3D Systems (DDD) 9 Nov 222022 Q3 Earnings call transcript

Good morning and welcome to 3D Systems Conference Call and Audio Webcast to discuss the Results of the Third Quarter 2022. My name is Kevin and I will facilitate the audio portion of today’s interactive broadcast. [Operator Instructions]

At this time, I would like to turn the call over to Russell Johnson, Vice President, Treasurer and Investor Relations. Please go ahead.

to Third welcome Call. XXXX and morning, XD Quarter Systems' Conference Good me Dr. are today's With call on Jeffrey and Andrew President and President Graves, Executive Chief Chief Turner, President and Financial Chief Executive Officer; Officer. and Legal Johnson, Vice Michael Executive Officer; Vice

Relations this call. this on The the access slide presentation to following the of wish presentation to along so on section slide contains that webcast call Investor a of will may website. we do the portion refer who portion of Those during our the phone

For have please the and via able who few may access those be of to questions delay the be be web. streaming webcast, that seconds there not post portion you will aware that to a

of on and as today forward-looking statements The slide. materially. this include only questions discussions following responses as to will described and results your may Actual differ views reflect management

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

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

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

opening turn I'll remarks. for that, the With Graves, our call to Jeff over CEO,

Michael After our time. review looking a and be everyone. our turn results. I'll already summary the joined many to current for call I to a Having morning, that, detailed executive this proven has valuable markets good the in performance. business more for new to our few our forward the the an first the know a are our and of finance Russell, position excellent that of hearing on QX organization I'll of in team. CFO, over company with Michael our from Turner, third September, Michael Thanks, open morning a climate, comments to addition you of quarter and leader

Michael. aboard, welcome So

year-to-date, backdrop supply Reflecting the by chain the on economic compounded and the has COVID disruptions existing global pandemic. created geopolitical

macro these and investment manufacturing news in our the in This their reduce that order production costs. customers environment. for adopting is industry more many an impacting increasingly growth good are companies, are even manufacturing While product in chain enhance supply for opportunity cautious to negatively flexibility design headwinds additive capital gives us operations risks, a reduce

prior to Systems already and the platforms For showing efficiency allowed XD our efforts this investments in streamline our sheet. results. which initiatives, focus operational in balance company make from while and significantly us specifically, technology year strengthening new has we benefited to important are This

industry than refreshed our execution, this scale needed support stronger Our we're customers meantime, are our an once confident ever on leader. expect In subside, emerge product profitability the recession we which will customers efficient fears performance, to and footprint their and focusing with operational period a lineup completely and intently from that is cash shareholders what and from the growth.

future. the we of we're that dedicated tell the of behalf world, the X,XXX the and leadership On proud year about Systems nearly our ahead can you XXXX, as very finished my role around I colleagues industry to XD look in and confident out additive

a costs. performance. pricing lag labor both impacting possible, quarterly drag line that we quarter, an is to operating internal offset on them. pressures, basically Turning purchase taking We're actions, and that our these to areas, effect exceeded Slide expectations and, then where a delivered put but there's components Reflecting standpoint, with in in results X. were inflation typically From high can some our third on

factors these Michael performance. U.S. the of light strength moments. in a dollars will few clearly impacted financial addition, our shed the on In more

the chains this trend further disruptions continue. showing On initial occur, And no of signs if to we expect side, positive supply are stabilization.

hard engineers supply to sourcing to component Our worked more increase in base new our have options and mind. products design with our

our the to Hill, plant I'm progress over manufacturing, of in contract in-sourcing facility, manufacturer. our from we Rock our pleased made with very printing of polymer we've production which over produce mid-quarter a regard South With soon will took This Carolina systems. XX%

to people in our momentum. percentage that investments expect We technology grow gain as and rapidly

and a colleagues were begin transition to In sincere expand margins pleased as Carolina. production to quarter, manufacturing the Systems our our increase, to to out improve we XD South shout management. want see in new to third the our give our rates productivity workforce gross I

Your efforts are noticed and greatly appreciated.

is standpoint, global upon a toll discretionary inflation consumer that From a dependent spending. significant markets on broader taking are

daily more they like have spend spend items. on less gasoline, and to on consumers As necessities food optional

this our impacts us, our markets and products. For orthodontic dental particularly,

be While seen slowed this have in spending, anticipated customers is financials. business we're committed that clearly their can our still in guidance, while a fully key to, our previous great which, largely

once business normalizes, the take some this strengthen expect we to economy Fortunately, this time. but may

to market business of a few and understanding give our how works in model on this a dynamics More in clear but want in now, position for come to you our I volatile our industry climate. moments, the

across and all The reasons additive manufacturing twofold. widespread, As positioned well we're to becomes market environments enable adoption are very virtually production rapid verticals.

complex the the the combined, is greater the our of integration in industry world. the of on. experience active our unparalleled day than every of produce rest proprietary customers have in our technology. in management using tons This output of over we factories and field, million experience fleets the almost us year, base XX,XXX greatest of X,XXX draw parts to each around With large production workflows consuming over giving entire materials the customers' our printers X printers First, in

reorganized applications, This additional highly proven we units, then growth for effective, us in the over complete, exciting the are the and their on effective to workflows factories. added approach then and and years, most the Once and growth to manufacturing has restructured market-facing enables expanded capacity and X.X will into we've their customers company drive Healthcare into last believe with years Second, of business focus these transfer company ahead. manufacturing Solutions our technologies market-specific our it developing our plans. supporting Solutions. workflows support This X Industrial

This our is It full sets the is operational having for around increasingly materials. partner. that is competition, of our that model are address gap of key and others of metal to and software the complement and what to looking company a a a see mimicked specific apart to applications, production continues That this printing the these elements, by grow. supported combination high-value in success customers from industry, our we expertise wide is one range by but polymer technologies

core systems broadest the the broadly metal truly unique of Systems, materials and of polymer I in Today, our span, printing also technology drug the and for printing and industry, at now only not materials that the refer development. XD methodologies but include range in body groundbreaking development essential These biologics. to are addressing in and human the technologies new biological within as applications systems

total, now in application production unique company to viewed a enter allows technologies of in with as us additive position scale this environments. expertise true and assume industry we global combination in leadership When the a

turn quarter. for now I'll the introduction, a of overview that X brief Slide to With

year-over-year. during XXXX, decreased consolidated adjusting company, X.X% we revenue for that after the third the businesses For divested for quarter

strong increased foreign currency significant impact U.S. adjusting the for showing revenue fluctuations, of the dollar. negative consolidated However, of the X.X%, impact

like, double-digit meet long-term all lower this much rate as manufacturing than segments. we of would ahead, expectations growth takes years in rebounds growth market fully expect to our consumer environments and we While hold virtually in organic spending production additive is the across

X% constant substantial third due by quarter. slowing in the to for year divestiture-adjusted in decreased our flat our Dental constant and segment softer in was X.X% driven our segment Solutions Revenue Solutions of increased performance nearly segment a but Healthcare X.X% Turning decreased our Revenue consumer Industrial spending. currency, segment to currency. for per year-over-year

to Industrial due Healthcare was last FX As impact said, service sales to segment's bureau Asia also Solutions on the our Europe With in segment pronounced and and on material. impact we saw exposure that the was that customers Solutions quarter, currency Pacific. manufacturers most

in given historically we recession market in and Europe, third In pressure in Industrial our and our Ukraine segment's in Industrial impactful Europe our customers. to supplies particularly, regarding Germany. strong variations uncertainty energy Solutions is presence business, quarter. In the continue and regional the Solutions This war saw

side, Americas strong sales positive verticals. third during quarter printer and the robust in the SLA with the remained commercial space On demand and the into energy

for solid recently Titan saw among and also defense our demand platform goods acquired We consumer printer customers.

sales quarter doctors, holding the business, and business growth strong years other experience system despite of health up In Medical for planning varied of virtual our the sharply manufacturing who to broader And care in The significant customers business, Within well. as manufacture for industry-leading outcomes. improve year-over-year best-in-class nonelective performance quarter to strong by uncertainty. a strong surgical Healthcare out our is story our demand additive surgeons Solutions market, personalized is for surgical had infrastructure regulatory packages and orthopedic solutions instrumentation. solutions our using third procedures economic printer we In and surgical patient products, that here stands market. saw XD suite of and providing Devices hospitals well

Solutions the in market area. year-over-year factor sales, dental decline the However, biggest the particularly in orthodontic was business for our during Healthcare quarter significant a

it's this our were difficult for how with dependent on so coming. was expectations. might evolve to our It's how that roughly conditions As third disappointing, last And line last were we demand quarter, in softer coming investors gauge results over because we decline while this quarters. quarter, communicated long general the macroeconomic our aware the to

strong this business growth to recover and to a and contributor eventually be profitability. We our expect to

ups guidance expenses for good of tighten in This remainder improving we Michael forecast and strong controls. reflect will XXXX the for performance these and broad this updating to full is our we're despite the execution into year cost moment, downs, you have for now describe significantly believe revenue as our while our why, a operating So business to range we visibility year.

valuable to advancements the only in quarter. to Slide they but These insights are core highlight activities like X. in will our I'd from of interesting provide third X next the company's not the that growth also isolation, type years. Turning drive into some

agreed As developer third I designed components. true of the quarter the for industry's quarter's mass described production polar, Germany-based acquire call, for manufacturing to last you system on we first the our dp of additive during customized high-speed

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third several significant announced additions quarter, to our we portfolio. Materials also the During

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gas; However, for material and rocketry. and oil it's extremely systems; marine an applications of demanding in chemical course, ideal processing plants;

business. for highlight hand to X, one making before and the namely progress most to Slide my a to we're goals world-class tremendous Michael, important on creation want medicine Turning I I of Systems, of the XD regenerative off

kidneys. human our proceeding shared printing organs and now partnership efforts for this I've goal As X in currently toward through livers with previously, lungs, XD functional our of We've Therapeutics. scope, including achieved an targeting a along primary with are biotechnology you lines: but progress partner, first, expanded transplantation, our United remarkable with long-standing area initially

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organ Second, of reconstruction tissue the printing and the More field this the transplantation months progress, initiative building ahead. on into technological adjacent announced surgical we've in details be human expanded exciting program's applications. regarding non-organ for will

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X. Slide to Turning

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shortened, eliminated can time. of over and animal success believe that For drug the enhanced rates ultimately we development using evaluation testing cycle be use the this technology,

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printing should company HVIOS note and given be the business a Based a highly confident believe has potential X Bio, bioprinting million agreement to pharmaceutical years. could advanced Systemic you. and technology, profit than company its supplier. manufacturing in company progress and Bio we'll feedback, first model revenue our upon I that capabilities technology a major within near forward future, announce rather believe proprietary, we of margins the early than I'm customer like to look in Systemic a company $XXX Investors biotech more with chips biomaterial selling that sharing achieve the the we with its

our remarks highlight Geomagic, XXXX Systems been XD Before solutions to provider digital applications to XD automate an over utilize to software, as significantly position XD offering that Sprint in like by has business. of specialized turning and to machine such Michael, I late acquiring printing help XX by and production turn AI I'd XD intelligently learning innovator Experts. my software in the Slide leading to We to entire close long a software workflows. Oqton, advanced manufacturers their call

we've Slide on The offering action most control cloud-based XD are Since and that floor go-to-market factory transformed across by management legacy manufacturing agnostic result OS. end-to-end additive multiple It And acquisition operations delivery. order digital sites technology the entire of XX. manufacturing under Oqton integrating workflow shown of today, able Oqton. complete industry Systems structure manufacturing will hardware our provides, entire The digital being is the solution software the All and thread combined that neutral. a we're single XD software system be feature-rich stand-alone will Oqton, traceability as into the be software applications that seamlessly Oqton from software the to strategy. a the the now integrate of complete comparison and suite in and with of every provides in complete table to far, in

that each approach. called this point for offers. field put add solutions time through have automation. alternative at investments a manufacturers leading suppliers the customers DIY, the And to given in to equipment are of or the with players over complexity hesitant only they're middle and themselves an and shown spectrum fraction approach can column approach Oqton XD the both through While partnerships do-it-yourself, feature, the R&D the will together offering only in who, cost industrial do and or the capability Oqton to to of best, commercial other The commonly of we CAD continue leading so refine

integrated example with that would partnership road true in of of development development to not make joint importantly, industry. functionality partners As only include applications an that discussions new e-commerce a it major just Oqton the potential the identification, serial has of manufacturing become map, one on cataloging. suite new leads industry, manufacturing our part additive optimism Most scale enabler entire key the can our of impact software and

data, in software all very ranging this For platform. run digits, on platform, excited Oqton elements from To markets. this has the reason, automotive, This industry. and entire the operation to With and including firewalls to we wins acceptance the opened we dental triple of a every will now a about on security contract impact have industry-wide the additive of the to additive Oqton confidentiality. facilitate audited Oqton's and includes approach, XD growth future With the double potential of adoption, priority is gaining high sensitive as business have of this with manufacturing care Systems customer traction externally protection printing software, health is new aerospace, including manufacturing, we're user ensure day it availability historical the manufacturing as broadly. tremendous Oqton believe a stand-alone

review Michael I'd over third results. the And to quarter Michael? to call with that, financial like turn to our

upcoming investor to look Thanks, be to the right. to for and analyst warm welcome. All meet Great. opportunities our excited and directly. forward Jeff, I community here, I'm

which like Systems XXXX XXXX The start, of measures XXXX. impact I with our remind significant issued that the Before of earnings to to divested make everyone to tables the release made businesses. call, be XD results we on basis. relating we will excluded night basis. that results XXXX results, X to XXXX that is this adjustment contains our make point same today's I'd XXXX I'll in divestitures from reference last non-GAAP comparable to Likewise, organic that The on an ex on any our our divestiture results

XX Slide on out presentation. the of Starting

to expectations Jeff areas results were some will with you discussed, the As morning. with quarter our this certain bright in line our generally that revenue in spots for we highlight

geopolitical business continued remained third tensions. saw quarter during to recessionary FX headwinds, persistent inflationary we the overall environment challenging fears, quarter, chain supply As last pressures, and the due challenges

However, revenues which in the during the expected guidance, decline revised significant biggest we from was we dental called and market year-over-year faced our headwind a in customers. quarter, out QX

third was year. XX.X% versus Revenue for prior quarter million, $XXX.X decrease the a of the

in segments, prior revenue our the reflects and top portion business. sales, FX, unfavorable represents both line to the continued compared a market you divestitures Industrial by impact significant increased by partially which, Excluding X.X% dental in solid of This offset weakness overall as year. growth and demand Healthcare know, our of

related materialize of mentioned to did third price convert Just pay roughly earnings to some $X price product experienced currencies, into of these cases, our during sales been appreciation in quantify We U.S. also XX% I that lost typically in the sales. of have more which factors which value result in U.S. dollars. made total quarter, And occurred in U.S. may us, the our U.S. quarter starting in therefore our of them on and dollars the of reduced some to not has the local international for customer a we overseas offerings that the sales. currency sales which revenue cases, million sharp headwinds some because, represents with There foreign increase the can some over their of from third dollar international the represents impact earlier, dollar to FX.

disruptions. of one second X impact adverse highlighted an chain third revenue conflict other year-over-year and the an the that supply we being call, quarter. impact additional persistent had our earnings less being had items items our quarter the during Russia-Ukraine On growth, of Both on these

to sales Russia. Regarding

were of sales result, material, third by much were start a had market. exited the And you'll relatively the than supply chain While as as Russia we we that comparisons to of quarter largely the on disruptions, our QX. to XXXX, revenue what saw cannot our in the of network behind quarter Russia ship impacted including on component impact for that supply million And us the these impact year-over-year recall second portions XXXX front, orders. third quarter the approximately well total customer contract caused in inefficiencies We of resulted manufacturing of estimate the as QX get commented that and we orders our on chain we of to supply issues $X in shortages that as less planned.

we that has During attributable margins. to enabled supply quarter to of catch thereby facilities the impact and to to million quarter, increase these approximately the chain our in-house. estimate delays. that work production customer our we orders our of we're we favorable however, significantly a a decision gross as profit late on of up shipments. part, to current due able pleased were outsourced backlog earlier rate say This printer $X manufacturing large in on this to orders, firm had that late also significantly while us unable back was, having of I'm many at that printer last of to major ship facility one bring customer result, printer And on

first Despite very for year-over-year in a we X back we growth able and operating the divestitures high impacts environment, months challenging achieve by consolidated year-to-date revenue, the X.X%. revenue digits. over first X of single months excluding grew of And year, revenue, to looking lastly, the the FX, of year the the were for unfavorable

to now revenues. XX review of segment a Turning Slide for

FX, elective increased third of revenue spending biggest reduced divestitures the for by we of our Solutions dental macroeconomic segment incorporated sharp Industrial in revenue, Solutions confidence Healthcare we For into coming in X% with guidance. driver was certain by and unfavorable that have while our negatively in quarter, X.X% demand of improvement orthodontic are procedures. year-over-year. a in other customers given consumer dental factors the reduction and inflation, the geopolitical foresee key decline confidence dependent in impact view High and by this our so at impact as Solutions revised prior and long The segment, such the the the XXXX starting year, of do to is divestitures quarters. Healthcare excluding quarter for decreased elective XXXX. FX excluding a caseloads. of revenue compared unfavorable weaker this will heavily not how lower demand for evolve last procedures, factors say last, we And on this time, the environment over But rest the the impacting material point, patient At how resulting cannot it market

healthy implants of in of business XD other within at growth some devices, Dental, orthopedic customers Solutions sales the a saw including we major such strong Print as types Outside of to and surgical lines Healthcare medical our segment, various guides.

business needing lines grew area held of less very third demand Therefore, nature. macroeconomic point-of-care These that uncertainty. serve has patients sales surgical up tend elective in our Additionally, well hospitals nicely despite and in to in the virtual surgical planning quarter. and solutions, this the are surgeons procedures very doctors,

software in cannot. a XD way planting and leader noted, competitors to materials end-to-end create field XD integrated Jeff in as As Systems surgical package our a an is services, printing with combine the ability to the recognized that surgical

year. because of current last comparison applications, tough by not largely repeat Industrial deals provided sales production Solutions and our in in to of energy for quarter some now microcasting was the segment. revenue Industrial Turning the did that in were this applications. in continued and growth year commercial space machines driven applications a Offsetting third strength precision large and automotive year-over-year lower by

noted, sell are in Overall, acquired printers, and to to which As sales good of XXXX. both across our printers metal see continue we Jeff of we Titan segment. Solutions starting our Industrial tractions with our family polymer well

to Slide on profit gross Moving XX. on

inflationary factors, divestitures and the year. prior Our decrease less materials in input printers margin changes, XXXX in including compared to in freight gross prior of margins and related impacts due XX.X% is on assets, selling to and more to XX.X% multiple profit than noncore mix year. was cost the The product mostly

we have announced the basis, margins as note some with seen benefit XXX back by of point I'd driven full of QX, also the rate down of basis as impact increase are the price quarter. in-house the well year-over-year during increases early while in bringing a some run to year like sequential production improvement printer that outsourced from on our earlier

operating Slide third expenses to partially $X.X This $X expenses to divestitures. year the and expenditures costs, increased quarter ago. or due Turning legal million now period million compared X% increase on in in a of operating to other same XX. million GAAP $XX.X includes settlement the decreases XXXX a in offset to by

research compared non-GAAP basis, and expenses support however, XXXX, infrastructure. operating and a year operating which some in divestitures, investments conditions improvement expenses same see expenses the did, tighten were in We $XX.X as year. spending from we've response in of in acquired to including which efforts compared future second period to reflects controls non-GAAP higher sequential to a excludes and as demand from businesses, targeted to On this The growth, experienced our corporate development the areas cost ago. quarter charges that reflect volatile $XX.X million to expenses the operating million nonrecurring

in for factors XXXX $X.X operating Slide as defined compared The Moving profit now XX. discussed. EBITDA previously to XXXX. third negative to is third million was the decline non-GAAP Adjusted quarter for the reflects the plus $XX.X of quarter year-over-year million of we've EBITDA, depreciation, which all that adjusted

revenue the regarding have important last and businesses Systems, that R&D I XD X.X years. call-out to and from over coming over the our to would SG&A investments These acquired here mention years. represent significantly like expect contribute we by growth acquisitions expenses to is we One

yet for time to However, revenue these being, acquired for businesses in us. have the aggregate meaningful generate

period a for to expense acquisitions. run due below adjusted As recent the expect time natural potential you of to a our our near-term impact result, of should EBITDA

the in share EPS fully third quarter, per diluted we share per a the had compared for of third to $X.XX of XXXX. $X.XX And loss income in quarter of

decline the the stock-based and loss earnings per Excluding all compared non-GAAP the posted night, as again discussed. items, for earnings quarter reflects compensation $X.XX appendix was share last we expense year. year-over-year to other $X.XX release that charges in quarter non-GAAP in factors per the previously prior the in the of third our of of we've third nonrecurring detailed The that share

ended Slide hand. the XX of balance for Now short-term and $XXX million sheet on turning investments with cash quarter We highlights. to

driven $XX $XXX cash used Our approximately cash acquisitions equity activities by operations $XX declined other financing cash and expenditures and million, million. used XXXX, primarily paid end million capital of and in the of $XX approximately $XX short-term million million of of for investments, since in investments

strong have continue support We sheet to with organic balance growth. sufficient a to cash

corporate new XXXX This additional an As during is revenue enter make business Industrial regenerative we previously investments as strategy as and regard as in at stated, our both businesses year, areas part our potential which grow overall high segments of such as in profitably well growth investment targeted to and to of infrastructure. medicine. our Healthcare we the will

are integrating While we they M&A have as X.X consider arise, businesses and are years. opportunities always we the currently the willing last focused to we on that acquired growing over

for finally, XXXX. on I'll full with year Slide on guidance conclude my remarks And XX our update an

XXXX quarter in environment impact our pressure procedures international believe geopolitical negatively in put earnings we announced the to and on segment, We Industrial Solutions we Solutions softer because step year macroeconomic full challenging demand market. expect we our call. would took a for Healthcare reduction particularly guidance second during reminder, the elective because sales dental our that a and this As that

expectations. certain that with cost fourth this of into revenue have now we results expenses Our with point year, we This the likely incorporates at quarter. during the our line improved in environment. our were better operating current visibility taken to third impact And control quarter and measures cost improved the in revenue these have visibility revised align the

updating these outlook non-GAAP improving significantly while operating revenue expenses. are range our on expected our to for factors, Based year guidance tighten full we our

gross year unchanged. margin profit remains full guidance Our

together, can foreign to million significant This supply negatively updated demand or million, as XXXX and disrupt guidance operating expenses to $XXX be or year changes in to COVID-XX, be gross such impact of $XXX that as non-GAAP it we business all to non-GAAP in remain a guidance exchange full geopolitical we is for and range the Pulling to XXXX environment follows: our range margins million. assumes to volatility. additional $XXX expect of no profit events $XXX the expect million XX%, continued the XX% we unchanged range macroeconomic in our revenue within chain, expect of

are the now we questions. up Operator, remarks. prepared ready my open concludes That to line for

Troy Street. question from Jensen Lake today coming Instructions] from is Our [Operator first

with Michael, I'm to going start you.

year. that $X being about to You for $XXX sequential basis, sequential talked about the million a implies OpEx increase $XX million million $XXX On a million to in OpEx.

explained think So you of growing OpEx now, increase absolute know, is one trending is formats? think be how an that at or in do the basis and that? you about like quarterly it nature declining sequential I'm just kind on And then OpEx beyond curious, of do you time how

Troy. Great question, Yeah.

dp on So one from QX QX driver Jeff to is in mentioned. we which going October, polar, as closed

slightly We'll get rate to our commission, their being will OpEx I I the we expenses guidance for that commissions, QX forward. full as QX rate further kind should give have think mean, of and So We'll of think run to you about the rate in higher higher get sell we run related you now. exit demand. is also And, XXXX sales going point.

Jeff, And, out else to businesses? its it standalone with business for business versus mean, that so within that, that segment just systemic, regenerative in required what your why on attractive regenerative? how everything of kind you own you're about carve doing I was

that are market, new of historically business, there pharma one, new reasons, mentality pharmaceutical customer it technology drugs these are a cultural is customer going testing companies So startup new that's the a two of a we've to reasons. Number couple base. question. the that companies is There's to had and different good will. you companies. wanted for drive There's if largely, business, base And a the because it in real a kind we

different. is model sales the So

selling selling printers. off growth, clarity that printer, do it'll fundamentally passing, revenue for real the as gross these chips up - We product Troy, will technology on valuable of the business that We want the model to comes but just different We is sell mentioned that exciting, We're to that works, The we're the be the company. really it. the jealously not that the business the too performance. margin technology Also, guard chips, in printing business ourselves come the that it themselves. h-VIOS I model rest in off than printers setting is that the case, to be that think that We IP is not only to product drive and very proven. want think sell and valuable. and knowhow

that, mind the look at out way it. my best So do was in separately and carved to

investors, In spend to much fairness wanted how were to we going on our say to shareholders, it. we

invest invest we're, we to if bring there that business, to in we outside want this to XX at the in its going us hit And put we're can if will to out say parties out do. get that it and allow what estimate profitability. it beyond to as we'll we that would objectives with exceed million own those And we to in grow fast to on want invest we the capital we put based flag capital as us on to contribution business, to it plan revenue to is So continue material base and return, that, it optionality clearly, can to in want logically comfortably measure this or report it. to be the gives able we that think ourselves requirements We right, I, for ourselves, time. grow. And the in

it If capital, because technology, investment well. may revolutionary if some in that point, it is as requires business it really additional we outside a at requires, entertain

the It part is set forever. that those owned up but gives as we is We'll on all - the reasons, it'll us a business for be optionality portfolio and assumption XD Systems to it in of our standalone how So goes wanted future. wholly a default business.

system just I'm that's just material one demand in maybe on the follow-up. in used on or the machines just in kind weakness more being full sales product you the side. demand? assuming or material delineate fact, some the In is just color that last quarter of extent But could

there. you guess, the with is being as the think is where sales just economy going - being by on everybody customers in our Troy, to to be translates more we which certainly the us to sales they see customers, - And see viewed fewer off, hesitation spending is I it, sure pushed broadly. conservative some being might are about some going we make with demand printer concerned that want capital

on and, in side, bringing XD their using printing and So production. they're the using more it heavily. flip in more actually assets heavily They're

sales So in see decline, declining. growth new scenario, materials up you rate the going it that printer in

how viewing much variation. And very how quarter-to-quarter that's customers So they their it depends need much a on are future cash. and the

balance people to sheets. the Fortunately, sell really we good have or

macro they And direct don't goes, on to given not have that impact they it's stuff how the their They're a where money current trend. each that's prudent mainly just money the predict it on. to that quarter. So being invest. about Hard but the all going spend has

Chung Next question coming Morgan. from is Paul today JP from

a just follow-up OpEx. on So

to of forward? of I that think, I heard 'XX. the high-single-digits kind implied right on around you OpEx way rate XX of a for so this quarterly or think pace is that say the exit business of moving or the Is about million Is kind maybe rate run it?

or mentioned that ballpark. you're get next to guidance about But QX We We're beat I on our correctly. next not directionally call. that comment number call, you on we that you prepared XXXX. closer, which give in to slightly, as that be We'll definitely on maybe yet think our hope will thinking

from a so year We our if there Paul, in this and our perspective, infrastructure. we investments efficiencies years that And expect make support basically gaining we back growth to office will, Paul, to could you do office start sure in longer-term needed future were our would G&A, back to our make efficiently. future infrastructure

we as So the why this investment. an that's was viewed idea

critical the but gain you only to need to in do investments hit that. G&A, in efficiency not okay, will, and to in to R&D, those scale, our if future just You're years, you make

about in from down? expansion You And pricing insourcing? 'XX trough then come margin after some on I also is the Great. some impact from to sequential benefits. improvement do line and know, here XQ, a get costs get chain then the gross supply what you margin some, OpEx think you're margins, in benefit guess, on on seeing we insourcing And the how

year when a finishes on company will as any Paul. much all are better as trends tell the can, the But correct. give we'll you XXXX So out, mentioned you, just you I clarity much

a bit takes As and implement to little through. flow it we take price root increases,

to more Some platforms new customers. introduction technology, tied of bring of are them to new the value that

there's that your costs all, going if recovery a lag and and between pricing. and cogs So your up

flowthrough, into some the improvement 'XX. saw as expect go more we quarter that pricing in come of to we we So

as that. about the done We've been cost skis initial quarter had it, mentioned insourced we saw mid saw real. very cogs from line, in careful only benefit we our manufacturing point. about on reductions, which out in advertising, we over already it up the not and but And Michael in they're benefits we only shows the again getting And had QX

So improving. expect point. Hopefully, our gross margins consistently be to QX we low was the

outlook it we to guidance, expect macro-economic to but you what just improving, We be get can't see specific through is. the consistently until we went up, give

last kind four sure. last here not then 'XX, quarters, been, seen you've it some exit to pre-cash see helps, to the do year maybe And we start as here insourcing on in pre-cash, we look we can I'm moves it's about rebound But, forward some mostly to and a of lower think how for the earnings. to one the end year, usage on

general Just your outlook?

up When it's to a a existing over a pick the capital. from in as up continue for inventory will time, us. That working tick inventory, levels that of and And operating details, and inventory we operational down because of and that'll people cash would manufacturing, that burn the to had of big it was look at lot expect cash better insourcing It's well. good flow inventory improvements supplier. source be drive we

we're flow, intensive business. very terms cash really in of So a not free capital

that flow get on where nice are of we inherently be kind spend flow, a it growth, changes, don't, infrastructure going on a but capital organic we've a cash we of expect we cash on because big bolt other of to we cash don't or free infrastructure spend changes forward. And a operations a we already flow into wouldn't the So lot usage acquisitions made. would through lot

to that, the cash. got just Michael in dp future. and own other But own over sheet than and we with the the execute grow balance polar a need out for exited quarter return. acquisition them We close really we mentioned, assets after as million now the quarter We we've the $XXX need did So to closed. we strong

I add, right. just And Yeah.

kind strip $XX range statement. face you activity we outflows of to in $XX manufacturing, of kind and related acquisition roughly out QX, instead the in our sourcing and flow we've of to million If the on kind of and the of million look all had the out at strip of cash cash that that done

I think to you'll be ballpark of kind expect was. in flow what the for cash

from Tyler Next is Hutin from coming William Blair. question

start numbers was on off potentially obviously of kind wondering to down. want is I you year-over-year? how quantify growth healthcare. just just I with if said, in could you I much was any year-to-date know dental down

orthodontic strong I follow performance have that but for you have coming you it a growing to products declined been double-digit those segment more rates manufacturers of period was have in you all strong more what when time. us, clearly, inflationary is, performance from environment. single-digits market, said the didn't very the this flattish rapid look was growth of meaning break if will, of to it if out meaningful. double-digits, that And We at number, mean, into business

teeth. I and attributed are to is eggs for what fully And straightening that tolerable milk, decide teeth while. between their having which And in and that to, they've understand a gas consumers are case, crooked

we've got the it's will market right market that expect really great declined there. has the technology, to and for fully But rapidly I in that's, channels during doldrums great So, now, rebound. And year.

XX%. of pricing, you in gross should kind pricing, back and guess there's Taking margin that that a long-term, your not you Where said really lag like now? my kind to just would when be part a a follow-up just long-term see the we kind of of on but goals, trajectory I effect? 'XX then see And guidance, of getting just do

in The on increase of the pricing. price QX. I question we've mean, announced full So, price a I'll think your that increases start the earlier year. rate in run I seen with

input in on just expect in to, to think the specifically, is are like for where I into say materially I we where that I price you're near-term. can we'll you change QX make And forward XXXX, now, rate costs not and we're comment said, that not QX. I'll not So the run we of monitor adjustments going kind for to seeing continue of But going that going can. but mean, we're indicative

at that materials isn't is a said a we've look usually the because always least side, capital the our for on at always drive more opportunity OpEx customers, to is bit there item tricky, products pricing customers. a now printer you existing from for it little on If what is past, and

through new look the So is really product out and we our years. over pricing set opportune next entire of products, you strategy an when to 'XX two time line beginning introduce at at refresh the

happen in 'XX set opportunity the those So new 'XX hitting always 'XX, that and market. points the pricing are new when will and most of products to

question coming Wamsi is Next America. from from Mohan Bank of

here. you how wondering could potential I help going if perhaps XD was characterize Systems a is positioned into downturn

be maybe margin it but revenue a time, seen not In out. flow, same a if investors in and we the cash flows not not how terms want things take and comfort that's cash would flow-through happen, hypothetical potentially play what tough compression bit going of that? of I'm levers trough where XX%, how if unreasonable at sort the should margins sense maybe some to to of you What to you have little pull? were and know decelerating Could a happen, we've revenue maybe get of question I of are. it's a given the will think levers what's to -- investors around But about that's saying case, environment.

us can So do to you anything great. help be there would

markets in marvelous our feel answer, you, -- we because and as balance had Sure. our cash the foundation. 'XX, that tell capital a to in We time came excellent with backdrop have it's to we into other that largely Yes, of a the position our 'XX would divestitures I a strong sheet. and really maintained year. And an base position, we've in actions about cash good Wamsi,

happen on and a the stable where of the dollar also all with the forward, for flexibility while currency terms be going recently not to our additional is lot headwind. plateauing is In going be the business The and won't yes, line going discretionary business. now will what's an you know fluctuations. economy kind of that A guess. Hopefully, top and is of never economy anybody's

would So don't few unless get out. oriented, bad, a expect really dental the are you outside procedures procedures medically gets those and maybe pushed that economy of

of worse, revenue anybody's there but probably the a impact, gets is if downside other economy guess, industries. So but in it's little terms certainly, modest more some many bit than

pleased On supply the the cost labor I chains Wamsi, levers. stabilize we've hopefully side, now got we've improve. to and follow you the at many industries. costs. got starting all least normal And are am

-- chips Those a quite the issue were real You really year. in computer know have the a lot. early like moderated

pricing negotiate buy. components some So to easier on to to componentry. starting are able even We're be

drop that's course, So have thing. if all a then, we And of good labor costs volumes off.

in initiatives really hard. XXXX normal our the pull, will we and We've all have do we tried to So maintain to levers that.

done. as, need that to we spent money can, a in view we've can lot that us all you the in So 'XX, Those but back be cut 'XX. all future, if available yes, of to things that's on in then are

Michael, any don't if I have So -- other know you

right the I you just hit comments, No, Yes. all would say.

any strength near-term levers the sheet double we're Just we structure, mean, in liquidity very mentioned, kind [indiscernible] of back on think think to I do have Jeff storm capital positioned. I enough our that of certainly balance I well weather, and

this have -- been the attract question, balance don't your from the too. and was strong nice if business. to included Wamsi, company a labor given And know we've we that we're in interesting, to talent able but a I it's healthy standpoint, is really sheet,

have up The is And situation needs attracting not do. dependent to on labor much to gone an in a front. how issue have labor, be us. inflation. have terms employees' because really So to good But a availability business company that you of you that is of talent how for have you of costs issue, faces sensitive been every is good much it's lot labor on

address tried scales, keep our in we've Very that. on up hard that. will, make pay if to to you adjustments to So

the pull levers So the get those if all kind we that's to of it. them. are part and we've -- But of normal pull harder, will challenge times got

focused I'll cash are on own and there line growth, markets But is be We drive need end profitability execution. performance. the assets execute we're okay? our cash we on what We heavily and these The by to own. on to now we executing invested hope That performance. is profitability now we saying in with and need rebound. assets, focused we've priority priority, top will and our in those

Cross from Credit Instructions] [Operator Shannon is question Our next coming Suisse. from

I to purchasing some to made comments a question think, sales obviously, the losing given strength, regards I impacts of decisions due had about the you just with plays some currency to dollar the which maybe extent, in U.S. how overseas. the pricing, some

terms international? offset dollars? of about demand I'm Or what you sort thinking elasticity from general, in say to you And that? of about price you're to pressure there. need or pricing it take of in how in U.S. So the you you're down wondering led currency you what think thinking to standpoint just Do of where

Yes. general I couple say mean Shannon. comments, would a I of think I just

risk you the -- to the same sales I with foreign-denominated but in X traditionally in dollars, have that form we're assessing impact of may bit, you as the headwinds say generates it international us net impacted one, just number stuff Maybe to your a U.S. to little dollars may some do that we sales, that U.S. forms, make. always overall perfect regards It's and the translated FX affect losing going right? it And FX those to to more So of the sales. come have pricing but general, in pricing overstated or evaluating little and right? you're a headwinds, kind headwinds just price overseas in business. and it's ways would lower It's can we a

it's [indiscernible] okay. No,

commented think Go your next enough. I with ahead probably question. we

Okay.

talk biotech you call, about not or just the because that bit I I'm what more are Now including is Systemic? thinking a on -- analysts. was myself, Systemic Bio wondering, can those

that as direction? wondering, qualitative the forward, for look in what we both should right milestones just quantitative I'm So watch everything is and we sort trending show to of

Yes.

would a I it's little as be we we probably that we terms as qualitative, bit of So but can quantitative in contracts say will land.

a multiple the with we're This brand-new pharmaceutical the is What companies we're is make do for, you a then can in effective technology offer those on discussions can can month, if live. So with about demonstrating the new models model, we cells. the And an live inside printed is now tissue, drug which study cells not to allow -- work. sure say, concept. cells vasculature that

So it's really attractive to companies. pharma

We good with then to statistics. and works, do it the have you model can demonstrate

to are Externally, Wherever them. going those. we what announce of landed announcements announce going we've we you numbers can, should to to watch Wherever can, we're put for them. contracts. we're going We're to

on want see you time, financial much reporting much work over actual the growing. to put on How depends transparency, those we how to So of some into want margin it the business.

because type Biotech moved we is anyone revenue as about we'll don't want really worth pretty It's and amortize So be talk as And it investor, margins want we has different that transparent. I to I would business. and we our business to really what business. on get different doing industry make could want think a shareholders of is be can for think yet. growth, value in much we can what a do sure it. biotech it this to we -- we into for for

be can. we as transparent, we'll as Shannon, So

of announcement as about possibly financial we'll give it can. First you and much would as contracts, information be we indicator then

a just for companies, how strategic looking you in some your a I'm that or I'm just companies curious, the are with thinking. grows, would just guaranteed discussions wondering are lock in And those more any -- from of revenue? you're perspective, -- contract I'm from investments this you as funding pharmaceutical

$XX fine now. committed No, we show don't get and it. That's investments where million to business that right to good externally material to us this going a business, can there. from any it's a to internally need We've and is to we grow scale

to somebody invest give away to afraid the bit run It but based magnitude burden high, give had take to grows look there ourselves. come If will future on little what the and with on too capital the bringing we to depends already it set value. because we early now. us it and on the on coming in I'm at a wanting we'll we are. and up just don't we'll in people we've share return us, capital investment. if really business If how might and with on want investment. demand So decided the they're investment requirements low it, that's in outside enough, want may we way the be we've up But That do it ourselves optionality investment they're right

model trust sheep the because And else so is in this work the a one are drug to come and so the now. world have to amount the this And failure mice accelerate it cruelty physiologies. development and animals. excited way can go you to not reason obviously just humans. truly, not development really in for same chance drug is contracts on your human humans. high, test testing. models why physiologies on physiology is pigs nobody in see I'm that those rate scale to that's animal first not rate into to and reduce That's why the to the just and failure is of to it the in up an is forth as Shannon, animal These demonstrated advertisement drug right do statement a

it human this a works chance the for everybody. that cells, to can there's a in animal cycle, reduce with So we is demonstrate hit if testing, win shorten a rate and which lab the increase

and the shareholders talk that model that about it we is come contracts see value that to pharmaceutical the can we I that to in through So show talk creating. works. business want about

from Valero Alek from coming Loop is Capital. question Next

deeper macro actions impact actions what's guys on mentioned, you as view customer could as their manifest? you so are doing on if you is, the macro's behavior, question XXXX? concept your has My maybe and And provide increasing believe on how customers patient

all up not picked I'm I that sure question. Well,

little run slower. and me So by a it go again

You run it by me again.

got You sorry. so it. I'm

And part on So you the impact maybe patient was a the manifest? believe directions I in their you second could actions then how behavior as view enter XXXX? the as deeper question macro's if are provide customers said, viewing your on context macro what's customer increase of on and we

want off that? on you Do Yes. start to

Yes.

of I I are all, uncertainty. So XXXX. mean in our of how as I as the that nobody Healthcare your are -- customers what's Systems, as we to question going in knows reacting remarks, I'm think right, market. is And happen really is fully not first mean macroeconomic continuing in the But have to or you of a directions. procedures we're the perform But people supply down that recession-proof than we're recession-resistant outside best environment, markets. elective kind and within the are to think areas XD saw orthodontic I chain as it primary business the we more prepared impact segments impacts are And that kind very spending continuing of do experience of can. is consumer different the moving hatches. And our choppy dental batting addressing strongly in to some

nicely And of X% Our like seventh Solutions think kind of Jeff health some year-over-year. year-over-year But the quarter was up growth. pretty had care was that and in fill that then let just consecutive the to And business in our segment backdrop Industrial year-over-year lay blanks. growth. I of

reason flexibility top is broad growth, customers industry is which, chain. in to manufacturing more can can exotic in design allows comment, On of this So everything absolutely get their the And Michael industry still true. is said they bring for additive an and supply better parts you performance.

virtually this, this Eastern We've by -- stung pandemics, of uncertainty. we've extended chains Europe industry we're had all all we've and wars. these every them were Asia had had and stung have this So and by supply is things the us in headwinds. U.S., this have industry, leverage I economy, tailwind the and we will, well tailwind, the of the to in got strength you've dollar, the the where positioned chains extended all if are And for supply think you But customers headwinds these in into those clearly. of

are at saying, additive I to can home, should if look it I customers flexibility. our of factory, bring most can in because well, my I closer So have

of in do on types need make I make I parts I perform and my product. can I it better a if that that can do fly. multiple So can parts, to that,

manufacturing industry, an parts can leaders I introducing want new we've in with as of think to they materials I this for additive." been make the say, now and really "Well, production, So I make

helps pain periodically, around recessionary it And the the a exists. parts pandemic, still because is shutdowns, logistical everybody environment a getting chains, a China the us still China see world. shipped remembers of supply newspaper issues with you And down lot that and really shutting open in

-- economy the a up yes, capital more. believe particularly from and tailwind there's production. but to unique and loosens I continue industry additive macro a So and rebounds And that's going the to people our headwind accelerate, that's economy, is adopting of as spending there get

care idea industry health for chain it's Which most term, month, But the who wins, a industrial around I in months, chain and issues the real the opened of production part permanent So both opportunity these a knows? trade-off. in have term, those X the supply short X have supply in companies, no I it to believe that a this going is make world. of longer

question is from next Group. Greg Capital coming Palm Your Craig-Hallum from

or with Danny guess like on dental you're I are just implies and short. end the expecting sounds less Eggerichs guide more pretty Greg I'll project seeing I you on today. Obviously, the keep few across But QX November This guess challenged. revenue remains in to into months? markets, try maybe what here? broadly And QX. other October for it next line is more how through that

throw outbreak kind honestly, and there's new here, go. a can as unless don't expect between the mid-November. here today today, have of We year. steady and we're now It's expect range don't we pandemic, we risk and XX as in sit we -- out caveats, unless I of the the you range it we tighten a as war, unless That's bigger why the always changes a any happen, -- and don't sit fully major think and could our that we revenue down could there's that in we end we reflects expect revenue

unless in catastrophe we some changes. So the between any significant the now happens world, the and end don't of expect year,

risk reducing interest I are people and supply chain. their will XXXX think everybody -- in cautious, our level, from more customers in that or the also of continue. There's enhancing a on personal even -- the

we steady as unless the we now. be most of year, into that may kind year I now go think exciting but And right here. So disruption, we what not next as right as that's there's environment, sit you end the a and go major it's see

I it. just then slower growth, light in and about And investments. of just how you're thinking Got guess, demand that environment, managing balancing weaker

incremental industry to to to investments need Yes. Well, right order we today. got news that portfolio not technology be a needed of well, about of got are we why growth growth. incremental need We for the making. there's be broadest and to growth bank. purely point. We external want seeds There's watering got of in on and that's it million we've make the in a the it this to the the And We We've some you number top that investments very be because now. them. of that's fulfill into invested part that exciting want And Any And is is capability. live do don't We're an it. or focused tricky be minimum believe growth. in prudent to the at organic to industry. need investing clear. The do this we it, do bought good assets assets we really opportunistic to I to lot we run have $XXX in planting

to those do purchased being exciting to And our world and we bring year think strong happen at that return possible. ahead. see if brought because it's X will. we're we and things to we Again, a that focused to want $X in we spite In want years. long-term assuming cash what sheet, to stuck the that still own no prudent. don't kind a we that performance. company in very there guidance we billion spend no time. to on We there's think I balance company we same catastrophes So the having we That's -- or of what on position of think growth execute time, economies next That's normal in mighty we've see we're I if out growth, double-digit money. over world. predominantly. the need to over them just with then need in hung why a going of and oaks, not full where And we We're profitability can't the you seeds two, heavily into reason that's the

wrap and think the I that, out. close with up Kevin, And we'll Q&A

turn I'll further over doctor. for comments, or you to any closing

on been with for all you our and to forward have joining you pleasure results call. It's good we us day. you, Thanks, look a our Thank Great. Bye-bye. today. updating to talking next year-end and a

does That conclude you. Thank today's and teleconference webcast.

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