3D Systems Corporation Aktie

Greetings and welcome to the 3D Systems Third Quarter 2026 Earnings Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Monica Gould, Investor Relations. Monica, please go ahead.

Hello and welcome to 3D Systems' Third Quarter 2026 Earnings Conference Call. With me on today's call are Dr. Jeffrey Graves, President and CEO, and Phyllis Nordstrom, Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website.

The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures.

In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. With that, I'll turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.

Thank you, Monica, and good morning, everyone. Our third quarter showed clear continued progress. Revenue grew at double-digit rates year-over-year, excluding the impact of the enterprise software divestitures we completed in 2025. Gross margins expanded, operating expenses declined significantly, and we again delivered positive Adjusted EBITDA. Phyllis will walk through the financial details with you shortly. What's most encouraging to me is not simply the numbers, but the source of the growth: accelerating penetration of our 4 strategic markets.

These are medical technology, dental, aerospace and defense, and data center infrastructure. Customers in these markets are choosing us for the design flexibility additive manufacturing uniquely provides, together with the part quality, regulatory rigor, and very importantly, the production economics required for true manufacturing at scale. We're winning significant new business on the strength of these capabilities. At the same time, in an increasingly unpredictable global environment, customers in both the United States and Europe are placing greater value on localized supply chains. With established operations in both of these regions, we're well positioned to be a long-term partner wherever they choose to manufacture.

The past 3 years demanded hard priority decisions and disciplined execution. Through our prolonged industry downtrend, we reduced costs while protecting the technology and application investments that matter the most. We continue to do this. We concentrated those investments on markets where additive manufacturing creates meaningful, durable value—the 4 key markets we focus on today.

As the headwinds now begin to recede, the benefits are becoming clear. Revenue is growing, margins are expanding, profitability is strengthening, and most importantly, customer adoption is accelerating. I want to thank our employees around the world. Their commitment has made this progress possible.

Turning to slide 5, let me put the quarter in the context of those 4 key markets: medical technology, dental, aerospace and defense, and data center infrastructure, which includes, by the way, semiconductor equipment, advanced GPU cooling, and energy applications. In MedTech, demand for both standard and personalized orthopedic implants continues to grow, driving both parts revenue and printer sales. We're expanding production capacity to meet it. Titanium remains a central focus, and the quality and economics of our titanium printing are compelling.

An accelerating trend is medical-grade PEEK for personalized bone replacements, a material that combines biocompatibility, bone-like mechanical properties, and radiation transparency for X-rays and cancer treatments. We also continue to see steady growth in our personalized health solutions business, where we work directly with surgeons to plan procedures and deliver custom FDA-approved cutting guides and increasingly custom bone replacements. MedTech continues to deliver solid growth, and with new technologies and improving economics, we expect that to continue.

In dental, material revenue recovered in the third quarter as aligner volumes returned to their longer-term run rate, and adoption of our denture printing technology by labs across the United States and Europe continued to rise. We expect these trends to strengthen as 3D printing becomes the standard manufacturing process for dentures.

In aerospace and defense, revenue grew more than 50% in the quarter, excluding our Air Force development program, driven by printer sales into space launch systems and a range of other defense applications. This is a large and exciting market, although growing exposure to defense program timing may make quarterly results somewhat lumpier as we grow. On a rolling 12-month basis, however, we expect a clear upward trend. Near-term, rocket propulsion applications remain the most compelling opportunities.

In data center infrastructure, semiconductor and high-performance computing revenue grew significantly. Our metal printing technology is already producing components for semiconductor manufacturing equipment and advanced computing systems, and customers added printer capacity in the quarter to support that work. We expect this area to grow and become a material revenue stream for our industrial business over time.

These 4 markets are at the core of our growth strategy and will continue to receive the majority of our investments. Underlying technology also applies to select consumer-facing markets, allowing us to participate opportunistically in them.

Moving on to slide 6, looking ahead, we see 2 important complementary drivers of growth, both centered on the manufacture of metal parts. Our ability to address both of these opportunities with differentiated technologies and deep applications expertise gives us a unique position in the industry. The first of these is the continued expansion of direct metal printing for production applications. As the technology advances, customers can manufacture larger, more complex, and higher-value metal components at scale. For us, the cornerstone is titanium printing, leveraging our deep expertise in printing for the human body.

Those volumes are rising, and the rapid expansion of titanium applications in aerospace has opened entirely new markets. Our quality systems and infrastructure built for human applications are now a powerful advantage as we extend into the industrial markets. The second driver is the growing use of additive manufacturing within investment casting. Here, the opportunity is not to replace an established process, but to make it faster, more flexible, and capable of producing increasingly complex designs.

I'd like to cover each of these in greater detail: what's driving the market, how additive fits into the workflow, and why we believe we're well positioned to capture the growth. So moving on to slide 7.

Investment casting is essential for many high-performance metal components, particularly in aerospace and defense, from rocket propulsion systems and turbine blades to complex structural parts. Industry estimates place the global investment casting market at approximately $20 billion annually, with the U.S. representing a significant share and benefiting from strong aerospace and defense demand. For decades, the casting industry has relied on hard tooling to create molded polymer patterns. Hard tooling is expensive, slow to produce, and creates barriers to design changes once production begins.

Additive manufacturing changes that equation by producing casting patterns directly from digital designs. Customers can avoid tooling costs, dramatically reduce lead times, accelerate design iterations, and manufacture geometries that are difficult or impractical with conventional tools. The transformation of the commercial space industry illustrates what becomes possible when advances in propulsion, reusable launch systems, and modern manufacturing come together.

Over the past decade, launch cadence has increased dramatically, while the cost per kilogram of reaching low Earth orbit has fallen by more than an order of magnitude compared with earlier launch systems. Additive manufacturing has contributed to this progress by enabling complex propulsion components to be developed and produced faster, with fewer parts and greater design freedom. Importantly, when additive manufacturing is used to produce casting patterns, foundries can achieve these benefits while continuing to use the alloys, casting processes, and manufacturing expertise they already trust, minimizing the need to requalify finished components.

Now turning to slide 8. As shown on slide 8, we address the investment casting market with two core printing platforms. Our new SLA 825 Dual serves large-format casting applications, while the MJP 300W Plus provides high-resolution wax patterns for smaller precision industrial and aerospace castings. While our focus today is aerospace and defense, these systems also serve a number of other high-value applications, some of which are actually illustrated on the slide.

Turning to slide 9, let's look more closely at each platform, beginning with the SLA 825 Dual. This is our flagship large-format system with roots that reach back to the invention of 3D printing in the early 1980s. The SLA 825 Dual is designed for large-format cast components. Its scale, precision, speed, and ability to produce lightweight, stable patterns allow customers to create large single-piece designs, reducing assembly times and lead times.

Equally important is the print material and process that we use. Historically, as production volumes rise, the economics at some point favor a transition to injection molding with hard tooling. Through our QuickCast technology, lightweight patterns that are strong and leave virtually no residue during burnout can be printed using up to 50% less resin. That savings meaningfully changes the economics, raising the volume threshold at which hard tooling becomes attractive, thereby favoring 3D printing and the design flexibility that it enables. These factors are rapidly transforming the investment casting industry as new designs and improved manufacturing economics drive higher adoption rates.

Moving to slide 10, our newest MultiJet Printing system is highlighted. While the SLA 825 Dual is ideal for large components, the MJP 300W Plus brings high-resolution wax patterns to smaller precision investment castings, such as those used in smaller turbine engines that are rapidly expanding in use on drone aircraft, long-range munitions, and portable power systems. The high throughput these printers enable delivers excellent economics while retaining the precision and design flexibility inherent in 3D printing.

Because the wax patterns integrate directly into a customer's established lost-wax casting process, technology can be adopted without changing the metal alloys or manufacturing methods they've already qualified and trust. Together, the SLA and MJP platforms position us to participate broadly in the casting market with a strong emphasis on aerospace and defense applications that are growing so rapidly.

Turning to slide 11, let me next turn to direct metal printing, where we see some of our most significant long-term growth opportunities. Across aerospace and defense, energy, semiconductors, and healthcare, customers are moving rapidly to adopt and expand the use of direct metal printed parts. The reasons are straightforward. The technology can now reliably meet the highest standards of quality and performance while reaching the throughput rates required in production.

Parts that previously required multiple processing steps, each with their own scrap, rework, and precision assembly costs, can now often be produced in a single printing operation. Combined with the design flexibility of additive manufacturing, this is becoming a compelling value creator. And with AI dramatically accelerating design iterations, customers can adopt higher-performing, lower-cost designs much more quickly.

With advanced metal printing systems we're now fielding and our application engineering teams, we focused intensely for the last 3 years on aerospace and defense, and on the equipment manufacturers essential to semiconductor chip production. These markets, together with our traditional orthopedic applications, represent outstanding growth opportunities. The investments we've made are now producing clear results with increased shipments of large-frame metal printers and growing parts volume, both of which I'll touch on shortly.

Turning to slide 12. Our metals business has several important sources of differentiation built over many years. We've maintained a consistent, strong focus on metal printing technology, even through the recent industry recession. As a result, we now have systems very well suited to printing metals that are either highly reactive, such as titanium, or extremely difficult to process conventionally, such as nickel-based superalloys for flight systems, copper-nickel alloys for naval applications, and tungsten and other refractory metals that withstand extreme temperatures and stressful environments that are common in advanced energy systems.

This progress requires more than hardware. It required application specialists who developed the print processes needed for high-performance, high-reliability components. We do not simply sell equipment. Our application engineering group works closely with customers to develop and optimize applications and then help transition them into repeatable production workflows. The combination of platforms, materials, application expertise, and strategic partnerships with key customers gives us capabilities that are highly valued and very difficult to replicate, which positions us well as additive manufacturing moves toward scaled production.

Moving to slide 13 for a brief overview of 2 of our key metal platforms, the DMP 350 Triple and the DMP 500. The DMP Flex 350 Triple laser platform provides the productivity, process control, and material flexibility required for many of the most demanding production applications. The larger DMP 500 replicates this capability for larger parts. These systems are renowned for their ability to print the most difficult materials: lightweight, high-strength titanium alloys as well as extreme-performance nickel, copper, and refractory metal alloys. These materials are extremely difficult to process conventionally and therefore derive the highest value from additive manufacturing.

While the printing systems and application expertise provide clear value as customers qualify new components, the remaining barrier to large-scale adoption has been the availability of production parts to bridge the period from qualification to high-volume production. For targeted markets, we now offer this capability, allowing us to move customers smoothly from initial concept demonstration through process qualification and into low-volume production.

As volume demands then grow, we can provide printers and process knowledge for them to continue scaling at the pace they desire or with third-party manufacturers, while preserving the qualified processes and production parameters developed during the initial manufacturing phase. This approach has resonated very well with customers within aerospace and defense and AI infrastructure that value both our technology and our quality systems, which have deep roots in our medical device manufacturing experience.

Taken together, this approach reduces adoption barriers, generates attractive parts revenue, and creates future printer opportunities as customer demand expands. From a financial standpoint, the returns are sufficient to support the ongoing R&D required to maintain a leadership position in metal printing and to create growing value for our investors.

Nowhere is this approach more relevant than in defense. The defense industrial base faces well-documented constraints. As an example, lead times for critical naval castings often run from 12 to 24 months, and production capacity for key munitions, propulsion components, and others remain limited. High-end weapons, high-mix, low-volume production of complex alloy parts is precisely where additive manufacturing excels. It does not require new foundries or long-lead tooling. It can add capacity quickly and effectively.

This same model is highly relevant to semiconductor equipment manufacturing, where supply chain constraints, long qualification cycles, and limited production capacity create significant opportunities. These markets remain central to our long-term industrial growth strategy. In support of these efforts, we continue to work with the U.S. government, both on the development of new metal printing technology and on the application of metal additive manufacturing to next-generation energy and other national security applications.

As I wrap up the section on metals, I want to turn to slide 14. The growth I've just described is already translating into increased demand for production capacity. To expand our capacity for manufacturing metal parts, we recently celebrated the grand opening of our new facility in Littleton, Colorado. Building on the extensive fleet of metal and polymer systems already located there and the quality systems we have in place for our MedTech business, we cut the ribbon on an additional 50,000 square feet that will house printers and post-print processing equipment for metal parts in our key markets.

We'll add print capacity at the rate needed to support growing demand for industrial metal parts. By focusing this new facility on our industrial markets, we'll simultaneously free up capacity for our medical implants, where demand is also growing quickly. We were grateful to the key customers and the local, state, and federal representatives who joined us for this event. It was a terrific day.

Before turning the call over to Phyllis, I'd like to briefly comment on my planned transition. As announced in August, the independent directors of our Board continue to lead the search process for my successor. I remain fully committed to supporting this process while maintaining our operational momentum and positioning the company for long-term success. The strategy we have discussed today remains the right strategy for 3D Systems. We're committed to it, and I remain very optimistic about the company's future.

So moving to slide 24, operator, we're now ready for questions.

Thank you, Jeff, and good morning, everyone. I'll walk through our third quarter financial results, including the progress we made on profitability, and then discuss our recent capital structure actions and fourth quarter outlook.

Let's begin on slide 16. Before reviewing our financial results, I would like to remind you that we completed the divestiture of our legacy enterprise software businesses during 2025. Accordingly, the year-over-year comparisons I'll discuss today are presented on an adjusted basis, excluding the impact of those divestitures, to provide a consistent view of our operating performance across periods.

With that, let's turn to slide 17. Consolidated revenue increased 10.9% year-over-year to $99.3 million. All 4 strategic markets grew in the third quarter, collectively delivering nearly 30% year-over-year growth and nearly 25% growth year-to-date. This performance reflected positive momentum across our product portfolio. In aerospace and defense and data center infrastructure, we continue to see strong demand for our DMP 350 metal printer and our SLA 825 polymer printer. Additionally, parts manufacturing contributed meaningfully to revenue in MedTech and data center infrastructure in the quarter, while higher material sales benefited dental and aerospace and defense.

More broadly, printer hardware systems and parts manufacturing each grew more than 25% year-over-year, helping drive the quarter's double-digit revenue increase. Higher revenue also contributed to improved profitability. Adjusted EBITDA was positive $3.1 million, a significant improvement from the prior-year period, reflecting higher sales volume, favorable pricing, and continued operating discipline.

Moving to slide 18, I'll provide additional detail on our business segments. Healthcare Solutions revenue was $49 million for the third quarter, an increase of 14.4% from the prior-year period. Healthcare Solutions was driven by positive performance across both dental and MedTech. In dental, material sales increased at a strong double-digit rate compared to the prior-year period. MedTech benefited from continued demand for orthopedic implant applications, including spinal cages, knees, and shoulders. Our personalized healthcare solutions, or PHS business, also delivered growth, led by surgical planning solutions in cranial and trauma applications.

Moving to Industrial Solutions, revenue was $50.3 million, up 7.7% from the prior-year period. Within industrial, aerospace and defense, and data center infrastructure both delivered strong double-digit revenue growth. Year-to-date, aerospace and defense, our largest industrial market, increased more than 30% compared with the prior-year period. Revenue strength in these markets more than offset a double-digit decline in price-sensitive markets, including jewelry and certain areas of general manufacturing.

While we continue to selectively pursue opportunities in these areas, our investment priorities remain focused on areas where we have greater differentiation and see stronger potential for profitability. These results reinforce our strategy of focusing our resources on key markets where customers value precision, reliability, and qualified production outcomes. These demanding requirements align closely with our differentiated technology and applications expertise and create meaningful barriers to entry.

We are seeing these benefits in our results. Year-to-date, industrial revenue from our strategic markets grew nearly 50%, reflecting the progress we are making in shifting the business toward higher-value, more differentiated opportunities. We remain encouraged by the long-term potential in these markets while recognizing that the timing of customer investment and program-driven activity can vary from quarter to quarter.

Now turning to slide 19 to review gross margin. Third quarter non-GAAP gross margin was 35.5%, an increase of 420 basis points from the prior-year period. Higher printer parts manufacturing volumes improved cost absorption and operating leverage, while favorable product mix also contributed to higher gross profit. Importantly, the margin expansion reflects stronger operating performance as volumes increased across key areas of the business. The year-over-year comparison also benefited from the absence of certain non-recurring costs recorded in the prior period, including costs associated with the closure of a legacy facility and a one-time regenerative medicine accounting adjustment.

Turning now to slide 20, we remain disciplined in managing our cost structure while investing selectively in the areas that support our strategic priorities. Third quarter non-GAAP operating expenses were $36.1 million, a decrease of nearly 15% from the prior-year period. Year-to-date, non-GAAP operating expenses were $112 million, down $31 million or 22% compared to the prior-year period. Although operating expenses may fluctuate from quarter to quarter based on expense timing, we are seeing the benefits of the actions taken to reduce our operating costs and remain focused on maintaining that discipline as we grow the business.

Moving to slide 21. The combination of higher sales volumes, gross margin expansion, and our lower cost structure drove Adjusted EBITDA to $3.1 million, a $13.1 million improvement from the prior-year period. Year-to-date, Adjusted EBITDA was $4.4 million. This reflects the progress we have made through our prior cost reduction actions, together with higher sales and improved margins across products and markets.

Turning to earnings per share, third quarter non-GAAP diluted loss per share was $0.06, an improvement of $0.02 from the prior-year period. The difference between our GAAP and non-GAAP results reflected several key items, including costs related to a recent legal matter, a product-related asset impairment, and non-operating non-cash foreign currency impacts within APAC.

Now turning to slide 22 for a summary of our balance sheet. We ended the third quarter with $120.5 million in cash and investments, including $91.8 million of cash, cash equivalents and restricted cash, and $28.7 million of investments. At quarter end, we had $96 million of debt. Approximately $3.9 million will mature in the fourth quarter of 2026, with the remaining $92 million classified as long-term debt.

Since quarter end, we have taken 2 important steps to strengthen our balance sheet and enhance our capital structure, better positioning us to support the business and invest in opportunities that can drive profitable growth. First, we launched an at-the-market equity program. The ATM provides us with additional flexibility to access capital markets while maintaining discretion over the timing and execution of potential capital raises.

We also announced our plans to exchange our 2030 secured notes for new unsecured notes due in 2031, together with cash and common stock. Upon closing, we anticipate this new structure will extend our debt maturity, transition us to unsecured debt, and give us greater flexibility in managing liquidity and allocating capital. Together, we believe these actions will enhance our ability to invest in the areas where we see the greatest opportunity, including expanding our parts manufacturing capabilities, continuing to advance our metals portfolio, and accelerating focus on our strategic markets. Additional details on these capital structure initiatives are included in today's filings.

Moving now to slide 23. Turning to our fourth quarter outlook, we expect revenue between $100 million and $103 million, with Adjusted EBITDA between negative $2 million and breakeven. Following a strong third quarter, we expect fourth quarter revenue to remain on a positive trajectory. Our outlook reflects normal variability in customer order timing across several of our strategic markets, where purchasing decisions are often tied to customer programs, R&D priorities, and broader investment cycles. In addition, printer material orders have been spread more evenly throughout the year, resulting in less concentration at year-end than we have historically experienced.

We remain encouraged by the positive trends we see within our markets, while recognizing that the timing and pace of customer orders can vary between quarters. As we continue shifting the business toward these growing areas, we believe we are building a strong foundation for sustainable, profitable growth.

For the full year, we expect our results to reflect meaningful improvement in the underlying profitability of the company. Higher revenue, gross margin expansion, and a substantially lower cost structure have established a more efficient operating foundation. Looking ahead, improved operating performance and greater balance sheet flexibility positions us well to selectively invest in the areas that can support continued growth and improve profitability.

With that, I'll turn the call back to Jeff before we open the line for questions.

Thank you, Phyllis. To summarize, our focused strategy is producing results. Growth across our strategic markets is strong, operating margins are improving, and Adjusted EBITDA is strengthening. Most importantly, we're seeing increasing evidence that additive manufacturing is moving from prototyping into production across healthcare and industrial applications.

Looking ahead, we'll continue focusing our investments where our technology creates the greatest value, managing costs with discipline, and transitioning growth into stable profitability with sustainable cash generation and long-term shareholder value.

So moving to slide 24, operator, we're now ready for questions.

[Operator Instructions] Our first question comes from the line of Troy Jensen with Cantor Fitzgerald. Please proceed with your question.

Jeff, I missed the Littleton launch, but I want to dive more into the metals. Thank you for the good update this quarter. Looking at your portfolio, I think it's just 2 platforms right now. So I'd be curious if you have a roadmap for much larger formats, and where are you on supportless overhangs and number of lasers? And I guess, to throw 3 questions into 1, can you also talk about post-processing partners and selling more of a solution there?

Yes, both categories are great questions, Troy. On the additional printer platforms, absolutely. And the decision there is, Troy, I would tell you, they're becoming a little bit more application specific. If you look at it right now, we have the 350 and the 500. And we're in discussions with folks ranging from 600 to 800, obviously a meter size. So we're beyond concept design on all of those sizes, trying to understand what is the right value proposition, what's the best volume and pricing for the components that are going to be produced, and make sure we dial in the size for that.

I think the whole industry, Troy, is going to move from having generic sizes to having sizes that reflect the size of certain market applications because they're growing quickly enough now that you can design printers for specific ecosystems, if you will, like AI infrastructure. You've got the companies that design the chip-making equipment, if you will, the multi-hundred-million-dollar type machines. The market potential for making components in those machines alone would justify its own type of printer, its own size of printer, if you will. Aerospace and defense is the same way. It depends heavily on what size components you're going to make. If you're going to make missile parts that are over a meter in diameter and 2 meters high, for that, the other applications are smaller components that can obviously be done in a smaller footprint.

So it's a long-winded way of saying we do absolutely plan on launching additional platforms. They're all well beyond the concept phase and ready for detailed engineering and then move into manufacturing. We are waiting to see what the highest potential applications are, and those customer discussions are heavily underway right now, which is part of the reason, Troy, quite honestly, we wanted to make sure our balance sheet's in good shape because those all require investments.

Once customers see you're going to have the machines, they want you to be ready to make parts and then ultimately sell them machines. So we've tried to have a logical progression. We have a building now to make parts in that's expanded for industrial. We'll soon have not only the current machines, but larger machines to go in that building, and we'll sell them to people that want to buy parts at first at limited volumes and then ultimately buy those printers for their own application. Those discussions, Troy, are all moving in parallel, both in AI infrastructure, the chip-making equipment folks, and in defense and aerospace. Does that all make sense?

Yes, that's great to hear. Thank you. If I could throw in a follow-up just for Phyllis, I think I noticed a second 10% customer in the quarter. I'm just curious if you could touch on that.

Yes, so both of those customers, I think the last couple of quarters have risen to that level. They're both within our healthcare business, supporting two different sides of the healthcare business. Obviously, we don't talk about their names, but two very important customers for us in our key priority markets, and we continue to have great partnerships with both of them.

And Troy, with the kind of volume discussions that are underway right now for parts and then ultimate printer sales, I would expect the emergence on the industrial side of equivalent-size customers over time. So we clearly have 2 big ones on the healthcare side right now in different parts of healthcare, dental and orthopedics. On the industrial side, I'd be shocked if we didn't have 10% customers in both AI infrastructure and in aerospace and defense.

Good to hear. All right. Congrats. Good luck in Q4.

Thanks so much, Troy.

Thank you. Our next question comes from the line of Gregory Palm with Craig-Hallum. Please proceed with your question.

Maybe just to start, in light of the news on the debt exchange, on the surface it looks like the holders got a pretty lucrative deal, so maybe this is a good opportunity for you to sort of flesh out some of the details on why now and why does it make sense and all that.

So, Greg, do you ever know a case where debt holders don't get a lucrative deal? I think that's their business. But no, I have to compliment them, we have tremendous debt holders. They're great people. They have spent a lot of time understanding our business, and I could not ask for better partners from a debt standpoint. Now, they're in the business obviously to make money, and we are too. So it was a timely time to redo that structure, not only to push it out in time, but to make sure it was the most flexible debt structure we could have.

Because again, my biggest concern right now, Greg, I would tell you, is making sure we have the capital for investing in growth right now because the opportunities are going up by the day. And I think we have good line of sight on the healthcare side, so it's very predictable, both the denture growth and the orthopedic growth in our MedTech business. The potential volatility is on the industrial side. If you look at the progress that additive is making now in metals for both AI infrastructure and for aerospace and defense, it's enormous. And so those markets, when they hit, can be very large, and we want to have the capital available to us and flexible enough to invest for that growth because that's really where the payback comes from.

So yes, you always wish these deals were cheaper and better, but I think this was a very fair exchange. I appreciate our debt holders being willing to do it. The timing was driven by the opportunities we see coming over the horizon now and approaching us pretty quickly for CapEx investment. We've just got to be ready to do that. On the ATM side, that's why it's a flexible instrument. We don't have to use it, but if we have an opportunity and we need the investment, we can make it and capture that growth. Anything to add, Phyllis?

No, that's helpful. It sounds like you're sort of doing this on the offense. I think it'd be helpful for all of us to understand kind of how you see things playing out over the next 2 years because we haven't really been accustomed to growth here in the recent past. And I know you've returned to growth, but as you look ahead, given the capital structure, given all these opportunities that are out in front of you, the Littleton expansion, what's going on in metals, how do you see that translating into growth over the coming years?

So there's 2 factors that you've got to weigh against each other, and time will tell the timing on each one. But for our 4 key markets that we're in for growth, again, 2 in healthcare, 2 in industrial, I think the healthcare side is very solid double-digit growth going forward and fairly predictable. It may not be linear, but it's fairly predictable over the next 2 to 3 years.

The industrial side, I think, is going to come in waves because there's so many good applications that are opening up right now. And our customers are going through the procurement process with the federal government on everything from munitions to drones, to flying aircraft, manned aircraft, and on the rocketry side, enormous potential as the demand for space access explodes. So the opportunities are there. The hard thing to predict is timing. If you look at our aerospace and defense, I think the number we put out was 50% growth. Now that may not happen every quarter year-over-year, but it is clearly a market that's growing really fast.

And additive, not only for us, but for others in the metal business, additive is going to have a key role in that because of the economics. They're earning their way in right now. But the added design flexibility they have to change designs... It's an unfortunate thing that the world is so war-prone right now. There's many fights going on all over the place. If you look at the headlines, the weaponry used and the reconnaissance vehicles used, all of that has changed so much in the last couple of years. That wouldn't be nearly as easy without additive manufacturing.

And that's why I think we're positioned really well. So in that environment, you just want to have a fair bit of dry powder because when somebody comes along and says, "Hey, I need 100 of these," or "Hey, I want 100, then I want to buy 3 printers," you've got to have the cash to say, "Yes, I'll put in the capacity, and I'll buy the raw materials to build the printers for you," because when they need it, they need it. And if you're there, it's really sticky business. If you're not there and you missed the window, then you open it up for someone else to come in.

So I love our model right now. We invested through the hard years, especially in metals. I would tell you, I'm really proud of our metal technology. It's built off of titanium and into other materials. And our big SLA system for supporting castings of metals, those two are highly differentiated areas that I think are going to really drive our growth in those 2 industrial markets. So we get really solid growth, double-digit growth, I believe, on the healthcare side. And I think we'll have strong double-digit growth in those markets.

Now, one last comment, and I apologize for going on, but the only thing working against us right now, Greg, are the markets we're exposed to on the industrial side that are more consumer-facing, so things that we've traditionally been pretty big in, like jewelry and service bureaus and stuff. Those guys, #1, they're under pressure from the war in the Middle East, so that hurts that business. The inflationary pressure on consumers in the Western world, at least from buying jewelry, things like that, clearly there's a lot of problems in that industry. We have some exposure to that industry. So that exposure will go down quarter by quarter, year by year as the other industrial markets grow, but it's a headwind for us.

Our printing platforms apply equally well to those markets. So if they're opportunistically growing, it's great for us. If they're shrinking, it's a headwind, but it's now outweighed by the growth in the high-end industrial markets, defense, aerospace, those, because overall the company's growing. Look at the difference though between those markets. The consumer-facing ones are shrinking. The high-reliability ones are growing fast. The net result is modest growth for the whole company, but that will increase over time because the headwinds on the consumer side will go down as we get bigger in the other markets. And that's the way we look at it.

So I'm really pleased. Our cash burn is dramatically reducing as volumes come through and the margins come through on these high-end systems. We will flip to positive operating cash flow and then ultimately support our CapEx investments. We've got to bridge that period, make sure we've got the cash to invest for the growth. So that's what brought this whole timing together. I'm super excited about the opportunities. I feel much better now about our balance sheet that we are poised to exploit those opportunities as they open up ahead of us.

That covered it. And then I guess last one, and you kind of alluded to this, but you did announce this large-scale order for investment casting on the Q2 call. I was maybe hoping you can just update us on the progress there and maybe the broader opportunity with that customer and others.

Yes, Greg, that was in the rocketry space. That order is filled and flying. I mean, it was a tremendous opportunity, and that's more to my point about being able to exploit these opportunities. We were able to take an order, ship it within a series of a few months, get the units up running and operational, and today they're making parts that are flying into space. And that's the pace that industry is moving at, and I think we are very well positioned to continue supporting that.

We clearly have a lead in additive manufacturing for rocketry, for castings, and for direct metal printing, I'm very proud of our capability too. It's a smaller opportunity, and we're not participating heavily in that, but we are in the casting arena, which is the big opportunity. And the margin potential there is very nice with the consumables, as you know.

So the order's filled. They're very pleased with the product. I think we're the recognized leaders in the field. And the growth potential there, Greg, as you look at—these are publicly announced numbers—as you look at the planned cadence for rockets going into space, regardless of the customer that's sitting in there, you just look at the total global rocketry launch pace today, it is moving so quickly. So it will move from measured in months to weeks to days to hours over the next several years. And I think we're perfectly positioned for growth in that business.

Okay. All right. Thanks.

Thanks, Greg. Thank you.

[Operator Instructions] Our next question comes from the line of [ Patrick Walravens ] with Needham & Company. Please proceed with your question.

This is Patrick Muth on for Jim Ricchiuti over at Needham. You've typically seen a seasonal pickup in hardware sales in Q4, but it seems like that pattern has been a bit more variable over the last 2 years given macro conditions. Are you guys seeing early signs of normal seasonal strength playing out this year? And if so, which markets or product lines are leading that?

Yes, Patrick, it has been a consistent trend over many years, probably a little bit dampened last year because of the recession that our industry had. I would expect it will return, but I think over time, Patrick, what's going to happen is there's going to be more leveling of quarter-to-quarter performance. Companies will always have extra capital at the end of the year to spend. But as you look at the markets today, the consumer-facing markets are really tough. I don't think they're going to have an uptick in capital spending, from what I can tell.

The defense-related ones, aerospace, those guys, they've got a lot of capital to spend. Some of it will be seasonal, but remember a lot of those defense programs are tied to the federal budget, which is an October budget. So I think you'll see as aerospace and defense grows, you'll see that Q4 spike spreading out more. Maybe there'll be more into Q3. And with the softness in the consumer side of the business, I think that this year could be more muted. That's why we're being reasonably conservative about our growth projections for Q4. We'll be growing. I don't doubt that we'll be growing. But in terms of the magnitude of that, we just don't want to get out over our skis in predicting it to be more aggressive than what we can see. Hopefully we'll be surprised, but we'll see how that goes.

Okay, great. Thanks for the color on that. And then maybe quickly, how are you guys thinking about OpEx in Q4? You've noted that OpEx has stabilized over the past 2 quarters following the completion of your cost reduction initiatives, but should we expect that level of discipline to hold throughout the rest of Q4, or are there any seasonal factors or year-end investments that can move OpEx up or down from where it's been running recently?

Yes, that's a great question. I would say yes, at the end of the year and early beginning of the following year, we typically in Q4 and Q1 see slightly higher OpEx. I think overall you're going to see the discipline carry through. I think the first-half OpEx spend that we had is pretty indicative of what you'll see for the back half of the year. So that's how I would look at it for 2026 performance.

Patrick, I want to compliment Phyllis on this call. She's done a really nice job. We have a very lean infrastructure now. There will be fluctuations in cost just due to normal cycles of insurance payments and all the annual kind of stuff that rolls through, but we're built to run lean, and I think that'll continue. Obviously, with volumes, there will be some parts that will scale with that, but we were built to run lean, and we expect more operating leverage going forward.

Okay, great. Thank you guys so much.

Thanks, Patrick. Give Jim our best.

Thank you. We have now reached the end of our question and answer session. And with that, I would like to hand the call back over to Dr. Jeffrey Graves for any closing comments.

Great. Thank you all for joining us on our call today. We look forward to updating you on our progress following the close of the fourth quarter and the fiscal year. Have a wonderful holiday period. Thanks for the call.

This concludes today's conference. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

Greetings, and welcome to the 3D Systems Q2 2026 Earnings Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Vice President, Investor Relations, Monica Gould. Monica, please go ahead.

Hello, and welcome to 3D Systems Second Quarter 2026 Earnings Conference Call. With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Chief Financial Officer.

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

The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures.

With that, I'll turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.

Thank you, Monica, and good morning, everyone. Today's call is accompanied by 2 important announcements: our earnings results and the beginning of a leadership transition plan, both of which I will address this morning. I will begin by reviewing a few important highlights from our second quarter and first half as well as provide updates on several of our key market focus areas. After that, I'll address this morning's leadership announcement. I'll then turn the call over to Phyllis Nordstrom, our CFO, who will summarize the quarter's financial results and outlook, and we'll then open the call up for Q&A.

So with that, let's turn to Slide 5. A major theme clearly emerging this year is the return of capital spending by our customers in key markets. The timing is excellent given the intense focus we have placed on refreshing our product portfolio over the last 3 years. In the second quarter, printer sales increased by more than 45%, led by our best-selling DMP 350 metal printing system, our new SLA 825 flagship polymer platform and our multi-jet printing systems that form the cornerstone of our new denture product line. I'll comment on each of these in the context of their market drivers in a few moments.

From a business unit standpoint, our Healthcare business once again delivered solid growth and remained the company's largest segment. driven in particular by strong demand for new printing systems in both medtech and dental markets. Industrial business revenue was modestly lower year-over-year as older systems in our installed base are now being increasingly replaced by our new printer platforms. Despite this dynamic, our 2 key industrial focus markets, aerospace and defense and data center infrastructure, both delivered strong double-digit growth again this quarter. I'll share a few highlights on those markets momentarily.

And moving to Slide 6. Our newest generation of 3D printers offer levels of precision, economics and robustness that were only dreamed of a few years ago. These advancements are now proving essential to the widespread adoption of 3D printing in key production environments. One of the clearest trends is the accelerating use of 3D printing in metal component manufacturing. As we've discussed on previous calls, there are 2 equally important paths to producing metal parts, direct metal printing using laser powder bed fusion and metal castings that rely on 3D printed patterns as a critical step in the manufacturing process.

To address each path, we've launched 2 important systems: our DMP 350 triple laser direct metal printer and our SLA 825 dual laser polymer printing system designed for high-quality metal casting patterns. Sales of both platforms into our key markets have been very strong with second quarter growth of roughly 90% and 125%, respectively, year-over-year. Given this rapid rise in demand for 3D-printed metal parts, we're also significantly expanding our internal metal parts production capacity. This is an important element of our growth strategy, and I'll touch on it in more detail in a few moments.

The third breakthrough product we have brought into the market is the NextDent 300, purpose-built for the production of dentures. This platform is being very well received because of its precision and economics, enabling dental professionals to deliver a high-quality, durable product that improves the patient experience while increasing the productivity of their practices. These technologies will continue to enable our success in key markets for years to come.

Now on to Slide 7. As proud as I am of our refreshed product portfolio, it would mean very little if we did not target these systems effectively at markets moving most decisively toward the adoption of additive manufacturing technologies. Four markets fit this profile very clearly: med tech, dental, aerospace and defense and data center infrastructure. Two of these sit in our healthcare business and 2 in our industrial business. Customers in these markets derive exceptional value from 3D printing from enhanced design flexibility that improves both performance and cost to reduce supply chain risk in an increasingly volatile world. With limited time on each quarterly call, I'll focus on a few key use cases that I hope will capture the excitement and momentum these 4 markets provide.

Moving to Slide 8. I'll start with aerospace and defense with a specific focus this quarter on space applications. As everyone is aware, there's been a resurgence of interest in space access with applications ranging from new satellite constellations for communications to large-scale orbital data centers and even interplanetary travel. These visions are all enabled by the remarkable advancements achieved in reusable launch vehicles. These enormous rockets have already reduced the cost of access to space by an order of magnitude and the next generation of fully reusable vehicles is positioned to drive cost down even further, making these large-scale applications in space far more economically viable.

The impact of this breakthrough in rocketry is clearly visible in launch cadence. A rocket to space is now launched roughly every 2 to 2.5 days. In short, what used to be a yearly total for the entire global industry is now being achieved by a single company in a matter of weeks. This acceleration is expected to continue as reusability improves and costs decline further. A critical enabler of this progress has been the development of advanced rocket engines designed for high flight rates. These engines use a sophisticated combustion architecture that improves efficiency and durability while reducing maintenance between flights. Additive manufacturing has been integral to this evolution, both through direct metal printing of complex geometries and even more so through high-precision investment castings made from 3D printed patterns.

Our SLA 825 dual laser system launched late last year is specifically targeted at these advanced casting applications. As evidence of its early success, in the second quarter, we received one of the largest industrial printer orders in our company's history, driven by demand for casting patterns used in next-generation reusable rocket engines. Production of these engines is expected to grow by nearly an order of magnitude over the next decade as launch cadence continues to accelerate. These capabilities are helping make fully reusable heavy lift vehicles more practical and are contributing to the sharp reduction in the cost of access to space.

Moving to Slide 9. Let's turn to the healthcare business with an update on our dental market. Of the 4 dental markets, straighten, protect, repair and replace, 3D printing has already proven its value at scale in tooth straightening. Building on that foundation, the next large growth opportunity is converting the historically labor-intensive replace market for dentures into a fully digital 3D-printed monolithic denture product, an objective we have been intensely pursuing for the last 3 years. With more than 30 million denture wearers in the U.S. and nearly 4 million new dentures sold each year and comparable numbers in Europe, the end market opportunity is measured in the billions of dollars. Based on these estimates, the corresponding revenue potential for our company exceeds $150 million annually in the U.S. in printers and consumables sold to the dental labs that produce dentures with a similar exciting opportunity in Europe.

We launched our NextDent 300 denture printing system in late 2025, following FDA clearance and secured full EU MDR approval for sale into Europe in the second quarter of this year. Since that time, acceptance by dentists has been strong, driven by the beauty of the product, its durability and the comfort patients experience from the first fitting. These clinical benefits create demand while the efficiency of the digital production process and shorter lead times translate that demand from dental labs into revenue for 3D systems. The result has been a rapid rise in demand each quarter since launch, as shown in the production chart on Slide 9. While the market is highly fragmented with more than 8,000 labs across these regions, revenue is concentrated in the top 300 to 400 manufacturers. Based on our current outlook, we expect to have printers installed in more than 100 of these dental labs by year-end with a growing number of multiunit deployments to follow.

Importantly, once operational, even these initial printers alone will generate a recurring revenue stream of more than $2 million annually at highly accretive gross margins. While encouraging, these sales represent less than 2% penetration of the overall denture market in the U.S. and Europe, meaning the future growth potential is very strong. As an example of customer receptiveness to this technology, one of our earliest lab customers purchased their first printer late last year and is already installed and is running a sixth unit, tripling their historic capacity. We now see others following suit. For early adopters, this creates a clear path to market share gains through lower production costs and faster turnaround times. Looking ahead, with regulatory approvals expected in Mexico, South America and several Asian countries over the next year, combined with the strong acceptance rates we're seeing in the U.S. and Europe, we expect our denture-related revenue to become one of the largest and most profitable streams for the company in the years ahead.

Moving to Slide 10. We come to one of the most exciting growth opportunities in our industrial business, second only to aerospace and defense, data center infrastructure, a market we have been building for several years. This market spans several high-value applications, including semiconductor manufacturing equipment, advanced GPU cooling systems and emerging energy generation technologies, including both nuclear fission and fusion-related applications. We participate in these markets in 2 complementary ways by supplying precision metal printed parts directly to customers and by providing printers that enable them to manufacture these components themselves.

In the second quarter, our semiconductor and high-performance computing business grew almost 30% year-over-year, building on strong first half momentum. Growth was driven primarily by demand for metal printed parts, while the pipeline for new printer systems also remains healthy. This distinction is very important. While printer sales expand our installed base, the growing volume of parts we manufacture for these customers is a key lever for improving the gross margin profile of our metal printing business over time. As production volumes scale and we continue to optimize our manufacturing operations, we expect parts manufacturing to become an increasingly meaningful contributor to both revenue and profitability. Over time, many of these customers are also natural candidates to adopt our metal printing systems as their volumes increase.

Looking ahead, the unprecedented level of capital investment flowing into data center infrastructure continues to create strong demand for complex, high-performance metal components that are difficult or uneconomical to produce with traditional methods. Direct metal printing opens new design opportunities that will play an important role in future chip manufacturing capability and cost. We believe we are well positioned to capture a growing share of this market through both our parts manufacturing capabilities and our advanced printer platforms. From an energy perspective, we're already seeing demand related to large land-based turbine manufacturing, which benefits from both our polymer systems used in investment casting and our direct metal printing systems.

Given the significant electrical demands for data centers and the growing need for hyperscalers to secure their own power, there is increasing interest in metal 3D printing for next-generation nuclear applications, including small data center-focused designs as well as fusion-related components that require materials capable of withstanding extreme temperatures and radiation. These are areas where traditional manufacturing is often difficult and very costly.

Turning to Slide 11. I want to highlight the resources we're drawing upon to expand our energy-related activities. As many of you know, 3D Systems is headquartered in South Carolina, and we're fortunate to have one of the leading organizations in nuclear research as our neighbor, Savannah River National Laboratory, or SRNL, as it's known. For decades, SRNL has conducted critical research and development in support of nuclear energy, spanning nuclear materials and component processing to system applications relevant to both national security and commercial power generation.

I'm pleased to announce that we've executed a cooperative research and development agreement or CRADA as they're known, with SRNL. This partnership will enable our organizations to collaborate on the development of new materials for the extreme environments of nuclear fission and fusion reactors on component design and manufacturing and on the use of AI to optimize processing and performance. We believe direct metal 3D printing will play an essential role in developing and scaling these technologies.

Of particular note, this collaboration will leverage the Advanced Manufacturing Collaborative, a 63,000 square foot research and innovation center operated by SRNL on the University of South Carolina Aiken campus, which opened in 2025. As the only Department of Energy facility of its kind located on a university campus in South Carolina, the AMC is uniquely positioned to support both R&D and the training of engineers in advanced manufacturing processes, including metal 3D printing. In short, this partnership provides a clear pathway from collaborative research on nuclear energy applications to commercial scale industrial opportunities in the United States. We view it as an important element of our longer-term growth strategy in advanced energy markets.

Moving to Slide 12. I'd like to take a few minutes to describe how our direct metal printing technology is differentiated, an area that represents a major growth vector for the company. Our metal printing systems were originally developed to manufacture critical components from highly reactive materials used for medical applications. These systems were designed to meet the highest quality standards required by the FDA and European regulatory bodies. Central to that capability is exceptional environmental control during the printing process, which minimizes reaction with oxygen. As a result, our systems rank among the best in the world at printing titanium, a lightweight, strong, temperature-resistant and biocompatible material as well as cobalt chrome alloys used in joint replacement.

Today, we maintain a large active installed base of metal printers with leading medical device OEMs and their contract manufacturers, along with our own fleet of metal printers in the U.S. and Europe, producing parts daily for implantable applications. Building on this foundation, over the last several years, we've expanded our metal focus into aerospace and defense, data center infrastructure and advanced energy applications. As demand has grown for components made from nickel-based super alloys and refractory metals such as tungsten, molybdenum, niobium, materials used in extreme temperature and stress environments, we've engaged with leading OEMs on these applications. These high-performance materials are extremely difficult to fabricate with traditional methods. Direct metal printing not only enables conventional designs to be manufactured economically, but also opens the door to new configurations that can improve system performance and reduce cost.

The commercial results are now clear. Sales of our metal printers are growing at record rates. In fact, we sold more metal printers in the first half of this year than in all of 2025 and demand continues to rise. Looking ahead, with the support of the U.S. government, we're building on this strong foundation through the development of a large-scale metal printing system capable of manufacturing components over 1 meter in size at quality levels and production rates that we expect to lead the industry. Importantly, this system is being designed and will be manufactured entirely in the United States, including the critical application development work required for targeted markets.

Finally, let's turn to Slide 13, and I'll conclude my comments on the quarter with a brief summary of our metal parts expansion plans. Demand for direct metal printed parts is rising rapidly. This is not only driving sales of our printer systems, but increasingly, our customers are asking us to supply finished metal parts. These are typically very challenging production parts that combine extreme performance requirements with highly advanced materials and therefore, generally command a higher ASP. Given our application development work with OEMs and our ability to ultimately provide printers for their own use, this is a natural request by our customers. By fulfilling it, we can effectively bridge a customer from concept demonstration to full-scale production without the need to qualify new print processes or suppliers along the way. Depending on the demand profile, this bridge period can last for months to years.

In response to this growing demand, we're expanding our part production facilities in both Leuven, Belgium and Littleton, Colorado. Leuven primarily supports European customers, while Littleton, a suburb of Denver, focuses largely on U.S. customers and has the capability to support U.S. defense work. To put numbers to this expansion, today, we have roughly 220,000 square feet of space dedicated to metal printing, covering design, manufacture, application development and support. We're adding approximately 50,000 square feet of parts production capacity in Littleton, bringing our total to over 270,000 square feet with the grand opening of this expansion targeted for the fall.

From a printer standpoint, we currently have 77 metal printers in production and an additional 42 polymer printers used primarily in support of our medtech business. This expansion of both our U.S. and European metal parts production allows us to leverage the rigorous quality infrastructure that is essential to our medical business. The ability to print metal parts at the highest quality levels is at the heart of our growing metal part business. You'll hear more about this expansion in the months ahead.

Before I turn the call over to Phyllis, I want to briefly address the announcement we made this morning regarding my planned transition. Today's quarterly earnings call is roughly my 100th as a public company CEO. After more than 6 years leading 3D Systems, I've developed a deep appreciation for this company, for my colleagues, for our mission and for the customers that we serve. I'm also grateful for the unwavering support of our shareholders, particularly through the challenging industry conditions we've experienced over the last 2 years. While the succession process is just getting underway, in the months ahead, I'll be concluding my service as CEO. I remain fully committed to supporting a smooth transition and we'll stay closely engaged with the Board and leadership team during this period to ensure we stay on track with the positive momentum that we're experiencing.

The strategic priorities we've discussed today, focusing on our 4 key markets, expanding our metal printing and parts capabilities and driving profitable growth remain the right path forward for this company. I'm confident in the strong foundation we've now built and pleased with the progress we're making as we emerge from the industry recession. I believe there are bright days ahead.

And with that, I'll turn the call over to Phyllis for a more detailed review of our second quarter and first half financial results. Phyllis?

Thank you, Jeff, and good morning, everyone. Before I begin, Jeff, I want to thank you for your leadership over the past 6 years. Through a period of industry challenges and considerable change, the company made notable progress in strengthening its operational foundation and streamlining its cost structure while also refreshing the product portfolio and sharpening our focus on 4 important growth markets. These efforts have established a solid foundation, enabling us to build on our strategy moving forward. We are grateful for your continued service to the company during the transition. Thank you very much, Jeff.

With that, let's now turn to our financial presentation. Before beginning our review, I'd like to remind you that we completed the divestiture of our legacy software businesses during 2025. As such, the comparisons I will reference today are presented on an adjusted basis, excluding the impact of these divestitures to provide a more meaningful apples-to-apples view of our operating performance across periods.

With that, let's now begin on Slide 17. As highlighted earlier on the call, our second quarter results reflect continued progress against our strategic priorities. Before I walk through the financial results in more detail, let me start with some highlights from the quarter. Second quarter revenue increased year-over-year, driven by strong demand across our target markets and increasing sales of our new polymer and metal printer platforms. Adjusted EBITDA also improved notably from the prior year period as a result of higher revenue, disciplined cost management and ongoing operational efficiencies.

Turning to our second quarter revenue performance. Revenue was $94.6 million, an increase of 1.4% year-over-year. This increase was driven by continued momentum in hardware printer sales, which grew over 40% from the prior year period and more than 20% sequentially as demand across several of our printer platforms continued to strengthen. Performance across our key strategic markets remained strong in the quarter as medtech, aerospace and defense and data center infrastructure each delivered double-digit year-over-year growth.

Within the medtech and aerospace and defense markets, we had strong demand for our DMP 350 metal printers, along with healthy sales of our SLA 825 polymer printer. Both of these platforms meaningfully contributed to revenue performance during the quarter. In data center infrastructure, revenue grew more than 20% year-over-year as a result of increasing demand for metal parts used in critical airflow and thermal management components for semiconductor manufacturing equipment.

Moving now to Slide 18 to cover our business segments. Healthcare Solutions remained our largest segment in the quarter with revenue of $48.1 million, up 6.8% from the prior year period. Healthcare growth was driven by continued strength in our medtech market. Demand for metal printers used by OEMs to produce orthopedic medical implants meaningfully increased during the quarter and Personalized Healthcare Solutions, our PHS business, benefited from growth in surgical planning and trauma applications. Dental revenue also increased in the quarter with steady demand for dental material sales and continued adoption of our NextDent 300 denture printer across both the U.S. and Europe.

Turning to our Industrial segment. Revenue for the second quarter was $46.5 million, down 3.7% from the prior year period and up 2.4% sequentially. The decline primarily reflected revenue that did not carry forward following the closure of a noncore product offering last year as well as lower services revenue on our legacy printer installed base. As we continue to see momentum in sales of our updated printer platforms, we believe the ongoing refresh of our installed base should position us to drive future recurring products and services revenue. Looking across our industrial markets, aerospace and defense remained our largest market with space and defense applications driving sales in the quarter. We also saw healthy year-over-year growth in data center infrastructure, resulting from increased demand for parts manufacturing, along with solid growth in materials and services revenue within automotive and motorsports.

Turning to Slide 19 to review gross margin. Second quarter non-GAAP gross margin was 36.7%. Gross margin performance in the quarter reflected offsetting factors, including a higher mix of hardware printer sales, less favorable materials mix and the comparison to a large regenerative medicine milestone recognized in the prior year period. These headwinds were partially offset by the benefits of prior cost reduction actions and the recognition of $2.6 million in tariff refunds during the quarter. As we look to the second half of the year, we expect continued demand for printer hardware, which should drive a growing base for future materials and services revenue.

Turning to Slide 20. We continue to demonstrate strong cost management and operational efficiencies through the first half of 2026. In the second quarter, non-GAAP operating expenses were $39.5 million, a decrease of 11% from the prior year period. Sequentially, operating expenses increased by $2.9 million, primarily due to normal quarterly timing of expenses and an isolated bad debt reserve. Additionally, this quarter, we completed our 6-quarter cost reduction initiative, which included actions to optimize our facilities footprint, streamline our operating model and reduce ongoing operating costs.

These actions have now delivered a little more than $60 million of annualized savings, contributing meaningfully to the improvement in our profitability metrics. While this initiative has concluded, we remain focused on identifying additional opportunities to further optimize our operations. These actions have strengthened our cost structure and reinforce our disciplined approach to expense management, enabling us to selectively increase investments in R&D and capital to support our strategic priorities.

Now moving to Slide 21. Second quarter adjusted EBITDA was negative $800,000, an improvement of $3.9 million from the prior year period. This was primarily driven by the benefits of our previous cost reduction actions and the recovery of tariff refunds in the quarter and was partially offset by the isolated bad debt reserve recognized in the period. Turning to earnings per share. Second quarter non-GAAP EPS was negative $0.04, an improvement of $0.02 per share compared to the prior year period. While there is still work ahead, our consistent performance over the past several quarters demonstrates that the actions we have taken are delivering measurable financial improvement. We believe these efforts are strengthening the foundation of the business and positioning the company for long-term profitable growth.

Turning to Slide 22 for a summary of our balance sheet. During the second quarter, we completed an equity offering with net proceeds just over $53 million, strengthening our liquidity position and providing flexibility to support ongoing business operations and strategic investments in our priority growth markets. We believe target investments in talent, facilities expansion, printers and equipment and critical tools and technology will enhance our ability to capitalize on key markets that are accelerating the adoption of additive manufacturing.

Moving to our cash position for the quarter. We ended the second quarter with $129 million in cash, cash equivalents and restricted cash. Total debt outstanding was $96 million, with $3.9 million coming due in the fourth quarter of 2026 and the remaining $92 million maturing in 2030.

Now turning to Slide 23. As we conclude our detailed review of the second quarter, I'd like to briefly summarize our year-to-date performance through the first half of 2026. Looking at the first 6 months of the year provides a more comprehensive view of the performance of the business by helping to normalize the impact of typical quarter-to-quarter fluctuations related to the timing of customer purchases.

Turning to our first half results. Revenue increased 6% compared to the prior year period, driven by strong performance across our 4 priority markets, each of which delivered more than 20% growth year-over-year. Within our business segments, Healthcare grew 14%, while Industrial revenue declined 1% compared to the prior year period. Revenue growth in Healthcare was driven by strong demand across the medtech business, including growth in Personalized Health Solutions, higher DMP printer sales and continued strength in orthopedic parts demand, along with double-digit growth in our Dental business for the first half.

Industrial revenue performance was primarily impacted by softer demand in our consumer-facing and general manufacturing markets, the end markets most sensitive to pricing and macroeconomic conditions. These headwinds were mainly offset by strong growth in aerospace and defense and automotive during the first half of the year.

Moving to adjusted EBITDA. We generated positive adjusted EBITDA of $1.3 million in the first half of 2026. This performance reflects solid revenue growth in the half, meaningful benefits from our completed cost reduction actions and continued discipline in managing operating expenses. While there is still work to be done to carry forward this momentum, we believe these results demonstrate the progress we are making toward our long-term profitability objectives.

Turning to Slide 24 to conclude with our Q3 outlook. As we look to the third quarter, we remain encouraged by the positive trends we see across the business. We anticipate ongoing strength within our key markets, supported by growth in both printer hardware systems and parts sales. We also remain confident in the continuing adoption of our new denture platform and ongoing growth of our PHS business. Reflecting on our recent performance, ongoing operating discipline and expected product sales mix trend, we are providing the following outlook for the third quarter of 2026. Revenue in the range of $96 million to $99 million and adjusted EBITDA in the range of negative $3 million to negative $1 million.

In summary, we believe our results in the first half of the year, combined with the breadth of our metal and polymer portfolio to address the needs of our growth markets, position us well for the third quarter. This now concludes the review and discussion of our second quarter and first half financial results.

With that, I will now open the line for questions. Operator?

[Operator Instructions] Our first question today is coming from James Ricchiuti from Needham & Company.

First off, Jeff, congratulations, and I wish you the best.

Thank you, Jim, very much. I appreciate that coming from you. I really appreciate it.

And it looks like some nice progress in the quarter. And a couple of things. First off, how are you thinking about the NextDent deployment looking out to 2027, just based on what you're seeing in the market today?

Jim, I would tell you, I've been thrilled with the receptivity. We're starting -- we've been out there long enough now to really start getting some feedback from the end user, the patients, if you will, and the dentists. And I knew it was an attractive product and the performance was good. What I've been particularly pleased with, Jim, is the feedback we get on the comfort of fit the first time. So from a patient standpoint, they don't have to come back multiple times to have them adjusted, which you do with conventional dentures quite a lot.

And for the dentist, what that translates into is productivity. They can see more paying patients a day by doing that. So all the stars aligned for dentures right now. I am thrilled with the uptake. Now it's really about marketing to make sure more and more dental offices know of the availability of the product, and then our direct sales activity to dental labs. And there are a lot of them, Jim. And that's good and bad. I mean, it's nice to have a distributed customer base, so you don't have customer concentration. But for a smaller company like ours, we also have to have really good direct salespeople and channel partners to get out there and touch those labs. Even when you concentrate it down, there's about 8,000 total labs between the U.S. and Europe. You focus it down, there are about -- there are a few hundred that really drive a lot of revenue, but that's still a large number.

So what I was really pleased about, Jim, is that we've got -- we're now in about 100 of those labs with our first printers. Some of them are buying second and third printers. That's the start of really building momentum. So I think it will take a couple of years to really build. But if you look at -- we've already revised our Q3 and Q4 production plan up twice this year. And we're starting to be a little -- to be frankly, Jim, to be a little bit rate limited by electrical components that are going into data centers. So we're starting to -- we are starting to have to kind of buy ahead, make sure our supply chain is able to support our growth in the denture market. But I am really pleased. I see no impediments. It's all a matter now of marketing and sales and really getting the message out about it. And on the heels of the products we've already launched, we've got already a next-generation product in the pipeline we're working on to make it even faster and better.

So I'm thrilled. Just opening up the U.S. and Europe, Jim, could potentially bring a revenue stream that's several times the revenue stream we've had for teeth straightening for the aligner product. And the materials are regulated. They're FDA and EU MDR approved. So when you sell a printer, customers really are incentivized, if you will, by the regulatory environment to use your materials. So I am thrilled with all aspects of that, Jim, and the quality of what we're shipping is outstanding. I think by '27 and '28, you'll see this revenue stream growing significantly. We've got other exciting growth markets, so it's impossible to say what will be the single biggest in our company. But I would tell you, dental in total, I could see being that and dentures, I believe, in a couple of years could be the leader in that whole parade. So I'm really excited. '27 will be a good year. I think '28, '29, there's many good years to follow, Jim.

Got it. That's great color. Phyllis, maybe a question for you. I'm wondering how we should be thinking about gross margins and OpEx in the back half of the year. If you're able to give us some color on where you see margin trends.

Sure, Jim. So just looking at gross margins, Jeff mentioned in his script that we were going to be printer heavy in the back half of the year, particularly in Q4, that's always a very printer heavy quarter given CapEx spending that occurs near the end of a calendar fiscal year.

On the OpEx side, so I'd say margins will be, I'd say, slightly impacted by that printer mix. So I would sort of factor that in as you're looking forward in the second half. As it relates to OpEx, I think we've done a really good job over the first 2 quarters. I don't see that momentum changing. I think there's stability now in our OpEx performance. So looking in the back half of the year, I would expect what you saw in the first half of the year to be pretty similar to the back half.

Jim, before you drop off, I just want to personally thank you. You have followed this company. I've known you a long time, you followed this company extremely well and our entire industry. Really appreciate the hard work you've done and the research you put out on us and others in this industry. Thank you very, very much for the support. It's obviously a bit of an emotional day for me, and I just want to say thank you personally very much.

Our next question is coming from Greg Palm from Craig-Hallum. [Operator Instructions]

Yes. Thanks, Jeff. Well, I think you mentioned almost 100 quarterly calls. That's a pretty impressive feat that probably puts you in rare territory. So yes, I'd like to just offer my congratulations on a pretty amazing career as well.

Thank you, Greg. I really appreciate that.

So let's maybe start with that. The timing is a little bit interesting given, frankly, a lot of hard work over the last few years that's now, I think, put the company in a pretty interesting position to accelerate growth, profitability. So I guess the question is, why now? Why does the timing make sense? And just to be clear, has the search process already started? I just wonder how long this has been going on behind the scenes.

No, it's just really getting underway, Greg. So that's -- it will -- it could be a protracted period, Greg. I'm certainly not leaving right away. This could take many months to play out. So it's just getting underway. Yes, I will say in terms of timing, Greg, it's a great question. I -- in addition to being the CEO, I've been on public company boards for cumulatively for 35 years and through several -- many different boards and public company boards and CEO transitions are always tricky. That's always an art. Many companies wait until a company has a real problem. There's an issue, and they're forced to make changes and make them as quickly as they can.

I think 3D Systems now, we're in an enviable position. We have made it through a really difficult period in this industry, where we had to cut an enormous amount of cost out of the business while maintaining our R&D portfolio spend in order to be ready for this resurgence now out of the recession that I think you're going to see going forward. So the timing may look a little interesting from the outside, but I would tell you, we've got the company well positioned now. When you go to look for a CEO, you can say to somebody, look, the hard work is done of leaning out the company, getting the portfolio refreshed and focusing on the core markets, we're ready to rock. And we've got cash on the balance sheet to do it.

That's a really attractive, if you will, advertisement for a CEO to come in that has maybe a 10-year runway. I grew up at GE, where when you look for a CEO, it was a -- you wanted somebody with a decade runway, okay? I've been at this for some time. It's not like I want to go sit on a beach somewhere, but it is an elegant time to hand to somebody and say, you've got a run ahead of you now that's very positive. So I think it's a good time to do this type of thing. It may look a little different because it's not being driven by anything, but it is being driven more by an opportunity of the future to keep the momentum going in this company for an extended period of time because our products tend to last 10 years or more.

So the decisions that you make, they take several years to see them play out, and you want somebody in the chair that's going to see it through that whole process. So that's what I would say is the timing. It's a positive thing for the future. I'll be here until we get a very good person in this seat to carry the ball forward. I'm committed. I love what we do. I love this company, frankly, I love our people and particularly our customers and our mission. I will ensure that to the best of my ability that we get somebody that is credible worthy of this position going forward and can really carry the ball to new heights. So that's the simple kind of long-winded explanation, Greg, for you. Okay?

Yes. No, I appreciate the thoughts. I wanted to maybe shift gears and talk about some of the highlights. So you noted, I think what you said was a record industrial polymer printer order or at least I think, sort of strongest order activity since 2014. Can you quantify that or give us some sense of what that represents in terms of the number of shipments? And were some of those shipped? Are those from future delivery? I just wanted to be clear. I think you said that was casting for reusable rockets, but just wanted to confirm.

Yes. You certainly got the market right, Greg. And in terms of the exact details of the order, I don't want to get to an order level of detail, but I will tell you, it spans multiple quarters. It's a very large order for printers that are critical to the production of reusable rockets. And I just couldn't be happier about it. And when we accepted that order, I'd tell you, I was not only happy for the company, I was happy for our nation and the world. I think the revolution in space travel now is amazing. The cost they brought out of doing that is incredible. And 3D printing is really, really showing its potential to change the manufacturing environment for a company that will embrace it and use it.

And I love visiting that customer because I see every day how they're embracing new manufacturing technology, not only 3D printing, but other technologies that are really evolutions of our traditional industrial base and you say, "Wow, you guys are plowing new ground that is amazing to me." I look up in the sky at night and sometimes you can see the constellation of satellites that are up there, all based on their use of this kind of technology. So I can talk on and on about it. I love it. It spans multiple quarters. We did do some shipments in Q2. They wanted immediate delivery as much as we could. And we've got much more ahead of us.

So if we play it right, I mean, if we do a good job for them, it can be a revenue stream for many, many years to come. And because it's a polymer-based product, you'll have consumable access to material sales that carry a high gross margin. So love the application. It's a model for us to follow in all of our core growth markets now, okay? And that's why I think you'll see a nice resurgence of industrial 3D printing in key markets now, Greg.

Yes. Okay. That makes more sense because I was going to segue into that and ask about Q3 because I'm not sure when the last time you actually grew sequentially from Q2 to Q3, and it's mid-single digits at the midpoint. So it sounds like maybe it's a combination of this and some of the other stuff. But...

Well, the encouraging thing, Greg, is, yes, this order was a really nice cornerstone to build on. But we see strength. I'll ask Phyllis to comment on here in a second on -- we see strength. We keep talking about these 4 key growth markets, 2 in healthcare, 2 in industrial. They're all coming back, and they're doing well. Now there -- quarter-by-quarter, there'll still be noise, but they are all doing well. And look, we still have exposure to other markets and stuff. That's why the whole company is not growing at this rate yet. But if you look at our 4 core growth markets, and they're all firing now on all cylinders. And I think you'll see that going forward a lot. Now it starts with printer sales. So we're selling a lot of printers into the field. Material sales on the polymer side will follow and metal parts sales will follow on the metal side.

Phyllis, maybe you could comment for Greg on the core growth markets.

Yes. I think what I'm most excited about is not just being it concentrated in any one category. So Greg, we're seeing it again across printers, materials, parts, even within our healthcare services like PHS, there's an expectation that there is continued momentum from quarter-to-quarter. Oftentimes, we can be a little lumpy just depending on mix, but I think we've got a good broad sort of growth story coming into Q3, which is why we set the range where we did. So I'm very happy about that.

Yes. Okay. And I guess just last one in light of this positive commentary, I mean, across a whole bunch of end markets and product lines, and I'm cognizant of the fact that you only guide 1 quarter out, but I'm having a hard time not believing that this is kind of a growth company again, and you can maybe get back to double-digit growth. I mean, do you have line of sight in returning to double-digit growth, whether that's next year, '28?

Greg, yes, you can certainly extrapolate that direction. Given the last 2 years of severe headwinds from this recession, our industry has gone through, I hate to get it too far out in time because I just don't know what's going to go on in the world. But yes, I agree with you. That's the trend. We've taken the conservative approach now to just guide a quarter out, one foot after another. That's where we're going. We try to give you color on the core markets so that we don't just hang our hat on a onetime event, like one big order, try to give you color on the core markets. And our 4 key growth markets are, I believe, long-term growth markets. They're looking really solid for years to come, I believe.

So I'm optimistic. I'm positive about the trajectory. I don't want us to get out over our skis like so many times this industry has done. I just want to keep delivering on solid growth every quarter and improving profitability. So that's why we're guiding Q3 and not the full year or '27, okay?

[Operator Instructions] Our next question is coming from Kieran McCabe from Cantor.

I want to thank Jeff for his service to the company. I just start up on this industry a few months when you joined 3D Systems. So I enjoy learning the industry as you're CEO of the company. So I want to send my congratulations. My question...

Thank you, Kieran. Kieran, thank you very much for those kind comments. And please pass along my thanks to Troy as well, Troy Jensen, who has done an excellent job, your colleague there at Cantor has done an excellent job working not only with me and 3D Systems, but this entire industry particularly through this difficult period in the last couple of years, you guys have been there and done a terrific job, Kieran. So thank you.

Great. Well, I'll pass it on and we appreciate it. I guess my question is maybe kind of a follow-up to the previous one, but maybe can you -- I guess, in industrial, you said some of the end markets are price sensitive, were a little bit weaker and maybe you can provide a little bit color on like aligners sort of are you seeing better visibility in those markets that may be more cycle, more price sensitive? Maybe are you kind of seeing some light at the end of the tunnel in those kind of markets that are maybe more tied to the economy?

Yes, Kieran. So I would tell you, dental as a whole has been a good story. And historically, it's been highly tied to the aligner market. And we've written the ups and downs of that market. That market now seen from everything I can see publicly and stuff, it seems to have stabilized at more modest growth rates but continue to be a growth market. I think that's a great foundational business. I do not put that in the category of severe external competition and things. I think we've got a really deep relationship and foundation there.

When you think about other markets that remain weak for us, it's on the industrial side of the business, outside of -- it's easier to say what's outside of aerospace and defense and data center infrastructure. So the more consumer-facing markets that we have are like the service bureaus that support consumer-oriented business. The jewelry business happens to be not only a consumer-facing business, but also deeply embedded in the Middle East. So those kind of markets remain challenging. And that's why on the industrial side, you see that as pretty much an offset to the strength in the high-growth markets.

Over time, those high-growth markets are going to become dominant. Aerospace and defense is already our biggest industrial segment, and it's got great legs to it. Data center infrastructure, I think you're going to see the exact same thing. It's going to be a big market for us and a very good one. And then part making to support those markets is going to be very big. So over time, we'll get less exposed to consumer-facing markets. It is -- those are not markets that we're looking to make tremendous investments in for growth. They're certainly more competitive, particularly with Chinese products now. So we look more and more, they're good. They're foundational, but we're looking more and more to these high-growth markets for our future investment, Kieran, okay?

Right. And then you did have a very strong improvement in adjusted EBITDA and nearly breakeven. You're guiding to a small loss in the third quarter. And it seems like things are improving and have done $60 million in run rate cost reduction. I kind of -- I guess, maybe what do you kind of view as the levers to get you over that bump to positive EBITDA and kind of the timing? I know you're kind of conservative on the outlook, but you seem to be almost there and just kind of a nudge to get to the positive side.

It's like you're sitting at the table, you could smell dinner, but it's not quite on the table yet. So no, you're right. It's really tied -- no, it's really tied to continued volume growth, and we're getting that now in printers. It's great to have. We'll get volume efficiencies with that. We'll get gross margins up based on volume efficiencies there and stuff. But the real payoff is going to come on material pull-through when those -- on the polymer side, when those printers are installed and really running, we're going to get material pull-through that almost assuredly always follows. I mean in many cases, it's a regulated environment and it has to follow. In other cases, our materials are just very attractive and are strongly preferred for our printers. So you'll get material pull-through, which is important for our gross margins.

And on the metal side of things, we've got what's emerging is this, I think, a relatively unique model where we now bridge customers from initial application development through part production through printer sales. And it's the rise of part production as a part of that model that's going to also drive our gross margins. So the key to profitability for us is getting our gross margins up. The linkage there is to consumables on the polymer side and metal parts on the metal side. And I think that naturally follows from the growth we're seeing on printers right now. So I'm thrilled with the outlook. I think it's rock solid in a very volatile world. We're in the markets you'd like to be in for growth and a bit of insulation from some of the day-to-day volatility, if you will.

And my final question, kind of personal interest in it, but it's on the data center infrastructure, the slide you had powering the data center and nuclear, are you working a lot with like the hyperscalers and data centers for powering more behind the meter at the site? Or are you also working with large utilities and sort of the grid and generation off-site?

No. So there's -- we're working primarily with the traditional -- first of all, the traditional OEMs. You've got people like GE Vernova, Siemens, others that are in the business of manufacturing power generation equipment using traditional means like natural gas-fired gas turbines. Then you've got now these hyperscalers that have to basically bring their own energy, Kieran. I mean it's too much for the grid to handle easily, so they have to bring their own power. So I'm getting called into more and more meetings about things like small nuclear reactors for data centers.

And it's -- after not being in the nuclear business for a few decades as a country, I think you'll see a resurgence in nuclear power, not necessarily the big power plants owned by utilities as much. Those take a long time to build many, you measured it in decades sometimes. You'll see nimble smaller nuclear plants, I believe, powering big data centers. And we're in direct discussions right now with the OEMs, the hyperscalers that have to buy those products and then their key suppliers that are going to supply them, okay? They're not going to -- hyperscalers aren't going to manufacture the energy generally. They're going to rely on key suppliers to produce it. Those are the folks that we're getting down to now.

And Kieran, I'd just point out this Savannah River National Lab tie-in that we have now in South Carolina, they do marvelous work on nuclear power and fusion power, which is right on the cusp of being commercially viable. The materials they use are custom made for 3D printing, if you will. They are high-temperature difficult materials, very hard to manufacture through traditional means and they're very expensive parts. So they're ideal for 3D printing where you can bring the cost down and you can enhance the design capability of those components.

So that's what we're doing on the fundamental side, working with SRNL on -- they're leveraging their R&D. We're putting that technology into our printers now, and we're working with the hyperscalers to apply that technology. So that's where we're headed. I wanted to mention it because it's a future thing, but I think it's a really big deal, Kieran. So when you look out a few years for us, I think energy will warrant its own discussion. It will have its own revenue stream and profit stream from that, okay?

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

Kevin, you've been our operator on these calls, I think, since I arrived at this company over 6 years ago. You've done a marvelous job for us. And in my mind, you're not only a hero for seeing us through these calls, but you represent hundreds of people that help us do what we do every day and communicate with the outside world. So I want to thank you personally and for all the folks that largely go unsung in getting information out on the company and helping us deliver every day. So thank you, my friend, for helping us through these calls, and I wish you the very best as well.

So with that, let me wrap up the call. Again, I will be here for months to come yet, most probably. I may see you on another earnings call. Thank you all for tuning in today. Thank you for supporting our company, and we look forward to sharing our continuing results with you in the -- after the third quarter.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the 3D Systems First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Vice President, Investor Relations, Monica Gould.

Hello, and welcome to 3D Systems first quarter 2026 earnings conference call. With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Chief Financial Officer.

The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures.

And with that, I'd like to turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.

Thank you, Monica, and good morning, everyone. Building on the momentum we achieved in the fourth quarter of last year, I'm pleased to report a strong first quarter performance for 2026. I'll start today by reviewing a few highlights from our first quarter and provide some comments on overall market conditions. I'll then provide an update on our business strategy and key growth initiatives. After this, I'll turn things over to our CFO, Phyllis Nordstrom, to summarize the quarter's financials. When Phyllis concludes, we'll open up the call for Q&A.

So let's turn to Slide 5. The additive manufacturing industry is now beginning to emerge from a multiyear trough driven largely by global economic and geopolitical challenges that led customers to severely curtail capital spending. Our company's targeted investments in research and development, which we sustained in the face of intense cost pressures over this period, are now enabling us to introduce a completely refreshed portfolio of new products, spanning from direct metal printing systems to the 5 major polymer printing platforms. No company in our industry can match this range of technologies nor the product performance that these systems can deliver. While it's been a painful period, the results can now begin to be seen in our performance, and there's much more excitement to come.

I want to thank our dedicated employees for their hard work over the last few years in a highly cost-constrained environment. Speaking directly to my colleagues around the world, the success we're now seeing is a direct reflection of your talent and commitment to our company and to our customers.

To drive the highest value from R&D investments, we focus them intensely on our 3 key growth markets, Aerospace & Defense, Med Tech and Dental. These markets in particularly derive enormous value from 3D printing and are all expected to grow significantly in the years ahead. They are also the most challenging markets to penetrate, given the extreme requirements for quality, precision, reproducibility and regulatory oversight. Fortunately, we have a rich history and strong foundation in each of these markets, which provides the critical infrastructure and expertise needed for success.

On Slide 6, our Q1 highlights tell a story. Solid growth in printer sales, increased momentum in parts sales, strong growth in healthcare material sales. These results reflect the impact of our technology and market focus. From a product standpoint, we saw double-digit year-over-year growth in printer and material sales as well as parts manufacturing, particularly in metals. We also saw balanced growth across both of our business units, healthcare and Industrial.

Turning to Slide 7. In Med Tech, we continue to build on our market-leading position. During the first quarter, we saw strong double-digit year-over-year growth in several key areas, including medical parts manufacturing, printer sales and surgical planning services. Medical parts manufacturing demand was driven specifically by titanium spinal implants and both titanium and cobalt chrome joint implants used in replacement procedures.

Printer revenue was led by sales of our DMP 350 metal printer to medical device customers who are now entering a refresh and expansion cycle. This growth was partially offset by lower-than-expected sales to one key customer due to a temporary disruption in their internal operations, which was resolved by the end of the quarter. We're already seeing a recovery in their demand and expect a solid rebound in the second quarter.

We also saw increased requirements for print know-how transfer by a large global health care customer as they prepare to purchase printers and transition to high-volume parts manufacturing, likely to complete in 2027. This example illustrates the 3-phase growth model that we discussed on our Q4 call, namely process development, low to intermediate volume part production and ultimately full system sales.

As highlighted on Slide 8, momentum in Dental is accelerating across the full spectrum of our solutions, which we classify as straighten, repair, replace and protect. We saw strong year-over-year double-digit growth in Dental material sales driven by both an increase in demand for aligners as well as in prosthetic materials for tooth repair, which we sell under our Vertex brand.

Our Vertex Dental materials have been a mainstay in Europe for many years, and we were pleased to gain U.S. regulatory approval late last year following a protracted trademark negotiation. This doubled the size of the market for Vertex and is now beginning to be reflected in our dental revenue performance.

Now turning to Slide 9. As you know, we've been very excited about our new product launch in the denture market. 2 quarters into the sale of these marvelous platforms, I can tell you that the reception by our dental lab customers and dentists alike has been terrific. As an example, yesterday, we announced a major commercial milestone reflecting the enthusiasm of our denture technology is generating.

In this case, ROE Dental Laboratory, one of the nation's premier full-service digital dental labs, became the first major U.S. dental lab to deploy an extensive fleet of our NextDent 300 Jetted Denture printing systems across their multiple sites Following our U.S. launch in the fall of 2025, ROE has expanded their purchases, effectively tripling their manufacturing capacity for high-precision multi-material monolithic dentures.

As BJ Kowalski, CEO of ROE Dental Labs said, the NextDent 300 has exceeded our expectations in production efficiency, dentist acceptance and patient satisfaction. Adding more systems at this early stage allows us to triple output while maintaining the highest standards of quality and consistency.

From a market standpoint, following our U.S. regulatory approval last year, we recently received the equivalent EU Phase IIa approval for our denture printing solution, 2 months ahead of schedule. With both U.S. and EU regulatory approvals now in place, we've significantly expanded our addressable market to more than 60 million edentulous patients, roughly 1/3 of the global market. This represents a multibillion-dollar opportunity as Dental Labs around the world transition from traditional labor-intensive methods to scalable high-margin digital workflows. We expect to announce regulatory approvals in additional countries as they are gained throughout the year.

Looking ahead for our denture platform, we've built a solid order backlog moving into our second quarter and are raising our internal production targets for the second half of the year. The NextDent 300 has been the most successful new product launch since my arrival at 3D Systems 5 years ago, with very few installation issues, rapid integration in lab workflows and acceptance by dentists often upon initial exposure to the product.

From a patient standpoint, these printed dentures look wonderful, fit perfectly and can be worn with confidence due to their toughness and wear resistance, a winning equation for the lab, the dentist and the patient. I fully expect our portfolio of dental solutions to be a major contributor to our revenue and profitability for many years to come.

Moving to Slide 10. Before shifting our focus to Aerospace & Defense markets in detail, I want to first make clear the way in which 3D printing is used for these critical applications. What many investors do not appreciate is that our company is unique in offering 2 complementary approaches to the manufacture of high-reliability metal components, both of which are seeing a rapid rise in demand.

The first is direct metal printing, often called DMP for short of components, which uses high-powered lasers to directly center metal powder under a tightly controlled environment to form fully dense parts. In this process, it's essential that there is no binder or other contaminant in the system as these will degrade the performance of the part. This is the way the very highest performing metal parts are manufactured and it will remain so. Those that do not have this technology will simply not be able to participate in this high-value portion of the market.

The second path for making metal parts is through the use of high-precision SLA printed patterns for investment casting of specialty metals. This approach gives customers the flexibility on part size, material and design at a cost and performance level that's virtually impossible to achieve with any other approach. Many complex aerospace systems such as those used in rocket and aircraft propulsion systems increasingly make use of both methods for the manufacture of critical flight components. Without them, we could not be routinely discussing space exploration, hypersonic flight or many other advanced systems that are an integral part of our country's future.

For the last several years, we've targeted leadership in both of these metal technologies, the culmination of which has been our DMP 350 triple laser system and the SLA 825 polymer platform that we've released over the last several months. And that are rapidly gaining traction with key customers around the world.

As you can see on Slide 11, our metal printer portfolio now includes the DMP Flex 200, the DMP 350 Triple, the DMP 500 and our next-generation large-format metal printer system, the development of which has been supported in large part by the U.S. government. This $28 million development program is designed to ensure leadership for U.S. in metal printing for the future. These systems deliver significant performance benefits and lay the foundation for further expansion in capacity, productivity and material flexibility as the 3D printed metal market continues to expand.

And finally, turning to Slide 12. Aerospace & Defense, which we discussed extensively in our last earnings call, remains the largest and one of the fastest-growing segments within our Industrial Solutions business. Examples of the projects driving growth include titanium antenna brackets for satellite systems that are 25% lighter and can be produced in half the time compared with traditional methods as well as the mass production of turbine blades for jet engines and industrial turbines that improve performance and efficiencies in both flight systems and ground-based energy applications.

Given our unmatched breadth of defense-focused printing technology, we continue to expect over 20% growth in our Aero & Defense markets this year, equating to approximately $35 million in revenue in 2026. This growth will be largely driven by space, naval and aero propulsion applications as well as the expanding use of sophisticated flight and weapon systems in unmanned aerial vehicles and precision munitions.

In response to the rapidly growing demand for Aerospace & Defense components, we're investing in a significant expansion to our Littleton, Colorado facility, adding 80,000 square feet of manufacturing space for the production of metal components. The grand opening of our new facility is on track for late summer, and we're excited about these new growth opportunities that this new facility opens for our company.

Looking ahead on Slide 13. We have the largest installed base of production printing systems in the industry, a refreshed portfolio on both polymers and metals, new printer systems that are gaining traction with customers and rapidly expanding opportunities in high-growth, high-reliability markets. Acceptance of additive manufacturing is accelerating, and we're well positioned to capitalize on it. While the world situation never fails to present new challenges, I am more excited than ever about the future of our company.

With that overview, I'll turn to Slide 14 and hand the call over to Phyllis to walk through the financial results for Q1 in detail. Phyllis?

Thank you, Jeff, and good morning, everyone. Before I begin reviewing our first quarter results, I'd like to remind you that we completed the divestiture of the Geomagic, 3DXpert and Oqton legacy software businesses in 2025. Throughout today's call, I will reference comparisons on an adjusted basis, excluding these divestitures to provide a clear apples-to-apples comparison of our performance across periods.

Turning to our results for the first quarter, beginning on Slide 15. First quarter consolidated revenue was $95.5 million, an increase of 11% year-over-year, demonstrating a solid return to revenue growth in the quarter. This meaningful increase was driven across our key growth markets, Med Tech, Dental and Aerospace & Defense, each achieving meaningful double-digit growth in the quarter.

Performance within Aerospace & Defense and Med Tech was supported by higher metal printer sales, along with solid growth across other product categories. In Dental, higher sales were driven by strong material sales within both the aligner and repair markets. In reviewing our core products, printers, materials and parts manufacturing each delivered solid double-digit growth compared to the prior year period.

Moving to Slide 16. Within our segments, Industrial Solutions revenue totaled $45.4 million, an increase of 1.6% year-over-year. Industrial Solutions saw continued strength in our largest end market, Aerospace & Defense, which delivered over 20% year-over-year growth. This was complemented by a return to growth in the automotive and semiconductor markets and partially offset by lower demand in certain regional areas due to the conflict in the Middle East, primarily impacting our jewelry business.

Healthcare Solutions revenue of $50.1 million grew 21% year-over-year, surpassing Industrial Solutions as the larger segment this quarter. Growth was driven by strong performance across both Dental and Med Tech. Healthcare revenue included an increase in both printer and material sales and strong demand in health care parts, particularly for orthopedic medical implants.

Now moving to Slide 17. In the first quarter, non-GAAP gross margin was 36.1%, up 6 percentage points from the prior year period when adjusting for software divestitures. Non-GAAP gross margin performance reflects improved manufacturing absorption from higher production and sales volume in the quarter, along with a favorable consumables mix, improved printer margins and the benefits of our cost reduction initiatives.

Moving to Slide 18. We continue to demonstrate strong cost management discipline as we move into 2026. Two key areas were the primary contributors to our operating expense performance in the first quarter. First, we continue to realize incremental savings from the cost reduction initiatives executed throughout last year. Through the end of the first quarter, we've delivered more than $55 million in annualized cost savings. We expect to complete our defined cost reduction and efficiency programs by the end of the second quarter, marking the conclusion of a 6-quarter focused effort to optimize our cost structure.

Additionally, the company has made significant investments in R&D over the past several years to both refresh our product portfolio and advance our core technologies across both polymers and metals. The elevated R&D investments as a percentage of sales have led to the successful launch of our new jewelry printer, the MJP 300 Plus, our new denture printer and materials with the NextDent 300 and meaningful upgrades to our mid- and large frame DMP metal printer portfolio. As these launches are now substantially complete, we expect to transition to a more balanced level of R&D spending with a focus on targeted enhancements to further advance our portfolio innovation.

Reflecting on these actions, first quarter non-GAAP operating expenses were $36.6 million, down 35% or $20.1 million from the prior year period when adjusting for the software divestitures. On a sequential basis, non-GAAP operating expenses declined 11% or $4.3 million. Looking ahead, we expect operating expenses to remain largely stable through the remainder of the year with normal seasonal fluctuations across quarters.

Now turning to Slide 19 to finalize the P&L. First quarter adjusted EBITDA was positive $2.1 million. This represents an improvement of $26 million year-over-year or $28.2 million when adjusted for divestitures. This increase was driven by higher sales volumes, favorable product mix and the timing of seasonal costs, with the majority of improvement coming from operating expense reductions from cost savings initiatives.

There were several offsetting factors that were reflected in overall adjusted EBITDA performance, including supply chain disruptions related to the conflict impacting the Middle East, an isolated business disruption affecting a key customer that has since been resolved and modest FX and tariff impacts to our bottom line. In aggregate, these headwinds and tailwinds were largely offsetting, resulting in minimal impact to our adjusted EBITDA for the quarter.

Moving to earnings per share. First quarter non-GAAP loss per share was $0.01, an improvement from a loss of $0.21 in the prior year period.

Now turning to Slide 20 for a review of the balance sheet. We ended the quarter with $86.5 million in total cash, including $85.1 million in cash and cash equivalents and $1.4 million in restricted cash. We have $3.9 million of debt coming due in the fourth quarter of 2026, with the remaining $92 million maturing in 2030.

As we move into the second quarter, our focus is on maintaining a disciplined and efficient cost structure while remaining flexible to support strategic investments within the business and key growth markets. This positions us well to capitalize on accelerating growth opportunities ahead.

Lastly, I'll turn to Slide 21 for an update on the company's Q2 outlook. Following a strong first quarter, we expect demand to remain healthy through the balance of the year with customary seasonality in the second quarter. In line with these trends and given our current macroeconomic environment, we are taking a measured approach to our outlook and guiding second quarter revenue to a range of $93 million to $95 million with an adjusted EBITDA loss in the range of $2 million to $4 million.

With the completion of the review of our first quarter financials, I will now turn the call back over to Jeff for closing remarks.

Thank you, Phyllis. In summary, we had a strong first quarter performance across our key growth markets, driven by our leading direct metal printing capabilities across printer sales, parts production and materials. Additionally, we had one of our most successful new product launches with our NextDent Jetted Denture Solution, which is now being rolled out in Europe 2 months ahead of plan. Our manufacturing capacity expansion in Littleton remains on track and will help support the growth of our Aerospace & Defense business.

We expect to build on our top-line growth momentum in key markets over the coming quarters while maintaining strong cost discipline to achieve breakeven adjusted EBITDA or better for the full year. We thank you for your time and continued support of 3D Systems.

We'll now open the line for questions. Operator?

[Operator Instructions] Our first question today is coming from Greg Palm from Craig-Hallum.

Jeff, you -- I don't want to put words in your mouth, but you struck me as at least your tone was a little bit more positive than it has been in recent years. So I'm just kind of curious, as you're sitting there looking at your own portfolio and what you've done and just some of the industry green shoots that are emerging, what kind of strikes you as most important as kind of the lever to reaccelerate the growth profile here?

Yes, Greg. So in terms of tone, you're absolutely correct. It was a bet a few years back that we should hang on to our R&D spend and refresh our portfolio. And it turned out it was a good bet. We refreshed our entire product line, in time for 3D printing to start regaining traction in the market. So I'm really pleased about that.

Now look, it is -- you described it right. It's green shoots. It's early days, but what gives me comfort is it's broad. It's broad across the markets that are really embracing 3D printing. And for us, I think for everyone, Dental is a big driver. It's going custom, it's going 3D printing. Med Tech is really expanding nicely, especially in the orthopedic space. And then you've got Aerospace & Defense, which is really benefits from 3D printing.

So I look at that and say it spans Healthcare and Industrial, primarily on the high reliability markets. 3D printing is really starting to take off. And look, the world is still a scary place. There's a lot of stuff going on, but I feel better than I felt, Greg, in 2 or 3 years, and it's just in time for our new products to be hitting the market. So I like that. We need to see continued traction. I think health care, really much more predictable because a lot of these are non-optional or high-impact procedures that impact the quality of people's lives.

So I wasn't surprised to see that become our largest segment in the quarter. I think it will be neck and neck now with Industrial because of Aerospace & Defense. Aerospace & Defense broadly across many markets in that sector is really, really now understanding the benefits of 3D printing. They can make parts out of very exotic materials that have been difficult to fabricate, very expensive parts to fabricate. They can print them at high efficiency. The technology has gotten to the point where it's not only easy to use, but it's cost effective, and they're really figuring out how to do it.

Now the leaders in that space figured it out a few years back, okay? So you look at like Rocketry, you look at rockets that are going in the space, those guys are heavy users of this now. They were right at the leading edge. Now it's catching on across all of Aerospace & Defense, funded by big budgets as well as that sector expands.

So yes, I feel good about things for the first time in a few years. It is wonderful to see new products hitting the market right at the right moment. And I pray that the world continues to be at least stable, hopefully improve. And with that, in any scenario, our Healthcare business should continue to grow nicely and our industrial business should continue to gain strength. So I feel good about that across the board, Greg.

Okay. And just in terms of the Q2 revenue outlook specifically, normal seasonal trends would suggest a sequential increase. It sounds like you actually had one of your bigger customers that was maybe a little bit of a shortfall in Q1. So I guess you should presumably see improvement. Anything that was, I don't know, pulled forward or anything to note? Or should we maybe focus more on your comment of taking a measured approach to the guide at this point?

No, it's the latter. Yes. We didn't pull things forward, Greg. There were no pull forwards. Now there was an uptick in demand in certain sectors in Q1 above what we had forecast. And that's really what drove the overachievement on revenue versus guidance because it was just a legitimate uptick in demand. There were no pull forward. So the seasonality aspect in our business as dental particularly gets bigger and orthopedics what you find is people don't start procedures in the spring because generally, they're planning to go on vacation and nobody -- when they get out of school or they're anticipating family vacations, you see a distinct drop-off in anything that's optional.

So whether it's straightening your teeth or it's having an optional surgery, you tend to live with it because like orthopedic surgeries, people are often laid up for months, and they don't want to do that in a nice weather period. So Q2 is becoming a little bit more of a seasonal dip for us because of the size of our Healthcare business. Other than that, nothing unexpected.

We're also, I would tell you, Greg, trying to not get out over our skis in terms of excitement. We just want to stay measured because, again, the world is just so darn volatile. This issue in the Middle East it's probably continues to drive increased defense and aerospace spending, but it's made logistics a nightmare in many cases, just getting printers and parts and materials to customers. Certainly, if those customers are in the Middle East, which we have some customers there, it's been a real problem. But it screwed up logistics around the world in part. So we just want to be cautious and say, look, the world is getting better. Let's not get out in front of ourselves and let's keep the guidance realistic.

And last one, clearly, the bright spot was getting back to EBITDA profitability in the quarter. So congrats on that. Phyllis, I think what I heard was stable OpEx, which presumably means maybe OpEx is in towards this level that you reported in Q1, which was quite a bit lower sequentially and at least what I think we thought it would be. But it kind of implies EBITDA kind of breakeven-ish based on the Q2 guide for the second half -- for the first half. I'm having a hard time thinking or figuring out how you won't be nicely EBITDA positive for the year just given normal seasonality trends in the second half. So kind of the same question as the revenue, but was there anything that maybe positively impacted Q1 because obviously, that came in quite a bit better than expectations.

Yes. I mean for us, Greg, I think what you really have to focus on is product mix too in the quarter. I did mention in the script about our expenses being a little bit lower than you'll typically see as you look out the rest of the year. We had some timing just of expenses that were in our favor for the quarter. It wasn't significant, but it was noteworthy, and we took that into effect as we go into Q2 and Q3.

On the mix side, again, just looking at consumables, we have heavy printer sales that are coming in. Jeff talked about the increase in our metal printer sales. Those mixes will really drive sort of margin and overall performance. So you'll see us pretty consistent throughout the year as we aim towards that goal of adjusted EBITDA breakeven, but look at, again, more stabilization of that OpEx and product mix quarter-over-quarter will really drive that end result.

[Operator Instruction] Our next question is coming from Troy Jensen from Cantor Fitzgerald.

Sorry, I jumped in a little late. Maybe so I apologize if I'm asking stuff that's been addressed here. Jeff, for you, can you just give me an update on the Healthcare business, personalized health care versus dental on the year-over-year growth, was that primarily personalized health care? Or is it big dental kind of driving that also?

So Troy, I'll let Phyllis put some numbers to it, but I can say both were strong. The personalized health care, and that really, we call it now Med Tech. It encompasses all of the surgical planning work we do with surgeons, surgical guide production and implants, okay, implants into the body. So spinal and other bone or orthopedic implants. It covers all of that. That was a good business this quarter.

There was disruption in one customer, which cost us a little bit. And we expect that to kind of rebound now that that's behind them. But it was a very good business. It continues to be, I expect a double-digit grower year-on-year organically. And what's driving that, Troy, is we've gotten the response time to surgical requests down now to the point and the cost down to the point where we can turn things around fast enough to participate in trauma. So folks that are in car accidents and other emergent issues, we can respond to these folks within a matter of a couple of days now and really come to their age. So that's expanding the market for us.

The other real growth driver in that in the Med Tech part of it, Troy, is oncology. So the treatment of bone cancer. So planning these complex surgeries to remove the tumor and now to replace the bone using our printed PEEK implants, that's going to be a real growth aspect of our business. So on the Med Tech side of health care, nice consistent double-digit grower. We continue to invest nicely for new applications there. We have some great new technology for bone implants that I think is really taking root fast.

On the Dental side, we've got our traditional markets in alignment and repair. And on the repair side of that, the great news for us late last year is we got trademark approval finally in the United States, that Vertex material has been approved in Europe for a long, long time, and the trademark has been fine. In the U.S., there was a trademark dispute. So it wasn't a technical issue. It was a trademark issue. We got that resolved in the fourth quarter, and now you see that material stream coming online for repairing teeth. And then, of course, the straightening of teeth is always a good business.

Last year was pretty tough for them in the first half. So we see a nice stabilization of that business and a return to some modest growth. So I feel good about all parts of our Healthcare business. And it's because of the regulatory nature, Troy, as you know, it's hard to get in. And once you're in, it's -- there's a limited number of people that can fulfill those requests. So we love that business, and we continue to invest in it.

Great. And then just another question here, specific to like metal additive parts. Where are you guys kind of expanding in that category? I believe you're looking to expand the footprint in Littleton or something, but touch on it if you could.

Yes. Right, Troy. We're adding another 80,000 square feet on out there to a building adjacent to the one we have. The building we have today has been largely -- historically, it was health care, including health care parts manufacturing. As over time, there's been pressure to add industrial manufacturing there, too. And so we said we kind of hit that pivot point and said, let's get the building next door, and we'll turn it into an industrial part making facility. It leverages the quality systems we already have in health care, and it's coming along nicely. So we'll have a grand opening of that building anticipated at the end of July, beginning of August, sometime late summer. We'll have a grand opening of the building. That will be dedicated to part manufacturing and what we expect right now is that will be aerospace.

The parts we're focused on, Troy, are these very high-end difficult materials that our printers are really good for. So they're titanium, zirconium, nickel-based materials and copper nickel alloys for the Navy. So the nickel-based alloys are primarily for propulsion, so for aircraft and rocket propulsion, the coppers for the Navy. And you've got titanium and other lightweight materials for satellites and other flight systems for drones and things. So there's more demand than we can handle in our current facility. We're expanding that, and we'll be adding printers to that facility over time as we move through the second half of the year.

[Operator Instructions] We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments to Dr. Jeff Graves.

Thanks, Kevin. And listen, thanks, everyone, for joining the call today. I appreciate the time, and we'll look very forward to updating you again next quarter. Have a great day and a great start to the summer.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the 3D Systems Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Monica Gould, Vice President, Investor Relations. Please go ahead, Monica.

Hello, and welcome to 3D Systems Fourth Quarter and Full Year 2025 Earnings Conference Call. With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Interim CFO. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone, who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements, as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures.

In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable periods of 2024.

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

Thank you, Monica, and good morning, everyone.

Having executed well on both our 2025 savings initiatives and new product launches, I'm pleased to report a stronger finish to 2025 with momentum continuing to build as we move into '26. I'll start today by reviewing a few highlights from our fourth quarter and provide some comments on overall market conditions as we enter the new year. I'll then focus very specifically on our strategy and key growth initiatives, the early stages of which you can see reflected even now in our operating trends. After this, I'll turn things over to our Interim CFO, Phyllis Nordstrom, to provide details on the quarter's financials. When Phyllis concludes, we'll open the call for Q&A. So let's turn to Slide 5. Despite global economic and geopolitical challenges that have translated to restraint in CapEx spending by our customers for some time now, we've been able to balance the need for significant cost reduction with the requirement for continuity in key R&D programs that are essential to long-term growth and value creation for our customers and shareholders alike.

I'm extremely proud of our employees and their ability to execute this balance day-to-day over the last two years, and I'm pleased to see the results of their hard work and creativity now entering the market. These efforts are allowing us to refresh our installed base of printers, which is the largest and most diverse in the world and launch exciting new products and applications that provide extraordinary value to our customers. Importantly, during a period in our industry where cost savings are imperative, we've reduced overall operating costs while selectively doubling down on those industries where additive manufacturing is poised to reshape the market and where we have a unique competitive advantage. I'll provide specific details on these markets in a few moments, and Phyllis will summarize the impact of both our cost actions and growth initiatives on our financial performance and trends.

Slide 6. I'll start by reviewing our highlights from the fourth quarter. Consistent with past years, we had seasonally strong Q4 in our historic markets. But what was unusual this year was the additional top line benefit specifically related to our three key growth initiatives. Given their importance, I'll cover these key growth areas in some detail in a few moments. Overall, revenue increased 16% sequentially, above our guidance of 8% to 10% growth. From a product standpoint, these results reflect the strengthening of both our printer and material sales, driven by key new product launches over the last year in both our industrial and health care businesses. Now let me give you a little more insight into what drove this strength, beginning with changes in our historic markets. Within our Industrial Solutions business, we saw sequential double-digit growth in several of our more traditional consumer-oriented end markets, including both automotive and jewelry manufacturing.

In automotive, this growth reflected the impact of our newest SLA printing platform, specifically our dual laser SLA 750 that we launched just over a year ago, which is the most precise and productive industrial scale SLA printer in the market today. It's being adopted preferentially in both motorsports and in consumer automotive OEMs, delivering significant improvements in productivity in their development labs. The strong sequential growth in jewelry was driven by the recent launch of our new wax printer, the MJP 300W Plus, which delivers significantly improved accuracy and surface finish and wax patterns that are central to the casting process. These factors are very important to manufacturers as they provide dramatic reductions in gold loss during final polishing of the product, particularly at a time when gold prices are at record levels.

An interesting note with regard to gold jewelry is the rate at which the entire industry is now adopting additive manufacturing, which allows for virtually limitless customization of designs without increasing the cost of the product or in some cases, even reducing it. Anticipating these inflection points in an industry is essential in order to capitalize on the rapid CapEx investments that follow, disproportionately benefiting those companies that are well positioned to meet this rise in demand from its outset. With our industry-leading application engineering team, we're experts at doing just this. Within our Healthcare Solutions business, we saw sequential growth in dental material sales driven largely by stabilization of demand for aligners. These are also beginning to see -- we are also beginning to see sales from the commercial release of our new NextDent Jetted Denture platform, which is being very well received in the market, and I'll offer some more comments in a moment.

Looking beyond these trends in our traditional markets, I'd like to now spend a few minutes on what I believe are the three most exciting growth markets that are opening before us. These are aerospace and defense, personalized health services and dental. Applications within these markets greatly benefit from additive manufacturing in that their performance is greatly enhanced by mass customization design. And with the latest evolution of our printing technologies, the manufacturing cost has declined to a point to support rapid adoption. Turning then to Slide 7. One of our key growth markets is aerospace and defense, which has become the largest and one of the fastest-growing segments within our Industrial Solutions business. On a full year basis, our aerospace and defense revenue, which includes production printing systems, consumable materials and custom metal parts, achieved 16% growth, and we continue to expect over 20% growth for 2026.

So what technologies are required to deliver sustainable revenue growth in aerospace and defense? Well, the fastest-growing and highest value portion of this market, which is where we're focused, comes from the manufacturer of metal parts. These parts can be made in one of two ways, either by metal casting or by direct metal printing. We've invested heavily in both of these technologies, and they are playing a vital role in the growth we're now experiencing in this market. In the casting process, our market-leading photopolymer printing technology is used to manufacture complex cores and shells for high-performance cast metal components, while our direct metal printing systems, which are known for outstanding environmental control and precision, are used to manufacture high-value metal parts directly from powder using materials such as titanium and nickel-based superalloys.

Indeed, an increasing range of advanced aerospace and defense applications can only be made by direct metal printing due to the complexity of the designs needed for today's applications. This is why we have maintained our R&D investments in this area even through these challenging periods. Without this suite of technologies, a company simply cannot participate in the high value end of the market. From a customer standpoint, in aerospace and defense, we define three phases of growth. First is the development of a specific process to manufacture a customer's key components. Second is an offer of metal part production at a low to intermediate volume that allows the customer to directly scale from the initial test and manufacture the system to full-scale production. And then the third, the sale of the complete printing systems that allow a customer to further scale manufacturing to high volumes. This approach to aerospace and defense, which has been under intense development for the last three years, is proving to be very attractive to our customers and is a key in sustaining the growth we're now enjoying.

From a geographic standpoint, we're taking this approach through our operations in Littleton, Colorado for the U.S. market; in Leuven, Belgium for our European market and through our Saudi Arabian joint venture, NAMI for our growing demand in the Middle East. Each of these has very similar capabilities to serve their regional customer base. And as a final comment, this three-phase customer approach is the same one we've used very successfully in our Healthcare business for many years, which has given us the operating model and the quality infrastructure to make it work at scale in this adjacent market. So because aerospace and defense is a very broad market, many folks are asking what are the key focal areas for us. The ones we're gaining the most traction and look to be the most sustainable in the years ahead include satellites, naval and marine applications, aircraft and rockets and flight systems.

More specifically, in satellite systems, our technology is being used to provide antenna arrays, waveguides and filters as well as numerous lightweight structural brackets. This is a rapidly expanding market as satellite communication is proving essential in many areas of the world. For naval applications, submarines are often leading the way as our printing technology provides high reliability hydraulic fittings, piping and valves as well as advanced turbomachinery and pumps, all manufactured from very special materials that are resistant to the extreme environments that these boats encounter. For aircraft and drone applications, our printing systems are most often used for critical aerodynamic parts such as winglets, bearings and ducts, structural elements and airframes, rotor blades and stabilizers and air propulsion components, including complex turbine components.

In addition to the printing systems themselves, recurring revenue in aerospace and defense comes from material pull-through, which, in this case, includes both polymer resins used in casting workflows as well as finished parts consumed by customers at the early stages of full-scale manufacturing. Casting processes in aerospace and defense have been critical for decades, but they've assumed a new and even higher level of importance in the most advanced rocket and aero propulsion systems being introduced today. Interestingly, this acceleration has been driven not only by enhanced component performance requirements, but also in simplifying complex assemblies to reduce part count and therefore, the cost of new propulsion systems. As a leader in this field, we benefited from this expansion in 2025 and expect this momentum to continue, particularly as the number of rocket launches increase substantially in the years ahead.

Slide 8. As I mentioned earlier, expansion in naval and marine applications is very exciting and is in part why we're expanding our manufacturing efforts tied to design and qualification of naval components for our U.S. customers. For example, in shipbuilding, we're collaborating with Huntington Ingalls to enable the first-to-market direct printed copper nickel alloy solutions for naval components, dramatically shortening production times often from months to days. In addition to providing design flexibility for enhanced performance. These materials are critical to performance in seawater environments, but like so many specialized alloys, they're very difficult to manufacture using traditional methods. Direct metal printing from powder solves this problem and provides system designers flexibility in next-generation componentry. This early success has resulted in increased volumes within our parts manufacturing as we design and qualify parts as well as the transfer of that technology to Tier 1 suppliers to the U.S. Navy through the sale of our metal printing systems.

Slide 9. As we look toward the future, we also expect recent provisions in the National Defense Authorization Act, or NDAA, which restrict foreign sourced 3D printing systems for the Department of Defense programs will create additional tailwinds for our business as demand shifts to domestic suppliers. Having positioned ourselves well through sustained investments in metal-related technologies for aerospace and defense markets over the last several years, we remain confident in our ability to deliver on our 20% growth target in this segment in 2026. Strategically, we have very little exposure to lower-end applications such as jigs and fixtures used in factories, an area we believe will be under increased pricing pressure from non-U.S. suppliers in the years ahead. Instead, our growth will be led by expansion in the use of 3D printing for metal components, manufactured by either casting where printer sales and material consumption drives revenue and profit margins or by direct metal printing, where parts sales followed by printer sales and service provide similar financial benefits.

In terms of key applications, they will lie within satellite, naval and aero propulsion systems as well as the expanding use of sophisticated flight and weapon systems in unmanned aerial vehicles or drones as they're commonly referred to. To address our anticipated growth in aerospace and defense, we recently announced a major expansion of our U.S. facility in Littleton, Colorado. We're adding up to 80,000 square feet to increase our application development, process qualification, validation and production scale manufacturing capacity. This positions us to capitalize on the growing demand for secure U.S.-based manufacturing for national security and space applications and effectively leverages our quality and manufacturing infrastructure that also support our Healthcare business. Moving next to Slide 10. Our second key focal area is personalized health services, or PHS, which realized double-digit growth once again in 2025, becoming our largest Healthcare segment, and we continue to build on our market-leading position with new personalized applications, materials and printing technologies.

In 2025, we reached new levels of care by providing more than 18,000 personalized planning cases, boosting our total to over 400,000 patients. We provided over 260,000 customized patient implants, all of which required regulatory approval in the meeting of strict quality standards. And we raised our total FDA and CE Mark device count to over 100. We're very proud of this business and the impact it has on patients' quality of life each day. Our sustained growth in this segment is driven by our innovation and cost-effective personalization in craniomaxillofacial or CMF procedures through our partnership with Stryker. Typical applications here include jaw and cranial procedures as well as reconstruction in the head and neck regions utilizing our FDA-cleared titanium metal implants as well as our medical-grade PEEK material and implants. The latter innovation has opened an entire new set of applications due to PEEK's unique capability to offer bone-like properties, excellent biocompatibility and transparency to radiation, such as those needed for X-rays and for oncology treatment protocols.

Our ability to work directly with surgeons on all stages of treatment from planning and modeling of a surgical procedure to providing custom surgical guides to improve precision and speed of an operation to printing customized replacement segments of bone for long-term use in a patient's body has built an exceptional foundation for our expanding orthopedic business. We've evolved not only our printing technologies, but also our operational capabilities needed to expand our markets, which now include not only preplanned surgical procedures, but also rapid response trauma cases and highly complex oncology cases involving bone cancer and at times, a related need to treat the surrounding tissue.

To keep our focus on the leading edge of patient treatment, we've developed unique point-of-care embedded collaboration teams at numerous medical research hospitals in the U.S. and Europe. These teams are bringing our most advanced medical technology directly to surgeons for their integration in the most challenging new cases. This gives us direct insight into the value that our metal and polymer printing solutions can bring to future patient treatment and services that are needed to guide our future investments. We expect our strong pipeline of new applications and shortened response times to fuel continued growth in PHS in 2026 and beyond. As one example, we believe that our recently received FDA clearance for our VSP solutions for skeletally mature adolescents will help accelerate adoption in what was previously a case-by-case compassionate use protocol.

So now turning to Slide 11. In our dental business, we began shipments of our commercial NextDent jetted denture platform solution for the U.S. market in the fourth quarter. Our unique multi-material monolithic denture is not only a beautiful product, distinctive in its durability and wear resistant but is increasingly praised by patients for its comfort and fit, which not only improves the patient's quality of life, but also reduces chair time for the dentists and often a need for repeated visits to adjust the fit over time. Expanding upon our initial offering and just in February, we announced a broadened range of available gum shades to more accurately match the diversity of patients' natural gum colors in the U.S. population. Looking to the addressable market. In addition to FDA approval in the United States, we now have clearance in New Zealand, Colombia and Chile.

We expect to achieve full European clearance this summer with additional South American markets coming online in the second half of the year and most of our target markets in Asia next year. Many investors have asked about the size of this dental opportunity. So let me take a moment to speak to it. In the United States, approximately 32 million people wear dentures. That's about 10% of our population and roughly 12% get new dentures each year. Globally, more than 180 million people wear dentures and approximately 13.7 million denture sets are produced each year to address this market. Due to aging populations worldwide, this number is growing rapidly. The vast majority of these dentures are custom-made with slow analog processes and in large part by hand craftsmanship. With the advent of digital workflows and with our new jetting technology and ability to make beautiful, comfortable, custom single-piece dentures in a cost-effective manner close to the dentists and their patients, we believe over time, we'll convert the large majority of this manufacturing to 3D printing, just as it has with clear aligners today.

We also believe that this will result in annual recurring revenue opportunity of over $400 million globally for simply materials alone. From a competitive standpoint, our solution delivers an exceptional ROI for our customers, enabling faster production, a reduction in manual labor on the order of 40% to 70% and one-day turnaround compared to five days for traditional methods. This results in a faster, more cost-effective and highly scalable alternative to traditional denture fabrication, enabling both an outstanding patient experience and a strong return on investment for dental labs that provide these products to dental professionals each day. While still in its earliest stage, given the pace of adoption that's possible in the dental industry, I predict this will become one of the largest revenue streams in our company in the years ahead. It's simply a matter of adoption rate at this point. Moving to the next slide, Slide 12. In closing, the stabilization of our core markets, combined with our cost reduction efforts is enabling us to invest in new growth opportunities that are now opening before us, leaving us more excited about the year ahead than we have been in some time.

Moving to Slide 13. Before I turn it over to Phyllis for a recap of our financials, I want to take a moment to acknowledge our Founder and Chief Technology Officer, Chuck Hull, who was recently named by Forbes Magazine as one of America's top 250 greatest innovators. Chuck has been honored by countries and organizations around the world for his past accomplishments, and yet I believe his greatest achievements are still yet to come as he works closely with the visionary Dr. Martine Rothblatt of United Therapeutics to develop the world's first 3D-printed human lung. Two weeks ago, I had the honor of accompanying Chuck to the Lake Nona Impact Forum where he and Martine addressed a standing room-only crowd on the lung program. I, along with the rest of the audience, stood in admiration of the progress that's been made and the impact on the world that is anticipated when this is ultimately successful. On behalf of all of my colleagues at 3D Systems and those millions of people around the world that have been and will be impacted by Chuck's innovations, I want to say a heartfelt thank you to him for his dedication and his contributions to all mankind.

I look forward to the documentary on Chuck's life that will be selectively aired this summer and extended audiences everywhere in early 2027. So with that, I'll now turn it over to Phyllis.

Thank you, Jeff, and good morning, everyone. Before I begin reviewing our fourth quarter results, I'd like to remind you that we completed the divestiture of our Geomagic software business on April 1, 2025. Throughout today's call, I will reference both reported results and adjustment comparisons that exclude Geomagic to provide a clear apples-to-apples comparison of our performance across periods. Additionally, in the fourth quarter of 2024, we recorded a onetime regenerative medicine accounting adjustment that reduced revenue by $8.7 million due to a change in estimate. I will reference this accounting adjustment when discussing certain prior year comparisons. I would like to start off by highlighting a few of our key accomplishments in 2025. We have been strongly focused on driving expense reductions while also supporting new product launches, strengthening our balance sheet by reducing debt and improving operational excellence and cost discipline. These actions have enhanced the strength of our core business while allowing us to invest in new growth opportunities that are now beginning to deliver results.

I will begin with revenue for the quarter, turning to Slide 15. Fourth quarter consolidated revenue was $106.3 million, an increase of 3% year-over-year, adjusting for Geomagic. When further adjusting for the regenerative medicine adjustment impacting prior year quarter, consolidated revenue declined 5%. The year-over-year decrease was primarily driven by softness in industrial printer and materials demand, which was partially offset by double-digit growth across our priority markets, including both PHS and aerospace and defense. Now to Slide 16. As we manage revenue headwinds in the first three quarters of the year, we saw solid strengthening in the fourth quarter, reflecting not only normal seasonality, but also what we believe to be a return to growth as we exit 2025 and begin 2026. We believe the sequential improvement is driven by returning customer demand and our focus on priority markets that continue to accelerate the adoption of additive manufacturing.

With that summary, I will now walk through our sequential revenue growth for the quarter. Fourth quarter consolidated revenue increased 16% sequentially from the third quarter, driven by growth in new printer system sales and increased materials consumption. Within our segments, Industrial Solutions revenue was $55.8 million, an increase of 15% sequentially. This growth was driven by continued strength in aerospace and defense as well as higher new printer sales within our consumer end markets, including increasing demand for our new MJP printer for jewelry applications. Healthcare Solutions revenue of $50.5 million grew 18% sequentially. This increase was primarily driven by the strengthening of dental material sales within the quarter and the continued positive performance of our PHS business.

Now moving to Slide 17. In reviewing 2025 performance, the additive manufacturing industry faced strong macroeconomic headwinds impacting customer spending. As a result, we realized a decline in our year-over-year revenue. For the full year 2025, consolidated revenue was $387 million. When adjusting for the divestiture of Geomagic, revenue declined 7% year-over-year or 9% when adjusting for both Geomagic and the prior year regenerative medicine adjustment. Turning to Slide 18. For the fourth quarter, non-GAAP gross margin was 31%, up 3% when adjusting for Geomagic and down 2% when adjusting for both Geomagic and Regenerative Medicine. For full year 2025, non-GAAP gross margin was 34.3%, down 70 basis points when adjusting for Geomagic and down 2 percentage points when adjusting for both Geomagic and regenerative medicine. Non-GAAP gross margin decline over the prior periods was primarily driven by lower sales volume and less favorable product mix in the current quarter.

Moving to Slides 19 and 20. We continue to see the positive impact of our cost reduction initiatives, both in the fourth quarter and for the full year 2025. In the fourth quarter, non-GAAP operating expenses were $43 million, down 23% or $13 million from the prior year period when adjusting for Geomagic. For the full year, non-GAAP operating expenses were $196 million, a reduction of 19% or $46 million year-over-year when adjusting for Geomagic. We remain keenly focused on executing the cost reduction initiatives we have previously outlined. Actions already underway and that will be complete by the first half of 2026 include optimizing our organizational capacity, streamlining our facilities footprint and reducing expenses across our business. To date, our cost reduction and efficiency programs have delivered approximately $55 million in annualized savings completed in 2025, exceeding our target of $50 million.

Looking ahead to the first half of 2026, our cost savings initiatives will remain closely aligned with the company's 2026 priorities, ensuring we focus on investments on the products and markets with the strongest opportunity for both growth and profitability. Moving to Slide 21 to finalize the P&L. Adjusted EBITDA for the fourth quarter was negative $5.3 million, an improvement of $17 million compared to the prior year when adjusting for Geomagic. For the full year 2025, adjusted EBITDA was negative $45.4 million, an improvement of $31 million when adjusting for Geomagic. Adjusted EBITDA improvements were primarily driven by the company's cost reduction initiatives, which delivered meaningful expense reductions throughout 2025. Full year 2025 non-GAAP loss per share was $0.37, an improvement from a loss of $0.62 in the prior year period. Now moving to Slide 22 for a review of the balance sheet. We ended the quarter with $97.1 million in total cash, consisting of $95.6 million in cash and cash equivalents and $1.5 million in restricted cash.

During the quarter, we executed an equitization transaction to retire the majority of our debt scheduled to mature in the fourth quarter of 2026. As a result, only $3.9 million of that debt now remains outstanding with the remaining $92 million scheduled to mature in 2030. As we move to 2026, my priorities remain focused on continuing to optimize our cost structure while working closely with the business to prioritize the key growth markets. Lastly, I'll turn to Slide 23 for an update on the company's 2026 outlook. Given the current geopolitical environment and its potential impact on near-term macroeconomic conditions, we believe at this time, it is appropriate to limit financial guidance to the first quarter of 2026. We expect revenue to be in the range of $91 million to $94 million and adjusted EBITDA to be within the range of a loss of $5 million to a loss of $3 million for the quarter.

Key contributors to our first quarter performance include continued cost management discipline, consistent execution of our core business, strong performance in our priority markets and positive momentum in product sales driven by recent printer launches. We thank you for your time and continued support of 3D Systems. We will now open the line for questions.

Operator?

[Operator Instructions] Our first question is coming from Jim Ricchiuti from Needham & Company.

Phyllis, I may have missed it, I apologize, but did you give any color as to how we should be thinking about operating expense in the seasonally weaker Q1 just versus Q4?

Yes. I think operating expenses, remember, Q1 is seasonably more -- higher for us in terms of spend. So when you look for 2026, I'd say look for slight increases in Q1 and Q2 with a pretty steep drop off as we get into Q3 and Q4 to normalize a little bit less year-over-year than what we had in 2025.

I appreciate that. And just how much of that industrial business is currently being derived from A&D? And Jeff, you highlighted several drivers in that A&D business. How balanced are these revenue streams in A&D? Or is it more concentrated in any one area?

So on your last question there, Jim, it's pretty diverse, the four areas I outlined, and I know they're still very broad areas, so I try to give some more concrete examples. But those four areas are all strong. And A&D is such a broad area, you could find other areas to focus on, too. For us, the four areas I mentioned are -- we know we have a good technology base. We have a good runway in and we're doing well in. So I really like the naval applications, doing very well, printing these more exotic materials that are resistant to seawater is great. Some of the lightweight structures for rockets and planes, terrific stuff, titanium, the more exotic aluminum alloys, things like that, that are required for those are super. The propulsion systems themselves for rockets, particularly interesting and then also aero propulsion for engines. So those are all really exciting areas. In terms of total revenue, I don't -- have we broken that out?

We have not. But it is one of our top industrial segments. It's on track to be our largest industrial segment or market within the 2026 fiscal year. So it continues to produce sizable and meaningful revenue, both on the top and bottom line for Industrial. Its growth is about 16% year-over-year from '24 to '25 with really heavy sales coming from both printers and parts in 2025 as well.

And Jim, certainly, the added capacity we're putting in, in Littleton right now should be done by early summer, and we'll be phasing that in the second half of the year. But it reflects the growing demand we see from -- broadly from DoD-driven applications working really with their Tier 1 suppliers to those defense systems.

Our next question today is coming from Greg Palm from Craig-Hallum.

Going back to Q4, just a couple of questions on the results in terms of the upside on revenue, I guess, what outperformed relative to expectations back in, I guess, November? And on gross margin specifically, can you just maybe unpack that a little bit more? I think it was negative mix, but that was down sequentially on much higher revenue. So maybe just a little bit more color there.

Sure. So just looking at Q4, I think we over-indexed really in aerospace and defense, the mix for aerospace and defense, both on the margin side, but then a little bit of upside on the top line revenue was strong. PHS and our aligner materials were strong for the quarter. We also had an upswing in our Healthcare parts for the quarter as well, which helped contribute to the excess revenue that we anticipated when we first set guidance. So I think we were pretty spot on. On the margin side, we heavily were weighted towards printers in Q4. We had several new printer launches in the back half of the year. Printers just carry a lower margin. So I wasn't too surprised in seeing that. But the overall just decline in revenue year-over-year holistically was what we'll address next year as we start to look at margin pull-through from some of the new printer launches and just the increase in volume overall for the year.

Okay. And just thinking about Q1 specifically, I just want to make sure I'm understanding this right. So you're guiding revenue down quite a bit sequentially. You're guiding OpEx up a little bit and improved EBITDA. This is all sequentially. So that implies, I mean, a massive boost in gross margin from Q4 to Q1. I just want to make sure that's what the guide implies.

So I'll correct one item. We are pretty consistent with the prior year if you exclude Geomagic. So Geomagic had high revenue in Q1 of 2025. That was the last quarter in which we had Geomagic. So we've replaced that revenue with other sources for Q1 of 2026, and we had very strong operational expense savings that are going to be coming through Q1 as well. So while I said it's a seasonally higher spending, our overall reductions are going to see meaningful results as we report results for Q1. On the margin side, I think we're doing things to protect the margin in terms of just additional cost savings activities as well as anticipated better pricing in Q1. So both of those things, I think, should help to the overall adjusted EBITDA improvement you're seeing.

Okay. But I guess I'm looking from Q4 to Q1, and I just want to make sure -- based on what you've said, it implies gross margin is going to improve, I mean, meaningfully quarter-over-quarter. I just want to make sure that's what the guide implies.

Yes. Again, I'd say you have to look at it. We certainly are anticipating gross margin improvement in Q1, but we're also anticipating continued execution of our operational cost reductions in the quarter. The mix of both of those will drive the adjusted EBITDA improvement. So we didn't give specific guidance on those two is, again, product mix as we close out the quarter will really sort of align on that. But overall, we anticipate gross margin improvement for sure.

Okay. Okay. And then just cognizant of the fact that you're only giving one quarter guidance at this point, I mean, if we just think about some of the segment, A&D, you've talked about 20% growth this year. Personalized Health, that's growing strongly. It seems like dental is improving. You're still guiding to Q1 revenue declines on a year-over-year basis, just modestly at the midpoint. I mean is that just a weak spot for the year? I'm just trying to sort of reconcile a lot of these sort of growth areas to the Q1 guide, which still suggests a revenue decline on a year-over-year basis.

Yes, Greg, it gets very hard to call the actual inflection point. So we're just trying to -- I love the direction that it's going. It feels good after a couple of tough years. Things are moving in the right direction. We're just trying not to get too far ahead of ourselves. So yes, it's -- there's no particular weakness or something that we expect in Q1 to swamp results or anything. It's continuing the trend. So A&D should grow consistently. The rest of industrial is always a wildcard to be frank with you. It's much more dependent upon how people feel about the world. And as you know, it's a bit crazy out there right now. Oil is way up and stuff. So when it comes to discretionary spending on the part of consumers, that's always a concern for me when it comes to our more consumer-oriented business. With that said, it looked really good in Q4. It looks like it's coming back.

We're launching some great new products there. It's just a more volatile -- the consumer stuff is a bit more volatile. So I love A&D. I've got high confidence there. We're going to continue the trend. Healthcare, very stable because most of that stuff is not optional with the exception of aligners. Some people put off aligner purchases when things get harder. But our increased exposure to dentures is a good thing. That's going to continue throughout the year to grow. And certainly, PHS is a very good thing because a lot of those procedures are really not optional procedures for orthopedics. So we're just trying -- we're reintroducing some guidance. We're trying to be -- we're trying to be prudent about it. I'm not going to say it's conservative, just trying to be prudent about how far out over our skis we get in terms of the future.

Our next question is coming from Kieran McCabe from Cantor Fitzgerald.

It's Kieran on for Troy. I just had a couple of questions. I guess the first is you had, in the past, a lot of R&D spend to refresh the product line and bring out a lot of new products that are now showing up in the results, especially in this quarter. Given kind of your focus areas of A&D and personal care product -- the personal health care area, sort of what's your -- and retaining some investments kind of based upon 4Q R&D, kind of what's your outlook for R&D going forward?

It's in the OpEx number, Kieran. We don't really break it out. We've been able -- so we had very strong spending. If you look at R&D spending, we had very strong spending for about three years to refresh our product lines. And what you're seeing now enter the market is reflective of that investment. And it was a difficult time with sales being off to maintain that continuity, but it was critically important to us because when these markets turn, you've got to have a fresh portfolio ready to go, and we do. So we've been able to throttle back on R&D spending to some extent as we launch those new products because the next platform will be out anywhere from a year to three years, so depending on the market.

So you're able to throttle back a little bit on R&D spending. It's kind of a natural cycle a company goes through, and we went through a heavy periods. So heavy period at a difficult time of sales, which is why OpEx was a drag for us. It was certainly reflected in the bottom line financials and our cash position. We invested a lot for the future. I'm really pleased now that we're on the backside of that, that we did it. And it's -- we're well positioned as the markets rebound. It's just the world is a little bit crazy right now still. So we just want to be cautious about sales, make sure we don't get out in front of the market on it, but I feel like we're very well positioned. So R&D spending for us should be -- as a part of OpEx will be coming down to some extent. But also, Kieran, one thing to remember is we have the broadest technology portfolio in the entire industry, okay?

We have metals and polymers. And in polymers, we have 5 significant platforms -- that's wonderful from a customer standpoint. We can service that and we can grow. It's a burden from an R&D standpoint. So when you look at our R&D burden, fundamentally, it's heavier than most because of the breadth of our technology. But in a growth environment, it positions you very well to serve the customer. So you -- I feel very good about our position. We are able to throttle back a little bit now because we were doing every refresh in parallel for three years. Now it's coming down to one here and one there, and we can get more in a rhythm of it. So it helps us with our OpEx management here in '26.

But I would say we have not excessively cut R&D. We certainly have pared it back. We have a sizable R&D budget for 2026 that's in the overall OpEx budget. It's rightsized to the current portfolio that we have and the product investment priorities that we have. You'll definitely see that come in. It's still double digits. It's lower double digits than what it has been, but I think fits the product road map and new product launches we have for next year.

And Kieran, a great example of the strength of that approach is when you look at metal parts for aerospace and defense. There's two ways that they're fundamentally made broadly. One is casting where they use our 3D polymer printers for as they know we're part of and one is direct metal printing for the more difficult alloys or the higher-performing components. Both of those are in demand in the aerospace defense market. And in both cases, we have launched new product upgrades over the last 12 months that are fabulous. And that's why we're growing in aerospace and defense. And it's the high value end of the market. That's where you want to be.

And my other question was just on speaking of aerospace and defense, everybody kind of is looking at aerospace and defense as a growth area because geopolitical and kind of the assumption that there'll be increased spending in that area. But even with aerospace and defense, how much of it is really kind of the companies and the government wanting to be more efficient and using additive to maybe change the method of producing the parts. So you may not need a new program, but maybe not be tied to that procurement budget, really kind of saying, well, we have this budget, and we have to be smarter about it and may not expect the growth or politics to get the growth eventually. How much of it is sort of really kind of rethinking and being more efficient and reducing times and things like that and really using to do that...

You touched on a good point, Kieran. So part of the demand in aerospace and defense is for the -- is just new weaponry coming out and new vehicles to deliver that weaponry. So you've got the advent of drones, you've got new generations of naval ships. So part of it is the natural evolution of technology that's drawing in because additive is really good at those things. The other part of it, I'd say there's two pieces. One is cost savings. By moving to -- from an assembly of many pieces to a casting that's a single-piece casting, you can simplify the system and get cost out, out of the manufacturing process now the finished product. That's significant. When you look at -- look at a modern rocket engine compared to three years ago and just look at the, that's available through 3D printed cores and shelves for castings.

And then on direct metal applications, you've got the added benefit of a dramatically reduced cycle time for manufacturing and safer supply chains, more localized, more close to home and they can respond much more quickly. The example I put in the opening statements about the reduction for some of these naval components going from 12 to 15 months production time with traditional manufacturing to literally a couple of weeks to produce the same component out of the same materials. So you've got higher performance, you've got cost savings that are coming together in aerospace and defense that's really transforming the industry. So yes, overall volumes are up, demand is up. But you've got some key drivers that are highly sustainable in the kinds of parts we're working on, okay?

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

Thanks, Kevin. So I'd like to thank you all for participating in the call today, and we look forward to updating you on our progress once again after the close of the first quarter. Have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the 3D Systems Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It is now my pleasure to turn the call over to your host, [ Monica Gould ], Investor Relations for 3D Systems. Please go ahead, Monica.

Thank you. Hello, and welcome to the 3D Systems third quarter 2025 earnings conference call.

With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Interim CFO.

The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of the presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including the most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable periods of 2024.

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

Thank you, Monica, and good morning, everyone. I'll start today with a brief recap of our third quarter results. I'll provide some commentary on the overall market and then focus the remainder of my comments on our strategy and growth initiatives. I'll then turn things over to our Interim CFO, Phyllis Nordstrom, to provide details on the quarter's financials. And we'll then open the call for Q&A.

So let's turn to Slide 5. I'll start by reviewing our third quarter results at a high level. The macro environment for our company and 3D printing OEMs broadly remains challenging. This can be seen in our third quarter revenue of $91.2 million, which was down 13.8% year-over-year, soft but consistent with our normal seasonality trends. As has been the case over the last several quarters, this overall softness continues to be driven by our customers' muted CapEx spending for new production capacity stemming from uncertainty around tariffs. As such, we've taken aggressive actions to adjust our cost structure while maintaining core R&D investments to position the company for long-term growth when market conditions improve.

As part of this effort, we've been rationalizing noncore assets, including the recently announced sale of Oqton and 3DXpert, which closed at the end of October. As you may know, these software platforms are not proprietary, but were designed to serve the entire industry. And while we will continue to remain very involved with the software, we believe that transitioning these solutions to an independent software developer will help drive them as the industry standard, which will help accelerate OEM adoption of additive manufacturing broadly. We expect the financial impact of this disposition on our fourth quarter results to be approximately $1.2 million in revenue and $1 million on gross margin. This impact is reflected in our guidance for Q4.

Turning to Slide 6. We remain very focused on our core assets and continue our strategic investments in metal and polymer printing technology with emphasis on R&D activities that will drive our future growth and profitability. During the quarter, we launched some very important new printer platforms derived in this case, from our expertise in photopolymer jetting technology. Jetting is a very special 3D printing technology that involves a simultaneous deposition of thousands of fine droplets of photopolymer. These droplets are cured by ultraviolet light as they're deposited onto the build platform. The process can be -- can simultaneously deposit multiple materials in a fast but precise pattern to create a monolithic structure, having distinct regions of coloration, geometry and mechanical performance.

It's a preferred approach where speed, precision, surface finish and multi-materials are required for an application. In the Industrial segment, we introduced the MJP 300W Plus at the Istanbul Jewelry Show in early October. This new generation of jetting technology prints extremely intricate wax patterns used for casting precious metal jewelry, improving productivity by 30% and reducing gold, silver or platinum waste by 20%. While the global jewelry market is competitive, it's transforming rapidly into a digital manufacturing ecosystem where a designer can embrace custom creativity without sacrificing cost competitiveness in the market.

Our advantage in this growing market is our recognized expertise in jetting technology, including both the printer itself and the custom wax materials that are essential for the post-print casting process as well as our expert channel partners that serve the thousands of local jewelry manufacturers around the world. Customer feedback on our new printing systems has been very positive, and we've already begun to accept orders for this new printer platform, which, given the size of this global market, we expect to accelerate rapidly in the quarters ahead. While fine jewelry is viewed broadly as a consumer business, it's embedded deeply in the culture of many countries around the world, which drives continuing demand growth and the uniqueness of our wax materials, combined with the high rate of their consumption and the casting process, continue to make it an attractive market for our company.

On to Slide 7. In applying jetting technology to the dental market, in the third quarter, we announced the full commercial release of our NextDent Jetted Denture Solution for the U.S. market. Our consistent investment in this revolutionary dental technology has culminated in a truly outstanding denture product with associated excellent economics for dental labs across the Americas, Europe and even in Asia. This first-to-market solution for jetted monolithic dentures utilizes multiple materials in a single printing process to deliver a durable, long-wear, aesthetically beautiful prosthetic to patients. This results in a faster, more cost-effective and highly scalable alternative to traditional denture manufacturing, enabling both an outstanding patient experience and a strong return on investment for dental labs that provide these products to local dentist -- dental professionals each day.

We've already placed these printers with a dozen of the leading U.S. dental labs that serve the American market and feedback has been excellent. We're building backlog for the fourth quarter and are very excited about this market opportunity, which we believe will reach $1 billion in industry revenue across the U.S. and Europe alone over the next several years as the market transitions to 3D printing and away from machining and hand assembly. Given the success that we've seen with our U.S. product launch in parallel with the European regulatory approval, which we're targeting for mid-2026, we continue to work aggressively through the regulatory process in other markets throughout Central and South America and in Asia, which we expect to follow rapidly. With the addition of our denture solution to our industry-leading positions in both aligner technology and our NextDent dental materials portfolio, we expect dentistry to be one of our single largest revenue streams in the years ahead, given the custom nature of the applications and the strict regulatory standards.

Turning to Slide 8. Another core area focus -- core area of focus for us is the MedTech half of our health care business. For 3D Systems, MedTech comprises our historical personalized health services business, our small but important point-of-care business, medical implants and traditional printer and consumable sales to medical OEMs. While we are most often prohibited from discussing details of our point-of-care efforts for long periods of time, these groups live within leading research and specialty hospitals around the world, focusing on new and highly [ innovated ] applications of our medical 3D printing technology, which are extraordinary in terms of patient impact and provide the best indicators of where 3D printing can bring the most value to patients and hospital systems in the future.

As these applications are successful, we're well positioned to gain any required regulatory approvals and then bring them to the market broadly. While there are quarter-to-quarter fluctuations in growth rates for MedTech, particularly driven by seasonality of preplanned orthopedic procedures, this business remains on track to grow at a double-digit rate once again this year.

To drive this consistent strong growth, we continue to build on our market-leading position with new applications, materials and printing technologies, the vast majority of which ultimately require regulatory approvals. This not only provides a strong pipeline of new patient indications that we can address, but also opens new markets for medical 3D printing, such as trauma, which is now the fastest-growing element of our PHS business.

A key area for focus for us in MedTech is accelerating the use of our printed medical-grade PEEK materials. That's Polyetheretherketone for short. These materials are biocompatible with properties very similar to native human bones and can be custom printed very quickly and economically. Importantly, they can complement titanium implants, which have similar strength and compatibility, but instead of blocking radiation used for imaging or the treatment of cancer, PEEK materials are transparent to it, allowing doctors to observe and treat the underlying tissue when required. These printed PEEK materials are now being used in real-life patient applications such as reconstruction of the face and skull from defects or injuries and even addressing post-cancer-related surgical procedures and even trauma cases.

An example of printed PEEK for a spinal application is shown on the right side of Slide 8. In this case, we printed a porous PEEK implant tailored for enhanced bone growth, the results of which can easily be seen in the x-rays. In addition to the patient benefits, our technology investments have brought the cost and response time down to the point where bones can be repaired in hours or days instead of weeks, further opening the range of cases that can be addressed from preplanned complex surgeries to rapid responses needed for trauma cases. We expect this trend to continue in the years ahead.

Now let's turn to Slide 9. In addition to new printer and materials technologies, we also recently announced several important milestones in our Saudi Arabian Growth Initiative. In 2022, we established the National Additive Manufacturing Innovation Company or NAMI for short through a partnership with the Saudi Arabian Industrial Investments Company. The goal of this venture was to enable Saudi Arabia's Vision 2030 program, which aims to create a strong local manufacturing base and enable the Kingdom to industrialize more rapidly through the adoption of industrial scale 3D printing. 3D Systems is the exclusive provider of printers and materials, both polymers and metals to the joint venture with NAMI providing local application expertise, service and support for customers.

Recently, we were proud to announce that the Saudi Electric Company or SEC for short, the Middle East's largest electricity producer, signed an agreement to make a strategic investment in NAMI, acquiring a 30% stake in the venture with the goal of reducing costs and lead times for high-demand spare parts through the creation of local manufacturing capability combined with advanced digital warehousing. This partnership strengthens NAMI while deepening collaboration with SEC to establish new workflows that accelerate the adoption of 3D printing for critical energy infrastructure applications and to develop a skilled national workforce.

Additionally, the Modern Isotopes Factory or MIF for short, a Saudi electric company -- a Saudi company established to support the expanding need for radioactive sources for industrial applications has signed a framework agreement of $26 million with NAMI for the manufacture of up to 2,000 tungsten core components used in nondestructive testing devices for pipelines and weldment inspection. And in the key market of defense and aerospace, Lockheed Martin recently announced a collaboration with NAMI to qualify and use additive manufacturing to develop critical military and aerospace components in Saudi Arabia, utilizing 3D Systems' Direct Metal Printing Technology. While it has taken time to establish the local capabilities needed to support these customers, we're very excited to see our efforts begin to bear fruit in what we believe will be an increasingly important element of our global growth strategy in high-reliability industrial markets in future years.

Turning to Slide 10, I'll briefly touch on additional critical market opportunities before turning the call over to Phyllis. AI infrastructure as shown on the left-hand side of Slide 10 and aerospace and defense highlighted on the right are 2 of the emerging growth opportunities that I'm most excited about, given the exceptional level of investments now being made in these areas. Starting with AI infrastructure, there are 3 key areas where we participate. These include semiconductor chip manufacturing, where our 3D metal printing capability provides critical componentry for chip fabrication equipment, data centers where our ability to print 3D -- 3D print copper-based heat transfer components to help keep these high-intensity computational units cool are increasingly valuable and for components used in gas turbine engines that are used to create the electricity that powers the data center.

These markets are beginning to receive enormous investments around the world, and we've been developing key applications for them for several years in anticipation of increasing demand. From an aerospace and defense standpoint, as printing technology has scaled and key materials for high-temperature and aggressive environment applications have come online, the applications for 3D printing have rapidly expanded. Our latest efforts, which range from rocketry to naval applications and from human systems to drones have shown great promise. These customers are not only working on a wide range of new applications of our technology, but encouraging us on a selective basis to support them from the developmental phase through initial component fabrication, particularly for low-volume challenging part types.

We select this work very carefully such that we can ultimately bridge the customer from limited part supply to full-scale production, either within their factories or the supplier of their choice. This business model is unique, and we believe will be a highly -- will be highly effective as we work hard to grow this portion of our business, both in the U.S. and in Europe from our regional locations in Colorado and in Leuven, Belgium.

So with that, I'd like to introduce Phyllis Nordstrom, our Interim CFO. I've had the pleasure of working with Phyllis in several capacities for many years, and I'm very pleased that she stepped into this important role at such a challenging time for our industry. Phyllis?

Thank you, Jeff. I appreciate everyone joining us today. I began at 3D Systems in 2021, serving as the Chief People Officer and then Chief Administrative Officer. In early September, I stepped into the role of Interim Chief Financial Officer. My background is in finance and accounting and throughout my career I've held a variety of roles within these areas. Most recently, I led audit and risk management teams at MTS Systems and PricewaterhouseCoopers, where I focused on advancing strategic priorities, driving operational excellence and strengthening discipline around risk and controls.

Before I begin a review of the third quarter results, I would like to remind you, we completed the divestiture of our Geomagic software business on April 1 of this year. As a result, throughout today's call, we will reference both reported results and adjusted comparisons that exclude our Geomagic business, allowing for an apples-to-apples comparison of our performance across periods.

With that, let's begin with a summary of our revenue, which you'll find on Slide 12. Third quarter consolidated revenue was $91.2 million, down 19% year-over-year or 14% when excluding Geomagic. Sequentially, revenue declined modestly, primarily reflecting typical third quarter seasonality and the absence of a Regenerative Medicine milestone that was recognized in the prior quarter.

Within our segments, Industrial Solutions revenue of $48 million declined 16% year-over-year or 4.5% excluding Geomagic. These declines were primarily driven by softness in our printers and materials sales in consumer-facing end markets. This was partially offset by continued momentum in aerospace and defense, which grew nearly 50% over the prior year. Healthcare Solutions revenue of $43 million decreased 22% from prior year, predominantly driven by lower sales within dental, with 2024 representing higher purchase volumes from a specific customer. Outside of our Dental business, MedTech delivered solid growth, up 8% from the prior year and slightly ahead of last quarter. Additionally, we continue to see momentum in our PHS business with year-to-date growth of 10% through Q3.

Now to Slide 13. For the third quarter, we reported a non-GAAP margin of 33% compared to 38% in the prior year and 34% when adjusted to exclude Geomagic. The year-over-year gross margin decline was modest, primarily driven by lower sales volume and reduced material sales. These impacts were partially offset by reduced inventory reserves compared to the prior year. Gross margin declined sequentially, reflecting the absence of the prior quarter's Regenerative Medicine milestone as previously discussed, as well as higher manufacturing variances in the period.

Turning to Slide 14 and 15. We continue to demonstrate strong cost management in the quarter with non-GAAP operating expenses of $44.7 million, down 24% year-over-year when adjusted to exclude Geomagic and down 4.5% sequentially. This improvement reflects the impact of our cost reduction initiatives, which run through the first half of 2026. Our cost actions are well underway and continue to focus on optimizing our organizational capacity, streamlining our facilities footprint and reducing expenses across the business.

Looking ahead, we expect continued reductions in expenses through the end of the year and are targeting fourth quarter operating expenses to be marginally below the current quarter. To date, we are on track to deliver over $50 million in annualized savings by year-end. As we look ahead to the fourth quarter and the first half of next year, our cost savings initiatives will be closely aligned to the company's strategic priorities for 2026, focusing our investments on the products and markets that offer the greatest opportunity, both for growth and profitability.

Turning now to Slide 16 to finalize the P&L. Adjusted EBITDA for the third quarter was negative $10.8 million, an improvement of $3.5 million compared to the prior year. We reported a GAAP net loss of $18 million for the quarter or a GAAP loss per share of $0.14, a meaningful improvement compared to the $1.35 loss per share in the prior year period. The improvement was primarily related to the absence of prior year asset impairment charges as well as lower amortization expense and lower operating expenses in the current quarter. On a non-GAAP basis, loss per share was $0.08, an improvement from $0.12 in the prior year period. This progress reflects our focus on cost reductions across the business.

Turning now to Slide 17 for a review of the balance sheet. We closed the quarter with $114 million in total cash, consisting of $95 million in cash and cash equivalents and $19 million in restricted cash. Total debt net of deferred financing costs was $123 million as of the end of the quarter. Of that total, $35 million is due in the fourth quarter of 2026, with the remaining balance due in 2030. We have successfully reduced cash usage over the past 2 quarters and expect continued improvement as we execute on our remaining cost savings actions through the first half of next year. As we enter the fourth quarter, my priorities remain focused on completing our cost reduction initiatives while working closely with the business to prioritize key markets, products, services and investments. These efforts are aimed at delivering meaningful impact, both in the near term and throughout 2026.

So with that, we thank you for your time and support of 3D Systems. We'll now open the line for questions. Operator?

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

So a quick -- either one of you guys. Just gross margins kind of dropped a lot sequentially here. It looks like it was mainly in products, but maybe in both products and services. Can you just touch a little bit on the decline in gross margin?

Thanks, Troy. I think looking at gross margins quarter-over-quarter, there's really 2 main components as I highlighted. RegMed, we recognized a milestone under our lung program in the prior quarter. That was about $2 million of that total revenue that dropped down to the bottom line. We also had some manufacturing variances recognized in the quarter, which also had an impact to our margin. I don't think those will repeat going forward, but there was some scrap and some inventory reserves or some slower-moving inventory that we had that we cleaned up this quarter. So looking ahead, you can see that we said gross margin would be flat quarter-over-quarter. Again, Jeff will touch on some of that printer revenue that we're seeing with the new products that will come in next quarter as well.

So Troy, that explains Q3. If you look at going forward, there's offset -- there's offsetting factors. So on the positive side, volume is going up, the launch of our new products, we're selling more product, but it is concentrated in printers right now. Printers faster than materials. So it will be a mix effect going forward, offsetting the volume benefit through the factory. So that's largely it. We have a slight drag continuing on tariffs, but it's relatively constant. It's there. It's relatively constant quarter-by-quarter. That's it. It's pretty simple, pretty simple puts and takes.

All right. Understood. And then, Phyllis, this is for you, too, on -- just on the OpEx, I think I heard you say down slightly sequentially. But is there more to do on the cost cut efforts? I know you guys had some facility consolidations that were depending on timing. I guess what I'd ultimately like to get to is, is there a revenue level you think you guys need to hit once all these cost cuts are in place that will get us to a breakeven?

Troy, I'll start with the first part of your question, and I'll let Jeff handle the second part of your question. The first part of the question, there is still more to go get. We've taken a lot of the organizational capacity actions already. There's still a little bit left to do, but the vast majority of that is behind us. The facilities take a little longer. There's work to do. We've made, I think, significant strides in getting ourselves into a place where the facilities will be ready to be exited that we've identified. It's a timing issue just with the market and ensuring we can get those things closed out. So that will happen, I think, in the first part of next year. In terms of OpEx, you're going to see a continued decline through the first half of 2026. It will be a little bit of puts and takes in terms of timing to achieve our total cost savings objectives here. As far as revenue, I'll let Jeff sort of cover where our OpEx would need to be in terms of revenue outlook. It's something that we're doing right now as part of our 2026 budgeting.

And the frustrating part of what Phyllis just said, Troy, is the timing around facilities. We've exited 5 or 6 facilities, and they're on the market now. It's just a matter of timing to get them subleased or have the leases expire. So that will flow through over the next few quarters, we're estimating, but they're all in the market right now. Just look, the other question is, to me, very important is where does OpEx need to be in order to really drive profitability and positive cash flow for the business. It's highly dependent, obviously, on the gross margin that we derive from sales. So it will be sales volume dependent, gross margin dependent.

The good thing right now is we are selling a lot of high materials used printers. Our new products are largely focused on those. It's these jetting solutions consume a lot of materials in the markets they serve. The new SLA printers, we have the large SLA printers, the large SLS printer that we go to market with, those consume a lot of materials. So you'll continue to see us innovating on SLA and impacting all those product lines. They pull through a lot of materials. So there's a lag when you first sell the printer on gross margin, but we should see some nice continuous gross margin lift as they pull through materials. So the OpEx, you could argue it to a couple of different levels depending on sales volume for factory efficiencies and the gross margin we derive from those sales. So I'm not giving you a crisp answer.

Our original target of $70 million for these rounds of cost takeout we believe in a little bit more normalized environment, but not great environment, but in a little bit more normalized environment through our gross margin estimates, we believe that would get us to positive cash flow and profitability. I still believe that. It's all-in-all is dependent on the volume and mix that comes with increased sales. Good news is sales are picking up in Q4, as we've guided to, and we all fingers crossed for 2026 if the world continues to improve.

Good luck going forward.

Thanks, Troy.

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

Perfect. This is Jackson Schroeder on for Greg Palm. Just kind of wanted to talk a little bit more about the -- what was press released last week with some of the new partnerships talking about with Lockheed Martin, some of the stuff out in the Middle East. Can you talk a little bit more about that, give some detail and maybe -- I mean, obviously, the end market in A&D, but also kind of the products and what you're working on with them?

Sure. Yes, absolutely. So we work with Lockheed Martin around the world. And obviously, in the U.S., they're a very big defense contractor. So very excited about business in the U.S. The unique thing about our Saudi initiative is when -- Saudi is a big consumer of American defense products, obviously, and with that consumption goes a commitment from OEMs generally to spend money in the Kingdom. And so it drives them to look for innovation and local manufacturing of products. So that is very consistent with why we set up our joint venture there in the first place.

A lot of the JV is directed at the local Saudi infrastructure like oil and gas and electricity, but defense does benefit it substantially because of the requirement of the global defense OEMs to spend money in the Kingdom. So it's very good for us. It helps build things. The part types that they're interested in are very specific to what they sell in that part of the world. And I can't comment on those. So -- but it's all the normal systems you would associate Lockheed with both aircraft and missile systems that you'd associate them with. Their activity is very focused and aggressive because they have these local sourcing requirements. So it's a great end with a terrific customer, and we're uniquely positioned to serve that.

Obviously, in the U.S., there's other folks that can serve them as well. But these relationships take a while to develop and the technology takes a while to prove. So whether we prove it in the U.S., we prove it in Europe or we prove it in Saudi Arabia, it all goes to the same endpoint. And in terms of the systems and applications, again, I shouldn't talk about that for any customer. But in that case, it's all the normal kind of flight systems you would expect and the things that propel those flight systems, engines and rocket motors, things like that are all fair game.

And then as an off-topic follow-up, maybe I missed this, talking about cash generation for next year. Can you touch more on CapEx expectations for that?

Yes. Our CapEx, we have -- we are now able to throttle back on CapEx pretty nicely because we've made some significant investments in past years. And our infrastructure needs don't evolve that quickly. We generally assemble products, we mix materials. They're not highly CapEx-intensive manufacturing processes. So that works in our favor. We have traditionally, if you draw a line through the past, said 4% of sales on CapEx is a good long-term average. But I would tell you over the next couple of years, the number can be meaningfully below that because we've spent pretty heavily in the last several years on building out what we needed in terms of building infrastructure, stuff like that. So 4% is a historic benchmark in a perfect world and everything is growing, that's probably the level to model us at.

But for the next couple of years, I would tell you we can get by with substantially less than that, probably less than half of that. We're still putting things together for 2026. But we can get by with substantially less than that because, again, the nature of our manufacturing operations, not very capital intensive.

[Operator Instructions] Our next question today is coming from Alek Valero from Loop Capital Markets.

So my first question is, I saw in the press release that you mentioned that the Dental business is seeing more stability. I wanted to ask what is driving the Dental business to stabilize? And I also wanted to ask on monolithic dentures. I want to see if you could speak to the opportunity there and when we can possibly see it become a meaningful part of revenue.

Yes. Two good questions. So on the first one, in terms of stabilization, obviously, there are several -- we have several revenue streams today in dentistry. One is our historic stream in materials to repair teeth, if you will, which is NextDent and Vertex. That market is consistent, okay? It runs pretty consistently, and we've got approvals in the U.S. and Europe for a long time. So that's a pretty consistent performer. The volatility revenue stream, which is great. We love it, but it's more volatile is the aligner revenue stream.

So that really -- you can follow that through public statements by the customers that we serve. That market fluctuates because in tougher economic times, some people -- consumers view those as luxury items and they don't spend as much money on them. There's also a number of different age groups that those OEMs try to serve from younger folks to middle-aged and older folks with the growth in video conferencing and stuff, straight teeth have become very popular. And it also varies by geography. So U.S., Europe, Asia. So we serve -- we're a big provider in that market. I think we're the leader in providing printing technology and materials in that market by far. And we kind of go -- we kind of live with the volatility that, that encounters.

So if you want to understand the driver of that, you can easily -- they're public companies, you can easily tie into their earnings calls. And I think what you would hear right now is that market has declined in the last couple of quarters, but is now stabilizing for them in terms of end product sales. So if you work back through the supply chain, you would -- it's consistent with our commentary on we see revenue stabilizing in that market. And it continues to be a great business. It's stable now. Love to see it return to faster growth, but we're -- we kind of live with that volatility in consumer spending.

The denture part of your question is very interesting. Dentures today are largely handmade products. I'm sure that patients -- the consumers of those products don't appreciate the labor content that goes into a denture historically. So you -- whether you make teeth by machining, which is the common way to do it or you print -- or you try to print them, the assembly of the product has historically up until now been very much a hand operation. If you walk through a dental lab, which is where these products are made, they're made regionally in the U.S. and Europe, and they serve all the dentists around the city.

If you walked into that lab, you would see a lot of people that are involved in some way in making and finishing dentures, okay? Because it's labor-intensive, some labs have chosen to ship the assembly operation to Asia to access lower-cost labor, but that's the way it's gone. That is all going to change now.

But with the digital dentistry, the scanners that dentists employ now are excellent. So you can get a good scan of someone's teeth or their needs from their jaw construction. You can send that image to a lab. But now instead of being made by hand, you can 3D print a denture. And you can print it in minutes and hours, not days, okay, and finish it. It is beautiful. It is durable. It in many cases matches or exceeds current product standards. And within a year or 2, it will be the full spectrum of colors, performance, everything that people expect today will be embodied in these dentures. So I'm thrilled with the product. I love the process because it takes enormous time and cost out of manufacturing. And what the patient experience is at the end when they buy the denture is excellent. So it wins on every front and the economics are absolutely compelling. So what is paced by -- and this is where the rubber hits the road for investors is, okay, you talk about a $1 billion market, what has to happen to make that happen?

We need to -- we've got full regulatory approval in the United States. We need now to mimic that in Europe, and we're working our way through. That will happen in '26. We need then to have these dental labs try the manufacturing process and accept it and phase it in. And that's -- I wish that process were faster, but it is becoming a very sticky product. They like the product. They're going to ring it out and try it and make sure their economics work. I'm very confident they do. And then we'll be selling a lot more machines. So our production rates are ramping. We brought in inventory to make the product and the materials are fantastic. So I expect revenues to continue to grow in that market. We want to access as much of that $1 billion market as we can because I think this beats any manufacturing process out there.

We are also because of requests now seeking regulatory approval in Central and South America. Several countries there would like to adopt the technology as well. Some of them use U.S. standards, some use European, some use a blend. Every country is different. It takes some time to get through those. But I have yet to see us ship a product to a lab and then say, wow, this does not work for me, okay? Everybody that tries it loves the output of it right now, right? And if there's any hesitations, it gets down to the details of the market they serve in terms of coloration, gums and teeth that varies by demographics, region of the world, all of that. So there's a little more work to do on some areas of the market, but fantastic acceptance.

We're excited about the growth, and now it's just working through there. So all in all, dentistry for us, I think, is going to be a great business. It already is. The repair materials will always be needed for caps and crowns and all of that. The aligner product is very well accepted. It may become a little bit more of a volatile market with consumer spending in some parts of the world, but it's great. It will continue to consume a lot of material and printer investment. It is the most -- it's the largest application for 3D printing today. Well over [ 1 million ] of those are made per day through 3D printing because they're all unique to each person's teeth. So materials will be strong. Aligners will be strong for us.

We're doing some really good work on night guards as well. And obviously, the -- and I would say, direct printing of aligners to change both the markets they serve and the way the product is manufactured. We're doing some good work there. And then, of course, dentures is our biggest new growth initiative. So thank you for the question. I'm super excited about the product and the process, the acceptance. Look forward to updating you more in the future.

I have a quick follow-up if that's okay.

Sure. I'll give you a short answer [indiscernible].

Now I was just going to ask on the denture opportunity, just digging a little deeper. So denture seems to be kind of like a more nondiscretionary product [ for that ], but if and when that initiative turns into revenue, would that become kind of like a more stable part of the dental revenue?

Yes, absolutely. And that's a very good question, absolutely. If you look at aligners, they truly -- for many people that buy them, they are discretionary. I mean a lot of people have very good teeth. They're discretionary objects. Although I would tell you, the applications are expanding for aligners into folks that need more manipulation of teeth and beyond cosmetics, so for actual functionality of chewing stuff. So that's -- so that market is continuing to expand. Dentures are exactly what you said. They are, in my mind, an essential item to people, particularly in the developed countries and even in the nondeveloped countries, it's one of the first things people want.

And life expectancies continue to expand. So you have an aging population. There's more demand, if you will, for teeth replacement. And this product wins both aesthetically and economically in addressing that need. So it should be a more stable revenue stream, a growing revenue stream as the manufacturing is converted and because of the aging population and growing demand profile. So we're thrilled by it. It's a great -- I think it will be a great business for us. And I think you'll see dentistry for us be neck and neck with our -- the balance of our health care business in orthopedics be 2 of our largest and most valuable revenue streams in the future.

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

So thank you all for calling this morning. We look forward to updating you again as we wrap up the year and report Q4 and full year results in the springtime. Thanks very much for the call.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.