, especially manufacturing, of group it see

it invest helpful the to to core. in up certainly it you. us that's again, I resources if was and a divestiture So But frees our think win-win for

Operator

you. Thank

with comes Company. & next your question Our from with proceed Needham Please Jim Ricchiuti question.

Jim Ricchiuti

all you're in not moving top parts. the really just talk a line a to realize lot in Just about position whole given QX the

how timing any help you expansion, might wondering great? Cimatron, think to help in I'm can the operating would know but just particularly, be can give of So we of if any we terms you give don't non-GAAP us about

Jagtar Narula

sure. Yes,

we but So in regarding think to Cimatron expect will in QX, that closing, happen the we QX. timing of it later be

impact be changes number. smaller of think in it I OpEx a to kind our will So,

program. We I'd rate that you So, run the to that we've $XX million out QX. tell that savings year say $XX about to other the half think going cost through million right? we're will with OpEx, of savings get about, I want that I'd half got restructuring OpEx of how about a we now. in $XX exit Regarding the the cost XX% this Think hits the say line, line. got million OpEx out

if we're hits XX% get million, in So about it you of other ramping QX, OpEx. halfway $XX think the that you done, half to

perspective expect you we'd that the OpEx I to some what number of think gives be.

Jim Ricchiuti

saw the line. with to [Technical Difficulty]? you sequential on just revenue the then Any seeing And Okay. improvement you're colors to product respect

Jagtar Narula

Sorry, you're but bit, breaking little revenue. about I think you up a sequential asking the were

Jim Ricchiuti

within product you're to side. the And get some trying revenue portfolio improved seeing any to the where what I'm in areas CapEx Improved particular is, demand?

Jagtar Narula

mean, pretty broad-based. would was it I say I

the in product it materials, it metals. saw we our board. and was so our saw saw software, within line, we So in printers. it Within saw we both across printer plastics category, We

So, the it was revenue a on side. pretty broad-based recovery

Operator

you. Thank

proceed Paul come will your question with Please question. with JPMorgan. next Our Coster from

Paul Coster

kind decent EBITDA is And happens of just give of the with now? of a sort number. forward? the to Jeff, to rate to Perhaps I'm sense you what wondering D&A what write-downs, get moving run of some I'm us sort can trying

Jagtar Narula

Yes.

$XX So million. been our depreciation has run about rate

reduce million will move be a significantly but dollars, it but it different. bit, will few little it think won't I a

Paul Coster

of expect do fourth And you cash, sort any noncash? the restructuring quarter, charges Okay. in

Jagtar Narula

Yes, we do.

about million $X we're side, cash expecting So the million on charges, of that expecting of $X $X noncash. million another we're restructuring

Paul Coster

it? that assume the which in or Cimatron I business then segment the And well, was Okay. -- was industrial

Jagtar Narula

segment. the was that Industrial Yes,

Paul Coster

revenues obviously, And Okay. given that, the of 'XX? beginning the doesn't probably until the start impact subjects closing to

Jagtar Narula

close. fair it, a mid-December expecting, call That's assumption. We're

Paul Coster

or Cimatron Were there product the software between and sales? material any synergies

Jagtar Narula

Not aware that of. I'm

Dr. Jeffrey Graves

No. completely base, different a was Paul. customer It

-- really that number working we as I not small of system. did keep software we're a So, our mentioned, engineers software additive on design for

with the we the subtractive synergy our what business, interesting were we resources owning whatever parent and kept had those the really buyer company So was resources. with

Paul Coster

every million I Got created opening using XD think said objects like you. And statement. you Jeff, have back to I your want to go X.X but printers. may misheard, I day being something

are Or But So they bigger? smaller? In of printers are that. objects elaborate other you I getting main don't know just on question sort perhaps or the terms quantity? whatever, trying I'm to or what the if getting of understand your is but is, implication words, can the all material it's printers in

Dr. Jeffrey Graves

question interesting on you the correctly. Yes. an that's heard size. Paul, No, Yes,

specifically So my around XD around Systems -- was comment and our technology technology.

whole so We're our used a that's including installed printers, great. XXX And Those our any or at technology. with other day. day software. components the look I technologies that materials, not being best is the components peripheral are to I growing, a a it's X.X are not of are every X.X When being excited have million I core which based hear being other people legacy I'm million smile day. -- that's day. X.X on year and application. numbers, conservative stretch not be the a when technologies hard trying with somewhat to is stretch. I mean and about. our are our And our made industry but our estimation making That's million numbers our our to to technology about Our base, Because aggressive, million made make our are components a

our experience, and tremendous what's them also it's of keep a to So, base very running the and well fueling service it's keep replenished machines we're team successful. building up and

really We're pack of learning question. our more and really this it's about interesting machine. is in terms densely part to the in components a software targeted how In size,

you So efficiency. can increase the customer's

our getting on large newest smaller? being very to the they some machines, I small really machines, lot hard days. would really trend. but are made, say components, So physically while stuff Are that's business especially making a our it's helpful. of There's a that these industrial side largest say the are of

newest at look you it's are materials. customers size by X.X metal our other if and meter So X.X printer, componentry actually titanium those meter parts and of making sized out

the that. on you helpful stuff you densely give I size it is -- efficiency. being more insight really printer, really made. tell I the more any you of can't I which it's exciting, is packed the the can't at look can small in I'll give parts for exciting. So being

Operator

Thank you.

of with next question comes Our America. proceed Bank Please with Wamsi of from question. Mohan your line the

Wamsi Mohan

this all give trajectory? puts and you takes, we drawdown given of inventory color some wondering margins can about should on Can in us the how some the that and you quarter. talking the happen particularly, of comment was should here this gross I if trajectory you're about fourth that on think

Jagtar Narula

Sure.

Let me start with gross margins.

line look was lower slightly I effects, by if margins, that we the year-over-year, one And volumes at the year-over-year. two down gross product year-over-year. QX, driven product versus line, down with had was right? the On line hand, services So

hand, cost restructuring had actions. the On the we other

sort we slightly funding essentially of down, each were and but other, flat. those remained So

uses line, by parts in and as were On lower costs our services improvement. drove there, lower the up parts labor as business, we business services improvements That well driven volumes manufacturing our that cost field year-over-year. was which

sort lot $XXX We've sales teams supply I million and our we're improve between in of a of the prepared chain. forecasting -- inventories, Regarding million, the supply actions to we $XX this flexibility year. at enhance to talked in about up my as quarter done the ended cadence remarks, at the chain teams

of year, the And back expecting, the so be levels. end to turns to historical by we're inventory

to we'll been. inventory where to So back that draw get historically we've

Wamsi Mohan

this be perspective? is Jeff, something or have of And as is off this noncore? you we Or you the does buyer XXXX divestiture a think the longer as going sort do a sort depending phenomenon? process, all Okay. appetite out to follow-up, it divestitures a from you think a completing about in X-quarter as Is that of line mind view to that on stretched phenomena, get what time

Dr. Jeffrey Graves

it you two-quarter as tell would I think a Yes. of phenomenon. to not

going take a of to I work these on evaluate think considerations. because be there looking we're And to kind are things through continuing things and number of -- time. all

to run to the What You run disruptions, drives good frames leave and a want do along. At want to are considerations to And time do just for internally. we lot the same of we processes. shorter the want uncertainty the move time, we you don't we them disciplined employee processes want things best.

each adds looking look and all And through decisions, So, conclude we you to up at that updated and you as just time, keep make as probably updated. obviously, we'll 'XX things keep it systematically. we'll out we,

of leveraging markets the of quality of lot And driving puts them. of gross get healthcare, comparisons first broadly, the be for margin is gross in cost and was and gross the growth one moving the to the gross higher a Jagtar business value or value hold in about were actually question a but carry team businesses it team margins, for it's But gross with relatively so because kind we're takes years, short-term on the on more in put nice businesses in and focus generally of we're pleased that facing have they to space. the -- a margin focus, out example, tend told reference those customers. we're to with could component, and a things in of to margin. out sophisticated our associated we that components, additive a our margins industrial good every tend at really them we in still about well. margins where level. higher their that a year flat gross I the the that gross to to systems our They over and last bring love forward margin we the as versus higher that hold service able gross the the at quarter-by-quarter margin look as built-out And tends be the they premium that your future on manufacturing, lower a reorganization you have, capability condition those get that a the you quality becoming markets Just enough meaning We markets. demand associated I day, higher as have

So see future environment trend be one focused is in. it's where I said is, the to I nice and value would that you'll We're a in hope quarters.

Wamsi Mohan

systems-based of I being any out up an attach to systems-based I materials as could Jeff, printers just comment, close follow there any the more if open to as have business from your mean, or is a on opposed really around in allowing it material like heard perspective. consideration it So any on was thinking of see the I to had approach separating change, approach comments, going I a bigger if the thoughts you I sounds if your wanted model to if change margin gross mean just wouldn't in that a mind? but mean,

Dr. Jeffrey Graves

it's We together. And a linking value tend different and our of lot to competitors question. and able out that the we deliver No. of all the Yes, to a take great it's one printers I positions materials know on. be

tailored systems, many, this extremely a being certain So And of our by we of a taken material printer we've why materials, value application. by in approach tailoring and targeting applications that's many can focused. derive for extra

materials the can we -- with to to we want much financially reason is printers want our that only we to that driven, not way So deliver -- customers. we sell value more

to But we as look, available everybody together. else's So to value we that for and we link a and material by say, customers, that can we special. the special really then that if them economic printers. printer them through get materials tailoring are value not our to long great it's us. will offer pay wouldn't good can certain we commercially or It's same It's where deliver ever to they a our a outcome is point for worth as material outcome customers something a as for

doing on we're So forward. focused that of on, the going that's kind of work more

Operator

you. Thank

question. Markets. next comes Kenny from Please with proceed Capital Berenberg question Our with your Vallace

Kenneth Vallace

mentioned And a lot you to the covered earlier commercial Any what here, as in about from competition thinking I does wanted spring the the printers. direct into recovery kind metal kind there? in how this updates briefly kind of are of comments. the Obviously comes but play just look market the like, of particularly But hit on on XXXX? as launch opportunity

Dr. Jeffrey Graves

Well, with large need or big printers. metal Yes. obviously, we to out going to materials printers. you -- very very very difficult we're is it. some be ours a being good particularly bullish ours, market there. pursue type And technologies obviously good control. to materials on of With variety It's atmosphere process, used very And meaning aerospace there are a have

sensitive aerospace very flight example, are out high-temperature companies in making for we're interested of So, hardware materials.

in You technology And want can part the the that's making printers. you really for we've find. atmosphere best our exploited the

materials to forward, on range faster and we're working even demonstrate multiple same able or better of materials and broader into making going the them So now, printer. a

I that's growth nice general, say market. challenge a metals, for a So us. in would

there, now a that much it well. for number an in as and a is scale and but across kind able production we're for the a us, base and building while, Our XXX what in platforms shipping The on for it's customer received. XXX up are has markets. of experience anticipate we demand large newer larger being start continued to of like and installed seeing growing is demand well been The

entire business, from they plastics I back lot the but on the depending customers trying plastics what to to we big. it to again look want say oversell participate. it's manufacture. is change are over So metals And components and our certainly don't of of time, the future fully to to to and metals want very A move will -- going and

of So, our offering that we to believe we're strongly in range customers. technologies

Kenneth Vallace

you you -- area the Awesome. as particularly highlight then on metal happen, investment more interesting cash a Would is for of a hand? divestments have and And just quick quick kind as follow-up.

Dr. Jeffrey Graves

enormous -- broadly lot plastic back I And and range again, to we're have bodies. from No, say Plastics an industrial of you into changes mean they're -- day-to-day a heavily on at look machines It that for And wouldn't going focused that the range metal actually, specifically go. metals. on applications. to I to are apply or actual they're devices, to healthcare, too, components but again. human into useful plastics

about I plastics So or it's fiber metals. more think excited carbon I am like have very carbon alloyed excited through printers, plastics was or or a I blends great equally a whether prior reinforced going on, am on things neglect that, future, which opportunity. of address And fantastic blended I plastics. reinforced there about to question, plastics, more

So equally bullish and like both. both I'd say on areas, I'm I our do well. customers as

Operator

you. Thank

question. with a we'll Craig-Hallum. with question, last follow-up Greg our For take Please proceed from your Palm

Greg Palm

we can our healthcare, And the about years. growth. the the a you're organic assets I that can confirm that I investors revenue don't mean, think to consistently of mean pathway from that? is basis pretty divest math, looking been know going has I've if expect questions to you one forward? over something then divesting the to that to by similar as And I continue that's been organic guess I Cimatron. you getting the on segment is growing actually of are sort an shrinking guess majority in you're I

Dr. Jeffrey Graves

exciting GibbsCAM And tell example. many that just is sold in to under convinced many an we that Yes, speaking, right markets. much, those we to far, out to in under shrinking do, we additive, Greg. Company ownership, in invest are were able going laid I us were had purpose and areas. not so too broadly to trajectory soon Greg, And I'm them. the would continue. going with They businesses the opportunities meant just s weren't Cimatron was we're trying our for because properly And invest and that investing assets, said absolutely, we too that subtractive the we shrinking we were certainly, you, statement, as generically,

on of let can So, grow. focus stuff, in areas it's right rid the the ownership get best future growth it where that we us to put and under for

Our with the We customer pockets much their healthcare they leading of haven't base -- in number fabulous. healthcare, invest just other in companies do at to of to use too because been that the some work too as an is example, areas many. trying were of we in great And if do world. absolutely look demand, I want able that us we in to just but a for

are that we're way And the the focus kind sales base application so, is growing, on things, industry there's engineering a VA. and working and we're really new we're planning, areas areas all And Those the This great and to marketing from things doing saw of surgical our double the the are those that work we're areas. fabulous. on to as and technology healthcare getting in down Med growing. devices, going through out are is of those with I trying example. because growth real

us end I as seeing well. think up you'll grow

and we to And is reinvest turning cost things doing to stop noncore, I into. you'll core cash out to earn increasingly as in Our for that of drive growth think the see profitability growth. we business the in profitability, short-term business, further our that can the discussion get to go get priority that here are increasingly

Greg Palm

Yes.

of mean, clear divestiture then that some business. there's I trajectory, Cimatron pretty will margin looking take flip out lower the on be I are you're that at gross And Okay. so side to high-margin the that probably on just where offset target the maybe divestitures to the can that I so mean, forward? impact I go margin, you from you could we Jagtar, internal I the restructuring over going year next an have that. mean, think gross mentioned efforts and do here? margins But assume

Jagtar Narula

of we that of said rate this we've some XX% the gross right? margins the cost on end to up. you is, what line. in So where year, about roughly sold is think by gives of right? if of So million end on run you expect perspective total $XX exiting That cost million year, $XXX savings probably next goods

Greg Palm

pressure divestiture put Okay. some just on by certainly Cimatron But gross would right? margins at with matter, that the upward that even

Jagtar Narula

fair. I high-margin mean is that that's a business. Yes,

Operator

session. concludes back additional over question-and-answer our the I'll to closing Solomon This now Melanie for comments. turn floor

Melanie Solomon

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

Operator

today's may for your thank and Ladies this webcast. lines your and you time. does this conclude disconnect participation, gentlemen, you teleconference and We at

3D Systems (DDD) 6 Nov 202020 Q3 Earnings call transcript