Earnings Call Transcript - DDD Q1 2026

Operator, Operator

Greetings, and welcome to the 3D Systems First Quarter 2026 Earnings Conference Call and Webcast. Operator provided instructions to participants. 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.

Monica Gould, Vice President, Investor Relations

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.

Dr. Jeffrey Graves, President and CEO

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 five 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 three key growth markets: Aerospace & Defense, Med Tech and Dental. These markets in particular 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 three-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. Two quarters into the sale of these 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 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, two 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 one-third 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 five 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 two 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, 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 the 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?

Phyllis Nordstrom, Chief Financial Officer

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 six 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 six-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.

Dr. Jeffrey Graves, President and CEO

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 two 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, Operator

Operator provided instructions to participants. Our first question today is coming from Greg Palm from Craig-Hallum.

Greg Palm, Analyst (Craig-Hallum)

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

Dr. Jeffrey Graves, President and CEO

Yes, Greg. So 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. 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. For us, Dental is a big driver—it's going custom, it's going 3D printing. Med Tech is expanding nicely, especially in the orthopedic space. And then Aerospace & Defense really benefits from 3D printing. So I look at that and say it spans Healthcare and Industrial, primarily in high-reliability markets. 3D printing is starting to take off. The world is still a scary place and there's a lot going on, but I feel better than I did two or three years ago, and it's just in time for our new products to be hitting the market. We need to see continued traction. Health care is more predictable because many of these are non-optional or high-impact procedures that affect quality of life. I wasn't surprised to see Healthcare become our largest segment in the quarter; I think it will be neck and neck with Industrial because of Aerospace & Defense. Aerospace & Defense broadly across many markets is now understanding the benefits of 3D printing: they can make parts out of very exotic materials that have been difficult to fabricate and very expensive to produce, and 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 organizations are figuring out how to do it. The leaders in that space figured it out a few years back—look at rocketry—those teams are heavy users of this now. Now it's catching on across all of Aerospace & Defense, funded by big budgets 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. I hope the world remains at least stable and hopefully improves. 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.

Greg Palm, Analyst (Craig-Hallum)

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 short in Q1, so you should presumably see improvement. Anything that was pulled forward or anything to note? Or should we focus more on your comment of taking a measured approach to the guide at this point?

Dr. Jeffrey Graves, President and CEO

No, it's the latter. We didn't pull things forward, Greg. There were no pull-forwards. There was an uptick in demand in certain sectors in Q1 above what we had forecast, and that's what drove the overachievement on revenue versus guidance because it was a legitimate uptick in demand. The seasonality aspect in our business, as Dental becomes a larger part and with orthopedics, is that people often avoid elective procedures in the spring because of vacations and other plans, so Q2 can be a seasonal dip for us because of the size of our Healthcare business. Other than that, nothing unexpected. We're trying not to get out over our skis; we want to stay measured because the world is volatile. The issue in the Middle East continues to drive increased defense and aerospace spending, but it has made logistics difficult in many cases—getting printers, parts and materials to customers. If customers are in the Middle East, it's been a real problem, and it has affected logistics globally in part. So we want to be cautious and keep the guidance realistic.

Greg Palm, Analyst (Craig-Hallum)

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

Phyllis Nordstrom, Chief Financial Officer

Yes. For us, Greg, you really have to focus on product mix in the quarter. I mentioned in the prepared remarks that our expenses this quarter were a little lower than you'll typically see as you look out the rest of the year. We had some timing of expenses that were in our favor for the quarter; it wasn't significant, but it was noteworthy, and we took that into account as we go into Q2 and Q3. On the mix side, looking at consumables and heavy printer sales, we have an increase in metal printer sales. Those mixes will really drive margin and overall performance. You'll see us pretty consistent throughout the year as we aim towards that goal of adjusted EBITDA breakeven. Again, stabilization of OpEx and product mix quarter-over-quarter will drive that end result.

Operator, Operator

Operator provided instructions to participants. Our next question is coming from Troy Jensen from Cantor Fitzgerald.

Troy Jensen, Analyst (Cantor Fitzgerald)

Sorry, I jumped in a little late. Maybe I apologize if I'm asking stuff that's been addressed. Jeff, can you give an update on the Healthcare business: personalized healthcare versus Dental on the year-over-year growth? Was that primarily personalized healthcare, or is big Dental driving that as well?

Dr. Jeffrey Graves, President and CEO

Troy, both were strong. I'll let Phyllis put some numbers to it, but Med Tech—what we call personalized healthcare now—encompasses our surgical planning work with surgeons, surgical guide production and implants, including spinal and other orthopedic implants. That was a good business this quarter. There was a disruption at one customer which cost us a bit, and we expect that to rebound now that it's behind them. Med Tech continues to be a double-digit grower year-over-year organically. We're getting response times down to participate in trauma care—turning around requests in a couple of days—and that's expanding the market for us. Oncology, the treatment of bone cancer, is another growth driver where complex surgeries to remove tumors and then replace bone using printed PEEK implants will be a real growth area. On the Dental side, we have our traditional markets in alignment and repair. The Vertex repair material was approved in the U.S. late last year after a trademark resolution, and that material stream is coming online for teeth repair. Straightening is stabilizing and returning to modest growth after a tough 2025 first half. Overall, I feel good about all parts of our Healthcare business. Regulatory barriers make it hard to get in, and once you're in, there's limited capacity to fulfill requests. We like that business and continue to invest in it.

Troy Jensen, Analyst (Cantor Fitzgerald)

Great. And then another question: specific to metal additive parts, where are you expanding in that category? I believe you're expanding the footprint in Littleton—touch on that if you could.

Dr. Jeffrey Graves, President and CEO

Yes, Troy. We're adding another 80,000 square feet adjacent to our current Littleton facility. The existing building historically focused on healthcare parts manufacturing, and over time we've had pressure to add industrial manufacturing there as well. We decided to acquire the building next door and convert it into an industrial part-making facility. It leverages the quality systems we already have in healthcare, and it's coming along nicely. We expect a grand opening of that building toward the end of July to early August, late summer. That facility will be dedicated to parts manufacturing, and we expect it will primarily serve Aerospace customers. The parts we're focused on are very high-end, difficult materials that our printers are well-suited for: titanium, zirconium, nickel-based materials and copper-nickel alloys for the Navy. Nickel-based alloys are used for propulsion in aircraft and rocket propulsion; copper alloys are used for naval applications. Titanium and other lightweight materials are used in satellites and flight systems for drones. There's more demand than we can handle in our current facility, so we're expanding and will be adding printers to that facility over time as we move through the second half of the year.

Operator, Operator

Operator provided instructions to participants. 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. Jeffrey Graves.

Dr. Jeffrey Graves, President and CEO

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

Operator, Operator

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.