3D Systems at Cantor Fitzgerald Conference: Strategic Shift in 3D Printing

On Tuesday, 11 March 2025, 3D Systems (NYSE: DDD) participated in the Cantor Fitzgerald Global Technology Conference, where CEO Jeff Graves outlined the company’s evolving strategy. The discussion highlighted a shift from prototyping to production in 3D printing, with a strong focus on the dental and healthcare sectors. While the company is optimistic about future growth, challenges such as tariffs and geopolitical uncertainties remain.

Key Takeaways

• 3D Systems is transitioning from prototyping to production, with a significant partnership with Align Technology valued at $250 million.
• The company is focusing on customized healthcare solutions, including personalized bone replacements and advancements in printing human tissue.
• Strategic insourcing of production aims to mitigate risks and improve quality control.
• 3D Systems targets profitability and positive free cash flow within the next couple of years.
• Industrial spending is expected to rebound in 2025, despite current geopolitical and economic challenges.

Financial Results

• The sale of Geomagic software to Hexagon is expected to close soon, bringing in $123 million in cash.
• The company aims to increase gross margins from 40% to 50% by boosting production volumes and enhancing its consumable revenue stream.
• Operational expenses will be reduced through footprint consolidation and streamlining general and administrative and research and development costs.

Operational Updates

• 3D Systems is insourcing its manufacturing to the United States to reduce vulnerability to tariffs and streamline supply chain activity.
• The dental sector is a key growth area, with new products like night guards and dentures expected to enter the market soon.
• In healthcare, the focus is on personalized bone replacements and expanding into emergency surgeries and other joints.

Future Outlook

• The company is poised for organic growth, with no immediate need for acquisitions to expand its technological capabilities.
• A significant portion of sales, at least three-quarters, is now production-related, with a focus on applications that could generate substantial revenue.
• Despite current headwinds, industrial spending is anticipated to pick up again in 2025, driven by pent-up demand.

Q&A Highlights

• Jeff Graves acknowledged the emergence of competitors in the aligner business but emphasized 3D Systems’ strong position due to its comprehensive technology portfolio.
• The company is committed to cost reduction and aims to be profitable even at current revenue levels.
• Graves highlighted the importance of reliability and cost-effectiveness in 3D printing as key factors for future adoption.

In conclusion, for a deeper dive into 3D Systems’ strategic initiatives and financial outlook, readers are encouraged to refer to the full transcript.

Full transcript - Cantor Fitzgerald Global Technology Conference:

Troy Jensen, Manager Director, Kantor: Alright. Thanks everyone for joining us. My name is Troy Jensen, manager director at Kantor. With me today is CEO of three d Systems, Jeff Graves. Jeff, thanks for making it.

Maybe give us a quick background out of yourself and then, and three d Systems for those who don’t know you.

Jeff Graves, CEO, 3D Systems: Sure thing, Troy. And thanks for the invitation. I always appreciate being here. So my name is Jeff Graves. I’ve been the CEO of three d Systems since 2020.

Spent most of my career prior to that at General Electric and then leading other technology companies. Three d Systems, marvelous company. We’re one of the leaders in three d printing technology. We develop our own printers, materials, software, bring them together for advanced applications. Our founder actually invented three d printing back in the early eighties, Chuck Hull, and is still going strong at this point in his career.

And his next endeavor is the printing of human organs. So it’s as he’s leading that activity. Amazing guy who’s been recognized internationally for all of his contributions to mankind and obviously to the economy of The United States. So pleasure to be here and very happy to talk about the business.

Troy Jensen, Manager Director, Kantor: Yeah. Thanks. For those who don’t know, I’ve actually been falling out of it for twenty years, so I know it, you know, pretty well. So it’s been a quite a turnaround of your your leadership after the prior CEOs. But quickly, a fun topic here to start with.

Any quick thoughts on the Vikings quarterback situation?

Jeff Graves, CEO, 3D Systems: Well, I was proud last year to say I thought they’d have a good season last year.

Troy Jensen, Manager Director, Kantor: They did right away, and I’m challenging.

Jeff Graves, CEO, 3D Systems: And, Sam Darnold led led the charge there. So I guess he’s gone on to greener pastures now. So we’ll we’ll see a new a new well, hopefully, a a new quarterback that’s healthy this year coming up to the ranks. But hopefully, they’ll have a good season, Troy. Yeah.

Troy Jensen, Manager Director, Kantor: So a quick question for you. Jets, Giants, Chick fil A employees, what do they have in common?

Jeff Graves, CEO, 3D Systems: No idea.

Troy Jensen, Manager Director, Kantor: None of them work on Sunday. I like

Jeff Graves, CEO, 3D Systems: that one. That’s a good one. That’s a good one.

Troy Jensen, Manager Director, Kantor: I really hope to have a bigger crowd in New York fans here. But

Jeff Graves, CEO, 3D Systems: I particularly appreciate it because my second favorite team is the Eagles. So that’s that’s good. That’s that’s a good one. That’s a good one.

Troy Jensen, Manager Director, Kantor: Alright. So let’s dive in. I know you guys just got back from the Lab Day conference in Chicago. So it’s a big, big dental conference. I’ve unfortunately never been there, and I couldn’t last week or when it was recently.

But just give us an update on what happened there. I mean, Align is a big customer, and I know they slowed down, you know, in 2324. Right? But they’re back now. You guys had a nice big contract, but let’s just start with dental.

Jeff Graves, CEO, 3D Systems: Dental’s a dental’s an amazing field. I would tell you just broadly, dentistry is all turning to three d printing. In in the in the past, most of dental products have been handmade and machined. Three d printing technology between the printing technology and the materials and the software controls has gotten to the point of being able to make products very quickly, very cost effectively to for use in your mouth. You saw the trend of that start with the Invisalign product with a line, very successful for straightening of teeth.

We were, we participated with them in the eventing of that process and been a long term supplier to them. Marvelous company, really helped change the dental industry. But it’s tip of the iceberg. The reason I was at Lab, Lab Day is a kind of a funny name. It’s a conference, the biggest conference in The United States for dental technology.

And you see everybody there. Small companies, large companies like Align, everyone’s there. We break dentistry into four categories and we’ve got active programs on all of them now given the state of the technology. One is for straightening of teeth. So straightening protection, meaning night guards to protect what teeth you have in your mouth.

Folks are living longer. So the protection aspect is more and more important. Repairing teeth as you have cavities, not many people in The States have cavities anymore, but crowns and other implants. And then complete replacement dentures. And that last market is actually, given the aging population, is one of the most exciting growth markets that we face.

If you think of aligners as a, for a three d printing company, the available market in aligners is for products that are supplied today is about a hundred and $25,000,000 by our estimates. We have a meaningful percentage of that of that business and it’s growing. But the, if you look at at protection and repair, they’re equivalent sized markets. If you look at dentures, actually complete replacement of teeth, it’s about four x that size. So that’s why we’re excited about this.

We can make monolithic dentures, one piece dentures, teeth and gobs together, and virtually make them overnight now. So that technology is just hitting the market in the next year or so. We’re excited about the product offerings. We’ve gone through the FDA approvals. So Lab Day was a chance to show all of that.

And we there’s another big conference in Europe coming up the March called IDS, biggest international show for dentistry. Never thought as a kid you’d be excited about talking about dentures, but there it is. So maybe I’m just aging. But, no, it’s exciting to see a whole industry start converting toward three d printing. I think it’ll be a model for many industries to follow.

Troy Jensen, Manager Director, Kantor: Can you just remind us about the Align partnership and the new contract that you guys signed not too long ago?

Jeff Graves, CEO, 3D Systems: So, again, we’ve been a key supplier to Align for many, many years as they’ve grown globally now. And many people’s lives have been touched by that product, either yourself, your kids, maybe maybe you’re young enough, maybe your parents, but a lot of folks, especially coming out of COVID. So we’ve been a long term supplier of printing technology and materials, consumables for that for them. Last year, we signed a five year contract with them for the supply of materials, for their printers worldwide. That’s we we just finished the first year of that contract.

It’s got four to go. And there’s more and more participants coming in that market every day. So they’ve got a great business. They have a super business model. Undoubtedly, they’ll face competition.

And they’ve got a strong focus on cost with us to continue to bring the cost of aligners down. And and the evolution there will be, today it’s called an indirect method. You print a mold and you form plastic over it. And that mold is basically customized to to match your mouth and where your teeth are going. In the future, the trend will be to direct print those aligners.

So you do you avoid the mold altogether and you direct print them to to match your mouth. And you can do it faster the and you can move teeth. And principally, you can move them further because you can customize the thickness of the of the aligner. Today, there’s a limit on how far you can move teeth with each one of the aligners. With direct printing, you have the it offers the capability to move teeth further and further encroach on the on the old fashioned wire system that, people still wear.

Right. Okay.

Troy Jensen, Manager Director, Kantor: And I think the Align contract, was it a $250,000,000?

Jeff Graves, CEO, 3D Systems: Yeah. The largest contract in the company’s history, a quarter billion dollars over five years.

Troy Jensen, Manager Director, Kantor: Yep. Five years. And to me, I think that was just material sales

Jeff Graves, CEO, 3D Systems: that has

Troy Jensen, Manager Director, Kantor: nothing to do with the hardware sales. So Correct. Right. With respect to that direct printing of, of aligners, I’ve been told that the material pricing could be the biggest gating factor.

Jeff Graves, CEO, 3D Systems: Yeah. It’s it’s, it’s likely to be a more exotic material, because it has more performance characteristics. So it still is clear. It it’s got to be strong and tough to last in your mouth. And the idea there is to is to customize the thickness and the material properties to move teeth further.

So it addresses a a different and maybe larger segment of the market that’s still dominated by wire braces. So the the debate will be how much does it encroach on the indirect method, the current method, versus opening up a new piece of the market. My guess, Troy, is it’ll do both. It it’ll consume some of the current market, but it’ll also open up new markets for that application.

Troy Jensen, Manager Director, Kantor: And all the materials are ready, FDA approved and

Jeff Graves, CEO, 3D Systems: We’re working our way through that right now. Yeah. The material the challenge there, quite frankly, has been the the materials development. And we’re working our way through that and going through, as you might guess, there’s there’s a lot of testing that’s required in order to pass FDA approval for something you have to wear in your mouth. So we’re working our way through that process.

It’s always a tedious process, but one that’s that’s good for consumers to make sure everything’s safe in your in your mouth. Especially dentistry, there there’s low barriers to to enter from a printer standpoint, but you don’t wanna put unknown materials in your mouth for a long period of time. So the FDA approval part of it is very important. Yep. Okay.

Perfect.

Troy Jensen, Manager Director, Kantor: And then how about just the straight and protect, repair, replace? When do you think those are gonna sorry. Hidden the income statement?

Jeff Graves, CEO, 3D Systems: Yeah. So so the they should enter so we’ll we’ll just go step by step. So the so protection, meaning nightguards, they have they’ll still be clear in in large part, although where cosmetic taste will go. I mean, maybe people will want fluorescent, you know, nightguards in the future. I have no idea.

But wherever it goes, we’ll be ready to do that. That’s probably the easiest technologically to get through. So we’re working our way through FDA right now. We have a partner in Glidewell that we’re launching that product with, major dental lab, the national and even international for aligners. So though or, for night guards.

So those will enter the market over the next twelve months. Dentures are already FDA approved. We have a brand new printer coming out this summer, which will largely cater to local dental labs and and even chairside if for more adventuresome dentists that want to print these in the backroom. So that will hit the market and hit the P and L, I would guess, by year end. And what I with the repair aspect is just incrementally growing over time.

They’re already in the market, so it’ll incrementally grow. I would expect, looking at our company, the fastest growing segment over the next twenty four months will be dentistry.

Troy Jensen, Manager Director, Kantor: Okay. Awesome. It’s going to be easy to outgrow industrial here since it’s been struggling so much.

Jeff Graves, CEO, 3D Systems: But anyway There is that. The bar the bar is pretty low.

Troy Jensen, Manager Director, Kantor: Alright. Let’s talk production.

Jeff Graves, CEO, 3D Systems: By the way, great teeth, Troy. That’s that’s good. But you may need to protect them.

Troy Jensen, Manager Director, Kantor: Make sure. Get those nightguards. Alright. Production versus prototyping. Can you talk about the significance for additive in production?

Jeff Graves, CEO, 3D Systems: Yeah. So so it’s very interesting transition in our industry that would say and you’ve been following this industry for a long time, Troy, the transition from focusing on on prototypes. Prototyping has become very, very easy, but the but prototype labs in a in a any business are usually run by engineers, degreed engineers, often with advanced degrees, and they print prototypes for showing off designs and and even functional fitting. That’s still a market. It’s still growing and everything.

But the real volume applications and the future of this industry, I believe, is in production applications. So in that, it’s a completely different sale, a completely different customer base even within a within the the same customer. If you take a large industrial company and make up your own name, the large a large industrial company, they’ve been buying printers for for the lab for a long time for prototyping. Now in a factory, different customer. You’ve got a factory manager whose job depends on keeping production flowing every day of the week.

So what he cares about is is not only precision, the ability to make a part, make it reliably, reproducibly, make sure it’s serviced, make sure it’s it can be run by technicians without engineering degrees. So in in simplistically, a big red button and a green button. Hit the green button, make parts, make sure every machine runs the same. For our industry, reproducibility, as simple as that sounds, has been a challenge. So making sure every machine runs the same way.

Make sure the interface with the human is simple. So those are all design challenges initially and then sales challenges. So basically, we spend most of our design money now. Now the machines are precise, we spend more and more money on reproducibility, repeatability in the machines, making sure they’re all the same. We insourced production over the last two years completely to take control of the quality of the machines because they’re going in factories around the world.

And then from a sales standpoint, our sales engineers teaching companies about, about the application of three d printing, not how the process works. Customers don’t care anymore about how the process works. It’s a it’s a machine. They want to treat it as a black box by and large. They just wanna know it can make parts reproducibly and well.

So our our sales folks are telling them how that’s done, how it how it affects their business rather than how it’s done behind the scenes. So it’s changing the nature of the business. The payoff, it will be not only machine sales, but large volumes of consumables and large service revenue. So to compete in that market, you’ve got to be good in materials development or partnerships to do materials development. And you’ve got to have a really good service organization, either directly or through your channel partners to make sure those machines run every single day.

Our technology produces over a million parts a day that are three d printed, more than this entire industry combined. And we can support that because of our service team fundamentally.

Troy Jensen, Manager Director, Kantor: Yep. Yep. I would say, if you think about Align, they’re a 25% customer for you guys, right, and they disrupted the Aligner business. I mean, we should have dozens of 10% customers across the industry. We just don’t yet.

So this consistency, repeatability, I’ve never really heard the service side. You’re absolutely right. If you’re doing production, if something breaks down, they need to know that you’re there the next day, the next, you know, next hour

Jeff Graves, CEO, 3D Systems: Exactly.

Troy Jensen, Manager Director, Kantor: To fix things. So but

Jeff Graves, CEO, 3D Systems: And and even think about dentistry, like a dentist office, if if a dentist is gonna print parts, doesn’t care how the machine works, but it’s gotta be available. Yeah. Because he wants the patient to walk out the door and and have a have a new denture, have an aligner in their hand when they walk out the door. It’s a big sales tool for them.

Troy Jensen, Manager Director, Kantor: Yep. So do you have any estimates on what percentage of your sales are production, Bruce’s prototype?

Jeff Graves, CEO, 3D Systems: Oh, it’s shifting quickly, Troy. So I would tell you at least three quarters of our sales now, probably more, are production related. Oh, really? Wow. Yeah.

It’s it’s shifting fast. And frankly, we’re we’re only focusing now on on applications that when they take off, could be 10% type customers for us. So $100,000,000 kind of customers. Those are the ones that we want. We want to pick the application in the market so that if it takes off, if we’re successful, it has that potential.

Now all of them won’t work, but we want to pick them that way. Right.

Troy Jensen, Manager Director, Kantor: That makes sense. So it’s interesting. I suppose if you put dental and all that customized healthcare

Jeff Graves, CEO, 3D Systems: Yes.

Troy Jensen, Manager Director, Kantor: Right, that’s 40% plus of your business, leave, and then whatever industrial is is at is production. So

Jeff Graves, CEO, 3D Systems: Right.

Troy Jensen, Manager Director, Kantor: Alright. So speaking of customized healthcare, it’s been extremely strong for you guys and actually most of the industry. Is it sustainable? And can you talk about the bigger applications for you guys?

Jeff Graves, CEO, 3D Systems: Yes. So so we have been so by healthcare, it for us, it’s orthopedics. And that’s print literally printing personalized bone replacements, if you will. So helping surgeons perform the surgery faster and better for the patient and then providing replacement parts, if you will, for the skeleton. So it’s been a great business for us.

We’ve been focused really above the neck. So cranial, facial, maxilla, it’s called. So all the bones above your neck. We’ve been very good in planned surgeries. We work with surgeons directly to plan the surgery so that when the patient’s on the table, they can get them in and out fast.

And then now more and more the replacement parts for the bone structure. We’ve now we’ve got the cycle time down now where we’ve moved into trauma. So if a patient’s in a car accident. So one growth vector for us has been moving from planned surgeries to to emergency surgeries to trauma. Again, focusing above the neck.

The big growth area for us, because we’re so dominant above above the neck and in the spine, The big growth areas are for the other joints in the body fundamentally. So we just moved into ankles, ankle surgery, ankle replacement. In the past, that’s largely been done by with slow operations and the parts come from cadavers, largely from cadavers. Now you can three d print the elements. You can three d print the the elements to make the surgery go fast for productivity.

Now we’re moving through the other joints of the body, knees, hips, shoulders, elbows. So those kind of replacements, great growth trajectory and and a and a really specialized business in a large market. So it’s terrific. We’re big in The US. We’re growing in Europe, and and we’ll continue to grow in those markets.

Troy Jensen, Manager Director, Kantor: Yep. So I’m surprised knees weren’t bigger than above the

Jeff Graves, CEO, 3D Systems: neck. It’s interesting, Troy. The so it’s the bigger opportunity, but the the cost competition for those joints has been high because what they’ve done is they they make a library of parts, and it’s an off the shelf product before. But as you think about it, everyone in this room’s knee is different. Everyone has different different needs for their knee.

Right? But a surgeon is forced to take part a, b, or c off the shelf, the closest one that fits you, and use it. Now with three d printing becoming faster and and less expensive, you can customize a knee joint or an an elbow joint. So the market’s bigger. It was a it was a tougher price point to get to, but now we’re able to do it and we’ve got the materials.

They’re special wear materials. Right.

Troy Jensen, Manager Director, Kantor: I was

Jeff Graves, CEO, 3D Systems: gonna say It has to it has to work so we can print those materials down and the cost has come down where more and more of your of your of your bones and your body will be customized replacements rather than generic replacements.

Troy Jensen, Manager Director, Kantor: Yes. Yep. Interesting. All right. Then you kind of touched on this a little bit, but when you go from planned surgeries to emergency surgeries, point of care is where these products need to be.

So can you talk about just the point of care market for additive?

Jeff Graves, CEO, 3D Systems: Yeah. It’s it’s interesting. So the so the first pressure wave as a supplier to that market is do it fast, but still do it from a distance because it’s it’s hard to do. So do it from a distance. As you mentioned, Troy, the ideal situation is where the hospital could print it, where somebody print it in the emergency room.

So we’ve got for cranial replacements, we’ve got a printer now that can go in the surgery. It’s a it’s a it’s a sterile environment for printing. You can print this special polymer, medical polymer called PEAK PEAK medical grade PEAK for somebody’s head that’s been in a car accident, for example. So we’ve moved polymer printing largely into the hospital capability wise. The interesting thing is the FDA has an approved hospitals as a production site.

So so we have an approved production site in in our case in Denver, but the hospital is approved for production.

Troy Jensen, Manager Director, Kantor: Oh, interesting.

Jeff Graves, CEO, 3D Systems: And they don’t know how to get approved for production. There aren’t many rules around that. So it’s it’s kind of a work in progress. But ideally, yeah, you move your source of supply closer to the surgeon, so it’s on demand printing in that case. And we’ll support that transition however we need to.

Yeah.

Troy Jensen, Manager Director, Kantor: And so how about talk about, insurance reimbursement?

Jeff Graves, CEO, 3D Systems: Yes. It’s absolutely critical. So we we we started life, and this was an acquisition years ago, in medical modeling. So you make a model to for a surgeon to use to, number one, show the patient. For example, if you have a heart defect, you can take a little model apart.

You can print it the exact defect that you have in your heart. I’m sorry to be pointing at you. You look healthy. So let me so you have a you have a model of a defective heart. You can take it apart, show a patient the problem, and the surgeon can plan the surgery.

That’s medical modeling. Generally, that’s not reimbursable. So as you might imagine, hospitals work on razor thin margins. It’s it’s not really very positive to to go in and do things that aren’t reimbursed by insurance companies. So what we’ve been able to do is now do much more of the modeling on a computer, which is fast and easy.

You’d take a CT scan and you can manipulate it, take it apart, put it together, all that. And then we just print the replacement. We just print the surgical aid and the replacement. So modeling has, because it’s non reimbursable, is kind of phasing out as a as a tool versus computer generated animation and then and then the actual printing. But when you choose to go into a market, you must choose it in order to be reimbursed.

So you have to understand the regulatory environment and the insurance environment, which most of most companies in our space haven’t really thought about until they get into it. And you could spend a lot of money going out of trail that’s not reimbursable. And so technically, it works, and you’re never reimbursed for it. Right. So we try to be smart about picking applications and methods of of supply that are reimbursable for,

Troy Jensen, Manager Director, Kantor: an insurance company. And which ones are today? Are there are you still working on all of them?

Jeff Graves, CEO, 3D Systems: None of the major ones that we work on. Yeah. That’s why we’ve kind of phased out our modeling work to to a large extent because it was becoming onerous for people to pay for it and moved into the actual work on the body. That required the technology to get to that level, so where you could actually do body replacement parts. And then and then, of course, the exciting extension of that is actually printing moving from bones, which are simple by comparison to human tissue, including up to and including organ replacement.

So if you look out on the horizon, that’s what’s coming is we’re working on bones now. We’ve got a lot of nice organic growth organic growth through FDA approvals to get through the joints of the body. The next phase of our evolution will be working then on human organs, human tissue to replace the rest of your body. So that’s where we’re headed. Sounds kind of Star Trek y, all I gave myself.

But so much so that when I first got to three d, I didn’t pay attention to it for about six months. I thought, this is crazy crazy stuff. We’re never gonna be able to print print it, but it actually works. It actually is true. It’s actually on the road map, and it will come someday.

Troy Jensen, Manager Director, Kantor: Okay. Alright. So if you go back kind of post COVID, re showing, near showing was a really hot theme. And, you know, I know talking to just the the channel, the resellers, that these guys were telling me that they’re having higher level conversations with C level executives, really starting to think about reshoring and nearshoring production into The U. S.

But then it was rates went up and inflation and we had the war and whatnot recession. Now we’ve got tariffs, right, to deal with. So just your thoughts on just tariffs and is this whole reshoring, you’re showing theme going to pick up again?

Jeff Graves, CEO, 3D Systems: I didn’t check the news this morning. I’m not sure who were tariffing today. But but the, clearly, moving moving production closer to the use we talk about hospitals. Moving production closer to the use source is always a good thing. So you reduce logistics costs, you reduce complexity and more control.

It also addresses tariffs and makes so when you move closer to home. So from a from a used standpoint, an import of the actual things from a printer, for example, may get close to the source gets around that. Now where you make the actual device is an issue. So we we sometimes you get some well, I won’t even say if we got lucky or smart, but we insourced production into The US over the last two years. So all virtually all of our polymer printers are made in The United States today down in South Carolina.

Great place to assemble products. Some of the supply still comes from from overseas and in different places of the of parts. But the assembly operations and many of the parts are US based now. So we’re insulated from tariffs. Tariffs can help from a sales standpoint because there’s a a lot of Chinese exports that’s trying to work its way into The States, quite frankly.

So so tariffs could help the sales situation. From a supply chain situation, it’s gonna drive up cost undoubtedly, no matter where the parts come from. So the more you can source locally in The States, the better for us. So we have a factory in Europe. We have a we have a a larger factory here in The States.

So for us, tariffs are less of a concern and potentially a benefit for the industry. It’s very company specific. A lot of folks still outsource manufacturing. It can be outsourced in Asia and elsewhere. Frank, I’d be concerned about that.

So we we we’re we’ve gotten around it now because we’ve insourced things.

Troy Jensen, Manager Director, Kantor: Okay.

Jeff Graves, CEO, 3D Systems: But I would tell you, we did it for quality reasons, not for tariff reasons. But as it worked out, it was fortuitous. Right.

Troy Jensen, Manager Director, Kantor: As far as your customers then, I mean, have have you heard anything yet? Or is it too early for the terrorist conversation?

Jeff Graves, CEO, 3D Systems: No. It’s it’s very interesting. I think conceptually, everybody thinks, okay, moving stuff closer to the use. Most of our revenue comes out of The US and Europe now. So making things closer to those or in in those countries or areas is a is a really good thing.

For customers though, they often have plants around the world. They’re very concerned about where they spend capital now. So it’s basically just just as, you know, the election was behind us, all all this stuff. And we had hopes that everything would settle down and everybody would would would spend money that they hadn’t spent in a couple of years on on production capacity. I think now there’s a bit of a a headwind of people saying, I don’t know where to spend it.

If they have factories and multiple sites around the world, where do they actually spend the capital for capacity because of the tariff risk? Hopefully, a transient concern because I I do think they’re gonna need the capacity. It’s now a question of timing. Right.

Troy Jensen, Manager Director, Kantor: And you comment too, if they establish production capabilities, you know, geographically, typically they got depreciation cycles, right? So they need to depreciate those assets over the life of the asset. And I’m sorry for them to just stop and move to a new technology until

Jeff Graves, CEO, 3D Systems: Yeah. It’s hard. It’s it’s hard. It takes time. It it really does take time.

So three d printing is gonna get there. It’s gonna have its place in the world. It just in factories, it just takes time to get there.

Troy Jensen, Manager Director, Kantor: Okay. Let’s talk industry consolidation, been a hot topic, for a long time. I mean, your product portfolio is fairly expansive. Was there anything that’s, that you’re missing technology wise or anything on your radar?

Jeff Graves, CEO, 3D Systems: Just bits and bobs, Troy. For us, personally, we’re we’re we’re it’s a blessing and a curse. We have the broadest technology portfolio in the industry, hardware, software materials. But on the even even just looking at hardware, printers alone, we have five different polymer printing platforms and we have the leading metal printing technology, yeah, inherently as well. So most of our growth capability is is can be through organic growth, through through organic R and D investment.

We don’t need the seeds of technology very much. Opportunistically, there may be bits and pieces that make sense for us to bring on either because of the technology or because of the customer base. But we don’t need any acquisitions in order to fuel our technological expansion. And from a scale standpoint, we’ve got the scale we need. It’s a matter of focus.

It’s a matter of picking our spas, making sure we can service those customers and growing. So broadly on consolidation for us and for, for, you know, at least one or maybe more of our competitors, they’ve probably got the scale they need from a, from an overall mass standpoint, like a service team, all of that. Some of them need more technology in fusion than we do. So I feel good about our position there. And then some are owned by large parent companies.

If they choose to invest, they can. And if not, they if not, they won’t. So does the industry need consolidation? I think the smaller players do. I don’t I don’t think it’s sustainable with current sales levels.

For the larger players like ourselves, I think it’s a matter of focus more than consolidation, quite frankly. Fair.

Troy Jensen, Manager Director, Kantor: Yes, I did say, and we talked about this at the MS conference a month or so back, but hardware acquisitions are tough. And for the most part, it’s really hard to pin point someone who’s done a hardware acquisition that it worked and it was accretive and it hit their expectations. So my question for you is, like, do we really need to emerge and acquire all these companies or should we just let them fall by the wayside? If you remember at that conference on that panel, you know, Max made that conversation that if you just let 20% of the smaller guys just kinda go away, that revenue gets kinda redistributed, you know, amongst the rest of the players. But do we need more

Jeff Graves, CEO, 3D Systems: mergers and acquisitions? He’s brutally brutally frank on that comment. Yeah. No. No.

That’s right. I think either that technology needs you know, it it can benefit from finding a home somewhere. Does that happen by them just going out of business and and the technology getting picked up somewhere or not? That’s fine. I mean, they they can.

And the way it’s headed, it seems that way. Like a lot of the smaller players are just going to just going to go under, go away, and then that business will be redistributed. Technically, they all started for a reason. So they all have a little technology kernel or more that’s that has some value. So I’m guessing that technology finds its way somewhere, but maybe not being purchased as a whole company.

Yeah. That so that it would be helpful if that revenue because the overall revenues aren’t growing a lot right now. It’d be helpful if that was redistributed. But it sounds kind of brutal, but, yeah, that’s the way capitalism works. So that’s fine.

For us for us, it’s a matter of focus. We have we’ve spent a lot on R and D in the last few years. But when I arrived in 2020, we needed a refresh on the portfolio. And I think we’ve largely gotten there with what we spend and what we’re spending. We need a hard focus on cost to make sure we get our footprint down, make sure we can afford the sustain of the sustaining R and D, and then the sales and service cost.

That’s it. We’ve got the mass we need. It’s more getting the footprint down and getting some cost out of the business.

Troy Jensen, Manager Director, Kantor: Yes. Okay. Can you talk about the Hexagon acquisition? I know you guys will be when is it closed? Just remind us of the details.

Jeff Graves, CEO, 3D Systems: So in when I arrived in ’twenty and ’twenty one, we sold a lot of non-3D printing assets and we put that cash on the balance sheet. I held on to this Geomagic software, which is a reverse engineering software. It was a it was a it was a great asset. And arguably, it related to three d printing. It was a reverse engineering software, and it wasn’t painful to own.

But were we the rightful owner of it? Hexagon came along and approached us to buy that software. That software is often packaged with laser scanners for reverse engineering. So they’re a great owner of the technology. So we had a long conversation And it was a great outcome for our employees to sell the business to them, great outcome for their business.

It needed to be approved in three countries. We got it through two of them now. It’s working its way through The States. I expect no impediments to getting that deal closed. It’s timed at the end of Q1 roughly.

So if the administration changed, I guess, end of Q1 up through May, we’ll close that deal. Dollars 123,000,000 of cash coming in for us before taxes. So it’ll be taxed down a bit, but then we’ll put that cash on the balance sheet, take care of some debt and make sure we’ve got cash in the bank to sustain any investments we need to do.

Troy Jensen, Manager Director, Kantor: What timing of closing?

Jeff Graves, CEO, 3D Systems: So end of Q1 up through, I’d say, the latest kind of May timeframe, March to May. Okay. Perfect. Yes.

Troy Jensen, Manager Director, Kantor: And how about just lastly, just the industrial business for you guys has been the big challenge, Right? Yeah. So, I mean, I get it. CapEx dollars, it’s all been deferred. But when do you think it turns?

What’s going to turn it? Just kind of an update on industrial stuff.

Jeff Graves, CEO, 3D Systems: How are the Vikings going to do in 2020?

Troy Jensen, Manager Director, Kantor: Let’s go back to an easy question.

Jeff Graves, CEO, 3D Systems: That’s that’s it. So so so when do when do people start spending money again? The on capital equipment. It’s it’s, it’s such a mixed bag. You all see this in a newspaper.

It’s you read it, and and and the economy feels okay. As a consumer, it feels okay. Planes are still pretty full and everything else, but but there’s so much change in the world. Companies companies like people, they need to plan their investments, you know, for a significant period of time and then make them. In companies, it’s even probably harder than your personal situation.

They have to they have to be very thoughtful about all these geopolitical considerations and things, when they invest capital. So it takes a long time. And when the environment’s changing this fast, it’s hard to predict. So I think things just need to settle down a little bit. The demand is there, and and they have the cash.

So if the if, you know, if there’s no more wars, if even if they settle this one or at least it calms down, these calm down. And then if if the discussion just cools off on the changing tariff dynamic and stuff, I think then you’ll see an inflow. Nowhere in there did it give you a date. But but I’m, you know, I’m hoping ’25 I’m hoping ’25. And again, we haven’t released earnings.

We usually give an outlook for the year when we release earnings. But I, you know, I think if you just look at the at the tea leaves, you’d say ’25 should be a good stable year. It could be an up year. I’m I’m not I’d be I’d be foolhardy to say it’s gonna be a tremendous year. But I also think there’s, you know, there’s there’s, you know, out there’s good outlook for stability and hopefully a little bit of growth over over time.

And then ’26 and beyond, you know, like everything over the horizon, you think it’s gonna be great. And so I do think the long term prospects for growth in our industry are tremendous. I, you know, we I’d still peg it, you know, if you pick your markets high single digit, low double digit in an environment that maybe, maybe macro is growing faster than that, but you can you can make make money and target high value markets and grow organically at high single, low double digits. It’ll return to that. I don’t think ’25 is gonna be that kind of a growth year, but I do think, and it could be.

It really could be. But I do think ’26, ’20 ’7, ’20 ’8, you’re gonna see more and more of these, you know, aligned kind of of customers coming up for our industry. And hopefully, we’ll capture a reasonable percentage of that.

Troy Jensen, Manager Director, Kantor: Yeah. I agree. It’s like this this whole production applications, I mean, there’s just so much we could do to date that we haven’t yet. And

Jeff Graves, CEO, 3D Systems: it seems like there’s

Troy Jensen, Manager Director, Kantor: a lot of pent up demand for this stuff. So

Jeff Graves, CEO, 3D Systems: Reliability’s up. Costs are coming down. It’s it’s a very attractive, flexible technique. It’s gonna be used. It’s a matter of timing.

Troy Jensen, Manager Director, Kantor: Yep. Just you guys got, like, a minute left. Any questions in the audience?

Jeff Graves, CEO, 3D Systems: Was that a question?

Troy Jensen, Manager Director, Kantor: Yeah. She was go ahead.

Jeff Graves, CEO, 3D Systems: Go ahead. Yes. Well, you know, we we we worked with them to develop the process years ago. They’ve been the dominant player in the industry. Like every industry, when it starts maturing, you get other competitors coming in, you get other players coming in.

And and even from a supply chain standpoint, as they get bigger, they’re gonna want other suppliers for for their technology products. So I think it’s a natural evolution. When they were they’ve been kind of the sole player in all of that, they they were the dominant guy. And when you’ve got them as a customer, that’s your focus. As they mature now and others come into the market, I think, you know, our our scope certainly broadens, and I’m sure their supply scope over time broadens too.

It’s just the way things work. So, yes, will we be cultivating other customers in the aligner business? Absolutely. %. You know, how fast that will occur and things just depend on the evolution of the market.

And this changing technology to direct printing, I think, again, that’s going to change the playing field a little bit. You may see some new players coming in, things like that. So there’s new opportunities for growth there as well. And maybe one just in the financials, what level of revenue do you need to consistently break even or is it still cost down? Yeah.

So great question. No. Great question. I would tell you, even at this revenue level, we can make money. We have to get cost out of our business.

And I’ll give you an example. We had we were a company built up by acquisitions largely. We had a good core, but we had a lot of acquisitions. We’re consolidating those now. And you’ll see a pretty aggressive program in ’twenty five and ’twenty six for us to get our costs down, our footprint simplified, all of that work done.

We insourced manufacturing. So now we can streamline supply chain activity. That’s our big focus right now. We’ve had a big R and D focus for the last couple years. You’ll see it shifting to cost.

My goal is at this sales level to be able to be profitable and have positive free cash flow within the next couple of years. Okay? So you’ll hear more about that when when as we talk going forward, when and it’s there’s some investment required to get there, but that’s the focus for us is at this scale making money. So when you give the outlook, you’ll basically give these costs of outlooks Yeah. So So so gross growth I’ll start with gross margin.

So gross margins today are 40 ish percent. I think those can trend upward to 50%, especially as these production volumes come on. You get a richer consumable revenue stream. Gross margins can trend up to 50% and some are doing 50% already today at a in isolated pockets. So that very attainable.

So if we get just a nice normal incremental lift in gross margins over the next decade. From an OpEx standpoint, OpEx we can bring down. SG and A, absolutely certainly. G and A as we integrate acquisitions, things like this, we get our G and A structure down. R and D has certainly stabilized.

We can probably streamline even that a little bit more. So you’ll see gross margins just gradually trending up. You’ll see EBITDA margins swing pretty quickly as some of the footprint consolidation, the operating costs come down, reflected both in in COGS and, and in OpEx. Okay? So that combination, and I’m not going to give, I’m not going to give our formal outlook right now, but you’ll see some big swings in EBITDA coming over time.

And again, my goal is to get our company to positive free cash flow free cash flow over the next couple of years. Okay? I think it’s very attainable. Over over a couple I grew up in Indiana. Couple means usually means two, but but it could mean three in the new definition.

Maybe it does. I don’t know.

Troy Jensen, Manager Director, Kantor: We gotta cut it off, guys, just to be respectful of the Nexmo. Thank you, Jeff. Appreciate it. Thanks.

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